What is a bank bail-in? How failing banks are rescued without taxpayers
By SendPay Business · · 2 min read
A bail-in is a way of rescuing a failing bank by making its shareholders and certain lenders absorb the losses, instead of using taxpayers' money. After the 2008 financial crisis, the UK and EU gave authorities the power to do this.
Bail-in vs bailout
In a bailout, the government puts in public money to keep a bank going, as happened with several UK banks in 2008. In a bail-in, the bank's own investors pay: their shares or bonds are written down or turned into new shares to rebuild the bank's capital.
Who takes losses first
- Shareholders.
- Holders of bonds designed to absorb losses.
- Other unsecured lenders to the bank.
- Only in rare cases, deposits above the protected limit.
The Cyprus example
In 2013, as part of an international rescue, large depositors at two Cypriot banks lost part of their savings above €100,000. Protected deposits under that limit were not touched.
Protected deposits
In the UK, deposits covered by the FSCS are excluded from bail-in. Check the FSCS website for the current limit.
Where SendPay fits
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.