Hybrids in the news

The next financial risk: CoCos

The question now is whether these synthetic bonds will become another cause of concern given that CDS contracts are already being issued against them. It will take little time before we see the repackaging of these Co-Co bonds into ABS, CDO or similar formats and one can guess what the consequences will be.

Becks love CoCos

Victoria and David Beckham are struggling to find an alternative name for the baby girl, due in the summer. CoCo was number one of the list, but now has been taken by the dog.

Credit Suisse CEO convinces investors on CoCos

A robust speech from Credit Suisse (CSGN.VX)(CS.N) chief Brady Dougan helped the bank overcome tough opposition to the issue of conditional capital at its shareholders meeting.

Squeeze on Credit Suisse, Barclays as new rules bite

Buba sees up to 20 banks on global watchlist-paper 07:17 Hours ago

Germany's Bundesbank expects international regulators to draw up a "manageable" list of up to 20 global banks that would be subject to stricter supervision this year, the central bank's vice-president told a newspaper.  Global SIFI banks would need to demonstrate resilience to losses that go beyond the new Basel III bank capital rules. This could be achieved by using debt-equity hybrid instruments known as contingent capital, which could act as an automatic stabiliser.

Why Are Convertible Bonds Popular With Investors & Borrowers? | eHow.com

Convertible bonds are investment instruments sharing the characteristics of both a debt instrument and an equity instrument. Convertible bonds have become increasingly popular as an investment tool, particularly with startups, because of their unique combination of aspects of both debt and equity.

A Contingent Capital Requirement for Banks

A Contingent Capital Requirement for Banks | e21 - Economic Policies for the 21st Century

In this paper, we show how a properly designed requirement for Convertible Contingent Capital (CoCos) can provide unique incentives that will both (a) motivate Systemically Important Financial Institutions (SIFIs) to implement strong systems of risk governance to measure and manage risk and (b) raise additional capital or sell assets in a timely fashion, when necessary, to minimize the chance of violating minimum capital adequacy standards. In addition, our proposed requirement would supplement an institution’s capacity to bear loss. Finally, a suitably designed CoCo requirement would supplement supervisory oversight with market discipline.

BarCap's 7% CoCo coupon is decidedly more generous than most deferred bonuses

Getting paid a bonus in CoCos no longer seems like such a raw deal for Barclays' bankers. The coupon rate of 7% is not just too generous for shareholders, it also outstrips the rate of interest being paid on most other deferred cash bonuses.

Switzerland presses ahead with stricter bank rules By Reuters

The Swiss government pushed ahead on Wednesday with plans to make UBS and Credit Suisse reach tough new capital standards, saying the benefit to the economy outweighed costs to the banks.

Credit Suisse Raps Holder Opposition To Coco Capital

ICB proposals will have a 'mixed credit impact'

Cocos channel revenue for securities finance

Are cocos a coconut plant or a "very dangerous" financial instrument? In actual fact, contingent convertible capital bonds (dubbed cocos) are one of the central banker’s favored tools to help recapitalize banks under stress.

Vickers body adds to warnings over CoCo 'death spiral'

How does the UK bank report compare globally?

Britain's Independent Commission on Banking published its preliminary report which recommends shielding depositors from riskier banking activities.This objective is shared by regulators across the world but divergences are emerging over how to achieve this. This article compares the ICB's report with what's happening elsewhere. 

UK banks told to boost capital, shield taxpayers

Britain's top banks should shield retail operations from riskier investment banking activities and boost capital levels to protect taxpayers from future crises, a government-commissioned report said.

ICB report as it happened April 11, 2011

Canada’s push to have bank debt converted into equity in the event of a government rescue has won over global banking regulators, who on Thursday said it could be part of a suite of financial reforms up for approval by Group of 20 leaders at their summit in November.

Basel Develops Method to Identify Banks Posing Systemic Risk

International regulators have agreed on a way to identify the banks that must hold extra capital reserves to avoid collapses that would undermine global financial stability.