Document Type

Case Study

Case Series

Resolution and Restructuring

JEL Codes

G01, G29


On Friday, June 2, and Monday, June 5, 2017, Banco Popular Español, S.A., experienced a depositor run. Emergency liquidity assistance from Spain’s central bank proved insufficient to meet the bank’s liquidity needs. On June 6, Popular informed the European Central Bank that it was likely to fail, triggering the European Union’s Single Resolution Mechanism. That evening, the Single Resolution Board (SRB) initiated a sale of Popular’s business to one of Spain’s largest banks, Santander Group S.A., provided that Santander raise or inject enough capital to meet regulatory requirements and provide liquidity to manage further outflows. The sale involved the write-down or conversion of capital instruments and resulted in EUR 4.2 billion (USD 4.5 billion) in losses for investors in Popular’s common shares, convertible contingent (CoCo) bonds’ being treated as additional Tier 1 (AT1) capital, and subordinated debt’s being treated as Tier 2 capital. Senior debt holders and depositors were protected. Spain’s Fund for Orderly Bank Restructuring executed the transfer to Santander, and the bank opened for business the following morning. Santander raised EUR 7 billion in new equity from private investors in July 2017. The SRB determined Popular’s resolution was in the public interest given its significant lending to small and medium-sized enterprises, payments functions, and market share in Spain and Portugal. The resolution of Popular was the first that SRB executed under the Single Resolution Mechanism and the first-time authorities wrote down CoCos. European courts ultimately dismissed litigation filed by creditors. Policymakers and the press generally considered the privately funded resolution a success, given the SRB’s rapid execution without resorting to official support, Popular’s uninterrupted operations, and the lack of contagion.