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 Committees 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 banks capital requirements and
strengthened the leading position of common equity in tier-1
Another increase of additional capital requirement met
by CET1 would further intensify the financing pressure