| Subordinated
Debt |
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A loan that ranks below other loans with regard to claims on assets
or earnings.
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Subordinated
debt is a way to remove a bank's incentive to go for broke. In the
case of default, the bank would be barred from making any payments
on the debt until all depositors or other senior debt holders were
paid off in full. Therefore, sub-debt holders (creditors) would be
left holding the bag if the investment failed. |
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Dictionary
