A man operates at the ATM as customers exit a Banco Popular branch, yesterday, near Barcelona after European authorities announced the sale of the bank.
Madrid: European authorities announced yesterday the sale of Spain’s Banco Popular to compatriot Banco Santander to avert a looming failure of the troubled lender in a solution that will not leave Spanish taxpayers to pick up the tab.
The European Central Bank (ECB), in its capacity as the eurozone’s banking supervisor, said that Banco Popular was “failing or likely to fail” following a “significant deterioration of its liquidity situation.”And as a result, it would be sold to Banco Santander.
It was the first time such a decision has been taken since the ECB took over the role as Europe’s banking supervisory authority in November 2014.
"The ECB determined that the bank was failing or likely to fail and duly informed the Single Resolution Board (SRB), which adopted a resolution scheme entailing the sale of Banco Popular Espanol to Banco Santander," the ECB explained.
The SRB—tasked with ensuring an orderly resolution of failing banks with minimal costs to taxpayers and to the real economy—said in a separate statement that it had “transferred all shares and capital instruments” of Banco Popular to Banco Santander. The purchase price paid by Santander was the symbolic price of one euro.
“This means that Banco Popular will operate under normal business conditions as a solvent and liquid member of the Santander Group with immediate effect,” the SRB said.
“The decision taken today safeguards the depositors and critical functions of Banco Popular,” said SRB chief Elke Koenig.
Banco Popular, Spain’s seventh biggest bank, was suffering from the weight of the “toxic assets” it accumulated during the financial crisis—property taken from individuals or developers unable to reimburse their loans—as buyers remain scarce.
Sold at a loss, these forced the bank into a net loss of €3.5bn last year. Fears of its looming collapse had sent Banco Popular shares into free fall on the Madrid stock exchange in recent days, wiping off half of its market capitalisation within the space of a week. Its shares had traded at just 32 cents on Tuesday and were suspending from trading yesterday. For its part, Banco Santander is Spain’s biggest lender and one of the leading banks in the euro area. It said that it had been “selected as the successful bidder” in an auction by the European and Spanish authorities. The purchase would grant Santander access to the market for small and medium-sized enterprises, it argued. Santander said it would issue €7bn worth of new shares in a so-called “rights issues” in which existing shareholders will have preferential rights on the new shares.
