Completing the European Banking Union: Capital cost consequences for credit providers and corporate borrowers

The bank recovery and resolution directive (BRRD) regulates the bail-in hierarchy to resolve distressed banks in European Union (EU). Using staggered BRRD implementation across 15 member states, we identify banks’ capital cost responses subsequent pass-through borrowers towards surprise elements due national transposition details. Average costs increase heterogeneously countries with strongest funding hikes observed for located GIIPS non-EMU countries. Only core E(M)U that exhibit higher credit spreads corporate contract supply. Tighter conditions are only passed on more levered less profitable firms. On balance, of appears have strengthened financial system resilience without a pervasive hike borrowing costs.