# kaal:claim:1908473-013

**Claim.** Letting national regulators keep their existing Tier 1 capital definitions creates a collective action problem: countries with stricter definitions appear to have less capital and thinner cushions than countries with broader ones.

**Type.** failure  **Support.** argued

**Holds when.**

- Applies where EU wide harmonization of the Tier 1 definition is absent

**Source quote.**

> This creates collective action problems. A country that uses stricter definitions of Tier 1 capital could appear to have less capital and thinner capital cushions than banks in countries with broader definitions for Tier 1 capital.

**From.** Wulf A. Kaal, Christoph Henkel, *Contingent Capital with Sequential Triggers* (2011), II.B. Limitations and Open Issues, page 21

**Cite as.** Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011). SSRN: https://ssrn.com/abstract=1908473

**Verify.** sha256 of source PDF `9d578dac663357529edd1f6453fcfe69bdc59ac882408d9edfde5a4c2916befa` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20and%20Henkel%20-%202011%20-%20Contingent%20Capital%20with%20Sequential%20Triggers.pdf

**Failure mode.** tier-1-definition-divergence  (family: harmonization-and-standardization-failure)

**Topics.** institutional-design

**Keywords.** tier-1-capital, collective-action, regulatory-harmonization, european-union

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