The decision was taken after a week that saw Popular shares plummet. According to the European Central Bank, Popular was “failing or likely to fail.” The takeover has been endorsed by the European Commission.
Trading in Popular shares has been suspended and shareholders will lose 100% of their investment
“The decision taken today safeguards the depositors and critical functions of Banco Popular. This shows that the tools given to resolution authorities after the crisis are effective to protect taxpayers’ money from bailing out banks,” said Elke König, chair of the SRB, in the statement.
Trading in Popular shares has been suspended and shareholders will lose 100% of their investment in the lender. Until now, Banco Popular’s listed value had been around €1.3 billion, but that figure has evaporated following the sale for the symbolic price of one euro. Around 300,000 investors are affected by the move.
Santander will raise €7 billion in capital in order to absorb the struggling bank, according to a filing with the National Securities Commission (CNMV).
This is the first such decision adopted by the SRB since it became an independent agency in January 2015 with the mission to “avoid bail-outs and worst-case scenarios.”
“The Single Resolution Board (SRB) has transferred all shares and capital instruments of Banco Popular Español S. A. (Banco Popular) to Banco Santander S. A. (Santander),” reads the SRB’s statement. “This means that Banco Popular will operate under normal business conditions as a solvent and liquid member of the Santander Group with immediate effect.”
The takeover is considered to be “in the public interest as it protects all depositors of Banco Popular and ensures financial stability.”
Like many other Spanish lenders, Popular had suffered from exposure to bad loans following the slump in the property market after a decade-long boom that ended in early 2008. In June 2012, the Eurogroup approved up to €100 billion for Spain to recapitalize the country’s banks.
In a statement of its own, Santander underscored that the takeover will be conducted “without any taxpayer support.”
“The combination of Santander and Popular creates Spain’s largest bank by lending and deposits, with 17 million customers,” says the Santander statement.
“The combination of Santander and Popular strengthens the Group’s geographic diversification at a time of improving economic conditions in both Spain and Portugal, and will allow us to continue to deliver for customers and shareholders on all our commitments,” said Santander chairwoman Ana Botín.
.English version by Susana Urra.