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Should a mandatory subordinated debt policy be introduced in the United Kingdom? Evidence from the issuance activity of banks and building societies

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journal contribution
posted on 20.05.2014 by Paul Hamalainen, Barry Howcroft, Maximilian Hall
Current research is beginning to question the role and effectiveness of traditional rules-based bank regulatory oversight in favor of incentive-compatible regulatory design and market discipline and, in particular, mandatory subordinated debt market discipline. However, research on the suitability of a mandatory subordinated debt policy (MSNDP) has focused primarily on the United States. The primary aims of this article, therefore, are to examine the market for subordinated debt (SND) issued by UK credit institutions and to assess the suitability of introducing an MSNDP into UK banking regulation. A further contribution of this article is that it explores SND issuance and its characteristics at a bank level and, uniquely, considers them in relation to regulatory, structural, and economic events that either are specific to the UK or otherwise affect international banks. The article compares the UK findings with research on SND markets in the United States and Europe and, in so doing, raises concerns over whether an MSNDP for the largest global credit institutions would be feasible. Although the focus of this study is the UK banking industry, the country-focused bank-level approach provides conclusions that might be relevant to other countries considering the implementation of an MSNDP.

History

School

  • Business and Economics

Department

  • Business

Citation

HAMALAINEN, P., HOWCROFT, B. and HALL, M.J.B., 2010. Should a mandatory subordinated debt policy be introduced in the United Kingdom? Evidence from the issuance activity of banks and building societies. Contemporary Economic Policy, 28 (2), pp. 240 - 263.

Publisher

Wiley / © Western Economic Association International

Version

AM (Accepted Manuscript)

Publication date

2010

Notes

This article was published in the journal, Contemporary Economic Policy [Wiley / © Western Economic Association International]. The definitive version is available at: http://dx.doi.org/10.1111/j.1465-7287.2009.00174.x

ISSN

1465-7287

Language

en

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