Bail-in has been the reference point of the EU’s transition from the pre-crisis to the post-crisis era. Taxpayer money will only be used once shareholders, junior and senior creditors have seen their titles being written off and/or converted to equity. In this context, banks are obliged to issue bail-inable debt to up to 8% of the entity’s liabilities. Due to the relatively low return that such financial instruments provide banks are forced to sell those bail-inable instruments to retail investors, most of whom are also clients of the issuing bank (‘self placement’). This was a common case, inter alia, in Spain and Italy. The recent resolution of Monte Paschi di Sienna, Banca Popolare di Vicenza and Veneto Banca (Veneto banks) in Italy, and Banco Popular in Spain have shown that national authorities are trying to avoid the use of the bail-in tool at all cost by using either traditional resolution techniques (bail-out) or by searching for legislative getaways (precautionary recapitalization). Full use of bail-in has applied only once so far in the case of Banco Popular. On top of that, resolution inconsistencies have been observed in seemingly similar cases (Veneto banks in Italy and Banco Popular in Spain) since retail investors in Spain have been treated brutally compared to the ones in Italy. That said, this paper aims to examine in detail the factual and legal background of those cases in order to conclude on what the (political) barriers are to an effective bank resolution framework in the EU.
