The preferential participations are emissions of debt without a concrete term. The entity pays a profitability according with its results. Thus, during the years of economic growth high interests were paid and, nowadays, with the crisis, this profitability can be invalid in the main cases.
The key points to understand the working of the preferential participations are:
- The preferential shares are not ordinary shares, thus they do not have right of vote although they have priority of charge above the shareholders.
- The preferential shares are not deposits with a fixed profitability.
- In the case of bankrupt of the bank, the preferential participations are not guaranteed by the Deposit Guarantee Fund, who covers till 100.000€ of the “deposits of money or securities or other financial instruments created in the credit entities”.
- The European directive about markets of financial instruments (MIFID) obliges at banks to submit their clients in an evaluation before to send them complex financial products. If they do not know what they are contracting, the entity has forbidden signing the deal. However, there are a lot of cases of clients that they do not know what product they had contracted.
- In the case to want to sell the preferred stocksbecause you are not earning anything, the owner of these shares can go to secondary markets where they pay contributions (AIAF Market, wholesale market of private fixed rent). However, they can cost less or nothing of the previous investment, making it possible to not follow buyers.
- The hardening of the require requirements to entities by the European Banking Authority (EBA) has inspired to banks and cashes to proposal the change of the preferred shares for ordinary shares and other instruments that count as capital.
- From 2013, EBA requires a core capital at least of 8%. It is, that the amount of shares and available funds are equal to the 8% of the group of actives with risk of unpaid.
- The entities that are not nationalized they normally offer to rebuy the preferred stocks or to change them for ordinary shares, bond convertible into shares or debt to fixed term as the subordinate duties. To choose for the shares depends of the risk that can afford the client of the entity. The convertible bond is one emission of debt that offers profitability and it can be changed for new shares at a fixed price.
With the objective that the client can recover the invest money in the preferred stocks, we offer counsel about the different courses of action:
- Extra-juridical actuation with bank.
- Acceptance of the offer of exchange.
- Demand to the bank.