Contingent Convertibles (CoCos) represent debt that is subject to being converted automatically into common equity under pre-specified terms of conversion if the chosen regulatory capital ratio falls to a level triggering conversion. CoCos are that subspecies of contingent capital that references regulatory (Basel III) concepts in its triggers. From 2014, trigger points are set by common equity (Common Equity Tier 1 [CET1]) in percent of risk-weighted assets [RWA] or of more complicated measures of total exposure to a variety of risks, particularly credit risk. This is the first comprehensive book on CoCos, an innovative instrument that has attracted growing attention since it was first issued in 2009.
The book is mostly concerned with going-concern 'recovery-' rather than 'resolution-' CoCos, because avoiding failure and costly disruption of financial networks without government financing is the first order of business. CoCos hold a high promise of providing fully loss-absorbing equity capital when it is most needed and least available to financial institutions. Yet, having grown out of the 2007-2009 financial crisis, they are still an 'infant' reform instrument in many respects. Few of the instrument's design features (or even the rating, regulatory, and tax treatments) are entirely settled. This book seeks to move the discussion toward, and then past, the main decision points so that CoCos can prove their value for contingency planning and self-insurance all over the world. It is intended to increase the ability of issuers and investors to analyze and understand the different kinds of CoCos.
Since entering the doctoral program at Princeton University as an International Finance Fellow, and inspired by Burt Malkiel and Ed Kane,
George von Furstenberg has been fascinated with macro and micro aspects of finance. Throughout his career, work at US government agencies such as the President's Council of Economic Advisers (Senior Economist, 1973 76) and the Department of State (1989 90), at the IMF Research Department (Division Chief, 1978 83), and at the National Science Foundation (Rotating Program Director Economics, 2006 08) has alternated with his academic pursuits. A titled Professor of Economics at Indiana University, emeritus as of 2006, he is a member of the Toronto-based G8 Research Group, a past president (2000) of the North American Economics and Finance Association, and a participant in meetings of the Asian Economic Policy Panel. He has been listed in
Who's Who in the World since 2006.
Work in his principal fields has been supplemented by continuing analyses of US economic and financial policies in several areas. These include regional trade agreements, housing and mortgage credit, and capital insurance for financial institutions as well as evaluations of US policy responses during the depth of the 2007 2009 financial crisis.
His current work on efficient design of Contingent Convertible Debt Securities (CoCos) and on Contingent Capital as a reform instrument to strengthen the private safety net through self-insurance of financial institutions has benefitted from visiting research fellowships in the Research Centre of the Deutsche Bundesbank (2010), the Hong Kong Institute for Monetary Research (2011), and the Risk Management Institute of the National University of Singapore (2011)
