Banks often oppose higher equity asset ratios, because equity capital is more expensive than debt capital. But this is precisely because of the lemon effect.

The equity capital of banks urgently needs to be substantially increased.

Higher equity capital requirements, for example, require banks to fund themselves with relatively more equity and relatively less debt.

This capital is typically provided through equity flotation on securities markets and through venture capital firms and DFIs.

Spanish banks have 7 equity capital on average on their balance sheets.

And equity capital requirements for large, systemically important financial institutions remain too low.

Meanwhile, the ECB has announced that it will have to double its equity capital.

Typically there is an even greater shortage of venture and equity capital for new enterprises.

Equity capital will increase relative to assets but, under current policies, it will increase because banks reduce their assets, not because they raise capital.

55. For firms over a certain size, sources of external equity and venture capital are critical.

Nevertheless, private equity continues to be a large and active asset class and the private equity firms, with hundreds of billions of dollars of committed capital from investors are looking to deploy capital in new and different transactions.

This form of financing is often used by private equity investors to reduce the amount of equity capital required to finance a leveraged buyout or major expansion.

Rather, the banking system is at the brink of insolvency, with a permanent loss in equity capital.

This would be the case as long as the banks losses remained smaller than their equity capital.

(d) Strengthen local capital markets, including new or expanded stock exchanges and specialized financial institutions, providing equity and loan capital to small and medium size enterprises

The advantage of equity capital is that it is loss absorbing, meaning that only after losses wipe out all of the equity do they need to be apportioned between creditors.

Under Chapter 11, companies with a solid underlying business generally swap debt for equity. Old equity holders are wiped out and old debt claims are transformed into equity claims in the new entity which continues operating with a new capital structure.

This is why equity capital held by financial institutions typically is more than twice as expensive as debt capital and why these institutions try to minimize its use.

This dataset takes account of only the approved equity capital for projects in production and under implementation, not actual, and does not cover reinvested earnings and other capital.

Lack of equity capital, in turn, made risk averse shareholders hire gamblers to manage their limited liability investment companies.

Other headlines that have recently reached South Africa were Bain Capital and KKR, the big boys of private equity.

Higher and pro cyclical equity capital requirements on banks, combined with a requirement to raise contingent long term debt debt that converts into equity in a crisis is a better way forward.

Where realistic debt restructuring scenarios indicate capital shortfalls, across the board conversion of bank debt into equity will be necessary.

Instead, they should become partners of private shareholders, endowing the banks temporarily with new equity capital until the crisis is over.

Loan or bond covenants often require borrowers to agree to maintain a minimum level of equity capital or cash on hand.

Second, with banks losing substantial amounts of equity capital estimates now reach 300 billion and more the need to maintain minimum equity debt ratios will force them to curtail business lending, hindering investment demand.

Investment banks like Bear Stearns and Lehman Brothers got into trouble because they had too little equity capital far less than 10 .

He also has invested in non traditional asset classes, including real estate, oil, timber, private equity, and venture capital and buyout firms.

These risks are already exacerbating the economic slowdown equity markets are falling everywhere, leading to negative wealth effects on consumption and capital spending.

They will continue to deprive the banking system of its equity capital, with little chance of it being recouped in the near future.

Rather, bonds should be at least partly converted into equity capital, and any infusion of new capital by the government should be in exchange for securities that are senior to those of existing bondholders.

But in bad times, when it is important to keep banks lending, bank capital would automatically be increased by the debt to equity conversion.

Its members proposed that universal banks be obliged to set up ring fenced retail banking subsidiaries with a much higher share of equity capital.

In particular, if the firm s equity capital erodes, the government should not provide funds (directly or indirectly) to increase the cushion available to bondholders.

It's equity.

When a bank s capital falls below a pre specified limit, its cocos automatically convert from debt to equity at a fraction of their previous price.

The mutual interaction between the incentive to minimize equity capital and the incentive to gamble in order to exploit the upside risks caused America s crisis.

And the greatest devils of our economic age lurk in the details of how officials regard the capital the equity funding of our largest banks.

They are wary of rocking the financial boat, so they go easy on financial reform and refuse to insist on more equity capital for banks.

Often private equity fund managers will employ the services of external fundraising teams known as placement agents in order to raise capital for their vehicles.

Lastly, debt growth was somewhat restrained by the dynamism of non debt related capital movements, especially foreign direct and indirect investment (in equity capital), as well as the flow of resources to short term deposits in the region apos s banking systems, reflecting in part a repatriation of capital.

First, capital requirements should be set as a straightforward ratio of common equity to total assets, thereby abandoning all reference to banks own risk management models.

To do so, they develop complicated legal claim structures that hardly anyone can fully understand and operate with too little equity capital to cover the risks.

The US financial institutions that went bankrupt in 2008 or that would have gone bankrupt without government help were in trouble because they lacked equity capital.

Higher equity capital requirements for banks are good for the broader economy they make financial crises (and the zombie syndrome) less likely, less severe, or both.