11 November

BANCARIO E INTERMEDIAZIONE FINANZIARIA

Investment contracts in OTC derivative financial instruments that do not provide the information necessary to assess investment risk are null and void

11/11/2019

With sentence no. 4188 of 17/10/19, the Court of Appeal of Milan returned to the contract requirements for investments in Over the Counter derivative financial instruments, declaring their nullity in the event that they do not contain all of the elements required for the assessment of risk. In this case, the Court, in examining two Interest Rate Swap contracts, found the lack of indication of the Forward Euribor 3 month curve used to determine the playoff of derivatives, in addition to a failure to indicate the Market to Market at the time the contract was stipulated, and the mathematical formula used to update future flows deriving from the execution of derivatives. This implies that contractual will was not present, as the customer was unable to assess the risk as regards the contract swap, which is an essential element of the margin due to the bank (which influences the initial Market to Market) and, therefore, the risk assumed by each party.