OSLO, April 24 (Reuters) - Norway’s biggest bank DnB NOR DNBNOR.OL faces a lawsuit from a consumer rights advocate for selling structured savings products that made heavy losses in the credit crisis, a watershed case that may lead to more suits.
Norway’s consumer council said it intended the lawsuit to be a “pilot case in the court system” which, if successful, “should be a precedent for many other similar cases”.
“(DnB NOR) will most likely receive the subpoena in May,” Council manager Jorge Jensen told Reuters on Friday.
The lawsuit stems from a private Norwegian customer who lost 266,000 crowns ($40,330) after he invested in two different structured products sold by DnB NOR, before such complex investment vehicles were made illegal in Norway last year.
Law firm Raeder is also working to file a group lawsuit against DnB NOR, and has said that should this not be accepted by the court system, it could lead to many individual lawsuits.
The consumer council said banks had issued about 38 billion crowns ($5.76 billion) of such products, which were leveraged by cheap short-term financing and hit hard by the credit crunch over the past 18 months. It has earlier estimated that Norwegian consumers lost 14 billion crowns on these investments.
A complaints board for Norwegian bank customers, Bankklagenemda, in January ruled against DnB NOR in the case, saying it had violated good banking practice and should compensate customers for their losses.
DnB NOR said it would not comply with the Bankklagenemda ruling, which is not binding but often followed, as the products had good prospects for positive returns and were legal.
DnB NOR declined on Friday to comment on how much money it would stand to pay should this case lead to further lawsuits, saying it was too early to speculate.
Head of communications at DnB NOR said the upcoming lawsuit was no surprise and would enable the court to evaluate more aspects of the case than the complaints board had.
“A court case will enable a broader view of the complexity of this case,” Trond Bentestuen said. He said the complaints board’s ruling had looked only at the structure of the products and not the quality of the sale and counselling process.
Other Norwegian banks and financial institutions have also sold structured products but have so far not faced lawsuits.
The consumer council has hired the high profile lawyer John Christian Elden to lead the case against DnB NOR. ($1=6.596 Norwegian Crown) (Reporting by Aasa Christine Stoltz)