{"id":522475,"date":"2010-04-09T12:28:00","date_gmt":"2010-04-09T16:28:00","guid":{"rendered":"e2249889-c78b-43e3-9643-b1d7d4aa587b:421140"},"modified":"2010-04-09T12:28:00","modified_gmt":"2010-04-09T16:28:00","slug":"embedded-contingent-capital-great-idea-too-bad-about-the-name","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/522475","title":{"rendered":"&#8216;Embedded contingent capital&#8217;: Great idea, too bad about the name"},"content":{"rendered":"<p>Julie Dickson, Canada\u2019s superintendent of financial institutions, doesn\u2019t think much of many of the ideas that people have put forward to regulate the world\u2019s banks. She believes that concepts such as capital surcharges, systemic risk funds and bank taxes are needlessly complicated creations. In an<a href=\"http:\/\/www.ft.com\/cms\/s\/0\/0310ebf4-4342-11df-9046-00144feab49a.html\" > essay in the Financial Times<\/a>, Dickson argues that a better way forward is to require banks to carry \u201cembedded contingent capital.\u201d <\/p>\n<p>While that\u2019s a term that only a banker could love, the idea is rather simple. Each bank would be required to issue large amounts of securities that would act as bonds during good times, but would automatically convert into shares if the bank ran into serious trouble. The converted funds would be capable of replenishing the bank\u2019s common equity without using a penny of taxpayers\u2019 money. <\/p>\n<p>As Dickson points out, such a system would encourage market discipline. It would motivate bondholders to keep an eye on bank management, since buyers of the embedded contingent capital would fear being involuntarily turned into shareholders. <\/p>\n<p>Dickson\u2019s idea is a fascinating notion with wide ranging implications. It could force bank management to be more conservative. It could also force managers to be far more transparent about risk. But one suggestion? Please, Ms. Dickson, find a better name for the concept. Somehow we can\u2019t imagine a crowd of voters chanting \u201cWhat do we want? Embedded contingent capital!\u201d <\/p>\n<p><i>Freelance business journalist Ian McGugan blogs for the Financial Post. <\/i><br \/>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/network.nationalpost.com\/NP\/aggbug.aspx?PostID=421140\" width=\"1\" height=\"1\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Julie Dickson, Canada\u2019s superintendent of financial institutions, doesn\u2019t think much of many of the ideas that people have put forward to regulate the world\u2019s banks. She believes that concepts such as capital surcharges, systemic risk funds and bank taxes are needlessly complicated creations. In an essay in the Financial Times, Dickson argues that a better [&hellip;]<\/p>\n","protected":false},"author":4062,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-522475","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/522475","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4062"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=522475"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/522475\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=522475"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=522475"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=522475"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}