Podcast Location:
Download it here [file size: 34.1 MB]
Categories:
Banking and Financial Services
CPD Points:
Up to 1 point. details »

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Regulated by the Solicitors Regulation Authority:
Listen and pass the quiz: Gain 1 CPD point (60 minutes)
Listen only, gain ½ a CPD point (30 minutes)

Regulated by the Bar Standards Board:
Listen and pass the quiz: Gain 1 accredited CPD point (60 minutes)

Regulated by ILEX:
Listen and pass the quiz: Gain 1 CPD point (60 minutes)
Listen only, gain ½ a CPD point (30 minutes)

Cost:
  • FREE
Length:
30 minutes of audio
(+ optional 5 minute online quiz)
Plays on Computer:
Yes Downloadable as MP3:    Yes
Contributor(s):
Course Aims:

In this podcast, Anna Pinedo and Thomas Humphreys discuss contingent capital and the regulatory interest in this financial instrument. The podcast looks at the performance of hybrid instruments during the financial crisis and the regulatory response to this before outlining the types of instruments that would be classified as contingent capital. In particular, the concept of triggers and conversion features is explored. This podcast also features case studies of the contingent capital transactions undertaken by Lloyds, Rabobank and Credit Suisse and includes an analysis of the tax, ratings and other considerations applicable to these financial instruments.

Outcomes:
After completing the course you will:
  • Understand the concept of contingent capital;
  • Appreciate the recent regulatory focus on this area;
  • Understand the link between hybrid securities and contingent capital;
  • Know what is meant by a conversion or trigger feature and how these work;
  • Be aware of what happens in the event the trigger is breached and the complexity inherent in setting appropriate triggers;
  • Understand the features of the contingent capital instruments used by Lloyds, Rabobank and Credit Suisse;
  • Recognise the relevant tax issues when dealing with contingent capital instruments.
Level:
Specialist Difficulty: 5 of 5
Classification:
Legislative Updates
Market Update / Hot Topic
Sources and References:
  • Basel III;
  • Dodd-Frank Act;
  • Proposal for a Directive amending Directives 2006/48/EC and 2006/49/EC as regards banks affiliated to central institutions, certain own funds items, large exposures, supervisory arrangements, and crisis management (1 October 2008), http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0602:FIN:EN:PDF.
Tags:

Contingent capital instruments, or CoCos, are an innovative financial instrument offered by banks to bolster their regulatory capital levels during stress scenarios. CoCos are receiving regulatory endorsements and attracting investor interest. Anna Pinedo and Thomas Humphreys, partners at law firm Morrison & Forester in New York, discuss the features of, and regulatory proposals relating to, this financial instrument.

Podcast last reviewed: 2011-11-17

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