kaal:claim:1998455-013

Converting contingent capital securities too late makes the capital injection superfluous, because by that stage the institution may face unresolvable difficulties that a capital injection can only marginally soften, and conversion may not suffice once the institution has entered resolution.

On the other hand, converting CCS too late could make the capital injection superfluous. At that stage, the financial institu- tion may have experienced unresolvable financial difficulties that may only marginally be softened with a capital injection.

Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012), III.B. Unresolved Design Issues, p. 23
https://ssrn.com/abstract=1998455 · source PDF

Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455

• where the trigger fires after the institution's difficulties have become unresolvable
• especially once the institution has entered the resolution stage

failuresupport: arguedfailure: late-conversionfamily: trigger-design-failurecontingent-capitalsystemic-risk

• extends kaal:claim:1908473-003 If conversion of contingent capital securities is triggered too early, before a real financial need for an equ...
• restated_by kaal:claim:2061166-032 A trigger that fires too late is equally useless: by then the financial institution may already be in the reso...
• restates kaal:claim:1908473-004 If conversion from debt to equity is triggered too late, the institution may already be in the resolution stag...
• extended_by kaal:claim:2061166-034 A second, sequential trigger placed before reorganization or resolution cushions the risk that policy makers m...

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