When shareholders exacerbate their own banks’ crisis

Banks are increasingly issuing ‘CoCo’ bonds to boost the levels of equity they hold. In a crisis situation, bondholders are forced to convert these bonds into a bank’s equity. To date, such bonds have been regarded only as a means of averting a crisis. A study by German economists now shows that if such bonds are badly constructed, they worsen a crisis instead of stabilizing the banking system. —> Read More Here


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