Multi-Currency Mortgages: What They Are, Supreme Court Doctrine, and How to Claim

Multi-Currency Mortgages: What They Are and Why They Are Problematic

Multi-currency mortgages were a financial product massively marketed in Spain between 2006 and 2012, especially referenced to the Japanese yen (JPY) and Swiss franc (CHF). They promised lower installments thanks to interest rates lower than the euro, but concealed an exchange rate risk that has caused devastating financial losses for thousands of Spanish families.

How Multi-Currency Mortgages Work

A multi-currency mortgage is a mortgage loan where the principal is denominated in a currency other than the euro. The borrower pays installments in euros, but the outstanding principal is calculated in the reference currency. This implies:

1. Principal in foreign currency: If a loan of EUR 200,000 referenced to the Japanese yen is granted, the principal is converted to yen at the exchange rate at the time of execution.

2. Installments in euros: The borrower pays monthly installments in euros, converted to the reference currency at the prevailing exchange rate at each maturity.

3. Double indexation: The loan is subject to both the currency's interest rate (LIBOR JPY, LIBOR CHF) and the EUR/currency exchange rate.

4. Exchange rate risk: If the euro depreciates against the reference currency, the outstanding principal in euros increases. This means the borrower may owe more money than originally borrowed, even after making timely payments for years.

Practical Example of the Risk

A borrower who contracted in 2008 a EUR 200,000 mortgage referenced to the Swiss franc (EUR/CHF = 1.60) had an equivalent principal of CHF 320,000. When the Swiss National Bank removed the franc floor in 2015, the exchange rate dropped to EUR/CHF 1.05. The outstanding principal of CHF 300,000 now equaled EUR 285,714, despite having made payments for 7 years. The borrower owed more in euros than originally received.

Supreme Court Doctrine

The Spanish Supreme Court has addressed multi-currency mortgages in several judgments, consolidating a consumer-protective doctrine.

STS 323/2015 of June 30 (Civil Chamber)

This landmark judgment established that the multi-currency mortgage is a complex financial instrument incorporating a speculative component (exchange rate risk). The Court declared:

• The multi-currency clause is an essential element of the contract, not an ancillary general condition, and is therefore subject to transparency control.
• The bank has a duty to inform the client clearly and comprehensibly about the inherent exchange rate risks.
• Lack of adequate information may give rise to partial nullity of the multi-currency clause due to vitiated consent (Arts. 1265 and 1266 CC).

STS 608/2017 of November 15

Deepened the bank's duty of information, requiring the financial institution to have provided:

• Adverse scenario simulations showing how a significant euro depreciation would affect the outstanding principal.
• Information about the historical volatility of the reference currency.
• Clear explanation that the borrower could end up owing more than the principal initially received.

STS 599/2018 of October 31

Confirmed that the nullity action for vitiated consent is not subject to the 4-year limitation period under Art. 1301 CC when dealing with general contract terms with consumers, applying the CJEU doctrine on the imprescriptibility of the nullity action for unfair terms.

CJEU Doctrine

The Court of Justice of the European Union (CJEU) has reinforced consumer protection in multi-currency mortgage matters through several landmark judgments.

Kasler Judgment (C-26/13, April 30, 2014)

The CJEU declared that the currency conversión clause in a mortgage loan forms part of the main subject matter of the contract and that, nevertheless, it may be subject to unfairness control when it fails to meet the transparency requirement of Art. 4.2 of Directive 93/13/EEC.

It established that transparency requires the average consumer to understand the economic consequences of the clause, not just its grammatical wording. The institution must inform how the conversión mechanism may affect the borrower's obligations.

Andriciuc Judgment (C-186/16, September 20, 2017)

The CJEU specified that the lender must inform the borrower that:

• The exchange rate risk may be unlimited.
• There is no maximum cap on the increase of outstanding principal due to exchange rate fluctuations.
• The information must include the effect of a severe euro depreciation on installments and outstanding principal.

Dziubak Judgment (C-260/18, October 3, 2019)

Addressed the consequences of nullity of the multi-currency clause. The CJEU established that if the clause is declared unfair and the contract cannot survive without it, the national court must annul the contract entirely, unless the consumer prefers to maintain it. It is not possible to replace the unfair clause with a supplementary provisión of national law if doing so does not benefit the consumer.

Claim Procedures

Those affected by multi-currency mortgages have several legal avenues to claim.

Nullity for Vitiated Consent

The most common route. It is based on the borrower having given consent under an essential, excusable, and invalidating error (Arts. 1265 and 1266 CC), caused by the bank's failure to adequately inform about the product's risks.

Effects of nullity: Conversion of the loan to euros from the date of execution, recalculation of installments at the original exchange rate, and refund of excess amounts paid due to the exchange rate differential.

Nullity for Unfairness (Directive 93/13/EEC)

For consumers, it is possible to request nullity of the multi-currency clause for unfairness when it fails to meet the material transparency requirement of Art. 4.2 of Directive 93/13/EEC (transposed by the TRLGDCU). This avenue is imprescriptible under CJEU doctrine.

Liability Action for Breach of Information Duties (MiFID)

Multi-currency mortgages marketed after the entry into force of the Securities Market Act and the MiFID Directive (November 2007) are subject to enhanced pre-contractual information duties. Breach of these duties may give rise to the bank's financial liability.

Judicial Procedure

The claim is filed with the Court of First Instance of the defendant's domicile (generally the bank) or the location of the mortgaged property. It is processed as ordinary proceedings (amount exceeding EUR 15,000).

Key evidence: The suitability and appropriateness test (MiFID), contractual documents, banking correspondence, and especially the absence of adverse scenario simulations that the bank should have provided.

Limitation: The nullity action for unfairness is imprescriptible. The action for vitiated consent has a 4-year limitation period from contract completion, though recent case law (STS 599/2018) has relaxed this period.

Lexiel as a Tool for Lawyers

Lawyers handling multi-currency mortgage claims can use Lexiel AI to locate Supreme Court, Provincial Court, and CJEU judgments on multi-currency clauses, describe in the query the currency (yen, Swiss franc), bank or outcome (upheld, dismissed), filter by court, date and territory, and access claim templates updated with the latest case law doctrine.

Frequently Asked Questions

Can I claim if I have already paid off the multi-currency mortgage?

Yes. The nullity action for unfairness is imprescriptible under CJEU doctrine. You can claim the refund of excess amounts paid due to the exchange rate differential, even after paying off the loan.

Which banks marketed multi-currency mortgages in Spain?

The main ones were Bankinter, Barclays (now CaixaBank), Deutsche Bank, Banco Popular (now Santander), BBVA, and some savings banks. Marketing was particularly intense between 2006 and 2011.

How much can I recover?

The amount depends on the loan amount, the reference currency, the exchange rate evolution, and the amortization period. In typical Swiss franc cases, affected borrowers have recovered between 20% and 50% of the originally disbursed principal.

Do I need an economic expert for the lawsuit?

It is highly recommended. An expert report calculating the differences between what was paid under the multi-currency clause and what would have been paid with a euro-denominated loan is crucial for quantifying the claim.

¿Can the bank argue that I knew the risks?

The bank will try to prove it informed adequately. However, case law requires the information to be clear, comprehensible, and specific about the risks, including adverse scenario simulations. Merely signing a generic risk document is not considered sufficient information (STS 608/2017).

What happens if my mortgage was converted to euros by the bank?

The bank's unilateral conversión does not prevent the claim. The affected party may request nullity of the multi-currency clause from the date of execution and claim excess amounts paid until the conversión.