kaal:claim:2957645-021

Appropriate use of contingent capital triggers can further lower the default risk of the contingent capital securities themselves, on top of the moral hazard reduction that comes from internalizing bank failure costs.

contingent capital can minimize moral hazard,43 and appropriate use of contingent capital triggers can further lower default risk of CCS.44

Kaal, Dynamic Regulation via Contingent Capital (2017), III. Contingent Capital, p. 13
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

• triggers are designed and evaluated appropriately

conditionsupport: arguedcontingent-capitalrisk-and-incentives

• extends kaal:claim:1998455-008 Contingent capital contributes to minimizing moral hazard by internalizing bank failure costs, that is, by pla...
• extends kaal:claim:1908473-016 By internalizing the costs of bank failure, contingent capital can reduce moral hazard, and because a continge...
• extends kaal:claim:2061166-021 Contingent capital supports general risk control and reduces moral hazard by holding shareholders responsible ...
• extends kaal:claim:2097160-022 Early triggers in executive compensation improve the signaling of default risk by producing the signal while d...

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