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Risk Allocation and Bond Mis-selling After the Bail-in Directive

In: The New Bail-In Legislation

Author

Listed:
  • Angela Maria Maddaloni

    (European Central Bank)

  • Giulia Scardozzi

    (Roma Tre University)

Abstract

This chapter analyzes the holding of bail-inable securities. During 2012–2013, several cases of mis-selling occurred in European countries as banks sold risky bonds to retail investors as “safe assets.” The chapter shows how bond holdings across different types of investors has evolved in recent times. Before the approval of the new resolution regime, the mis-selling was a widespread financial phenomenon, especially in Southern Euro Area countries. However, allocation of bonds across sectors changed after the launch of the bail-in resolution mechanism; households sold their bank bonds to other, more sophisticated, financial intermediaries. This suggests that the new European Resolution mechanism was effective in reducing the mis-selling of bank bonds.

Suggested Citation

  • Angela Maria Maddaloni & Giulia Scardozzi, 2022. "Risk Allocation and Bond Mis-selling After the Bail-in Directive," Palgrave Macmillan Studies in Banking and Financial Institutions, in: The New Bail-In Legislation, chapter 0, pages 33-48, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-030-87560-2_3
    DOI: 10.1007/978-3-030-87560-2_3
    as

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