kaal:claim:2273857-060

Contingent capital triggers have significant design limitations: accounting based triggers may not respond adequately in financial crises because they are updated too infrequently, while market based triggers are susceptible to market manipulation and bank runs.

accounting-based measures in institution-specific automatic triggers may not be able to respond adequately in financial crises because they are arguably too infrequently updated. Market-based measures, on the other hand, could be susceptible to market manipulation and banking runs.

Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013), IV. Implementation (footnote 127), 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

• accounting based institution specific triggers
• market based institution specific triggers

failuresupport: arguedfailure: CoCo trigger design failurefamily: trigger-design-failurecontingent-capitaleconomicsregulatory-failure

• restates kaal:claim:2097160-016 Market-based trigger measures are vulnerable to market manipulation and bank runs, while accounting-based meas...
• supersedes kaal:claim:1908473-008 The first trigger should be based on a threshold in market value rather than accounting measures, because a ma...

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