دانلود رایگان مقاله چگونگی بهبود پرداخت بدهی بانک با صدور اوراق قرضه قابل تبدیل مشروط

Abstract

This paper examines how issuing an innovative financial instrument called contingent convertible bond (CoCo) may enhance bank's solvency in comparison to issuing a conventional bond. CoCos convert automatically into common equity or have a principal write-down when bank's regulatory capital fails to meet a predetermined level. They have been invented and put into legislation with an objective to absorb losses thus preventing institutions from bankruptcy. From the standpoint of an issuer CoCos bring about two counter effects regarding his solvency: on one hand they recapitalize a bank approaching insolvency on the other hand CoCos pay much higher coupon comparing to conventional bonds. In our model a bank has two funding alternatives: either to issue CoCos or conventional bonds. We measure issuer's default risk using the concept of Value-at-Risk (VaR) and Expected Shortfall (ES). We conclude that CoCos have the potential to strengthen the resilience of the issuer on the condition that the probability of conversion triggering is higher than the VaR's significance level. Our findings can be helpful to the policymakers and banks to better understand the impact of CoCos on issuer's solvency.

4. Conclusion

Loss absorbing capacity of contingent convertibles made them a key element of Basel III regime and consequently CRD IV legal framework for bank capital requirements. Therefore these new regulatory packages deliver strong incentives for issuing contingent debt. The post-crisis legal regime is very intent on bailing-in banks’ liabilities at the cost of creditors rather than accepting any future bail-out. Market uncertainty replaces the ‘too big to fail’ confidence of creditors. The previous approach was very safe for creditors, as losses were borne only by shareholders and taxpayers. The main reason behind introducing CoCos into the legal system has been to enhance pre-bankruptcy loss absorbing capacity of an institution (that is on a going-concern basis). It is the CoCo-holders who became exposed to the risk of issuer's distress on an ongoing basis which protects other creditors and sometimes – the shareholders. This is the main reason why CoCo bonds must offer coupon (yield) for the investors significantly higher than of other debt instruments with no contingent conversion option embedded. For these reasons a strategy of financing with CoCos instead of using straight bonds results in two opposite effects: on one hand it reduces institution's default risk. On the other hand high coupon of CoCo bonds undermines issuer's solvency.