Giuseppe De Martino, Massimo Libertucci, Mario Marangoni, Mario Quagliariello, 30 October 2010

Contingent capital requirements may reduce the problems of low-quality bank capital and excessively leveraged institutions, but they also risk being too complex. This column aims to strike an appropriate balance by presenting a proposal based on both macroeconomic and bank-level triggers for debt-to-equity conversion. It assesses how such a rule would have performed in identifying stressed banks in recent years.

CEPR Policy Research