He convertible bank bond that is on everyone’s lips, after what happened in the takeover operation of the Swiss Swiss credit by UBS, It has its own name: CoCos. At the request of the Swiss Financial Market Supervisory Authority (Finma), the entity’s bondholders were left without 16,000 million when the operation materialized.
Related news
Cocos are non-maturity high-risk hybrid debtconsidered until now safer than investing in shares, something that, however, in the case of Credit Suisse has not been fulfilled since its shareholders will be able to recover part of the money invested in bank securities, while the holders of CoCos they have lost everything.
Logically, what happened alerts those who invested in this financial instrument, that banks and companies use to bolster their capital buffers and absorb losses without affecting the course of the entity’s operations. It is a type of AT1 debt, the one with the highest risk but, at the same time, the best remuneration. When a bank’s reserves fall below a certain level in relation to its assets, they are converted into shares to restore impaired capital.