Contingent Capital: Canada a Laughing-stock?

The Globe & Mail reports:

Finance Minister Jim Flaherty is edging away from his alternative to a global bank tax, acknowledging in an interview that it’s “debatable” whether enough countries can be won over to make Canada’s contingent capital plan work on a global scale.

It’s still too early to write off the idea, which would require banks to sell debt that would convert to equity at times of stress. Mr. Flaherty stressed that he remains a fan of the concept, which he sees as a form of self-insurance that would make financial institutions less likely to rely on taxpayers to bail them out in future.

But the proposal has run into a wall of doubt in financial markets, where investors are skeptical that enough buyers could be found to make the securities affordable for banks to issue.

“I like the contingent capital idea, but I understand some of the concerns that have been expressed about it. It needs more work, more discussion.”

As far as Canada is concerned, it might be a good idea to try some work, some discussion; any work, any discussion.

As I have complained in the past, Canada’s efforts to provide a coherent plan have been limited to an off-the-cuff remark from the Central Bank (promoting an insane extension to the idea that has the intent of eliminating creditors’ rights) together with an intellectually dishonest speech and childish essay by the head of bank regulation. There is no evidence of any money being spent whatsoever on research, discussion, or thought.

Canada may not just have blown its own credibility with these antics, but, such are the vagaries of politics, have made the entire idea more difficult to achieve.

What did we ever do to deserve a clown like Spend-Every-Penny as Finance Minister?

One Response to “Contingent Capital: Canada a Laughing-stock?”

  1. […] sop for Canadian simpletons. We are following through on our commitment to reduce moral hazard in the financial system. We are […]

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