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Thursday, May 26, 2022
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Preferences or simple investments? Triodos Bank Financial Products Provide Another Legal Cover for Banking Abuse

CDA Triodos Bank, a certificate of deposit with which the ethical bank has funded part of its activities for 40 years and which it began selling in Spain in 2004, is beginning to open a new legal front for alleged abuses of the bank. .

What in a country like Spain, entails a relative risk to the reputation of members of the standard financial system, whose institutions report more than 20,000 clients to the supervisor each year. At the same time, the number of those who chose sue themoverwhelmingly successful, reaching around 200,000 a year at the height of the previous crisis.

Controversial CDA Triodos is a complex financial product

So-called ethical banking, one of three types of formally non-profit financial operators along with credit cooperatives and the latest non-bank savings banks, has so far remained outside these conflicts due to defrauding its customers, which in this case entails greater reputational risk. than for the so-called banking always.

The controversial Triodos CDA, a complex financial product that has paid juicy dividends at times but has plummeted in value, is beginning to face legal scrutiny in what is the first of its kind to affect ethical banking.

judicial conflict it is in its infancy and the courts have hardly delivered multiple verdicts at first instance. However, there are still no statements in this case at any provincial hearing, especially since it has not been received. to the Supreme or in the EU (Court of the European Union).

“You invest because you believe in value”

“DPM is like all financial products. If you clearly and transparently explain what they consist of, there should be no problems. in preferred“in the rest of the bank, points Patricia Suarezpresident of the Asufín (Association of Financial Users), an organization that represents multiple victims and tends to handle individual claims.

“We don’t know how many people we’re talking about. This is not something massive, like minimum size clauses or other mortgage violations, but there are quite a few affected, ”says Suarez. For their part, sources in the financial institution note that “at present, there are a little more than 7500 CDA holders“.

In this case, the number of affected persons will be approximately the same as those of the preferred Fagor companies, with which about 10,000 families lost with company bankruptcy 185 million euros of their savings, which the Basque savings banks channeled into their capital through preferred shares.

Suarez, for his part, highlights their profile: “In organizations like Triodos, you invest because you believe in certain values. These are loyal customers who trust what they are told, and with the help of the CDA, the bank invites them to become part of the project.”

What is CDA and what is it for?

Triodos is not the only financial institution to issue a CDA, although it is the first to be approached by its clients. courts in Spain for his administration.

Share certificates of deposit are participation in the capital of a company, whether it be a bank or an industrial company or other areas in which the owner has property rights.

Stock depository receipts are a share in the capital of a company, whether it be a bank, industrial or other business, in which the owner has economic rights. This means that you have ownership of these securities and the right to receive their dividend income, but not those that are political in nature, such as attending and voting on meetings or joining them with other members to form a group.

The latter belong to the bank’s own management company. “This allows investors interested in the project to participate without compromising the independence of Triodos Bank and the purpose of its founding,” sources at the financial institution explain. “The CDA is used to fund an organization that at the same time keeps its owner from interfering with management,” says Suarez.

This is a complex financial product offered by the bank itself, with a risk rating of 6/6, with a minimum risk level of 1/6, which requires a suitability test before being concluded, and with a warning that “sale or early cancellation is not possible or may result in corresponding losses.”

30% devaluation due to pandemic

The value is calculated by dividing by the number of shares the difference between the book value of the company’s assets and liabilities, although they are listed on their own exchange.

And this is the source of conflicts and lawsuits: its value has fallen by 30%: from 84 euros, which cost the KDP in the last issue, to 59, at which the bank estimated it for December 2021. This is due to the presence of many more sales orders that purchases with the onset of the crisis associated with the pandemic, which forced the bank to close the market and suspend its commercialization.

“It was created as a small indoor arena where more clients demand money than the organization can return,” says Patricia Suarez.

Buyback fund and new market

While the listing is being prepared in the MTF, the sale will be made at a price of 59 euros per CDA.

Two weeks ago, the organization decided to include a fund of three million euros for a “limited purchase” CSA operation for clients with “more urgent need for liquidity to cover vital expenses” awaiting re-listing in the first half of next year on the Multilateral Trading System (SMN), a sort of proprietary secondary market to be operated by ABN Amro and on which valuations will be separated from the company’s net worth.

This buyback, which aims to “offer some liquidity during the CDA commercial suspension period and while the MTF listing is pending, will be made at a price of EUR 59 per CDA”, although this price “is not indicative. from the CDA price in general, once the listing on the MTF becomes effective,” sources at Triodos explain.

The three million comes from a fund of 14.4, which is “the equivalent of the Market Making Buffer that was available under current rules“.


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