Equity Recourse Notes: Creating Counter-cyclical Bank Capital

  • Jeremy Bulow
  • Published 2014


We propose a new form of hybrid capital for banks, Equity Recourse Notes (ERNs), which ameliorate booms and busts by creating counter-cyclical incentives for banks to raise capital, and so encourage bank lending in bad times. They avoid the flaws of existing contingent convertible bonds (cocos)--in particular, they convert more credibly--so ERNs also help… (More)


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