NEW YORK, Nov 10 (Reuters) - Contingent capital bonds may help banks manage their capital in times of stress, however the securities are not a panacea, Standard & Poor's said on Tuesday.

Contingent convertible bonds, which are designed to convert into equity if a bank comes under stress and breaches certain triggers, are being touted as a means of helping shore up capital levels.

British bank Lloyds (LLOY.L: Quote, Profile, Research) plans to raise 21 billion pounds to increase its capital base, which will include swapping 7.5 billion pounds of existing debt into contingent capital. For details, see [ID:nL3540088]

"It is always difficult to talk about hypothetical situations that have not yet taken place, but we think contingent capital securities can help the bank's balance sheet in a time of stress," Standard & Poor's said in a statement.

The securities are not designed to help repair existing weak balance sheets, however, and "many banks will still need to address their capital positions through traditional forms of tangible equity," S&P added.

One potential difficulty in the securities is whether the contingent bonds will convert into capital early enough to help a bank, S&P said. The securities will need to have their conversion triggers set at appropriate levels, which can be difficult to determine ahead of a crisis, it said.

It may also be difficult to price the bonds at a level that will be attractive to both investors and the banks selling the debt, S&P said.

"We expect that there will be investor interest in contingent capital securities, but we do not yet know whether they will remain a niche product or become a more mainstream part of the bank capital funding market," S&P said.

(Reporting by Karen Brettell; Editing by Diane Craft)