(4) U.S. regulators are also interested in the idea of using contingent capital. As one of the
provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Federal
Reserve may establish heightened prudential standards for contingent capital requirement. It
"authorizes the Board to require each Board-supervised nonbank financial company and bank holding
companies with total consolidated assets of $50 billion or more to maintain a minimum amount of contingent
capital convertible to equity in times of financial stress." 8
(5) Office of the Superintendent of Financial Institutions Canada (OSFI) issued its final advisory
on Non-Viability Contingent Capital. Seen as a fast movement on implementation of Basel
III, it requires that the regulatory capital of all federally regulated deposit-taking institutions
(DTIs) must have loss absorbing quality when the DTI fails. All the non-common Tier 1 and
The Fed is in discussions with bankers.
Unlike the existing contingent capital deals that have trigger events related to the issuer's own
capital ratio, the Fed is also exploring a system wide trigger.