Question

CoCo bonds can be an alternative to bail-in from depositors in bank. Do you agree.

Answer 1

Contingent convertible have a strike price when the bond will be converting into the stock and contingent convertible will be used in the banking industry in order to to strengthen their balance sheet and it will be helpful for a struggling Bank to not repay the bond and it will make the interest payment or it can even convert those bonds to the stock so investors will be receiving interest payment that are typically much higher than the traditional bonds so so these bonds can be an alternative to bail in from depositors in the bank.

Yes, I do agree that these loans could be alternative because these loans are expanding on the concept of convertible bonds by modifying the convergent terms so it will be trying to provide the bank with the time and it will also provide the investor's interest payments which will be typically much higher than the traditional Bond and these will be including the triggering effect also in case the bank will not be able to pay with their interest obligation so there will be conversion of shares and other repayment terms which would be available to the bank and these banks would be able to survive even at the time of adverse economic conditions by converting the bonds to the stock on making the interest payment.