The Fragility of Financial Systems: Enhancing Stability through Contingent Capital

Hosted by Canton and University of St Gallen

Friday, 29 August 2025
07:00 - 08:30 CEST

Abstract

In the aftermath of the global financial crisis, contingent convertible bonds (CoCos) emerged as a key tool to address the “too-big-to-fail” problem by enabling swift recapitalization of distressed banks without taxpayer-funded bailouts. The dramatic write-down of Credit Suisse’s AT1 CoCos in 2023 – amounting to $17 billion – marked the first major real-world test of this instrument and sparked global debate.

This panel will explore the facts and misperceptions surrounding the event, assess the effectiveness of CoCos as a stabilizing mechanism, and evaluate their potential role in future regulatory frameworks. Drawing on recent empirical evidence and lessons from the Credit Suisse case, we will discuss how to simplify and refine CoCo design to enhance financial system resilience while reducing regulatory uncertainty.