Opinion: Contingent Capital

The concept and implications of Contingent Capital have been discussed extensively on PrefBlog. This commentary has been distilled into an article published by Advisors’ Edge Report.

Look for the Opinion Link!

The draft version with footnotes is also available.

9 Responses to “Opinion: Contingent Capital”

  1. […] I recently published an opinion piece on Contingent Capital. […]

  2. […] Assiduous Readers will know, I advocate that contingent capital be issued by banks with the conversion trigger being the decline of the common stock below a certain price; should conversion be triggered, the conversion into equity of the preferreds / Innovative Tier 1 […]

  3. […] One way or another, I suggest that a regulatory trigger for contingent capital would be a grave mistake. Such a determination by any regulator will be the kiss of death for any institution in serious, but survivable, trouble; therefore, it is almost certain not to be used until it’s too late. Triggers based on the contemporary price of the common relative to the price of the common at the time of issue of the subordinated debt are much preferable, as I have argued in the past. […]

  4. […] could very well occur. However, extreme cases leading to a death-spiral will be avoided under my proposal which leads to conversion at a set price if the common trades below that set price. No death-spiral […]

  5. […] excellent – mainly because it advocates a framework for Contingent Capital that includes the structure I advocate (and have been advocating ever since HM Treasury’s Turner Report response brought the basic […]

  6. […] am very pleased to see that the structure I have been advocating is receiving academic scrutiny. He discusses the model in terms of the CC proposals of McDonald and […]

  7. […] the MacDonald CoCo with the index trigger set arbitrarily high, so that the instrument reflects my original recommendation. As has been previously noted, I consider 9bp at issue time to be an unrealistically narrow spread […]

  8. […] In a rational world, the issuing banks will include another trigger for conversion that occurs well before the point of non-viability can credibly be discussed by regulators, as I have urged in the past. […]

  9. […] note immodestly that, were there any justice in the world, they would be called Hymas CoCos, since I published first, but there ain’t no justice and McDonald has the union […]

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