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Contingent capital

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  • Yaron Leitner

Abstract

Government bailouts during the recent financial crisis were controversial because of the burden on taxpayers and because even if taxpayers eventually get their money back, such bailouts can undermine banks? incentives not to take excessive risk in the future. New regulatory reforms aim to avoid such crises in the future. One proposal is to require banks to hold ?contingent capital.? In this article, Yaron Leitner explains what contingent capital is and discusses some of the arguments in favor of it. He also discusses potential implementation problems and looks at some of the alternatives.

Suggested Citation

  • Yaron Leitner, 2012. "Contingent capital," Business Review, Federal Reserve Bank of Philadelphia, issue Q2, pages 11-18.
    • Handle: RePEc:fip:fedpbr:y:2012:i:q2:p:11-18
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/economy/articles/business-review/2012/q2/brq212_contingent-capital.pdf
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    References listed on IDEAS

    as
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