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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
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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. 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.
    2. 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.
    3. 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.

    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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