Banco Santander has announced it will offer perpetual bonds to those retail clients who held shares and subordinated debt from Banco Popular, and were hit by the bank’s failure last month.
Through the initiative, the Spanish bank will compensate those customers who lost their money with up to €980m of perpetual bonds. Those bonds will pay 1% interest and will be redeemable after seven years, as long as the European Central Bank gives its approval.
Santander estimated the scheme should not have a higher cost to €680m, and also highlighted its plan would have no impact on the group’s earnings.
In particular, the compensation will be given to those retail clients who acquired shares from 26 May to 21 June 2016, when the bank received its last capital increase of around €2.5bn. It will also include those customers who bought subordinated debt issued in 2011 by Banco Popular. In both cases, it applies to those who had their investments deposited in any of the retail networks of Santander or Popular when the resolution took place.
In return, clients might waive their right to take legal action against the entity as well as to make the commitment of keeping a similar commercial relationship with Santander, to the one they had with Banco Popular.
Santander echoed the decision has arisen from the exceptional circumstances and also with the aim to strengthen customer loyalty.
On 7 June, Santander acquired Banco Popular paying a notional consideration of one euro after European authorities intervened to prevent the bank’s collapse.