Benjamin Bernard, Agostino Capponi, Joseph Stiglitz, 18 October 2017

Worried about the cost of public bailouts, governments have proposed bail-ins whereby banks contribute to rescuing their debtors. This column analyses the conditions under which bail-in strategies can be credibly implemented, showing that this heavily depends on the network structure. While earlier work has suggested that denser networks are socially preferred to more sparsely connected networks, the opposite holds in the presence of the government’s strategic intervention.

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The training will touch upon the technical framework for contingent capital and bail in debt and the different choices made by the European legislator as compared to other regulators throughout the world. A comparison is made of different bail in regimes in Europe as well, in order to explore the common ground and the differences in the applicable regimes. In addition to the analysis from a legal perspective, an elaborate discussion will be presented about the first market developments in respect of contingent capital and bail in debt, effects on pricing and the different rationale for investors taking positions in contingent capital and bail in debt.

Anne Sibert, 02 April 2013

Depositors in Eurozone banks are facing a steep learning curve on just exactly what deposit insurance means. This column points out that the precedents set in Cyprus and Iceland show that deposit insurance is only a legal commitment for small bank failures. In systemic crises, these are more political than legal commitments, so the solvency of the insuring government matters. A Eurozone-wide deposit-insurance scheme would change this.
This reposted column corrects an error, due to the editor, that was in the first posting.

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