Banking and Finance Law Commons^™

Creditors, Shareholders, And Losers In Between: A Failed Regulatory Experiment, Albert H. Choi, Jeffery Zhang

Law & Economics Working Papers

In the aftermath of the 2007-08 Global Financial Crisis, regulators encouraged many of the world’s largest banks to hold a new type of regulatory instrument with the goal of improving their safety and soundness. The regulatory instrument was known as a “CoCo,” short for contingent convertible bond. CoCos are neither debt nor equity. They are something in between, designed to give the bank a shot in the arm during times of stress. Many of the largest international banks have issued CoCos worth hundreds of billions of dollars. After more than ten years—a decade that includes the collapse of Credit Suisse …