Contingent Convertible Bonds: Who Invests in European Cocos?
18 Pages Posted: 31 May 2017
Date Written: February 16, 2017
Using a comprehensive dataset on issuances and holdings of contingent convertible debt instruments (CoCos) issued by European banks we investigate who invests in European CoCos. The results indicate that most European CoCos are not directly held by euro area investors. Foreign investors outside the euro area and investment funds located in Ireland and Luxembourg hold the large majority. Euro area banks, insurers and pension funds only have very limited direct exposures. Households in the euro area hold almost no direct positions in European CoCos, although there could be indirect holdings through non-euro area entities and euro area investment funds. Concerns for contagion through cross-holdings of CoCos by banks seem to be unwarranted.
Keywords: contingent convertible debt, CoCos, banks, systemic risk, securities holdings
JEL Classification: G11, G21, G23
Suggested Citation: Suggested Citation