By Christopher Spink
LONDON, Dec 21 (IFR) - Former junior bondholders of SNS Reaal, the Dutch bank nationalised in February 2013, are looking forward to a more prosperous 2019 after the country's finance minister Wopke Hoekstra said they should be compensated.
When the government stepped in nearly six years ago, senior bondholders of the lender were left untouched but more junior creditors were completely wiped out. The latter have subsequently been challenging the decision in a lengthy process.
An independent report has said the junior bondholders could have received over €800m if the bank had been put into an insolvency process and run down.
The resolution of SNS Reaal was the first in Europe to use new bank legislation introduced in European countries after the financial crisis, accepting that creditors should bear losses before taxpayer money is used to bail out banks.
That "bail-in" principle was behind the European Union's subsequent Banking Recovery and Resolution Directive, which came into full force at the start of 2016. Since then Spain'sBanco Popular has been resolved along BRRD guidelines.
As with SNS Reaal, its shareholders and junior bondholders were effectively wiped out before the bank was sold to compatriot Santander. Investors have since challenged the decisions taken, which were based on valuations saying they would not have been better off without the resolution action.
The Dutch government's acceptance that SNS Reaal junior bondholders should be compensated has given hope for Popular's investors too, who also claim they would have been better off without the resolution actions.
"There are striking parallels between SNS Reaal and Banco Popular," said Richard East, partner at law firm Quinn Emanuel, which represents a group of Popular bondholders.
"In both cases, bondholders were told by the central authorities that their assets had zero value in a liquidation scenario and that they would get no compensation.
"The ruling in the Netherlands shows that it's important that the valuations which are commissioned by the central authorities are challenged and subject to critical analysis. We hope that the EU General Court will take note of what happened in the Dutch case."