The Impact Of Basel Iii On Convertible Bonds With Particular Emphasis On Contingent Convertible Bonds
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The Impact Of Basel Iii On Convertible Bonds With Particular Emphasis On Contingent Convertible Bonds
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Author : Timo Köffer
language : en
Publisher: GRIN Verlag
Release Date : 2013-10-22
The Impact Of Basel Iii On Convertible Bonds With Particular Emphasis On Contingent Convertible Bonds written by Timo Köffer and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-10-22 with Business & Economics categories.
Bachelor Thesis from the year 2013 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 2,3, University of Cooperative Education, language: English, abstract: Many banks contributed through their high-risk business models to the financial crisis in 2007. The financial crisis has shown that for a bank's solvency it is not only the amount of equity that is important, but also significantly the quality of equity. In particular hybrid capital was not used to a sufficient extent to absorb losses, although it is partially core capital under Basel II. Because of this the Basel Committee on Banking Supervision decided in December 2010 on new capital- and liquidity rules for banks (''Basel III framework''). The Basel III framework implemented the regulatory requirements to strengthen the financial system. In particular the qualitative requirements were raised for core capital. Under these new regulations core capital is crucial, because it can fully and immediately be claimed for losses. The old forms of hybrid capital will be recognized in regulatory capital to a lesser extent in the future. This has implications especially for subordinated bonds. The aim is to involve subordinated creditors and equity investors in the recovery phase in the cost of crisis management. The new capital requirements mean major structural changes for the banks, because the comparatively cheap hybrid capital must be replaced by capital of higher quality. A new form of hybrid capital have emerged, so called contingent convertible bonds(CoCos), a fixed-income security which is a capital buffer for a bank in financial distress and so could be attributed to regulatory equity capital. This hybrid capital is in the form of a mandatory convertible bond, which can contribute to making up for losses such as equity in the event of a crisis. In order to meet the new regulatory requirements, many banks are considering the advantages of CoCos. Therefore this thesis attempts to answer the question of how CoCos differ from convertible bonds, and how these instruments are suitable for contributing as core capital under Basel III. The place ability of CoCos and the challenges resulting from their use are discussed in this thesis. Based on the different design options for a coco bond, the most sensible will be determined and put into practice. So far it is a mainly theoretical issue with little empirical evidence, so the thesis will explain and evaluate the various theoretical aspects. Overall a comprehensive picture of the impacts resulting from the new capital definition will be created.
The Impact Of Basel Iii On Convertible Bonds With Particular Emphasis On Contingent Convertible Bonds
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Author : Timo Köffer
language : en
Publisher:
Release Date : 2013-10
The Impact Of Basel Iii On Convertible Bonds With Particular Emphasis On Contingent Convertible Bonds written by Timo Köffer and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-10 with categories.
Bachelor Thesis from the year 2013 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 2,3, University of Cooperative Education, language: English, abstract: Many banks contributed through their high-risk business models to the financial crisis in 2007. The financial crisis has shown that for a bank's solvency it is not only the amount of equity that is important, but also significantly the quality of equity. In particular hybrid capital was not used to a sufficient extent to absorb losses, although it is partially core capital under Basel II. Because of this the Basel Committee on Banking Supervision decided in December 2010 on new capital- and liquidity rules for banks (''Basel III framework''). The Basel III framework implemented the regulatory requirements to strengthen the financial system. In particular the qualitative requirements were raised for core capital. Under these new regulations core capital is crucial, because it can fully and immediately be claimed for losses. The old forms of hybrid capital will be recognized in regulatory capital to a lesser extent in the future. This has implications especially for subordinated bonds. The aim is to involve subordinated creditors and equity investors in the recovery phase in the cost of crisis management. The new capital requirements mean major structural changes for the banks, because the comparatively cheap hybrid capital must be replaced by capital of higher quality. A new form of hybrid capital have emerged, so called contingent convertible bonds(CoCos), a fixed-income security which is a capital buffer for a bank in financial distress and so could be attributed to regulatory equity capital. This hybrid capital is in the form of a mandatory convertible bond, which can contribute to making up for losses such as equity in the event of a crisis. In order to meet the new regulatory requirements, many banks are considering the advantages of CoCos. Therefore this thesis at
Contingent Convertible Bonds Corporate Hybrid Securities And Preferred Shares
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Author : Marcin Liberadzki
language : en
Publisher: Springer
Release Date : 2019-06-17
Contingent Convertible Bonds Corporate Hybrid Securities And Preferred Shares written by Marcin Liberadzki and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-06-17 with Business & Economics categories.
This book is a comprehensive guide to the new generation of hybrid securities: subordinated and perpetual bonds with deferrable coupon first issued around 2003, and the youngest member of the hybrids family named CoCos (contingent convertibles) being a product of Basel III or European Union CRD IV regime (2014). Contingent capital constitutes a contractual recapitalization mechanism for troubled financial institutions. An increasing number of European banks have issued CoCo bonds in order to bolster their capital ratios. Following the EU pattern, CoCos issues have become increasingly popular within banks in Asia and the Pacific. The EU regulatory treatment of the contingent convertibles issued by banks and insurers together with bank bail-in instruments is at the forefront of the book. Furthermore, the book provides an overview of hybrids pricing and risk assessment approach and covers the non-voting preferred stocks as another hybrids class.
Basel Iii Implications For Banks Capital Structure What Happens With Hybrid Capital Instruments
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Author : Timo Köffer
language : en
Publisher: Anchor Academic Publishing (aap_verlag)
Release Date : 2014-02-01
Basel Iii Implications For Banks Capital Structure What Happens With Hybrid Capital Instruments written by Timo Köffer and has been published by Anchor Academic Publishing (aap_verlag) this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-02-01 with Business & Economics categories.
This book attempts to answer the question of how CoCos differ from convertible bonds, and how these instruments are suitable for contributing as core capital under Basel III. The place ability of CoCos and the challenges resulting from their use are discussed in this book. Overall a comprehensive picture of the impacts resulting from the new capital definitions will be created. The Background to the introduction of Basel III is described at the beginning of the book, in addition to a presentation of the Basel III document and the new capital definitions. To create a kind of basic understanding of the functioning of convertible bonds and CoCos, hybrid capital will then be explained. In the following part of the book the design options of CoCos and different interests of investor groups are shown. Then the Commerzbank AG is analyzed by means of an analysis of how the capital components changed in Basel II through to Basel III over the last two years. The effect of Basel III on hybrid capital will be illustrated with a practical example. At the end of the book follows a short conclusion regarding the potential impact of Basel III on hybrid capital and the new capital instrument CoCos.
The Handbook Of Hybrid Securities
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Author : Jan De Spiegeleer
language : en
Publisher: John Wiley & Sons
Release Date : 2014-05-19
The Handbook Of Hybrid Securities written by Jan De Spiegeleer and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-05-19 with Business & Economics categories.
Introducing a revolutionary new quantitative approach to hybrid securities valuation and risk management To an equity trader they are shares. For the trader at the fixed income desk, they are bonds (after all, they pay coupons, so what's the problem?). They are hybrid securities. Neither equity nor debt, they possess characteristics of both, and carry unique risks that cannot be ignored, but are often woefully misunderstood. The first and only book of its kind, The Handbook of Hybrid Securities dispels the many myths and misconceptions about hybrid securities and arms you with a quantitative, practical approach to dealing with them from a valuation and risk management point of view. Describes a unique, quantitative approach to hybrid valuation and risk management that uses new structural and multi-factor models Provides strategies for the full range of hybrid asset classes, including convertible bonds, preferreds, trust preferreds, contingent convertibles, bonds labeled "additional Tier 1," and more Offers an expert review of current regulatory climate regarding hybrids, globally, and explores likely political developments and their potential impact on the hybrid market The most up-to-date, in-depth book on the subject, this is a valuable working resource for traders, analysts and risk managers, and a indispensable reference for regulators
The Agency Of Coco
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Author : Roman Goncharenko
language : en
Publisher:
Release Date : 2018
The Agency Of Coco written by Roman Goncharenko and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with Banks and banking categories.
Most regulators grant contingent convertible bonds (CoCos) the status of equity. The theory, however, suggests that these securities can distort incentives via inducing debt overhang and risk shifting. In this paper, we therefore theoretically model how the degree of this distortion varies with bank risk. Our model predicts that riskier banks face higher debt overhang from CoCos. Next, analyzing a comprehensive database of CoCo issuance in Europe, we empirically test the predictions of our model. We find that banks with lower risk are more likely to issue CoCos than their riskier counterparts. Since in the current regulatory framework of Basel III banks are expected to raise equity prior to CoCo conversion, future debt overhang makes CoCos an expensive source of capital. Thus, riskier banks will opt for equity issuance over CoCos.
International Convergence Of Capital Measurement And Capital Standards
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Author :
language : en
Publisher: Lulu.com
Release Date : 2004
International Convergence Of Capital Measurement And Capital Standards written by and has been published by Lulu.com this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Bank capital categories.
Contingent Convertibles Cocos
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Author : George M. Von Furstenberg
language : en
Publisher: World Scientific Publishing Company Incorporated
Release Date : 2014-08-12
Contingent Convertibles Cocos written by George M. Von Furstenberg and has been published by World Scientific Publishing Company Incorporated this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-08-12 with Business & Economics categories.
Climate effects on agriculture are of increasing concern in both the scientific and policy communities because of the growing population and the greater uncertainty in the weather during growing seasons. Changes in production are directly linked to variations in temperature and precipitation during the growing season and often to the offseason changes in weather because of soil water storage to replenish the soil profile. This is not an isolated problem but one of worldwide interest because each country has concerns about their food security.The Agricultural Model Intercomparison and Improvement Project (AgMIP) was developed to evaluate agricultural models and intercompare their ability to predict climate impacts. In sub-Saharan Africa and South Asia, South America and East Asia, AgMIP regional research teams (RRTs) are conducting integrated assessments to improve understanding of agricultural impacts of climate change (including biophysical and economic impacts) at national and regional scales. Other AgMIP initiatives include global gridded modeling, data and information technology (IT) tool development, simulation of crop pests and diseases, site-based crop-climate sensitivity studies, and aggregation and scaling.
Effectiveness Of The Basel Iii Contingent Convertible Mechanism On Market Discipline
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Author : Yilian Guo
language : en
Publisher:
Release Date : 2019
Effectiveness Of The Basel Iii Contingent Convertible Mechanism On Market Discipline written by Yilian Guo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
As part of the Basel III capital reforms, a new Additional Tier 1 (AT1) capital is introduced with the intention to improve market discipline which are the contingent convertible capital instruments (Cocos) widely discussed in the literature. Eligible Cocos that included as Additional Tier 1 capital need to be issued with both a capital ratio trigger and a mandatory point of non- viability trigger. With Basel III capital reforms started to be implement in Australian banking system from 1 January 2013, which is 3 years ahead of Basel Committee's phase-in deadline. We examines the extent to which a risk premium is embedded in the credit spreads of newly issued Basel III AT1 Cocos and whether there is an impact on the secondary market liquidity of Cocos. Our estimations suggest that (i) the Basel III AT1 Cocos realise a risk premium of around 20 basis points compared with hybrid securities issued under the Basel I and Basel II regimes; (ii) there is no evidence that the risk monitoring effects of Cocos get improved due to the contingent convertible mechanism with the implementation of Basel III capital reforms; (iii) the secondary market liquidity of Cocos gets improved since the implementation of the Basel III capital reforms.
Contingent Convertible Bonds And Subordinated Debt Of Euro Area Credit Institutions
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Author : Fuentes Egusquiza Ignacio
language : en
Publisher:
Release Date : 2017
Contingent Convertible Bonds And Subordinated Debt Of Euro Area Credit Institutions written by Fuentes Egusquiza Ignacio and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
The progressive entry into force of the new bank capital accord, known as Basel III, and the approval of the new regulations on the recovery and resolution of credit institutions in the European Union are increasing the need for credit institutions to have a sufficient capital buffer to absorb potential losses. In order to meet these legal requirements, European banks have, in recent years, issued contingent convertible bonds and subordinated debt. This article analyses the main characteristics of these hybrid instruments. It first presents the information available on the volumes and the numbers of issues and issuing institutions, and then analyses issuance costs and market prices of outstanding issues, paying particular attention to Spanish institutions' issues.