Final answer:
The regulator can typically require the conversion of capital notes issued by an Australian bank into ordinary shares at face value. This conversion mechanism is used to ensure financial stability and protect bank capital structures in certain scenarios.
Step-by-step explanation:
The question asks about the conditions under which a regulator can require the conversion of capital notes issued by an Australian bank into ordinary shares. This is a specific scenario related to regulatory actions in the banking sector, particularly to the mechanisms designed to preserve financial stability and protect investors. In Australia, the conversion of capital instruments such as contingent convertible bonds (CoCos) or additional Tier 1 securities is typically done at a predefined trigger event, which might include the bank reaching a certain minimum capital ratio. The conversion is usually done at face value, not at market value, a fixed rate, or a negotiated price.
An exchange rate regime where governments allow their currencies to fluctuate within margins is known as a floating (flexible) exchange rate regime. This is in contrast to a fixed (pegged) exchange rate regime where a country's currency value is tied to another major currency or basket of currencies.