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 UKs 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 Diamonds £60 million annual income will be paid in CoCos but he alone could ignite the entire market.