The FSB rules separate the liabilities needed to keep a bank running from purely financial debts such as notes issued for funding, according to Bloomberg. By “bailing in” the bonds  writing them down or converting them to equity  regulators aim to ensure a lender in difficulty has the resources to be recapitalized without using public money, and to allow the resolved firm to continue to operate.

In a departure from previous practice, senior debt issued by banks is explicitly exposed to loss.