European authorities stepped in to avert a collapse of Spain"s Banco Popular (POP.MC) following a run on the bank, orchestrating a last-minute rescue on Wednesday by Santander (SAN.MC), the country"s biggest lender.
Owners of Popular bonds faces losses of some 2 billion euros, while Santander will ask its shareholders for around 7 billion euros ($7.9 billion) of capital to absorb Spain"s sixth biggest bank.
Popular"s rescue was unveiled as the European Central Bank announced the lender was set to be wound down, echoing a banking crash some five years ago that cost Spain 40 billion euros.
Santander"s takeover of the bank, which has been weighed down by risky property loans, for a nominal one euro marks the first use of a stricter European Union regime to deal with failing banks adopted after the financial crisis.
The sale was organized in less than 24 hours, and followed a recent acceleration in the withdrawal of deposits, which two people with knowledge of the matter said had in recent weeks hit 18 billion euros, equivalent to almost one quarter of the total.
A final decision to sell Popular was made at about 0430 GMT on Wednesday, Dominique Laboureix, a member of the Single Resolution Board, told a news conference in Brussels. The SRB is the agency set up by the EU to wind down stricken banks.
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