Coco capital: rainy-day money

Nicholas Paisner Lloyds Bank has opened the door to new era of bank capital. The UK bank plans to swap hybrid bonds for a security convertible into equity when times get tough. Meanwhile, Royal Bank of Scotland has secured access to rainy-day capital from the government. Regulators will be happy that “contingent capital” is becoming a reality. Investors will be wary, but may have to play ball. The authorities like contingent capital because it should allow bondholders rather than taxpayers to ...