‘Bonus Bonds’ for Bankers: A New Type of Debt-Based Remuneration in the Financial Industry

Abstract

This paper is based on our respective presentations given in German at the annual conference of the University of Zurich Research Priority Programme in Financial Market Regulation (<http://www.finreg.uzh.ch/index_en.html>), which was held on 2 and 3 June 2014 at the University of Zurich, Switzerland. This Research Programme is jointly run by chairs from the Law Faculty and the Economics Faculty of the University of Zurich and promotes an interdisciplinary exchange of ideas through regular workshops, from which we have both greatly benefited. We owe particular gratitude to Prof. Rolf Sethe, Vanessa Isler and an anonymous reviewer for their valuable comments on an earlier draft of this paper. A collection of the contributions to the aforementioned conference was published in winter 2014 (Hans Caspar von der Crone & Jean-Charles Rochet (eds), Finanzstabilität: Status und Perspektiven (Schulthess Verlag 2014)). Brought to you by | Universitaetsbibliothek Basel Authenticated Download Date | 4/29/19 4:23 PM 1 Triggers in contingent capital securities now usually refer to the issuer's capital ratio for the timing of conversion or write-down, but other design options have been discussed in the literature. See, e.g., John C. Coffee, Jr., 'Systemic Risk After Dodd-Frank: Contingent Capital and the Need for Regulatory Strategies Beyond Oversight' (2011) 111 Columbia Law Review 795, 830-832. In the following, we use the term of 'contingent capital securities' indiscriminately for instruments featuring either a conversion or a write-down mechanism.