Spain’s Santander bank buys struggling Banco Popular for €1

THE European Central Bank has endorsed the sale of Spain’s ailing Banco Popular and ordered the transfer of all of its shares and capital to Banco Santander SA for the princely sum of €1.

The ECB decided that the sale was in the public interest as it protects all depositors of Banco Popular and ensures financial stability.

Shares in Banco Popular have fallen 63% over the past month amid concerns the lender, which has been struggling under the weight of billions of euros in non-performing loans, would need to raise capital or seek a government rescue.

Due to its recent stressed liquidity situation, the ECB had decided that Banco Popular was “failing or likely to fail”.

The deal will create the biggest bank in Spain and Portugal, with around 21 million  customers.

Santander said it would raise around €7 billion in new capital as part of the rescue process  “which will cover the capital and the provisions required to reinforce the balance sheet of Banco Popular,” the bank said in a statement.

“The current shareholders of Banco Santander will have preferential subscription rights in the share capital increase. Banco Santander holds underwriting commitments for the total of such amount.”