The president of BBVA, Carlos Torres, has defended that contingently convertible bonds (CoCos) will maintain their level of importance in the bank’s capital structure, despite the volatility registered in recent days as a result of the Credit bailout Suisse will break the standardized order of priority.
During his speech at an act of Invertia and El Español, Torres has indicated that there were moments of “nervousness” during the past week, but that the situation “has normalized quite a bit” since then. In fact, the banker has underlined his conviction that this type of debt “will return and will be a very important instrument in the capital structure.”
In this context, Torres has highlighted that the turbulence registered is due to a “very particular situation” in the Swiss jurisdiction, which decided to reduce the value of Credit Suisse’s CoCos bondholders to zero while approving a rescue that returned a certain value to shareholders.
Faced with this situation, the BBVA executive stressed that the European authorities have made it “very clear” what the order of priority is, so that it is the own resources, the shareholders, who are in the front line to bear any loss or negative impact, if any.
In addition, the banker has sent a message of “calmness” regarding the solidity of European banks, arguing that the problems registered on both sides of the Atlantic, with Credit Suisse and SVB, are the consequence of previous problems and poor risk management.
“The situation of European banks is one of strength”, Torres stressed, highlighting profitability, capital, liquidity and the financing structure. In addition, supervision and regulation in Europe are “much more demanding” than in the United States, which should be another sign of reassurance.