[cm2187]

That's correct. The regulators are still playing with these rules but two things will mitigate that:

1. Banks are not allowed to have a too large exposure to a single counterparty, so the bail-in of a single bank should never result in another bank failing.

2. The investment in regulatory capital or in bail-inable bank capital is likely to be treated in a very penal way from a capital point of view.

Banks do have this exposure naturally as they tend to be market makers for other banks paper, so typically always hold some inventory of these bonds, but these are relatively small amounts. Banks should normally not hold large positions in other banks capital and debt as these instruments are not eligible for their liquidity pools.