MORE European banks could follow Swiss lenders' lead in paying some bonuses in contingent convertible bonds, as the
The instruments only have a value when the bank is strong - if its capital position deteriorates, the bond is wiped out.
The aim of the bonds, known as cocos, is to create a bail in mechanism.
Instead of banks being bailed out when their capital positions fall, their investors - or bankers paid with the bonds - give their support.
The EBA said the bonds should convert when a trigger point of a seven per cent capital ratio is breached, and that they should be deferred for several years to make sure they give long-term incentives.
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