BRUSELAS, 22 Nov. (EUROPA PRESS) –
The General Court of Justice of the European Union (TGEU) – in the first instance of the CJEU – has considered this Wednesday that the creditors and shareholders of Banco Popular did not have the right to receive compensation from the Single Resolution Fund (SRF), a emergency that can be used in times of crisis and that is financed by the banking sector itself.
This is one of the legs of the Single Resolution Mechanism (SRM), established by the European Commission after the 2008 global financial crisis along with other measures in order to protect the EU financial markets.
The objective of the SRM is to allow an orderly resolution of banks without using taxpayers’ money while preserving financial stability, so that if a bank is in serious difficulty or is likely to be in serious difficulty, the Single Board of Resolution (JUR), an EU agency, can, under certain conditions, adopt a resolution mechanism that will have to be approved by the Commission.
In June 2017, the SRB adopted a resolution mechanism with respect to the Spanish bank Banco Popular, which was approved by the Commission and led to the purchase of Banco Popular’s shares at the price of one euro by Banco Santander.
According to the Union Regulation on the resolution of credit institutions, if it is proven that the shareholders or creditors of an institution that has been the subject of a resolution measure have suffered greater losses than they would have suffered in the event of the liquidation of the institution said entity under an ordinary insolvency procedure, the SRB may use the FUR to pay them compensation.
In the case of Banco Popular, to estimate this possible difference in treatment, an independent expert carried out a valuation of the bank in a hypothetical liquidation scenario, and the affected shareholders and creditors had the opportunity to present allegations on the matter.
The SRB then decided that the affected shareholders and creditors would not have received better treatment in the event of the liquidation of Banco Popular than that which resulted from the resolution and that they were not entitled to receive compensation from the SRF.
However, several affected shareholders and creditors challenged this decision before the General Court and offered it the opportunity to rule for the first time on the legality of that decision.
In its ruling this Wednesday, the TGUE dismissed the appeals, particularly to the extent that they questioned the independence of the expert and were also based on the violation of the right to be heard of the affected shareholders and creditors.
The Court also considers that, in his evaluation, the expert was based on a correct methodology and did not make manifest errors when valuing the assets of Banco Popular since the result that an ordinary insolvency procedure would have led to would have been, in Consequently, the same as that of the resolution, so that the property right of the affected shareholders and creditors was not violated.
