The Anti-Corruption Prosecutor’s Office has requested the provisional closure of the case investigating the capital increase carried out by Banco Popular in 2012, considering that the information provided by the bank already addressed its “complicated situation” and that the operation benefited those who took part in it.
In her brief, addressed to National Court judge Santiago Pedraz, the prosecutor in the case, Belén Dorremochea, refers to the report by the Bank of Spain’s experts, and frames the capital increase in the context of a “serious global economic crisis” that forced Spain to implement “strict measures in the banking sector”.
In the case of Banco Popular, he explains, it was calculated that they had to obtain 3,223 million euros of additional equity, so the bank decided to meet the requirements “through its own means without resorting to public aid”.
It was then that it opted for a capital increase which “was carried out in accordance with current legislation and was subject to the relevant controls”, to the extent that the decision was taken at an Extraordinary General Meeting, and “several meetings of the Executive Committee and the Board of Directors” were held.
Banco Popular presented the ‘legally required’ information, prosecutors say
In them, the different options for increasing the provisions were discussed, as well as the advantages and disadvantages, continues the document, which stresses that the bank presented the “legally required” information on its situation “so that potential buyers could have a true picture of it”.
In this regard, it stresses that the 2012 accounts that formed part of the documentation provided recognised losses of 2.3 billion euros and reclassifications to doubtful assets of 9.436 billion gross (5.701 billion net of recoveries).
On this point, Anticorrupción cites the expert opinion of the experts from the Bank of Spain provided to the case, who recalled that this was a “substantially higher” figure than in previous years, which led the bank to raise its NPL ratio from 5.99 % to 8.98 %.
Despite the report, the experts continued, the bank “did not reclassify as doubtful all the outstanding amounts identified by the inspection, but only half, reclassifying the other half in 2013, specifically 3.92 billion euros”.
There was no deception
However, the Public Prosecutor’s Office understands that this omission is not “sufficiently relevant” to worsen the bank’s image, and adds that it cannot be proven that the failure to include these reclassifications in 2012 “was done with the intention of deceiving potential buyers”.
Even more so, it continues, bearing in mind that the information provided already addressed the “complicated situation of the bank, its losses and the significant reclassifications made”, and that there was a report from an independent auditor, Deloitte, which indicated that the provisions to be made in 2012 were lower than those indicated by the Bank of Spain’s inspection.
Lastly, Anticorrupción believes that the transaction was ultimately “beneficial” for those who participated, as there were “very early” significant revaluations of the shares, even above the market.
Therefore, it believes, after analysing the case “with special attention to the report issued by the Bank of Spain inspectors”, that the alleged facts do not meet the requirements established by the Criminal Code for the alleged offences of misrepresentation of financial information in issue prospectuses by the directors of a company.
Ron has already testified for these facts
A year ago, the former chairman of Banco Popular, Ángel Ron, testified on these accusations at the Audiencia Nacional, where he defended that the supervisory and regulatory bodies (the Bank of Spain and the ECB) endorsed the capital increase, which complied with all the requirements.
In parallel to the case being investigated by Judge Pedraz, the head of central court number 4, José Luis Calama, has been investigating since 2017 the last two management teams of Popular, led by Ron and his successor at the head of the bank Emilio Saracho, for alleged corporate offences.
The judge then opened two separate pieces, one investigating Ron’s team for the 2016 capital increase, and a second on the 108 days of Saracho’s mandate, which focuses on a possible crime of market manipulation with false news to lower the value of the share price.