CORRECTED-UPDATE 1-Spanish court to finalise mortgage stamp duty details next month

(Corrects last paragraph to make clear the court would make final ruling on Nov. 5 not on Nov. 30)

MADRID, Oct 22 (Reuters) - Spain’s Supreme Court sought on Monday to clarify who was responsible for paying stamp duty on mortgages, upholding a ruling last week that banks were responsible while saying it would make a final decision on who should pay it in future early next month.

Spanish bank shares fell on Thursday after the Supreme Court unexpectedly overturned an earlier ruling in a case which analysts estimate could cost them between 1.7 billion and 10 billion euros ($2-$11.5 billion) in compensation.

Although banking shares recovered some of their losses on Friday after Spain’s highest court said it would review the criteria and the impact of the stamp duty, which applies to the value of the mortgage taken out on a property, they fell again on Monday as it said the ruling was final.

However, it did not state from when clients were entitled to be compensated or who would foot the bill in the future. Shares in Bankia fell 4.8 percent and Banco Sabadell dropped 5.35 percent.

The back and forth over the decision by the Supreme Court could have an impact on banks’ mortgage lending business and has prompted the Spanish banking association AEB to demand greater legal security and predictable rules.

A source at a Spanish bank said that some clients were now visiting branches asking for clauses to be added to their mortgage contracts, while others were even considering delaying their decisions over signing new home loans.

Although last week’s ruling does not state from when clients are entitled to be compensated, the Spanish legal systems allows customers to potentially claim compensation from tax authorities for cases going back four years.

Gestha, a union of tax inspectors, on Monday estimated that around 1.5 million clients could be entitled to claim 3.6 billion euros for the last four years from Spain’s tax agency or regional authorities.

The ruling comes at a sensitive moment for Spanish banks as they struggle to glean earnings from loans with interest rates at historic lows and as increasing competition erodes margins.

It is the latest legal setback for Spanish lenders after a European Court of Justice ruling in December 2016 that banks had to compensate customers who were sold mortgages with interest rate floors that were not clearly explained.

The Supreme Court said the final ruling would be made on Nov. 5. ($1 = 0.8703 euros) (Reporting By Jesús Aguado; Editing by Paul Day and Alexander Smith/Adrian Croft)