• Medientyp: E-Book
  • Titel: Modigliani-Miller Doesn't Hold in a 'Bailinable' World : A New Capital Structure to Reduce the Banks' Funding Cost
  • Beteiligte: Baglioni, Angelo S. [Verfasser:in]; Esposito, Marcello [Sonstige Person, Familie und Körperschaft]
  • Erschienen: [S.l.]: SSRN, [2016]
  • Erschienen in: UNIVERSITÀ CATTOLICA DEL SACRO CUORE, Dipartimento di Economia e Finanza, Working Paper n. 52, November 2016
  • Umfang: 1 Online-Ressource (21 p)
  • Sprache: Englisch
  • DOI: 10.2139/ssrn.2875880
  • Identifikator:
  • Entstehung:
  • Anmerkungen: Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 25, 2016 erstellt
  • Beschreibung: To protect retail investors from the bail-in rule, we propose that banks should issue subordinated "contractual bail-in instruments", as defined in the BRRD, for an amount (together with Tier1 capital) at least equal to 8% of their liabilities. We support our argument by means of a theoretical model, where retail investors are uncertainty averse, due to their lack of information about the new "bailinable" regime. To the contrary, institutional investors are better informed. Within this framework, a bank is able to reduce the cost of debt by splitting it into a junior and a senior tranche, sold to institutional and retail investors respectively. This result is a deviation from the Modigliani-Miller theorem. We also provide some estimates of the amounts of contractual bail-in instruments that European banks should issue in order to reach the 8% target level. Such amounts are considerable, implying that the solution proposed here should be implemented gradually over a transition period
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