Swedbank stands accused of attempting to block a €792m class-action mis-selling claim filed against it in December, and that it is using “mafia tactics” to intimidate its clients into dropping their claims for unfair bank mortgage practices against its asset management arm, Swedbank Robur.
Swedbank is Sweden largest bank and is one of a number of financial institutions that has been accused of a practice called “closet tracking”. This is a practice in which fund managers charge extortionate fees for essentially just monitoring the stock exchange; a task that requires little time, effort or skill.
Last December the Swedish Shareholders’ Association took action against Swedbank and filed a class-action claim against the bank for mis-selling funds in Sweden. More than 3,000 of the banks customers have already added their names to the claim. The claims for unfair bank mortgage practices seek SKr 7bn (€792m) in damages; however the bank has denied that it uses this practice. The claim was filed with Sweden’s National Board for Consumer disputes (ARN), but Swedbank has already challenged the case and has threatened its consumers with legal action should the case be ruled against it. Swedbank is being very aggressive and has warned its customers that they will face high legal fees and that they will be sued by the company. The CEO of the Swedish Shareholders Association, Carl Rosen, has called the banks actions “mafia tactics” and finds the matter highly disturbing. He says “This is not America in the 1930s, this is Sweden in 2015. We see this as an empty threat”
It is not clear whether the bank intends to follow through, but Swedbank appears concerned and is trying to limit its liabilities. Cecilia Hernqvist, Swedbank’s communications Director, told the Financial Times that the bank is not happy with ARN judging the case due to how claims for mis-selling are handled. The ARN only allows written evidence and there is no appeals process. Hernqvist says “We think ARN is a very good authority for consumer disputes, but not for a group class-action which comprises SKr 7bn and concerns an industry-wide issue” she went on to say that should the case be tried, “the consequences might be that we have to bring this to court. We do not want this to happen, however, we think it is important to understand that this could be the result”
ARN has responded saying that it is the correct authority to try the claim, although it has yet to decide if it will actually handle the claim for unfair banking practices.
A Widespread Problem Across Europe
Closet Tracking is a problem is an industry-wide problem, but it is certainly not limited to Sweden. The case is being closely monitored all across Europe and a favourable verdict for the respondents against the bank is likely to set a legal precedent, and is sure to trigger a flurry of European class-action closet tracking lawsuits against a wide range of financial institutions.
In February this year the issue was widely reported in the UK media, with the Daily Telegraph calculating that individuals who invested with companies using closet tracking could miss out on up to £50,000 over a 30-year period. The article also indicated that, in the UK at least, “one in three savers were affected by the issue”. Closet tracking is coming under increasing scrutiny, and in Sweden the practice has been widely condemned, with industry experts, consumer organisations and academics speaking out on the issue.
Sweden’s deputy finance minister and minister for capital markets and consumers, Per Bolund, announced in February that the government will be conducting a formal investigation into these “active funds that do little more than mimic an index.”