A Financial Stability Board (FSB) official and a Deustche
Bank in-house counsel have clashed over the
Board’s plan to ban contingent convertible
instruments (CoCos) from being used in global systemically
important financial institution (G-Sifi) buffers.
Speaking at the IBA session 'Recapitalising financial
institutions in distress – can it really
work?’ on November 2, and ahead of an official
announcement on Friday after the G-20 summit in Cannes, Eva
Hüpkes of the FSB said that they had considered the pros
of allowing CoCos in the G-Sifi buffer, the shareholder
discipline effect and lower costs.
"But at the end, those who pointed to the risks associated
with these instruments prevailed, so the requirement will be
common equity tier one only," said Hüpkes.
Trigger failure was one reason cited by Hüpkes, as the
complexity of the instruments will actually prevent the
definition of the trigger. The trigger instruments will also be