The subject of Raiffeisen shares has come up from time to time but I wanted to have your opinion on the risk associated to them as girlfriend and brother are turning to it on my advice.
To sum up, if you live or work in the region, the regional Raiffeisen banks offer the possibility of buying shares at CHF 200 per share up to a maximum of 10k or 20k depending on the bank. These are remunerated at between 2 and 3%. As a member, you are free of charge for current and savings accounts. In my experience, after a move, you can keep your old shares, which allows you to accumulate memberships and thus benefit from the 2-3% on larger amounts, which is, in my opinion, a good way to store your money in an environment with zero interest rates. Moreover, most of the time, there is no notice needed to resell your shares, so the money stays liquide.
The major risk is the bankruptcy of Swiss Raiffeisen, which I am not worried about. However, is it fair to assume that, in the event of a financial crisis, the banks can block this money in order to maintain sufficient equity capital and avoid a massive sale of shares? Is there any other reason not to hold lot’s of money in that way?
I just wanted to get your opinion before advising myself, family and friends to buy more shares
Thanks a lot
The maximum can be as low as 1200 CHF, if not lower. The remuneration can be at least 3.5% in some cases.
To answer your question, I would say that it is certainly not a way to keep your emergency funds. It is not a bad investment, but keep it proportionnal-ish to your net wealth. Consider them like bonds, not cash.
As corporate bonds, rather than government. Big difference when it comes to safety.
Thanks for your answers and inputs,
Have a nice day
I remember their bylaws allowing the local bank to block redemption of their shares. And since the dividends differ, it must be the local bank setting them too.
Also whilst you do own a part of the local bank, they must copy the bylaws of Raiffeisen Switzerland, or they get kicked (and have to pay damages). Raiffeisen Switzerland is controlled through delegates. Delegates of course weaken the control the actual owners (you and others) have, and strengthens the control of management.
They changed the delegates system recently. Now one bank = one vote.
And on the bank level, each person has only one vote.
Not worried about Raiffeisen ?
This bank lends money very easily to people who can’t necessarily afford it.
If interest rates go up, this bank could be in trouble.
Don’t forget that everything is free by taking share, but if that changes, they risk losing customers.
EU banks are not going very well and the ECB has had to lend them money at a negative rate. If big European banks skip this can create a domino effect.
I don’t trust the banks, but that’s my personal opinion.
Where you allocate your liquid assets, then? Money market? Government bonds?
They (the Raiffeisen banks) won’t be alone… But they are officially classified as “too-big-to-fail”, so they can’t fail. Nothing to worry about (for such banks) …
Clients Money is likely fine, but not sure why you think the individual bank’s shares are fine. Is there a solidarity clause among each banks branch?
Even if they don’t go to 0, can’t they lose value?
…up to 100,000 CHF. Above that, it can be “cyprus-ified”.
Those assets will still rank higher than anyone else’s. You’d need a massive failure to fully wipeout a bank incl. cash from clients.
Equity and bond will cover the loss first, eg: https://www.bloomberg.com/opinion/articles/2019-02-13/santander-didn-t-pay-its-non-debt
Yes, the group will save any local bank.
But I guess while the clients savings will be fine the bank equity (the shares) might take a loss? I assume the solidarity is towards client’s assets first.
I just had a look at my local banks balance sheet. Looks like capital is only 60 percents of the total equity. My understanding is that the bank will need to be saved before they loose those 40% because of regulations. The group will use the excess capital of all banks (they have to make it available for the group) to increase the capital of the local bank.
That means that nobody will loose his X x 200 CHF (even though they won’t be able to take it back for a while).
Raiffeisen is a bit more complicated, but if you look at the rescue of UBS 12 years ago, you can get some lights…
- if the assets melt enough %'s to match the capital’s size, the entire capital is gone
- this happens very quickly in a super-leveraged world where a small domino falling causes large losses
- at the time, the SNB ultimately brought the needed cash (from its magic hat)
- since then, obscure “too-big-to-fail” laws have been voted
- next time, bail-ins will be used to prevent a failure
This in the case of a failure, but it will be prevented (remember: “too big to fail”). The “bank resolution” will work as already experimented in Cyprus: depositor money turned into assets.
But when Banco Popular failed more recently, I had the impression senior bondholders and deposits where not impacted during the resolution process.
I guess the difference is that Cyprus was much less isolated and impacted an entire country.
UBS too but already failed in 2008/2009. Switzerland people save this CH bank but if EU banks failed Switzerland can’t buy back all CH and EU banks so the risk with so many debts is here. ECB inject already 5’000 billions to EU bank for try to save them of this crisis.
Yes it’s the same for EU 100k € but if more than one bank failed who can pay this amount to every customers ?
Probably decrease amount to 80/60/40k/… €.
Go get the provisioned amount to reimburse clients in Switzerland… it’s not enough for reimburse all.
Too big to fail = we can’t reimburse all customer that’s all
We can save may one bank but not a collapse of more banks. European banks are not doing as well as US banks with too much debt compared to their capital. USB/CS not better…