In the Single Resolution Board’s (SRB’s) preparatory act, i.e. ‘SRB Notice’, published today, the SRB preliminarily decides, based on the findings of the ‘Valuation 3’ report, that it does not intend to pay compensation to former shareholders and creditors of BPE whose interests were affected as a result of the resolution decision. Before the SRB takes a final decision on whether compensation needs to be granted, the SRB is now launching a ‘Right to be heard’ procedure.
According to the resolution framework, the ‘Valuation 3’ determines whether affected shareholders and creditors would have received better treatment if the bank had been wound up under normal insolvency proceedings. This report has to be prepared by an independent expert. In the case of BPE, the ‘Valuation 3’ report was carried out by Deloitte.
The ‘Valuation 3’ report comes to the conclusion that under normal insolvency proceedings the overall losses would have been substantially higher than the losses that were realised in resolution. The shareholders and creditors whose instruments were written down or converted and transferred in resolution would not have received a better treatment if BPE had been wound up under normal insolvency proceedings. Thus, based on the report, the SRB preliminarily decides that it is not required to pay compensation to affected shareholders and creditors.
The SRB today opens the first phase of the right to be heard procedure, i.e. the registration phase. Affected shareholders and creditors who wish to exercise their right to be heard with the submission of written comments in the second phase should now register to prove their eligibility, i.e. to prove that they have been affected by the resolution because the instruments they held were written down or converted and transferred. Eligibility will have to be proven by submitting a valid proof of identity and an accepted proof of ownership of the written down or converted and transferred instruments. The registration phase will remain open until 14 September 2018 at 12:00 noon (Brussels time).
The second phase will be open to those whose eligibility has been verified by the SRB in phase one, once the SRB has assessed all registrations. During the second phase, affected shareholders and creditors will have the right to express in writing their views in relation to the SRB’s preliminary decision that compensation would not need to be granted and the underlying reasoning, through a dedicated electronic platform. Further details will be released ahead of the opening of phase two of the procedure.
All comments provided in the second phase will be duly assessed and taken into account when preparing the SRB’s final decision on whether compensation needs to be granted.
- The SRB Notice and the non-confidential version of the ‘Valuation 3’ report can be found here
- Affected shareholders and creditors are now able to register at the following dedicated website where more information on the registration procedure
- Explanatory note on the Valuation 3 Report
On 6 June 2017, the European Central Bank (ECB) determined Banco Popular Español S.A. (BPE) to be failing or likely to fail. The ECB notified the SRB accordingly.
On 7 June 2017, the SRB adopted a resolution decision for BPE, Spain’s 6th largest bank. After the write-down and/or conversion of subordinated liabilities into new shares, all shares of BPE were transferred to Banco Santander S.A. The SRB and the Spanish National Resolution Authority (FROB) decided that the sale was in the public interest as it ensured financial stability, while protecting all depositors of BPE. The resolution scheme entered into force on the same day, following the endorsement of the European Commission. The resolution scheme was implemented by FROB.
The SRB published on 2 February 2018, among other documents, a non-confidential version of the Resolution Decision in respect of BPE, the Valuation 1 and 2 Reports, annexed to the Resolution Decision, and the 2016 Resolution Plan for Banco Popular Group. On 13 June 2018, the SRB announced that it had received the final ‘Valuation 3’ report.
About the Single Resolution Board and the Single Resolution Mechanism
The Single Resolution Board (SRB) is the resolution authority within the Banking Union and, as part of the Single Resolution Mechanism (SRM), is at its centre. It works closely with, in particular, the national resolution authorities (NRAs) of participating Member States, the European Commission (EC), the European Central Bank (ECB) and national competent authorities (NCAs). Its mission is to ensure an orderly resolution of failing banks with minimum impact on the real economy and public finances of the participating Member States and beyond.
The SRM regulation (SRMR) establishes the framework for the resolution of banks in EU countries participating in the Banking Union.
The bank recovery and resolution directive (BRRD) requires banks to prepare recovery plans to overcome financial distress. It also grants national authorities powers to ensure an orderly resolution of failing banks with minimal costs for taxpayers.
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