LONDON, Nov 30 (IFR) - The law firm acting for a group of junior bondholders in Banco Popular, who saw their instruments effectively wiped out on June 7 when the Spanish lender was resolved, has criticised the likely reappointment of Elke Konig as chair of the Single Resolution Board.
On Monday the European Parliamentary Committee on Economic and Monetary Affairs is scheduled to meet to discuss Konig’s reappointment as her initial three-year term comes to an end. However, law firm Quinn Emanuel Urquhart & Sullivan has said it understands Konig is the only candidate.
A letter to Roberto Gualtieri MEP, chair of the committee, which is also copied to the European Commission’s vice president Valdis Dombrovskis and commissioner for economic and financial affairs Pierre Moscovici, says that alternative candidates should be considered for the role.
The SRB was responsible, alongside the EC, European Central Bank and the local Spanish banking authorities, in deciding on the resolution of Popular. This saw the junior debt exchanged for equity before the institution was sold to Santander for a token €1.
The group of bondholders, advised by Quinn Emanuel, has filed a complaint at the European Union general court against the SRB seeking to annul its decision. It estimates that 95 separate legal actions have now been filed by aggrieved parties in Popular.
One of the lawsuit's main complaints is that Konig said on May 23 that the SRB was watching Banco Popular. A week later an unnamed SRB source said Konig had issued an “early warning” against the institution. Quinn Emanuel says this was a breach of professional secrecy and helped sparked a run on the bank.
“We believe the committee should be deeply concerned about the legality of the current appointment process as well as of the prospect of the (apparent automatic) re-appointment of the current chair of the SRB, whose stewardship of that agency and ultimate responsibility for the resolution decision must give rise to serious scrutiny,” said Quinn Emanuel in the letter.
The bondholders are also unhappy that the full valuation report by Deloitte, which justified the SRB’s decision, has not yet been made public. Deloitte has also been commissioned to do an additional report for the SRB reviewing the valuation.
Last week, the SRB appeal panel told the SRB to release more details of the initial report, but most of the details, such as documents detailing the competitive process which saw Santander buy the bank, are still to remain private. The SRB said it was considering how to respond to the decision.
Quinn Emanuel also said the litigation “raise(s) the prospect of substantial liability for the SRB”.
“Such substantial liability for a newly created EU agency, exercising its powers for the first time, surely raises material questions about whether its chair should seek, or be permitted, to continue in the post,” it wrote.
“The reappointment ... risks undermining the long-term credibility and viability of that agency and the EU’s resolution regime as a whole.”
The bondholders, which include Algebris, Anchorage and Ronit Capital, said the committee should consider alternative candidates and the EC should have offered at least another choice for the committee to consider.
The SRB declined to comment. (Reporting by Christopher Spink)