* Court identifies lack of transparency in IRPH contracts
* Decision is seen as a relief for Spanish banks
* Consumer group accuses court of protecting banks
MADRID, Oct 21 (Reuters) - In a boost for Spain's banks, the
Supreme Court said on Wednesday a mortgage pricing index used
during the country's property crisis was valid and did not
constitute market abuse, although there was a lack of
transparency in some contracts.
The long-awaited ruling, similar to the court's first
decision in 2017, spares Spanish banks from a worst-case
scenario that could have cost them billions in compensation,
just as they are struggling with the economic impact of the
COVID-19 pandemic and ultra low interest rates.
The ruling followed a European Court of Justice (ECJ)
decision to send the dispute back to national courts, opening
the way for individual claims.
Hundreds of thousands of home loans were sold in Spain,
mainly in 2007 and 2008, based on the IRPH index at interest
rates that tended to be higher than interbank benchmark rate
The Supreme Court, which will publish the ruling in the
coming days, said in statement that in four of the five IRPH
cases it analysed there was no abuse, even though failure to
report the index's evolution showed a lack of transparency.
It will deliberate on a fifth, slightly different case -
related to social housing - later on Wednesday, it said.
Spain's listed banks still hold around 14 billion euros
($16.6 billion) of these mortgages, with Caixabank and
Bankia - which are in the process of merging -
accounting for around half.
Shares in Bankia rose after the ruling but later
pared gains. Caixabank was down 0.4%.
"In principle, the news is positive as you take pressure off
the sector. Lenders will have less pressure to return any
interest earned from the IRPH contracts to customers," said
Nuria Alvarez, analyst at Madrid-based brokerage Renta 4.
Most Spanish banks have not set aside any specific
provisions over the case.
Though there are no official figures for how many mortgages
were sold using the IRPH, Spanish consumer association Asufin
estimates around one million people were affected.
Consumer association 'IRPH Stop Gipuzkoa' said the court was
trying to protect banks and added that "bottom line, to no one's
surprise, it has not found abuse".
The court had ruled in 2017 that the index did not
constitute a market abuse, but customers and lower courts
challenged that decision at the ECJ.
Even after March's ECJ decision there have rulings in favour
and against customers, prompting the Supreme Court to update
guidelines which apply to all lower courts.
($1 = 0.8582 euros)
(Reporting by Jesús Aguado; additional reporting by Emma
Pinedo, editing by Andrei Khalip and Mark Potter)