Contingent convertible bank capital is a good idea. Credit Suisse is doing its best to show it is also a practical one. The Swiss bank’s agreement to trade SFr6bn of existing hybrid debt for new cocos in 2013 is a small step towards a safer global banking system. The US should take note.

The crisis showed that the capital structure of banks was not fit for purpose. There was not enough equity to keep the institutions afloat, but debtholders, even of the most subordinated instruments, ended up taking almost no losses. Regulators’ sensible response is to require a thick layer of semi-equity capital: debt in good times, equity in bad (with bad defined as falling below a specific level of capital).

It is not clear yet how thick the coco blanket will be. Bank regulators are keen and banks like these securities more than equity, although less than cheaper straight debt financing. Analysts believe banks globally would like to issue something close to $1,000bn of various sorts of cocos before the Basel III regulations come into full force in 2018, if buyers can be found at a reasonable price.