22. CoCos – also known as contingent convertible bonds, cocos are a type of bond that converts into stock if the strength of the issuing bank worsens.

Investors want the bank to maintain its health or to get stronger, so that they can keep getting their interest payments and eventual repayment of principal.

But if the health of the bank does decline, they stop receiving interest payments or future return of principal, and become shareholders in the bank.

BBVA is one bank that has issued contingent convertibles.

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