Co-founder of Affari Miei Independent Financial Advisory Company
29 September 2023
What are the Mediobanca certificates of deposit? What are theirs characteristics?
Not all investors know this investment instrument, also because some confuse them with deposit accounts.
So today we will first of all see what certificates of deposit are, and then we will see what the offer is MedioBanca.
This article talks about:
What are certificates of deposit
Let’s start by trying to understand what the certificates of deposit.
It is a form of time deposit which offers those who subscribe to them the right to reimbursement of the principal at maturity, and also guarantees interest.
These tools have a duration which varies between 2 and 5 years; they can have a fixed return or a variable return.
As for the interests instead these are paid through periodic coupons or in a single payment upon maturity.
These tools resemble in some ways the bondsprecisely because they offer investors the sum deposited and the interest that will be paid.
It is also important to remember that there is a secondary market certificates of deposit which allows the investor to resell it if he no longer wishes to continue to hold it or is no longer interested in an investment in this sense. The only thing you need to know is that if the certificate is sold then you will have to give up the interest part.
Mediobanca certificates of deposit
Certificates are issued by Mediobanca and they are versatile. In fact, you will be able to choose between 4 time limits, and you will also be able to choose the option you prefer on how to have the interest paid.
These certificates are also protected: the capital does not lose value, and upon maturity you will be entitled to receive the sum initially tied up.
Furthermore, these instruments, as well as deposit accounts, enjoy the guarantee of interbank deposit protection fundwithin the limits of €100,000 for each depositor.
Another interesting feature of certificates of deposit is related to release: if you need to get your money back before it expires, as long as at least a year has passed, you can release the certificate.
At this point you will be refunded the sum you had initially tied up, and the interest amounts already paid up to that point will be withheld.
However, the sum you have already deposited will be recalculated and interest will be paid at a lower fixed rate than that which was originally applied.
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Subscription methods and costs
The certificates are issued by Mediobanca and are distributed by CheBanca! exclusively for current account and yellow account holders.
No gods are foreseen subscription costsyou will only have to pay the financial income tax and stamp duty.
You will also be able to bind any amount, with a minimum amount of €1,000, and there are no multiples.
Let’s now see in detail what theoffer from Mediobancawhich offers its investors 5 different categories of certificates of deposit:
Fixed rate: in this case the capital is remunerated at a fixed rate which is predetermined and constant for the entire duration of the bond, with the periodic payment of coupons;
Fixed rate with final premium: the capital is remunerated at a fixed, predetermined and constant rate for the entire duration of the bond, with the periodic payment of coupons. At maturity you will also receive a pre-determined final reward coupon;
Fixed rate “step-up”: in this case the capital is remunerated at an increasing fixed rate with the periodic payment of coupons;
At variable rate: the capital is remunerated based on the trend over time of a parameter (such as 12-month Euribor) increased by a spread, with the periodic payment of coupons;
Fixed rate “one coupon”: the capital is remunerated at a fixed rate with the payment of interest in a lump sum on the expiry date of the certificate of deposit.
An example of a fixed rate certificate is the one with a gross interest rate of 0.40% with a minimum subscription amount of €1,000. The duration of constraint it’s 24 months.
A fixed rate certificate with final premium is one that promises a gross final premium of 0.60% and has a 48-month commitment.
A fixed rate certificate with step-up has a gross interest of 0.55% in the first year, 0.65% in the second year and 0.75% in the third and 0.85% in the fourth year. The bond is 48 months.
A variable rate certificate with the 12-month Euribor reference parameter and 60-month commitment offers a variable rate with a spread of 0.55% per annum.
The last type of certificate is the one-coupon fixed rate certificate with a 36-month commitment and a gross interest rate of 1.50%.
Are certificates of deposit safe?
It is important to know, before making any type of investment, whether there are risks and if so, what they are.
Generally speaking we are in the world of safe investmentsbut we must not forget that even safe investments hide their pitfalls and have their potential risks.
As a risk you have to consider the liquidity riskgiven that securities that expire before 18 months can never be repaid before the natural term and can only be sold to third parties.
The other risk is that of destruction of the titlebecause some certificates of deposit are bearer certificates, meaning that by losing the security you lose the right to reimbursement.
We also have the risk relating to the debtoralthough in this case we can say that it is a very unlikely risk, also thanks to the interbank guarantee fund, which we talked about before.
Comparison with the deposit account
At the beginning of the discussion I mentioned to you that some investors confuse the certificate of deposit with the deposit accounts.
The functioning of the two instruments is quite similar, even if the deposit accounts are almost always at a fixed rate and offer both the free and restricted versions.
The certificate of deposit, on the other hand, is a security, so you will not be able to trade it as if it were a bond, and above all they have precise denominations that may not be suitable for the investing needs of every investor.
The returns on these instruments are currently not entirely advantageous, also because they stand at gross interest of 0.50%, and are unlikely to reach 1.50%.
Currently if we have to talk about returnswithout a doubt, deposit accounts are the most advantageous tools as in this period they are offering truly advantageous interest rates.
I recommend you take a look at TOP deposit account to get an overview of the best deposit accounts.
Before saying goodbye, I also invite you to consult these guides which could be exactly what you are looking for to begin your investment journey, suitable for you and the moment you are currently experiencing:
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