Financial Regulatory Forum

Regulators face battle to create market for CoCos

By Jane Merriman

LONDON, Oct 18 (Reuters) – Financial regulators favour contingent capital — bonds that convert to equity — as a way to strengthen large banks, but they face a tough job convincing investors to buy these new-fangled instruments in bulk.

A Reuters survey of major corporate bond investors shows that some would be willing to buy the bonds under certain conditions, but they have a lot of questions they want answered.


SNAP ANALYSIS-Swiss give fresh momentum to contingent bonds

RTXSLHY_CompBy Jane Merriman

LONDON, Oct 4 (Reuters) – Contingent capital got a boost on Monday as Swiss regulators said these bonds, which convert to equity when banks are in trouble, could help bolster the capital base of Credit Suisse and UBS.

The Swiss initiative marks a step forward for the asset class, which has failed to find a big fan base among investors since UK bank Lloyds and Dutch-based Rabobank issued contingent-style bonds in November 2009 and March this year.


Lloyds cash call moves focus to turnaround

By Clara Ferreira-Marques

LONDON, Dec 14 (Reuters) – Lloyds completed a record 13.5 billion pound ($21.9 billion) rights issue on Monday, ending a turbulent period for the bank and shifting investor focus to a potential government stake sale in 2010.

The discounted cash call — the world’s largest to date — is a key plank of a bumper capital raising effort worth over 23 billion pounds in total and aimed at helping Britain’s largest retail bank avoid a state-backed scheme for bad debts.

Lloyds Banking Group said on Monday 95.3 percent of the new shares offered were taken up by investors including the British government, which owns around 43 percent of the bank.

Bankers, regulators eye next generation of CoCos

By Jane Merriman
LONDON, Nov 20 (Reuters) – Investment bankers are already pitching to clients a new form of hybrid bond that financial regulators see as a potential saviour of troubled banks, but it is uncertain if they will work or if investors will buy them.The bonds, which convert to equity if a bank’s capital runs low, have been created for Lloyds as part of a 21 billion pound ($34.63 billion) capital raising to free the UK bank from a government insurance scheme for bad loans.