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Systemic Implications of the European Bail-In Tool: a Multi-Layered Network Analysis

Author

Listed:
  • Hałaj, Grzegorz
  • Hüser, Anne-Caroline
  • Kok, Christoffer
  • Perales, Cristian
  • van der Kraaij, Anton

Abstract

The new bail-in tool in the EU bank resolution toolkit is an important step forward to safeguard financial stability in Europe, notably in relation to mitigating moral hazard and other problems inherent in a strong reliance on bailouts. At the same time, it is important to understand the potential contagion channels in the financial system following a bail-in and prior to resolution in order to assess potential systemic implications of the use of the bail-in tool. This special feature outlines salient features of the new requirements and then presents a multi-layered network model of banks’ bail-inable securities that could help in gauging potential contagion risk and, prior to a resolution, identifying mitigating measures to avoid systemic implications. JEL Classification: G00

Suggested Citation

  • Hałaj, Grzegorz & Hüser, Anne-Caroline & Kok, Christoffer & Perales, Cristian & van der Kraaij, Anton, 2016. "Systemic Implications of the European Bail-In Tool: a Multi-Layered Network Analysis," Financial Stability Review, European Central Bank, vol. 1.
    • Handle: RePEc:ecb:fsrart:2016:0001:2
    Note: 508948
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/fsr/art/ecb.fsrart201605_02.en.pdf
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    Citations

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    Cited by:

    1. Grzegorz Hałaj, 2016. "Dynamic Balance Sheet Model With Liquidity Risk," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 19(07), pages 1-37, November.
    2. Claudia Pigrum & Thomas Reininger & Caroline Stern, 2016. "Bail-in: who invests in noncovered debt securities issued by euro area banks?," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 32, pages 101-119.
    3. Giuliana, Raffaele, 2022. "Fluctuating bail-in expectations and effects on market discipline, risk-taking and cost of capital," ESRB Working Paper Series 133, European Systemic Risk Board.

    More about this item

    Keywords

    bailout; financial stability; moral hazard; systemic risk;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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