Should the Marketing of Subordinated Debt Be Restricted/Different in One Way or the Other? What to Do in the Case of Mis-Selling?

An important prerequisite for the efficiency of bail-in as a regulatory tool is that debt holders are able to bear the cost of a bail-in. Examining European banks’ subordinated debt we caution that households may be investors in bail-in able bonds. Since households do not fulfil the aforementioned prerequisite, we argue that European bank supervisors need to ensure that banks’ bail-in bonds are held by sophisticated investors. Existing EU market regulation insufficiently addresses mis-selling of bail-in instruments.

External author: Martin R. Götz and Tobias H. Tröger.

European Parliament: Directorate-General for Internal Policies of the Union: Publications available via the EU Bookshop http://bookshop.europa.eu/en/directorate-general-for-internal-policies-of-the-union-cbf.cKABstF7wAAAEjwYYY4e5K/

European Parliament: European Parliamentary Research Service: In-Depth Analysis, March 2016: Should the Marketing of Subordinated Debt Be Restricted/Different in One Way or the Other? What to Do in the Case of Mis-Selling? http://www.europarl.europa.eu/RegData/etudes/IDAN/2016/497723/IPOL_IDA(2016)497723_EN.pdf

European Parliament: European Parliamentary Research Service: In-Depth Analysis, March 2016: Should the Marketing of Subordinated Debt Be Restricted/Different in One Way or the Other? What to Do in the Case of Mis-Selling? http://www.europarl.europa.eu/RegData/etudes/IDAN/2016/497756/IPOL_IDA(2016)497756_EN.pdf

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