Exclusive: HKMA rejects CoCos for now

Author: | Published: 20 Oct 2011

Contingent convertible bonds (CoCos) will need to be more widely-tested before the instrument is recognised in Hong Kong, the Hong Kong Monetary Authority (HKMA) has told IFLR.

The Bank of China recently submitted recommendations to the Basel Committee on Banking Supervision (BCBS) that the scope of application of CoCos be expanded on the basis of existing regulations to meet additional capital requirement for G-Sibs [global systemically important banks].

The statement, a response to the Committee’s proposal that the bulk of additional loss absorbency for G-Sibs be met with Common Equity Tier 1 (CET1), said the Basel III had significantly increased bank’s capital requirements and strengthened the leading position of common equity in tier-1 capital.

“Another increase of additional capital requirement met by CET1 would further intensify the financing pressure upon...