NDIC Quarterly vol. 30 no. 4 2016 articles
Research, Policy & International Relations Department: NDIC,2016
Abstract; Introduction; Bail-in Debt and its Rationale; What is bail-in? Rationale for bail-in; Advantages and disadvantages of bail-in; Design features; Potential Impact of Bail-in Resolution on Banks’ Funding Cost and Implications for Financial Stability; Resolving D-SIBs in Nigeria using Bail-in; Resolution tools available to regulatory authorities in Nigeria; Converting liabilities into equity; Applying Bail-in in Nigeria; The bail-in resolution vs. Bridge bank mechanism; Findings; Conclusion
The 2007-2009 global financial crisis resulted in public sector capital injections used to directly bail-out major global banks in excess of US$1 trillion. When the guarantees and insurance provided by major governments were added, the cost of the bail-out was estimated to be more than US$8.5 trillion. The 2009 Nigerian banking crisis led to the capital injection of N879 billion (more than 10% of GDP) into the Nigerian banks in the form of subordinated loan as well as through the purchase of bad loans. This paper describes the bail-in resolution tool available to regulators to resolve failing banks. The paper presents the bail-in creditor-funded resolution regime, its structure, merits and demerits.