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.
2019
Wiley
Internazionale
https://onlinelibrary.wiley.com/doi/full/10.1111/eufm.12206
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11393/247647
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