Bail-In Requirements and CoCo Bond Issuance

17 Pages Posted: 19 Oct 2022

See all articles by Arndt-Gerrit Kund

Arndt-Gerrit Kund

University of Cologne - Department of Banking

Patrick Hertrampf

University of Siegen - Department of Banking & Finance

Florian Neitzert

University of Cologne - Faculty of Management, Economics and Social Sciences

Date Written: October 5, 2022

Abstract

CoCo bonds are a predestine instrument to enhance banks’ resilience as they combine the advantages of debt and equity instruments. Based on the combination thereof, CoCo bonds are counted either towards the going- (AT1) or gone-concern (T2) capital of a bank. In this paper, we empirically investigate, whether banks explicitly manage these characteristics to offset fundings gaps in the respective capital ratios. 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

JEL Classification: G01, G21, G28, G33

Suggested Citation

Kund, Arndt-Gerrit and Hertrampf, Patrick and Neitzert, Florian, Bail-In Requirements and CoCo Bond Issuance (October 5, 2022). Available at SSRN: https://ssrn.com/abstract=4238937 or http://dx.doi.org/10.2139/ssrn.4238937

Arndt-Gerrit Kund (Contact Author)

University of Cologne - Department of Banking ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany
+492214702628 (Phone)

Patrick Hertrampf

University of Siegen - Department of Banking & Finance ( email )

Unteres Schloss 3
Siegen, NRW 57072
Germany

Florian Neitzert

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Albertus Magnus Platz
Cologne, DE NRW 50923
Germany

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