Subordinated debt refers to the long-term debt issued by commercial banks with a fixed term of not less than 5 years (including 5 years). Unless the bank closes down or liquidates, it will not be used to make up for the daily operating losses of the bank. The creditor's rights of this debt rank behind deposits and other liabilities. ?

Subordinated bond refers to a form of debt whose repayment order is superior to the company's equity but lower than the company's general debt. The priority of creditor's rights of various securities is: general debt >; Subordinated debt > preferred stock > common stock, securities with higher priority, lower risk and lower expected return, and vice versa.

Institutions often allocate assets in a certain proportion according to their own situation and CAPM model to balance their own risks and benefits. In particular, the word "subprime" in subordinated debt is completely different from the word "subprime" in the five-level classification of bank loans (normal, concern, subprime, suspicious and loss).

Extended data

On June 5438+February, 2003, China Banking Regulatory Commission issued the Notice on Subordinated Term Debt Included in Tier 2 Capital, and decided to supplement the capital structure of China's commercial banks and include subordinated term debt that meets the prescribed conditions in Tier 2 capital of banks. This makes it possible for commercial banks to broaden capital financing channels and increase capital strength by issuing subordinated term debts, which is helpful to alleviate the situation that China's commercial banks are inherently short of capital and have a single capital replenishment channel.

Compared with the convertible bonds that listed banks like to issue in the early stage, subordinated debt belongs to equity financing, while the former belongs to debt financing. Subordinated debt will not be converted into shares at maturity, that is to say, it will not be raised through the securities market, but from institutional investors to supplement the bank's capital.

For banks, there is no risk in issuing convertible bonds. After maturity, it will be converted into shares, and the net assets per share will increase without repayment of the principal. However, there is pressure to repay the principal and interest when the subordinated debt expires, and the net assets will not increase. Therefore, banks must consider the pressure of repayment of principal and interest when financing through subprime loans to enhance their profitability.

Baidu Encyclopedia-Subordinated Debt