CoCos and FCA

FCA: From Oct. 1, the FCA will limit sales of CoCos to institutional, professional investors and high-net-worth individuals for 12 months, the London-based regulator said in a statement today. The FCA will publish a consultation paper on a set of permanent set of rules for CoCos in September, according to Bloomberg. Under pressure from regulators to boost capital after the financial crisis of 2008, banks have been selling CoCos, a form of fixed-income security that automatically converts into ordinary shares if a firms capital falls below a pre-determined level. European regulators last month expressed concern banks may be selling them to consumers without properly explaining the risks. Portugal s bailout of Banco Espirito Santo SA this week left shareholders and junior bondholders with losses and The U.K.s Financial Conduct Authority will ban firms from selling contingent convertible bonds to individual investors, saying they re too complex and risky for the mass retail market. In a low interest rate environment, many investors might be tempted by CoCos offering high headline returns, Christopher Woolard, the FCAs director of policy, risk and research, said in a statement today. However, they are complex and can be highly risky. (news.financializer.com). As reported in the news.