Bail-in
Bail-in (Resolution Tool)
Definition
A resolution tool that allows authorities to write down or convert the liabilities of a failing bank to absorb losses and recapitalise the institution, as an alternative to taxpayer-funded bailouts. The bail-in tool follows a prescribed creditor hierarchy, with shareholders and subordinated debt holders absorbing losses first.
Regulatory Context
Bail-in was introduced under the EU Bank Recovery and Resolution Directive (BRRD) and the UK Banking Act. The tool can only be used where the resolution authority determines that resolution is in the public interest. MREL/TLAC requirements ensure sufficient bail-inable instruments are available.