Alessandro Di Stefano

The resolution framework for global systemically important banks has been over a decade in the making. The failure of Credit Suisse (CS) in March 2023 was its first major test. Authorities had a resolution plan in place but chose a different path amid financial stability concerns. They facilitated a takeover of CS by UBS, backed by public guarantees. Additional Tier 1 (AT1) bonds were written down in full; bail-in creditors, who would bear losses next under resolution, were left whole. We study how this episode reshaped bail-in credibility across Europe. Using bond-level data from 94 banks in 22 countries, we trace the repricing of AT1, bail-in, and senior debt over the subsequent year. AT1 spreads moved in line with jurisdiction-specific regulatory signals, while bail-in spreads and credit default swap subordination premia narrowed across the board, consistent with markets assigning a lower probability to bail-in. Lower-rated banks saw larger spread declines, and investor responsiveness to firm-specific disclosures fell, pointing to reduced market discipline. This evidence suggests the CS episode weakened bail-in credibility.

Payment platforms increasingly originate credit and recover it by withholding a share of each merchant sale at settlement. We call this contract programmable repayment (PR). PR is state-contingent debt on platform-recorded sales. It transfers part of the merchant’s cash-flow risk to the lender and automates collection, but the merchant chooses which sales are processed through the platform. This puts the contract’s risk-sharing benefit in tension with its enforcement reach. At an Indian payment fintech running PR at scale, merchants with more volatile sales and outside-credit pressure accept offers more often. After disbursal, high-volatility merchants drive the platform-sales decline relative to matched controls. The same merchant diverts substantially more on her second loan than her first, learning to substitute toward digital channels where cash becomes scarce. The contract’s pledgeability is therefore endogenous to borrower experience. The lender nevertheless earns positive returns: high-volatility merchants default less and stay longer on the platform.