CRISIS OF THE SIXTH SPANISH FINANCIAL INSTITUTION

Santander injected liquidity 13.000 million to prevent its closure Popular

The bank lost deposits 18,000 million from March and 6.000 million in just three days

PABLO ALLENDESALAZAR / MADRID

TUESDAY, JUNE 27, 2017 - 07:00  IST

The council intervened entity had prepared the declaration of bankruptcy

THE REASONS FOR THE DEBACLE OF THE PEOPLE 'S BANKCOME FROM AFAR, BUT THE MOST IMMEDIATE CAUSE OF ITS INTERVENTION IN EARLY THIS MORNING FROM 6 TO 7 JUNE WAS THE  MASSIVE OUTFLOW OF DEPOSITS THAT SUFFERED IN RECENT MONTHS AND LED HIM TO BE A PASSAGE OF BANKRUPTCY AND RECEIVERSHIP. THE EXTENT OF THE BLEEDING WAS SUCH THAT SANTANDER , WHICH BOUGHT THE COMPANY THAT NIGHT FOR ONE EURO TO THE AUTHORITIES, HAD TO INJECT URGENCY 13.000 MILLION EUROS OF LIQUIDITY TO THAT OFFICES WOULD OPEN IN THE MORNING AND CUSTOMERS COULD CONTINUE TO OPERATE NORMALLY WITH THEIR MONEY.        

As explained , market sources told this newspaper, the customer distrust caused the bank then chaired by  Emilio Saracho  lost nearly  18,000 million  in customer funds (deposits and current and savings accounts, mainly), around 24% of the total, in just over two months ranging from closing their accounts in March for the first quarter and intervention. Only in the three preceding days the authorities acted, fear led customers to withdraw  6,000 million at the rate of about 2,000 million per day

To get an idea of the magnitude of liquidity hole was suffering the entity, it is recalled that between January and March had suffered an outflow of deposits of  799 million euros , to 77,346,000. In the financial sector it is often said that the solvency problems constitute a serious and slow disease but usually eventually cause liquidity crisis caused the death of a fulminant entities. And that was precisely what happened to the Popular.

PREPARED DEMAND

The situation was so desperate that its  board of directors , explain the sources, had prepared the  demand for bankruptcy  to present early in the morning of 7 in the courts as a last resort, which did not have to fall back thanks the  actions of the authorities and sale to Santander . Even had prepared a guide for its employees to explain the situation. The bankruptcy declaration would have meant that the offices would open and no savings customers suffered a "corralito '.

Of the 60,347 million euros in deposits that remained to the entity  35,410 million  (of which 30,725 million were individuals and 3,500 million SMEs) were guaranteed to be less than 100,000 euros. However, the  Fund Deposit Guarantee  does not have enough money to cover them , so that customers have seen their money locked and have been recovering gradually, as the bank was selling its assets or authorities forced the sector to make an exceptional pours Fund.

Economy Minister,  Luis de Guindos , has already warned a few days ago in Congress that the contest would have caused an "absolutely chaotic and inasumible situation" for customers, but also for the whole of the Spanish economy that had infected the fear of customers of other banks. After the purchase by Santander, the situation stabilized deposits. At first, some outlets of large institutional clients who had given the orders occurred the previous day, but a few days later and produced net inflows.

BBVA withdrew from the auction around 23h

BBVA was by Santander, the only bank that agreed to sign the confidentiality agreement to access information Popular ( 'data room') offered by the European authorities (the Single Resolution Mechanism, MUR, and in his name Spanish Fund for Orderly Bank Restructuring, FROB) potential interested in Popular. However, the entity presided by Francisco González withdrew from the process at around 11 pm without presenting offer, according to market sources.

In mid-May, about three weeks before surgery, the MUR hired Deloitte to advise him on the situation of the People. The audit earmarked for this purpose about 60 employees, who calculated that the bank had a negative value of between 2,000 and 8,200 million euros according to a scenario of neutral or adverse evolution was used. Government and law firms Cremades and Calvo Sotelo as (that Monday brought together 160 affected in the Barcelona Bar Association) have called for the report to be made public.