Spanish mortgage index IRPH could be considered abusive - EU court advisor

By Jesús Aguado

MADRID, Sept 10 (Reuters) - The European Court of Justice's advocate general on Tuesday said that Spain's mortgage price index (IRPH) should not be excluded from the remit of EU directives and could be considered abusive, potentially impacting Spanish banks that used the index.

Shares in Spanish banks fell after the advocate's conclusions were published, with Caixabank CABK.MC and Bankia BKIA.MC and Banco Sabadell SABE.MC down between 2% and 3%.

An unfavourable court ruling could have an impact worth billions of euros on the Spanish banking sector.

"The advocate is basically paving the way to recognise that IRPH could be considered abusive," a spokesman for the ECJ court said.

The conclusions are non-binding but are often followed up on by the court.

While analysing the level of transparency in IRPH contractual clauses, the advocate said its "mathematical calculation formula is complex and not very transparent for an average consumer".

Hundreds of thousands of mortgages set using this rate were sold, particularly in 2007 and 2008, but it tended to be higher than Euribor and did not fall as much when the European Central Bank cut borrowing costs.

The Spanish government scrapped it in 2013 saying it was unfair, leading customers to take banks to court demanding compensation.

Spanish courts have rejected these appeals, but a question focusing on the lack of transparency when selling mortgages with this clause had been lodged at the European Court of Justice.

An adverse ruling expected later this year or beginning of 2020 on the Spanish banks could potentially lead lenders to have to pay out compensation, hitting their bottom lines just as they grapple with low interest rates.

(Reporting By Jesús Aguado; editing by Ingrid Melander and Andrey Khalip)

((jesus.aguado@thomsonreuters.com; +34 91 585 8339; Reuters Messaging: Reuters Messaging: jesus.aguado.reuters.com@reuters.net))

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