This paper examines the implementability of bail-in―a special bank resolution regime that reorganizes failed banks at the expense of creditors not taxpayers. In the first part of the paper, I consider the statutory bail-in case. I find theoretically the existence of multiple equilibria. If investors believe that the government will choose bailout (bail-in) in case of bank failure, the government indeed chooses bailout (bail-in). I also find that the depositor preference could be a commitment device by which the government can persuade the investors that it will choose bail-in. In the second part of the paper, I consider the contingent convertible bond (or CoCo bond), which is designed as a contractual bail-in tool. I find theoretically the same existence of multiple equilibria. Also, I show that if the government requires CoCo bond issuing banks to use rule-based triggers instead of discretionary triggers, the government can credibly persuade investors that it is tough. As a result, the equilibrium interest rates of CoCo bonds with discretionary triggers are lower than that with rule-based triggers. I confirm this theoretic prediction by conducting an empirical study. Using a CoCo bond issuance dataset from Moody’s and Bloomberg, I find that the interest rate gap is on average 2.5~3%p. The theoretic and empirical analyses imply that CoCo bonds with a discretionary trigger does not work effectively as a contractual bail-in tool.

Preface
Executive Summary

Chapter 1 Introduction
　Section 1 Literature Review

Chapter 2 Overview of Bail-In
　Section 1 Background and Importance of the Bail-In System
　Section 2 Overview of Statutory Bail-In
　Section 3 Overview of Contractual Bail-In: Contingent Convertible Bonds

Chapter 3 Feasibility of Bail-In: A Return to Bailout?
　Section 1 Is Bail-In Feasible?
　Section 2 Case Study: Italy
　Section 3 Case Study: South Korea
　Section 4 Commitment Problem

Chapter 4 Statutory Bail-In
　Section 1 (Theoretical Analysis) Ex-Post Feasibility: Importance of Pre-Resolution Policies
　Section 2 (Theoretical Analysis) Effects of Depositor Preference
　Section 3 (Theoretical Analysis) Welfare Effects of Bail-In
　Section 4 Conclusion

Chapter 5 Contractual Bail-In (Contingent Convertible Bonds)
　Section 1 (Theoretical Analysis) Trigger Mechanism, Feasibility, and Bail-In Risk Premium
　Section 2 (Empirical Analysis) Trigger Mechanism, Feasibility, and Bail-In Risk Premium
　Section 3 Conclusion

Chapter 6 Policy Implications
　Section 1 Pre-Resolution Preparations for Effective Resolution
　Section 2 Depositor Preference System
　Section 3 Policy Considerations for CoCo Bond Trigger Mechanisms

Chapter 7 Conclusion

References
Appendix
ABSTRACT