by Mark O’Byrne, Gold Core:

Banco Popular’s shares crashed another 17 per cent yesterday to record lows amid concerns the Spanish bank may have to be “wound down” and could see bail-ins of investors and depositors.

There are increasing fears that there is no buyer for the bank and this saw its share price dropped to €0.34 (34 euro cents). The bank’s stocks had already fallen nearly 50 per cent in the last week and is down 63% this year.

Shares also fell sharply last Friday as hoped for buyers dropped out of the Banco Popular auction process. Final bids are due this week and international publications have reported that Spanish banking rivals BBVA and Bankia had been interested.

Analysts estimate that the bank needs at least €4 billion more capital and it is burdened with a likely insurmountable €37 billion pile of toxic property loans and assets.

Banco Popular is Spain’s sixth-largest bank and there is a debate as to whether it is systematically important. It likely is as it has the largest amount of small business customers in Spain. These companies are the backbone of the Spanish economy and now vulnerable to having their deposits over €100,000 confiscated in bank bail-ins.

The bank is also used by many of Spain’s wealthy catholic individuals and institutions including one of Spain’s most influential institutions – Opus Dei.

The badly debt laden bank may have to liquidate as neither a buyer nor a new capital raise appear likely. It now looks possible that Spain may be the first nation to have the EU’s new BRRD “bail-in” insolvency directive involving bank “resolution” imposed on it.

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