Good
all once again.
Now that English banks have a need to capture maximum period of funding, it seems that again captiously comercilizarse-called "preferred." captiously I say, because of "preferential" is completely misleading and, I fear, very little explained when some "expert" business of any bank tries to sell us the wonders of this product.
first thing that catches the attention of this product is its banking attractive returns. Find returns close to 9% is not difficult. I do not think that explain when offered to buy this "wonderful" product is that this return is fictitious, not real , as the issuing bank has the power to pay or not pay such interest, with absolute discretion. As heard. The authority may cancel the promised interest payments if you understand your financial situation and solvency so dictates. Is not precise and prove a loss situation, enough to understand that the situation of the entity at the time advised not to pay the interest promised.
preferred shares have no fixed maturity, not never expire, are issued in perpetuity. There is no time limit after which it can recover the amount invested for as are issued in perpetuity, in principle in perpetuity is in possession of such preference shares. When an investor wants to recover the amount invested, you must go to a secondary market with little liquidity. This, in practice, is quite similar to the absolute illiquidity.
If the issuer pays for previous issues of preference shares it always does at very favorable to their interests, earning large amounts of money they have counterpart substantial losses for investors. And it does at very favorable to their interests because it allows low market liquidity that comes to buy back those shares.
this has nothing to do with a bank deposit product, although more than a bank employee assimilating a product try to convince the other . In a bank deposit the Deposit Guarantee Fund exercises a safeguard, ensuring a minimum amount of investment in case of bankruptcy of the bank. In preferred shares no such degree of protection or coverage. If an investor has the bad fortune of owning preference shares of a bank to bankruptcy, to recover the amount invested would be located behind the common and subordinated creditors , being only ahead of ordinary shares and voting shares, in the case of banks savings.
In short, there or statutory protection afforded to bank deposits, or understandably informs us that in case of bankruptcy of the entity that sold the shares preferntes us, we would forward to many other creditors who would receive money from their investment long before the shareholders TES preferences.
incomprehensible thing is that this banking product is perfectly legal and regulated and protected by banking regulations adopted in Basel III.
For me, it is not just a product tremendously advantageous for banks and, therefore, extremely unfavorable for investors . If payment or payment of interest is decided at the discretion of the issuing bank, if the product is almost zero liquidity and, ultimately, investment security leaves much to be desired, not find many reasons for any sensible person when it comes to managing your money get a single euro on such preferred stock.
seems obvious that all the risks and disadvantages of the product is transferred to the investor , banks not assuming any risk comercilizar when that product, when they get the funding change they need to strengthen its solvency ratios and compliance with minimum cost requirements set out in the regulations adopted in Basel III.
A greeting to all
José Antonio
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