The Geneva Court of Justice clarifies the scope of the bank’s duty of care in the context of an “execution only” relationship, when the client enters into speculative transactions with leverage.
Summary: In this case, a client, an independent trader and former employee of the respondent bank, had entered into option transactions on the “F” index. These trades were highly volatile and highly leveraged. During the financial crisis of 2008, the “F” index lost 30% of its value. This resulted in a total overdraft of CHF 1’345’302,45 on the client’s account. The bank terminated their banking relationship and ordered the client to pay the final debit balance. The customer unsuccessfully claimed compensation on the grounds that the bank had breached its duty of care in an execution-only relationship. After being rejected, the client appealed to the Court of Justice. The Court of Justice did not find the bank in breach of its duty of care, declared the appeal unfounded and confirmed the judgment of the lower court.