Upfront
OPINION INTERNATIONAL FINANCING REVIEWContrary to Popular belief
T
wo years on from the collapse of Spain’s Banco Popular,
the bank’s sorry story appears to be coming to a
conclusion. Within weeks, Santander, which bought the
bank for just €1, expects to rebrand the last of the branches it
acquired after many months integrating Popular’s €140bn of
ASSETS û ûOFlCESûANDû ûEMPLOYEES
But the real story of the bank’s collapse is yet to be told. In
Madrid, at the European Court of Justice, in New York and
elsewhere, more than 100 legal cases are just beginning.
Former shareholders and bondholders, who lost billions of
euros, are seeking answers.
While disgruntled investors are leading those challenges,
what is at stake is much bigger. The outcome of the cases
could determine the future of European rules, hammered
out over years in the aftermath of the 2008 crisis, that were
supposed to create an orderly process for dealing with failing
banks.
What’s clear is that Spanish and European banking
AUTHORITIES ûUNDERûSIGNIlCANTûPRESSUREûASû0OPULARûWOBBLED û
having to enact rules that had no precedent and with the
STABILITYûOFûTHEûlNANCIALûSYSTEMûINûTHEûBALANCE ûMADEûSOMEû
hasty decisions.
That was inevitable. But it is now absolutely essential that
lessons are learned and that means that the authorities have
to be open about what happened and provide access to key
lLESûnûEVENûIFûTHATûMEANSûGIVINGûAMMUNITIONûTOûTHEûLAWYERSû
of those who believe they were wronged.
The Popular case has created a huge amount of uncertainty
in the markets for bank capital, and that uncertainty may
even be making it substantially more expensive for healthy
banks to raise cash. Investors need to know how they will be
treated.
It isn’t just investors that need to have certainty. The
current rules were meant to stop taxpayers from having to
bail out errant banks. If those rules (or the institutions
implementing them) prove inadequate, then taxpayers may
once again end up footing the bill.Better connections
T
he case for Huatai Securities’ London listing is tenuous at
best, but stronger connections between the UK and
China will be useful in the future.
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POISEDûTOûBECOMEûTHEûlRSTû#HINESEûISSUERûTOûSELLûGLOBALû
depositary receipts under a new tie-up between stock
exchanges in Shanghai and London.
Launched last Wednesday, the offering will see Huatai
quoted in London by mid-June, putting the Shanghai-London
Stock Connect scheme back on track after an unexpected six-
month delay.
The brokerage had been forced to shelve plans for the deal
in early December, blaming technical reasons. Last month’s
CLARIlCATIONûFROMû#HINASûFOREIGNûEXCHANGEûREGULATORûOFûTHEû
RULESûAROUNDû'$2ûANDû#$2ûLISTINGSûCLEAREDûTHEûlNALûHURDLE
Huatai doubtless has its own strategic reasons for wanting
TOûBEûlRST ûBUTûMOSTûOFûTHEûINITIALûINVESTORSûINûTHEûDEALûAREûSAIDû
to be from Asia, so will already have access to Huatai through
its existing listings in Shanghai and Hong Kong, meaning a
UK listing will add little to its shareholder register. Asia-based
investors are also unlikely to trade the stock in UK hours, so
liquidity will be thin, and follow-on issuance tricky.
4HEûSIGNIlCANCEûOFûTHEûDEALûISûTHATûITûWILLûINAUGURATEûTHEû
London Connect scheme ahead of more interesting deals in
THEûFUTUREûnûBUTûINûTHEûOPPOSITEûDIRECTION
There are much more compelling arguments for a London-
listed company with a sizeable Chinese business to sell
depositary receipts in China, where the London Connect link
WOULDûALLOWûACCESSûTOûAûVASTûNEWûINVESTORûBASEûFORûTHEûlRSTû
time.
Among the biggest London-listed stocks, HSBC is the
obvious candidate, but the previously untapped Chinese
capital market should also be of interest to the likes of drinks
group Diageo, designer label Burberry or InterContinental
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3ECONDûnûORûEVENûTHIRDûnûLISTINGSûDOûNOTûALWAYSûLIVEûUPûTOû
EXPECTATIONS ûASûLIQUIDITYûTENDSûTOûmOWûQUICKLYûBACKûTOûTHEû
dominant exchange in today’s globalised world. But because
it is locked up behind capital controls and other restrictions,
China’s enormous investor base may be an entirely different
proposition.Former shareholders and
bondholders, who lost billions
of euros, are seeking answers