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June 8, 2017

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Santander buys Banco Popular in face-saving deal

EUROPEAN authorities yesterday announced the immediate sale of Spain’s Banco Popular to compatriot Banco Santander to avert a looming failure of the troubled bank.

The European Central Bank, 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.

As a result, it would be sold to Banco Santander.

It was the first time the ECB has issued such a statement acting as Europe’s banking supervisory authority.

“The significant deterioration of the liquidity situation of the bank in recent days led to a determination that the entity would have, in the near future, been unable to pay its debts or other liabilities as they fell due,” the ECB explained.

“Consequently, the ECB determined that the bank was failing or likely to fail and duly informed the Single Resolution Board, which adopted a resolution scheme entailing the sale of Banco Popular Espanol to Banco Santander.”

A sale to a larger rival had been the preferred option for Banco Popular’s chief, Emilio Saracho, with a second bank, BBVA, also mooted as a possible buyer.

The SRB, which puts into effect the ECB’s decision, 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 (US$1.13).

“This means that Banco Popular will operate under normal business conditions as a solvent and liquid member of the Santander Group with immediate effect,” it said.

“The decision taken today safeguards the depositors and critical functions of Banco Popular,” said SRB chief Elke Koenig.

“This shows that the tools given to resolution authorities after the crisis are effective to protect taxpayers’ money from bailing out banks.”

Banco Popular is Spain’s seventh biggest bank.

It is still 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 3.5 billion euros last year.

Already struggling for months, Banco Popular has seen its share price almost halve in a week, to just 32 cents on Tuesday.

The Spanish lender thus became the lowest-value entity on the Madrid stock exchange’s main Ibex 35 index, at around 1.4 billion euros in market capitalization.

Initially, Banco Santander’s investors did not seem to be particularly happy about the latest development.

Spanish Economy Minister Luis de Guindos welcomed the solution to sell Banco Popular to Santander, saying it was “a good outcome for the bank, given the situation it has found itself in recent weeks.”

He stressed the operation would be carried out “without the use of public resources and without the risk of any possible contagion” for Spain’s sovereign debt, as had been the case in the past.

“The current situation is very different to what it had been in 2012,” the minister said.


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