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Bank Bond Holdings and Bail-in Regulatory Changes: Evidence from Euro Area Security Registers

Author

Listed:
  • Carlo Altavilla

    (European Central Bank (ECB))

  • Cecilia Melo Fernandes

    (International Monetary Fund (IMF))

  • Steven Ongena

    (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

  • Alessandro Scopelliti

    (KU Leuven, Department Accounting, Finance and Insurance; University of Zurich - Department Finance)

Abstract

We assess how regulatory changes in bail-inable liability requirements, aimed at ensuring orderly resolution processes and minimizing taxpayer-funded bailouts, affect bank bond holdings. Using confidential data on banks' securities portfolios, we find that the introduction of the Minimum Requirements for Eligible Liabilities prompts banks to increase their holdings of eligible bank bonds issued by other banks, compared to non-eligible bonds. Similarly, the Total Loss-Absorbency Capacity requirements encourage banks to invest in eligible subordinated debt issued by global systemically important banks. Our findings also reveal a within-country concentration of bank bond holdings, which may pose challenges to effective bail-in implementation.

Suggested Citation

  • Carlo Altavilla & Cecilia Melo Fernandes & Steven Ongena & Alessandro Scopelliti, 2025. "Bank Bond Holdings and Bail-in Regulatory Changes: Evidence from Euro Area Security Registers," Swiss Finance Institute Research Paper Series 25-38, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2538
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    More about this item

    Keywords

    bank bonds; regulatory changes; bail-inable debt; MREL; TLAC;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • 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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