Seite - 111 - in Austrian Law Journal, Band 1/2019

ALJ 2019 EU Consumer Contract Law Directives and Ownership 111 possibility is highly questionable.101 There are of course many different ways to understand the role of the very complex institution of banks, but a possible way of explaining one part of the role of banks is to point at the stability they should provide. From this perspective they are supposed to gain from the margin of interest rates. A bank’s expectation under a secured credit contract is to earn a profit from interest and fees, secured by a proprietary security. The function of a security right is limited to what is to be secured. Contract terms allowing the bank to acquire the collateral itself by way of self-contracting, at a potentially overly low price, and selling it off for a higher price without attributing the surplus to the security provider, are thus to be seen quite critically. If banks are allowed to speculate in the risk, or rather chance, of consumers’ failure to discharge their credit obligations, this might affect the stability of the bank, and thereby the financial system. One part of the risk could be that banks start competing on the market by offering interest rates that are calculated from the possible surplus the speculation in consumer failure may generate. This has the positive effect of lower interest rates, but it also implies the risk that speculations of a bank do not work out as intended. From the perspective we use here, a bank’s role is not to take speculative kinds of risks. The other part of the risk is that consumers in general may start to distrust the motives of banks. This can also potentially lead to distrust against banks when it comes to lending money to the banks. If consumers avoid using banks, the effect might be damaging for the financial system as a whole. What actually affects the trust in banks and the financial market is, however, something that still needs more research; so does the question of whether or not speculative behaviour of banks is beneficial. What we do know is that the concepts of stability and systemic risks are central concepts for our understanding of the roles of banks in the society.102 What we discuss here is based on the assumption that comparable clauses may have been used in many consumer mortgage contracts by many banks. The possible consequence we are pointing at is that contract terms allowing the bank to make profit on consumer failure may have unwanted effects at aggregate level. This is a rather clear argument in favour of deciding the ‘real issue’ in terms of also allowing a judicial review at a late stage of the bank’s process of using the security to cover the debt. Such a decision would limit the risks we point at, although it would just be by blocking a rather small possibility for the banks to make such profit. It is also relevant to consider the possible consequences of establishing such a norm through a court decision. When a norm is created by the judiciary, market participants do not get a transition period, as they usually do when norms are established through legislation. In this context, a 101 Compare, on a normative level, Article 28(5) Directive 2014/17/EU of the European Parliament and of the Council on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 [2014] OJ L60/34. However, this directive has not yet been applicable to the Banco Santander case; see the transitional provisions in Article 43(1) Directive 2014/17/EU. 102 See the definition in Article 3(1)(10) Directive 2013/36/EU of the European Parliament and of the Council on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC [2013] OJ L176/338; see also, e.g., Philipp Hartmann, Olivier de Bandt and José Luis Peydró, Systemic Risk in Banking after the Great Financial Crisis, in THE OXFORD HANDBOOK OF BANKING 667 (Allen N. Berger, Philip Molyneux and John O. S. Wilson eds., 2nd ed., 2014, online 2015); SYSTEMIC RISK, INSTITUTIONAL DESIGN, AND THE REGULATION OF FINANCIAL MARKETS (Anita Anand ed., 2016, online 2017); Andrew G. Haldane and Robert M. May, Systemic risk in banking ecosystems, (2011) Nature 351 (Vol. 469).