Argument en faveur d'une politique de dette subordonnée obligatoire

A straightforward method to enhance market discipline in banking is the Mandatory Sub-Debt Policy (MSDP), i.e. a requirement by which some large banks are forced to regularly issue a certain minimum amount of subordinated and non-guaranteed debt. The reasons behind the mandatoty attribute of a MSDP are not trivial. At first glance, a MSDP may be even superfluous if one notes that existing sub-debt issues by many large banking organizations actually meet or exceed the minimum requirements put forward by the proponents of this reform proposal. Our objective is to demonstrate that despite this stylized fact, a MDSP is not unnecessary. Under the current regulation framework - that is, in the absence of a formal MSDP - market discipline can be easily alleviated because, as a bank's conditions deteriorates, the funding manager will shift toward insured deposits as a source of funding and will reduce the reliance on market-sensitive debt instruments. A MSDP eliminates this perverse quid pro quo by foring banks to regularly tap the primary market even when their financial conditions are weak. In the second part of the paper, we illustrate this intuition by performing several tests on European data. If the decision of issuing sub-debt is endogenous and/or subordinated creditors are really able to influence bank managers' behavior, we should find a positive correlation between the amount of sub-debt held in bank balance sheets and banking performance. Our main empirical findings can be summarized as follows. First, the sub-debt issues are made generally by the most profitable European banking organizations. Second, voluntary sub-debt issues allow banks to reduce their Tier 1 rations, while improving their overall capitalization (Tier 1 + Tier 2 ratios). Third, as far as concerns the risk profile, the amount of sub-debt held in bank balance sheet is negatively correlated with the quality of credit portfolio, but positively correlated with the ratio of loan loss reserve to total (gross) loans. These results arouse several reflections about the virtues and limitations of market discipline in banking in the absence of a formal MSDP.