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Bail-in requirements and CoCo bond issuance

Author

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  • Kund, Arndt-Gerrit
  • Hertrampf, Patrick
  • Neitzert, Florian

Abstract

CoCo bonds are a predestine instrument to enhance banks’ resilience. Based on the individual characteristics of the CoCo bond, they are counted either towards the going- (AT1) or gone-concern (T2) capital of a bank and therewith provide additional loss-absorbency. In this paper, we empirically investigate, whether banks manage potential fundings gaps in the respective capital ratios by issuing CoCo bonds. Based on a worldwide data set of 389 CoCo bonds from 2012 until 2018, we find that AT1 eligible CoCo bonds are used to manage the LR, while T2 eligible CoCo bonds do not influence the TLAC.

Suggested Citation

  • Kund, Arndt-Gerrit & Hertrampf, Patrick & Neitzert, Florian, 2023. "Bail-in requirements and CoCo bond issuance," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612322007450
    DOI: 10.1016/j.frl.2022.103569
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    References listed on IDEAS

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    More about this item

    Keywords

    Bail-in capital; Bank stability; Capital management capital regulation; TLAC;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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