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The recent proposals for reforming banking regulations put forward by the Bank for International Settlements and the Federal Reserve System include specific elements of market discipline that naturally supplement traditional regulatory instruments. More specifically, a mandatory subordinated debt policy that requires large banking institutions to issue a minimum amount of subordinated debt on a regular basis (as common equities) can prove effective in mitigating the effects of moral hazard. This paper focuses on the incentives given to subordinated creditors and their implications for the Subordinated Debt Policy. In particular, the aim of our analysis is to highlight the dual nature of subordinated creditor behavior: on the one hand, they behave as “allies” of regulators, in the way they protect their investments through active monitoring and immediate penalization of excessively risky strategies. On the other hand, they are “enemies” of regulators, by similarly encouraging shareholders to adopt risky strategies.