Mexican investors ask ECJ to overturn Banco Popular sale
Suit blames EU regulators for liquidity problems at lender sold to Santander for €1
Mexican investors have launched legal action against the European authorities that oversaw the failure of Banco Popular, seeking to overturn decisions that led to the bank being taken over by Santander for €1.
The shareholders, led by Antonio del Valle, a prominent Mexican businessman, have filed a legal challenge in the European Court of Justice seeking to nullify the decision of EU regulators.
Banco Popular was deemed to be “failing or likely to fail” in early June and placed into resolution by the Single Resolution Board, a body in Brussels created to deal with bank failures. The move marked its most significant intervention since it was set up as part of a new post-crisis framework in Europe.
Santander bought the bank for a symbolic €1 after the holdings of equity and subordinated debtholders, including investors in Mexico, were wiped out.
The Mexican shareholders held a 4 per cent equity stake in Banco Popular, and had overall bought about $600m in shares, including original purchases in 2013 and participation in a capital increase in 2016.
“The SRB not only failed to meet the legal requirements for ordering the resolution of Banco Popular, but precipitated the very liquidity crisis that led to its decision,” said Javier Rubinstein, a lawyer for Kirkland & Ellis representing the Mexican group.
“The illegal and unprecedented actions taken here jeopardise the credibility and integrity of the entire European banking system and post-crisis regulatory framework.”
Legal tension surrounding Banco Popular’s fate have been brewing for the past two months. A group of international bondholders hired lawyers in June to explore options, and Adicae, a Spanish consumer group that represents some small shareholders, filed a claim with court this week.
Investors have questioned aspects of the regulatory process, including the speed with which the bank ran out of emergency liquidity, and the way in which it was valued as part of the resolution.
Lawyers for the Mexicans say the SRB’s decision should be nullified for several reasons, among them that it did not meet conditions required by regulations, and that the bank was not failing or likely to fail. They argue other private sector measures would have averted the need for resolution.
Since Santander acquired Banco Popular, it has launched a €1bn scheme to compensate retail shareholders in Spain. Lawyers in Spain last month welcomed the process but said they planned to press ahead with legal action, including potentially against European authorities.
This week, it emerged that Blackstone, the US private equity group, has entered into talks to buy the portfolio of distressed real estate assets that made up part of Banco Popular’s balance sheet. Santander completed a €7bn rights issue last week that it had launched to support its acquisition of Banco Popular.