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Spain's Santander bank buys failing local rival for 1 euro

Spain's Santander bank buys failing local rival for 1 euro

- European authorities on June 7 stepped in to avert a collapse of Spain's Banco Popular, following a run on the bank, orchestrating a last-minute rescue by Santander.

Banco Santander plans to acquire Banco Popular Español and raise €7 billion to clean up the balance sheet.

The deal also marks the first test of the ECB's new rules on failing banks, created to avoid taxpayer-funded bailouts and instead leave existing shareholders and creditors bearing the brunt of the losses.

Around the region, the Stoxx Europe 600 Banks index, the broadest sector benchmark, was up by 1.15% during early trading and quoted at 181.58 by 09:45 BST. The current share price indicates that stock is -9.01% away from its one year high and is moving 78.71% ahead of its 52-week low. Alpha One also assigned news stories about the bank an impact score of 50 out of 100, indicating that recent press coverage is somewhat likely to have an effect on the company's share price in the next several days.

The Santander deal means Banco Popular avoids being the subject of the first bailout by the euro zone's Single Resolution Board, which was set up in 2015 to help failing banks without affecting public finances.

But the rescue also underlines the risks to growth, banking and government debt burdens that are likely to delay a major switch in language and policy direction by the European Central Bank at its meeting on Thursday.

Banco Santander has announced that it will spend €1 to become the biggest bank in Spain. Santander said it would buy Popular (NasdaqGS: BPOP - news) and carry out a capital increase of around 7 billion euros ($7.9 billion).

"This deal is good for Spain and it's good for Europe", Santander chairman Ana Botin said of the agreement, which breaks the mold of using taxpayers' money, instead imposing losses on shareholders and creditors of the bank.




Popular's shares have plunged 53% since the beginning of last week over worries about its dwindling cash reserves.

Banco Popular will operate under normal business conditions as a solvent and liquid member of the Santander Group, the statement said.

"This shouldn't pose any real problems for other banks", Aberdeen Asset Management Head of Credit Research Laurent Frings said, as quoted by Reuters.

"The decision. safeguards the depositors and critical functions of Banco Popular", said Elke Konig, chair of the SRB.

Shares of Banco Santander, S.A. (ADR) (NYSE:SAN) inclined 0.15% to $6.56.

Less than four months later, his tenure ended with a forced fire sale of what was Spain's sixth-largest bank by assets.

Spain's Bankia, Italy's BPER Banca and France's Societe Generale were all up between 2.2 per cent and 3.8 per cent.


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