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In a dramatic ruling that rocked the banking world, the EU General Court upheld a contentious decision by the bloc's bank resolution authority. This ruling has left shareholders and creditors of the Spanish giant Banco Popular empty-handed, as their compensation claims were denied. The court found no glaring oversights in the appointment of a Deloitte subsidiary to perform a critical hypothetical valuation of Banco Popular's assets.

Bank Investors Rightly Denied Compensation : The Intricacies of the Valuation

The Single Resolution Board, tasked with assessing Banco Popular Español SA's situation, determined that the bank's investors would not have fared better had the bank been left to liquidate. This decision was grounded in a valuation conducted by an independent expert using an appropriate methodology. Deloitte Réviseurs d'Entreprises, at the center of this whirlwind, was charged with estimating potential losses for the investors.

Controversy and Conflict of Interest Allegations

The ruling comes amid swirling allegations of partiality. Investors, including the Mexican billionaire Antonio del Valle Ruiz, raised doubts about Deloitte's impartiality. They pointed to Deloitte's past as Banco Popular's auditor and adviser, questioning its ability to objectively evaluate its own previous work. However, the General Court dismissed these claims, citing no substantial error in Deloitte's appointment.

Bank Investors Rightly Denied Compensation : Legal Reasoning and Investor Disappointment

Judge Marc van der Woude highlighted that the plaintiffs failed to demonstrate how past interactions with Banco Popular could bias Deloitte's valuation. He also noted that investors couldn't prove a significant shared interest or conflict with Banco Popular. The EU court concluded that the valuation was accurate, and investors did not suffer additional losses due to the bank's resolution process.

Shareholders' Rights and the Valuation Process

Additionally, the court addressed claims that Deloitte neglected shareholders' and creditors' rights to be heard during the valuation. The court found these allegations baseless, confirming that they had, in fact, been given a chance to express their views.

Bank Investors Rightly Denied Compensation: Financial Stability and Legal Confirmations

Dominique Laboureix, chair of the resolution board, expressed satisfaction with the ruling, emphasizing that the resolution shielded financial stability and Spanish taxpayers. This verdict aligns with a previous decision by an international tribunal, which also ruled against the investors, stating that Spain did not violate its investment treaty with Mexico in the 2017 relief scheme.

The Fate of Banco Popular

The saga of Banco Popular's resolution has been fraught with legal challenges. In June 2022, the General Court rejected a series of "test cases," affirming no viable alternative to prevent the bank's failure. This latest ruling not only solidifies the stance of the Single Resolution Board but also shapes the future discourse on bank resolution and investor compensation in the EU.