Banco Popular: the eurozone finally gets a bank rescue right

Regulators have pushed Spain’s moribund Banco Popular into the arms of its giant rival Banco Santander.

849-Banco-634

Banco Popular: pushed into the arms of Banco Santander

Europe has at last got a bank rescue right, says Lionel Laurent on Bloomberg. Regulators have pushed Spain's moribund Banco Popular "into the arms" of its giant rival Banco Santander, which will now tap shareholders for €7bn in capital to bolster Popular's balance sheet after scooping it up for €1.

The restructuring imposed losses on several groups of investors. Popular's stock and bondholders forfeited about €3.3bn, while €2bn in junior bonds and contingent convertible debt was converted into equity and written down to zero or handed to Santander. Crucially, however, no taxpayers' money was required.

So this first major action by the EU's Single Resolution Board, set up in 2015 to deal with euro-area bank failures and wind them down with minimal impact on taxpayers and financial stability, must count as a success. "If there was ever any doubt that European bank regulators would flex their muscles to prevent wider financial contagion, there is none now," says Lex in the Financial Times.

This "shows just how much healthier European bank regulation has become", says Martin Sandbu, also in the FT. The eurozone's key problem used to be "self-fulfilling and self-inflicted death spirals' between governments and national banking systems". Now it is "applying capitalism to bank investors" rather than rescuing them from the consequences of their bad decisions. Italy should now "get on with a bail-in of its own wobbly banks", further increasing investors' confidence in the single currency area.

Recommended

How the Covid-19 vaccine crisis is putting the EU in danger
EU Economy

How the Covid-19 vaccine crisis is putting the EU in danger

The botched coronavirus vaccine campaign will cause long-term harm to the EU's economy, says Matthew Lynn.
4 Apr 2021
How the vaccine wars will harm us all
Global Economy

How the vaccine wars will harm us all

Grabbing and hoarding vaccine supplies, or even manufacturing one’s own, might seem to make sense for a state in an emergency. But the damage done to …
27 Mar 2021
The European Central Bank fumbles its way towards yield curve control
EU Economy

The European Central Bank fumbles its way towards yield curve control

The EU’s economic recovery is faltering, but its bond yields keep rising. That makes things tricky for the European Central Bank, says John Stepek. He…
12 Mar 2021
Vexing vaccine delays hit drug firms
Biotech stocks

Vexing vaccine delays hit drug firms

AstraZeneca and Pfizer are being attacked by the EU over what it claims are delays in delivering the Covid vaccine.
28 Jan 2021

Most Popular

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?
Bitcoin

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?

Dogecoin – a cryptocurrency created as a joke – has risen by more than 9,000% this year alone. Saloni Sardana looks at how something that began as an …
19 Apr 2021
The FTSE 100 has clawed back above 7,000 – how much higher can it go?
UK stockmarkets

The FTSE 100 has clawed back above 7,000 – how much higher can it go?

The FTSE 100 index has risen to over 7,000 for the first time in over a year – it now sits just above where it was in 1999. But its era of neglect cou…
19 Apr 2021
The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021