Banks refute case for market triggers on contingent convertibles

In remarks published in late March, Haldane argued for a reconfiguration of banks’ capital structures, which “would bake-in the benefits of simplicity, robustness and timeliness”. Integral to this, he suggests, is the requirement to issue cocos alongside equity. These coco instruments should have triggers based on market-based measures of solvency and the triggers should be graduated, stretching up the bank’s capital structure with the coco converting to equity on triggering.

Andrew Haldane, executive director of financial stability, Bank of England

The first of these points would mark a radical departure for this nascent market.