The paper analyses the sectoral composition of the investor base of the bonds eligible for the Total Loss Absorbing Capacity (TLAC) requirement issued between 2013 and the first half of 2020 by the eight euro-area banking groups identified as Global Systemically Important Banks (G-SIBs). We assess the extent to which, in the case of the resolution of a G-SIB, the composition of the investor base could be an obstacle to a bail-in or have repercussions on financial stability.
Two thirds of TLAC-eligible bonds are held by non-euro-area investors. The composition of euro-area investors has changed over time such that a possible bail-in would be less problematic: the share of bonds held by households has significantly declined and the share held by insurances and pension funds has risen. The pandemic has not changed these dynamics. The share of households' wealth invested in TLAC bonds is very low but negatively correlated with the country's average level of financial education.
Published in 2021 in: Rivista Bancaria, Minerva Bancaria, v 12, pp 32-46
