Saturday, July 7, 2012

Stealing from the poor with preferred shares

Poor and uneducated savers have been the main victims on the deposit side of the banking crisis in Spain so far, potentially losing as much as 30 billion euros, with hardly any mention in the press. While the government has been willing to spend billions to bail out regular bond holders, the banks used the last three years to scam as many customers as possible into holding preferred shares.

I have some personal experience with this, as three years ago I noticed that all of a sudden my regular monthly renewing deposits had been shifted into a securities account and was now in preferred shares of the bank. This had been done completely without my consent, and luckily for me I knew enough about these things to immediately raise hell, and I managed to sell the preferred shares without taking a loss.

Another family member was not so lucky, and we found out that she had lost 50,000 euros that she thought was in a regular deposit account.


Casey said...

The same thing is happening to my Mother-In-Law right now in Barcelona. She deposited her money in the bank (Bankia I believe), seeking a very modest return. However, the bank changed her deposits to preferred shares without her consent (and without her knowledge). There is nothing written in the contract she signed that allows the bank to make such a move.

What can be done?

santcugat said...

From what I can tell, Bankia is offering some customers a swap to a 5 year 1% deposit, which is effectively a loss 20% at current market rates.

It would also make a big difference whether the deposit was for Bankia or for one of the BFA entities (Caja Madrid, etc).

I'd definitely talk to a lawyer about her options. The danger of going the lawsuit way is that you might (eventually) end up with a judgement against an effectively bankrupt entity, which would be worth very little.

On the lawyer front, the good news is that the Spanish Supreme Court has since 2009 allowed contigent fees, so if she sues the court for damages, she might be able to recover the legal costs without having to put out an initial payment.

The Singing Organ-Grinder said...

Do you know if anyone has guesstimated the total sums/heads involved?