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Economic Perspectives, 24, 2nd, No. 2, May 2000
Subordinated debt as bank capital: A proposal for regulatory reform
Industry observers have proposed increasing the role of subordinated debt in bank capital requirements as a means to increase market discipline. A recent Federal Reserve System Task Force evaluated the characteristics of such proposals. Here, the authors take the next step and offer a specific sub-debt proposal. They describe how it would operate and what changes it would require in the regulatory framework.


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