imported>Doug Williamson |
imported>Doug Williamson |
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| ''Bank regulation''. | | ''Loan documentation.'' |
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| Bailin refers to the use of private sector money, rather than public money, to deal with a failed or failing bank.
| | A clause in a loan agreement. It states that a default with any other lender will constitute a default under this agreement. |
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| Under bailin, private sector creditors of the bank suffer a share of the bank's losses.
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| Broadly, there are two forms of bailin:
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| #Statutory bailin; and
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| #Contractual bailin.
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| The term is derived from 'bail''out''', which refers to the use of public money these circumstances.
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| '''1. Statutory bailin'''
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| A technique used as part of the resolution of a failed bank under statutory authority. | |
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| The Resolution Authority (RA) makes an assessment of the extent of expected losses and reconstructs the bank's capital accordingly.
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| In reconstructing the bank's capital the RA imposes losses on creditors, including preferred shareholders and depositors.
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| The allocation of the total expected losses follows the creditor hierarchy that would apply in a liquidation, until the total expected losses are covered.
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| The remaining (surviving) layers of debt are partially converted to equity to recapitalise viable parts of the business.
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| The viable parts of the business are thus enabled to continue under new ownership.
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| The RA is normally given significant discretion in how the reconstruction - including bailin - is applied.
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| '''2. Contractual bailin'''
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| Contractual bailin refers to a provision in the terms of certain bank debt that are to be converted automatically to equity or written off, if conditions specified in the contract obtain.
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| Sometimes written ''bail-in'' or ''bail in''.
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| | It is designed for the benefit of the lender to ensure that they will enjoy a 'seat at the table' in any refinancing negotiations with the defaulting borrower. |
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| == See also == | | == See also == |
| * [[Bailout]] | | * [[Default]] |
| * [[Capital]] | | * [[Event of default]] |
| * [[Capital adequacy]]
| | * [[Loan agreement]] |
| * [[Eligible liabilities]]
| | * [[Materiality]] |
| * [[Loss absorbing capacity]]
| | * [[Cross acceleration]] |
| * [[MREL]]
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| * [[Multiple Point of Entry]]
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| * [[Recapitalisation amount]]
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| * [[Recapitalise]]
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| * [[Resolution Authority]]
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| * [[Single Point of Entry]] | |
| *[[SLAC]] | |
| *[[TARP]] | |
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| [[Category:Accounting,_tax_and_regulation]] | | [[Category:Long_term_funding]] |
| [[Category:The_business_context]] | | [[Category:Long_term_funding]] |
| [[Category:Compliance_and_audit]] | | [[Category:Treasury_operations_infrastructure]] |
| [[Category:Risk_frameworks]]
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