A capital note that is issued by a regulated institution (e.g., a bank) with the enhanced feature of “automatic convertibility” into that institution’s shares if its reserve ratio falls below a pre-defined level. As a hybrid debt security, an enhanced capital note (ECN) is embedded with an option for conversion if a contingency related to the level of capital occurs. It is generally a high-yield product, that allow an issuer to tackle and absorb a loss of equity. It comes up as an alternative way for maintaining solvency for multiple types of institutions including insurance firms.

This note is also known as a contingent convertible note (or a contingent convertible bond) or for short as CoCo note.