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ECB faces lawsuits over handling of failed Spanish bank Popular
October 13, 2017 / 12:29 PM / in 6 days

ECB faces lawsuits over handling of failed Spanish bank Popular

The head quarter of the European Central Bank (ECB) is illuminated with a giant euro sign at the start of the "Luminale, light and building" event in Frankfurt, Germany, March 12, 2016. REUTERS/Kai Pfaffenbach

FRANKFURT (Reuters) - The European Central Bank is facing two lawsuits over its handling of the failure of Spanish lender Banco Popular, which saw investors lose billions of euros while taxpayers and depositors were protected.

The two cases, published on the European Court of Justice’s website, were filed by Popular’s minority shareholders and Spanish firm La Guirigaña against the ECB and the Single Resolution Board, the body that disposes of large banks in the European Union.

They add to a deluge of lawsuits filed against the SRB and the European Commission, dragging the ECB, as the euro zone’s top bank supervisor, into a legal dispute that will test the EU’s resolve in applying new rules aimed at shielding taxpayers from bailing out banks.

No information is yet available about the substance of the two cases. Spokespeople for the ECB and the Court declined to comment.

The ECB declared Popular likely to fail on June 6 after what it later described as a run on the bank by its depositors. The SRB then quickly decided to sell Popular to larger rival Banco Santander for 1 euro.

Spanish taxpayers were spared and the bank’s clients were not affected but its shareholders and junior bondholders lost around 4 billion euros ($4.73 billion).

Critics of the ECB’s conduct have said it did not provide more emergency cash to Popular as depositors fled, although the Bank of Spain has said the bank failed to come up with enough collateral to receive the money.

Such Emergency Liquidity Assistance is provided by national central banks if the ECB approves it.

Reporting by Francesco Canepa; Editing by Catherine Evans

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