ADDITIONAL tier-1 (AT1) or contingent convertible bonds
(CoCos) were designed in the wake of the 2008 global financial crisis to provide sufficient capital to banks, reduce their risk of failure and ensure that investors rather than taxpayers bear the costs of rescuing a failing lender.
DGB Financial Group plans to fund the deal with a mix of contingent convertible bonds
and corporate bonds which will increase the debt at the holding company," Moody's said in a statement.
This measure was deemed necessary as the conversi of contingent convertible bonds
(CoCos) purchased by retail and institutional investors was insufficient to recapitalise the two banks and as a result affected this category of investors.
It could also resume preparing models of how sovereign-debt restructuring could be better supported - whether at the national level, through GDP-linked or contingent convertible bonds
, or at the regional or global level.
The Hellenic Financial Stability FundAaAaAeAeAaAeAeA -- Greece's state-owned bailout fund -- will provide mone aid to the banks by purchasing a mix of new shares and contingent convertible bonds
,AaAaAeAeAaAeAeA which are designed to convert into share in the event a pre trigger is activated, the Greek government (http://www.
Certain types of debt instruments known as contingent convertible bonds
(CoCos) are categorised by the Qatar Central Bank as Additional Tier 1 capital.
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
5bn (USD2bn) from Madrid, possibly through the issuance of contingent convertible bonds
Credit Suisse and domestic peer UBS (VTX:UBSN) are also seeking to raise capital through the issuance of contingent convertible bonds
, or "coco" bonds - a hybrid of debt and equity issued as debt but converted automatically into stock if the issuer encounters financial strains.
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.