Banco Popular ‘right to be heard' process: update

The Single Resolution Board (SRB) is moving into the final phase of the right to be heard process regarding its preliminary decision whether to compensate the shareholders and creditors affected by the resolution actions concerning Banco Popular Español S.A..

The SRB and the independent valuer, where relevant, have reviewed and are finalising their assessment of the 2,856 submissions from registered and verified affected parties. On this basis, the SRB will carefully consider its final decision as to whether compensation needs to be granted to the affected shareholders and creditors. The SRB will strive to reach and announce its decision in the coming months.

We will continue to provide further updates through our dedicated webpage.

Background

On 7 June 2017, the SRB transferred all shares of Banco Popular Español S.A. (Banco Popular) to Banco Santander S.A (Santander), following the exercise of the write-down and conversion of capital instruments prior to the transfer. This means that Banco Popular continued to operate under normal business conditions as a solvent and liquid member of the Santander Group with immediate effect.

Due to its stressed liquidity situation, the European Central Bank (ECB) had decided on 6 June 2017 that Banco Popular was “failing or likely to fail” and notified the SRB accordingly. The SRB and the Spanish National Resolution Authority – FROB – decided that the sale was in the public interest as it protects all depositors of Banco Popular and ensures financial stability. The resolution scheme entered into force on the same day, following the endorsement by the European Commission.

On 6 August 2018, the SRB published its preparatory act (SRB Notice) in which it took a preliminary decision that it is not required to compensate affected shareholders and creditors of Banco Popular based on the conclusions of the report of the independent valuer regarding the valuation of difference in treatment (“Valuation 3 report”). At the same time, it opened the registration for the right to be heard process. This allowed affected shareholders and creditors to provide reasoning where they do not agree with the preliminary decision and to explain why they consider alternative approaches or assumptions for the normal insolvency proceedings should have been adopted and, if they had been, how in their view these would have affected the final outcome.

The SRB collected 2,856 submissions from parties who registered and were verified to take part in the process. The comments included in these submissions covered both the way SRB approached the valuation for difference in treatment and the Valuation 3 report.