To Bail-in, or to Bail-out, that is the Question

The introduction of the bail-in tool in the EU legal framework will increase market discipline, reduce moral hazard and save taxpayers’ money through bank restructuring; it should therefore be positively assessed. However, it is unlikely that the use of this new instrument will automatically put an end to bail-outs. This is mainly because there could still be bank crises where public bail-outs might be more effective and less costly than bail-ins. Recent cases of Italian bank crises seem to be a clear confirmation of this assumption.