Suppose the 20% - 20% rule is imposed on the bank of the last question using CoCos advocated by Calomiris. Assume the bank maintains the same total assets. What does its liability structure become?

LIABILITIES deposits 20 borrowing 70 capital 10 Total 100

LIABILITIES deposits 20 borrowing 60 capital 10 CoCo 10 Total 100

LIABILITIES deposits 20 borrowing 60 capital 20 Total 100

LIABILITIES deposits 20 borrowing 60 CoCo 20 Total 100

From the last two questions, would the 20% - 20% Calomiris rule have saved the bank if 20% of its loans had to be completely written off?

No, because the CoCo cannot be converted to stock.

Yes since the CoCo can be converted to stock and 20 > 14.

No, because the CoCo cannot be converted to debt.

Yes since the CoCo can be converted to stock and 10 < 14.