Spain Passes Buck to ECB as Pimco Seeks Retribution for Popular

  • Economy chief asked if he’s worried about potential lawsuits
  • Italian bank bailout turns up the heat on Spanish officials

Economy Minister Luis de Guindos said Spanish officials were simply implementing the decisions of the European authorities when they forced write-offs on Banco Popular Espanol SA investors last month, as firms including Pacific Investment Management Co. seek legal restitution for their losses.

It was European institutions such as the Frankfurt-based central bank and the Single Resolution Board that were calling the shots as Popular was sold off, and not their Spanish counterparts, Guindos said.

“It’s the European Central Bank, as the single supervisor, and the SRB that executed all the decisions,” Guindos said in Madrid Monday, when asked by reporters if the Spanish government is worried about potential lawsuits.

Pimco, Anchorage Capital Group, and Algebris Investments are among a group of bondholders who hired the law firm Quinn Emanuel Urquhart & Sullivan LLP to look at a possible claim for damages over Popular’s collapse. The bank’s equity and junior debt were wiped out last month before the lender was sold to Banco Santander SA for one euro through Spain’s bank bailout fund.

In Spain, consumer associations and law firms are also seeking to represent retail investors who were caught up in the bank’s collapse. Many Popular investors were aggravated when Italy bailed out Banca Popolare di Vicenza SpA and Veneto Banca SpA, also last month, using public money to help fund their takeover. Santander is considering a possible solution for some investors who may have been missold the securities, Expansion reported last week.

Popular was the first European bank to suffer a forced sale under the European Union’s bank resolution framework.

The ECB’s supervisory division took control of Popular on June 6 after it determined the lender was “failing or likely to fail” because of liquidity issues. The SRB then forced the write-off of equity and junior bondholders before selling it for one euro to Santander, the only bidder in an overnight auction.

Guindos has defended the process arguing that both Popular depositors and Spanish taxpayers’ interests were protected.

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