Fresh wounds from the financial crisis in Spain

Many wounds caused by the misconduct of banks that led to the 2008 financial crisis are still open. There are victims who continue to be trapped in lengthy legal battles after losing their savings and even part of their health. The abuses have not been limited to mortgage misconduct, but have also involved incomprehensible contracts such as structured products or swaps. The victims are individuals as well as small and medium-sized business owners.

These operations share a common element. Banks took excessive risks and, to protect themselves, they passed on those risks to their clients. Behaviors that have been widely condemned by the courts. Since 2012, the Provincial Courts have issued over 4,000 judgments on these products, with 80% in favor of clients in swaps and 65% in structured products, according to the 2020 Fieldfisher Jausàs Observatory. In the Supreme Court, clients’ successes exceeded 88% in 2019.

Behind the cold numbers lie the stories of suffering of thousands of people trapped in very high-risk operations. One such case is that of José Miguel Martín de la Sierra, a small business owner from Palencia, who is enduring a true ordeal due to the combination of three products (structured product, swap, and loan) offered to him in 2006 by Banco de Castilla, a subsidiary of Banco Popular, now Banco de Santander. The facts are laid out in the judgment of the Provincial Court of Madrid dated April 28, 2023, which invalidated “all investment and financing contracts” and obligated the parties to return the contracted assets. The bank appealed to the Supreme Court.

Martín de la Sierra, aged 72, explains: “I was deceived. I have spent my whole life working since I was 14. Through my effort, I built a food distribution company. I always worked with Banco de Castilla and trusted the manager because he had helped me on occasions. They proposed an investment of 300,000 euros over five years, which the bank itself loaned me, assuring it was only for the best clients, the VIPs. In 2011, it turned out that the investment was only worth 45,000 euros, and I owed the bank 255,000. I felt lost, I was very afraid and didn’t tell anyone, not even my family. The bank renewed my loans. There have been many sleepless nights. I have had two cancers. In 2017, ill, my children took me to a lawyer.”

The Court relies on a “similar assumption” from the Supreme Court of March 2023, which established that with this contract “the client could not obtain positive results but significant losses.” However, according to the bank, the client was aware of the risk. The judgment states, “There was no mistaken mental representation about the risks of the structured product.”

Fernando Zunzunegui, a lawyer and president of Finsalud, an organization that investigates the effects of banking abuses on health, took on the case. He argues that it was a common antisocial practice in banks to approach clients and transfer the risks they had in their portfolios. It is unjustifiable for institutions to continue lengthening legal battles with appeals.

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