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Santander to beef up capital with CoCo bonds 

May 12, 2014
Aimee Donnellan, IFR

Spain’s largest bank Santander on Thursday sold US$1.5bn worth of contingent convertible CoCo bonds, in a move that will help the bank beef up its capital base ahead of European stress tests this year.

The lender had already sold €1.5bn (US$2.1bn) of so-called Additional Tier 1 bonds in March and had said then it planned to sell €6bn more over the coming years. Such instruments convert into shares or are wiped out if a bank’s equity capital falls below a set level.

Santander said last month it wanted to have a core capital ratio of 9% by year end under Basel III “fully-loaded” criteria, which takes into account changes that need to be made by 2019 and is a measure closely monitored by investors.

It is already above minimum requirements – its core capital ratio was 10.6% in March under the Basel III rules currently in place – but banks across Europe are racing to strengthen their solvency ratios as much as possible ahead of region-wide health checks.

Read more: IFR

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