CoCo bonds could be one-off

Author: | Published: 1 Dec 2009

Elizabeth Fournier
Staff writer

Lloyds Banking Group's exchange offer for new contingent convertible (CoCo) bonds has been popular with both investors and regulators. And the bonds could be the product that regulators are looking for to ramp up capital reserves at banks, as part of the effort to dampen the effect of future market disruption.

During a speech in Brussels, Paul Tucker, deputy governor for financial stability at the Bank of England, voiced his support for the instrument, which Lloyds debuted to huge investor interest at the beginning of the month. "If CoCos could form a material part of recovery plans, the landscape might just be transformed," he said. And Veenay Chheda, executive director of hybrid capital structuring at JP Morgan in London, commented: "This is going to be a fundamental, if not the only, instrument that facilitates building affordable capital buffers that will provide...