A dealer's treasury desk is purchasing a new issue of fixed-rate bank preferred shares that include a Non-Viability Contingent Capital (NVCC) clause. What is the practical implication of this clause for the dealer?

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NVCC (Non-Viability Contingent Capital) clauses are required for bank preferreds to count as Tier 1 capital; they trigger a permanent conversion to common equity if the bank is deemed non-viable by OSFI.

A dealer's treasury desk is purchasing a new issue of fixed-rate bank preferred shares that include a Non-Viability Contingent Capital (NVCC) clause. What is the practical implication of this clause for the dealer?

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