What Is a Contingency Agreement?
Emergency capital, also known as contingent capital and committed capital, means that when a company has a specific event and is in financial distress, it can obtain the company's capital in the form of preferred debt, preferred stock, or sub-preference stock according to a prior commitment contract. Needed capital.
Emergency capital
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- Chinese name
- Emergency capital
- Foreign name
- contingent capital
- Emergency capital, also known as contingent capital and committed capital, means that when a company has a specific event and is in financial distress, it can obtain the company's capital in the form of preferred debt, preferred stock, or sub-preference stock according to a prior commitment contract. Needed capital.
- In essence, emergency capital is the right to raise capital under certain restricted conditions. Emergency capital is not an insurance product, but an integrated risk management product that combines the insurance market and the capital market. It is a hybrid of virtual capital and real capital.
- Contingent capital is an important part of the Basel 3 agreement. In order to enhance the loss absorption capacity of systemically important banks, measures such as emergency capital and Bail In Debt can also be taken. Emergency capital requires banks to
- To a certain extent, it enhances the solvency of insurance companies, reduces the capital cost of insurance companies, and shares the risk of insurance company capital. It is one of the effective ways of insurance company risk management. At the same time, because emergency capital transactions provide capital and charge fees, rather than providing full compensation for losses, this transaction fills the gap between universal insurance and full self-insurance.
- The method of formulating the contents of emergency capital instrument contracts can be roughly divided into four types: contingent credit lines, contingent surplus notes, contingent equity financing, and contingent long-term capital financing.