The bank will package the money you borrowed and transfer it to others. More generally speaking, it is the house you bought with a loan and then mortgaged the value of the house to others.
The difference between subordinated bonds
Subordinated bonds are called subordinated bonds (subordinated securities derivatives). Sub-prime housing loans are packaged by lending institutions and Wall Street financial institutions, mortgaged in the form of sub-prime securities derivatives, and sold to investors in the secondary market. These subprime securities derivatives are called subprime bonds (the principal and interest of bonds depend on the principal and interest returned by subprime borrowers). The interest rate of subprime bonds is higher than that of prime loans, and many packaging skills are involved, because to make these bonds attractive, buyers need to be interested in them. Therefore, these bonds are favored by many investment institutions because of their high returns, including banks, hedge funds and other funds. But there is a major premise for high returns, that is, housing prices in the United States are rising. Sub-prime loans, referred to as sub-loans, refer to loans provided by financial institutions to people with poor credit ratings who cannot borrow from normal channels. The interest rate of subprime loans is generally higher than that of normal loans, and it is a floating interest rate, which often rises sharply with the passage of time, so it is risky for borrowers. Due to the high default rate of subprime loans, institutions that issue loans also have higher credit risk than normal loans.
What is a subordinated bond? What are the classifications of subordinated bonds?
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: common debt, subordinated debt and preferred stock. The higher the priority of creditor's rights, the lower the risk and the lower the 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, Pan Da should make it clear that subprime loans are completely different from those in the five categories of bank loans (normal, concerned, secondary, doubtful and loss). Subgrade in subordinated bonds only refers to its creditor's rights, which does not mean that its credit rating is necessarily secondary; In the five-level classification, subprime loans are classified as non-performing loans together with doubtful loans and loss loans. What are the classifications of subordinated bonds?
Subordinated bonds in secondary capital can be divided into two categories according to the repayment period: upper secondary II and lower secondary II.
Senior secondary capital is the accumulated subordinated bonds with no specific repayment period, including accumulated preferred shares, subordinated convertible bonds and permanent subordinated bonds. Low-order Tier 2 capital refers to subordinated long-term debt, including ordinary unsecured subordinated bond capital instruments with an initial term of at least five years and redeemable preferred shares at maturity.
Because long-term subordinated bond instruments have a fixed repayment period, they cannot be used to offset losses unless the bank goes bankrupt and liquidates, so it is necessary to limit the amount of such debts included in tier 2 capital. According to the Basel Accord, long-term subordinated bonds can only be equivalent to 50% of the core capital at most, and must be discounted (or amortized) by 20% every year during the last five years to reflect the decrease in capital value.
When a bank goes bankrupt and pays off, the repayment order of the higher tier II comes after that of the higher creditors and the holders of the lower tier II capital instruments. The bank has the right to postpone the payment of interest on such capital instruments, and can suspend all principal and interest payments indefinitely. The minimum term of high-grade Tier 2 capital instruments is 65,438+00 years or permanent term.
On the other hand, tier 2 capital II is a capital instrument with a minimum term of five years, which ranks only behind senior creditors when banks go bankrupt. Banks usually issue low-order tier 2 capital instruments when market conditions are not suitable for issuing stocks, so as to improve the capital adequacy ratio.
What does "subordinated debt" mean?
What is subordinated debt?
The so-called subordinated debt refers to the long-term debt of a commercial bank 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. The condition that subordinated debt is included in capital is that it cannot be guaranteed by banks or third parties, and it must not exceed 50% of the core capital of commercial banks. Commercial banks should convert subordinated term debts into "subordinated term debts" in their balance sheets within five years before the maturity of subordinated term debts. If the remaining term is more than four years (including four years), it is counted as100%; The remaining period of 3-4 years, 80%; 60% of the remaining period is 2-3 years; 40% if the remaining term is 1-2 years; If the remaining term is within 1 year, it will be counted as 20%.
The procedure of issuing subordinated debt is that commercial banks can decide whether to issue subordinated term debt as secondary capital according to their own conditions. When issuing subordinated term debt, a commercial bank shall submit an application to the CBRC, and submit a feasibility analysis report, a prospectus, an agreement text and other required materials. The financing method is directed by the bank to the target creditor.
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. On the contrary, for investors, the risk of buying convertible bonds is of course much greater than that of subordinated debt, which is mainly aimed at institutional investors and has little impact on secondary market investors.
Market participants believe that the CBRC's move is the most substantial benefit for the banking industry in the near future, which can supplement the bank's capital shortage and alleviate the current situation that banks blindly reach out to investors in the secondary market. In the second half of 2003, bank stocks were sold off by the market because they frequently issued refinancing plans. The issuance of subordinated debt can alleviate the contradiction between banks and the secondary market.
The difference between subordinated debt and subordinated bond is 10.
It's just the different distribution methods. Bond is also a kind of debt, so subordinated debt includes subordinated debt, but generally subordinated debt refers to subordinated debt approved by relevant departments, and its "subordinated" function is protected and monitored by national laws, so subordinated debt is the most standard subordinated debt. There are many kinds of debts, especially those for individuals or legal persons, and it is also a question whether the secondary status of these debts can be effectively guaranteed.
What is subordinated debt?
The priority of creditor's rights of various securities is: common debt, subordinated debt and preferred stock. The higher the priority of creditor's rights, the lower the risk and the lower the 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. What Pan Da particularly wants to explain is that the "subprime" in subprime debt is completely different from the "subprime loan" in the five-level classification of bank loans (normal, concerned, secondary, suspicious and loss). The "subordinated" in subordinated bonds only refers to the "subordinated" of its creditor's rights, which does not mean that its credit rating must be "subordinated"; The "subprime" in the five-level classification is classified as non-performing loans together with "doubtful" and "loss". Subprime lenders should first examine the applicant's reputation before providing loans, and only those who meet the requirements can get loans. And many people who have no credit record or bad credit record (such as those who have defaulted or defaulted) also have the need to borrow money, and subprime mortgage loans have emerged to meet this demand. The so-called subprime refers to the loan interest rate, not the meaning of inferior and inferior. The interest rate of subprime mortgage is higher than that of ordinary mortgage to make up for the greater default risk borne by the lender.
What are subordinated bonds and hybrid securities?
Subordinated bonds refer to the types of bonds whose repayment order is after deposits and high-grade bonds and before preferred stocks and common stocks. As bondholders, they can only get the fixed interest and principal amount stipulated in the issuance conditions, that is, the subordinated bondholders can't share the excess income of silver hair, but they bear a greater risk of default. 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 is not financed through the securities market, but through raising funds from institutional investors to supplement bank capital. The issuers of subordinated bonds are mainly domestic commercial banks, and the funds issued are used to supplement the capital adequacy ratio.
Features:
(1) Less restrictions and high flexibility: only the requirements of subprime institutional investors and the consent of both lenders and borrowers are required, without the approval of regulatory authorities, and the procedures are simple; There is no clear limit to the scale;
(2) Medium-and long-term financing instruments with a term of more than 3 years;
(3) It can be included in net capital to improve the capital adequacy level and liquidity of securities companies. As net capital will be the core index of securities company supervision, the qualification of business access and financing will directly depend on net capital. Therefore, borrowing subordinated debt can not only enhance the financial strength of securities companies, improve the structure of assets and liabilities, but also contribute to the business development of securities companies. These characteristics just make up for the shortage of equity financing and other debt financing, and will also become the main driving force to attract securities companies to borrow subordinated debt. But in the short term, except for a few high-quality securities companies, the subordinated debt of securities companies is not attractive for investment; In the long run, with the gradual improvement of the investment value of the securities industry, subordinated debt will become an important source of funds for China securities companies.
Hybrid securities: It is a form of bonds, which aims to meet the requirements of the Basel Capital Accord for hybrid (debt, equity) capital instruments, and the funds raised can be included in the bank's secondary capital. As an important financial tool for commercial banks to replenish capital, hybrid securities have been widely used by banks internationally. In view of the current situation that China's commercial banks are facing insufficient capital and limited supplementary channels, the introduction of hybrid securities will greatly alleviate the "urgent needs" of these banks. Mixed securities
What is subordinated debt?
What is subordinated debt?
"subordinated" comes from the English word subordinated, which means subordinate and in a secondary position, and is generally used to indicate the repayment order of debts in bank terminology. Subordinated debt means that the creditor's right to the debtor's assets is inferior to that of other creditors. That is to say, only after the debtor has paid off the creditor's rights of other creditors, if there is any surplus property, can it be used to pay off the creditor's rights of secondary creditors. Therefore, subordinated debt is actually a kind of debt whose right to compensation is constrained, and the risk of subordinated debt to creditors is greater than that of ordinary debt. However, for the debtor (that is, the bank that issues debt or bonds), this kind of debt with constrained rights can give him a guarantee close to equity capital. That is, his nature is between ordinary debt and equity capital. This is why long-term subordinated debt can only be counted as secondary capital, but not as core capital.
What's the difference between financial debt and subordinated debt?
Financial debt refers to the securities that are issued by legally established financial institutions in People's Republic of China (PRC) in the national inter-bank bond market and repay the principal and interest as agreed. These financial institutions include policy banks, commercial banks, enterprise group finance companies and other financial institutions.
Subordinated debt refers to bonds issued by commercial banks. The repayment order of principal and interest is listed in commercial banks and other liabilities, which takes precedence over the equity capital of commercial banks and belongs to the secondary capital of banks.
Subordinated debt is issued in the interbank bond market, and its investors are all investors in the interbank bond market. After issuance, it can be traded in the inter-bank bond market with the approval of the central bank. Its characteristics are simple issuance procedures and short cycle. If investors judge that the overall business environment is good and the demand for loans from enterprises and individuals is strong, subordinated debt is a good supplement to the bond market. However, the risk and interest rate cost of subordinated debt are generally higher than other bonds issued by banks.