IDEAS home Printed from
   My bibliography  Save this article

Who or what has been hobbling CoCos: three essentials for making CoCos a success



CoCos are contingently convertible debt securities. They are an infant reform instrument that grew out of the 2007-09 crisis. As hybrid capital, they convert to common equity tier 1 (CET1) outside bankruptcy when a built-in trigger level of the regulatory capital ratio with risk-weighted assets (RWA), CET1/RWA, has been breached. For the going-concern Co-Cos here considered, that trigger level now has to be at least 7%. CoCos offer stabilization benefits from improved crisis management through efficient capital insurance that helps recapitalize a financial firm when needed. Even without regulatory mandates to issue them, they will have a market to the extent they lower the cost of capital to the firm. Despite their promise, there have been few going-concern CoCos issues to date. The outlook will remain bleak as long as complying with the capital requirements proposed by the Basel Committee on Banking Supervision (BCBS) and considered by the European Banking Authority (EBA) in effect relegates CoCos to the category of high-yield (speculative-grade or “junk”) bonds.

Suggested Citation

  • von Furstenberg, George M, 2013. "Who or what has been hobbling CoCos: three essentials for making CoCos a success," Journal of Financial Transformation, Capco Institute, vol. 36, pages 93-104.
  • Handle: RePEc:ris:jofitr:1547

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    1. Bervas, A., 2006. "Market liquidity and its incorporation into risk management," Financial Stability Review, Banque de France, issue 8, pages 63-79, May.
    2. Anil Bangia & Francis X. Diebold & Til Schuermann & John D. Stroughair, 1998. "Modeling Liquidity Risk With Implications for Traditional Market Risk Measurement and Management," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-062, New York University, Leonard N. Stern School of Business-.
    3. Umut Çetin & Robert A. Jarrow & Philip Protter, 2008. "Liquidity risk and arbitrage pricing theory," World Scientific Book Chapters,in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 8, pages 153-183 World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

    More about this item


    CoCos; contingently convertible debt securities; crisis management; capital insurance; high-yield bonds;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:jofitr:1547. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Shahin Shojai). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.