A security (hybrid security) that has, in addition to debt features, other additional features, particularly its convertibility to equity and subordination. Examples of debt-like hybrid securities include “securitized” preferred equity and subordinated debt. Debt-like hybrids are part of a bank’s capital that can help banks raise capital without a direct influence on their management, while providing a reasonable buffer at the time of a crisis.

Debt-like hybrids (debt-like hybrid securities) usually come in the form of contingent convertible capital instruments (CoCos) which are treated as regulatory capital that, upon a trigger event occurring, either convert to equity or are written-down (loss absorption mechanisms).

The issuance of such hybrids is subject to regulations prescribing acceptable trigger type(s) and level(s), loss absorption mechanism(s) (conversion or write-down) and rate(s) (impacting loss allocation), issuance size, and other structural elements (e.g., maturity and coupon payment policies).