Antonio Flores’ Blog

An 80 year-old rural-based lady who could not write nor read was told it was the ideal product for her, others were advised that it was a secure fixed-deposit they could cash at any time, when the small-print indicated that the deal’s maturity was postponed till… 31/12/3000 and many others were simply duped by excessively commission driven bank staff.

Examples of the inventiveness of despicable branch managers, hoping to convince anyone with any decent sum of money entrusted to them, are as abundant as are the numbers of people affected: around 900,000 according to some estimates.

It makes me wonder how come savers who bought Spanish banks’ preference shares, or were (mis)sold rather, have not revolted as pretty much everyone stuck with this “toxic refuse” would argue that bank managers doing time in some Siberian gulag would not be harsh enough.

Below is an email sent to a client advising on what I think are the different options specifically related to CAM and Sabadell:

Dear John

I have been getting information about this offer made by Banco Sabadell.

As you know, the original CAM was split into to 2, the CAM Savings Bank and the CAM Bank, that was taken over by Sabadell.

You purchased “participaciones preferentes”, which form part of the latter and therefore, are taken over by them. Had you had “cuotas participativas”, which are a type of share or bank stock, the value today would be literally zero.

Banco Sabadell is now offering that you change your preferential shares for ordinary Banco Sabadell shares, until the 27^th of July 2012. One thing seems clear from all of this: it is difficult to predict whether it best to accept the swap or not.

The 3 options you would have now are as follows:

1. Accept the swap: the main advantage with this is that you get rid of a perpetual product, which is exactly the nature of these shares (and which was never told to you when you “bought” them). The main disadvantage is that you can lose a substantial part of your investment if you sell, in fact you will, since you are being offered shares at €2.3 per share when the value is now around €1.5 per share.What you would then need to do is cross fingers and hope that the share value goes up to €2.3 so that it washes its face (at €2, you would be losing in the region of 20%). Below is a chart showing the trend of the bank, clearly downward.
   
2. Keep the “preferential shares”,which would allow you to keep receiving the annual coupon, as it is called, provided the bank has profits. The bigger problem is that lack of liquidity: if you wish to sell them you need to go to the secondary market, a pretty difficult scenario nowadays.
3. Sue CAM and Sabadell invoking that contracts were sold unlawfully i.e., without a clear, transparent and concrete explanation of the nature of the product and associated risks. This again throws you into the litigation route, which we had managed to avoid till today…but it may mean that your contract is declared null and void. Following a consultation with our legal library elderecho.com, there are currently 63 Court rulings showing when typing the search words “participaciones preferentes”, some as back as 2005 (which indicates that far from being a novelty, defrauded bank users have  silently battled along…I cannot give just now the proportion of wins vs. loses but there are of both types).

It appears that many people are accepting the swap as the least worst of options, but many others are staying put since there may be a second “offer” for those investors who chose not to swap: the value here is unknown though.

Antonio Flores Litigation, Scams Banco Sabadell, CAM Bank, Preference Shares

Banks must have done something really dodgy in respect of these Russian-roulette swap contracts, because, besides the deluge of rulings tagging these instruments as the epitome of banking misrepresentation, one particular court in Madrid has now issued, at the request of the Banking Services’ Consumers Association, a search warrant in the central offices of the BBVA bank, the second biggest in Spain.

The execution of the measure was set for the 21st of December, since the bank was refusing to provide the court with a list of consumers that had signed up to the protection provided by these contracts against interest rate fluctuations, thinking this was the case. To avoid further embarrassment, BBVA decided to hand in the paperwork a few days before the deadline.

Statistically, I would say that 3 courts out of 4 are now rendering these contracts as null and void since they were sold as an insurance cover in the event of heavy interest rate fluctuations (upwards obviously) but craftily concealed the scenario where, if they went down, the bank would be cashing in. Courts understand that these contracts hid a complex financial-speculative derivative product that has caused thousands to lose millions in favour of banks.

Fortunately for lawyers acting on behalf of victims of this misrepresentation, each bank has a standard contract that applies throughout Spain, so, once a ruling is reached by a Court in respect of say, Banco Sabadell or Caja España, it is very difficult for a claim brought under the same grounds to be rejected by a different court (but may happen, after all, it’s the judiciary!).

So what’s the solution to this then? Well, if you ask me with my lawyer’s hat on, I’d say instruct me! But if you want to give it a go yourself, and give me a miss, this is what I propose:

1. Ask your bank for a copy of the swap contract, in case you don’t have it.
2. Go to the extraordinary website of the Asuapedefin and Apymifid associations and try to find the name of your bank among the 100 or so favourable rulings posted there (the column on the right of the screen). If you can find it, print it.
3. Get a letter out to the bank advising them that, due to the swap contract’s absolute nullity, you will not accept any more withdrawals from your bank account.  I have typed up a letter (see below) that will help you address these issues, and which you will need sent via official channels, i.e. “burofax”, irrespective of whether you hand-deliver or fax it, to ensure acknowledgement of content and recorded delivery, for litigation purposes.
4. If you can personally go to the branch to deliver the letter, do it. If you have found a copy of a ruling against your bank, don’t forget to enclose it.
5. The following can happen once they get the letter:
   1. that they bin it (very likely),
   2. that they make you an offer or settlement, which would normally come in a roundabout way so that you don’t notice that what they’re really after is to sting you once again (likely),
   3. or that they accept tearing up the contract and reimbursing you the sums you have lost so far (very unlikely).
6. If they offer you an offer or settlement, analise it carefully. At this point you need to understand one thing: a derivative contract is an agreement that is known, to financiers, as a “zero-sum game”. This means that one party’s loss is equal to its counterparty’s gain and therefore, the only way for you to win is that the bank loses, and vice versa. So when negotiating, do keep this in mind.
7. If you get really tired of trying to get an answer from the financial entity, then your best bet is to hire legal representation and go to court. This will allow you to get on with your life and with more productive matters.

Documents

• Swap Cancellation Letter to Bank Template (PDf – 121Kb)

Antonio Flores Litigation, Mortgages, Property abusive mortgage clauses, Banco Sabadell, BBVA, Caja España, mortgage clip, spanish swap, Swap Clause