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Mortgage floor clauses to have impact of 4 bln euros on Spanish banks

Xinhua, December 22, 2016 Adjust font size:

The decision on mortgages floor clauses by the European Court of Justice will have an impact of around 4 billion euros (4.17 billion US dollars) on Spanish banks, the Bank of Spain said on Wednesday.

The Spanish institution provided the figure after the European Court unveiled the decision of ordering lenders to pay their clients back all the money from mortgage floor clauses.

Floor clauses imposed a minimum interest rate on floating-rate mortgages establishing a limit on how far mortgage rates could fall, which meant that many mortgages holders did not take advantage of the low interest rates of recent years.

A Spanish high court had declared floor clauses illegal in 2013 and limited refunds to the period from May 2013, although banks began to apply floor clauses in 2009.

However, the European court said "the situation of unfairness must have the effect of restoring the consumer to" his or her previous situation as floor clauses had never existed.

Those banks affected would be BBVA, Caixabank, Banco Sabadell, Banco Popular and Liberbank.

Banco Popular, which is already going through a restructuring process, saw its shares fall 7 percent in morning trading, while those of Banco Sabadell and Caixabank dropped 3 percent and Liberbank 13 percent.

The decision will have more consequences apart from paying back as banks will have to set aside additional provisions. (1 euro=1.04 U.S. dollar) Endit