Bank stock, debt could have 'distress triggers'-Bair

WASHINGTON, May 7 (Reuters) - U.S. regulators could in the future require large banks to issue preferred shares that would automatically convert to common equity in distressed times, providing greater stability to their funding bases, the chairman of the Federal Deposit Insurance Corp said on Thursday.

Sheila Bair said a systemic risk regulator could require banks to issue debt and securities that would automatically convert if a "distress trigger" -- such as a ratings downgrade -- occurs.

"We cannot effectively solve the problems caused by the 'too big to fail' notion unless we overhaul how we regulate and supervise big institutions," Bair said in prepared remarks for a bank conference in Chicago. (Reporting by Karey Wutkowski and Ros Krasny, editing by Matthew Lewis)