Bail-in requirements and CoCo bond issuance

Arndt-Gerrit Kund, Patrick Hertrampf and Florian Neitzert

Finance Research Letters, 2023, vol. 53, issue C

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.

Keywords: Bail-in capital; Bank stability; Capital management capital regulation; TLAC (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 G33 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:53:y:2023:i:c:s1544612322007450

DOI: 10.1016/j.frl.2022.103569

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