About equity certificates

Equity certificates are a special kind of equity instrument first introduced by savings banks in 1988. A total of 32 banks have now issued such certificates, and 19 of them are listed on the stock exchange. 

Equity certificates are an important part of savings banks’ capital base and confer ownership of between 14% and 97% of the individual bank.

A savings bank that has issued equity certificates has two types of equity. One is its primary capital, or “ownerless” equity, which consists of retained earnings built up by the bank over the years. The other is certificate-holders’ equity, consisting of equity certificate capital and related reserves (equalisation reserve and premium account).

Equity certificates have clear similarities to shares. The main differences lie in their owners’ rights to the bank’s assets and influence over the bank’s governing bodies. The key principle is that profits are distributed proportionally on the basis of ownership share and the bank’s other capital.

At a limited company, losses hit shareholders’ equity directly. At a savings bank, losses are first absorbed by the primary capital and equalisation reserve, and the equity certificate capital is at risk only if the primary capital is exhausted.