Bankia Agree To Reimburse 200,000 Investors

State owned Spanish bank, Bankia has agreed to fully reimburse 200,000 investors  who bought €1.8 billion worth of shares before the company had a public offering in 2011.

The bank are giving the investors a three month window to claim back their original investment plus an additional 1% interest.

Bankia’s troubles in 2012 which almost lead to collapse following record losses of €20 billion led to Spain seeking a European bailout, which further impacted the country’s already severe recession.

A Bankia spokesperson stepped forward to say: “[Investors] will get their funds back in a period of time that we estimate to be no longer than 15 days after the claim is filed.”

“It will save them money by avoiding the legal process, or by reducing legal processes already underway.”

Bankia say that the decision to repay investors comes as a result of January’s landmark decision in favour of two plaintiffs who invested thousands in the bank.

The pair purchased €9,997 and €20,868 worth of preferred shares in the bank, which was formed as a result of seven failed caja – or savings – banks merging.

The Supreme Court ruled in favour of the duo after stating there were ‘serious inaccuracies’ in Bankia’s stock market launch prospectus.

Former head of Bankia, Rodrigo Rato is currently the target of several criminal investigations in relation to the case.


Background Investment Checks

CPC are now working with expert financial investigators who operate from two key locations in the U.K. and have associated offices in Spain, France, Brazil, Argentina and Dubai.

The team is able to conduct searches of property ownership, business ownership and the financial status of both businesses and associated individuals.

We can also have “background checks” conducted on any potential investment opportunity that you are considering.

The research will identify the credibility of the investments and outline the details and track records of the individuals behind the opportunities. In doing this, we aim is to assist potential investors to make an informed decision as to whether a particular investment opportunity is right for them.

To provide asset-checking services throughout Europe we can provide our report within a 48-hour timeframe. This will include official documentary proof of ownership.
To provide an equivalent service outside of Europe we require a ten-day turnaround from instruction.

Investment checking services and backgrounding are available now to both CPC clients and non-clients alike.


The European Court have declared floor clauses in Spanish mortgages illegal. CPC and associated Spanish experts will review your deeds / escritura, free of charge to see if you are a victim of abusive clauses.

The European Commission has issued a damaging report for Spanish Banks who have for many years introduced floor clauses into their mortgage contracts.

These clauses (although common, are not used by all banks) set a minimum interest rate that clients have to pay even if the benchmark rate (Euribor) drops below that figure.

Spain’s Supreme Court has declared this practice “abusive” and so far has sentenced banks to pay back, but only the payments made since May 2013.

The European Executive disagrees with the setting of this date, stating that refunds must be made way back to the very first mortgage payment; obviously their rationale is that if the clause is void, it is void from the start of the mortgage.

There are 2.5 million mortgages with abusive clauses in Spain, is yours one of them?

We can help you NOW; our Spanish Legal Teams are on standby to advise if your mortgage carries these clauses and our reviews are carried out free of charge.

Mortgage – Cap & Floor Clauses

A floor clause (or “cláusula suelo” in Spanish), usually entered in a financial agreement in relation to a cap floor, refers to a specific condition generally included in financial contracts, principally loans.

As a loan can be agreed based upon fixed or variable interest rate, the loans agreed with variable rates are usually linked to an official interest rate (in the UK the LIBOR, in Spain the EURIBOR) plus an extra amount (known as spread or margin).

Thus, what the mortgagee actually pays the bank every month is: a portion of the capital plus the benchmark or interest reference plus the spread. The latter (the spread) is, from the bank’s perspective, the profit for lending the capital; from the borrower’s is the price of using the monies borrowed.

Since the parties will want some certainty on the amounts actually paid and received in case of sudden and sharp movements of the benchmark, they can, and usually do, agree a system by which they are sure that the payments will not go too low (on the bank’s side, so they count on a certain and regular profit) or too high (on the borrower side, so the payments keep in an affordable level all throughout the mortgage term).

This system of limitation of the interest getting too low or too high, is that one known as “floor and cap clauses”.

Stage 1

These schemes have been used for many years in banking, and have been deemed as a useful way to keep the risk and uncertainties of the signing parties of a mortgage at bay. However in Spain, from around a decade ago, the original scheme has been corrupted to a point in which it has taken the Spanish Supreme Court to issue a Judgment in order to protect the consumers / mortgagees from the constant abuses that the banks inflicted on them.

The problem started around the years between 2001 and 2003. In the beginning of the last decade thousands of properties were sold every year in Spain (many of them to foreigners, as second residences), and thousands of mortgages were agreed to finance those purchases. In a crazy push to gain new clients, the local banks had to look for fresh ways to attract new borrowers.

In the midst of what is now considered irresponsible lending, a way to appeal to the new applicants, to all those looking for offers on how to finance their new homes, was to offer mortgages with a ridiculous, almost symbolic, interest rate, linked to an also very low margin – ads reading “mortgage at EURIBOR plus 0.5 %” or very similar were typical for almost a decade.

The competition between the banks was fierce in offering lower and lower rates. Since the EURIBOR, or benchmark, was low (it started the decade at 3% and ended up in 2010 below 1%), a quick calculation provided attractive figures: the repayment costs virtually nothing in the medium and long term, and with a lease it would be a profitable investment.

Stage 2

At this point very few borrowers, if that, would read the whole mortgage agreement before signing it, let alone having it translated and fully explain by an independent accountant or solicitor. There were a couple of years at a fixed rate, typically 3.5 %, but that was just the beginning – for 15, or 20 or more years the monthly payment was going to be ridiculously low. The buyers jumped on these offers – at the peak of the property bonanza (between 2004 and 2006) one million properties were sold every year in Spain.

After signing the agreements, the borrowers started repaying the loans for the first couple of years, at the initial fixed rate, expecting a drastic reduction of the payments once they go to variable. However, after some years into the term of the contract, the monthly repayments went up. They called their banks managers commenting on a mistake in the last month’s charge, but the reply they got was that there was nothing wrong with the charges – these were correct, all made as per the agreement.

Stage 3

It was in the agreement. Going down to the smaller print of the mortgage deeds, conveniently hidden amongst the endless and tedious legalities (a mortgage agreement has normally about 50 pages of complex verbiage, hard to understand even for a Spaniard not completely familiar with the legal jargon), there was a clause that simply was to make that godsend clause reading “EURIBOR plus 0.5%” totally futile, completely irrelevant, as good as not actually entered in the contract. This was the floor clause.

No one mentioned it to the borrowers initially, but somewhere in the contract there was a clause setting the floor and cap levels. The floor clause meant that regardless how low was the benchmark or official mark linked to the mortgage (EURIBOR), there was a floor in place: a minimum interest to apply to the mortgage every month. For instance, if the floor clause is set at 4 %, it didn’t matter that the rate of reference rate would go down to 1%, because if the sum of this rate to the spread gives less than four, then 4 % would be the interest to pay.

The borrowers complained about it to their banks in two ways, closely related one to the other: firstly, it is unfair that they do not benefit from the cut in the interest rates of the reference rate (the EURIBOR has been below 2% for 4 years now, from 2009 to 2013. Currently it’s 0.5 %); secondly, it is there in the agreement, but nobody explained it clearly to them. However, the banks refused firmly to discuss it, retorting in all cases to the same reply – you signed the agreement freely, and now it’s final in all its clauses enforceable, there’s nothing they will do about it.

The Aftermath

Since the banks rejected even to consider discussions with their clients, so the claims started to reach the Courts, profusely, and all based on the same grounds; that something essential to the agreement, such as the cap and floor clauses, should have been explained precisely and more into detail, not left in a clause towards the end of the contract.

The first Judgments were dubious – it was a new circumstance, a dispute based upon complex, unique financial terms and conditions. Some Judges ruled favoring the banks – after all, there was an agreement and witnessed by a Notary.

However, the Higher Court, and eventually the Supreme Court, all ruled in the same direction in their pronouncements of the appeals (which came by the thousands): the clauses are obscure, very difficult to understand, hence they must be declared abusive and taken off the agreements.

Even if there was an agreement in place, and it was freely signed by the borrower, the general rules on financial contracts state that the essential clauses of an agreement (and the applicable interest rate is one of them) must be discussed individually and must be stated clearly in the document to sign.

Stage 4

The Supreme Court issued a historical Judgment (May 9th 2013) ruling illegal all floor clauses entered in the mortgage contracts from BBVA and two other Spanish banks. The conclusions of this document works like a handbook on the use of floor clauses in fair contracting:

The Courts must protect the weaker party in an agreement, usually the consumer against the lender. A clause is abusive when: a) it limits only the rights of the consumer, and b) it has not been negotiated and discussed individually between the parties.

The professionals (the banks) must prove that they offered to discuss the essential clauses individually, and has offered the consumer (the borrower) alternatives.

Any clause deemed abusive must be taken off the agreement, retroactively, i.e. not from the moment it’s declared abusive, but from the date the contract was agreed.