One-third of colleges and universities trade in risky derivatives

One-third of the Netherlands’ colleges, training schools and universities invest in complicated financial products known as derivatives, the education ministry said on Tuesday.

Educational institutions use derivates to cover themselves against the risk of a rise in interest rates on loans. However, the drop in interest rates means the value of these investments is now negative.
Although this negative value is virtual, it can affect the institutions’ financial stability and lead banks to demand extra guarantees.
New rules
In total, the derivatives owned by training colleges (mbo) to shore up their investments are down in value by €74m, while hbo college and university investments are down by €216m, according to education ministry figures.
Education minister Jet Bussemaker is now working on plans to tighten up the rules for investments by public bodies. Earlier, home affairs minister Ronald Plasterk called for a ban on local council investment in derivatives, saying it is wrong to take such risks with public money.
A number of housing corporations have also run into trouble with derivatives trading. One, Vestia, had to be bailed out after losing €2.6bn.

Universities invest in derivatives, speculate on interest rates

Four vocational colleges latest to join derivatives scandal
Housing corporations to have amateur status as investors
Should colleges be free to invest as they think fit? Use the comment box below.

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