Keywords: Capital regulation, bank, rating, subordinated debt
Abstract: During the last twenty years an increasing number of proposals to improve bank market discipline through the introduction of a mandatory subordinated
debt policy have been drafted and critically discussed by academic economists and bank regulators. While theoretical issues are key in this debate, a
proper understanding of the market of banks' subordinated notes and debentures (SND) and of the securities main features is also considered as
relevant for the potential introduction, design, and goals setting of such a policy. This paper builds on information concerning issuers, investors,
markets, and securities technical features to critically discuss these aspects. Data on over 1,800 European banks' SND issues completed during the
1988-2000 period together with information on primary and secondary
market functioning is presented.
Full paper (224 KB PDF)
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Last update: October 26, 2000