The CoCo death spiral is the process by which the expectation of a swathe of bank-issued Contingent Convertible (CoCo) debt converting into equity can exacerbate share price declines.
- We constructed a valuation model calibrated on the CoCos of Lloyds and CS. Read more
Central bankers and regulators have agreed to impose an extra capital charge of 1 per cent to 2.5 per cent of risk-adjusted assets on the largest banks in a bid to protect them from the big losses that could trigger another financial meltdown. The FT reports that the deal agreed a smaller increase in capital than central bankers had wanted, in exchange for stricter rules on what can constitute core tier one reserves. About eight banks will have to hold 9.5 per cent of risk-weighted assets as this capital by 2019, while about 20 will have to hold 8 to 9 per cent. The agreement represents a victory for countries like the US and the UK, however Reuters says the deal will disappoint some banks that hoped to use so-called contingent capital or “cocos” to make up the surcharge. Read more
Breaking pre-market news on Monday,
- Credit Suisse issues $6.2bn of CoCo bonds — statement. Read more