A dozen years ago, I went to the London office of Credit Suisse (CS) for a tutorial about so-called “cocos” – – or the contingent convertible bonds introduced after the 2008 financial crisis, in a bid to enable banks to absorb losses in a crisis.

The CS financiers duly presented a neat PowerPoint, complete with arrows and charts, that explained that cocos lay second from bottom in the capital structure. Thus, if a bank went bust, its equity would be wiped out first, followed by the cocos, in order to protect senior creditors. In exchange for this risk, those bonds paid a high (ish) return to investors, reflecting the normal rules of financial capitalism.

Financial Times