- CoCo design as a risk preventive tool
- VOX : Research-based Policy Analysis and Commentary from leading Economists
- Volume | Issue number
- 2011 | 9 February
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam Business School Research Institute (ABS-RI)
- Contingent Convertible (CoCo) bonds have been suggested as a way to ensure that banks keep aside enough capital to help them through financial crises. This column proposes a market-triggered CoCo buffer to maintain risk incentives during periods of high leverage. It argues that this will also activate risk information discovery through the market prices of bank securities and increase activism by outside shareholders.
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