Are bank regulators being painted into a corner by the Cocos?

Sir, Patrick Jenkins refers to Barclays’ $3bn issue of contingent capital bonds “which simply wipe out investors if the bank’s core tier one capital ratio falls below the new 7 percent minimum specified by international rules”, “Coco’s flavor raises investor appetite for wipeout bond”, February 5. 

But the big wipe out could also happen because of changes in regulations, like for instance if regulators decided to require the banks to hold some more capital when lending to “infallible sovereigns”, in order to decrease the distortions in the market and the discrimination of “the risky”. What would happen in that case? Would the investors sue the regulators? Have the regulators now been painted into a corner by the Cocos?