Advertisement

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.

Advertisement - Article continues below

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.

Advertisement
Advertisement

Recommended

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Boris Johnson’s big Brexit plan
Brexit

Boris Johnson’s big Brexit plan

The prime minister needs to get Brexit done, and get the economy growing – particularly for first-time Tory voters. Can he manage all that while negot…
15 Jun 2020
European assets bounce as the eurozone's economy turns upwards
European stockmarkets

European assets bounce as the eurozone's economy turns upwards

Both the euro and European stocks have rallied strongly in the last few days.
12 Jun 2020
Margrethe Vestager: a symbol of all that’s wrong with the EU
EU Economy

Margrethe Vestager: a symbol of all that’s wrong with the EU

Margrethe Vestager, the EU’s competition commissioner, wields enormous power over industry, and abuses it, says Matthew Lynn.
7 Jun 2020

Most Popular

Can Rishi Sunak save the economy with stamp duty cuts and half-price meal deals?
UK Economy

Can Rishi Sunak save the economy with stamp duty cuts and half-price meal deals?

John Stepek runs his eye over the chancellor's £30bn stimulus package and asks if it's enough to get the economy back on its feet after months of lock…
9 Jul 2020
An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
What gold, bonds and tech stocks have in common
Stockmarkets

What gold, bonds and tech stocks have in common

"Risk off" or "safe haven" assets such as gold and government bonds have been doing well lately. But so have riskier tech stocks. That seems to defy c…
10 Jul 2020