How you invest in a bank
Every day, people invest in a bank in a number of ways.
The most common way is by depositing money in a transaction account or term deposit account. Another way is by investing in securities issued by a bank such as retail bonds, Tier 2 hybrid capital, Tier 1 hybrid capital and ordinary shares. Tier 1 hybrid capital securities and Tier 2 hybrid capital securities are together called "bank hybrid securities".
Depending on the type of investment an investor may be exposed to different levels of risks and return. Investors should carefully consider which investments are appropriate depending on their individual circumstances.
Each type of investment has different features. This may result in the following outcomes for investors.
- Different returns on the investment
- Different terms to maturity
- Different rankings of the investment if the bank becomes insolvent
- Different risks and benefits of the investment
For a description of each type of investment and a comparison of their different features click the link below.
Ways to invest in a bank