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Convertible Capital Note or Security
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A fixed term debt instrument or preferred stock issued by a bank and convertible into perpetual preferred stock. In some issues, conversion to preferred may be encouraged or forced by the issuer who may have the right to reduce the note coupons or simply to effect conversion. The perpetual preferred stock becomes Tier I bank capital under the Basle Capital Adequacy Directive. These notes are used primarily to assure a bank access to additional capital in an emergency. Also called Exchangeable Capital Security (X-Cap), Exchangeable Capital Unit, Preferred Purchase Unit. See also Equity Contract Notes, Perpetual Preferred Stock (Perp).
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