March 18, 2020 / 11:19 AM / 13 days ago

UPDATE 1-No compensation for Banco Popular's creditors, EU regulator says

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BRUSSELS, March 18 (Reuters) - Shareholders and creditors of Spain’s defunct Banco Popular have no rights to compensation, the European Union regulator in charge of the matter said on Wednesday.

Banco Popular’s shareholders and junior bondholders lost around 4 billion euros ($4.4 billion) in the process, which involved the sale of the lender, then the sixth-largest in Spain, to bigger rival Santander for the nominal price of one euro.

“The Single Resolution Board (SRB) has decided that no compensation is due to shareholders and creditors affected by the resolution of Banco Popular Espanol,” the regulator said in a statement.

It said that the decision was justified by the fact that creditors of the ailing bank would not have been better off under normal insolvency proceedings.

Spanish taxpayers were spared the bill and the bank’s savers and activities were not affected, as Santander took over the ailing rival.

The SRB’s decision concluded that the resolution was the best option for the failing Banco Popular.

“I understand this will be disappointing for those who have lost out, however it proves that the resolution framework is effective and shielded the taxpayer from losses and financial instability,” the SRB’s head Elke Koenig said.

Disgruntled investors in Banco Popular have filed dozens of lawsuits with the European Union’s General Court against the SRB and other EU bodies involved in the resolution decision, the first carried out under new EU banking rules. ($1 = 0.9088 euros) (Reporting by Francesco Guarascio @fraguarascio, editing by Louise Heavens)

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