Saving Banco Popular…
On the 7th of June, the European Commission approved the rules for the rescue plan of Banco Popular proposed by the Single Resolution Board under the EU bank recovery and resolution directive. The Bank was sold to Santander for a symbolic €1. The Commission endorsed the resolution scheme because the conditions for resolution were met: (1) the Bank was failing or likely to fail, (2) there were no private sector solutions outside of resolution and (3) there were no supervisory actions that would have prevented its failure.
The Commission raised that, the resolution by sale of business was foreseen in the Bank Recovery and Resolution Directive (BRRD) and was the best way to ensure the continuity of the important functions performed by the bank and to avoid significant adverse effects on financial stability.
…at the expense of individual shareholders
Banco Popular was saved but the story does not end here.
Through investor associations (AEMEC, ADICAE…) more than 6.000 individual shareholders lodged a complaint with the Court of Justice of the European Union (CJEU) against the European Commission and the Single Resolution Board. Among those individual investors, some of them owned shares that were wiped out.
AEMEC (Asociación Española de Accionistas Minoritarios de Empresas Cotizadas) lodged a complaint claiming that fundamental rights such as ownership and private property were violated. The Association, which represents more than 1.500 small shareholders, asks damages of €1.85 for each share sold to Santander at the price of €1 at the time. In the meantime, Santander has launched a €1bn scheme to compensate retail shareholders in Spain.
ADICAE, a Spanish consumer group representing small shareholders stresses that this rescue plan caused losses for shareholders and points to a lack of transparency. It also argues that there was no clear public evidence that the bank was no longer viable.
Since the rescue was technically carried out in Spain by the country’s bailout fund (FROB), ADICAE also lodged a complaint with Spain’s High Court against FROB.
Spanish investors are not the only ones who suffered from the rescue plan. Mexicans investors also launched a legal action against European authorities. They question some aspects of the regulatory process, including the speed at which the bank ran out of emergency liquidity.
It seems that we can now look forward to years and years of legal proceedings at the national and European level… everyone will remember the first rescue plan orchestrated by the Single Resolution Board created in 2015 as the first pancake.
BETTER FINANCE already raised in several occasions that banks’ rescue plan are usually to the detriment of consumers, for instance in the Slovenian case:
- Slovenian Bail-In Highlights Perverse Facet of Banking Union
- Banking regulations used to expropriate investors in slovenian bank bail-in found unconstitutional
To read more on BETTER FINANCE’s position regarding bail-in procedures, please go here "Post-crisis bank rescuing in the EU is unfair and undemocratic"
Read more on the Banco Popular’s rescue plan here :
- Press Release European Commission
- El Mundo article (in Spanish)