JP Morgan is embroiled in a legal battle with a region of northern Italy over allegations that the UK branch of the bank mis-sold financial contracts.
The Emilia-Romagna region, which stretches from Parma to San Marino, has sued the Wall Street giant’s UK activities in a court in Bologna, according to documents seen by The Telegraph.
The municipality alleges that JP Morgan failed to brief its officials on vital details relating to a derivatives deal that dates back to 2004, including costs and margins.
Prior to the financial crisis, dozens of Italian local authorities had entered into similar interest rate swap contracts with major international banks in an attempt to hedge against rising borrowing costs.
While contracts looked cautious at the time, falling interest rates in the wake of the crisis shifted the benefit of swaps in favor of banks and left many authorities out of pocket.
The municipality claims that JP Morgan “breached its contractual obligations regarding the swap that led to its termination”, adding that its behavior represents a “clear violation” of Italian law.
However, JP Morgan denies the mis-selling allegations and has launched its own proceedings in the High Court in London against the Italian region, according to court documents.
The US banking giant says any lawsuit relating to the contract has jurisdiction only in the English courts and is seeking damages for breach of the agreement’s jurisdictional agreement.
He hired elite lawyers from the town of Clifford Chance, one of London’s “magic circle” firms, to act on his behalf.
Neither party has yet disclosed financial details of the damages they are seeking.
The case sheds light on how banks have faced long-standing problems with derivatives agreements signed before the financial crisis.
In 2013, the Financial Services Authority, the predecessor to the Financial Conduct Authority (FCA), ordered UK lenders to review interest rate swap contracts with small businesses due to concerns over mis-selling.
Meanwhile, in 2017, the FCA investigated allegations that banks systematically mis-sold interest rate swaps to doctors.
The challenge from the Emilia-Romagna region comes after Italy’s Supreme Court ruled in 2020 that interest rate swaps could be considered null and void under Italian law if the bank failed to provide Italian authorities information on hidden costs.
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Source: www.telegraph.co.uk
This notice was published: 2022-04-03 08:00:00
