“Financial innovation” may be a euphemism for the type of complex finance that nearly broke the banking system. But in recent months, an innovative and complex form of funding for banks has emerged, which could help protect them against losses in future crises.

So-called contingent capital, which comes in the form of bonds that convert into common equity in an emergency, has gained regulatory backing on both sides of the Atlantic, support that it is hoped will hasten the birth of a new asset class.