Non-Viability Contingent Capital (NVCC)

Non-Viability Contingent Capital (NVCC) bonds are a type of bonds issued by banks and other financial institutions that are designed to absorb losses in the event of a bank’s financial distress or insolvency. They are considered a form of "bail-in" capital, meaning that they can be used to recapitalize a bank by converting the debt into equity or writing off the investment entirely.

NVCC securities are typically structured as perpetual bonds. They include a "trigger event" clause, which specifies the conditions under which the bond will convert into equity or be written off. The trigger event is typically tied to the bank’s capital ratios or other measures of financial strength, and the conversion or write-off is intended to occur before the bank’s capital levels become so low that it would fail. Henceforth, this type of bonds provides a degree of relieve for taxpayers as well, protecting them from the cost of bailouts.

Examples of a NVCC bond:
CIBC, 7.15% 28jul2082, CAD
Royal Bank of Canada, 5.01% 1feb2033, CAD