Transparency is coming to a bank resolution near you
GlobalCapital, is part of the Delinian Group, DELINIAN (GLOBALCAPITAL) LIMITED, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 15236213
Copyright © DELINIAN (GLOBALCAPITAL) LIMITED and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement
People and MarketsCommentGC View

Transparency is coming to a bank resolution near you

Magnifying_Glass_focus_Fotolia_230x150

A recent court ruling in Spain could help to set a precedent for what information must be made public when a bank fails, as claims about the need for confidentiality start to wear thin.

Banco Popular is the only financial institution to have been wrung out through the EU’s bank recovery and resolution directive (BRRD), after failing in June 2017.

16 months on and those who suffered most from the Spanish bank’s collapse are still without a complete picture of what actually happened.

The main reason that many details are still lacking is that there is a debate raging about what information should become made available after a bank is put through a resolution.

An important development in the Spanish courts last week suggests that the pendulum may finally be swinging towards fuller disclosure, which this newspaper, naturally, supports.

The Spanish National Court ruled in a criminal investigation into Banco Popular that the European Central Bank should not be allowed conceal documents on the grounds of confidentiality.

The court had told participants in the case to hand over any information they had in relation to the investigation, which is looking into whether there was any wrongdoing around the time of the Spanish bank’s collapse last summer.

But the ECB argued that the court should not share its materials with the other parties, because of the risk of exposing sensitive details about its operations as a supervisor.

Fernando Andreu, the presiding judge, threw out these claims, saying that the ECB’s documents were “useful” and would not prejudice the criminal investigation in progress.

It is not the first time that European institutions involved in monitoring Banco Popular have tried unsuccessfully to avoid sharing their information on the grounds of confidentiality.

The Single Resolution Board, which wrote off Popular’s capital and pushed through its sale it Santander, has been working according to what it refers to as a “general presumption of non-accessibility”.

It has published a number of files relating to its June 2017 decision, but large parts of these documents have been redacted where the resolution authority thinks they “pose a threat” to protected interests or financial stability.

On two separate occasions, the SRB has been ordered by its own appeal panel to be more transparent about the valuation of Popular’s balance sheet — with the SRB still yet to respond to the second set of instructions.

Slowly but surely, the lines are being drawn around what should and shouldn’t be made public information after a bank fails.

Importantly, the bodies responsible for reviewing these decisions have in many areas started pushing back against claims that secrecy and confidentiality should trump transparency.

These battles are worthy of note because they will set a precedent for what happens the next time that a bank collapses in Europe.

Whatever anyone makes of the chances of success for the hundreds of outstanding law suits contesting the Banco Popular resolution decision, the patterns they are starting to form will be extremely important for establishing the rights of the public in countless cases to come.

Gift this article