10 YEARS OF FROB 2009 - 2019 A DECADE FOR FINANCIAL STABILITY 10 YEARS OF FROB 2009 - 2019 A DECADE FOR FINANCIAL STABILITY Reproduction for educational or non-profit purposes is permitted provided the source is cited. FROB, Madrid, 2019. 10 YEARS OF FROB 2009-2019 TABLE OF CONTENTS MESSAGE FROM THE CHAIR ................................................................................................................................. 11 SECTION I: DEVELOPMENT OF THE ROLE OF FROB IN THE BANKING CRISIS ..................................................... 13 CHAPTER I (2009-2011) THE ORIGINS OF THE CRISIS, FROB AND THE NEW BANK RESOLUTION REGIME ....................................................... 14 Period 2009-2010. FROB I. Supporting the integration of savings banks .................................................................... 14 National and international context ............................................................................................................................... 14 Legal and institutional framework ................................................................................................................................. 20 The model for orderly bank restructuring and the creation of FROB ................................................................... 20 Restructuring processes ................................................................................................................................................... 20 Integration processes ........................................................................................................................................................ 21 Interventions under FROB I ............................................................................................................................................... 23 Period 2011. FROB II. First round of recapitalisations and support in restructuring of savings banks into commercial banks ................................................................................ 25 National and international context ................................................................................................................................ 25 Legal and institutional framework ................................................................................................................................. 27 Royal Decree Law 11/2010. Restructuring of savings banks into commercial banks ......................................... 27 Royal Decree Law 2/2011. The first public recapitalisations ..................................................................................... 28 Interventions under FROB II .............................................................................................................................................. 30 CAM ......................................................................................................................................................................................... 32 Catalunya Caixa ................................................................................................................................................................... 32 Novacaixagalicia .................................................................................................................................................................. 33 Unnim .................................................................................................................................................................................... 33 Banco de Valencia ............................................................................................................................................................... 33 CHAPTER II (2012-2015) SYSTEMIC BANKING CRISIS, STABILISATION AND ORIGINS OF THE BANKING UNION ............................................ 34 National and international context .......................................................................................................................................... 34 Legal and institutional framework .......................................................................................................................................... 38 From the MOU to the new bank resolution regime: Law 9/2012 .................................................................................. 38 Early intervention ....................................................................................................................................................................... 38 Restructuring ............................................................................................................................................................................... 39 Resolution .................................................................................................................................................................................... 39 Financial support instruments ................................................................................................................................................ 40 Asset management company .................................................................................................................................................. 41 Subordinated Liabilities Exercises for hybrid instruments and subordinated debt .................................................. 41 Legal status of FROB .................................................................................................................................................................. 45 Interventions under FROB III ...................................................................................................................................................... 46 Conversion of convertible preferred shares and FROB III advance for the BFA-Bankia Group ............................. 46 General aspects of FROB III ..................................................................................................................................................... 46 Restructuring / resolution plans ............................................................................................................................................ 47 3 CONTENTS Conclusion of the Assistance Programme and surveillance missions .......................................................................... 52 Monitoring and completion of the plans .............................................................................................................................. 52 Other actions prior to the new European resolution framework .................................................................................. 53 Return of aid granted through CoCos ................................................................................................................................... 54 Recovery of aid granted through shares .............................................................................................................................. 54 Divestment of FROB´s share in Bankia ................................................................................................................................ 55 Legal proceedings ............................................................................................................................................................................. 57 Criminal jurisdiction ................................................................................................................................................................... 57 Appeals against the measures taken by FROB ................................................................................................................... 58 CHAPTER III (2015-2019) THE ESTABLISHMENT OF THE BANKING UNION ........................................................................................................................ 59 National and international context ......................................................................................................................................... 59 Legal and institutional framework .......................................................................................................................................... 60 Single Resolution Mechanism ................................................................................................................................................. 60 Single Resolution Board (SRB) ................................................................................................................................................. 62 FROB as Executive Resolution Authority .............................................................................................................................. 64 Legal framework: Law 11/2015 ................................................................................................................................................ 64 Single Resolution Mechanism Interventions ....................................................................................................................... 70 First European bank resolution. Banco Popular ................................................................................................................. 70 SECTION II: FROB INTERVENTIONS BANK BY BANK ...................................................................................................... 73 BFA-Bankia .........................................................................................................................................................................................