The term “bail-out” became ubiquitous during the recent financial crisis. Its counterpart, “bail-in,” is now rapidly becoming equally well-recognized and, at least in some circles, just as controversial.
Bail-out is, of course, when outsiders, be it government or private, rescue a distressed institution by injecting capital or providing other financial support. By contrast, in a “bail-in” it is the creditors to the distressed institution that bear the risk of its failure through a forced reduction or conversion to equity of debt.1 The term bail-in has recently become closely associated with the EU Bank Recovery and Resolution Directive (BRRD).2
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