How bank bonds work — Our Bond Plan

1. Who gets paid first

If a bank ever ran into serious trouble, this is the order in which people get their money back. Shareholders lose first. You sit above them in every bond we own.

The colours match the tiers on the main page.

Depositors Paid first

Senior bonds

LACIs Senior bonds that absorb losses first

Tier 2 bonds

Perpetual bonds (AT1)

↑ Paid firstPaid last ↓

2. How safe are the banks we use

Banks must hold a cushion of their own money against losses. Regulators require roughly 9% for our local banks. DBS, OCBC and UOB each hold more than 15%. TD holds 14%. Each bank could lose more than a tenth of everything it has lent out, and you would still be paid in full.

Figures from the banks' 2025–2026 reports. Ask JX or ZX for the current numbers.

3. Bonds

Fixed payments on fixed dates. The bank cannot skip a coupon without defaulting. Three levels, paid in this order:

Senior bonds. Also called "senior preferred". Paid first.
LACIs. Also senior. If the bank is failing, can be used to absorb losses before depositors and ordinary senior bonds. Many of the foreign bank bonds you buy are this kind.
Tier 2 bonds. Paid after both kinds of senior bond, so they yield a little more. Usually issued for 10 years with the bank allowed to repay after 5, which Singapore banks have always done.

4. Perpetual bonds (also called AT1)

"Perpetual" means no fixed end date. Unlike the bonds above, there is no final repayment date: the bank can repay at year 5 or later but it never has to.

The bank may skip a payment. But if it does, it cannot pay shareholder dividends, so banks almost never do.
If the bank does not repay at year 5, the rate resets to a Singapore interest rate plus a margin. So far every Singapore bank has repaid on the first date allowed.
In a real crisis the bond turns into shares of the bank, that is why it pays the most.

In 2020, when regulators told banks to cut dividends to shareholders, every bank still paid its bondholders in full — including on perpetuals.