The decision of the Single Resolution Board (SRB) to resolve Banco Popular is the first resolution of a European bank under the new banking union legal framework (BRRD, SRMR). The resolution of the Spanish bank implies that shareholders are losing their money and bondholders will face painful losses. The resolution involves the sale of Banco Popular to its Spanish competitor Banco Santander for 1 Euro.
Commenting on the SRB decision Greens/EFA MEP Ernest Urtasun says:
“There is evidence of mis-selling practices and breaches of investor’s rights enshrined in EU law. With Banco Popular retail investors set to lose all of their savings, we call on the Commission and the SRB to closely monitor the situation of the bondholders. If there is evidence of mis-selling, they must ensure that bonds are not automatically absorbed.
“Such a resolution can be made without public money or implicit subsidies. As such, we expect an assessment by the Commission on the absorption of Popular by Santander, which has taken place under extremely beneficial conditions.
“We are concerned to see an increase of the concentration of the banking sector in Spain. If a bank is too big to fail, it is too risky to exist. With this move, Spain’s largest bank is growing and assuming risks of systemic nature.”
The financial and economic policy spokesperson for the Greens/EFA Group in the European Parliament, Sven Giegold, adds:
“The decision to resolve Banco Popular is the right one. The rules of the BRRD are being respected and losses are fully absorbed by shares and subordinated debt. However, the evident unequal treatment between the Spanish bank and the Italian Monte dei Paschi di Siena (MPS) is unacceptable.
“It is a heavy blow to the trust in the banking union that the MPS is not declared failing or likely to fail. Despite a lack of private investors and clear market signals neither the ECB nor by the SRB are ready to apply the law, which would require a full bail-in. It seems that the political risks of applying bail-in rules are judged differently in Spain than in Italy.
“The ECB and SRB should revise their position on the Italian MPS. Mis-selling to retail investors can and must be addressed without public money. Additionally, the ECB may not rely its MPS assessment on outdated and overly optimistic assumptions of the last EBA stress test. The asset quality review (AQR) of 2014 is a totally insufficient basis for this decision.”
The Decision of the European Commission on Banco Popular can be found here:
The Press Release of the Single Resolution Board can be found here: