Swaps: SMEs can also win against the Banks

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Many SME managers still believe that they cannot claim against being sold swaps because they think that, as they are legal entities, the courts will never uphold their claims. Nothing could be further from the truth, and to understand this, let us look back.

Swaps are products aimed at large investors with a very high level of knowledge of the financial and securities market who play with future exchange flows. For this reason, at the time they are contracted, swaps must have a zero value that guarantees a balance between the interests of the two parties.

When the economic crisis broke out, banks decided to sell swaps to individuals and SMEs. On the vast majority of occasions, without offering clear and precise information on the characteristics of the product being contracted and, consequently, on the risks being assumed. Proof of the lightness with which swaps were offered and marketed is also the fact that financial institutions avoided their obligation to carry out a suitability and appropriateness test on those who were contracting the swap.

A few months later, as any stock market expert would have predicted, the Euribor and interest rates plummeted, seriously damaging the interests of those who had taken out the swaps.

In the case of SMEs, when they are granted a credit line, they are obliged to contract a series of products as a “hedging service”. These products are actually disguised swaps which, to make matters worse, often start with a negative value, tipping the balance directly towards the interests of the bank.

When the SME realises that it is paying interest rates that are way above the market, it goes to the bank to cancel the loan, but finds that it is either unable to do so or that the cancellation penalty is extremely high, so it is apparently condemned to continue fattening the coffers of its financial institution.

However, the courts soon come to the defence of individuals, demonstrating that they had no knowledge of what they were actually signing, but what about the SMEs that are immersed in the market? Did they really not know what they were signing?

Well, for the courts, the vast majority did not know. In fact, it is enough to look at the corporate purpose of these SMEs, which is far removed from the financial world, to guess their lack of knowledge and, even more, to see that the value of the swap at the time it was contracted was negative to wonder what SME would sign a contract, really understanding it, that would damage the interests of its own company?

If your SME was sold swaps, do not hesitate. Call us on 954 53 60 38 and we will help you claim.

Image by Stuart Miles (FreeDigitalPhotos.net)


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