A trigger that fires too late is equally useless: by then the financial institution may already be in the resolution stage, and conversion at that point will not supply enough equity to turn the company around.
Source quote, verbatim
If conversion from debt to equity is triggered too late, the financial institution may already be in the resolution stage and conversion at that stage would not supply the company with sufficient equity to turn the company around.
From
Christoph K. Henkel, Wulf A. Kaal, Contingent Capital in European Union Bank Restructuring (2012), B. Timing Trigger Events, p. 66 https://ssrn.com/abstract=2061166 · source PDF
Cite as
Christoph K. Henkel, Wulf A. Kaal, Contingent Capital in European Union Bank Restructuring (2012). SSRN: https://ssrn.com/abstract=2061166
Holds when
contingent capital converting only at or near the point of non-viability
Classification
failuresupport: arguedfailure: Late conversion cannot recapitalize a firm already in resolutionfamily: trigger-design-failurecontingent-capitalsystemic-risk
Related claims
restateskaal:claim:1908473-004 If conversion from debt to equity is triggered too late, the institution may already be in the resolution stag...
restateskaal:claim:1998455-013 Converting contingent capital securities too late makes the capital injection superfluous, because by that sta...
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