The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookiesbefore using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

CoCos: Incentive alignment, Diamond-style

It is one of the eternal unknowns of the bond market, a riddle wrapped inside a mystery inside an enigma: who is going to buy contingent capital notes?

Identifying a buyer base for these innovative instruments – which, so far, only two banks have issued – is the Holy Grail of the bank capital market for 2011.

But the answer might already have been found at Barclays and Credit Suisse. The UK’s third-biggest lender is now in talks with the Financial Services Authority over a proposal to pay the bonuses of 1,000 of its senior bankers in CoCos. Credit Suisse is also rumoured to be looking at doing the same; its chairman Hans-Ulrich Doerig saying last month that he would buy contingent convertible bonds for his own account "as the ultimate litmus test of their solidity". In 2008 Credit Suisse attracted the ire of some of its employees for paying bonuses in assets such as leveraged loans and CMBS.

Paying bonuses in CoCos is a win-win for the banks, freeing up cash for capital ratios and aligning the employees’ interests with those of the bank in an if-the-institution-goes-down, your-remuneration-goes -with-it embrace.

It remains to be seen how much of Barclays chief Bob Diamond’s £60 million annual income will be paid in CoCos – but he alone could ignite the entire market.


You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?