Deutsche Bank loses interest-rate swap sales case at highest German court

Deutsche Bank AG, Germany’s biggest bank, lost a case over interest-rate swaps in the first ruling by Germany’s highest court concerning sales of the products that have spurred lawsuits against lenders throughout Europe.

The bank must pay Ille Papier Service GmbH ¤541,074 ($770,000) plus interest over the swap purchase, Federal Court of Justice Presiding Judge Ulrich Wiechers said in Karlsruhe, Germany, today. The bank didn’t adequately disclose the risks of the products, he said.

“As an advisor to its customer, the bank must guard the customers’ interest alone,” Wiechers said. “But as a seller of the swap, a loss to the customer works to the banks’ advantage.”

The ruling will influence dozens of disputes Deutsche Bank has with local German governments, community-owned utilities and companies that claim the lender sold swaps without adequately disclosing risks and fees for the products that were designed to lower interest payments. Cases over derivatives sales have spread throughout Europe with similar disputes in Italy, France and England.