Rabobank executives will begin marketing a new form of contingent capital bond on Monday that could provide a template for other banks seeking to raise fresh funds from the markets.

Bankers are currently devising new forms of contingent capital – hybrids that contain features of both debt and equity – to meet the stricter criteria expected to come from the new Basle capital requirements after existing forms were discredited during the crisis.

The notes from Rabobank, the Dutch co-operative lender, would act exactly like normal bonds unless the bank breached pre-set ratios, at which point the value of the notes would be written down by 75 per cent and the remaining quarter returned to investors.

The bonds are particularly notable because Rabobank, a triple A-rated institution, is doing this from a position of strength.

“Given the events of the past couple of years, we wanted to be absolutely sure that even the unthinkable could be hedged or mitigated,” said Bert Bruggink, chief financial officer.

The deal is also the first to use this sort of write-down feature. Rabobank is a mutual organisation, so could not offer to convert the bonds into equity as the UK’s Lloyds Banking Group did with an offer of contingent convertible, or CoCo, notes last November.

The CoCos were designed to switch into equity at a pre-set level. That structure generated interest from regulators around the world, but was not considered a true test of the market since it was an exchange for existing, poorly performing bonds.

The Rabobank deal will raise fresh capital and executives are looking to issue at least €1bn ($1.4bn) of the new bonds.

Michael Gower, head of long-term funding at Rabobank, said: “Contingent capital is a new flavour for the markets. A bank of Rabobank’s standing is probably the appropriate name to take a leadership role in this sector.”

Investors have already shown strong interest and a team of bankers and executives will hold a series of meetings and presentations across Europe this week.

“This sort of structure can work for listed groups as well as mutuals like Rabo. Can it dictate the path of new products in this space? I think it can,” said Sandeep Agarwal, head of the financial institutions debt capital markets team at Credit Suisse, one of four banks working on the deal.

Marc Tempelman of the debt capital markets team at Bank of America Merrill Lynch, also on the deal, said that many executives were waiting for new regulations before addressing their own funding.

“It’s very significant because everyone could theoretically apply a structure of this type, but a number of possible candidates may want to see what happens with capital regulation first,” he said.

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