A second, sequential trigger placed before reorganization or resolution cushions the risk that policy makers misstructure the first trigger, absorbing the negative effects of inadequate or untimely conversion at the moment the institution needs capital.
Source quote, verbatim
Given the risk that policy makers may not structure the trigger appropriately, the negative effects of inadequate or untimely conversion of debt into equity at a time when the company requires a capital injection could be cushioned with a second trigger
From
Christoph K. Henkel, Wulf A. Kaal, Contingent Capital in European Union Bank Restructuring (2012), C. Dual Triggers in Going and Gone Concern, p. 68 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 with sequential triggers spanning going and gone concern
extendskaal:claim:1908473-006 The second trigger, which increases voting rights before resolution, should fire on evidence that conversion i...
extendskaal:claim:1908473-005 Because policymakers may adopt a suboptimal single trigger design, and because contingent capital has uses at ...
extendskaal:claim:1908473-007 Beyond super-voting rights and dilution, the second trigger functions as a reorganization tool that operates i...
extendskaal:claim:1908473-030 The second trigger voting rights increase should never actually be triggered; its function is to level the pla...
extendskaal:claim:1998455-013 Converting contingent capital securities too late makes the capital injection superfluous, because by that sta...
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