Mubasher: Global issuance of contingent convertible bonds (CoCos) fell 25% year-on-year in 2016, in line with Moody's most recent projections.
CoCos reached AED 275.46 billion ($75 billion) last year, according to Moody’s.
Issuance of additional tier 1 (AT1) CoCos declined as “many banks had already issued sufficient volumes of these instruments to meet their minimum regulatory capital requirements", according to Simon Ainsworth, senior vice president at Moody's.
"Banks had also possibly been using legacy Tier 1 instruments, as well as common equity and therefore had less incentive to issue additional AT1 bonds," he added.
The global decline in bonds issue was mainly weighed by issuance reductions of 38% in Europe, 20% in Asia, and 51% in the Middle East.
“In Europe, issuance by Swiss banks decreased by 68% to $2.7 billion in 2016 from a high of $8.4 billion in 2015,” Moody’s said, adding that “this was followed by a large decline in issuance by UK banks, which dropped by 29% to $8.2 billion in 2016 from approximately $11.5 billion in 2015”.
China, which to date has accounted for around $45 billion or 10% of overall public market CoCo issuance by banks, fell by around 60% to $7.7 billion in 2016 from $18.6 billion in 2015.
