Contingent Convertible Bond (Co. Co. Bond) (EN)

It is an hybrid bank bond, in fact, is convertible into shares, but that option is not exercised by the lender (as in common convertible bonds), but it is mandatory to the occurrence of predetermined conditions. Co. Co. Bonds are converted into shares only if the financial conditions worsen for the issuing bank. Following the agreements of Basel III, these bonds are converted if the ratio of primary capital (consisting of the sum of the share capital plus profits and reserves less losses) and the total risk-weighted assets of the issuing bank falls below the threshold of 6%.

Bibliography

De Spiegeleer J., Schoutens W., Van Hulle C., The Handbook of Hybrid Securities: Convertible Bonds, CoCo Bonds and Bail-In, WILEYFINANCE, 2014.

http://www.bis.org/bcbs/basel3_it.htm

 

Editor: Giuliano DI TOMMASO