Nieuws - 29 november 2012

'No risks taken with derivatives'

Wageningen rapped over the knuckles because of its financial dealings. Low interest rates mean virtual losses.

In a report published in the wake of the Vestia scandal, the education inspectorate concludes that Wageningen is not complying fully with the rules in its use of derivatives. Derivatives are used as a way of insuring against interest rate movements by agreeing a fixed rate with another party. Higher education institutions are allowed to use derivatives only if they are linked to a loan. Otherwise 'you are essentially speculating in interest-rate movements', says the education inspectorate in its report.
Wageningen is one of the three universities that do not entirely satisfy that condition. The university has derivatives (interest-rate swaps) for 17 million euros but the associated loan is only 15 million euros.  In a comment by Simon Vink, the spokesman for the executive board, he confirms that there is indeed no corresponding loan for 'a small portion' of the derivatives. Vink: 'That was a small margin that seemed necessary at the time for the financial planning. It is less than one per cent of the balance-sheet total. Wageningen UR has been very careful about how it uses this instrument and no irresponsible or large risks have been taken.'
Vink does not want to reveal any of the details as the university is 'cautious about releasing financial information'. In addition to Wageningen, VU University Amsterdam and Leiden also have a so-called 'open position'. Pieter Omtzigt, the financial specialist for the CDA (Christian Democrats), said on ScienceGuide that he felt their financial policies should have consequences: 'What implications with this have for VU, Leiden and Wageningen? You just can't do what they did.'
The inspectorate's report also mentions 'virtual losses' for nearly all the higher education institutions as a result of their derivative positions. However, the minister is not too worried about that. The reason is that interest rates are unusually low whereas derivatives are used as insurance against high rates. This will not lead to unplanned expenditure as long as the universities 'hold on' to the end of the loan term. The additional losses for the universities are the price they have to pay for more predictable interest charges.