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Bail-in: who invests in noncovered debt securities issued by euro area banks?




During the financial crisis numerous banks experienced financial difficulties and were subsequently bailed out by governments using taxpayers’ money. Policymakers around the globe responded by overhauling resolution mechanisms for banks, including the introduction of bail-in rules to prevent future taxpayer-funded bail-outs. Despite the initial optimism that bail-in would mitigate the too-big-to-fail dilemma, criticism highlighting the shortcomings of this approach has recently been voiced both in academia and in wider circles. Several researchers have noted the urgent need for a more detailed analysis of the structure of holdings of bail-in-able debt securities. The aim of this paper is twofold: First, we provide an overview of the main arguments for and against the bail-in tool, and second, we shed light on the question of who invests in senior unsecured debt securities issued by banks, drawing on the Securities Holdings Statistics of the ECB for evidence. Our empirical evaluation on the basis of unconsolidated national banking sectors in the euro area provides information on the structure of the demand and supply side of bail-in-able bank debt securities in each euro area country. We are able to show which portions of the outstanding bail-in-able bank debt securities issued by euro area banks on aggregate and in individual countries are held in which region (home country, non-home euro area and outside the euro area) and by which sector (i.e. banks, other financial institutions and nonfinancial sector) within the euro area. In particular, we find that nearly 40% of all bail-in-able debt securities issued by euro area banks are held outside the euro area; intra-euro area cross-border holdings account for one-third of all euro area holdings of such debt, euro area banks’ holdings for one-third and the euro area’s nonfinancial sector (mainly households) for one-fourth. As regards bail-in-able debt issued by Austrian banks, about 20% are held outside the euro area, while euro area banks hold about 36% and the euro area’s nonfinancial sector about 38% of all euro area holdings of this debt.

Suggested Citation

  • 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.
  • Handle: RePEc:onb:oenbfs:y:2016:i:32:b:3

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    References listed on IDEAS

    1. Avinash Persaud, 2014. "Why Bail-In Securities Are Fool's Gold," Policy Briefs PB14-23, Peterson Institute for International Economics.
    2. Hakenes, Hendrik & Schnabel, Isabel, 2010. "Banks without parachutes: Competitive effects of government bail-out policies," Journal of Financial Stability, Elsevier, vol. 6(3), pages 156-168, September.
    3. Noss, Joseph & Sowerbutts, Rhiannon, 2012. "Financial Stability Paper No 15: The implicit subsidy of banks," Bank of England Financial Stability Papers 15, Bank of England.
    4. Virginia Skidmore Rutledge & Michael Moore & Marc C Dobler & Wouter Bossu & Nadège Jassaud & Jianping Zhou, 2012. "From Bail-out to Bail-in; Mandatory Debt Restructuring of Systemic Financial Institutions," IMF Staff Discussion Notes 12/03, International Monetary Fund.
    5. Sebastian Schich & Sofia Lindh, 2012. "Implicit guarantees for bank debt: where do we stand?," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2012(1), pages 45-63.
    6. Emilios Avgouleas & Charles Goodhart, 2015. "Critical Reflections on Bank Bail-ins," JThe Journal of Financial Regulation, Oxford University Press, vol. 1(1), pages 3-29.
    7. 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.
    8. Johannes Langthaler & Valentina Metz & Patrick Pechmann & Konrad Richter & Bernhard Rottensteiner & Daniel Unterkofler & Philipp Weiss, 2016. "Minimum requirement for own funds and eligible liabilities (MREL) – initial assessment for Austrian banks and selected subsidiaries in the EU," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 31, pages 82-95.
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    Cited by:

    1. Carmela Aurora Attinà & Pierluigi Bologna, 2021. "TLAC-eligible debt: who holds it? A view from the euro area," Questioni di Economia e Finanza (Occasional Papers) 604, Bank of Italy, Economic Research and International Relations Area.
    2. Lorenzo Gai & Federica Ielasi & Martina Mainini, 2021. "The Impact of Bail-in Risk on Bank Bondholders," International Journal of Business and Management, Canadian Center of Science and Education, vol. 15(9), pages 105-105, July.
    3. Hüser, Anne-Caroline & Kok, Christoffer, 2019. "Mapping bank securities across euro area sectors: comparing funding and exposure networks," Working Paper Series 2273, European Central Bank.
    4. Philipp Poyntner & Thomas Reininger, 2018. "Bail-in and Legacy Assets: Harmonized rules for targeted partial compensation to strengthen the bail-in regime," Working Papers 224, Oesterreichische Nationalbank (Austrian Central Bank).
    5. Ulf Lewrick & José María Serena Garralda & Grant Turner, 2019. "Believing in bail-in? Market discipline and the pricing of bail-in bonds," BIS Working Papers 831, Bank for International Settlements.
    6. Allen N. Berger & Charles P. Himmelberg & Raluca A. Roman & Sergey Tsyplakov, 2022. "Bank bailouts, bail‐ins, or no regulatory intervention? A dynamic model and empirical tests of optimal regulation and implications for future crises," Financial Management, Financial Management Association International, vol. 51(4), pages 1031-1090, December.
    7. Paola Leone & Pasqualina Porretta & Luca Riccetti, 2021. "European Significant Bank Stock Market Volatility: Is there a Bail-In Effect?," International Journal of Business and Management, Canadian Center of Science and Education, vol. 14(5), pages 1-32, July.
    8. Peter Lindner & Vanessa Redak, 2017. "The resilience of households in bank bail-ins," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 33, pages 88-101.
    9. Fiordelisi, Franco & Scardozzi, Giulia, 2022. "Bank funding strategy after the bail-in announcement," Journal of Corporate Finance, Elsevier, vol. 74(C).
    10. Altavilla, Carlo & Fernandes, Cecilia Melo & Ongena, Steven & Scopelliti, Alessandro, 2022. "Bank bond holdings and bail-in regulatory changes: evidence from euro area security registers," Working Paper Series 2758, European Central Bank.

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    More about this item


    banking regulation; systemic risk; bail-in; contagion;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation


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