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

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

Debt equity swaps rescue the banks without rescuing their shareholders.

Banks capital simply refers to their equity funding how much of their liabilities are owned by shareholders rather than being owed to creditors as some form of debt.

So 26 billion of assets minus 23 billion of liabilities means that we have 3 billion of equity of shareholders' equity.

And in this case, if it's a publicly traded company, what is its shareholders' equity?

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.

And the market cap of the company is really what's the market's guess of what the shareholders' equity is?

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.

To sustain its vital role, it is working with its shareholders to strengthen its capital base.

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

These debentures should be designed to create a strong incentive for bank managers and shareholders to issue equity rather than suffer conversion.

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

By removing that possibility, we would substantially enhance the benefits of equity based compensation for the performance of firms and for their shareholders.

In the past, government bailouts have typically protected all contributors of capital of a rescued bank other than shareholders.

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.

It was the equivalent of a Chapter 11 restructuring of American corporate debt, in which debt is swapped for equity, with bondholders becoming new shareholders.

And if you're a publicly traded company, actually you don't have to be publicly traded, but if you're a corporation, that's called your shareholders' equity.

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.

Insulating executives from losses to stakeholders other than shareholders can be expected to encourage them to make investments and take on obligations that increase the likelihood and severity of losses that exceed the shareholders capital.

Equity based awards, coupled with the highly leveraged capital structure of banks, tie executives compensation to a leveraged bet on the value of banks assets. As Holger Spamann and I show in our research, executive payoffs should be tied to the long term value delivered not only to shareholders, but also to other contributors to banks capital.

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.

Contrary to bankers claims, increasing equity requirements significantly, and thus safeguarding the financial system s stability, is in the public interest including the interest of most shareholders.

The logic behind that decision was that, previously in the crisis, equity shareholders had been severely punished when their firms were judged too big to fail.

(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

Getting executives to internalize perfectly the expected losses that their choices might impose on contributors of capital other than shareholders is complex.

Thus some of their major concerns, centred upon matters such as profits, taxation and shareholders apos equity, are of limited relevance for the organizations of the system.

Protection of shareholders

No Shareholders Spring

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.

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

They did not lack that capital because they never had it, but because they paid out too much of their abundant earnings in previous years to shareholders, leveraging their operations excessively with debt capital.

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.

Direct injury to shareholders

Should Shareholders Be Kings?