The General Court of the European Union recently ruled on a high profile case concerning Banco Popular, a resolution that culminated in a decision to unwind the bank rather than continue with its previous path. This decision came after a thorough examination of objections raised by Banco Popular shareholders against the measures taken in 2017, a year marked by dramatic shifts in the bank’s fate. At stake was the proffered settlement in which Santander acquired Banco Popular for a nominal one euro, a transaction that generated significant debate about whether shareholders could claim compensation for the losses they faced when ownership stakes were wiped out. The court’s ruling underscored that the objections raised by shareholders did not alter the fundamental assessment that led to the bank’s resolution. In particular, it highlighted that the sale to Santander, and the procedural steps surrounding that decision, did not warrant a reversal of the outcome, and that the remedy pursued by the shareholders would not be consistent with the broader goals of maintaining financial stability within the European Union. The court thus preserved the core outcome of 2017, while acknowledging the attention and controversy that accompanied the sequence of events leading up to the transfer for a symbolic price. Under this framework, the court affirmed that the resolution was conducted within the boundaries of applicable EU law, and that the parties involved had adhered to the legal standards expected in situations where credit institutions face severe distress and the options for normal operation appear untenable. In short, the ruling reinforces the view that the resolution of Banco Popular was carried out decisively and in a manner consistent with established regulatory procedures, and it upholds the legitimacy of the steps taken, irrespective of the questions raised about the underlying causes of the bank’s difficulties and the ensuing liquidation process.
The decision set forth that the Single Resolution Board and the European Commission did not commit a clear error of assessment in evaluating Banco Popular’s condition at the time and in determining that the bank was in grave trouble or faced an imminent risk of failure. This emphasis on the assessment process underscores the seriousness with which EU authorities approached the case, reflecting the intricate balance between ensuring financial stability, protecting depositors, and preserving market confidence in a system that relies on swift and credible action when banks encounter critical distress. The court’s analysis confirms that the resolution plan was implemented in a manner that prioritized orderly execution and the preservation of the overall integrity of the financial system, rather than prolonging the life of an institution that faced substantial and potentially systemic risks. Accordingly, the court asserted that the liquidation of Banco Popular was a valid and legally sound outcome, grounded in the realities of the bank’s condition and the constraints posed by the regulatory framework. The court’s language makes clear that the decision to liquidate was based on a careful evaluation of the threats to financial stability and the capacity of alternative measures to restore a viable path for the bank. This reinforces the notion that the resolution framework operates as a last resort when the conventional management of a bank cannot reasonably continue, and that such action is justifiable when it serves to protect the broader-interest safeguards within the European banking sector. The ruling thereby situates Banco Popular’s case within the established doctrine of resolution and liquidation, signaling to market participants and stakeholders that the EU possesses robust mechanisms to respond to severe bank distress while maintaining the primacy of orderly conduct and regulatory compliance.