In case of Euribor manipulation, the mortgage interest is zero. This follows from the decision of the Supreme Court from last December, handed down against four banks. The third part of the Court of Cassation actually declared the loan rate calculated on the basis of the Euribor agreed by some banking institutions to be zero. Let’s take a closer look at what the story is about and what implications it may have for borrowers, especially those who have taken out a mortgage between 2005 and 2008.
Euribor manipulation, the story
The story goes back to an investigation conducted between 2011 and 2013, when EU authority with AT case. 39914, wanted to find out the possible existence of a cartel between banks with the aim of manipulating the Euribor rate, i.e. the rate from which interest rates on “variable rate” mortgages are calculated. In fact, the investigation showed that in the period from 29 September 2005 to 30 May 2008 Euribor was set on the basis of agreements between Barclays Bank, Deutsche Bank, Société Générale and Royal Bank of Scotlandwho then admitted their responsibility.
According to what the Commission decided in the case, the unlawful conduct, which took place between 29 September 2005 and 30 May 2008, consisted in detail of communicating and receiving “preferences for “setting” certain Euribor values to a constant, low or high value” by banks; the exchange of “detailed non-public/available information about future trading positions or intentions sending data for Euribor of certain values at least one of its banks’; exploring “the possibility of reconciling their EIRD trading positions based on the information received” and “adjusting at least one of their banks’ future Euribor submissions based on the information received”; to contact “the person responsible for sending the Euribor data of your bank… with a request to send the data to the EBF calculator that followed a certain direction or a specific level”; with the notification “responsible person’s response before the moment of daily data transmission”. Banks were sanctioned for these events
Manipulated Euribor decision, implications for mortgages
As a result of the above, the Supreme Court effectively declared the rate used in the leasing contract to which the analyzed case applies is invaliddetermined with reference to the manipulated Euribor rate, a rate that therefore needs to be recalculated.
But the meaning of this sentence goes even further: it opens the door to sa number of possible appeals related to other mortgage rates and financing if it is proven that they were set on the basis of a manipulated Euribor.
“The investigation carried out by the Commission showed how, between 29 September 2005 and 30 May 2008, certain banks manipulated Euribor,” he summarizes Alessandro D’Antonio of Conserf Srl. – As is well known, Euribor is the main index according to which the interest rate of Italian mortgages is determined: very often, mortgage contracts stipulate that the rate used is equal to Euribor increased by X percentage points. Given the conclusions reached by the Commission, we must now question the validity of these mortgages: some specialists in the sector estimate the total compensation of Italians who took out mortgages during the period of Euribor manipulation at 16 billion”.
So who established a mortgage in the period covered by the Supreme Court decision (from September 29, 2005 to May 30, 2008)you may have the right to object to the rates.
Which 2005-2008 mortgages can be contested?
When identifying questionable mortgages There are two issues to considerD’Antonio underlines:
- The debtor is entitled to compensation arranged a mortgage with an unaccused bank that you manipulated Euribor? To date, no Italian bank has been charged with fraud, but it is also true that borrowers of Italian banks have (probably) been harmed by the manipulation;
- Many believe that mortgages are questionable only those with variable rates. In fact, many fixed rate mortgages also determine the rate applied to the borrower based on Euribor.
With reference to point a, according to some lawyers, they would be mortgages signed with all banks are questionable, including those that have not been investigated and even those that are not part of the Panel of banks that participate in setting the Euribor rate. If convicted, the bank brought before the court will be able to take action against whoever actually manipulated the Euribor rate. However, this interpretation does not seem fair or feasible. On the contrary, it is believed that the best solution would be to sue not only the lending bank but also all the banks that manipulated Euribor.
In terms of (b), the mortgages are deemed to be questionable it’s not just those with variable rates, but also those with a fixed rate signed in the breach period, where it is clear from a review of the contract that the agreed rate was set on the basis of Euribor. Mortgages with a fixed interest rate are the most damaged by the behavior of the banks, because they maintained a manipulated rate throughout the duration of the loan.