Luxembourg: a nightmare for the European Banks

Posted on 25/05/2016 · Posted in Europe, FX Loans in Europe, Spain
  • The Judgment of the Spanish Supreme Court and the Superior Court of Justice of the European Union, have defended those affected by FX LOANS and have knocked down the banks.

  • The European Banks will be obliged to irretrievably accept the negligent marketing of such loans, and face the facts: Citizens should be wining most law suits for justice is no longer on the banks side.

The FX Loans are a financial derivative, so the Spanish Supreme Court. This combination is in between a current mortgage and financial products, which began its trading by banks from the years 2006 to 2009. At that time, the Euribor reached up to 4%, becoming this the main attraction of these mortgages, for this also meant there was a low interest rate (1%). This resulted from the granting of the product in currencies like the Japanese yen or Swiss francs.

Thousands of customers, following the recommendation of their banks of confidence, hired this type of loan for the acquisition of their primary residence, attracted by the interest rate, without being aware of the consequences that might occur due to the volatility of exchange rates currency. Given that a mortgage is a long-term product, it could be expected that changes in various currencies would affect significantly these mortgages.

In many of the cases, none of the changes were reported by the financial institutions and those whose knowledge is in the mentioned field.

Currently in Spain more than 70,000 multi currency mortgages exist. The first law suites that were issued, were rarely ever favorable to the bank customers. This was because following the guidelines of the Bank of Spain, the courts understood that we were facing a complex product, but the customers should have understood and been more aware of this complicity. However, everything has changed with the Supreme Court ruling of June 30, 2015, which states that the multicurrency mortgages contain embedded derivatives, and therefore this is a complex product, and applies the law of the market and in certain cases the enforcement mifid.

On the other side,  the court in Luxembourg, in recent judgment of December 5, 2015, has determined that a consumer loan indexed in a foreign currency doesn’t fall within what is considered investment services and must not therefore be complied with the investment rules.

However, the war is not lost. The court appeals and states “that it is for the internal legal order of each Member State to determine the contractual consequences where an investment firm offering an investment service fails”.

Many professionals, associations and lawyers are believe it is the perfect time to go to court. Thanks to what Luxembourg has concluded, it is the mere absence of a personal test or binding offer that implies the invalidity of the contract. The bank can no longer be impasse, for now they were obliged to assess the profile of customers, as also in the pre-contractual information or binding offer to be aware of whom the client was, and  not sell fx loans indiscriminately, whilst not having any previous experience in derivatives.

This is why ASUFIN is preparing a collective law suit against the national bank Bankinter and others like Banco Popular or Barclays, and the placing of FX loans to more than 25.000 citizens. It is the perfect timing, in a national and European sense, to make justice for those that are victims of the banking system and its products. ASUFIN  is also the Spanish association that is going to Brussels the 7th of June to explain the problem with FX LOANS, and how it is possible to recover the money that was lost, whilst working in parallel to conform a European Association for the defense of the bank consumers.