Bail-In

Bail-in is a bank resolution mechanism where a failing financial institution's creditors and depositors (above the insured limit) are forced to absorb losses by having their debt converted into equity or written down, thereby recapitalizing the bank and preventing a taxpayer-funded bail-out. This regulatory tool, a cornerstone of post-2008 financial reforms like the EU's Bank Recovery and Resolution Directive (BRRD) and the US Dodd-Frank Act, is designed to ensure that the cost of failure is borne by the private sector, promoting financial stability and market discipline.