When confronted by a falling market, one naturally assumes that someone somewhere knows something, that the market must be possessed of great insight. The scramble then becomes to unearth what this great insight might be. This is what investors are doing now as they try to make sense of the violent swings in European bank shares.

The Euro Stoxx bank index is down 27% this year and 42% since its April 2015 peak. The drop has been accompanied by sharp moves in bank credit markets, not least steep falls in the prices of a previously obscure form of bank debt called a contingent convertible, or CoCo, which is a bond that stops paying its coupon or even converts into a share if the regulator thinks the bank is running low on capital.