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Contingent Capital Bonds for Bank Capital

The push to increase bank capital in the wake of the financial crisis was certainly to be expected. One of the more unusual steps taken by regulators is the development of (and regulatory push to promote) the use of Contingent Capital Bonds (CoCos), which place the bondholder at some significant risk of having the debt he holds converted into the equity of a weakened financial institutions. Please comment on how this blurring of lines between debtholders and equity holders changes the game.

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