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Should the marketing of subordinated debt be restricted/different in one way or the other? What to do in the case of mis-selling?

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  • Götz, Martin R.
  • Tröger, Tobias

Abstract

An important prerequisite for the efficiency of bail-in as a regulatory tool is that debt holders are able to bear the cost of a bail-in. Examining European banks' subordinated debt we caution that households may be investors in bail-in able bonds. Since households do not fulfil the aforementioned prerequisite, we argue that European bank supervisors need to ensure that banks' bail-in bonds are held by sophisticated investors. Existing EU market regulation insufficiently addresses mis-selling of bail-in instruments.

Suggested Citation

  • Götz, Martin R. & Tröger, Tobias, 2016. "Should the marketing of subordinated debt be restricted/different in one way or the other? What to do in the case of mis-selling?," SAFE White Paper Series 35, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewh:35
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    References listed on IDEAS

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    1. 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.
    2. Tröger, Tobias H., 2015. "Regulatory influence on market conditions in the banking union: The cases of macro-prudential instruments and the bail-in tool," IMFS Working Paper Series 93, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    3. Virginia Skidmore Rutledge & Michael Moore & Mr. Marc C Dobler & Wouter Bossu & Nadège Jassaud & Ms. Jianping Zhou, 2012. "From Bail-out to Bail-in: Mandatory Debt Restructuring of Systemic Financial Institutions," IMF Staff Discussion Notes 2012/003, International Monetary Fund.
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    Keywords

    bail-in; BRRD; subordinated debt; EU market regulation;
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