Aggrieved Spanish investors have filed the lawsuits against the EU bloc’s regulations for forcing the sale of Banco Popular in June, losing shareholders and bondholders about €5 billion.THE European Union is facing 51 lawsuits amounting to billions of pounds for closing down Spain’s sixth largest bank.
European authorities intervened following a run on the bank, and a sale was hastily organized after the European Central Bank determined the lender was likely to fail. The deluge of cases, filed with the EU’s General Court, is the first legal test of how the EU applies new bank rules aimed at forcing investors to bear the costs of rescuing a failing lender before taxpayer money is used.
Spanish and EU taxpayers were spared from footing the bill, and the bank’s savers and activities were not affected. The EU’s regulation agency forced the sale of the bank, then the sixth largest in Spain, to bigger rival Santander for the nominal price of one euro.
The EU’s bank disposal agency – the Single Resolution Board (SRB) – and the EU’s executive Commission, decided to intervene overnight on June 7. But the decision hit some of the bank’s bond and stock investors hard.
The investors are now fighting back with 51 lawsuits which have been lodged with the EU General Court before the August 17 deadline against the SRB, and in some cases also against the Commission. The lawsuits are among the highest number of legal actions against a single EU decision ever filed before the General Court, a court official said.
The General Court hears cases against EU institutions and its decisions can be appealed on points of law to the European Court of Justice. The Plaintiffs include significant international investment funds, such as Algebris and Anchorage Capital, Spanish pension funds, consumers groups, Italian cooperative banks and Mexican investors, according to the information shown on the website of the EU court.
There is no fixed deadline for the tribunal to deliver its judgment, court statistics show that a process takes on average 18 months. The only other similar case was last year, relating to the Slovenian government’s rescue of local banks in 2013, where EU judges ruled it was legally sound to impose losses on bank investors.
The legal action comes as talks are under way to partly overhaul the EU’s bank rescue regime, less than two years after it was introduced.
The forced shutdown of Banco Popular was caused by a run on the bank, which has, in turn, spurred talks on how to prevent a repeat in the future.
EU states are considering measures which would allow them to temporarily stop people withdrawing money from their accounts when a bank is facing difficulties, a document prepared by the Estonian presidency of the EU said.