Those who lend money typically take steps to protect against or compensate themselves for the risk the borrower will default. These steps — such as charging higher rates of interest for riskier loans — can affect borrowers’ activities in salutary ways. Lenders thus “discipline” borrowers to rein in risk. This type of market discipline can be an important supplement to regulatory efforts to ensure that banks and other financial firms do not take imprudent risks that wind up costing taxpayers or destabilizing the financial system. For lenders to serve as disciplinarians, however, they must expect to bear losses if the borrower becomes insolvent. If lenders believe the government will “bail out” an insolvent borrower, they will not expect to bear losses, and will have little incentive to monitor or discipline the borrower. Because of this, market discipline of the largest financial firms, where bailout expectations persist, is broken. It is not enough for regulators to say that they will impose losses on some class of creditors to reset the creditors’ expectations: such promises must be credible. I refer in this Article to lenders who expect to bear losses in the event of default as “credible losers.” Establishing credible losers among the claimants on systemically important financial institutions poses a knotty challenge. This Article offers a framework for meeting this challenge by articulating three criteria for establishing credible losers in support of prudential aims. It then applies the framework to evaluate a new proposed rule that largely meets these criteria for the largest financial institutions in the United States. The proposed rule can be understood to require these firms to issue a type of debt that converts to equity upon the failure and resolution of the firm. The Article then points to gaps in the rule’s coverage and proposes two possible ways to fill these gaps. First, debt that converts to equity prior to insolvency or resolution may help create market discipline for financial behemoths to which the rule does not apply. Although a European experiment with such “contingent convertible” (CoCo) debt has been problematic, the disciplinary role of such instruments may be strengthened by improving their design and clarifying their regulatory treatment. Second, “side bets” — in the form of credit default swaps or prediction markets — may help establish “credible losers” where the rule fails to do so.

中文翻译：

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可信的失败者：审慎市场纪律的监管设计

那些借钱的人通常会采取措施来防范或补偿借款人违约的风险。这些步骤（例如为高风险贷款收取更高的利率）可能会以有益的方式影响借款人的活动。因此，放贷人“约束”借款人控制风险。这种类型的市场纪律可以作为监管工作的重要补充，以确保银行和其他金融公司不承担导致纳税人成本上升或金融体系不稳定的轻率风险。但是，要使贷方充当纪律人员，如果借款人资不抵债，他们必须承担损失。如果放贷人相信政府将“救助”无力偿债的借款人，他们将不会承受损失，也没有动力去监督或惩戒借款人。因为这，维持救助预期的大型金融公司的市场纪律被打破。监管机构仅说要对某些类别的债权人施加损失以重设债权人的期望是不够的：这样的承诺必须是可信的。在本文中，我指的是希望在发生违约时蒙受损失的贷方为“可信的输家”。在具有系统重要性的金融机构的索赔人中建立可靠的失败者是一个艰巨的挑战。本文通过阐明建立可信赖的失败者以支持审慎目标的三个标准，为应对这一挑战提供了一个框架。然后，它使用该框架来评估新提议的规则，该规则在很大程度上符合美国最大的金融机构的这些标准。可以将拟议的规则理解为要求这些公司发行一种类型的债务，该债务在公司倒闭和解决后会转换为权益。然后，该文章指出了规则覆盖范围中的空白，并提出了两种可能的方法来弥补这些空白。首先，在破产或清算之前转换为权益的债务可能有助于为不适用该规则的金融巨头建立市场纪律。尽管在欧洲进行此类“或有可转换”（CoCo）债务的实验存在问题，但可以通过改进工具的设计和明确其监管方法来加强此类工具的纪律作用。其次，以信用违约掉期或预测市场的形式进行的“边际赌注”可能会帮助建立规则无法做到的“可信输家”。