Preferentes

Preferentes, or preferred shares, are a class of financial instruments issued by banks and other corporations that grant certain privileges over ordinary shares while often lacking full voting rights. They are treated as equity instruments but can have some debt-like features, such as fixed or variable dividend rates, and a priority claim on profits and assets in liquidation.

Typical characteristics include priority in dividend payments and liquidation proceeds relative to common stock, but limited or no voting rights. Many preferentes are non-perpetual but may be redeemable after a fixed term; some are convertible into ordinary shares or participate in additional profits beyond a fixed dividend. The absence or restriction of voting rights and the variability of returns distinguish preferentes from ordinary shares and many forms of debt.

Usage and risk: preferentes have been widely issued by banks as a means of raising capital without diluting control. They are often marketed to retail investors seeking higher yields, but they carry higher risk than plain debt and can be complex, with values sensitive to the issuer’s solvency and profitability. In several countries, including Spain and Portugal, the sale of preferentes to retail clients led to controversy and financial distress for some holders when banks faced losses or restructurings. Regulators and financial institutions have since strengthened disclosure requirements and, in some cases, offered compensation or conversion options to some investors; terms and protections vary by jurisdiction and issue.

Overall, preferentes occupy a middle ground between equity and debt, providing priority claims and potential upside while exposing holders to higher risk and reduced control over corporate governance.