On 31 July 2014, ESMA published a statement warning institutional investors about the potential risks of investing in contingent convertible instruments, known in the financial markets as CoCos. ESMA is concerned because CoCos are very complex and differ from traditional instruments in a number of ways. ESMA’s concerns relate specifically to trigger levels, coupon cancellation, capital structure inversion risk, call extension risk and yield or valuation risk.

ESMA’s statement is available at: http://www.esma.europa.eu/news/ESMA-Statement-Potential-Risks-Associated-Investing-Contingent-Convertible-Instruments?t=326&o=home.