How do bail-in amendments in Directive (EU) 2017/2399 affect the subordinated bond yields of EU G-SIBs?

Using a diff-in-diff analysis, we compare the yield reaction of subordinated bonds to the implementation of the Directive (EU) 2017/2399, for EU G-SIBs and smaller banks. We find an increase in the yields of EU G-SIBs relative to smaller banks of between 0.24 and 0.31 basis points. Such repricing indicates higher bail-in expectations among subordinated bondholders as the Directive's provisions improve the effectiveness of the bail-in. Moreover, this result implies the higher risk profile of subordinated bondholders following the implementation of the new Directive and suggests that its measures might be effective in restoring market discipline.