Barclays to sell CoCos to boost loss-absorbing capital

Barclays is marketing another round of contingent capital bonds (CoCos) to boost its loss-absorbing capital, just as the Bank of England (BoE) warned of a 25bn-pound capital shortfall in UK financial institutions.

Barclays is marketing another round of contingent capital bonds (CoCos) to boost its loss-absorbing capital, just as the Bank of England (BoE) warned of a 25bn-pound capital shortfall in UK financial institutions.

Several media reports suggested on Wednesday that the bank is meeting with investors about a potential sale of CoCos, its second such sale within six months.

CoCos, often referred to as loss-absorbing bonds, are debt instruments that convert into equity which is used to increase a bank's buffers once its capital falls below a certain threshold.

Barclays had already sold $3.0bn of 10-year CoCos back in November. It is unclear what amount of CoCos the bank is planning to sell in its latest issuance.

The BoE's Financial Policy Committee (FPC) said on Wednesday that some banks need to "strengthen" their capital buffers to absorb losses and sustain credit availability "in the event of stress", and that the Financial Services Authority (FSA) should ensure that these firms do so without hindering lending.

The FPC identified a possible £50bn reduction in banks' regulatory capital over the next three years in relation to potential losses, and said that - taking into account the banks that exceed the Basel III capital targets - banks and building societies had a combined £25bn capital shortfall at the end of 2012.

Shares in Barclays were up 0.54% at 288.75p before the close of trade.

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