Monday, 16 July 2012

"I put all my savings into 'preferentes' and now I have to live on €400"

Protesters demanding their money back
SPAIN According to organizations defending bank users, about one million people are trapped in what has been sold by banks and become known as preferentes, or 'preferred shares', a banking product that brought in some €30 billion in extremely complex operations, meant to be offered to businesses that understood their complexity, but not to individuals with little knowledge of the more esoteric financial maze. "The €80,000 savings of my whole life, and something left to me by my father, went into preferentes. Now, I have €400 to live on," says one woman. She is one in a million.>>>
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"I didn't even know what the Comisión Nacional del Mercaado de Valores (ANMV, Madrid's Bolsa, or Stock Exchange, regulators) was. I am a very normal person, I went as far as a Bachillerato (finished secondary school) but no further. I always had my money at a year's fixed rate. When I invested in preferentes, I though the bank was just renewing it," says the woman we'll call Carmen, "But when I went to take the money out, five years later, I was told that I had to sell them (the preferentes) first, which is when I found out this was not a fixed rate deposit account, but involved shares. That was in 2008 and I have not yet been able to recover the capital nor the interest it supposedly accrued. The same happened to me at another bank; they tricked me with the other part of my savings."

Lack of knowledge and information are a common thread among the victims of preferentes, a legal investment product but aimed at much better qualified and informed clients. They are high risk investments that several, if not most banks 'sold' to clients who trusted them. One million of them according to Asociación de Usuarios de Bancos, Cajas y Seguros (ADICAE, Association of Users of Banks, Building Societies and Insurance).

Banks and cajas (building societies) sold some €30billions' worth of preferred shares from 1999 to 2011, without ever informing their customers that there was a high risk of it never being possible to recover 100% of the investment. The attraction was a better interest rate than a much more normal and frequent deposit account.

The lawyer for another association, Asociación de Usuarios de Servicios Bancarios (AUSBANC), Pilar Buendía, who is defending numerous cases, says that the preferentes scandal has impacted the less resourceful, mainly elderly population. Most of them had long term relations with their local banks, and that trust was torn apart. "none of them are experts in financial deals, and the CNMV test that should have been applied to them, was totally ignored." Banks and financial institutions are supposed to apply a special test in some cases -such as this- to find out if the investor is sufficiently knowledgeable to know what they are buying. Buendía believes that a judge will annull these contracts bevcause there is a 'problem with consent', but understands that many of the victims do not have the time or the resources to go to court.

"I don't even have the €600 I am asked for to proceed in court," says Carmen.

An alternative solution is to accept the offer from the banks to exchange the preferentes for normal shares. However, many of the preferentes were sold by such entities as Bancaja, CAM and others that went into forming Bankia, which is itself having problems - and are the main reason Spanish banks have had to ask for European rescue. Other such institutions have merged with each other, such as Cajasol, first taken over by Banca Cívica, and now part of La Caixa.

The banks do not want to exchange the preferentes for, say, a mortgage or a fixed rate deposit, according to AUSBANC, and while the legal wrangle goes on, with the government intervening only timidly, it is too late for quite a number of the original victims: they have died.

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