contingent capital proposed in the literature, the COERC is less risky in a world where bank assets can experience sudden jumps …. A bank that issues COERCs also has a smaller incentive to choose investments that are subject to large losses. …

Banking systems have rapidly grown to a point where for many countries bank assets amount to multiples of GDP. As a …

Financial crises are associated with reduced volumes and extreme levels of rates for term inter-bank transactions, such … leveraged banks’ precautionary demand for liquidity. When adverse asset shocks materialize, a bank’s ability to roll over debt … is impaired because of agency problems associated with high leverage. In turn, a bank’s propensity to hoard liquidity is …