How frequently should debt issuance be required? In the design of a subordinated debt policy, one also needs to analyze what frequency of issuance would be required. On the one hand, frequent issuance could improve the quality of the signals provided by spreads of subordinated debt in the secondary market, because the issuance process generally involves increased disclosure.
This boost in the information content of secondary prices may be particularly important during periods of financial stress. More generally, frequent renewal of the information content of secondary prices may be highly beneficial as financial and technological innovations allow banking organizations to change their financial condition rapidly. Frequent issuance may also result in lower spreads as the market’s familiarity with the issuers increases.