kaal:claim:1908473-015

Switching to contingent capital financing may reinforce rather than reduce risk incentives, and whether the risk incentives generated by contingent capital outweigh its risk reduction potential remains unresolved.

In effect, however, switching to CCS financing could reinforce risk incentives. Additional research may be needed to determine if risk incentives generated by CCS113 may outweigh their potential for risk reduction.

Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011), II.B. Limitations and Open Issues, p. 24
https://ssrn.com/abstract=1908473 · source PDF

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

• Turns on the design features of the securities and on how much control equity holders retain after conversion

failuresupport: arguedfailure: risk-incentive-reinforcementfamily: moral-hazard-and-bailout-expectationrisk-and-incentivescontingent-capital

• restated_by kaal:claim:1998455-019 Switching to contingent capital financing could reinforce rather than dampen risk incentives, and these distor...
• extended_by kaal:claim:1998455-017 Contingent capital rules could contribute to overriding the moral reasoning of decision makers, in which case ...

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