kaal:claim:2957645-007

By internalizing the costs of bank failure, contingent capital may be able to minimize moral hazard, avoid financial contagion, and limit systemic risk.

By internalizing bank failure costs, contingent capital may be able to minimize moral hazard,14 avoid financial contagion,15 and limit systemic risk.16

Kaal, Dynamic Regulation via Contingent Capital (2017), I. Introduction, p. 8
https://ssrn.com/abstract=2957645 · source PDF

Kaal, Dynamic Regulation via Contingent Capital (2017). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2957645

• bank failure costs are actually borne by the institution's own capital structure

mechanismsupport: arguedrisk-and-incentivessystemic-riskcontingent-capital

• restates kaal:claim:1908473-016 By internalizing the costs of bank failure, contingent capital can reduce moral hazard, and because a continge...
• extends kaal:claim:1998455-008 Contingent capital contributes to minimizing moral hazard by internalizing bank failure costs, that is, by pla...
• extends kaal:claim:2061166-021 Contingent capital supports general risk control and reduces moral hazard by holding shareholders responsible ...
• extends kaal:claim:1998455-028 Contingent capital securities approximate the characteristics of a quasi-public good: just as ships cannot rea...

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