We analyze whether the introduction of the bail-in tool in January 2016 affected the pricing of Italian bank bonds. Using a unique dataset of 1,798 fixed-rate bonds issued during the period 2013–2016, we find an increase of the spread at issuance of bail-inable bonds compared to nonbail- inable bonds. This increase also depends on the intrinsic characteristics of each bank. Large institutions, banks with lower ratings, profitability, capitalization, and higher liquidity faced a higher cost of issuing bail-inable bonds. Overall, our results seem to support the hypothesis of an improved market discipline for the bank bond primary market.
Bail-in rules and the pricing of Italian bank bonds
giacomini, emanuela;
2019-01-01
Abstract
We analyze whether the introduction of the bail-in tool in January 2016 affected the pricing of Italian bank bonds. Using a unique dataset of 1,798 fixed-rate bonds issued during the period 2013–2016, we find an increase of the spread at issuance of bail-inable bonds compared to nonbail- inable bonds. This increase also depends on the intrinsic characteristics of each bank. Large institutions, banks with lower ratings, profitability, capitalization, and higher liquidity faced a higher cost of issuing bail-inable bonds. Overall, our results seem to support the hypothesis of an improved market discipline for the bank bond primary market.| File | Dimensione | Formato | |
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Crespi_Bail-in- rules-pricing_2019.pdf
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