How important is this for Europe’s new rules for saving failing banks?
Very. The Single Resolution Board was created at the start of 2015 as a pan-European authority for dealing with failing banks. Since then however, the institution has remained almost entirely untested. Now with Banco Popular it has shown its teeth at last.
Are there other struggling lenders in Europe that may require the new authority’s attention?
Yes. There are problem banks in Italy and Portugal that could provide further tests for Europe’s new failing bank regime
How did the situation get so bad at Popular?
The Madrid-based bank managed to avoid needing a state bailout along with many of Spain’s savings banks after the financial crisis. But since then it has been struggling to recover from heavy losses on real estate loans that went bad after Spain’s property bubble burst.
What does the deal mean for Santander?
Since Ana Botín took over from her late father as executive chairman of Spain’s biggest bank in 2014 she has faced under pressure to improve the bank’s relatively low capital levels while also fielding regular questions on whether she would continue her father’s acquisitive strategy. By taking over her struggling rival Popular for only €1, Ms Botín shows that she has inherited her father’s flair for daring dealmaking. But in launching a €7bn share issue, she is raising more than analysts think is needed purely to cover the capital shortfall at Popular and taking the opportunity to also bolster the bank’s overall capital levels. The Santander boss has been attracted by the opportunity to acquire Popular’s strong market position among small and medium sized businesses in Spain, and to expand in its home market at a time when the economy is recovering.
What does the Popular sale mean for Spain’s broader banking system?
Spain suffered a severe banking crisis in 2012 that forced Madrid to ask its European partners for a €100bn bailout package. Though intensely controversial at the time, Spain’s efforts to restructure its banking system are today widely seen as a story of success — especially when set against Italy’s perennial banking troubles.
Madrid nationalised and recapitalised a string of failing regional savings banks, and set up a bad bank to warehouse the sector’s toxic real estate loans. Confidence in the system was restored, and credit started flowing to households and companies once again — helping fuel Spain’s broader economic recovery.
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