Bank bonds -
senior and subordinated bonds
Senior bonds are fixed-income securities that have a higher claim on assets in case of an issuer's bankruptcy, which makes them more secure than other bonds from the same issuer. In contrast, subordinated bonds are fixed-income securities that are of a lower rank in the event of an issuer's bankruptcy compared to senior bonds. If the issuer becomes insolvent, the holders of subordinated bonds are only paid after all senior bondholders have been compensated. The increased risk associated with subordinated bonds results in higher interest rates compared to senior bonds.