Dagong Europe, Commentary on Recent Bank Resolution Cases in Europe
Dagong Europe has published a commentary with the title ‘Recent Cases of EU Banking Resolution – Liquidation, One Rule Does Not Fit All’. The application of the Banking Recovery and Resolution Directive (BRRD) has been tested in practice in the last weeks with two very different cases of banks’ resolution-liquidation, one in Spain and another in Italy.
On one hand the case in Spain of Banco Popular Español, the 6th largest player in the country, followed the process of resolution action and sale to Banco Santander. On the other hand, the cases of Banca Popolare di Vicenza and Veneto Banca, both Italian banks with markets shares of around 1.0% but with a strong presence in the Veneto region, are being liquidated under national proceedings.
In our opinion, the actions undertaken in the Banco Popular Español case were completely in line with the definitions stated by the Single Resolution Mechanism. The case of the Italian banks shows the different views between the ECB and the national authorities with regards to a liquidation process and state aid in the public interest. The cases have implications for the application of the BRRD and for state support likelihood for issuers and for senior debt issues, but they are not straightforward. The different approaches taken highlight that the cases in which a resolution/liquidation procedure needs to be implemented are still subject to country specifics.