N°25-38: Bank Bond Holdings and Bail-in Regulatory Changes: Evidence from Euro Area Security Registers

We assess how regulatory changes in bail-inable liability requirements, aimed at ensuring orderly resolution processes and minimizing taxpayer-funded bailouts, affect bank bond holdings. Using confidential data on banks' securities portfolios, we find that the introduction of the Minimum Requirements for Eligible Liabilities prompts banks to increase their holdings of eligible bank bonds issued by other banks, compared to non-eligible bonds. Similarly, the Total Loss-Absorbency Capacity requirements encourage banks to invest in eligible subordinated debt issued by global systemically important banks. Our findings also reveal a within-country concentration of bank bond holdings, which may pose challenges to effective bail-in implementation.