A hybrid/ structured credit product (bond/ debt instrument) that becomes convertible into equity shares if the price of the share exceeds a given amount (such as 20%, 30%, etc.) from the date of issue. Bail-in debt is not convertible when issued, but becomes so if underlying stock gains value. The issuer can convert the debt into equity as soon as it gets into solvency problems (solvency drops below acceptable levels). Technically speaking, when the bank’s common equity tier 1 ratio falls below a specific value, this debt converts automatically into equity. In terms of ranking, this type of debt is deeply subordinated with uncertain income and substantial capital risk.

The designation “bail-in” has to do with the fact that this debt helps banks protect themselves from having to be bailed out by taxpayers.

Bail-in debt is also known as CoCo bonds (contingent convertible bonds).