Medium-term note

A medium-term note is a fixed-rate security issued by banks with a maturity of typically two to ten years. Investors provide capital to the bank and, in return, receive a guaranteed interest payment paid annually. At the end of the term, the face value is repaid. Since cash bonds are not traded on the stock exchange, they are not subject to price fluctuations. A disadvantage is that they cannot be redeemed before the end of the term, or can only be redeemed at a financial loss.

Claims arising from medium-term notes are considered secured bank deposits. In the event of the bank’s bankruptcy, they are protected by the deposit insurance up to 100'000 Swiss francs and are paid out on a priority basis. Balances exceeding this limit (including other accounts at the same bank) are subject to unsecured counterparty risk.