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Contingent convertible securities: Difference between revisions
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{{aai|fwmd|}}{{Dpn|/kənˈtɪnʤənt kənˈvɜːtəbᵊl sɪˈkjʊərətiz/ (also “[[additional tier 1 capital]]”)|n | {{aai|fwmd|}}{{Dpn|/kənˈtɪnʤənt kənˈvɜːtəbᵊl sɪˈkjʊərətiz/ ''(also “[[additional tier 1 capital]]”)''|n}} | ||
A subordinated debt instrument which is not common equity, but is sufficiently ''like'' it, in certain moods, that it can be treated as [[additional tier 1 capital]]. | A [[subordinated]] [[debt instrument]] which is not [[Equity security|common equity]], but is sufficiently ''like'' it, in certain moods, that it can be treated as being the same as tier 1 capital (hence its alternative name of “AT1”, or “[[additional tier 1 capital]]”). | ||
Cocos have shapeshifting features of being able to turn into common equity if ''la merde frappe le ventilateur''. In fact, that is really what they are for: to create an additional capital cushion for old “[[Lucky]]” the when fiinally it gets what has been coming to it for literally years. | |||
Come in two kinds: one which, if the tier one equity trigger is struck, get mixed in with the other common equity holders (these we call call “coco powder”) and the other which, if struck, get cancelled altogether (“coco pops”). | Come in two kinds: one which, if the tier one equity trigger is struck, get mixed in with the other common equity holders (these we call call “coco powder”) and the other which, if struck, get cancelled altogether (“coco pops”). | ||
The latter caused quite the brouhahah in March 2023 when [[Credit Suisse]]’s coco pops ''popped'', even though their common equity holders still got paid (a bit). This seemed to be thanks to a Swiss federal ordinance, but it did not go down well with the markets, with even the ECB and the Bank of England loudly opining that this was not what was meant to happen. | |||
We have a sense that this psychodrama has not quite yet played out. | |||