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Full-Text Articles in Finance and Financial Management
Are Coco Bonds Suitable As Core Capital Instruments?, Kevin Dowd
Are Coco Bonds Suitable As Core Capital Instruments?, Kevin Dowd
Journal of New Finance
Basel III introduced significant innovations in bank regulation. One of them is the minimum required leverage ratio. To help banks implementing the new measure , Basel III created two different core capital measures: Common Equity Tier 1 (CET1) and Additional Tier 1 (AT1). Since raising capital for CET1 is expensive, other instruments are used to build up AT1 in case of need, like for example Contingent Convertible (CoCo), which can convert to equity or written-down when a bank is under stress. In this paper we show that CoCos are not suitable as regulatory core capital instruments. Problems of timing, incentives, …
Basel Iii B: Basel Iii Overview, Christian M. Mcnamara, Michael Wedow, Andrew Metrick
Basel Iii B: Basel Iii Overview, Christian M. Mcnamara, Michael Wedow, Andrew Metrick
Journal of Financial Crises
In the wake of the financial crisis of 2007-09, the Basel Committee on Banking Supervision (BCBS) faced the critical task of diagnosing what went wrong and then updating regulatory standards aimed at preventing it from occurring again. In seeking to strengthen the microprudential regulation associated with the earlier Basel Accords while also adding a macroprudential overlay, Basel III consists of proposals in three main areas intended to address 1) capital reform, 2) liquidity standards, and 3) systemic risk and interconnectedness. This case considers the causes of the 2007-09 financial crisis and what they suggest about weaknesses in the Basel regime …