Contingent capital bonds (CoCos)
BIS paper says reform to AT1 instruments ‘may be necessary’
Actual use of contingent bonds may clash with their original purpose, authors say
BoE paper studies CoCo effects in ‘one-shot game’
Game theoretic approach suggests CoCos cut risk-taking in certain circumstances
ECB and EBA action may have limited CoCo contagion – BoI paper
Deutsche Bank CoCos spread volatility throughout European banks in 2016, researchers find
Dudley outlines tougher incentives to make bankers behave
New York Fed chief says compensation could be linked to banks’ loss absorbency
Home truths on Europe’s NPLs
Europe needs to overcome fears of a hypothetical crisis, and impose more intrusive supervision and greater provisioning on its banks
Cocos lower banks’ funding costs – BIS paper
Mechanical triggers and equity conversion strengthen cocos’ impact, paper finds
BoE asks banks to allocate $154 billion to new MREL requirements
UK central bank introduces new internal capital requirement for large banks with subsidiaries; banks have net shortfall of £4 billion to meet by 2022
RBNZ considers cutting contingent instruments from capital regime
Central bank casts sceptical eye over debt instruments with in-built conversion triggers, following recent problems in Europe
Should banks hold cocos or other kinds of buffers?
Richard Heckinger examines the merits of contingent convertible bonds vs other instruments for meeting regulatory requirements
More work needed to make case for GDP-linked bonds – BoE paper
The design of GDP-linked bonds needs to align macroeconomic need with investor demand, according to a paper authored for the G20 summit; clearer guidelines and principles could aid adoption
Bank of Israel approves first issue of loss-absorbing bonds
Bank Mizrahi-Tefahot allowed to issue contingent convertible bonds that will count as part of regulatory capital, with other banks expected to follow suit
CoCo bonds decrease banks’ appetite for risk, paper argues
Convertible bonds decrease banks’ incentives to take risks in highly-leveraged states, a DNB working paper argues
In qualified support of coco bonds
Europe’s supervisors need to develop a code of best practice to support the prudential issuance of contingent convertible bonds, argues Andreas Dombret
Richmond Fed paper examines triggers for contingent capital conversion
Working paper finds the desirability of a regulator or fixed-price mechanism depends on the effect the conversion has on the value of equity to the incumbent owners
BoE’s Tucker sketches ‘richer’ capital accord
Paul Tucker gives a vision of what an ideal capital accord might look like in future including greater use of CoCos and longer-term debt; stresses this would still not remove the need for supervision
Calomiris unveils ‘Sword of Damocles’ CoCo to hold over CEOs
Columbia academic and ESRB committee member Charles Calomiris believes CoCos designed to force top bank executives to issue equity well before they are triggered would reduce systemic risk
Hong Kong regulator cautious about CoCos
The HKMA is unconvinced about banks issuing contingent convertible instruments, according its deputy chief executive, Arthur Yuen
BoE paper assesses contingent capital risk
Financial Stability Paper examines contingent capital’s risk to stability when used to fulfil banks’ equity requirements; warns that such capital may cause wider problems
Basel targets 28 banks with GSIB surcharge
Basel Committee says 28 banks will be required to hold additional loss-absorbency capital under proposed methodology for identifying global systemically important banks
Going-concern triggers on CoCos unrealistic, says White
Contingent capital instruments designed to provide a capital boost before the point of non-viability are laudable but unrealistic, says former RMMG chair Mark White
The whys and hows of CoCo issuance
There is much support for contingent capital, or CoCos, among regulators and economists. However, officials, bankers and investors alike are unsure what should serve as the trigger to turn debt into equity. Here, Charles Calomiris and Richard Herring…