Bail-in rules and the pricing of Italian bank bonds

Crespi, Fabrizio; Giacomini, Emanuela; Mascia, Danilo V.

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 non-bail-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 bonds primary market.

Citation

Crespi, F., Giacomini, E., & Mascia, D. V. (2019). Bail-in rules and the pricing of Italian bank bonds. European Financial Management, 25(5), 1321-1347. https://doi.org/10.1111/eufm.12206

• Journal Article Type: Article
• Acceptance Date: Nov 24, 2018
• Online Publication Date: Jan 10, 2019
• Publication Date: Nov 1, 2019
• Deposit Date: Dec 3, 2018
• Publicly Available Date: Jan 11, 2021
• Journal: European Financial Management
• Print ISSN: 1354-7798
• Electronic ISSN: 1468-036X
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 25
• Issue: 5
• Pages: 1321-1347
• DOI: https://doi.org/10.1111/eufm.12206
• Keywords: Bail-in; Bank bonds; Cost of funding; Too-big-to-fail
• Public URL: https://nottingham-repository.worktribe.com/output/1358632
• Publisher URL: https://onlinelibrary.wiley.com/doi/abs/10.1111/eufm.12206?af=R
• Additional Information: This is the peer reviewed version of the article, which has been published in final form athttps://onlinelibrary.wiley.com/doi/abs/10.1111/eufm.12206?af=R This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.
• Contract Date: Dec 3, 2018