Contingent Convertibles (CoCos) represent debt that is subject to being converted automatically into common equity under pre-specified terms of conversion if the chosen regulatory capital ratio falls ...to a level triggering conversion. CoCos are that subspecies of contingent capital that references regulatory (Basel III) concepts in its triggers. From 2014, trigger points are set by common equity (Common Equity Tier 1 CET1) in percent of risk-weighted assets RWA or of more complicated measures of total exposure to a variety of risks, particularly credit risk. This is the first comprehensive book on CoCos, an innovative instrument that has attracted growing attention since it was first issued in 2009. The book is mostly concerned with going-concern ‘recovery-’ rather than ‘resolution-’ CoCos, because avoiding failure and costly disruption of financial networks without government financing is the first order of business. CoCos hold a high promise of providing fully loss-absorbing equity capital when it is most needed and least available to financial institutions. Yet, having grown out of the 2007–2009 financial crisis, they are still an ‘infant’ reform instrument in many respects. Few of the instrument's design features (or even the rating, regulatory, and tax treatments) are entirely settled. This book seeks to move the discussion toward, and then past, the main decision points so that CoCos can prove their value for contingency planning and self-insurance all over the world. It is intended to increase the ability of issuers and investors to analyze and understand the different kinds of CoCos.
International money and credit Furstenverg, George M. von; Furstenverg, George M. von
1984., 09/15/1984, 1984, 1984-09-15, 19830101
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Edited by George M. von Furstenberg, this volume presents the rethinking of the functions and purposes served by international monetary arrangements at leading universities, banks, and official ...institutions.
Financial services with global reach are becoming ever more important in the conduct and organization of the trade and investment of nations, and currencies that lack international standing lose out ...in this business. The result of financial development has been destabilizing currency and portfolio substitution in favour of international currencies and against local ones. This book analyses formal approaches to overcoming monetary divisions within countries and within integrating regions, focusing on the consequences of monetary union for trade among union members and their financial development and stability. The authors discuss hard pegs such as those attempted by the currency board of Argentina, outright dollarization, such as in Ecuador, and multilateral monetary union, as in Europe, the least reversible form of monetary union and the most powerful elixir of financial integration and trade. The political classes and central banks in most countries have been reluctant to admit the market- and technology-driven forces of currency consolidation, much less yield to them. International financial institutions too are still in the habit of proffering advice about national monetary and exchange-rate policies on the assumption that getting rid of both is not even an option. Emerging-market countries, in particular, have to choose between retaining what independent monetary means they still have and can safely use in the presence of widespread liability dollarization and currency mismatches and formally replacing the domestic with an international currency to reduce exposure to debilitating financial crises. In concrete investigations of this choice, this volume shows that monetary union deserves a much more sympathetic hearing. Available in OSO: http://www.oxfordscholarship.com/oso/public/content/economicsfinance/0199271402/toc.html Contributors to this volume - Editors: Volbert Alexander Jacques Melitz George von Furstenberg Contributors: Ignazio Angeloni is Deputy Director General for Research in the European Central Bank. Guillermo A. Calvo is the Chief Economist of the Inter-American Development Bank, Director of the Center for International Economics and Distinguished University Professor at the University of Maryland, Research Associate at the NBER, and President-elect of the International Economic Association. Benjamin J. Cohen is the Louis G. Lancaster Professor of International Political Economy at the University of California, Santa Barbara. Claudia Costa Storti is an economist at the Banco de Portugal. James W. Dean has been a professor of economics at Simon Fraser University in Vancouver, Canada since he completed his PhD at Harvard in 1973. Paul De Grauwe is professor of international economics at the University of Leuven, Belgium, and member of the Belgian parliament. Augusto P. de la Torre is Senior Regional Financial Sector Advisor for Latin America and the Caribbean at the World Bank. Gerald P. Dwyer Jr. is a Vice President at the Federal Reserve Bank of Atlanta, where he is in charge of the finance group in the Research Department. Edgar L. Feige is Professor of Economics Emeritus at the University of Wisconsin-Madison, Visiting Research Scholar at the Croatian National Bank and consultant to the International Monetary Fund. Eduardo Fernandez-Arias is the Chief Economist of the Regional Operations Department I of the Inter-American Development Bank (Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay). Hans Genberg is Professor of international economics at the Graduate Institute of International Studies in Geneva, Switzerland. Alberto Isgut is Assistant Professor of Economics at Wesleyan University. Alejandro Izquierdo is senior research economist at the Inter-American Development Bank. Charles M. Kahn is the Bailey Professor of Finance and Professor of Economics at the University of Illinois. Eduardo Levy Yeyati holds a Ph.D. in Economics from the University of Pennsylvania and is a Professor at the Business School of Universidad Torcuato Di Tella in Buenos Aires. James R. Lothian is Distinguished Professor of Finance in the Schools of Business of Fordham University and Editor of the Journal of International Money and Finance. Robert A. Mundell. The Royal Swedish Academy of Sciences awarded the 1999 Nobel Prize in Economic Sciences to Professor Mundell of Columbia University. Volker Nitsch is a Senior Economist at Bankgesellschaft Berlin, where he covers the European economy and capital markets. Ugo Panizza is an economist in the Research Department of the Inter-American Development Bank (IDB). Guillermo Perry is Chief Economist of the Latin American and Caribbean Region at the World Bank. Andrew K. Rose is B.T. Rocca Jr. Professor of International Business, Economic Analysis and Policy Group, Haas School of Business at the University of California, Berkeley, NBER Research Associate, and CEPR Research Fellow. Dominick Salvatore is Distinguished Professor of Economics and Department Chairperson at Fordham University in New York. Joao A. C. Santos is an economist in the Banking Studies Group of the Federal Reserve Bank of New York. Sergio L. Schmukler is a senior economist in the Macroeconomics and Growth team, Development Research Group, of the World Bank and an associate editor of the Journal of Development Economics. Luis Serven manages the regional research program of the World Bank's Latin American and Caribbean Region. Ernesto Stein is Senior Economist in the Research Department of the Inter-American Development Bank where he has been since 1994. Ernesto Talvi, a University of Chicago Ph. D., is Executive Director of CERES (Center for Economic and Social Policy Research), a highly respected public-policy research institution in Uruguay, and permanent advisor to the Chief Economist of the Inter-American Development Bank (IDB), Guillermo Calvo.
CoCos, or simply cocos, are a promising form of hybrids first issued in 2009 by major West-European banks. They are contingent convertible debt securities that convert automatically into common ...equity when a regulatory capital ratio has fallen to its trigger level. For high-trigger cocos this level is reached when the book value of common equity tier 1 (CET1) has fallen to 7% of risk-weighted assets (RWA) as defined under the Basel III capital-requirements framework. At that point the bank is still a going concern and expected to recover. High-trigger cocos, which are the focus of this article, are dedicated to crisis preparedness and the recovery process.
The article here extended reflects on the excessively narrow debate over the government-sponsored enterprises (GSEs)' cost-benefit transfer balance which had been raging for a quarter-century before ...the 2007-2009 financial crisis. That crisis has cast a new light on the actual costs of GSE operations and exposed the unsustainability of some of their benefits for homeownership. After injecting afew new findings into the traditional debate, this comment adds some of what has transpired in recent years and what may be inferred from it so far. Doing so brings additional analysis to bear on the article's conclusion that "the GSEs might not be justified" and "Maybe it is time for them to exit" although most politicians in the past have been disinclined to show them the door.
Promising somewhat more than anyone expects to be delivered remains ingrained in international agreements, clouding their expected aggregate outcomes and how to assess the Parties’ performance. This ...persistence is explained by systematic overpromising being predictable and, up to a point, productive. I characterize this regime and its consequences and provide an empirical application to the Kyoto Protocol. Overpromising by governments or Parties can be part of a sustainable strategy for electoral success, and varies with socio-economic determinants that characterize the group regime. Thus targets need to be adjusted for regression-predicted overpromising to reveal the rationally-expected outcomes and individual countries’ performance is best identified by deviations of outcomes from their adjusted rather than the agreed targets.
The International Financial Services (IFS) industry is restructuring internally and by location. This paper outlines the economic forces and analytical methods that may be applied to examine the ...economic drivers of these processes as ever more cities, particularly in East Asia, are vying to attract IFS providers and their clients. The ICT revolution has made those IFS that can be commoditized footloose in search of cost efficiency. High value-added financial services, however, will continue to be developed and coordinated in a few major IFS centers that have invested in, or capitalized on, regional or global advantages for themselves and their clients. The resulting pattern of functional fragmentation and geographic dispersal may facilitate analyses of the competitiveness of different lines of the financial services business in a particular location by methods such as Data Envelopment and Stochastic Frontier Analysis. These forms of comparative efficiency analysis have recently been questioned and their results reinterpreted.
Rajan and Zingales (1998) use U.S. Compustat firm data for the 1980s to obtain measures of manufacturing sectors' Dependence on External Finance (DEF). They take any differences in these measures to ...be structural/technological and thus applicable to other countries. Their joint assumptions about how to obtain representative values of DEF by sector and about why these values differ fundamentally have been adopted in additional studies seeking to show that sectors benefit unequally from a country's level of financial development. However, the assumptions as such have not been examined. The present study, conducted with cyclically adjusted annual measures of DEF derived from U.S. industry data for 1977-1997, attempts to do so using data that are aggregated by sector. PUBLICATION ABSTRACT
When countries, and macroeconomic models, open up to international capital markets, the welfare gains available through completion of financial markets for contingencies potentially are much greater ...than those available from gaining access to non-contingent international borrowing alone. This paper goes beyond underscoring this well-known possibility numerically by showing how changes from shadow to market prices enable utility gains as first international borrowing and then insurance capabilities are introduced. However, the victory of Arrow-Debreu securities is not total when insurance payments themselves are at risk because riskless assets placed in escrow then may enhance insurability.
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