Banco Popular sale a ‘successful example’ of bank resolution system – EU’s Dombrovskis

Valdis Dombrovskis, the EU’s financial regulation chief, said that the sale this week of Banco Popular was a “successful” first test of the euro area’s new system for handling failing lenders.

“It was done overnight under strong time constraints,” Mr Dombrovskis told reporters today in Brussels. “We believe this test is passed with success,” he said, noting that the bank had been able to “fully continue its business activities.”

Asked why the bank had failed given that it had passed the latest rounds of EU stress tests, Mr Dombrovskis said that “the situation was deteriorating recently, both in terms of liquidity and in terms of share price, and so supervisors had to react and intervene”

“This is exactly what has been done, and eventually ensured a successful resolution model.”

“We believe it was a successful example of the first use of the single resolution mechanism,” he said.

Mr Dombrovskis said that the European Central Bank’s supervisory arm had taken a decision that the bank was at the point of failure “based on the data they have as a bank supervisor so we cannot comment much on the background or substance of this decision”

Separately, Mr Dombrovskis said that talks were continuing with Rome on possible support measures for two struggling banks in the country: Banca Popolare di Vicenza and Veneto Banca.

“Italian authorities have requested to work on a precautionary recapitalisation but this work is currently undergoing so I cannot comment in much more detail,” he said.