Greece's HFSF bank bailout fund will plug any capital gap beyond the baseline scenario if it cannot be raised in the market, by buying a mix of new shares and contingent convertible bonds
that banks will issue.
Different from the few issues of AT1 instruments seen to date in the German market, which have been structured with a write-down mechanism, the instruments issued by Greensill Bank are structured as true Contingent Convertible Bonds
(CoCos) and provide for a mandatory conversion of the instrument in share capital if the bank falls short of certain regulatory minimum capital ratios.
Technically, cocos are that subspecies of contingent convertible bonds
that reference a Basel 111 regulatory capital ratio, principally common equity Tier 1 as a percent of risk-weighted assets, as their trigger.
Meeting the minimum threshold means NBG will not need to resort to issuing costly contingent convertible bonds
Three ways can ensure the safety of the banking system: first, to make sure banks hold more capital, second to prohibit banks from holding each other's contingent convertible bonds
known as "CoCo" bonds, and third, to find a much better way of handling bankruptcy.
The bank also plans to pay some of its staff bonuses in contingent convertible bonds
, known as "cocos", which some investors think are too generous.
Earlier in the month, Qatar Holding, a unit of QIA, invested in contingent convertible bonds
issued by Credit Suisse .
Chief executive Bob Diamond is considering paying a large proportion of bonuses in special contingent convertible bonds
that are effectively worthless if the bank runs into trouble, newspaper reports said.
Pro-forma earnings per share for the latest quarter are calculated by excluding amortization of purchased intangibles, excluding shares attributable to the potential conversion of the company's contingent convertible bonds
(described below) and applying the tax rate in effect through the first nine months of the year.
6 billion bond issue--including a $4 billion chunk of so-called contingent convertible bonds
that will reinforce its pension plan--guys in the green eyeshades asked themselves: Is this a way to slay the pension monster?
Fitch Solutions, a division of the Fitch Group, says in a new pricing methodology paper on contingent convertible bonds
(CoCos) that, for instruments with low capital ratio conversion triggers, the impact of systemic risk on pricing could be much larger than that suggested by current CoCo pricing approaches.
Under the plan, the four will have to issue new shares to achieve a core tier 1 capital solvency ratio of at least 6% and contingent convertible bonds
, or CoCos, to boost the ratio to 9%.