# kaal:claim:1908473-016

**Claim.** By internalizing the costs of bank failure, contingent capital can reduce moral hazard, and because a contingent debt security with a conversion trigger would presumably not default, it helps avoid contagion and systemic spillovers.

**Type.** mechanism  **Support.** argued

**Holds when.**

- Assumes the conversion trigger operates as designed

**Source quote.**

> By internalizing bank failure costs, contingent capital may contribute to minimizing moral hazard. A contingent debt security with a conversion trigger would presumably not default and could thus help avoid contagion and systemic spillover effects, which in turn may limit systemic risk.

**From.** Wulf A. Kaal, Christoph Henkel, *Contingent Capital with Sequential Triggers* (2011), II.A. Potential for Reform and Financial Stability, page 17

**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

**Topics.** risk-and-incentives, systemic-risk, contingent-capital

**Keywords.** moral-hazard, contagion, systemic-risk, contingent-capital

**Related claims.**

- restated_by: https://wulfkaal.github.io/claims/2957645-007
- extended_by: https://wulfkaal.github.io/claims/2957645-021
- restated_by: https://wulfkaal.github.io/claims/1998455-008
- restated_by: https://wulfkaal.github.io/claims/2061166-021

**Canonical form.** This markdown file is the canonical hashed representation of the claim. Its sha256 is the content hash used for attestation.