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Please use this identifier to cite or link to this item: http://arks.princeton.edu/ark:/88435/dsp01wh246w308
Title: Resolvability Perceptions of U.S. Global Systemically Important Banks as Measured by Total Loss-Absorbing Capacity Eligible Debt
Authors: Dimpter, Nelson
Advisors: Kiyotaki, Nobuhiro
Department: Economics
Certificate Program: Finance Program
Class Year: 2022
Abstract: Bank resolution planning requires sufficient positioning of financial resources within a banking group to absorb losses in severe stress and failure, permitting orderly resolution that minimizes disruptions to financial stability. Bail-in debt instruments that meet the definition of total loss-absorbing capacity (“TLAC”) serve as capital between equity and subordinated debt and senior liabilities. Regulations in the U.S. seek to clarify the role of TLAC debt in the capital structure, mainly how losses would be imposed on this class of creditors during the failure of a large bank. This paper studies the pricing of these bail-in instruments issued by U.S. Global Systemically Important Banks from 2013 to early 2022 to assess the perceptions of bail-in credibility and its changes over time in response to bank financials, market risk factors, and resolution planning developments. This study uses a panel regression model and an event study analysis, finding the presence of a positive bail-in risk premium that remains relatively stable despite changing risk factors and regulations.
URI: http://arks.princeton.edu/ark:/88435/dsp01wh246w308
Type of Material: Princeton University Senior Theses
Language: en
Appears in Collections:Economics, 1927-2022

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