Abstract

Subordinated debt is largely used by banks as a source of regulatory capital. However, due to new rules on «burden sharing» and «bail in», it has recently raised concerns in terms of consumer protection for retail investors. I provide some empirical data on subordinated bonds issued by European lenders, including securities addressed to small savers, and discuss how such bonds may be affected by new rules on recovery and resolution. I then turn to European regulations aimed at sheltering retail customers from mis-selling and mis-pricing, highlighting some possible weaknesses and discussing how they could be fixed by promoting better supervisory standards.