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Contingent convertible bonds: Who invests in European CoCos?

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  • Martijn A. Boermans
  • Sweder van Wijnbergen
Abstract
Using a comprehensive data set on issuances and holdings of contingent convertible debt instruments (CoCos) issued by European banks, we investigate who invests in European CoCos. The results indicate that most European CoCos are not directly held by euro area investors. Foreign investors outside the euro area and investment funds located in Ireland and Luxembourg hold the large majority. Euro area banks, insurers and pension funds only have very limited direct exposures. Households in the euro area hold almost no direct positions in European CoCos, although there could be indirect holdings through non-euro area entities and euro area investment funds. Concerns for contagion through cross-holdings of CoCos by banks seem to be unwarranted.

Suggested Citation

  • Martijn A. Boermans & Sweder van Wijnbergen, 2018. "Contingent convertible bonds: Who invests in European CoCos?," Applied Economics Letters, Taylor & Francis Journals, vol. 25(4), pages 234-238, February.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:4:p:234-238
    DOI: 10.1080/13504851.2017.1310995
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    References listed on IDEAS

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    1. Mark J. Flannery, 2016. "Stabilizing Large Financial Institutions with Contingent Capital Certificates," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 1-26, June.
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    5. Koziol, Christian & Lawrenz, Jochen, 2012. "Contingent convertibles. Solving or seeding the next banking crisis?," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 90-104.
    6. Suresh Sundaresan & Zhenyu Wang, 2015. "On the Design of Contingent Capital with a Market Trigger," Journal of Finance, American Finance Association, vol. 70(2), pages 881-920, April.
    7. Mark J. Flannery, 2014. "Contingent Capital Instruments for Large Financial Institutions: A Review of the Literature," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 225-240, December.
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    9. repec:hal:pseose:halshs-01053616 is not listed on IDEAS
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    Cited by:

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    2. Petras, Matthias, 2022. "Increasing profitability through contingent convertible capital: Empirical evidence from European banks," Global Finance Journal, Elsevier, vol. 52(C).
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    4. Kund, Arndt-Gerrit & Petras, Matthias, 2023. "Can CoCo-bonds mitigate systemic risk?," International Review of Financial Analysis, Elsevier, vol. 89(C).
    5. Anne G. Balter & Nikolaus Schweizer & Juan C. Vera, 2020. "Contingent Capital with Stock Price Triggers in Interbank Networks," Papers 2011.06474, arXiv.org.
    6. Martijn Boermans, 2022. "A literature review of securities holdings statistics research and a practitioner’s guide," Working Papers 757, DNB.

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