Users' questions 

Can banks do a bail-in?

Leia Doyle

Can banks do a bail-in?

A bank can undergo a bail-in quickly through a resolution proceeding, which provides immediate relief to the bank. The obvious risk to bank depositors is the possibility of losing a portion of their deposits.

What happens when banks bail-in?

When creditors of a bank are bailed in, they will generally receive shares in the institution as compensation (where necessary). These shares will give them rights to influence the direction the firm takes, and to a share of future profits in a company with a profit motive.

Are bank bail ins legal in the US?

Depositors in the U.S. are protected by the Federal Deposit Insurance Corporation (FDIC), which insures each bank account for up to $250,000. In a bail-in scenario, financial institutions would only use the amount of deposits that are in excess of a customer’s 250,000 balance.

What is the bail-in tool?

The bail-in tool Bail-in is a key resolution tool provided for in the BRRD. It allows to write-down debt owed by a bank to creditors or to convert it into equity. By replicating how creditors would incur losses if the bank had gone bankrupt, it reduces the value and amount of liabilities of the failed bank.

What is the difference between bail-in and bail out?

There was a lot of uproar some time back about the Indian government introducing a Financial Resolution and Deposit Insurance (FDRI) Bill that replaced ‘bail-out’ with ‘bail-in. This is called ‘bail-out’, simply because the government bails out the bank.

How can I protect my bail-in money?

1 Diversify savings across banks and in different countries. 2 Consider counterparty risk and the health of the deposit-taking bank. 3 Attempt to own assets outright and reduce risk to custodians and trustees. 4 Own physical gold in allocated accounts with outright legal ownership.

What are bail-in powers?

‘Bail-in’ refers to powers exercisable by resolution authorities in the relevant EU Member States to rescue troubled European banks by writing-down their debt or converting bonds into equity.