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1:00 pm - 2:00 pm; This webinar will address the new regulatory treatment of Contingent Convertible Debt instruments and the development of the underlying CoCo bond markets. The contractual feature of the existing stock of CoCo debt will be analysed along various dimensions. First, in terms of their regulatory effectiveness in absorbing risk. Second, in terms of their impact on risk incentives and thus on their preventive effect. Third, we will look at the empirical evidence on the market response to their issuance. Finally, time allowing we will discuss the recent evolution on the CoCo bond market in terms of issuances and prices.

Enrico Perotti is Professor of International Finance at the University of Amsterdam, Member of the Scientific Committee of the Florence School of Banking and Finance and CEPR). His advisory work has focused on policy advice on issues of banking, financial reforms and stability to the EC, ECB, IMF, DNB, Bank of England, the World Bank and the UK Treasury.

Andrea Consiglio, Stavros Zenios, 02 January 2016

Contingent debt has been gaining ground as a tool for banking stability. This column argues for the advantages of sovereign debt with a contingent payment standstill. Sovereign contingent debt would have instigated early responses for Eurozone crisis countries ranging from a couple of months (Ireland) to almost two years (Cyprus). Pricing simulations illustrate how this financial innovation creates appropriate incentives for sovereigns and addresses creditor moral hazard. Using contingent debt for Greece, we illustrate that the country’s debt profile can improve significantly.

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CEPR Policy Research