what happens to contingent convertibles during a financial crisis 
during a period of financial stress or uncertainty for banks the value of cocos can significantly decrease as they are high risk instruments if a bank is struggling and needs additional capital the value of its shares may decrease putting coco investors at risk for losses if a bank fails to meet its capital requirements it may postpone the payment of interest or convert the bond into equity at a lower price to meet the regulatory standards in dire situations the bank may write down the value of cocos to zero the bottom linecontingent convertibles or cocos are a type of debt instrument issued by european financial institutions they are similar to traditional convertible bonds in that they can be converted into common stock at a particular strike price cocos are used in the banking industry to shore up banks tier 1 balance sheets allowing them to absorb a capital loss because of this cocos are high yield higher risk products and investors need to weigh the benefits and risks of investing in cocos carefully 