Technical standards and CoCo bonds : a new avenue for civil liability
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Olha O. CHEREDNYCHENKO and Mads ANDENAS (eds), Financial regulation and civil liability in European law, Cheltenham ; Northampton : Edward Elgar Publishing, 2020, pp. 264–283
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This chapter investigates the evolution of the regulatory framework for CoCo bonds in the context of the Banking Union. CoCos are highly sophisticated financial instruments used to enhance the capital of banks under the Basel III framework. The early triggering of their loss absorbing features is supposed to work as a buffer in cases of financial distress. But contrary to the initial intention of regulators, CoCos have never absorbed losses in a preventive manner. This is because their triggering requires the acknowledgement of an important capital downfall, an event that can damage the solvency and reputation of a bank. This chapter illustrates this point using the resolution of Banco Popular Espa-ol as an example. It also examines the potential for civil liability in the context of the EU regulation of capital instruments and its application in the multi-level Banking Union, thereby bringing together various important dimensions of the current regulatory framework for CoCos.
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Published online: 10 November 2020