2014年经济学人 ＂可可＂债券 大规模转变（在线收听）

“Coco” bonds

Mass conversion

Investors are panting for a risky new form of bonds issued by banks

IT TOOK three separate bail-outs to get KBC, a Belgian bank, through the financial crisis. So one might expect bonds that automatically get wiped out if the bank runs into trouble again to reward investors handsomely. Not so: KBC's “contingent convertible” bonds, designed to lose all their value in a crisis, yield a meagre 4% a year. Egged on by investors, banks are issuing such securities in growing amounts. Regulators are watching anxiously.

Cocos, as these instruments are known, are a newish hybrid of bank equity and debt. Regulators globally are keen on banks having more equity. This makes bail-outs less likely and, if they prove inevitable, less painful for taxpayers. Bankers prefer debt because it lowers their tax bill, and juices both profits and bonuses. Cocos are the compromise.

Cocos take multiple forms, but all are intended to behave like bonds when times are good, yet absorb losses, equity-like, in a crisis. At a given trigger point, when equity levels are so low that bankruptcy threatens, cocos either lose some or all of their value, or get exchanged for shares. Regulators have allowed them to be used in limited quantities to meet increased equity requirements. Banks promise the coco bondholders will get “bailed in”, to use the regulatory argot, in lieu of taxpayers.

Fans describe cocos as “pre-funded rights issues”, a metaphorical fire extinguisher in an otherwise tinder-like capital structure. But similar “hybrid” instruments misfired in the last crisis; none of the new generation of cocos has ever been tested. Some fret that coco bondholders could incur losses even as the issuer continues to reward shareholders, in defiance of fundamental laws of capitalism.

Such qualms have not stopped investors from piling in, at ever lower yields. Banks have duly stepped up issuance: from nearly nothing in 2010 to 64 billion so far this year. Credit Suisse, itself a coco-issuing bank, expects at least another 20 billion by year-end.

Much of this has come from big-name European lenders, such as HSBC, which is preparing a 6 billion issue. A mob of smaller banks is expected to follow suit later this year, after the European Central Bank vets their accounts. Peers in the Middle East and Asia are also lining up.

Investors disagree whether cocos should be viewed as perilous bonds or slightly less risky shares. Amusingly and worryingly, a recent survey by Royal Bank of Scotland found that 90% of investors thought their understanding of cocos was better than average. Whizzy hedge funds used to dominate the market, but sleepier asset managers are investing in growing numbers.

Coco yields have fallen in part because banks' balance-sheets are growing sturdier. That could change in a flash, especially if the euro zone tips back into crisis. Alex Lasagna of Algebris, a hedge fund, says each bank and bond presents its own idiosyncratic risks. The diciest of them, he says, are equivalent to “picking up pennies in front of a bullet train”.

Regulators, who crave a simpler financial system, wonder whether cocos will make dealing with failing banks even trickier. The triggering of one coco will frighten investors away from all of them. Lawsuits will undoubtedly ensue, injecting panic at the most awkward time. Given recent experience, the watchdogs are right to be wary of anything banks are keen on.