The General Court of the European Union has dismissed in their entirety the appeals filed by former shareholders of the Spanish bank Banco Popular against the resolution scheme by sale of the bank developed by the Single Resolution Board (SRB) in June 2017 and the decision (2017/1246) of the European Commission approving it (see EUROPE 11803/9), in a judgment delivered on Wednesday 1 June (cases T-481 & 510 & 523 & 570 & 628/17).
In these cases, the General Court rules for the first time on the legality of a European Commission decision on an SRB-led bank resolution under the Regulation (806/2014) establishing a uniform procedure for the resolution of failing banks.
With regard to the resolution of Banco Popular, the shares and capital instruments of the failing Spanish bank were written down and converted into new shares transferred to the Santander group for a purchase price of €1.
In its judgment, the General Court is of the opinion that, in the context of this resolution, the SRB and the European Commission did not commit a manifest error in considering that the bank concerned “was failing or was likely to fail”. The same was true when they considered that resolution by sale was necessary and proportionate in light of the public interest objectives pursued, namely to guarantee the stability of the financial markets by ensuring the continuity of the critical functions of the failing entity.
According to the General Court, the absence of a provision for a hearing of the shareholders and creditors of the entity concerned constitutes a limitation on the right to be heard which is justified and proportionate in order to meet the public interest objective.
Furthermore, the decision to write down and convert Banco Popular’s capital instruments did not constitute an excessive and intolerable intervention affecting the very substance of the claimants’ property rights, the General Court also ruled.
The European judge considers that preventing the applicants from having access to the entire file, including a valuation of the Spanish bank carried out by an independent expert, was justified. In his view, due to time constraints and available information, the SRB could rely on this valuation. Moreover, the reservations on this analysis expressed by the expert himself did not make it possible to affirm that the valuation was not “fair, prudent and realistic”.
Finally, the General Court rejects the arguments relating to the irregularity of the sale procedure. It confirms the legality of the SRB’s decision to ask the Spanish resolution authority to contact only those institutions that participated in the Banco Popular private sale procedure. This authority is entitled to request certain potential acquirers in particular, under the ‘BRRD’ Directive (2014/59) establishing a framework for the resolution of a failing bank.
The General Court rejected the extra-contractual liability of the SRB and the European Commission, as the applicants had not demonstrated the existence of any illegal behaviour on their part.
See the General Court’s judgment (in French): https://aeur.eu/f/1w6 (Original version in French by Mathieu Bion)