Rabobank Certificates suspend payments
Last Friday, the European Central Bank (ECB) asked European banks to stop paying dividends and buy back their own shares for the time being. The ECB considers it essential that banks maintain their capital in order to continue to support the economy in these uncertain times. The ECB therefore expects banks to waive dividend payments for 2019 and 2020 until at least October 1, 2020, so that banks can continue to support households, SMEs (small or medium-sized enterprise) and large companies. De Nederlandsche Bank (DNB – Dutch central bank) supports the call.
Image from Rabobank
It is not yet a commandment, but an explicit recommendation. The focus now must be on supporting individuals and companies to deal with the economic consequences of the corona pandemic. The central bank does not need banks to revert to profit distributions they made before the call was made.
Rabobank
Following recent announcements from the European Central Bank and De Nederlandsche Bank, Rabobank has decided not to pay out the fee on the Rabobank Certificates in March, June and September 2020. Rabobank thus complies with the ECB’s recommendation banks not to pay a fee until at least October 2020.
Rabo Certificates are a popular investment product, of which the fee represent a fair and factored part of their income. Even in these turbulent times, this step is remarkable because Rabobank has always emphasized that it wants to pay “certificate holders” consistently. Consistent in reliability under all conditions. That promise has now come to an abrupt end.
In their statement Rabobank wrote:
‘Rabobank attaches great importance to its relationship with private investors and realizes that this decision will have an impact on the direct yield of the Rabobank Certificates during this period until at least 1 October 2020”
Hmmmm, one of the safest banks in the World, that suspends its payments??? I must admit that I haven’t seen this one coming. Okay, I know that the corona crisis is causing considerable damage, including in financial markets. And this is hitting the banking sector hard. But, based on the annual report published on 2020, March 5th, there is no indication that the fee for certificate holders would be changed three weeks later. You guessed it, I’m not happy with this action from Rabobank. 
What does this mean for my Vrijheid Fonds?
The fees will not be paid out on the scheduled dates of March 29, June 29, and September 29, 2020. My Vrijheid Fonds consist of 55 Rabobank Certificates, and with this suspending next three payments, I will be missing out €67.02 ($73.79) in my Vrijheid Fonds.
Will I ever get these fees back, well I don’t know? On the website of the Rabobank, I read that the Rabobank is closely following further announcements and recommendations from the supervisors, including the ECB’s evaluation for later this year about the economic situation and possible dividend payments after 1 October 2020. By that time, Rabobank will make a completely discretionary decision about payment of the Rabobank Certificates, which can be nil, lower or higher than before.
Conclusion
I’m not amused by the action of the Rabobank. For 2020 I’ll probably miss a total of € 67 in fees. And as I already wrote, the discussion of the Rabobank came by surprise.
Was I the only one who hasn’t seen this coming? No, I’m not the only one who was surprised by the action of the Rabobank. The Dutch Investors’ Association (VEB) -a not-for-profit and member-based organization that aims to strengthen the representation of investors – got a lot of questions from their members and have written a Letter to the board of directors of the Rabobank. In this letter the board of directors is asked to explain their actions. I fully support the action by the VEB!
I’m curious about the answers from the Rabobank. The only thing I can do right now, is just wait and see. I’m not selling my certificates, because I still think that they are a great investment.
What do you think about the request of the ECB? Is your passive income affected by this request? And what do you think of the actions of the Rabobank? I like to hear from you!
Cheers,
Pollie
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