CoCo retail restrictions weigh on banks

Author: Ashley Lee | Published: 24 Mar 2015

The UK Financial Conduct Authority’s (FCA) continued restrictions on the selling of contingent convertible instruments (Cocos) is leading banks to follow the spirit rather than the letter of the law on other securities.

Last August the FCA introduced temporary restrictions on selling CoCos to retail investors, called temporary product intervention rules (TMR). Permanent regulations will come into force this October, and other regulators may follow the FCA’s lead.

According to the International Capital Markets Association's (ICMA) Charlotte Bellamy, banks are following the rules based on their intent. "People are trying to look at the spirit of the rules," Charlotte Bellamy, director at the industry association. "If something looks similar to a CoCo but perhaps doesn’t meet the strict FCA definition, they’re taking similar steps as if the product were caught."

The introduction of the FCA’s restrictions has certainly been an additional hurdle for foreign issuers in...