Duty of information and the principle of transparency in financial swap agreements ("swap")

ntroduction: definition of the concept and purpose of the "swap"

Our legal system does not collect or explicit definition nor a proper content-specific regulation of swaps, which is the most widespread name swap.

At present, therefore, can only be presumed to exist in freedom of covered agreements enshrined in the art. 1255 CC to say that the contracting parties may establish the covenants, terms and conditions it deems appropriate, provided that they do not contravene the law, morality or public order.

The explanatory memorandum of the RDL 2 / 2003 of April 25, manifested as follows: "Another area requiring urgent action is what the mortgage market, which thanks to its intense development has facilitated the access of many families into home ownership. However, it is desirable to take steps to promote competition and adjust the exposure of borrowers to interest rate risks, the financial market. To this end, advances in facilitating and cheapening of novation and subrogation operations, mortgage and promotes the development and dissemination of new insurance products of interest rate risk. "

What we can say, following these precedents is that the swap, imported from the Anglo-Saxon figure, are a type of contract whose definition has tried to be clarified through the various court decisions that have fallen on this very tricky.

It has been said so it's a lawful contract but is atypical in the aforementioned cover art. 1255 CC and in the art. 50 C of C, which are exchanged reciprocal obligations.

In its mode of interest rates, the agreement is to exchange on a notional principal of reference and not actual amounts that result from applying a different coefficient for each contractor called interest rates, limiting the contractors, under deadlines and agreed rates , exchange or partial payments, and just simply to settle on a regular basis, through compensation, exchange referrals, resulting in favor of either a debit or credit balance.

The SAP Oviedo January 27, 2010 is a state that is a new and unusual commercial contract that aims to satisfy specific needs of traders in financial markets and international level. It is a contract that can be defined as a financial agreement between two parties, usually a bank and a company, but can be two companies that agree to exchange on a nominal capital on quantities that result from applying a different coefficient for each one to a specified period. These coefficients are referred to as interest rates, although they are not such, since there is no agreed capital loan, which only quantum is set as reference.

The purpose of this contract is to help companies improve their financial avoiding possible losses they may suffer as a result of fluctuations in interest rates, so that being a corporate borrower, for example, fixed rate and waiting a general decline in interest rates, may contract with a financial institution or quantum limit equal to your loan amount and interest rate, for a specified period, agreed that the financial institution will pay the differential if rates actually fall , or, conversely, get a fixed rate, when you have signed a variable interest rate, presumably unfavorable.

All swap contract depends on a framework or financial netting drafted and approved by the Spanish Banking Association and the Spanish Confederation of Savings Banks. In the model that was adopted in 2009 defines the scope of this contract as the establishment of a contractual netting agreement and the regulation of unique business relationship between the parties arising as a result of performing operations.

The introduction of the principles of transparency and information

It is worth noting that the Law 24/1988, of July 28, the stock market, and came to set as the cardinal rule of the behavior of firms in the investment services and credit institution to its customers diligence, transparency and development of an orderly management to procure care for the interests of those as your own.

The estimates established in the Standard, mostly materialized, if possible, with the RD 629/1993 which developed a code of conduct chaired by the principles of fairness and good faith, care and diligence and adequate information on customers including comprehensive risks that each operation involves.

Law 42/2007 of December 19, modifying the Law on Securities Market, which in turn repealed the aforementioned RD 629/1993, this development continued regulatory protection of customers entering an important distinction between professionals and clients retailers, in order to differentiate between the behavior just as they were with one or with others.

Later, the RD 217/2008, of 15 February on the Legal Regime of Investment Services Firms came to recall the duty of loyalty and obligation to inform the customer, whether it was pre-contractual stage as the contract itself.

The statements of the Bank of Spain and the Ombudsman

The Bank of Spain has been the understanding that institutions must provide specific information to clients prior to what will be hired, the risks involved and the formula for calculating the cost of early termination. This it has done as a result of the gradual increase of complaints against this type of contract.

The Complaints Service estimates that financial institutions must be able to prove that, before the conclusion of the contract, has made available to the client a briefing on the product being offered, indicating the essential characteristics thereof.

Specific information must contain the caveat that in certain circumstances the evolution of interest rates, the monthly statements can be negative.

Subsequent complaints from customers of the banks has also led the Ombudsman to decide on this matter. Thus, in its activity report issued in 2009, came to defend the position that these products were employed by users who wanted to protect themselves against rate hikes, and not against possible declines, so they were not provided information transparent to allow them to choose freely, especially when banks themselves are aware of developments in the sector, a fact that they know in advance. It complains that the Ombudsman's Complaints Service Bank of Spain does not manifest itself in a more rigorous and forthright about these business practices of regulated entities since, which drive users to a lawsuit, whose outcome is always uncertain , is conduct that should go unpunished, at least, be severely investigated and appropriate to the severity of the problem manifested.

Arantxa Hernandez Escrig (Lawyer)

www.masqueabogados.com