European justice rejects all resources and supports Banco Popular’s proposal

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Settlement of hundreds of claims in five sentences for issues of legal structure, form and substance, ensuring that the judgment supports compensation legal, proportionate and without errors

Banco Popular branch with signage, acquired by Banco Santander
Branch of Banco Popular acquired by Banco Santander with Grupo Santander signage.Joaquin Carazo

Banco Popular’s Resolution was from, in accordance with European standards and complaints seeking compensation will be terminated. Nearly five years after the Spanish entity disappeared, was acquired by Banco Santander for 1 euro following an emergency offer, the first in history to conform to an EU framework, the Court of Justice of the European Union has ruled today. A kind of ‘jumbo sentence’, solving the issue in one go and answering dozens of questions in five resolutions.

In this five-year period, the court of Luxembourg has obtained More than a hundred resources of natural and legal persons that they were holders of Banco Popular Capital Instruments prior to the offer and had lost their investment. The appeals sought cancellation of the resolution instrument and/or decision adopted at the time by the European Commission and financial compensation. The CJEU has focused on five, “designated as ‘representative pilot cases’, and today, through separate rulings, it has rejected all that have come to the fore regarding a resolution tool adopted by the SRB. I take this opportunity to rule on the validity of the decision.

By now, it had already published decisions on specific aspects, such as the right to compensation or return of investments due to errors in information when holders acquired it. But today he falls into the background, covering all angles, from legal people who justify the process, through technical questions of the rights of those affected, to philosophical ones about purpose during and after resolution. and concluded that Neither the Single Resolution Board nor the European Commission made a clear error of assessment When it is considered that the conditions established for the adoption of a resolution measure are met, since the balance sheet does not even have solvency, it means that there is sufficient liquidity to keep a financial institution running. and that the plaintiff has not demonstrated the existence of alternative measures for resolution within a reasonable time,

The position of the CJEU has been consistent throughout these years, in light of the framework of directives and supervision and resolution, that the disappearance of a bank in the circumstances that occurred with the popular pursued the common interest and prevailed over shareholder investment. Thousands of protests have taken place before Spanish courts, but the CJEU recognizes, although it cannot be excluded, that the shareholders and creditors of an entity that is the object of a resolution measure can avail themselves of the right to be heard. can. In the process of resolution, the exercise of this right may be subject to limitations. And since that intervention at the highest level sought to guarantee the stability of financial markets, it is fitting that that right of hearing be limited. “Thus, in the framework of Banco Popular’s conciliation process, the non-existence of a provision that provides for a hearing procedure to the shareholders and creditors of the entity in question and the fact that the plaintiff was not granted a hearing is a matter of right. limit which is reasonable and necessary to answer the object of the general interest and which respects the principle of proportionality”, says today’s magistrates, who consider this style of hearing. would have jeopardized the objectives of protecting the stability of financial markets and continuity of essential functions of the unit.

Secondly, the General Court, before which an appeal is possible, reiterates in a line of several sentences already pronounced that the decision to redeem and convert the capital instruments of Banco Popular does not constitute “excessive and intolerable interference which affects the substance of the plaintiff”. There is a “right to property”, but a reasonable and proportionate restriction of their property right should be considered.

The third element of the sentences is more technical. Part of the legal logic of the appeals was centered on two evaluation reports that led to a settlement, one from the SRB and the other from an independent analyst. Defendants complained about the lack of transparency, that they had no access to, about the rigor. But the Court of Commons now holds that the Single Resolution Board and the Commission not making public the documents on which they based their decision are not infringing on this right to property, as it is part of professional secrecy and confidentiality. Therefore, the Court of Commons is of the view that, after adopting the resolution mechanism, the applicants do not have the right to be notified about the entire file on which the SRB depends.

Court believes that Although the process was not without inaccuraciesYes, or decisions that might not have been the best were understandable given the urgency, complexity, and doubt. “Thus, given the time constraints and available information, certain uncertainties and estimates are inherent in any provisional assessment and the reservation expressed by an expert does not mean that it was not ‘reasonable, prudent and realistic’. ” Note from Luxembourg.

The solvency of the institution need not take into account whether it has or is likely to have serious difficulties, the magistrate estimates, and is, therefore, not a condition for the adoption of a resolution device. “Indeed, the fact that an entity is solvent as per its balance sheet does not mean that it has sufficient liquidity, i.e., funds available to pay its debts or other liabilities when due.” For this reason, said today’s decision, the SRB and the Commission did not commit an apparent error of appreciation in presuming that Banco Popular was or was likely to be in serious trouble, which is the expression implied in the regulation of these matters. . Similarly, the General Court observed that the resolution mechanism was adopted “legitimately regardless of the reasons which caused the Banco Popular itself to be or perhaps to be in grave difficulties”.

On a technical level, closing the doors to other types of claims, the magistrate holds that there was no irregularity in the sale process and the SRB’s decision to request the Spanish Resolution Authority to contact only those entities that participated in the private process Had taken. The sale of Banco Popular was legal. and given that the plaintiff has not demonstrated the existence of illegal behavior by the SRB or the Commission, for example in disclosing sensitive information, “no breach of the principle of confidentiality or the duty of professional confidentiality is found”.

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