Judges ruled against investors who lost billions, in the first test of controversial banking laws
ADVERTISEMENTThe EU was right to wind up Spain’s ailing Banco Popular in 2017, the bloc’s General Court said today (22 November) in the tribunal’s first judgment on controversial European rules designed to stop lenders getting taxpayer bailouts.
Six years ago, Banco Popular was deemed by regulators to be on the brink of collapse, and sold to Banco Santander for a single euro — a move that saw billions of euros in value wiped out for investors and that has led to multiple legal challenges.
“The valuer relied on a correct methodology and did not commit manifest errors in the valuation of Banco Popular’s assets,” judges said, overturning claims from shareholders that they hadn’t got a fair hearing from the EU.
Judges also struck out investors’ claims of bias in a valuation report by Deloitte, which concluded they’d have been no worse off under regular insolvency proceedings.
It’s the first major case to test the legality of EU rules introduced designed to ensure major lenders can safely collapse.
The European Commission proposed its resolution rules in 2012 in the wake of the financial crisis, which saw governments desperate to avoid a wider meltdown offer billions of euros in taxpayer funds to lenders such as the Franco-Belgian bank Dexia.
The EU’s Single Resolution Board (SRB) last used the law in 2022 to wind up two Balkan units of Russia’s Sberbank in the wake of the Ukraine invasion, and the Commission also proposed a revamp of the rules in April after the collapse of three US lenders.
Spokespeople for the SRB and lawyers for the investors did not immediately respond to requests for comment.
