entity · derived
Contingent capital
Derived node: assembled mechanically from the claims carrying contingent-capital. A roster, not an adjudicated definition.
Every claim under this term
- 1908473-001 : Contingent capital is defined as the predefined conversion of a financial institution's debt securities into equity securities upon a triggering event, and this stipulated definition governs the whole
- 1908473-002 : Contrary to proposals that would replace Chapter 11 with contingent capital, the authors argue Chapter 11 needs no replacement; contingent capital should instead stabilize large financial firms for wh
- 1908473-003 : If conversion of contingent capital securities is triggered too early, before a real financial need for an equity injection exists, the expected financial impact of that injection may dissipate.
- 1908473-004 : If conversion from debt to equity is triggered too late, the institution may already be in the resolution stage, and conversion at that point may not supply enough equity to produce the intended finan
- 1908473-005 : Because policymakers may adopt a suboptimal single trigger design, and because contingent capital has uses at several points in a firm's life cycle, contingent capital securities should be built with
- 1908473-008 : The first trigger should be based on a threshold in market value rather than accounting measures, because a market value trigger avoids total reliance on accounting methods that are open to manipulati
- 1908473-009 : The volume of contingent capital issuance should be large enough that conversion produces sufficient dilution, and the trigger timeframe should be roughly ninety days.
- 1908473-016 : By internalizing the costs of bank failure, contingent capital can reduce moral hazard, and because a contingent debt security with a conversion trigger would presumably not default, it helps avoid co
- 1908473-017 : Contingent capital securities are likely to be more efficient than raising capital requirements, because the capital arrives only when it is needed.
- 1908473-018 : The threat of loss on conversion and the implicit dilution of existing stock holdings reduce shareholders' incentive to press management for higher risk in pursuit of higher returns.
- 1908473-021 : Without a degree of international convergence in contingent capital rules, regulatory arbitrage could undermine the establishment of contingent capital as an integral part of financial markets.
- 1998455-004 : Because both European regulatory initiatives and the United States academic debate concentrate on the technical design features of contingent capital securities, the possible corporate governance appl
- 1998455-005 : Combined with other corporate governance mechanisms, contingent capital securities function as an internal, institution specific mechanism that could fill the void left by regulators' apparent inabili
- 1998455-007 : For purposes of this Article contingent capital is stipulated to be the predefined conversion of a certain percentage of a financial institution's debt securities into equity securities.
- 1998455-008 : Contingent capital contributes to minimizing moral hazard by internalizing bank failure costs, that is, by placing those costs on the institution's own security holders rather than on the public.
- 1998455-009 : Installing contingent capital can be more efficient than raising capital requirements, because the capital injection becomes available only when it is needed and only enough securities convert to reca
- 1998455-010 : The threat of dilution of stock holdings, combined with the threat of loss on conversion, reduces the pressure shareholders place on the management of systemically important financial institutions to
- 1998455-011 : Trigger designs can be ranked by the certainty they give market participants: institution specific triggers presumably grant the most certainty, while regulatory trigger designs provide lower levels o
- 1998455-012 : Converting contingent capital securities prematurely, while the institution can still operate without an equity injection, dissipates the benefit: the injection is no longer available at the later mom
- 1998455-013 : Converting contingent capital securities too late makes the capital injection superfluous, because by that stage the institution may face unresolvable difficulties that a capital injection can only ma
- 1998455-014 : Contingent capital by itself, without additional measures and supplemental corporate governance improvements, may not prevent firm failure; its real potential unfolds only when it supplements other co
- 1998455-015 : Divergent national definitions of Tier 1 capital produce a distortion: financial institutions in countries with stricter definitions that exclude contingent capital appear to hold less capital and thi
- 1998455-016 : If a market evolves in which contingent capital designs appear to provide sufficient protection against systemic risk and contagion, decision makers may come to rely on the design of those securities
- 1998455-017 : Contingent capital rules could contribute to overriding the moral reasoning of decision makers, in which case contingent capital would actually increase, not reduce, risk incentives for institutions t
- 1998455-019 : Switching to contingent capital financing could reinforce rather than dampen risk incentives, and these distorted risk incentives are a drawback of contingent capital issuances.
- 1998455-022 : Absent cross holdings, the opposite conflict arises: institutions holding a competitor's converted contingent capital could be tempted to exercise their voting rights against the interests of that com
- 1998455-024 : The combination of demonstrated investor interest and an underdeveloped regulatory structure in the United States presents a unique opportunity to experiment with contingent capital designs and with t
- 1998455-028 : Contingent capital securities approximate the characteristics of a quasi-public good: just as ships cannot readily be excluded from a lighthouse, systemically important institutions benefit from the i
- 1998455-029 : The social welfare maximization potential of contingent capital securities is lower if their design features are left entirely to private ordering, because private parties do not necessarily structure
- 1998455-031 : Issuing contingent capital securities with a conversion feature is a way for a banking entity to signal to its market that it will adhere to stricter standards, ethical or otherwise.
- 1998455-032 : A contingent capital design that increases voting rights on conversion allows systemically important institutions to lower risk taking implicitly and to achieve an indirect, institution specific form
- 1998455-034 : Management incentives for risk control are heightened upon conversion, especially where management knows that holders of converted contingent capital would command a majority vote, with or without ins
- 1998455-036 : If central banks were to purchase contingent capital securities issued by systemically important institutions in the primary or secondary market as part of monetary policy, the prospect of internalizi
- 1998455-040 : Contingent capital can facilitate an incentive structure that lets regulators rely partially on private party contracting for the design of these securities while still accounting for systemic risk.
- 2061166-002 : The authors contend that the European Commission's goal of maximum harmonization through a global single rule book may not be achievable, and that a legal framework for private ordering of contingent
- 2061166-003 : Contingent capital is stipulated as the predefined conversion of a financial institution's debt securities into equity securities, and on that definition it supplies an option for the efficient restru
- 2061166-021 : Contingent capital supports general risk control and reduces moral hazard by holding shareholders responsible and internalizing the costs of bank failure rather than externalizing them onto taxpayers.
- 2061166-022 : Because conversion carries a threat of loss and implicit dilution of stock holdings, contingent capital reduces shareholders' incentive to push management toward higher risk in pursuit of higher retur
- 2061166-025 : Article 13 of the Swiss Banking Act, which authorizes boards of systemically important banks to issue mandatory convertible bonds subject to disclosure of the conversion triggering event and permits t
- 2061166-026 : Enacting the proposed German Corporation Act amendments that would give contingent capital securities a statutory basis would require substantial changes across other areas of German law, and is unlik
- 2061166-027 : Efficient calibration of the triggering event is the central design problem for contingent capital, and the optimal design of a trigger that converts debt into equity remains unclear.
- 2061166-028 : Mandating the issuance of contingent capital does not guarantee that a viable market in contingent capital securities will develop.
- 2061166-029 : Building critical mass in the contingent capital securities market could require banks and other financial institutions to buy their competitors' contingent capital securities, which would raise ethic
- 2061166-030 : The authors posit an inverse relationship between trigger uncertainty and market development: as the uncertainty generated by trigger designs increases, issuance volume of contingent capital securitie
- 2061166-031 : A trigger that fires too early wastes the equity injection: conversion occurs without a real need for capital or additional voting shareholders, and the effect of the injection may have dissipated by
- 2061166-032 : A trigger that fires too late is equally useless: by then the financial institution may already be in the resolution stage, and conversion at that point will not supply enough equity to turn the compa
- 2061166-033 : Dual trigger proposals draw their central strength from reliance on market prices, but the index leg is a major disadvantage because it can create incentives to manipulate the index or to force an ent
- 2061166-034 : 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 co
- 2061166-035 : Conversion of contingent capital securities from debt to equity should be timed to occur once problems are first detected but before the early intervention powers of regulatory authorities are trigger
- 2061166-036 : Using contingent capital as a preventative tool does not foreclose the statutory core power or the debt write-down tool within resolution; if early contractual write-down and conversion fail, authorit
- 2061166-037 : Convergence of contingent capital standards is impeded by a first mover problem: single jurisdictions hesitate to impose contingent capital requirements before they know how competing jurisdictions an
- 2061166-038 : Without a degree of similarity and convergence in bank resolution and contingent capital rules, regulatory arbitrage will work against establishing contingent capital as an integral part of financial
- 2061166-039 : Given the European initiatives on contingent capital and the nascent European market in contingent capital securities, the Board of Governors of the United States Federal Reserve would be well advised
- 2061166-040 : The Basel Committee rejected European Union Member State requests to allow contingent capital to satisfy the new capital buffer requirements under Basel III, deciding instead that systemically importa
- 2097160-001 : Early European initiatives to put contingent convertible bonds into executive pay lack governance-improving designs; contingent convertible bonds with an early conversion trigger should be used in exe
- 2097160-003 : Contingent convertible bonds placed in executive compensation serve a different purpose than those sold to investors: the point is not capital infusion during a crisis but governance-improving design
- 2097160-004 : The conversion feature of contingent convertible bonds affects corporate governance in a SIFI only if issuance volumes are sufficient and design features are adequate, because the governance effect ru
- 2097160-005 : Market solutions and private ordering alone are unlikely to produce contingent capital designs that improve corporate governance in SIFIs, because privately negotiated sales so far have not produced g
- 2097160-008 : Adding contingent convertible bonds with an early trigger to executive compensation packages creates a corporate governance mechanism that addresses the inability of contractual control rights to cons
- 2097160-012 : Contingent convertible bonds issued to executives are typically too small in volume to dilute investors' equity holdings or to supply a meaningful equity infusion during a crisis, so copying investor
- 2097160-031 : Regulatory guidance on contingent capital design and issuance may be needed to curtail executive involvement in designing these instruments and to produce socially optimal designs.
- 2097160-033 : Contingent convertible bonds with a conversion feature add what plain inside debt lacks: an early warning system and a buffer before insolvency that can help the entity avoid default.
- 2097160-038 : Trigger designs that work well in institutions with the traditional mix of debt-holders and shareholders may be suboptimal once executives themselves hold contingent convertible bonds.
- 2097160-039 : Who owns the contingent convertible bonds affects the efficiency, effectiveness, and corporate governance results of a trigger design, so ownership characteristics belong in the design analysis.
- 2273857-013 : Although implementing dynamic elements in regulatory structures remains uncertain, promising regulatory tools with dynamic elements already exist, including contingent capital securities, corporate in
- 2273857-056 : Depending on their design, contingent capital securities can function as an early warning system that helps preempt financial crises.
- 2273857-057 : Institution specific automatic triggers in contingent capital securities are flexible and can be tailored to the parties' needs precisely because they operate independently of regulatory discretion.
- 2273857-058 : Managers are incentivized to manage their institutions so as to avoid contingent capital triggers, and that incentive itself can optimize the governance of financial institutions.
- 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, info
- 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
- 2957645-001 : Contingent capital securities are a largely overlooked dynamic regulatory mechanism, and their regulatory value lies in their capacity to generate feedback effects, optimized timing, and improved info
- 2957645-006 : The issuance of contingent capital securities is a promising dynamic regulatory mechanism that can help address the suboptimal regulatory outcomes associated with disruptive innovation.
- 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.
- 2957645-014 : Section 165(b) of the Dodd-Frank Act already authorizes the Board of Governors of the Federal Reserve to utilize contingent capital, so the mechanism has a statutory foundation in United States law.
- 2957645-015 : Contingent capital is an automatic mechanism for increasing capital while reducing debt, and its long term benefit is lowering leverage.
- 2957645-016 : For purposes of this article, contingent capital is stipulated to mean the predefined conversion of a certain percentage of a financial institution's debt securities into equity securities.
- 2957645-017 : Strained financial institutions may find the automatic conversion of debt into equity through contingent capital securities an attractive alternative to being forced into restructuring or liquidation.
- 2957645-018 : The conversion feature of contingent capital securities has the potential to change the control dynamic, the distribution of power, and the dependencies within systemically important financial institu
- 2957645-019 : Regulators are often unable to supervise financial institutions effectively because of insufficient public funding, and contingent capital securities could help fill the void that this supervisory inc
- 2957645-020 : Contingent capital may be more efficient than simply raising capital requirements, because the capital injection is available only when it is needed and, when triggered, only as much of the contingent
- 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 ba
- 2957645-022 : The threat of dilution of stock holdings, combined with the threat of loss upon conversion, could help reduce the pressure shareholders place on management of systemically important financial institut
- 2957645-023 : Where conversion has a negative effect on stock price, management is further incentivized to maintain and manage risk in order to avoid reputational loss and the income reduction caused by losses in s
- 2957645-024 : Contingent capital could create a regime for providing countercyclical regulatory capital that further enhances the regulatory capital requirements of the Federal Reserve and those under Basel III.
- 2957645-025 : Contingent capital qualifies as a dynamic regulatory mechanism because capital injection is available only if and when needed and because the conversion of contingent capital securities into near wort
- 2957645-026 : Contingent capital securities optimize information for rulemaking because, when issued and triggered, they produce highly valuable, real time, decentralized information on the financial wellbeing of a
- 2957645-027 : Contingent capital creates feedback effects because the conversion of debt to equity signals to regulators that the entity's management was unable to avoid the trigger, which is itself a call for incr
- 2957645-028 : The occurrence of the debt to equity trigger creates real time regulatory information that a centralized system would require months or years to generate, and it enables regulators to open a regulator
- 2957645-029 : Contingent capital enables anticipatory regulation because regulators may observe and react in real time to triggering events, before the regulated entities encounter financial calamity.
- 2957645-030 : Information generated by contingent capital securities may allow regulators to adjust their regulatory requirements and the intensity of regulatory investigations anticipatorily rather than after the
- 2957645-031 : Most of the design features of contingent capital securities and their triggering events remain underdeveloped, yet despite these shortcomings such securities could still help regulators anticipate re