Seven banks taken to task over preferred share selling

Market watchdog announces that more lenders will be sanctioned for misleading customers into buying debt

The National Securities Commission (CNMV) has so far opened sanctions proceedings against seven of the 19 lenders that mis-sold preference shares to retail customers, the chairman of the CNMV, Julio Segura, said Thursday.

At a news conference on the balance of his stewardship of the CNMV before his mandate ends next month, Segura, said proceedings are expected to be initiated against another two banks at the end of this month, and two more before the end of this year. The banks have not been named.

Most of the files that have been opened against the banks concern alleged malpractice in the marketing of preference shares, a form of perpetual debt that normally yields higher interest rates than bank deposits but is a much riskier investment. The CNMV believes the banks failed to properly carry out tests designed to gauge the level of financial knowledge of potential clients and their level of tolerance to risk.

Many savers have seen the value of the preference shares they hold plunge in value and have found themselves locked into an investment with little liquidity. The CNMV also believes that some sales of preferred shares were carried out at their nominal as opposed to their market value.

Segura said legally the CNMV could not bar banks from selling preference shares to retail investors. The government last month approved a decree imposing restriction on the sale of preference shares.

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