A regulatory Catch-22: bail-in plans collide with Basel's NSFR

Basel’s liquidity rules mean banks will have to issue more long-term debt. That is not going to be easy if regulators also force senior bondholders to absorb a failing bank’s losses. By Mark Pengelly

Christian Weber

Europe's banks have to issue an estimated €2.7 trillion ($3.6 trillion) in long-term debt if they are to comply with Basel III’s incoming net stable funding ratio (NSFR). On its own, that would not be easy. But proposed rules on bank resolution could make the task far harder, by enabling regulators to impose losses on bondholders – a so-called bail-in regime that is expected to raise the cost of debt issuance by 100 basis points or more, while also shrinking the pool of investors able to hold