Getting the most out of a mandatory subordinated debt requirement

Rong Fan, Joseph Haubrich (), Peter Ritchken and James B. Thomson ()

No 214, Working Paper from Federal Reserve Bank of Cleveland

Abstract: Recent advances in asset pricing-the reduced-form approach to pricing risky debt and derivatives-are used to quantitatively evaluate several proposals for mandatory bank issue of subordinated debt. The authors find that credit spreads on both fixed- and floating-rate subordinated debt provide relatively clean signals of bank risk and are not unduly influenced by non-risk factors. Fixed-rate debt with a put is unacceptable, but making the putable debt floating resolves most problems. The authors' approach also helps to clarify several different notions of "bank risk."

Keywords: Bank; assets (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg
Date: 2002
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Related works:
Journal Article: Getting the Most Out of a Mandatory Subordinated Debt Requirement (2003)
Journal Article: Getting the most out of mandatory subordinated debt requirement (2003)
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