The Impact of the Bank Recovery and Resolution Directive's (BRRD) Bail-in Tool on Covered Bonds

The past financial crisis revealed ex-ante and ex-post failures, i.e. failures related to supervision and failures related to recovery and resolution measures, respectively. The ex-post deficiency to provide sufficient common crisis management measures to recover or resolve properly failing institutions motivated this research. In this context, the bail-in tool, which is embedded in the Bank Recovery and Resolution Directive, is a legal mechanism which aims to restore the viability of distressed institutions. The relation to covered bonds is based on their use as a debt instrument and their role under the new regulatory system, in particular under Basel III. Does the BRRD´s bail-in tool affect covered bonds or not? Are covered bonds an optimal instrument for banks to issue or not? Should covered bonds’ issuance be encouraged or not under the new recovery and resolution regime? These are the main research questions addressed by this book. Autorin: Véronica Pollaková