There was a new twist, on Friday 2 February, in the tale of the bailout of the Spanish bank Banco Popular, with the decision of the Single Resolution Board (SRB), the European agency responsible for resolving major Eurozone banks, to publish an extensive and non-confidential version of several documents that led to the decision to resolve the bank through selling it on 7 June of last year (see EUROPE 11803).
This operation, which is considered by the European institutions to be the first major litmus test of the European rules and agencies on bank resolution, has been the subject of several complaints to the European judicial system from investors who consider that they were harmed by the resolution of the bank (see EUROPE 11851 and EUROPE 11844). They also asked the SRB for access to several documents, including a number of assessment reports and the 2016 resolution plan the bank.
In November, the SRB appeals committee confirmed the course of action taken by the European authority to date, i.e. that the full disclosure of documents related to the resolution of Banco Popular would raise problems in terms of financial stability. However, it agreed that parts of these documents that were deemed non-confidential could be published.
The publication deadline, initially set for December, was postponed until mid-January, and has finally taken place in February.
SRB intends to be “as transparent as possible”
This decision has been made “taking into account the time that has elapsed since the resolution action and after careful consideration of potential financial stability concerns, following consultation of the relevant stakeholders”, the SRB explained in a press release.
The documents published are as follows: - the 2016 resolution plan of Banco Popular; - the assessment report prepared by the SRB on 6 June, to determine whether the bank was “failing or likely to fail”; - the assessment report and its appendices prepared by the consultancy firm Deloitte, which were used as a basis for the European authorities to determine whether the purchase offers received for the bank were adequate; and - an extensive version of the SRB’s resolution decision of 7 June, certain elements of which were already published in July 2017.
The SRB aims to be “as transparent as possible”, a senior official explained on Friday. As well as these documents, the disclosure of which was recommended by the committee of appeal, the SRB has gone further, publishing the selling decision of 3 June and the sales procedure letter of the Spanish resolution authority FROB, dated 6 June, sent out to potential purchasers, who were at the time -Banco Santander and BBVA.
However, parts of these documents will remain confidential and have therefore been blanked out. The SRB explains that this includes information the disclosure of which could compromise the protection of public interests concerning financial, economic and monetary policy or harm the commercial interests of Banco Popular and Banco Santander.
Not disclosed, for instance, in the resolution decision, was the level of emergency aid in the event of a liquidity crisis (‘Emergency Liquidity Assistance’) provided by the European Central Bank (ECB). According to the same senior official, the ECB, as initiator of this information, opposed its disclosure.
Deloitte itself recognises that time was short
Among these documents, the assessment report of the consultancy firm Deloitte is particularly controversial. It puts the value of Banco Popular in a range between €1.3 billion in the best-case scenario and -€8.2 billion in the worst-case scenario, with the firm’s best estimate standing at -€2.0 billion. The bank was finally sold to Banco Santander for €1.
In June 2017, the Bank of Spain called the consultancy’s independence into question for having given such a broad range and, in October, the Spanish Congress wrote an open letter calling for this document to be made public.
In a letter dated 6 June accompanying the submission of the report to the SRB, the consultancy points out that it had just 12 days from the date on which it had access to the necessary information to prepare its assessment, rather than the six weeks originally quoted. It goes on to explain that it did not have access to certain critical information and that it had only limited opportunities to discuss its conclusions with SRB officials.
Recognising that it was impossible to assess all the necessary information in a complete exercise carried out with reasonable diligence in the time available, it stresses that the assessment should therefore be considered as “highly uncertain”. SRB officials explained the lack of access to information on the grounds of the little time available.
These documents will now undoubtedly be picked over meticulously by the lawyers of the investors who made complaints.
The SRB has furthermore announced that an evaluation (aiming to determine whether the former shareholders and creditors of Banco Popular would have received better treatment if the bank had begun a normal insolvency procedure) is being prepared by Deloitte. According to our information, this assessment will be based on the data available on 6 June 2017. The saga is therefore likely to be a long one.
The documents are available for consultation at: http://bit.ly/2DV1Grh . (Original version in French by Marion Fontana)