Fixed Coupon Notes (FCN) in Singapore: How They Work, Risks and Alternatives

A fixed coupon note (FCN) is a short-term structured note issued by a bank that pays a fixed coupon while your principal is linked to one or more stocks. If the weakest stock stays above an agreed strike price, you get your money back plus the coupons; if it ends below, you receive that stock at the strike price instead of cash, and the loss can be larger than all the coupons put together.

In Singapore, FCNs are sold mainly to accredited investors through private banks, priority banking and some online brokers. Bank and broker examples typically show coupons of 10–12% a year. This guide explains the terms on an FCN term sheet, works through a US$200,000 example, shows where that coupon actually comes from, and compares FCNs with bonds and secured private credit, the other ways investors here earn a high contractual coupon.

What is a fixed coupon note?

An FCN is a debt obligation of the issuing bank whose repayment depends on the price of one or more reference stocks. You receive a fixed coupon every period, whatever the stocks do. At maturity you get either your principal in cash or shares of the worst-performing stock, bought for you at a strike price agreed on day one.

Three features make an FCN different from a bond or a deposit:

• The coupon is unconditional, the principal is not. Standard Chartered describes FCNs as equity-linked notes with an unconditional periodic coupon, aimed at investors with a stable or moderately bullish view. The coupon keeps coming even if the stocks fall; what you get back at the end depends on them.
• The worst stock decides. In a basket FCN, the payoff at maturity is set by the stock with the lowest percentage return, and if shares are delivered, it is that stock you receive (DBS calls it the least-performing underlying; Standard Chartered calls it the laggard).
• The upside is capped at the coupons. If the stocks rally, you still receive only the coupons, and the note may end early.

MoneySense, the national financial education programme, stresses that most structured notes are not principal-guaranteed and may tie your money up for a set period.

Is an FCN a bond?

Legally, an FCN is a note issued by a bank, so you carry the issuer's credit risk the way a bondholder does. Economically, it behaves more like selling a put option on the basket: you collect a fixed income stream in exchange for taking the downside of the weakest stock below the strike. For portfolio purposes, it is more accurate to treat an FCN as an equity position with a coupon attached than as fixed income.

FCN vs ELN

Equity-linked notes (ELNs) and FCNs both end in cash or shares, but they pay you differently.

The terms on an FCN term sheet

Five numbers decide an FCN: the stocks in the basket, the strike, the knock-in barrier if there is one, the knock-out level and the coupon. The tenor and the observation dates set how long the risk lasts. Each term is negotiable, and moving any one of them changes the coupon on offer.

The trade-offs between these terms are mechanical. DBS's own guidance for its online FCN service says that if no quote comes back, you can raise the knock-out level, raise the knock-in or strike, or accept a lower coupon. In other words, a higher coupon is only available if you accept more of the downside.

Three outcomes, with a US$200,000 example

An FCN ends in one of three ways: knocked out early with your principal back, held to maturity with your principal back, or held to maturity with shares delivered at the strike. The first two cap your return at the coupons received. The third is where losses come from. Here is how each plays out on one illustrative note.

The note below is an example built to show the mechanics, not a quote from any bank:

Notice that scenario B is also the best case. If all three stocks rise 40%, you still receive US$12,000, or the note knocks out early and pays less.

Where losses start

At maturity, the delivered shares are worth the nominal amount multiplied by (final price ÷ strike price). Add the coupons, and you break even when the worst stock ends at the strike multiplied by (1 − total coupons as a share of the nominal). In this example that is 80% × (1 − 6%) = 75.2%: the laggard can fall 24.8% before you lose money.

Below that point, the loss accelerates. Because you bought the shares at 80% of their starting price, every further 1% fall in the worst stock costs you 1.25% of your principal. Owning the delivered shares does not lock in the loss, but you are now holding the weakest of the three stocks, selected for you by the market at its lowest point in the term.

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Where the coupon comes from

An FCN coupon has two parts: the interest the bank would earn on cash for the same period, and a premium for the downside you take on the weakest stock. With six-month US Treasury bills yielding about 4.3% on 2 November 2026, most of a 12% coupon is the second part: payment for protection you are selling.

On the US$200,000 note above, the split looks like this:

The bank's own margin sits inside these numbers rather than being shown as a fee. MoneySense notes that issuers may charge for managing the reference assets and hedging the note's risks, so part of the premium your risk earns stays with the bank.

This also explains why the typical underlyings look the way they do. A basket of volatile stocks with low correlation to each other gives the market more ways for one of them to fall below the strike, so the downside you are selling is worth more, and the coupon is higher. For SGD notes the cash part is smaller still: six-month Singapore government bills yielded about 1.9% on the same date, so a similar headline coupon in SGD relies even more on the risk premium.

Kilde's view. A 12% coupon when six-month Treasury bills pay around 4.3% means that roughly two-thirds of the income is payment for insuring someone else against a fall in the weakest stock of the basket. That is not a flaw; it is the deal. The useful test is whether you would sell that protection on those three stocks if it were offered to you as a separate trade.

How FCNs behave in market sell-offs

FCN losses tend to arrive together, when equity markets fall sharply. Since 2020 the S&P 500 has fallen more than 20% from a peak twice and came close a third time. A worst-of basket of individual stocks is more fragile than the index, because only one stock has to fall.

The design of the note matters as much as the size of the fall. Take a six-month note struck on the index on 19 February 2020, the day of the peak:

• Strike at 80%, checked only at maturity. By 19 August 2020 the index was back at 3,375, 99.7% of its starting level. The investor would have received full principal plus coupons.
• Strike at 100% with a daily knock-in barrier at 80%. The barrier was breached in March. Because the index ended just below 100%, the note would have settled in shares at the starting price: a small loss on paper despite a full recovery, and a much larger one if the market had recovered less.

Index figures understate the risk of a real basket. In each of these episodes, many individual stocks fell further than the index, and a worst-of FCN takes the full fall of whichever one did worst.

Who can buy FCNs in Singapore, and where

FCNs are unlisted structured notes, which MAS classifies as Specified Investment Products. Banks typically offer them to accredited investors, who are exempt from the knowledge checks retail investors must go through. They are sold through private banks, priority banking and some online brokers, and are often linked to US-listed stocks.

What that means in practice:

• Regulatory category. Over-the-counter structured notes such as ELNs and FCNs are unlisted Specified Investment Products. Before selling one to a retail investor, a financial institution must run a Customer Knowledge Assessment, valid for a year. Accredited investors are exempt from that assessment. If you are not sure where you stand, our guide to accredited investor status in Singapore covers the thresholds and opt-in.
• Bank eligibility. DBS states that FCN investors must be accredited investors with a wealth management account, and must also complete a risk suitability assessment to trade FCNs online. Notes linked to US stocks need a W-8BEN form on file.
• Distribution channels. Private banks and priority banking units at DBS, Standard Chartered and others offer FCNs through relationship managers. Tiger Brokers added FCNs to its Tiger Trade app, aimed at high-net-worth clients. Minimum amounts differ by channel; the DBS Private Bank example uses S$200,000. For digital platforms open to accredited investors, see our comparison of investment platforms for accredited investors.
• No deposit insurance. MoneySense lists structured notes among the products that SDIC deposit insurance does not cover. For a wider view of how MAS rules protect, and do not protect, investors, see what MAS regulation means for investors.

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Risks to weigh

The coupon is fixed; the principal is not. Besides equity risk, an FCN carries the issuing bank's credit risk, limited liquidity before maturity, reinvestment risk when it knocks out, currency risk on USD notes and costs built into its terms rather than shown as a fee.

Issuer risk is not theoretical in Singapore. After Lehman Brothers collapsed in 2008, about 10,000 retail investors here lost all or a large part of over S$500 million invested in Lehman-linked structured products, including DBS High Notes 5, which more than 1,400 investors had bought for S$103 million. Those were credit-linked notes rather than FCNs, but they show what happens when the institution behind a note, or referenced by it, fails. MAS later banned 10 financial institutions from selling structured notes for a period, after finding flaws in their sales processes.

FCN vs bonds vs secured private credit

All three pay a contractual coupon, but they are paid for different risks. An FCN pays you for equity downside, a bond for the issuer's credit and for interest-rate risk, and secured private credit for a borrower's default risk, with collateral standing behind the loan. Which risk you are paid for matters more than the headline rate.

For context on the third column: Kilde reports an average net return of 12.46% over the last 12 months and 0.0% of investor capital permanently lost after recoveries since its 2021 launch. Its notes pay monthly or quarterly coupons, and Kilde states that collateral typically covers about 1.6 times the amount invested (Kilde statistics and FAQ, accessed November 2026). Capital is not guaranteed, recoveries after a default are not certain, past performance is not a guide to future returns, and private credit carries its own risks, explained in our guide to private credit investing in Singapore. Two useful reads on the credit side are how non-bank consumer lenders performed in past recessions and how Kilde rates borrower credit. For the bond column, see our guide to bond investing in Singapore and, for government issues, SGS bonds; for cash waiting between investments, our guide to money market funds.

Kilde's view. An FCN and a secured private credit note can quote similar headline coupons, but their losses come from different places: equity sell-offs in one case, borrower defaults in the other. That difference is why they can sit in the same portfolio. Before choosing either, be clear about what you would hold if it went wrong: shares delivered at the strike, or a claim on collateral that has to be recovered. Neither is risk-free.

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10 questions to ask before you sign an FCN term sheet

Most FCN problems are visible on the term sheet before you invest. These questions turn its parameters into the risks you are actually taking. If your relationship manager cannot answer one of them clearly, that is useful information in itself.

1. Which stocks are in the basket, and would I be comfortable owning the worst one at the strike price?
2. Is the strike checked only at maturity, or is there a knock-in barrier, and is it monitored daily or only on observation dates?
3. How far can the worst stock fall before I lose money after coupons? (Strike × (1 − total coupons as a % of nominal.)
4. How often is the knock-out checked, and from which month?
5. Who is the issuer, and what is its credit rating?
6. What currency is the note in, and what does that mean for my returns in SGD?
7. If I need to exit early, how is the price set, and what has it typically cost?
8. Are there distribution fees or a spread built into the terms?
9. How correlated are these stocks with each other, and with what I already own?
10. What does a six-month T-bill pay today, and how much extra am I being paid for the equity risk?

For a wider framework that also covers private credit and other non-public assets, see our due-diligence playbook for accredited investors.

Who an FCN suits, and who it doesn't

If an FCN doesn't fit, our guides to safe and low-risk investments and alternative investments cover other routes to income and diversification.

Kilde's view. Treat an FCN as an equity position with a coupon attached, not as part of your fixed income. If you would not be comfortable owning the weakest stock in the basket at the strike price for the next year or two, the coupon is probably not worth it, whatever the number on the term sheet.

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