BBVA to remove interest-rate floor clauses from mortgages

Bank’s decision follows clarification of ruling by Supreme Court

Spain’s second-biggest bank BBVA said Wednesday that in response to a ruling by the Supreme Court it would remove so-called floor clauses from variable interest mortgages that limit the extent to which consumers can benefit from the full extent of falls in the benchmark rate used for setting the interest to be paid on home loans.

The number of home loans issued by BBVA covered by the court’s ruling of May 9 amounts to 460,000. The bank calculated that with the one-year Euribor rate — the rate banks charge other lenders in the euro zone for one-year money — at current levels, removing such clauses would reduce its net profit in June by 35 million euros.

The bank said the annulment of such clauses would take effect as of the May 9 date on which the Supreme Court delivered its judgment. The court’s ruling came in response to a suit filed by a consumer protection group and also applies to savings bank Cajamar, which has also said it would remove such clauses, and the nationalized lender NCG Banco, which has yet to say how it will proceed.

The Supreme Court clarified its May 9 ruling on Wednesday, saying in the case of any one of the six areas it identified as deemed to be lacking in transparency, such clauses should be removed. In May it argued that while such clauses in themselves are not illegal, they should be annulled if, within the context of the mortgage contract as a whole, they lack the transparency required by law.

However, the court determined that its ruling on such clauses should not be applied retroactively in order to avoid “serious disturbances” to “public economic order.”


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