This week, on June 7, it was announced that the large Spanish bank Banco Popular was sold for the symbolic amount of € 1 to Spain's largest bank, Banco Santander. This € 1 was not the price per share, but the total acquisition price!
Back in the summer of 2016, when this distressing bank was tested in the stress test for European Banks, the bank passed the test without any problems. Did this stress test have any value?
At the top of the Spanish property market, in 2006, the Spanish bank Banco Populare had a capital buffer of 2%. This means that of all savings held at that time, 98% was invested in loans. Today we know most of these loans were of dubious quality. The actual value of these loans is totally unclear.
I find it bizarre that the mainstream media and the government of Spain pretend that this acquisition is a perfect solution to the problems. I think you also understand that the problems of these bad loans have not been solved by this acquisition at all. They are only moved to the balance of another bank. Bad loans remain bad loans.
This acquisition is, in my opinion, a clear warning that a new European banking crisis might return in the near future. Spain is not the only European country in which the banking sector is in trouble. Take Italy for example. In Italy they also tried to merge bad banks with other banks and to sell dubious loans to other banks. Without success. The Italian government can not help because they themselves are virtually bankrupt. For a bank in trouble, only one option remains, namely a bail-in instead of a bail-out.
Please ensure that you do some research into the bank where you have your savings. This is more important than ever before. Do not hold all your funds at one bank, but spread your risk. Do not forget that saving at a bank is not without risk!
