CORRECTED-Germany gives banks legal certainty on CoCos -Finance Ministry

Thu Apr 10, 2014 11:48am EDT

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(Corrects name of instrument to contingent convertible in final par)

BERLIN, April 10 (Reuters) - Germany on Thursday gave its banks long-awaited legal certainty on the tax treatment of so-called "CoCo bonds", allowing them to deduct interest payments on the special high-risk bonds from their taxes, the finance minsitry said.

"The finance ministry, together with the federal states, today created legal certainty on the treatment of instruments of banks' additional core capital, so-called CoCo-bonds," the ministry said in an email to Reuters.

"On the basis of existing tax law, banks in Germany can use these instruments with comparable conditions to their European competitors."

Additional Tier 1 (AT1) bonds act as reserve capital when a bank runs into trouble. Sometimes called CoCos for "contingent convertible," they can either convert into shares, be temporarily written down, have coupons suspended, or get wiped out if a bank's capital falls below a set level. (Reporting by Annika Breidthardt; Editing by Madeline Chambers)

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