CoCo Turmoil Forces Europe to Act on Surprise Coupon Loss
- Commission may split Pillar 2 into `guidance,' `requirements'
- Volatility sparked concern over investor certainty, fairness
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The volatility that roiled banks’ riskiest debt and raised questions about the future viability of the $102 billion market is forcing the European Commission to review the way the securities work to reduce the likelihood of investors facing a surprise loss of interest payments.
Different approaches that European supervisors have adopted in setting capital requirements “are a concern both in terms of investor certainty and maintaining a level playing field,” the commission said in a note to an expert working group that was obtained by Bloomberg News. “Such concerns were recently reflected in significant volatility in the price of certain capital instruments.”