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CoCo Holders May Get Protection as Europe Reviews Capital

  • European Commission looking to bring clarity to asset class
  • `Guidance' to raise capital doesn't bring automatic penalties
Updated on

Holders of banks’ riskiest debt may gain some protection against the possibility of losing interest payments as the European Commission seeks to clarify the way investors in the securities could be penalized to help a troubled lender recover.

The Commission is seeking to address how European Union banking supervisors calibrate some capital levels that could determine whether or not banks can make payments on additional Tier 1 securities, according to a staff note to an expert working group. The executive arm of the EU also told regulators to differentiate between capital “guidance” they give individual banks and requirements they enforce.