Issuance of contingent convertible capital securities (coco) reduces banks’ credit risk and lowers their funding costs, a paper published by the Bank for International Settlements has concluded.

In Coco issuance and bank fragility, Stefan Avdjiev et al evaluate the impact of such security issuances between 2009 and 2015. Their results shows that larger and better capitalised banks are more likely to issue cocos.

“A coco issue unambiguously strengthens the issuer’s balance sheet,” the authors