Bank Debt

From Open Risk Manual


Bank Debt denotes the range types of medium to long term financing employed by banks / financial institutions (that is, excluding short term financing and deposits)


There is a range of Bank Debt products:

  • Covered bonds are essentially asset securitisations that benefit also from a bank guarantee. The bank finances a specific pool of assets
  • Unsecured debt (as with any corporate)
  • Subordinated bonds (as with any corporate)
  • Contingent Convertibles (convert to equity upon breach of regulatory capital limits)

Credit Risk

The credit risk associated with bank debt is in some respects similar to other corporate debt. A key difference is that the business model of a bank is normally significantly more diversified via exposure to a large pool of assets, thereby bank debt is susceptible to systemic risks

Issues and Challenges

  • Ability of investors to analyse credit risk (disclosure of risks)
  • Adequacy of Regulatory Capital

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