Credit Suisse’s “CoCo” bonds did exactly what they were designed to do: Transfer all the risk of debt from the bank to bondholders. Here’s what we know about the “CoCo” bonds and what their evaporation may mean for the banking sector.
But these were not ordinary bonds. Designed in the wake of the 2008 financial crisis, these were issued precisely to give banks like Credit Suisse a financial cushion in the event of a severe setback. But holders of the bonds — regarded as extremely risky investments — were still angry about winding up with nothing, while Credit Suisse shareholders received shares in UBS.
Here’s what we know about the “CoCo” bonds and what their evaporation may mean for the banking sector.
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