Contingent Convertible

A contingent convertible (CoCo) is a deeply subordinated hybrid capital instrument, also known as an Additional Tier 1 instrument, sold by financial institutions. It sits above common equity in the repayment hierarchy in the case of issuer liquidation and is intended to absorb losses on a going-concern basis. CoCos are issued with capital triggers. If an issuer’s capital ratio falls below the trigger, CoCos convert to common equity or are written down.