BARCLAYS is preparing to issue more contingent convertible bonds – co-cos – in the coming months to shore up its balance sheet and satisfy regulators that it is following their orders around bail-in bonds, it emerged over the weekend.
The bank raised £2bn in a groundbreaking co-co issuance before Christmas, seeing strong demand for the notes which yielded 7.65 per cent. The notes differ from ordinary bonds because they convert into equity if the bank’s capital ratio falls below seven per cent.
Regulators including the Bank of England want lenders to hold more of these bail-in bonds because they will shore up banks’ capital position if they get into trouble.
Barclays is looking to issue a similar bond in May, with the Sunday Telegraph reporting the bank will hold a shareholder vote on the bonds in April, covering £7bn of co-co issues over the next two years.
The regulators have also indicated that the industry more broadly needs to hold more capital to promote confidence in banks.
The Bank of England is particularly concerned that lenders’ internal models for risk weightings are too variable from bank to bank, undermining the reliability of reported capital levels.
Barclays declined to comment.