kaal:claim:2273857-059

A contingent capital triggering event signals that management was unable to manage the entity so as to avoid the trigger, and therefore signals to rulemakers that regulatory action may be needed, information regulators cannot obtain by monitoring debt to equity and capital adequacy ratios alone.

While regulators have other means of monitoring debt/equity ratios and capital adequacy ratios, a CoCo triggering event signals that management was unable to manage the entity to avoid the triggering event, suggesting that regulatory action may be needed.

Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013), IV. Implementation, p. 28
https://ssrn.com/abstract=2273857 · source PDF

Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857

• a CoCo trigger is actually reached in a specific institution

mechanismsupport: arguedcontingent-capitalinstitutional-design

• restated_by kaal:claim:2957645-027 Contingent capital creates feedback effects because the conversion of debt to equity signals to regulators tha...
• extended_by kaal:claim:2957645-025 Contingent capital qualifies as a dynamic regulatory mechanism because capital injection is available only if ...

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