Housing corporations to have 'amateur' status as investors

Wednesday 05 September 2012

Housing corporations will in future only be allowed to invest in complex financial forms such as derivatives as 'non-professional investors', home affairs minister Liesbeth Spies said on Wednesday.

The measure is aimed at stopping housing corporations such as Rotterdam's Vestia getting into financial trouble through speculation. In future, corporations will only be allowed to invest as 'amateurs', giving them greater protection.

Vestia got into trouble after investing in derivatives to protect itself against interest rate increases. But the fall in interest rates means it now owes a total of 11 banks over €2.6bn.

In May, the Rotterdam corporation reached a deal with its banks to stave off bankruptcy by freezing interest rates.

Racing bike

Vestia's interim financial chief says the new measure is vital. He is very critical of the way in which the banks saddled Vestia with derivatives.

'It was like selling a racing bike to someone in a wheelchair,' he told the Financieele Dagblad. 'Vestia is not a professional investor, as some banks say. You can compare the situation to a premier club against top class amateurs,' he said.

The new measure means banks have a greater duty of care. They will have to check if their product really is suitable for a housing corporation under the terms for a non-professional investor.

However, Jim Schuyt, director of Alliantie, the Netherlands' third largest housing corporation, says Spies is going too far with the amateur status. 'It means a higher risk for the banks and that leads to higher costs for the corporation,' he told Nos television.

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