Canada Pushes Embedded Contingent Capital
Recent Buzzes - VC Experts, Inc.
DECEMBER 13, 2010
Essentially, OSFI would require all new non-common Tier 1 (perpetual preferred shares) and Tier 2 capital (subordinated debt) to contain features that would convert these instruments into common share equity when the bank is in serious financial trouble, instantly increasing the common share equity capital of the bank without the use of taxpayer money. Similarly, subordinated debt holders would have a two-stage conversion, which would be virtually simultaneous.