Commerz Bank to face swap rates action

After two leading US banks were under the limelight for FX pricing the troubles have drifted across the atlantic and

After two leading US banks were under the limelight for FX pricing the troubles have drifted across the atlantic and Germany’s 2nd largest bank is under question for promoting a product that was not deemed suitable for its client.

Metal processing company E. Ziegler Metallbearbeitung AG has filed a suit against Commerzbank AG in connection to an exchange rate-based swap product the bank sold to Ziegler, a lawyer for the plaintiff said.

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A lawyer for the law firm Roessner called the product, a forex-linked swap based on the euro and Swiss franc, misleading and accused Commerzbank of deceit and giving poor advice.

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“The bank sold the client a product that was of no benefit to him, which was structured to his disadvantage, and with which he could lose everything,” the law firm said in an email Saturday, adding that Ziegler faces EUR1.1 million through the deal. Ziegler filed the suit Feb. 29 in a Stuttgart regional court.

Roessner brought a similar case to court against Deutsche Bank AG  last year. At that time, it was ruled that Deutsche had to pay hygiene products manufacturer Ille Paper Service more than half a million euros because it didn’t sufficiently inform the customer of the risks involved in a so-called Spread Ladder Swap.

Under FSA guidelines financial professionals have to ensure products are suitable for clients post MIFID. In the margin trading business firms have to prove that they have done enough to ensure the client understands the product, the risks and is suitable to their requirements.

 

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