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Report: Banco Popular chair says mortgage floor clauses 'sold in good faith'


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Report: Banco Popular chair says mortgage floor clauses 'sold in good faith'

Banco PopularEspañol SA Chairman Angel Ron said April 11 that the lender will analyzea Spanish court's decision on mortgage floors with the best interest of itsshareholders in mind, Reuters reported.

A Madrid court ruled April 7 that 41 Spanish banks can no longerinclude in mortgage contracts clauses that set minimum interest rates andordered lenders to reimburse customers for related losses incurred since aninitial court decision in 2013 ruled them invalid.

Ron asserted that the latest ruling did not deem mortgagefloors illegal. "Far from saying that they were illegal, what (the ruling)says is that they are legal and were sold in good faith," he reportedlysaid at the bank's annual general meeting. Furthermore, he addedthat mortgage-floor clauses permit banks to protect their margins.

A report from Madrid-based consultancy AFI suggests thatSpanish lenders may need to pay up to €5.3 billion of compensation as a resultof the ruling, a figure that could rise if the European Commission followsthrough with its previous request for the banks to reimburse clients over theentire life of a loan.