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Bank Funding Strategies After Bail-in Announcement

In: The New Bail-In Legislation

Author

Listed:
  • Angela Maria Maddaloni

    (European Central Bank)

  • Giulia Scardozzi

    (Roma Tre University)

Abstract

The introduction of the bail-in might have induced a radical change in the funding strategy of banks. Changes in the legal protection of funding instruments can have implications for the cost and composition of banks’ liabilities. In particular, the introduction of the bail-in mechanism implies an increase in the credit risk of banks’ bondholders. Empirical evidence shows that, after the launch of the bail-in mechanism, banks privileged funding via customer deposits—the cheapest source of funding. This may enhance the liquidity risk due to asset-liability mismatch as customer deposits are the source of funding with the shortest maturity.

Suggested Citation

  • Angela Maria Maddaloni & Giulia Scardozzi, 2022. "Bank Funding Strategies After Bail-in Announcement," Palgrave Macmillan Studies in Banking and Financial Institutions, in: The New Bail-In Legislation, chapter 0, pages 17-32, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-030-87560-2_2
    DOI: 10.1007/978-3-030-87560-2_2
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    Cited by:

    1. Brausewetter, Lars & Ludolph, Melina, 2023. "Distributional income effects of banking regulation in Europe," IWH Discussion Papers 24/2023, Halle Institute for Economic Research (IWH).
    2. Martien Lamers & Thomas Present & Nicolas Soenen & Rudi Vander Vennet, 2023. "Does BRRD mitigate the bank-to-sovereign risk channel?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 23/1060, Ghent University, Faculty of Economics and Business Administration.

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