One of the ways that regulators are thinking about protecting banks is through contingent capital requirements, which is debt that "vests" (turns into equity) when the bank needs it most (you hear about triggers when bank stock volatility hits a certain number, or when daily measures of the economy's health look very bad). Two attractive aspects of contingent capital are first that it ought to be relatively cheap funding, since it works more like insurance than regular debt, and second that it can be traded, which might give regulators (and the bank) a market signal that a bank is in trouble.
I'm not sure that contingent capital will differ too much from preferred stock, which we already have, and which it looks a little bit like, but if you want more on it, Columbia, oddly enough, seems like the institution for you. John Coffee has a supportive paper on contingent capital, but if visuals are more your thing, Paul Glasserman of CBS has just the 20 minute video (HT: Youngmi Ko).
TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8345157d569e20154359210d2970c
Links to weblogs that reference Contingent Capital Outsource:
| Sun | Mon | Tue | Wed | Thu | Fri | Sat |
|---|---|---|---|---|---|---|
| 1 | 2 | 3 | 4 | 5 | ||
| 6 | 7 | 8 | 9 | 10 | 11 | 12 |
| 13 | 14 | 15 | 16 | 17 | 18 | 19 |
| 20 | 21 | 22 | 23 | 24 | 25 | 26 |
| 27 | 28 | 29 | 30 | 31 |
