Relevant Decision of the Federal Court of Justice on Bank Liability Relevant Decision of the Federal Court of Justice on Bank Liability
On July 9, 2024, the Federal Court of Justice (BGH) made a groundbreaking decision with the file number XI ZR 78/23, raising fundamental questions regarding the liability of banks for faulty advice and the violation of disclosure obligations. The ruling could have far-reaching consequences for the banking industry and the rights of consumers.
The case at hand involved a client who had purchased complex financial products between 2010 and 2014. The client argued that the bank did not sufficiently inform him about the risks associated with these products. The BGH found that clear information about the products as well as comprehensive risk disclosure is expected during the advisory process. The judges pointed out that a bank has the duty to inform its clients about all relevant aspects of an investment, especially when it comes to complex financial instruments.
The reasoning of the judgment emphasized that banks carry a special responsibility. They must ensure that the products they offer match the needs and risk profile of the respective client. This also means that banks must inform their customers about all potential financial consequences of an investment decision. A failure in this area could quickly lead to a claim for damages, according to the judges. Additionally, it was pointed out that the duty of disclosure applies not only during the advisory meeting but also beyond that. This means that banks must proactively provide sufficient information to enable their customers to make informed decisions. The BGH's decision could thus fundamentally change the behavior of banks in their advisory practices. The ruling is seen as a clear indication to banks that they must raise their advisory standards to avoid legal disputes. The judges indicated that in the future, there will be increased attention to compliance with transparency obligations, which will massively affect the responsibilities of banks in their dealings with their customers. Overall, the BGH's decision suggests that the highest court aims to strengthen consumer rights and establish a high duty of disclosure for banks. Whether and how banks will respond to these challenges remains to be seen. It is to be hoped that this groundbreaking decision will have a positive impact on consumer trust in financial services.
Author: Anita Faake, Thursday, September 12, 2024
