Court of Justice of the European Communities (including Court of First Instance Decisions)

JUDGMENT OF THE GENERAL COURT (Third Chamber, Extended Composition)

22 November 2023 (*)

(Economic and monetary union – Banking union – Single resolution mechanism for credit institutions and certain investment firms (SRM) – Resolution of Banco Popular Español – Decision of the SRB refusing to grant compensation to the shareholders and creditors affected by the resolution actions – Valuation of difference in treatment – Independence of the valuer)

In Case T‑330/20,

ACMO Sàrl, established in Luxembourg (Luxembourg), and the other applicants whose names appear in the annex, (1) represented by T. Soames and I. Prodromou-Stamoudi, lawyers, and R. East, Solicitor,

applicants,

v

Single Resolution Board (SRB), represented by M. Fernández Rupérez, A. Lapresta Bienz, L. Forestier and J. Rius Riu, acting as Agents, and by H.‑G. Kamann, F. Louis, V. Del Pozo Espinosa de los Monteros and L. Hesse, lawyers,

defendant,

supported by

Kingdom of Spain, represented by A. Gavela Llopis, acting as Agent,

intervener,

THE GENERAL COURT (Third Chamber, Extended Composition),

composed, at the time of the deliberations, of M. van der Woude, President, G. De Baere (Rapporteur), G. Steinfatt, K. Kecsmár, and S. Kingston, Judges,

Registrar: P. Nuñez Ruiz, Administrator,

having regard to the written part of the procedure,

having regard to the letter, lodged at the Court Registry on 23 January 2023, by which PIMCO Dynamic Income Fund informed the Court of its status as universal successor in title to PIMCO Income Opportunity Fund and PIMCO Dynamic Credit and Mortgage Income Fund,

having regard to the letter, lodged at the Court Registry on 13 November 2023, by which Bybrook Capital Badminton Fund LP requested to be substituted for Cairn Global Funds PLC and Cairn Special Opportunities Credit Master Fund Limited as applicant in the present case, the other parties having been given an opportunity to submit their observations,

having regard to the letter, lodged at the Court Registry on 16 November 2023, by which PIMCO Global Cross-asset Opportunities Master Fund LDC requested to be substituted for PHFS Series SPC – PHSF VII SP as applicant in the present case, the other parties having been given an opportunity to submit their observations,

further to the hearing on 9 September 2022,

gives the following

Judgment

1        By their action under Article 263 TFEU, the applicants, ACMO Sàrl and the other legal persons whose names are listed in the annex, seek the annulment of Decision SRB/EES/2020/52 of the Single Resolution Board (SRB) of 17 March 2020 determining whether compensation needs to be granted to the shareholders and creditors in respect of which the resolution actions concerning Banco Popular Español, SA have been effected (‘the contested decision’).

I.      Background to the dispute

2        The applicants are investment funds which, before the adoption of a resolution scheme in respect of Banco Popular Español, SA (‘Banco Popular’), owned additional Tier 1 capital instruments and Tier 2 capital instruments issued by Banco Popular, some of which through sub-funds, with the exception of one of the applicants, which is the successor to the rights of an entity which held Banco Popular bonds.

3        On 7 June 2017, the executive session of the SRB adopted Decision SRB/EES/2017/08 concerning the adoption of a resolution scheme in respect of Banco Popular (‘the resolution scheme’), on the basis of Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ 2014 L 225, p. 1).

4        Prior to the adoption of the resolution scheme, on 23 May 2017, following a procurement procedure, the SRB engaged Deloitte Réviseurs d’Entreprises as a valuer (‘the Valuer’) in connection with the preparation of a potential resolution of Banco Popular. The Valuer was awarded a specific contract following a competitive selection procedure under a multiple framework contract for services that the SRB had signed with six firms, including the Valuer. In accordance with the specific contract, the assignment of the Valuer included carrying out a valuation of Banco Popular prior to a potential resolution as well as the valuation of difference in treatment provided for in Article 20(16) to (18) of Regulation No 806/2014, after a potential resolution.

5        On 5 June 2017, the SRB adopted a first valuation, pursuant to Article 20(5)(a) of Regulation No 806/2014, which had the objective of informing the determination of whether the conditions for resolution, as defined in Article 18(1) of Regulation No 806/2014, were met.

6        On 6 June 2017, the Valuer submitted to the SRB a second valuation (‘Valuation 2’), drawn up pursuant to Article 20(10) of Regulation No 806/2014. The purpose of Valuation 2 was to estimate the value of Banco Popular’s assets and liabilities, to provide an evaluation of the treatment that shareholders and creditors would have received if Banco Popular had entered into normal insolvency proceedings, and to inform the decision to be taken on the shares and instruments of ownership to be transferred and the SRB’s understanding of what constitutes commercial terms for the purposes of the sale of business tool.

7        In the resolution scheme, the SRB, considering that the conditions laid down in Article 18(1) of Regulation No 806/2014 were met, decided to place Banco Popular under resolution. The SRB decided to write down and convert Banco Popular’s capital instruments pursuant to Article 21 of Regulation No 806/2014 and to apply the sale of business tool pursuant to Article 24 of Regulation No 806/2014 by transferring shares to a purchaser.

8        The SRB decided to cancel 100% of the shares of Banco Popular, to convert and write down all the principal amount of the additional Tier 1 capital instruments issued by Banco Popular and to convert all the principal amount of the Tier 2 capital instruments issued by Banco Popular into ‘New Shares II’. Following an open and transparent sale process carried out by the Spanish resolution authority, the Fondo de Reestructuración Ordenada Bancaria (FROB) (Fund for Orderly Bank Restructuring, Spain), the ‘New Shares II’ were transferred to Banco Santander SA, in consideration of payment of a purchase price of EUR 1. Subsequently, on 28 September 2018, in connection with a merger by acquisition, Banco Santander became the universal successor of Banco Popular.

9        On 7 June 2017, the European Commission adopted Decision (EU) 2017/1246 endorsing the resolution scheme for Banco Popular (OJ 2017 L 178, p. 15).

10      On 14 June 2018, the Valuer communicated to the SRB the valuation of difference in treatment, provided for in Article 20(16) to (18) of Regulation No 806/2014, carried out in order to determine whether the shareholders and creditors would have received better treatment if the institution under resolution had entered into normal insolvency proceedings (‘Valuation 3’). On 31 July 2018, the Valuer sent to the SRB an addendum to that valuation, correcting some formal errors.

11      In Valuation 3, the Valuer estimated the treatment which the affected shareholders and creditors would have received if Banco Popular had been subject to normal insolvency proceedings at the time when the resolution scheme was adopted. It carried out that assessment in the context of a liquidation scenario by applying Ley 22/2003, Concursal (Law 22/2003 on insolvency), of 9 July 2003 (BOE No 164, of 10 July 2003, p. 26905).

12      The Valuer stated that the hypothetical liquidation scenario had been prepared on the basis of the unaudited financial information of 6 June 2017 or, if that information was unavailable, on the information of 31 May 2017. It maintained that the opening of normal insolvency proceedings for Banco Popular on 7 June 2017 would have resulted in an unplanned liquidation. In order to assess the realisation values of the assets, the Valuer took into account three alternative liquidation time scenarios, of 18 months, three years and seven years, each including a best-case scenario and a worst-case scenario. The Valuer concluded that in each of those scenarios, for the affected shareholders and subordinated creditors, no recovery would have been expected under normal insolvency proceedings and that there was therefore no difference in treatment by comparison with the treatment resulting from the resolution action.

13      On 6 August 2018, the SRB published on its website its Notice of 2 August 2018 regarding its preliminary decision on whether compensation needs to be granted to the shareholders and creditors in respect of which the resolution actions concerning Banco Popular have been effected and the launching of the right to be heard process (SRB/EES/2018/132) (‘the preliminary decision’), and a non-confidential version of Valuation 3. On 7 August 2018, an announcement with regard to the Notice of the SRB was published in the Official Journal of the European Union (OJ 2018 C 277 I, p. 1).

14      In the preliminary decision, the SRB stated that it followed from Valuation 3 that there was no difference between the actual treatment of the shareholders and creditors affected as a result of the resolution of Banco Popular and the treatment that they would have received if Banco Popular had been subject to normal insolvency proceedings at the resolution date. The SRB decided, on a preliminary basis, that it was not required to pay compensation to the affected shareholders and creditors pursuant to Article 76(1)(e) of Regulation No 806/2014.

15      In order for it to be able to take a final decision on whether the affected shareholders and creditors should be granted compensation, the SRB invited them to express their interest in exercising their right to be heard with respect to the preliminary decision, in accordance with Article 41(2)(a) of the Charter of Fundamental Rights of the European Union.

16      The SRB stated that the right to be heard process would be conducted in two phases.

17      In the first phase, the registration phase, the affected shareholders and creditors were invited to express their interest in exercising their right to be heard, by means of a dedicated online registration form open until 14 September 2018. The SRB then had to verify whether each party that had expressed an interest qualified as an affected shareholder or creditor. The affected shareholders and creditors that had expressed an interest were to provide proof of their identity and proof that they owned, on 6 June 2017, one or more of the capital instruments of Banco Popular that were written down or converted and transferred in the context of the resolution.

18      In a second phase, the consultation phase, the affected shareholders and creditors who had expressed their interest in exercising their right to be heard during the first phase and whose status had been verified by the SRB were able to submit their comments on the preliminary decision, to which Valuation 3 was annexed.

19      On 16 October 2018, the SRB announced that the eligible shareholders and creditors would be invited to submit their comments on the preliminary decision in writing from 6 November 2018. On 6 November 2018, the SRB sent the eligible shareholders and creditors a unique personal link giving online access to a form enabling them to submit, until 26 November 2018, comments on the preliminary decision and on the non-confidential version of Valuation 3.

20      At the end of the consultation phase, the SRB examined the relevant comments made by the affected shareholders and creditors in relation to the preliminary decision. It asked the Valuer to provide it with a document containing its assessment of the relevant comments relating to Valuation 3 and to examine whether Valuation 3 was still valid in the light of those comments.

21      On 18 December 2019, the Valuer provided the SRB with its assessment, entitled ‘Clarification Document of valuation of difference in treatment’ (‘the Clarification Document’). In the Clarification Document, the Valuer confirmed that the strategy and various hypothetical liquidation scenarios detailed in Valuation 3, as well as the methodologies followed and analyses used, remained valid.

22      On 17 March 2020, the SRB adopted the contested decision. A communication concerning that decision was published on 20 March 2020 in the Official Journal of the European Union (OJ 2020 C 91, p. 2).

23      In the contested decision, the SRB considered that the Valuer was independent in accordance with the requirements of Article 20(1) of Regulation No 806/2014 and Chapter IV of Commission Delegated Regulation (EU) 2016/1075 of 23 March 2016 supplementing Directive 2014/59/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the content of recovery plans, resolution plans and group resolution plans, the minimum criteria that the competent authority is to assess as regards recovery plans and group recovery plans, the conditions for group financial support, the requirements for independent valuers, the contractual recognition of write-down and conversion powers, the procedures and contents of notification requirements and of notice of suspension and the operational functioning of the resolution colleges (OJ 2016 L 184, p. 1).

24      In Section 5 of the contested decision, entitled ‘Valuation 3 Report’, the SRB summarised the content of Valuation 3 and found that it was in line with the applicable legal framework and was sufficiently reasoned and comprehensive to form the basis for a decision taken under Article 76(1)(e) of Regulation No 806/2014. It considered that Valuation 3 assessed the necessary elements set out in Article 20(17) of Regulation No 806/2014 and in Commission Delegated Regulation (EU) 2018/344 of 14 November 2017 supplementing Directive 2014/59/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the criteria relating to the methodologies for valuation of difference in treatment in resolution (OJ 2018 L 67, p. 3).

25      In Section 6 of the contested decision, the SRB presented the ‘comments received from eligible affected shareholders and creditors and their assessment’. In Section 6.1 of the contested decision, entitled ‘Relevance assessment’, the SRB explained that some of those comments, which related neither to its preliminary decision nor to Valuation 3, were not relevant since they fell outside the right to be heard process. In Section 6.2 of the contested decision, it carried out an ‘assessment of the relevant comments’ received from the affected shareholders and creditors in relation to the independence of the Valuer and to the content of Valuation 3, grouped by theme.

26      The SRB concluded that it followed from Valuation 3, read in conjunction with the Clarification Document and the conclusions set out in Section 6.2 of the contested decision, that there was no difference between the actual treatment of the affected shareholders and creditors and the treatment that they would have received had Banco Popular been wound up under normal insolvency proceedings at the resolution date.

27      Consequently, the SRB decided:

‘Article 1

Valuation

For the purposes of determining whether compensation needs to be granted to the shareholders and creditors in respect of which the resolution actions concerning Banco Popular … have been effected, the valuation of difference in treatment in resolution pursuant to Article 20(16) of Regulation … No 806/2014 shall be as set out in Annex I to this Decision, in conjunction with [the] clarification document as set out in Annex II to this Decision.

Article 2

Compensation

The shareholders and creditors in respect of which the resolution actions concerning Banco Popular … have been effected shall not be entitled to compensation from the Single Resolution Fund in accordance with Article 76(1)(e) of Regulation … No 806/2014.

Article 3

Addressee of the Decision

This Decision is addressed to FROB, in its capacity as National Resolution Authority, within the meaning of Article 3(1)(3) of Regulation … No 806/2014.’

II.    Forms of order sought

28      The applicants claim that the Court should:

–        annul the contested decision;

–        order the SRB to pay the costs.

29      The SRB contends that the Court should:

–        dismiss the action as inadmissible in so far as it is brought in a representative capacity or by applicants who are affected only through sub-funds;

–        in the alternative, and for the other applicants, dismiss the action as unfounded;

–        order the applicants to pay the costs.

30      The Kingdom of Spain contends that the Court should:

–        dismiss the action;

–        order the applicants to pay the costs.

III. Law

A.      Admissibility

31      The SRB contends that some of the applicants have not demonstrated their standing to bring proceedings. It submits that the action must be dismissed as inadmissible in so far as it is brought by some of the applicants acting in a representative capacity, namely as managers of funds that held Banco Popular bonds, and by other applicants who are affected only through their sub-funds that held capital instruments of Banco Popular.

32      It must be noted that the SRB does not contend that the action is inadmissible in respect of all the applicants.

33      In that regard, it is apparent from the formal documents annexed to the application that several applicants did indeed hold additional Tier 1 capital instruments or Tier 2 capital instruments of Banco Popular on the date of adoption of the resolution scheme. Moreover, it should also be noted that they participated in the right to be heard process.

34      It follows that those applicants fall within the category of shareholders and creditors affected by the resolution of Banco Popular. They are therefore directly and individually concerned by the contested decision and they have standing to bring an action for annulment of the contested decision, which, moreover, the SRB does not dispute.

35      According to settled case-law, where one and the same action is involved, and where at least one of the applicants has standing to bring proceedings, there is no need to examine whether the other applicants have standing to bring proceedings (see, to that effect, judgment of 9 June 2011, Comitato ‘Venezia vuole vivere’ and Others v Commission, C‑71/09 P, C‑73/09 P and C‑76/09 P, EU:C:2011:368, paragraph 37; see also, to that effect, judgment of 24 October 2019, EPSU and Goudriaan v Commission, T‑310/18, EU:T:2019:757, paragraph 38 and the case-law cited).

36      Accordingly, there is no need to examine the plea of inadmissibility raised by the SRB alleging that the applicants acting in a representative capacity or for their sub-funds do not have standing to bring proceedings.

B.      Substance

37      In support of their action, the applicants raise three pleas in law. The first plea alleges that the SRB made manifest errors of assessment when it approved Valuation 3, concerning the assessment of the length of the insolvency period and Banco Popular’s performing loans, non-performing loans, real estate assets and legal contingencies. The second plea, which is raised in the alternative, alleges that the SRB made a manifest error of assessment in appointing the Valuer as an independent valuer. The third plea, which is also raised in the alternative, alleges that the SRB improperly delegated to the Valuer the decision-making powers conferred on it by Regulation No 806/2014.

1.      Preliminary observations

(a)    The scope of the review carried out by the Court

38      It should be noted that the case-law has defined the scope of the review carried out by the Court both in situations in which the contested measure is based on an assessment of highly complex scientific and technical facts, and in the case of complex economic assessments.

39      First, with regard to situations in which the EU authorities have a broad discretion, in particular as to the assessment of highly complex scientific and technical facts, in order to determine the nature and scope of the measures which they adopt, review by the EU judicature is limited to verifying whether there has been a manifest error of assessment or a misuse of powers, or whether those authorities have manifestly exceeded the limits of their discretion. In such a context, the EU judicature cannot substitute its assessment of scientific and technical facts for that of the EU authorities on which alone the FEU Treaty has placed that task (see judgments of 21 July 2011, Etimine, C‑15/10, EU:C:2011:504, paragraph 60 and the case-law cited, and of 1 June 2022, Algebris (UK) and Anchorage Capital Group v Commission, T‑570/17, EU:T:2022:314, paragraph 105 and the case-law cited).

40      Second, as regards the review by the Courts of the European Union of the complex economic assessments made by the EU authorities, that review is necessarily limited and confined to verifying whether the rules on procedure and on the statement of reasons have been complied with, whether the facts have been accurately stated and whether there has been any manifest error of assessment or misuse of powers. When conducting such a review, the EU judicature must not substitute its own economic assessment for that of the competent EU authority (see judgments of 2 September 2010, Commission v Scott, C‑290/07 P, EU:C:2010:480, paragraph 66 and the case-law cited, and of 1 June 2022, Algebris (UK) and Anchorage Capital Group v Commission, T‑570/17, EU:T:2022:314, paragraph 106 and the case-law cited).

41      Since the SRB’s decisions determining whether compensation needs to be granted to the shareholders and creditors in respect of which the resolution actions concerning an entity have been effected are based on highly complex economic and technical assessments, it must be considered that the principles stemming from the case-law referred to in paragraphs 39 and 40 above apply to the review which the Court is called upon to carry out.

42      While the SRB is recognised as having a margin of discretion with regard to economic and technical matters, that does not mean that the EU judicature must refrain from reviewing the SRB’s interpretation of the economic data on which its decision is based. As the Court of Justice has held, even in the case of complex assessments, the EU judicature must not only establish whether the evidence relied on is factually accurate, reliable and consistent but also ascertain whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of supporting the conclusions drawn from it (see judgments of 11 November 2021, Autostrada Wielkopolska v Commission and Poland, C‑933/19 P, EU:C:2021:905, paragraph 117 and the case-law cited, and of 1 June 2022, Algebris (UK) and Anchorage Capital Group v Commission, T‑570/17, EU:T:2022:314, paragraph 108 and the case-law cited).

43      In that regard, in order to establish that the SRB made a manifest error in assessing the facts such as to justify the annulment of the contested decision, the evidence adduced by the applicant must be sufficient to make the factual assessments used in that decision implausible (see, by analogy, judgments of 7 May 2020, BTB Holding Investments and Duferco Participations Holding v Commission, C‑148/19 P, EU:C:2020:354, paragraph 72, and of 1 June 2022, Algebris (UK) and Anchorage Capital Group v Commission, T‑570/17, EU:T:2022:314, paragraph 105, paragraph 109 and the case-law cited).

44      Consequently, a plea alleging a manifest error of assessment must be rejected if, despite the evidence adduced by the applicant, the contested assessment may still be accepted as true or valid (see judgments of 27 September 2018, Spiegel-Verlag Rudolf Augstein and Sauga v ECB, T‑116/17, not published, EU:T:2018:614, paragraph 39 and the case-law cited, and of 25 November 2020, BMC v Clean Sky 2 Joint Undertaking, T‑71/19, not published, EU:T:2020:567, paragraph 76 and the case-law cited).

45      Furthermore, it follows from settled case-law that where the institutions have a power of appraisal, respect for the rights guaranteed by the EU legal order in administrative procedures is of even more fundamental importance. Those rights guaranteed by the EU legal order in administrative procedures include, in particular, the principle of sound administration, enshrined in Article 41(2)(a) of the Charter of Fundamental Rights, which entails the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case. Only in this way can the EU judicature verify whether the factual and legal elements upon which the exercise of the power of appraisal depends were present (see, to that effect, judgment of 21 November 1991, Technische Universität München, C‑269/90, EU:C:1991:438, paragraph 14).

(b)    Admissibility of the evidence annexed to the reply

46      In the rejoinder, the SRB contends that the applicants produced, as annexes to the reply, a second witness statement by A and an addendum to their expert report which are intended to support arguments already set out in the application and which should therefore have been submitted with the application. According to the SRB, the applicants have not stated any grounds for the delay in producing that new evidence, in breach of Article 85(1) and (2) of the Rules of Procedure of the General Court, and that evidence is therefore inadmissible.

47      Under Article 85(1) and (2) of the Rules of Procedure, evidence produced or offered is to be submitted in the first exchange of pleadings and the main parties may produce or offer further evidence in reply or rejoinder in support of their arguments, provided that the delay in the submission of such evidence is justified.

48      It should be noted, first, that the applicants produced as an annex to the application the witness statement of a lawyer specialising in Spanish insolvency law, A, dated 28 May 2020, on relevant matters of insolvency law and practice. Second, also as an annex to the application, the applicants produced an expert report, dated 28 May 2020, which initially sought to examine the assumptions and methodology used in Valuation 3 following the form sent by the SRB during the right to be heard process and which was updated following the adoption of the contested decision and the Clarification Document.

49      As annexes to the reply, the applicants produced a second witness statement by A, dated 9 April 2021, relating to certain aspects of the defence concerning Spanish insolvency law, and an addendum to their expert report, dated 13 April 2021, prepared in order to respond to certain issues raised in the SRB’s defence.

50      It follows from the case-law that evidence in rebuttal and the amplification of previous evidence, submitted in response to evidence in rebuttal put forward by the opposing party in its defence, are not covered by the time-bar rule in Article 85(2) of the Rules of Procedure. That provision concerns offers of fresh evidence and must be read in the light of Article 92(7) of the Rules of Procedure, which expressly provides that evidence may be submitted in rebuttal and previous evidence may be amplified (see judgments of 17 December 1998, Baustahlgewebe v Commission, C‑185/95 P, EU:C:1998:608, paragraph 72, and of 5 May 2021, ITD and Danske Fragtmænd v Commission, T‑561/18, EU:T:2021:240, paragraph 102 and the case-law cited).

51      In so far as it follows expressly from those annexes that their purpose is to support arguments intended to challenge the assessments set out in the defence, they must be deemed admissible.

2.      The first plea, alleging manifest errors of assessment concerning the assessment of the length of the insolvency period and Banco Popular’s performing loans, non-performing loans, real estate assets and legal contingencies

52      By the first plea, the applicants claim, in essence, that the SRB made manifest errors of assessment in endorsing Valuation 3 and the Clarification Document and that the Valuer made manifest errors of assessment in the application of the liquidation scenario, as regards the length of the hypothetical insolvency proceedings and the assessment of certain classes of Banco Popular’s assets. Those errors led to an undervaluation of the applicants’ recovery estimates in the context of hypothetical insolvency proceedings in respect of Banco Popular and, accordingly, to a breach of their property rights.

53      This plea is divided into five parts. First, the applicants claim that the SRB and the Valuer erred as regards the length of the hypothetical liquidation scenario. Second, they maintain that the valuation of the performing loans in Valuation 3 is based on unreasonable assumptions. Third, they dispute the disposal strategy adopted by the Valuer for Banco Popular’s non-performing loans portfolio. Fourth, they submit that there are flaws and contradictions in the estimation, in Valuation 3, of Banco Popular’s real estate portfolio. Fifth, they dispute the approach taken by the Valuer with regard to legal contingencies.

54      As a preliminary point, it should be noted that, in the contested decision, the SRB stated that, according to Article 15(1)(g) of Regulation No 806/2014, Valuation 3 had to determine whether the affected shareholders and creditors were worse off under resolution than they would have been if Banco Popular would had been ‘wound up under normal insolvency proceedings’. It observed, as did the Valuer in the Clarification Document (paragraph 5.1.5), that Ley 11/2005 de recuperación y resolución de entidades de crédito y empresas de servicios de inversión (Law 11/2015 on the recovery and resolution of credit institutions and investment services firms), of 18 June 2015 (BOE No 146, of 19 June 2015, p. 50797), which transposes Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ 2014 L 173, p. 190), specifically states that valuation of difference in treatment is to be carried out on the assumption that the entity has entered into liquidation proceedings.

55      In that regard, the SRB noted that, in accordance with Valuation 3, in the light of the circumstances of the case and, in particular, Banco Popular’s inability to pay its debts as they fell due, the initiation of normal insolvency proceedings at the resolution date would have resulted in the liquidation of Banco Popular, which would have entailed an accelerated realisation of assets, with no minimum binding price, and payment of net realisation to creditors in accordance with the hierarchy established by Law 22/2003.

56      In the contested decision, the SRB found that Valuation 3 was in line with the applicable legal framework and that it was an appropriate and sufficient basis for adopting the contested decision. It stated that it had relied on Valuation 3 and the Clarification Document, which are annexed to the contested decision and form an integral part of its reasoning.

57      In Valuation 3, the Valuer considered that, given that Banco Popular’s banking licence would have been revoked with the declaration of insolvency, thereby forcing an immediate cessation of operations and precluding a sale of the business as a going concern, liquidation would have begun immediately. It added that, according to the resolution scheme, on 6 June 2017, the European Central Bank (ECB) had concluded that Banco Popular was failing or likely to fail on the basis of Article 18(4)(c) of Regulation No 806/2014. The Valuer stated that, in that context, liquidation was the only conceivable insolvency scenario.

58      The Valuer stated, inter alia, the following:

‘The opening of a normal insolvency proceeding for [Banco Popular] on 7 June 2017 would have resulted in an unplanned liquidation. This is by its nature value destructive, for reasons including: the abrupt cessation of business; customer attrition; an inefficient asset realisation process; and additional (often significant) costs and claims. In the case of [Banco Popular], the insolvent liquidation would be an unprecedented event in Spain, given its status as 6^th largest bank and a major player in key sectors such as mortgage finance and lending to [small and medium-sized enterprises (SMEs)] and small corporates.’

59      In the Clarification Document, the Valuer explained that the very nature of Valuation 3 was a hypothetical and prospective exercise to estimate the recovery value of Banco Popular’s creditors, for which it was necessary to adopt a series of hypothetical scenarios. It stated that it had based its assumptions and estimates on the information provided by Banco Popular, which was analysed and quality checked, as well as on public information from various sources.

60      In accordance with the case-law cited in paragraph 43 above, in order to demonstrate that the SRB made a manifest error of assessment such as to justify the annulment of the contested decision, the applicants must adduce sufficient evidence to make the factual assessments used in that decision implausible.

61      Thus, the Court’s review is limited to verifying whether the SRB made manifest errors of assessment in so far as it approved Valuation 3, which entails verifying whether the Valuer made manifest errors in Valuation 3 by relying on assumptions and estimates that were implausible. By contrast, the Court cannot substitute its own assessment for that of the Valuer which carried out Valuation 3.

62      In that regard, on several occasions in the first plea, the applicants present the analysis carried out by their experts in the report annexed to the application as a comparison with Valuation 3, with the aim of demonstrating that the valuation of Banco Popular’s assets in insolvency proceedings that was carried out in that report, based on different assumptions from those used in Valuation 3, would have led to greater recoveries for various asset classes.

63      Thus, in the second part of the present plea, the applicants refer to the analysis of the recovery of performing loans over a period of seven years, set out in their expert report, stating that that analysis is based on different assumptions from those used in Valuation 3. In the third part of that plea, the applicants present the analysis of the recovery of non-performing loans set out in their expert report. They state that, compared with Valuation 3, their analysis is based on a longer period, a reversal of the reclassification of performing loans as non-performing loans and a lower internal rate of return (IRR). In the fourth part of that plea, the applicants present the analysis set out in their expert report concerning the recoveries relating to Banco Popular’s real estate assets, including indirectly owned real estate assets, under assumptions of a three-year and a seven-year disposal period.

64      The Court notes that the expert report annexed to the application was drawn up in order to answer the questions asked in the form sent by the SRB during the right to be heard process. That report is not confined to a critical analysis of Valuation 3, but proposes its own valuation of Banco Popular’s assets in a liquidation scenario for comparison with the valuation carried out by the Valuer.

65      The analysis carried out in that report is based on different assumptions from those used in Valuation 3 and is centred around three liquidation time scenarios of five, seven and ten years, the latter not being considered in Valuation 3. In that report, the applicants’ experts set out, inter alia, the result of the comparison between their own calculations and the valuation carried out by the Valuer on the basis of a seven-year insolvency scenario. They also state that they did not have access to all the information available to the Valuer.

66      It should be recalled that Valuation 3 contains complex economic and technical assessments. By definition, the assessment of the various classes of Banco Popular’s assets in the case of hypothetical normal insolvency proceedings is based on assumptions and necessarily contains estimates based on the information available at the resolution date.

67      Furthermore, the only situation in which the assessments made in a decision taken on the basis of complex facts are capable of being examined by the Court is that in which the applicant claims that the factual assessments at issue are implausible (judgment of 25 November 2020, BMC v Clean Sky 2 Joint Undertaking, T‑71/19, not published, EU:T:2020:567, paragraph 77).

68      In accordance with the case-law cited in paragraphs 43 and 44 above, the applicants must establish that the SRB made a manifest error in assessing complex facts such as to justify the annulment of the contested decision. Thus, they must adduce sufficient evidence to make the estimates of the various asset classes carried out by the Valuer in Valuation 3 implausible.

69      Thus, the fact that the outcome of estimating the value of Banco Popular’s assets in the case of hypothetical normal insolvency proceedings, as set out in the applicants’ expert report, is at odds with the assessments set out in Valuation 3, except where the applicants claim that those assessments are implausible, constitutes a challenge which goes beyond the limited review by the Court provided for in the case-law referred to in paragraphs 39 and 40 above (see, to that effect and by analogy, judgment of 25 November 2020, BMC v Clean Sky 2 Joint Undertaking, T‑71/19, not published, EU:T:2020:567, paragraph 78).

70      Accordingly, the applicants’ presentation, in the various parts of the first plea, of the estimates made in their expert report in respect of the various classes of Banco Popular’s assets is not in itself such as to make Valuation 3 implausible or, therefore, to demonstrate that the SRB made manifest errors of assessment.

71      It is in the light of those considerations that the first plea must be examined.

(a)    The first part, concerning the length of the liquidation scenario

72      The applicants submit that the assumptions made by the SRB and the Valuer regarding the length of the liquidation scenario in respect of Banco Popular led to understated recovery estimates and are manifestly incorrect. By their first complaint, the applicants submit that those assumptions are based on a misunderstanding of the principles governing Law 22/2003. By their second complaint, relying on examples of bank failures, they submit that the Valuer failed to consider a liquidation period of more than seven years, which would have led to greater recoveries.

73      In the contested decision, the SRB noted the following:

‘The Valuer noted that the liquidator’s ultimate objective would have been to carry out the asset realisation in a reasonable period. In this regard, the Valuer considered a number of alternative scenarios and possible strategies that a liquidator might have applied to maximise realisations to creditors in a reasonable period. Taking into account the Spanish regulatory framework, as referred to in [Valuation 3], which provides for a liquidation phase of the insolvency proceedings of [a] one-year period, after which any relevant party can request the replacement of the liquidator in case of an undue prolongation of this phase, and the complexity of the hypothetical liquidation proceedings of [Banco Popular], the Valuer assessed three alternative time scenarios, assuming that the longer periods would have allowed enhanced recoveries through a more orderly disposal and work out of assets: (i) a liquidation period of 18 months; (ii) a liquidation period of 3 years; and (iii) a liquidation period of 7 years. The Valuer considered that in terms of how different creditors assess the liquidation plan, the suspension of payment of interest following the initiation of liquidation may be important. This was based on the fact that higher ranked creditors may consider that they are unlikely to be compensated for delays in repayment of amounts due, while the suspension of interest could be of benefit to creditors who rank lower in the creditor hierarchy. Against that background, the Valuer considered that it would be unreasonable to require creditors to wait longer than 7 years for the liquidation to complete.’

74      The SRB also stated that the affected shareholders and creditors had submitted comments during the right to be heard process concerning the length of the liquidation. It stated that, for each alternative time scenario, the Valuer had considered the optimal strategy and disposal period to maximise realisations for the different asset classes, according to their underlying nature and liquidity. The SRB noted in that regard that, according to the Clarification Document, Section 2.2 of Valuation 3 stated that, pursuant to Law 22/2003, following the 2015 reform, a period of 18 months would have been the effective maximum for the liquidation of Banco Popular. Nevertheless, given the complexity of Banco Popular’s hypothetical insolvency proceedings and that a very quick process would lead to market capacity issues, distressed prices and low realisation values, the Valuer had also considered two longer liquidation scenarios than that of 18 months established by Law 22/2003, namely scenarios of 3 and 7 years. The Valuer considered that those additional scenarios would enable Banco Popular’s assets to be liquidated more efficiently and with greater recovery rates than under the 18-month scenario, while respecting the principle of returning value to creditors in a reasonable timeframe. It considered that a longer liquidation period than the 7-year scenario would lead to higher liquidation costs, higher management and maintenance costs and increased uncertainty in relation to the level of asset realisations. In addition, the Valuer considered that a longer liquidation period would not be supported by the rationale of Law 22/2003 and the interests of senior unsecured creditors. The SRB concluded that the Valuer had correctly assessed the length of the liquidation.

(1)    The first complaint, alleging a misunderstanding of Law 22/2003

75      The applicants claim, in essence, that the assumptions regarding the length of the liquidation scenarios used in Valuation 3 are based on three errors of interpretation of Law 22/2003.

76      In the first place, they submit that, according to the witness statement of A, a lawyer specialising in Spanish insolvency law, annexed to the application, pursuant to Law 22/2003, the appropriate length of the liquidation period depends solely on the criterion of maximising recoveries in the interests of creditors and that there is no a priori temporal limitation in respect of the length of the insolvency proceedings. While acknowledging that the objective of the insolvency proceedings is to maximise the value of assets in the interest of the creditors, the SRB and the Valuer incorrectly consider that that principle of Spanish law is subject to a test of whether the liquidation period is ‘reasonable’.

77      In Valuation 3, the Valuer noted that, when realising the assets, Law 22/2003 required the liquidator to act in a diligent fashion to obtain the best value in the circumstances; however, he or she was not required to speculate on uncertain outcomes and he or she needed to take account of creditor wishes to receive repayment of the amounts due in a reasonable period.

78      In the Clarification Document, in response to the comments of the affected shareholders and creditors that the length of the liquidation scenarios considered in Valuation 3 was too short, the Valuer stated that a liquidation period of more than seven years would inevitably lead to higher liquidation costs, higher management and maintenance costs and increased uncertainty for the liquidator in terms of the levels of asset realisation. It considered that a liquidator would be unwilling to speculate as to possible upsides in the future which are highly uncertain.

79      The Valuer considered that the objectives of Law 22/2003 and pressure from creditors would not support a longer scenario than the 7-year scenario. First, it noted that Law 22/2003 determined the rules to liquidate the assets of the insolvent bank with the overall objective of obtaining the highest realisation value. As established by that law, the liquidator was required to act diligently to obtain the best value for the entity’s asset realisation within the parameters allowed by the legal framework (including the time allowed for liquidation); however, he or she is not required to speculate on uncertain outcomes. Second, it stated that Law 22/2003 encouraged the timely sale of the assets of the entity under liquidation. The amendments made in 2015 to Law 22/2003 were designed to speed up liquidation proceedings and avoid indefinite extensions, which had been a concern prior to the reforms. It stated in that regard that, following that 2015 reform, Law 22/2003 had established the right of creditors to apply to a court to replace the liquidator in the event of an undue prolongation of the liquidation phase. That statement was particularly relevant in the case of a market which, at the commencement of liquidation, was wide and liquid. Third, the Valuer stated that creditors would require their claims to be repaid in a reasonable period, especially those occupying a higher rank within the creditor hierarchy. That is particularly the case where, given the provisions of Law 22/2003 on interest on unsecured claims (that is to say that post-liquidation interest is not payable), senior creditors (including the deposit guarantee scheme) are unlikely to be compensated for delays in repayment of amounts due and therefore push for a shorter liquidation period.

80      First of all, the Court notes that, although maximising recoveries is the liquidator’s main objective, it is not the only one. In particular, as emphasised by the SRB and the Kingdom of Spain, the liquidator must also take other objectives into account and weigh up various interests.

81      As stated by the SRB and the Kingdom of Spain, some creditors, depending on their ranking in the hierarchy, may have an interest in bringing the liquidation proceedings to a swift conclusion. In that regard, the applicants do not dispute that that interest results in particular from Law 22/2003, in so far as it provides for a suspension of interest on unsecured creditor’s claims, which means, as the SRB notes, that senior creditors are not compensated for delays in the repayment of amounts due.

82      Contrary to what the applicants claim, the Valuer’s conclusion, after weighing up the interests of the various classes of creditors, that a longer scenario than the 7-year scenario was inconceivable was not intended to favour certain groups of creditors, but to maximise recovery for all of them.

83      Next, in order to establish that the liquidation proceedings had to take place within a reasonable time, the SRB and the Valuer took into account the fact that one of the objectives of Law 22/2003 was to avoid overly long liquidation proceedings.

84      In that regard, recital VII of Law 22/2003 states that ‘this Law aims to avoid overly long liquidation operations, to which end it imposes an obligation on administrators to provide quarterly reports on the progress of those operations and establishes a period of one year in which to complete them, with failure to comply being subject to the penalties of dismissal of the administrators and loss of the right to remuneration’.

85      In addition, Article 153 of Law 22/2003 provides that any interested party may apply to the insolvency court for the dismissal of the insolvency administrators and the appointment of new administrators where the liquidation period is not completed within one year of its commencement.

86      Moreover, as the Kingdom of Spain points out, in an order of 19 June 2015, the Juzgado de lo Mercantil n^o 6 Madrid (Commercial Court No 6, Madrid, Spain) held that Law 22/2003 ‘[did] not stipulate that the liquidation period [had to] have a maximum duration of one year; it [was] clear from the Explanatory Memorandum [Section VIII] to [Law 22/2003] and from the provision to apply for the dismissal of liquidators who disregard Article 153 [thereof] that the wishes and intention of the legislature were to ensure that liquidation operations did not last any longer than necessary, and that a period of one year in which to carry out and complete operations is initially reasonable, including making payments, submitting accounts and completing the insolvency process’.

87      The objective of not unduly prolonging liquidation proceedings was confirmed by the amendment to Law 22/2003 provided for by Ley 25/2015 de mecanismo de segunda oportunidad, reducción de la carga financiera y otras medidas de orden social (Law 25/2015 on the second-chance mechanism, reduction in financial burdens and other social measures), of 28 July 2015 (BOE No 180 of 29 July 2015, p. 64479). The Third Transitional Provision of Law 25/2015, on the tariff of liquidators’ fees, provides:

‘From the thirteenth month following the commencement of the liquidation period, the liquidator shall not receive any remuneration, unless the court decides, on reasoned grounds and after hearing the parties, having regard to the circumstances of the case, to extend that period. The agreed extensions shall be quarterly and shall not exceed a total of six months.’

88      In a judgment of 23 June 2020, the Tribunal Supremo (Supreme Court, Spain) interpreted the Third Transitional Provision of Law 25/2015 as providing, ‘in general, that the right to remuneration of the liquidator during the liquidation period [was] limited to the first twelve months’ and that ‘as from the thirteenth month, he or she [was] not entitled to earn fees from the estate, unless the court authorises it, on reasoned grounds and after hearing the parties, having regard to the particular circumstances of the case’. The Tribunal Supremo (Supreme Court) held that ‘that provision [formed] part of the legal provisions that are intended to ensure that the liquidation period is not overly long (Article 152 of Law 22/2003)’.

89      It follows that the Spanish courts’ interpretation of Law 22/2003 supports the Valuer’s assessment that the liquidation proceedings must be carried out within a reasonable time.

90      Furthermore, in considering that the liquidation proceedings could not last longer than seven years, the SRB and the Valuer also took other factors into account. They noted, inter alia, that, after a certain period of time, the costs of the proceedings and the uncertainties relating to the realisation of the assets did not ensure a maximisation of recoveries. As noted by the SRB, longer liquidation periods give rise to a higher level of uncertainty with regard to potential declines in value and macroeconomic risks.

91      As observed by the SRB and the Kingdom of Spain, the applicants are incorrect in claiming that taking longer proceedings into account can only bring about benefits and necessarily leads to a maximisation of recoveries.

92      It follows that the applicants have not established that the objective of the liquidation proceedings, which is to maximise recovery for creditors, precluded the Valuer’s assessment that those proceedings must be carried out within a reasonable time. Moreover, they have not shown that that assessment was the result of a misinterpretation of the Spanish legislation.

93      In the second place, the applicants submit that the SRB and the Valuer erred in considering that Article 153 of Law 22/2003, as amended in 2015, established a one-year period for the liquidation process. They complain that the Valuer considered that the provisions of Law 22/2003 on the remuneration of the liquidator laid down an ‘effective maximum’ period of 18 months for the liquidation of Banco Popular.

94      In Valuation 3, the Valuer stated that it had considered a liquidation scenario of 18 months, taking into account that, under Law 22/2003, the liquidator would be remunerated only for 12 months, with a possible extension of 6 months for complex proceedings. However, it found that the size and complexity of the bank would make such a scenario extremely unlikely.

95      In the Clarification Document, the Valuer recalled what it had stated in Valuation 3, namely that the position under Law 22/2003, following the 2015 reform, was that a period of 18 months would be the effective maximum for the liquidation of Banco Popular. It noted that the purpose of those amendments was to avoid indefinite extensions of the liquidation proceedings and that Law 22/2003, as amended, made undue prolongation of the liquidation phase a ground for replacing the liquidator. The Valuer nevertheless recalled that, given the complexity of Banco Popular’s hypothetical insolvency proceedings and that a very quick process would lead to market capacity issues, distressed prices and low recoveries, it had considered two longer liquidation scenarios than the 18-month scenario provided for by Law 22/2003. It added that the additional scenarios of 3 and 7 years would enable Banco Popular’s assets to be liquidated more efficiently and with greater recovery rates than under the 18-month scenario, while respecting the principle of returning value to creditors in a reasonable timeframe.

96      Accordingly, since the Valuer considered the 18-month liquidation scenario to be highly unlikely and therefore developed two other, longer scenarios, the applicants’ arguments claiming that the Valuer misinterpreted Law 22/2003 as establishing an ‘effective maximum’ liquidation period of 18 months are ineffective. Likewise, the examples given in A’s witness statement of insolvency proceedings that began after 2015 and lasted for more than 3 years are not relevant either.

97      In the third place, the applicants dispute, on the basis of A’s witness statement, the Valuer’s assessment, set out in the Clarification Document, that certain creditors ranking higher than the affected shareholders and creditors could request the dismissal of the liquidator in the event of an undue prolongation of the liquidation period beyond one year, as well as the assumption that the liquidator would anticipate such actions and accelerate the procedure.

98      Contrary to what the applicants claim on the basis of A’s witness statement, the explanations provided by the Valuer in the Clarification Document are not intended to justify an ‘accelerated’ liquidation scenario, but to justify why the liquidation proceedings would not last more than seven years.

99      First, it is apparent from the contested decision, cited in paragraph 73 above, that the SRB stated that, in terms of how different creditors assessed the liquidation plan, the Valuer had taken into account in Valuation 3 the fact that the suspension of payment of interest following the liquidation could be important, in so far as higher ranked creditors would consider that they were unlikely to be compensated for delays in repayment of amounts due.

100    Thus, Banco Popular’s various creditors, depending on their ranking in the hierarchy, could have diverging interests as regards the length of the liquidation proceedings and neither the Valuer nor the SRB can be criticised for taking all of those interests into consideration.

101    Furthermore, having regard to the wording of Law 22/2003, which provides for the possibility of dismissing the liquidator in the event of an undue prolongation of the liquidation, and to the fact that certain creditors have no interest in the proceedings being prolonged, such dismissal is an eventuality that the Valuer was entitled to take into account when assessing the length of the liquidation proceedings.

102    In that regard, it should be noted that, in A’s witness statement, on which the applicants rely, A stated that ‘if certain creditor groups were to put pressure on the [liquidator] to expedite the liquidation process, other creditor groups, such as subordinated debt holders, would be able [to] counteract such a strategy’ by means of an action for damages against the liquidator. A added that he therefore considered ‘that [the Valuer] [assumed] that the interests and hypothetical actions of higher ranked creditors would have influenced the [liquidator] more than the interests of lower ranked creditors’ and that he saw ‘no reason to assume that [a liquidator] would simply favour one specific creditor group in devising the liquidation plan over the other, by unduly expediting the insolvency proceeding, and, as a result, potentially foregoing recoveries for subordinated debt holders’.

103    It is sufficient to note that A’s witness statement is a mere opinion that is not capable of calling into question the eventuality taken into account by the Valuer in which certain creditors might consider liquidation proceedings lasting more than seven years to be unjustified and might therefore be encouraged to request the dismissal of the liquidator in order to obtain repayment of their claims within a reasonable period of time.

104    Second, the applicants have not put forward any arguments intended to call into question the other factors taken into account by the Valuer in Valuation 3 and referred to in the Clarification Document to show that the liquidation proceedings would not last more than seven years, such as higher liquidation costs, higher management and maintenance costs, increased uncertainty for the liquidator in terms of the levels of asset realisation and the fact that a liquidator would be unwilling to speculate as to possible upsides in the future which are highly uncertain.

105    It follows that the applicants cannot validly maintain that the assumptions made by the SRB or the Valuer regarding the length of the liquidation scenarios were based on a misunderstanding of Law 22/2003 and, accordingly, the first complaint must be rejected.

(2)    The second complaint, alleging failure to take a longer liquidation period into account

106    The applicants maintain that, according to A’s witness statement annexed to the application and the addendum thereto annexed to the reply, a reasonable estimate of the length of insolvency would be at least 10 years or more and a minimum of seven years. They also rely on their expert reports, according to which a 10-year liquidation scenario would have resulted in higher recoveries. They cite examples of insolvencies, referred to in their expert reports and A’s witness statement, in which the liquidation period of the asset portfolio exceeded the maximum liquidation period of seven years taken into account by the Valuer.

107    It should be noted that Article 4(3) of Delegated Regulation 2018/344 provides:

‘The valuer shall take the following into account in the determination of the discounted amount of expected cash flows under normal insolvency proceedings:

(a)      applicable insolvency law and practice in the relevant jurisdiction, which may influence factors such as the expected disposal period or recovery rates;

…

(c)      the information on recent past insolvency cases of similar entities, where available and relevant.’

108    In recital 121 of the contested decision, the SRB noted that certain affected shareholders and creditors had referred to previous insolvency cases in Spain and in other jurisdictions. It stated that, in the Clarification Document, the Valuer had noted that, while it had taken into account Banco de Madrid’s insolvency proceedings to some extent, the subsequent important changes in national insolvency law (for example, the changes impacting the duration of such proceedings) did not allow the comparison with previous Spanish cases. In addition, it stated that the Valuer had considered whether other European liquidation cases could provide insight into the hypothetical liquidation scenario. However, due to the lack of harmonisation of the different European insolvency laws, such comparison was considered by the Valuer only of limited value. Moreover, the macroeconomic context, the entity’s operations, business and assets could vary greatly across cases and impact the outcome of the valuation under insolvency proceedings. The SRB found that the Valuer, in line with Article 4(3)(c) of Delegated Regulation 2018/344, had considered information on recent past insolvency cases of similar entities and had provided sufficient reasoning on their relevance.

109    In that regard, it should be noted that the examples given by the applicants and cited in their expert reports annexed to the application and to the reply do not constitute relevant points of comparison for the purpose of assessing the length of Banco Popular’s liquidation scenario.

110    As regards the cases of AFINSA Bienes Tangibles SA, Ploder Uicesa SA, Assignia Infraestructruras SA and Essentium Grupo SL, referred to in A’s witness statement and the expert report annexed to the application, the insolvency proceedings of which lasted more than 18 months, it is sufficient to state, as the SRB noted, that those undertakings are not banking institutions and that they are therefore not relevant examples.

111    As regards the cases of Northern Rock, Bradford & Bingley, Dexia SA, Heta Asset Resolution AG, SNS Bank or Banco Espírito Santo, it should be noted that they do not concern Spanish banks and that, therefore, their insolvency proceedings were governed by national provisions different from those applicable to the situation of Banco Popular.

112    In addition, the applicants’ experts stated, in their report annexed to the application, that there were no insolvencies of banks comparable to Banco Popular in Spain and that the examples of the Portuguese bank Banco Espírito Santo and the Netherlands bank SNS Bank relied on hypothetical insolvency assessments. They cannot therefore serve as examples of insolvency practice in Spain.

113    Moreover, the SRB stated that the cases of Sociedad de Gestión de Activos procedentes de la Reestructuración Bancaria (SAREB), Heta Asset Resolution, Northern Rock, Bradford & Bingley and Dexia did not concern an insolvency case, as acknowledged by the applicants and their experts in their report annexed to the reply.

114    In that regard, as regards SAREB, the only example of a Spanish bank to which the applicants referred, the applicants have not disputed the SRB’s claim that the 15-year period provided for the purpose of the orderly disposal of assets corresponded to a restructuring period established as part of a general process of restructuring the Spanish banking sector and not to a liquidation period.

115    Last, the applicants do not explain to what extent the situation of the various examples to which they referred is comparable to that of Banco Popular, particularly in terms of the structure of the asset portfolios or the macroeconomic context.

116    As regards the case of Banco de Madrid, the applicants submit that the insolvency of that bank, which is smaller and less complex than Banco Popular, has lasted for more than six years and shows that a 10-year scenario would be appropriate.

117    In that regard, in Valuation 3, the Valuer stated that it had taken into account the case of Banco de Madrid, which was then the most recent Spanish bank insolvency proceedings opened, while noting that it differed from Banco Popular’s case in terms of its systemic impact. It also noted that the liquidation of Banco de Madrid predated certain important legal changes to Law 22/2003 that would have an impact on the scenario applied to Banco Popular. It nevertheless stated that it was a useful precedent in terms of confirmation of the banking licence revocation and valuation of certain assets.

118    As the Valuer also stated in the Clarification Document, Banco de Madrid’s insolvency proceedings predated the amendment of Law 22/2003, which potentially had the effect of limiting the liquidation proceedings to 18 months. As stated in paragraph 87 above, the adoption of Law 25/2015 had the objective of not unduly prolonging liquidation proceedings by providing for the possibility of limiting the liquidator’s remuneration to 18 months.

119    In addition, on the date of adoption of the contested decision, the liquidation proceedings in respect of Banco de Madrid, which began in March 2015, had lasted 5 years and therefore did not contradict the assumption of a maximum liquidation scenario of seven years. Last, the applicants do not explain why that example would establish that a 10-year liquidation scenario for Banco Popular would be appropriate.

120    Accordingly, the examples cited by the applicants do not establish that it was manifestly incorrect to take into account a maximum length of seven years for Banco Popular’s liquidation scenario.

121    Furthermore, it should also be recalled that, as is clear from paragraphs 66 to 70 above, the fact that the applicants’ experts carried out their own assessment of Banco Popular’s liquidation proceedings in order to establish that recoveries would have been greater over a period of 10 years is not such as to make the assessments made in Valuation 3 implausible.

122    In addition, A’s assertion that ‘in [his] view, a reasonable estimate of the length of insolvency would be 10 years or more, and 7 years would be a minimum’, is a mere opinion that is not based on a specific assessment of the situation of Banco Popular.

123    It follows that the second complaint must be rejected.

124    It is apparent from the analysis of the first part of the present plea that the applicants have not put forward any arguments such as to make implausible the Valuer’s assessments to the effect that the maximum length of Banco Popular’s liquidation proceedings would be seven years, having regard, in particular, to the objective of carrying out a liquidation within a reasonable time and to the uncertainties caused by a prolonged liquidation period. They have therefore not established that the SRB made a manifest error of assessment in relying on those assessments in the contested decision.

125    The first part of the first plea must therefore be rejected.

(b)    The second part, concerning the valuation of the performing loans

126    The applicants claim that the assumptions made by the Valuer and on which the SRB relied in the contested decision concerning the valuation of Banco Popular’s performing loans portfolio are manifestly incorrect and resulted in a substantial undervaluation of that portfolio.

127    This part of the plea is divided into four complaints relating to the analysis carried out by the Valuer in relation to, first, the reclassification of performing loans as non-performing loans, second, the prepayment assumptions for performing loans, third, the new delinquencies in respect of the remaining performing loans and, fourth, the discount rate on the sale of the remainder of the performing loans portfolio.

(1)    The first complaint, relating to the reclassification of performing loans as non-performing loans

128    The applicants submit that the reasons given by the Valuer to justify the reclassification, in Valuation 3, of EUR 1.1 billion of performing loans as non-performing loans are manifestly incorrect.

129    In the first place, they submit that the use of International Financial Reporting Standard (IFRS) 9 and of circular 4/2017 del Banco de España, a entidades de crédito, sobre normas de información financiera pública y reservada, y modelos de estados financieros (Circular 4/2017 of the Bank of Spain, to credit institutions, on the rules of public and reserved financial information and model financial statements), of 27 November 2017 (BOE No 296 of 6 December 2017, p. 119454) is inappropriate in an insolvency context and that, in reclassifying performing loans as non-performing loans, the Valuer applied IFRS 9 too restrictively. The criteria used by the Valuer do not correspond to what IFRS 9 defines as a loan to be classified as Stage 3 and therefore requiring a ‘write-off’ from the pool of performing loans.

130    In that respect, in Valuation 3, as regards the reclassification of performing loans as non-performing loans, the Valuer took into consideration the customers who, in Banco Popular’s accounting ledgers, were classified as Stage 2 under IFRS 9, namely customers with a high risk of default, and then applied objective criteria in order to determine which loan contracts held by those customers were likely to be reclassified as non-performing loans, particularly in the event of the bank’s insolvency. The Valuer then considered that loans that had already been in default for more than 30 days with an outstanding debt balance higher than the recoverable value of the collaterals received had to be reclassified as non-performing loans, as did loans of customers who already had a loan contract in default where the collaterals received were insufficient or the contract in default was material to the overall relationship with the bank.

131    Thus, it is apparent that the Valuer did not consider that certain loans had to be classified as Stage 3 in accordance with the criteria laid down in IFRS 9 and that it did not reclassify certain performing loans as non-performing loans in accordance with that standard.

132    Furthermore, the fact that the Valuer stated, in Valuation 3, that its method was in line with Circular 4/2017 of the Bank of Spain does not mean, contrary to what the applicants claim, that it applied that circular in order to reclassify performing loans as non-performing loans.

133    Accordingly, the applicants’ argument must be rejected, since it is based on a misreading of Valuation 3.

134    In the second place, the applicants claim that, in the Clarification Document, the Valuer incorrectly relied on the freezing of borrowers’ funds to conclude that borrowers may have difficulties in repaying their loans, disregarding, first, the fact that borrowers might have accounts in other banks and, second, the way in which the Spanish deposit guarantee scheme operates. According to the applicants, the reference to unspecified ‘counterclaims’ is pure conjecture. They maintain that those assertions are vague and unsubstantiated and do not justify the substantial reclassification of performing loans as non-performing loans carried out in Valuation 3.

135    In the Clarification Document, in response to comments from the affected shareholders and creditors seeking clarifications regarding the reclassification of certain performing loans as non-performing loans carried out in Valuation 3, the Valuer provided the following explanations:

‘As set out in [Valuation 3], an insolvency of [Banco Popular] would have far reaching consequences, including for borrowers, and was likely to lead to an increase in the level of defaults (e.g. borrowers also holding transactional accounts with [Banco Popular] could see those frozen and be unable to access their funds, others may raise counterclaims as a reason for not making or delaying scheduled repayments). This increase would be concentrated in the parts of the portfolio and/or for borrowers, already under stress and would be exacerbated by the difficulties in maintaining a proactive stance in the management of these loans given the disruption to [Banco Popular] operations and staffing resulting from the insolvency. Based on [its] experience and expert judgement, [it considered] that those borrowers identified as stage 2 [under IFRS 9] in the data provided [were] at a high risk of default. This classification jointly with other factors (e.g.: associated collateral) drive the estimation of the delinquency increase and reclassification. In this respect the situation [was] different to a going concern accounting analysis.’

136    It is sufficient to note that the applicants confine themselves to submitting that the examples given by the Valuer of actions that borrowers might take in the event of Banco Popular’s liquidation do not justify the scale of the reclassification carried out in Valuation 3. Those arguments must be rejected as ineffective.

137    The explanations provided in Valuation 3 and in the Clarification Document regarding the reclassification of performing loans as non-performing loans are not based on those examples. The applicants appear to overlook the fact that the reclassification carried out in Valuation 3, referred to in paragraph 130 above, concerned only certain loans held by borrowers who were already at risk of default. In that regard, they do not raise any arguments challenging the Valuer’s assessments relating to the consequences of an abrupt cessation of the bank’s business, first, in terms of worsening the situation of borrowers who already had difficulties in repaying their loans when Banco Popular was in business and, second, the increased risk of default on loans which, because of their characteristics such as the low level of associated collateral, were already at risk of default before the liquidation.

138    It follows that the applicants cannot validly maintain that the SRB should have considered that the reclassification of performing loans as non-performing loans carried out in Valuation 3 was manifestly incorrect. The first complaint must accordingly be rejected.

(2)    The second complaint, relating to the prepayment assumptions for performing loans

139    The applicants claim that the Valuer’s conclusion in Valuation 3 relating to the reduction in the size of the performing loans portfolio from EUR 59.5 billion to EUR 24.9 billion within 18 months is based on unrealistic prepayment assumptions. They dispute those assumptions with regard, first, to performing corporate loans and, second, to performing mortgage loans.

140    As a preliminary point, it should be noted that the comparison made by the applicants between the prepayment levels on the Spanish market in 2017 and the assumptions made by the Valuer is not relevant. Since Valuation 3 is based on the assumption that Banco Popular has entered into liquidation, the prepayment levels for going concerns are not comparable.

(i)    Performing corporate loans

141    The applicants dispute the Valuer’s assumption that 80.23% of the performing loans portfolio of Banco Popular’s corporate customers would be prepaid within one year of Banco Popular’s insolvency. According to the applicants, that assumption is based on the illogical supposition, contrary to the characteristics of the Spanish market, that corporate customers in need of a bank that provides transactional banking services would be obliged to refinance their loans with a new bank that could provide those services.

142    First, the applicants claim that there is no connection between a loan and a current account, that it is incorrect to assume that a corporate borrower has only one banking relationship for all its needs, and that borrower inertia in switching banks must be acknowledged. According to the applicants, the Valuer accepted this in the Clarification Document and relied on general statements regarding the deep relationships between Spanish banks and their customers or the strategies of competing banks, without identifying how many of Banco Popular’s corporate customers that had obtained loans made use of other banking functions that they would need to migrate.

143    In Valuation 3, the Valuer assumed that prepayment rates were likely to be significantly higher in a liquidation scenario than would have been the case for a going concern bank, since customers who had the ability to do so tended to migrate to other financial institutions and repay their debt with the bank, and the other large Spanish banks were also likely to actively try to attract the best customers from the bank in liquidation. It considered that that assumption was particularly true for corporate customers that, for the running of their daily operations, had to rely on a fully functioning bank that can offer products and services such as revolving credit facilities, further drawdowns, Point of Sale function and many other services that Banco Popular would not be able to continue offering after having been placed into liquidation.

144    It also stated that it had assumed that all corporate customers would migrate, with the exception of companies on the watch list, which were unlikely to be able to refinance with a different bank, and property development companies for which competitor banks had little appetite at the resolution date.

145    In the Clarification Document, following comments from the affected shareholders and creditors that the prepayment assumptions for performing loans appeared unduly high, the Valuer stated the following:

‘Moreover we noted that the Spanish retail banking business model is based on building deep relationships with clients. In this scenario of [Banco Popular]’s liquidation, many of the corporate customers would hold commercial discussions with alternative bank providers, during which the alternative entity would be well placed to capture the corporate customers’ loans as well as their transactional banking activities. For the avoidance of doubt, we are not assuming an operational link between the two products. However, we are assuming that the resulting commercial discussions would cover the customer’s entire banking requirement (both transactional and loans) and that the alternative provider would want to capture the largest possible amount of new business. Such discussions may be easier where a banking relationship already exists (multi banked clients). In particular, SMEs and lower end corporate franchises of [Banco Popular] would, in our view, have been of strategic interest to other banks in Spain at that time such that a proactive strategy to capture [Banco Popular] clients by one or more competitors would have been a likely outcome in a liquidation scenario. As such, we consider that the assumptions behind the increased level of loan prepayments as set out in [Valuation 3] are reasonable.’

146    In addition, in response to comments from the affected shareholders and creditors suggesting that borrower inertia would drive down the level of migration and that customer behaviour is not always rational, while the Valuer agreed that it was a factor in a going concern situation, in a liquidation scenario the situation was very different. It recalled that customers who relied on Banco Popular for transactional banking services would be forced to change bank, and even if there was no operational linkage, they were likely to migrate their loans at the same time to maintain service levels and for administrative convenience.

147    It follows that, contrary to what the applicants claim, the fact that the Valuer accepted that there was no operational link between a loan and a current account does not call into question its assessment that corporate customers must rely on a bank capable of offering them a full range of products and services. The fact that Banco Popular, as a result of its liquidation, would no longer be able to offer them those services is a factor liable to encourage the migration of those customers to other banks and therefore the prepayment of their loans.

148    Moreover, it is not apparent from Valuation 3 that the Valuer started from the assumption that an undertaking has only one banking relationship for all its needs. Thus, the applicants cannot maintain that the Valuer accepted that its assumption was incorrect when it acknowledged the existence of multi-bank relationships in the Clarification Document in response to certain comments. In that regard, the Valuer considered that the fact that a Banco Popular customer had an account with another bank could be a factor liable to facilitate the repurchase of their loans by that other provider and therefore the prepayment of the performing loans.

149    In addition, contrary to what the applicants submit, the Valuer did not acknowledge, in the Clarification Document, borrower inertia in switching banks in the event of Banco Popular’s liquidation.

150    Last, in so far as the Valuer clearly indicated which categories of corporate customers it had excluded from its assumption as being unable to transfer their loans, the argument that it failed to identify how many corporate customers that had obtained loans made use of other banking functions is irrelevant.

151    Furthermore, the applicants claim, in the reply, that the Valuer elevated ‘deep banking relationships’, as the key determinant of prepayments, above all other considerations, including the cost of borrowing. According to the applicants, corporate customers, in particular SMEs, prioritise the cost of borrowing over the nature of their banking relationships.

152    It is sufficient to note that the applicants’ argument fails to take account of the consequences of Banco Popular entering into liquidation, not only for its inability to provide full banking services, but also for the attitude of competing banks. In particular, the Valuer stated, in the Clarification Document, that some of Banco Popular’s corporate customers, including SMEs, would be of strategic interest to other banks in Spain that could put in place a strategy to capture those customers in the event of liquidation.

153    Accordingly, the applicants have not put forward any arguments capable of establishing that the existence of deep relationships between Spanish corporate customers and their bank was not a relevant factor that the Valuer was entitled to take into account. The applicants’ arguments do not make implausible the assumption, taken into account by the Valuer, that, following the liquidation of Banco Popular, corporate customers obliged to transfer their transactional business to another bank would choose also to transfer their loans in order to maintain a relationship covering all banking services.

154    Second, the applicants allege, in essence, a failure to state reasons in that the Valuer did not provide any figures relating to the interest rates and the termination fees which it took into account.

155    In the Clarification Document, in response to comments on the relative rates of interest and switching costs, the Valuer stated that in formulating its prepayment assumptions, it had taken into account the customer’s appetite for change (for example, relative rates of interest charged as between Banco Popular and alternative providers), potential barriers (for example, switching costs) and the customer’s attractiveness to other banks when considering a refinancing of the customer’s loans (taking into account the borrower’s risk profile, credit history, segmentation, financial situation, and so on). It stated that it had considered relative rates of interest, comparing the interest rate payable on outstanding loans (as shown in the data provided) with the interest rates applied to new analogous transactions at the termination date, and termination costs, including reviewing a sample of contracts in order to gain an understanding of the termination costs arranged for each standard contract, as well as measuring the impact of terminating those contracts.

156    It must be held that that statement of reasons is sufficient to establish that the Valuer did take into account, in Valuation 3, the interest rates applied by Banco Popular and the other banks, as well as the costs of transferring a loan. That explanation is consistent with the requirements of Article 6(b) of Delegated Regulation 2018/344, according to which the valuation must include an explanation of the key methodologies and assumptions adopted and how sensitive the valuation is to those choices. It was not for the Valuer to specify in Valuation 3 all the factors and figures on which it had relied.

157    It follows that the applicants have not put forward any arguments capable of making implausible the Valuer’s assumption that 80.23% of Banco Popular’s performing corporate loans portfolio would be prepaid.

(ii) Performing mortgage loans

158    The applicants submit that the Valuer’s assumption that 33.55% of Banco Popular’s performing mortgage loans portfolio would be prepaid within 18 months is based on unsubstantiated generalisations.

159    In the first place, the applicants submit that the mortgage rates on the Spanish market were significantly higher than the rates of 1% and 1.2% applied by the Valuer and rely on their expert report, which refers to data from the Statistical Bulletin of the Bank of Spain of July 2018 and to data from the ECB published by Standard & Poor’s. They claim that customers who paid an interest rate of 2% or lower on their mortgage, corresponding to the interest rate on mortgages on the Spanish market in June 2017, had no incentive to switch banks. In the Clarification Document, the Valuer did not contest those data or their relevance, but introduced an irrelevant distinction between the interest rates on the Spanish market in June 2017 and the ‘interest rates in place for the whole life of the mortgage’.

160    The applicants dispute the use of the interest rates in place for the whole life of the mortgage, since customers do not decide to take out a mortgage loan on the basis of such a rate, but only on the basis of the initial rate available on the market, and the initial rates tend to be lower than an average rate over the life of the loan.

161    In Valuation 3, the Valuer considered that customers for whom the ratio of the loan to the value of the property purchased with that loan (‘the loan to value ratio’) is less than 90% and who were not on the watch list or those for whom the maturity term of the loan was greater than 2 years were more likely to want to migrate. It considered that customers with a loan to value ratio below 80% would prepay their loan if they paid an interest rate of 1% or more and that customers with a loan to value ratio of between 80% and 90% would prepay their loan if they paid an interest rate of 1.2% or more.

162    It should be noted that the applicants’ arguments that interest rates of 1% and 1.2% should not have been taken into account were already raised by some of the affected shareholders and creditors during the right to be heard process.

163    In that regard, in the Clarification Document, the Valuer stated that the data from the Statistical Bulletin of the Bank of Spain of July 2018 and the data from the ECB published by Standard & Poor’s, relied on by the affected shareholders and creditors, were different to those used in Valuation 3, in so far as they reflected only the initial rate of the mortgage.

164    The Valuer explained that the mortgage rates used in Valuation 3 had been calculated by benchmarking the rates (both fixed and variable) of Banco Popular’s portfolio with those on offer on 6 June 2017 by the main mortgage providers on the Spanish market. In addition, it stated that it had considered the rates in place for the whole life of the mortgage (rather than just for the initial term), since mortgages in Spain tend to have a different rate at the beginning of the loan than in the rest of the life of the contract. The Valuer noted that those rates had been calculated by averaging the percentage of both variable and fixed mortgages on the Spanish market at the time and that those weightings had been multiplied respectively by the average rate offer for new variable and fixed mortgage loan contracts.

165    It follows that the applicants cannot maintain that the Valuer did not dispute the relevance of their data from the Statistical Bulletin of the Bank of Spain of July 2018 and the data from the ECB published by Standard & Poor’s. The Valuer stated clearly that, since those data did not reflect the mortgage interest rate over the entire term of the loan, they had not been taken into account in Valuation 3.

166    Furthermore, the applicants’ assertion that customers take into account only the initial interest rate of the loan and not the rate applicable throughout the term of the mortgage is not based on any concrete evidence. As the SRB states, that assertion is also contradicted by the applicants’ argument that customers seek to ‘achieve a lower long term average interest rate’.

167    Similarly, the applicants’ assertion that the initial interest rates tend to be lower than an average rate over the life of the loan is not supported by any evidence.

168    It follows that the applicants’ arguments consist solely in putting forward their own assumptions in order to contradict those used in Valuation 3 and cannot make the assessment carried out by the Valuer implausible. Furthermore, those arguments do not take into consideration the other factors, such as the loan to value ratio and the maturity term of the loan, taken into account by the Valuer to establish which performing mortgage loans would be prepaid.

169    In the second place, the applicants dispute the Valuer’s assessment that prepayment fees in respect of a mortgage were not a relevant factor and they submit that the Valuer erred in excluding the costs associated with setting up a new mortgage.

170    In the Clarification Document, the Valuer stated that, when drawing up the prepayment assumptions, it had taken into consideration all factors that could have an impact on the process of migrating customers to another entity, both from the perspective of supply, such as the customer’s credit quality or the availability of collateral, and from the perspective of demand, namely the impact of the costs of cancelling mortgage loans held with Banco Popular and the costs of formalising the new mortgage loans with the alternative provider.

171    It reiterated its assessment, set out in Valuation 3, that there were no barriers to prevent a customer moving their mortgage to another provider notwithstanding the fact that certain loans have a prepayment fee. It considered that customers holding deposits with Banco Popular would have to find an alternative provider for those deposits and that it was likely that those providers would give incentives and simplify the process of moving their other products. As a result, it did not consider that fee to be a disincentive to customers moving their mortgages. It also considered that the liquidator might be unable to enforce the prepayment fee if customers were seen as having to switch provider because of operational difficulties faced by Banco Popular following the liquidation. Last, it estimated those fees to be in the region of EUR 40 million for all customers leaving Banco Popular and therefore did not include the related income.

172    On that last point, the Valuer also stated, in the Clarification Document, that it had reviewed a sample of transactions in order to understand the standard cancellation costs contracted by Banco Popular and that it had concluded that they were within market ranges.

173    It follows that the applicants cannot validly maintain that the Valuer did not take into account, in its assessment of the prepayment assumptions in respect of the performing mortgage loans, the costs associated with the migration of those loans to another bank.

174    Furthermore, the applicants merely submit that the explanations given by the Valuer to disregard the prepayment fees are superficial and that it has not provided any explanation regarding the exclusion of the costs associated with setting up a new loan. They claim that the explanation based on the incentives of competing banks is purely speculative, that the liquidator would not waive recovery of prepayment fees and that, even if the amount of EUR 40 million is not significant at an aggregate level, the examination should have been carried out at an individual level.

175    It is sufficient to note that the aim of the Valuer’s explanations was not to establish that the costs associated with migrating performing mortgage loans to another bank should not be taken into account, but that they did not act as a disincentive. The applicants’ arguments are based on mere assertions which do not demonstrate that the assumptions taken into account by the Valuer were manifestly erroneous.

176    It follows that the applicants have not put forward any arguments capable of making implausible the Valuer’s assumption that 33.55% of Banco Popular’s performing mortgage loans portfolio would be prepaid.

177    It is apparent from the analysis of the second complaint that the applicants have not established that the SRB made a manifest error in considering, in the contested decision, that the Valuer had ‘provided appropriate arguments on the foundations of its assumptions concerning the increased level of [performing] loan prepayment’ in the Clarification Document. Accordingly, the second complaint must be rejected.

(3)    The third complaint, relating to the new delinquencies in respect of the remaining performing loans

178    The applicants state that they do not dispute the method of calculating the expected recoveries from the run-off of the remaining performing loans, namely the remaining loans in the portfolio after deducting those reclassified as non-performing loans and those resulting from the prepayment assumptions, and that they agree that some of those loans would become non-performing during their life. However, they claim that the Valuer provided no basis for the assumption, set out in Valuation 3, that there would be a ‘significant rise’ in new delinquencies in the event of insolvency.

179    The applicants refer to an extract from a table, set out in Valuation 3, containing a summary of the strategy applied by the Valuer for the realisation of Banco Popular’s assets, according to which the ‘performing loans portfolio … will be run-off until the end of the liquidation period, taking into account their yield, a significant increase of the prepayment rate and new delinquencies, followed by a final sale of the remaining book’.

180    It follows that the Valuer referred to a significant increase in the prepayment rate of performing loans, not in new delinquencies in respect of the remaining performing loans.

181    Therefore, it is sufficient to state, as the SRB noted, that that argument made by the applicants is based on a misreading of Valuation 3.

182    Accordingly, the third complaint must be rejected.

(4)    The fourth complaint, relating to the discount rate on the sale of the remainder of the performing loans portfolio

183    The applicants observe that, in the context of the hypothetical seven-year liquidation scenario, the Valuer applied a discount rate on the sale of the remainder of the performing loans portfolio (the ‘rump’) of between 5.1% in the best-case scenario and 6.1% in the worst-case scenario, without explaining the 1% difference.

184    In Valuation 3, the Valuer stated that the discount rate used at the end of the liquidation timeframe in each scenario reflected the required return rates in the Spanish market for each asset class based on the forecast risk profile at the time of liquidation, which required some adjustments. The Valuer set out the factors on which it based those adjustments. It explained that the changing discount rates used in the different liquidation scenarios reflected the evolving mix of the different asset classes in the portfolio and their respective assumed discount rates.

185    It is sufficient to note that those explanations, which are not disputed by the applicants, provide ample justification for taking into account distinct discount rates on the sale of the remainder of the performing loans portfolio in the best-case scenario and the worst-case scenario for each alternative timeframe.

186    Furthermore, as regards the applicants’ reference to their expert report, assuming a 5% maximum discount rate, it should be recalled that, as is apparent from paragraphs 66 to 70 above, a comparison with the analysis carried out in the applicants’ expert report is not relevant for the purpose of determining whether the Valuer made manifest errors of assessment in Valuation 3.

187    It follows that the fourth complaint must be rejected.

188    It is apparent from the analysis of the second part of the present plea that the applicants have not raised arguments such as to make implausible the Valuer’s assessments relating to the valuation of Banco Popular’s non-performing loans portfolio. They have therefore not established that the SRB made a manifest error of assessment in relying on those assessments in the contested decision.

189    Accordingly, the second part of the present plea must be rejected.

(c)    The third part, concerning the valuation of the non-performing loans

190    The applicants claim that the recovery estimate in respect of non-performing loans in Valuation 3 is based on inconsistent and unsubstantiated assumptions and is irreconcilable with the benchmark data, which resulted in understated recovery estimates.

191    In the first place, the applicants dispute the assumption in Valuation 3 that all non-performing loans would be sold within 18 months of the liquidation. They maintain that the secured non-performing loans portfolio mostly comprises real estate collateralised loans and that its value is therefore driven by the value of the underlying real estate asset. They submit that, while acknowledging in Valuation 3 that the main driver for the valuation of secured non-performing loans is the recovery of amounts from the sale of the repossessed assets, the Valuer had an inconsistent approach in assuming a different optimal disposal period for non-performing loans and for real estate assets.

192    In Valuation 3, the Valuer stated that the planned liquidation strategy consisted in selling the non-performing loans portfolio as soon as possible to prevent further deterioration in the bank’s position and given the ‘appetite’ in the Spanish market for such assets, and that this was consistent with experience in other bank liquidations. It considered that non-performing loans would be assumed to be sold in December 2018, approximately 18 months after the resolution date, in the three alternative scenarios of 18 months, 3 years and 7 years.

193    Following comments from the affected shareholders and creditors during the right to be heard process, arguing that a longer timeframe for the disposal of non-performing loans would yield higher sales proceeds, the Valuer stated, in the Clarification Document, that the assumption that Banco Popular would retain non-performing loans for a longer timeframe had been considered when preparing Valuation 3. However, it maintained that a timetable for the disposal of the non-performing loans portfolio over a period of 18 months remained the most appropriate.

194    In that regard, the Valuer considered that, over a longer timeframe, greater recoveries would be uncertain, while the costs of retaining the work-out team (taking into account the risk around key personnel leaving, which would increase the level of potential inefficiencies), and other factors such as the reluctance of defaulted borrowers to enter into discussions with an insolvent bank, were more certain. In addition, the Valuer stated that a longer timeframe also increased the macroeconomic risk, in particular because there was an active market for non-performing loans in the second half of 2017 and the Valuer considered it unlikely that a liquidator would want to speculate on favourable conditions continuing for a lengthy period of time (particularly against a background of possibly significant macroeconomic dislocation which could follow Banco Popular’s liquidation). It was therefore concluded that a relatively short-term sale was ultimately more beneficial and would not result in buyer capacity issues which would impact on the level of realisations achieved.

195    In the contested decision, the SRB referred to those explanations given by the Valuer and approved them.

196    Furthermore, it should be noted that, in the Clarification Document, the Valuer explained that, as regards the methodology used in Valuation 3, it had adopted a dynamic scenario, understood as a method that sets different moments of realisation during the liquidation and subsequently establishes a value of the asset based, inter alia, on the time of realisation. Thus, it stated that, for each of the alternative time scenarios, it had considered the optimal strategy and disposal period to maximise realisations for the different asset classes, according to their underlying nature and liquidity.

197    The applicants have not put forward any arguments capable of calling that methodology into question.

198    Thus, even though 66.6% of Banco Popular’s non-performing loans portfolio was secured by real estate assets, those loans and the real estate assets do not belong to the same asset class and their disposal in the context of a liquidation does not follow the same strategy.

199    The fact that the value of the secured non-performing loans is backed by the value of the real estate collateral is, admittedly, the main factor in their valuation. However, it is irrelevant to the question of which period of time is the most appropriate for maximising recovery in respect of those loans.

200    Therefore, the applicants cannot claim that there is an inconsistency in the different disposal periods taken into account for non-performing loans and for real estate assets.

201    The applicants have not put forward any arguments capable of calling into question the explanations provided in the Clarification Document, referred to in paragraph 194 above, indicating the reasons why maximising recovery in respect of those loans meant disposing of them quickly once liquidation had begun.

202    The applicants, in arguing that a longer disposal period would have allowed for greater recoveries, merely point to alleged differences in the Valuer’s approach between the disposal of the non-performing loans portfolio and the disposal of the real estate assets as regards macroeconomic risks, or state that their experts have a different opinion on the costs of maintaining the non-performing loans portfolio and on the reluctance of defaulted borrowers to negotiate. However, neither the comparison with the valuation of the real estate assets nor the comparison with the assessments in their expert report is capable of establishing that the Valuer made a manifest error of assessment in taking into consideration a disposal period of 18 months.

203    In the second place, the applicants maintain that the recovery estimate in respect of non-performing loans is inconsistent with the benchmark data. They claim that the internal rate of recovery (IRR) of 16% applied by the Valuer in Valuation 3 is unduly high, which has the consequence of driving down the price of the non-performing loans portfolio.

204    The applicants submit that the Valuer dismissed actual market data on the IRR, on the basis of the ‘lesser quality’ of the disposal process and the liquidator’s inability to ‘provide representations and warranties’. According to the applicants, those statements assume that the liquidation would be mismanaged by the liquidator in breach of the requirements of Law 22/2003. Moreover, market studies carried out by their experts show that the lack of representations and warranties has a limited impact on the IRR.

205    In Valuation 3, the Valuer stated the following:

‘IRR: we have assumed that the distressed investors interested in this type of portfolio [of secured non-performing loans] would require IRRs of between 16% in the high case and 20% in the low case which are higher than we are observing in the market due to the fact that a sale of [a non-performing loans portfolio] in a liquidation scenario would have to factor in:

–        Expected lesser quality of the processes and information provided to the potential buyers;

–        Inability of the seller (the liquidator) to provide representations and warranties in the Sales and Purchase Agreement.’

206    It is sufficient to note that the Valuer did not state that the lack of information was attributable to the liquidator or that it assumed any mismanagement by the liquidator. Moreover, the applicants merely reiterate an opinion expressed by their experts following alleged market studies carried out by them, without giving any further details as to the nature of those studies or their results. Accordingly, those arguments must be rejected.

207    Furthermore, as the SRB notes, actual market data cannot serve as benchmark data in hypothetical insolvency proceedings and will require adjustments in order to take account of the challenges, in particular administrative challenges, involved in liquidation.

208    It follows that the applicants have not established that the SRB and the Valuer made a manifest error of assessment with regard to the valuation of the non-performing loans.

209    It is apparent from the analysis of the third part of the present plea that the applicants have not raised arguments such as to make implausible the Valuer’s assessments relating to the valuation of Banco Popular’s non-performing loans portfolio. They have therefore not established that the SRB made a manifest error of assessment in relying on those assessments in the contested decision.

210    Accordingly, the third part must be rejected.

(d)    The fourth part, concerning the valuation of the real estate assets

211    The applicants claim that the Valuer’s valuation of the real estate assets indirectly owned by Banco Popular is based on inconsistent assumptions and that the SRB made manifest errors of assessment that resulted in understated recovery estimates relating to those assets.

212    They submit that the Valuer’s assumption that the real estate assets indirectly owned by Banco Popular, namely real estate subsidiaries, would be disposed of within an accelerated period of 18 months regardless of the liquidation scenario considered, is at odds with its assessment of the real estate assets directly owned by Banco Popular, the disposal of which would be spread over the entire liquidation period in order to maximise recoveries.

213    The applicants also submit that the Valuer did not quantify, and the SRB did not consider, recoveries achievable over a longer disposal period corresponding to the disposal period taken into account for the real estate assets directly owned by Banco Popular. Relying on their expert report, they dispute the reasons, put forward by the Valuer in the Clarification Document, for which it considered that a longer disposal period for real estate subsidiaries did not make it possible to maximise recoveries.

214    In the contested decision, the SRB noted that some affected shareholders and creditors had argued, during the right to be heard process, that the Valuer’s proposed liquidation strategy for real estate subsidiaries was inappropriate and inconsistent with the information detailed in Valuation 3 relating to the real estate assets directly owned by Banco Popular. They had alleged that realisations would be maximised through an orderly disposal of assets over the entire liquidation period and that the 18-month period had been unnecessarily accelerated, resulting in a significant understatement of recoveries.

215    The SRB stated that, as explained in the Clarification Document, for real estate subsidiaries, the Valuer had considered that the going concern sales of the real estate subsidiaries within the first 18 months of the liquidation was the optimum realisation strategy. The SRB noted that considering the real estate subsidiaries as ongoing companies and not simple property owners allowed those subsidiaries to be realised, once sold, in a quicker and more orderly way, without distressed property prices or saturating market capacity. It added that, while the Valuer considered alternative strategies, including for Banco Popular to retain the entities and work out the assets itself or to phase the disposals over a longer period, such strategies would have entailed a more capital-intensive and complex process and additional costs and risks that the liquidator would be reluctant to accept, without certainty to achieve higher recoveries.

216    In that regard, in the Clarification Document, the Valuer set out the reasons why it had not adopted, in Valuation 3, a strategy for disposing of the real estate subsidiaries over a longer period. The Valuer stated the following:

‘When preparing [Valuation 3], we considered alternative strategies, including for [Banco Popular] to retain the entities and work the assets out itself over a longer period or to phase the disposals over a longer period; however, this would have been a potentially more capital-intensive and complex process to manage – in particular considering [Banco Popular]’s liquidation. Specifically, pending asset disposals, the entities could require funding, moreover, in the context of [Banco Popular]’s failure and [the] potential macro-economic impact on asset values[,] such a strategy would expose the Liquidator to additional risk (including from an operational perspective) which, in our opinion, the Liquidator would be reluctant to accept. Moreover, given the additional costs and risks, we considered that a longer period of time for the sale of these entities would potentially negatively impact the realisable amount, given the potential impact of a liquidation process of the parent [company] [on] the management of these entities. Furthermore, the non-sale of real estate subsidiaries until the end of the liquidation timeline would entail higher liquidation costs, as well as higher management and maintenance costs, and not necessarily higher recoveries.’

217    It follows that the Valuer explained that, in so far as it had considered the disposal of Banco Popular’s real estate subsidiaries as going concerns and not as indirectly owned real estate assets, disposal over a period longer than 18 months did not allow for a maximisation of recoveries.

218    In that regard, the applicants state that the justifications put forward by the Valuer applied both to the real estate assets indirectly owned by Banco Popular and to those directly owned by it. They dispute the assumption that the management of the indirectly owned real estate assets would entail additional costs, in so far as, according to their experts, the liquidator would have benefited from the expertise of the real estate subsidiaries which would have assisted the liquidator in managing the risk associated with the real estate assets. They state that they are unaware of the specific funding needs referred to by the Valuer.

219    It should be noted that those arguments are not sufficient to call into question the explanations provided by the SRB and the Valuer that a disposal, over a longer period, of the real estate subsidiaries as indirectly owned real estate assets would increase both the costs associated with the operation of those subsidiaries and the liquidation costs, as well as the risks, taking into account in particular the likelihood of saturation of the property market, and therefore did not allow for the maximisation of recoveries.

220    Moreover, the applicants’ arguments do not establish that the Valuer made a manifest error of assessment in considering the disposal of Banco Popular’s real estate subsidiaries as going concerns. The fact that, according to their expert report, another strategy was conceivable, namely the disposal of those subsidiaries as indirectly owned real estate assets, is not sufficient to make the assumption adopted by the Valuer implausible.

221    In that regard, it must be borne in mind that, as stated in paragraphs 196 and 197 above, the applicants do not dispute the valuation methodology adopted by the Valuer, according to which it considered the optimal strategy and disposal period to maximise realisations for the different asset classes, according to their underlying nature and liquidity.

222    Thus, the applicants cannot validly maintain that taking different disposal periods into account for two different asset classes, namely real estate subsidiaries as going concerns and immovable assets directly owned by Banco Popular, is contradictory.

223    In addition, in so far as the Valuer explained why the disposal of the real estate subsidiaries as indirectly owned real estate assets did not make it possible to achieve higher recoveries, the applicants are incorrect in claiming that it did not quantify the recoveries resulting from such an assumption.

224    Last, it should be noted that the applicants’ arguments and the expert report on which they rely, seeking to establish that the Valuer should have considered a longer disposal period, are based on the assumption that the real estate subsidiaries are disposed of as real estate assets indirectly owned by Banco Popular. Those arguments are therefore not capable of calling into question the Valuer’s assessment of the disposal period for real estate subsidiaries as going concerns.

225    In that regard, it should be noted that the applicants do not claim that, in the event of a disposal of Banco Popular’s real estate subsidiaries as going concerns, it would be incorrect to take into account an 18-month disposal period.

226    It follows that the applicants have not put forward any arguments such as to make the Valuer’s assessments relating to the valuation of Banco Popular’s real estate subsidiaries implausible. They have therefore not established that the SRB made a manifest error of assessment in relying on those assessments in the contested decision.

227    Accordingly, the fourth part must be rejected.

(e)    The fifth part, concerning the valuation of the legal contingencies

228    The applicants claim that the estimate of the legal contingencies, in Valuation 3, in a very wide range from EUR 1.8 billion in the best-case scenario to EUR 3.5 billion in the worst-case scenario, stems from errors of law and manifest errors of assessment and led to an arbitrary overestimation of the provisions for legal contingencies and a reduction in the level of recoveries.

229    In Valuation 3, the Valuer set out its general approach to the valuation of the legal contingencies. It stated that it had reviewed Banco Popular’s financial statements and considered, together with the bank’s internal legal team, whether the estimates should be revised or whether additional claims could arise in the event of the bank’s liquidation. It explained that it recalculated the legal contingencies included in the financial statements using its own assumptions based on the information provided by the bank and to reflect existing legal precedent where appropriate. It noted that the declaration of insolvency did not prevent the parties from lodging new claims and that, indeed, its experience of other situations suggested that potentially material and hitherto unforeseen additional claims could arise in a liquidation scenario as clients, creditors or shareholders seek to maximise their recovery prospects. It also stated that, as with any legal proceeding, it was not possible to predict how the courts would view the claims received, especially such claims as were then purely hypothetical. In those circumstances, it considered that its analysis could represent a conservative assessment of potential legal contingencies for valuation purposes.

230    As regards the methodology and assumptions used, the Valuer explained that it had assumed that the main legal contingencies were included in Banco Popular’s financial statements and that it had reviewed the assumptions made by the bank and recalculated the potential amount which could be claimed. It stated that it had included in its analysis the existing risk attaching to capital increase claims in a liquidation scenario, based on its knowledge of the sector.

231    The Valuer then explained the method it had used to assess each category of legal contingencies, namely floor clauses in mortgage loans, mandatorily convertible notes, mortgage loan expenses, Banco Popular’s capital increases in 2012 and 2016, and real estate development bank guarantees.

232    In the first place, the applicants claim that the Valuer’s approach is inconsistent with Spanish law. They maintain, relying on A’s witness statement annexed to the application, that, in normal insolvency proceedings under Spanish law, the liquidator does not ordinarily make provisions for pending or potential claims against the entity in liquidation. According to the applicants, Spanish law avoids the liquidator speculating on the outcome of claims that have not yet materialised, so as not to prejudice existing creditors. The liquidator could, exceptionally, make provision for the value of a pending claim that has already been filed if he or she considered it very likely that the claim would succeed, but, in line with the liquidator’s obligation to maximise returns for existing creditors, he or she would not value any claims that have not yet been filed.

233    In that regard, it is sufficient to note that that argument made by the applicants is based on mere statements made by their witness, A, who does not expressly refer to any provision of Spanish legislation.

234    In addition, as noted by the SRB, Article 87(4) of Law 22/2003 provides:

‘When the insolvency court considers fulfilment of the termination condition or confirmation of the contingent claim to be likely, the court may, at the request of one of the parties, adopt precautionary measures for provisions to be made in respect of the estate, for securities to be lodged by the parties and any other measure which it considers appropriate in each individual case.’

235    It follows that, contrary to what the applicants maintain, Law 22/2003 does not limit the possibility for the liquidator to take claims into account to the exceptional case where he or she considers that it is ‘very likely’ that they will succeed.

236    In the second place, the applicants maintain that the Valuer recalculated the amount of the provisions for legal contingencies already provided for in Banco Popular’s financial statements not on the basis of the claims already filed but on the basis of its own experience or its own assumptions. According to the applicants, that does not constitute sufficient reason to depart from Banco Popular’s financial statements. Although the Valuer stated in Valuation 2 that a legal opinion was necessary in order to assess the probability of success of claims, there is nothing in Valuation 3 to indicate that it obtained such an opinion.

237    First, it should be noted, as observed by the SRB in the contested decision, that the Valuer stated, in Valuation 3 and in the Clarification Document, that it had consulted Banco Popular’s legal team and examined with it whether the estimates in the bank’s financial statements should be revised or whether additional claims could arise in the event of liquidation.

238    In addition, it is apparent from Valuation 3 that the Valuer relied on the applicable Spanish legislation in order to carry out the valuation. The applicants do not dispute that the Valuer possessed the ability required to carry out Valuation 3 effectively within the meaning of point 1 of Article 38 of Delegated Regulation 2016/1075, which includes ability in legal matters.

239    Therefore, the applicants cannot maintain that an additional legal opinion was necessary to carry out Valuation 3.

240    Second, as regards the fact that the Valuer’s estimates differed from the level of the provisions in Banco Popular’s financial statements, the SRB noted, in the contested decision, that it was apparent from the Clarification Document that the accounting criteria followed by Banco Popular for the calculation of the provisions of legal contingencies on a going concern basis did not apply in the context of insolvency proceedings.

241    In that regard, the Valuer explained in the Clarification Document that the accounting criteria followed by Banco Popular for the calculation of provisions of legal contingencies, outside of the insolvency proceeding, were different to those followed for the calculation to be carried out in a liquidation scenario and that the accounting criteria did not apply in insolvency. In addition, it stated that the creation of an accounting provision did not establish specific rights within the creditor hierarchy in a liquidation and did not provide a preference to those creditors to recover any amount. It stated that, accordingly, the levels of provisions calculated by Banco Popular in its financial statements would likely be different, as Banco Popular’s level of provisions did not reflect a liquidation scenario.

242    Moreover, the Valuer also stated that the opening of normal insolvency proceedings could result in additional claims that could be lodged by creditors seeking to maximise their recoveries before the end of the liquidation.

243    It follows that the Valuer gave sufficient reasons for departing from Banco Popular’s financial statements and relying on its own estimates in Valuation 3 to assess the legal contingencies in a liquidation scenario.

244    In the reply, the applicants claim that the Valuer failed to substantiate its claim that the estimates for legal contingencies would be higher in the case of an insolvency than in the case of a going concern. According to their experts, the estimate would be expected to be lower in an insolvency.

245    It is sufficient to note that, in addition to the explanation referred to in paragraph 242 above, the Valuer had indicated in Valuation 3 that liquidation proceedings typically resulted in significant litigation and claims based on hypotheses that were difficult to anticipate in advance. As stated in paragraph 229 above, it explained that, in its experience, potentially material and hitherto unforeseen additional claims could arise in a liquidation scenario, with the aim of maximising recovery prospects.

246    In addition, in Valuation 3, the Valuer provided specific explanations concerning the likelihood of an increase in claims for each category of legal contingencies. For example, with regard to floor clauses in mortgage loans, it took into account the entry into force of new consumer protection legislation in 2018.

247    It follows that the Valuer gave sufficient reasons for estimating provisions for legal contingencies that were higher in Valuation 3 than those resulting from Banco Popular’s financial statements.

248    In the third place, the applicants dispute the estimates of provisions for legal contingencies in respect of Banco Popular’s capital increases in 2012 and 2016.

249    In Valuation 3, the Valuer recalled that Banco Popular had undertaken two capital increases, in November 2012 and May 2016, each for EUR 2.5 billion. It noted that the Bankia case was a precedent for how shareholders might look back to potential errors or omissions in the original capital raise prospectus as grounds for a claim which, if successful, would allow the shareholder to recover damages against the bank. In order to assess the potential claims, it explained that it had, inter alia, taken into consideration the period of time that had elapsed, stating that the limitation period in respect of the 2012 capital increase had not expired, as well as the profile of investors based on available public information and the shareholding structure provided by Banco Popular.

250    In the contested decision, the SRB noted that some affected shareholders and creditors had commented that the claims relating to the 2012 capital increase were highly unlikely given the time that had passed. It stated that, in the Clarification Document, the Valuer had considered that, while potentially less likely compared to the claims relating to the 2016 capital increase, the possibility of such claims could not be entirely ruled out. In particular, according to the Valuer, claims regarding Banco Popular’s 2012 capital increase could arise in relation to potential errors or omissions in the original capital increase prospectus and that possibility could not be ruled out because the limitation period had not yet expired. The SRB stated that, therefore, the Valuer had concluded that, although claims relating to the 2012 capital increase were highly unlikely given the time that had passed, they could not be excluded.

251    It should be noted that, in the Clarification Document, the Valuer stated that it had assumed zero claims when it established the best-case scenario regarding the valuation of the provisions for legal contingencies.

252    First, as regards the legal contingencies associated with the 2016 capital increase, the applicants state that their experts concluded that a fair, prudent and reasonable provision amounted to EUR 1.1 billion on the basis of the estimate made by Ernst & Young on behalf of Bankia and the estimate made by Banco Santander.

253    It is sufficient to note that, in accordance with paragraphs 67 to 70 above, that argument, by which the applicants merely refer to the calculation made in their expert report, is not relevant for the purpose of establishing that a manifest error of assessment was made in Valuation 3.

254    Second, the applicants claim that, in the best-case scenario and worst-case scenario, the amount of the legal contingencies associated with the 2012 capital increase should be zero, given that the claims were highly unlikely given the time that had passed and that, according to A’s witness statement, a liquidator would not be permitted to make provision for such claims.

255    In that regard, it is sufficient to recall that, as is apparent from paragraphs 234 and 235 above, the liquidator may take potential claims into account and that that argument has already been rejected.

256    The applicants have not put forward any arguments capable of calling into question the explanations provided by the Valuer and approved by the SRB, referred to in paragraph 250 above, as to why claims relating to the 2012 capital increase could still arise after the liquidation of Banco Popular.

257    In that regard, the fact, noted by the applicants, that the Valuer acknowledged, in the Clarification Document, that the possibility of claims arising in relation to the 2012 capital increase was less likely than for the 2016 capital increase is not sufficient to call into question the plausibility of the Valuer’s assumption that claims relating to the 2012 capital increase could not be entirely ruled out.

258    Furthermore, the applicants cannot maintain that the amount of the provision for legal contingencies relating to the 2012 capital increase taken into account in Valuation 3 in the worst-case scenario was substantial and manifestly incorrect by comparing the total amount of the provisions for legal contingencies in the best-case scenario and the worst-case scenario set out in Valuation 3. That total amount includes the assessment of all the categories of legal contingencies referred to in paragraph 231 above.

259    Accordingly, the applicants have not put forward any argument such as to make implausible the Valuer’s estimate that the amount of the provisions for legal contingencies relating to the 2012 capital increase might not be zero in the worst-case scenario.

260    In the fourth place, for the first time in the reply, the applicants claim that, according to Banco Santander’s 2020 financial statements, the provision in respect of floor clauses made by Banco Popular in its financial statements was correct and that the increase in that provision made by the Valuer was not justified.

261    It is sufficient to note, as observed by the SRB, that that argument relating to floor clauses was raised for the first time at the stage of the reply and that, since it is not an amplification of a plea set out in the application and the applicants have not put forward any matter of law or of fact which came to light in the course of the procedure, it is inadmissible pursuant to Article 84(1) of the Rules of Procedure. In any event, that argument, based on matters of fact that occurred subsequently to the contested decision, cannot call into question the plausibility of the assumptions made by the Valuer in Valuation 3.

262    Furthermore, the applicants are requesting that the Court adopt measures of inquiry requiring the SRB to enable the Court to verify the file and implement appropriate safeguards to enable the applicants’ representative to examine it.

263    It is important to note in that regard that, to enable the Court to determine the usefulness of measures of organisation of procedure, the party requesting them must identify the documents requested and provide the Court with at least minimum information indicating the utility of those documents for the purposes of the proceedings (see judgments of 28 July 2011, Diputación Foral de Vizcaya v Commission, C‑474/09 P to C‑476/09 P, not published, EU:C:2011:522, paragraph 92 and the case-law cited, and of 20 March 2019, Hércules Club de Fútbol v Commission, T‑766/16, EU:T:2019:173, paragraph 29 and the case-law cited).

264    It is sufficient to note that the applicants do not specify what the information they are requesting is or what its utility would be. It must be held that the applicants’ request is not sufficiently precise and should therefore not be granted.

265    It follows that the applicants have not put forward any arguments such as to make implausible the Valuer’s assessments relating to the valuation of the legal contingencies. They have therefore not established that the SRB made a manifest error of assessment in relying on those assessments in the contested decision.

266    Accordingly, the fifth part of the present plea must be rejected.

267    To conclude the first plea, the applicants claim that their right to property has been infringed. They maintain that it is apparent from their arguments set out in the five parts of that plea that the finding in the contested decision that no compensation is due to them does not amount to fair compensation. According to the evidence that they provided, they would have received full recovery, or at least a substantial part, of their bonds in normal insolvency proceedings.

268    Since the five parts of the first plea have been rejected, it is sufficient to note that the applicants have not established that the SRB made a manifest error of assessment in deciding not to award them compensation. They cannot therefore validly maintain that that decision infringes their right to property.

269    It follows that the first plea must be rejected.

3.      The second plea, alleging that the SRB made a manifest error of assessment in appointing the Valuer as an independent valuer

270    The applicants claim that the SRB made a manifest error of assessment or an error of law in appointing the Valuer to carry out Valuation 3 in breach of Article 20(16) of Regulation No 806/2014. First, they submit that the SRB did not examine whether the Valuer was independent. Second, they maintain that, in any event, the Valuer was not an independent valuer for the purposes of Article 38 of Delegated Regulation 2016/1075.

(a)    The first part, alleging that the SRB did not examine whether the Valuer was independent

271    The applicants claim that the SRB delegated to the Valuer itself the duty to check whether the Valuer was independent, in breach of Article 41 of Delegated Regulation 2016/1075. The SRB did not give details regarding the internal conflict checks which it had asked the Valuer to undertake, or the sufficient safeguards that the Valuer had purportedly applied, the professional standards it allegedly followed, or the oversight that the SRB retained to ensure that no actual or potential material interests arose that could influence or be reasonably perceived to influence the Valuer’s judgement in the process.

272    In accordance with Article 20(16) of Regulation No 806/2014, the SRB is to ensure that a valuation is carried out by an independent person referred to in paragraph 1 of that article, namely by a person independent from any public authority, including the SRB and the national resolution authority, and from the entity concerned.

273    During the procurement procedure that led to the award of the specific contract referred to in paragraph 4 above to the Valuer, on 18 May 2017 the Valuer provided the SRB with a declaration of absence of conflict of interest with Banco Popular. On 22 May 2017, the Valuer provided a declaration of absence of conflict of interest in its ‘Proposal for provision of advice and assistance on economic and financial valuation under Lot 2 (SRB/OP/1/2015)’ in which it referred to the services it had provided to Banco Popular.

274    On 23 May 2017, on the date of its appointment as a valuer, it also produced a declaration concerning its independence in accordance with Delegated Regulation 2016/1075, in which it stated, inter alia, that it was aware of the legal requirements and that the appropriate arrangements had been made where necessary in order to ensure that neither it nor any member of the team proposed to perform the specific contract had any material interest as defined in Article 41 of Delegated Regulation 2016/1075. It undertook to put in place all the necessary arrangements to ensure that any future services provided to the other parties would not compromise its independence. It noted that any addition of new members to its team would be subject to compliance with the independence requirements and to the SRB’s approval.

275    After its appointment as a valuer, on 21 September 2017 and 11 April 2019 the Valuer provided additional declarations concerning its independence following the addition of new members to the team working on Valuation 3.

276    In addition, on 18 December 2019, at the request of the SRB following comments from the affected shareholders and creditors during the right to be heard process, the Valuer submitted a further declaration of absence of conflict of interest. It confirmed that, on 15 November 2019, based on its systems and controls, it was and had been independent for the purposes of Valuation 3 and that it was not aware of any conflicts with other work it had performed, nor any individual conflicts. It indicated, inter alia, the services which it had provided to Banco Santander and stated that there was no link between those services and the services provided to the SRB for the purpose of drawing up Valuation 3 or the Clarification Document. It added that it had not provided services relating to valuation or financial reporting of the assets or liabilities that were the subject of Valuation 3.

277    In the contested decision, the SRB considered that the Valuer was independent in accordance with the requirements of Article 20(1) of Regulation No 806/2014 and Chapter IV of Delegated Regulation 2016/1075. It noted that the Valuer had been selected through a public procurement procedure, following which the SRB considered that it possessed the necessary qualifications, experience, ability, knowledge and resources to carry out Valuation 3, without undue reliance on any relevant public authority or Banco Popular, in accordance with the requirements of point 1 of Article 38 and Article 39 of Delegated Regulation 2016/1075. The SRB concluded that the Valuer – taking into account the nature, size and complexity of the valuation to be performed – held such human and technical resources as appropriate to carry out Valuation 3, in accordance with Article 39(2) of Delegated Regulation 2016/1075.

278    Moreover, the SRB considered that the Valuer was a legal entity independent from public authorities and from Banco Popular and, in that regard, that it was fully independent from the SRB and had not been engaged for the annual accounting work of Banco Popular.

279    Last, the SRB noted that, with regard to the absence of actual or potential material common or conflicting interests, as required by Article 41 of Delegated Regulation 2016/1075, the Valuer had undertaken an internal check in accordance with the applicable professional standards. Based on the outcome of that check, the Valuer considered that it had no conflict of interest in respect of its appointment as an independent valuer. In that regard, the SRB referred to the various declarations of absence of conflict of interest provided by the Valuer during the procurement procedure and after its appointment, intended to guarantee its independence and that of the members of its teams, in particular the team tasked with carrying out Valuation 3.

280    Based on those declarations and assurances provided by the Valuer, the SRB considered that the Valuer applied sufficient safeguards to avoid any actual or potential material interest in common or in conflict with any relevant public authority or Banco Popular arising. It concluded that the Valuer was independent in accordance with the requirements of Article 20(16) of Regulation No 806/2014 and Articles 39 to 41 of Delegated Regulation 2016/1075.

281    Furthermore, in Section 6.2.1 of the contested decision, entitled ‘Comments related to the independence of the Valuer’, the SRB specifically responded to the comments of the affected shareholders and creditors relating to the Valuer’s lack of independence vis-à-vis Banco Santander and Banco Popular and to the fact that it had carried out Valuation 2. That section of the contested decision contains the SRB’s detailed reasoning explaining that the Valuer, when it was appointed and while it was conducting Valuation 3, did not have any actual or potential material interest in common or in conflict within the meaning of Article 41 of Delegated Regulation 2016/1075.

282    It is thus apparent from the contested decision that the SRB examined the various declarations of absence of conflict of interest sent by the Valuer and referred to in paragraphs 273 to 276 above, which contained, inter alia, a description of the services provided by the Valuer to Banco Popular and to Banco Santander. In addition, it is apparent from the declaration of absence of conflict of interest of 18 December 2019 that it had been produced by the Valuer at the request of the SRB following certain comments from the affected shareholders and creditors in order to provide additional information as to whether there was a possible conflict of interest in the light of the services provided to Banco Santander.

283    It follows that, throughout the procedure relating to the resolution of Banco Popular, the SRB ensured, as it was required to do, that the Valuer complied with the requirements of independence and, in particular, those relating to the absence of a conflict of interest laid down in Article 41 of Delegated Regulation 2016/1075.

284    Furthermore, contrary to what is claimed by the applicants, the contested decision contained sufficient information to determine the requirements and procedures used by the SRB to verify the independence of the valuer.

285    In that regard, the applicants request that the Court adopt a measure of inquiry requiring the SRB or the Valuer to provide information clarifying the relationship between the Valuer and Banco Popular and Banco Santander.

286    It is sufficient to recall that, as regards applications made by a party for measures of organisation of procedure or measures of inquiry, the Court is the sole judge of any need to supplement the information available to it in respect of the cases before it (see judgments of 4 March 2021, Liaño Reig v SRB, C‑947/19 P, EU:C:2021:172, paragraph 98 and the case-law cited, and of 1 June 2022, Algebris (UK) and Anchorage Capital Group v Commission, T‑570/17, EU:T:2022:314, paragraph 435 and the case-law cited).

287    Given that the SRB annexed to the defence the Valuer’s declarations referred to in paragraphs 273 to 276 above, in which the Valuer describes the services it provided to Banco Popular and to Banco Santander, the measure of inquiry requested by the applicants is not necessary.

288    The first part of the present plea must therefore be rejected.

(b)    The second part, alleging that the Valuer was not independent within the meaning of Article 38 of Delegated Regulation 2016/1075

289    The applicants submit that, in the light of the factors set out in Article 41(4)(a) and (c) of Delegated Regulation 2016/1075, the Valuer did not fulfil the conditions for being considered to have no actual or potential material interest in common or in conflict with a relevant public authority or with the relevant entity for three reasons, relating to the relationship between the Valuer and Banco Popular, the services provided to Banco Santander and the fact that it had carried out Valuation 2.

290    In that regard, it should be noted that the rules on the independence of valuers are set out in Chapter IV of Delegated Regulation 2016/1075, Article 38 of which provides:

‘A legal or natural person may be appointed as a valuer. The valuer shall be deemed to be independent from any relevant public authority and the relevant entity where all the following conditions are met:

(1)      the valuer possesses the qualifications, experience, ability, knowledge and resources required and can carry out the valuation effectively without undue reliance on any relevant public authority or the relevant entity in accordance with Article 39;

(2)      the valuer is legally separated from the relevant public authorities and the relevant entity in accordance with Article 40;

(3)      the valuer has no material common or conflicting interest within the meaning of Article 41.’

291    Article 41 of Delegated Regulation 2016/1075, relating to material common or conflicting interests, provides:

‘1. The independent valuer shall not have an actual or potential material interest in common or in conflict with any relevant public authority or the relevant entity.

2. For the purposes of paragraph 1 an actual or potential interest shall be deemed material whenever, in the assessment of the appointing authority or such other authority as may be empowered to perform this task in the Member State concerned, it could influence, or be reasonably perceived to influence, the independent valuer’s judgement in carrying out the valuation.

3. For the purposes of paragraph 1 interests in common or in conflict with at least the following parties shall be relevant:

(a)      the senior management and the members of the management body of the relevant entity;

(b)      the legal or natural persons who control or have a qualifying holding in the relevant entity;

(c)      the creditors identified by the appointing authority, or such other authority as may be empowered to perform this task in the Member State concerned, to be significant on the basis of the information available to the appointing authority or such other authority as may be empowered to perform this task in the Member State concerned;

(d)      each group entity.

4. For the purposes of paragraph 1 at least the following matters shall be relevant:

(a)      the provision by the independent valuer of services, including the past provision of services, to the relevant entity and the persons referred to in paragraph 3, and in particular the link between those services and the elements relevant for the valuation;

(b)      personal and financial relationships between the independent valuer and the relevant entity and the persons referred to in paragraph 3;

(c)      investments or other material financial interests of the independent valuer;

(d)      in relation to legal persons, any structural separation or other arrangements that shall be put in place to address any threats to independence such as self-review, self-interest, advocacy, familiarity, trust or intimidation, including arrangements to differentiate between those staff members who may be involved in the valuation and other staff members.

…’

292    As a preliminary point, it must be observed that the applicants do not dispute that the conditions laid down in points 1 and 2 of Article 38 of Delegated Regulation 2016/1075 were met by the Valuer, that is to say that it possessed the qualifications, experience, ability, knowledge and resources required to carry out Valuation 3 effectively and that it was legally separate from the relevant public authorities and from Banco Popular.

293    Nor do they claim that the Valuer had an actual or potential material interest in common or in conflict with the relevant public authority, namely the SRB.

(1)    The first complaint, relating to the links between the Valuer and Banco Popular

294    The applicants submit that the Valuer was not independent from Banco Popular, in that it appears to have provided Banco Popular with services between 2012 and 2016, including services relevant to Valuation 3. The SRB failed to take into account the existence of material conflicts of interest between the Valuer and Banco Popular, in breach of Article 41(4) of Delegated Regulation 2016/1075.

295    First, the applicants claim that the Valuer was Banco Popular’s auditor in 2012.

296    In that regard, it is sufficient to note that it is clear from the information on the website of the Comisión nacional del mercado de valores (CNMV) (National Securities Market Commission, Spain), referred to by the SRB, that the Valuer was not Banco Popular’s auditor between 1991 and 2017.

297    Moreover, the applicants’ argument is based on a misreading of the Bank of Spain’s document of 28 September 2012 entitled ‘Proceso de recapitalización y reestructuración bancaria’ (Bank recapitalisation and restructuring process), which they produce as an annex to the application.

298    The table taken from that document does not state that the Valuer was Banco Popular’s auditor in 2012, which the applicants acknowledged at the hearing. It is apparent from that document that the Bank of Spain entrusted the Valuer with work concerning the accounting review of the credit portfolio and the assets foreclosed or received in payment of debts of Banco Popular and three other banks, as part of the independent assessment of the Spanish banking sector carried out in 2012.

299    Furthermore, it should be noted that, in its declaration of absence of conflict of interest of 22 May 2017, referred to in paragraph 273 above, the Valuer specified that it was not Banco Popular’s auditor.

300    It follows that, contrary to what is claimed by the applicants, the Valuer did not provide auditing services to Banco Popular.

301    Second, the applicants submit that, in 2015, the Valuer advised Banco Popular on the sale of Popular Banca Privada, SA (‘Banca Privada’). They rely on an extract from Banco Popular’s registration document of 2015, according to which ‘in November 2015, [Banco] Popular commissioned [the Valuer] to sell 40% of its subsidiary Popular Banca Privada’ and according to which ‘as of the date of this document, no firm sale [had] taken place and the initial percentage established [could] be different’.

302    In that regard, it should be noted that, in its declaration of absence of conflict of interest referred to in paragraph 273 above, the Valuer stated that it had provided valuation and transaction support to Banco Popular, but that those services did not constitute a conflict of interest in so far as they concerned either assistance on sales of assets or businesses that were no longer part of the bank, or buy-and-sell side support to non-significant deals that were aborted or had no material value.

303    It is sufficient to note that it is apparent from Valuation 3 that, at the resolution date, Banca Privada was a subsidiary owned by Banco Popular and that the transaction referred to by the applicants had not taken place in 2015.

304    Third, the applicants state that, according to a press article, Banco Popular had hired the Valuer in 2016 to advise it on the implementation of new regulatory standards, namely Circular 4/2017 of the Bank of Spain and IFRS 9, the use of which they dispute in Valuation 3. According to the applicants, such services are provided for in recital 40 and Article 41(4) of Delegated Regulation 2016/1075.

305    The applicants rely on an article in El Mundo of 13 February 2018, entitled ‘[The Valuer] advised Angel Ron in 2016 on Banco Popular’s accounting policy’, from which it is apparent that the Valuer had been hired in 2016 by Banco Popular for technical advice on the consequences of the entry into force of IFRS 9 for the new regulatory provisions to be applied from 1 January 2018.

306    It is apparent from that article that the Valuer stated that at no time had it worked on any aspect of the provisions recorded by Banco Popular and that this was advice on how the bank should adapt to new rules that came into force on 1 January 2018.

307    The applicants have not adduced any evidence capable of calling into question those statements made by the Valuer regarding the nature of the services provided to Banco Popular in connection with the implementation of IFRS 9.

308    Accordingly, the applicants have not established that there was a link between the services provided by the Valuer to Banco Popular, in connection with both the proposed sale of Banca Privada and the implementation of IFRS 9, and the elements relevant for Valuation 3, within the meaning of Article 41(4)(a) of Delegated Regulation 2016/1075. The applicants have not explained to what extent those services provided by the Valuer to Banco Popular in the past could influence the valuer’s judgement in carrying out Valuation 3 and therefore establish that there was an actual or potential material interest in common or in conflict with Banco Popular, within the meaning of Article 41(2) of that delegated regulation.

309    The first complaint must therefore be rejected.

(2)    The second complaint, relating to the links between the Valuer and Banco Santander

310    The applicants claim that the Valuer had provided accounting services to Banco Santander from 2002 to 2016 and was the main auditor for the Santander Group in 2015. They submit that, contrary to what the SRB stated in the contested decision, the fact that the Valuer might have been independent on 23 May 2017, the date on which the SRB appointed it as a valuer, is not relevant for the purposes of Valuation 3. While the SRB could not have planned for Banco Santander’s involvement in the resolution procedure in May 2017, it should have taken that factor into account in June 2017 when it instructed the Valuer to carry out Valuation 3. The SRB should also have taken into account the services provided by the Valuer to Banco Santander following the resolution of Banco Popular when Banco Popular was integrated into the Santander Group.

311    The applicants maintain that the services provided by the Valuer to Banco Santander are relevant in the light of Article 41(4)(a) of Delegated Regulation 2016/1075, which concerns the provision of prior services to an entity that owns the entity in resolution.

312    In that regard, it should be noted that, during the right to be heard process, some of the affected shareholders and creditors submitted comments on the independence of the Valuer, which was, according to them, compromised by the fact that it had provided services to Banco Santander before and after the resolution of Banco Popular.

313    First, in the contested decision, in response to those comments, the SRB considered that in its assessment of independence conducted at the time of the engagement of the Valuer on 23 May 2017, it was not required to take into account the audit services provided to Banco Santander by the Valuer, since that assessment had been carried out in relation to Banco Popular. The SRB stated that, at that point in time, an assessment of the independence of the Valuer vis-à-vis the potential purchasers had not been performed since, on the one hand, it was not envisaged in the legal framework and, on the other, the valuation procedure was a separate process from the marketing procedure which determined the purchaser. In particular, the Valuer did not have access to any information on the names of the potential purchasers or the identity of the purchaser until the adoption of the resolution scheme.

314    The SRB considered that, in the light of the scope and the purpose of Valuation 3, the audit services provided in the past by the Valuer to Banco Santander did not interfere with the independence of the Valuer regarding the performance of Valuation 3 and did not give rise to an actual or potential material interest in common or in conflict, within the meaning of Article 41 of Delegated Regulation 2016/1075. In particular, it noted that Valuation 3 concerned only the assets and liabilities of Banco Popular prior to its sale to Banco Santander and not those of Banco Santander.

315    Second, the SRB considered that the services relating to the integration of Banco Popular provided by the Valuer to Banco Santander did not constitute a material conflict of interest or interest in common within the meaning of Article 41(2) and (4) of Delegated Regulation 2016/1075, with a relevant person within the meaning of Article 41(3) of that delegated regulation.

316    On the one hand, the SRB considered that, in the light of the scope and the purpose of Valuation 3, the services provided by the Valuer after the resolution date on a going concern basis could not affect Valuation 3 and the elements therein. Moreover, it noted that Valuation 3 could not adversely affect the position of Banco Popular or of Banco Santander, since it determined only whether compensation through the Single Resolution Fund (SRF) should be paid to the affected shareholders and creditors.

317    On the other hand, the SRB considered that, in any event, after the adoption of the resolution scheme, the Valuer had provided additional assurances to guarantee that the services rendered to Banco Santander could not give rise to an actual or potential material interest in common or in conflict. The SRB noted that, in its declaration of 18 December 2019, the Valuer had confirmed that no service provided to Banco Santander was related to the valuation or the financial reporting of the assets or liabilities that were the subject of Valuation 3. In addition, it stated that the Valuer had confirmed that there was no information flow between the valuation work performed and other projects, given the safeguards put in place and the Valuer’s confidentiality protocols.

318    In particular, as regards the services provided in relation to the integration of Banco Popular, the SRB stated that the Valuer had clarified to the satisfaction of the SRB that even though it had provided consulting services to Banco Santander, they were not related to the services provided to the SRB, did not relate to any matter in connection with the valuation services provided to the SRB and did not comprise valuation or legal services related to Banco Popular.

319    In that regard, it should be noted that, in its declaration of absence of conflict of interest of 18 December 2019, referred to in paragraph 276 above, the Valuer stated that there was no link between the services that it provided to Banco Santander and Valuation 3 or the Clarification Document.

320    Pursuant to Article 41(4)(a) of Delegated Regulation 2016/1075, for the purpose of establishing the existence of an actual or potential material interest in common or in conflict within the meaning of paragraph 1 of that article, the provision by the independent valuer of services, including the past provision of services, to the relevant entity and the persons referred to in paragraph 3, and in particular the link between those services and the elements relevant for the valuation, is relevant.

321    It must be stated that the applicants have not put forward any argument seeking to call into question the SRB’s assessments relating to the absence of a link between, on the one hand, the auditing services and the services relating to the integration of Banco Popular provided by the Valuer to Banco Santander and, on the other hand, the elements relevant to Valuation 3, which concerned only the valuation of Banco Popular and not that of Banco Santander.

322    The applicants do not explain how those services could have influenced or could have been reasonably perceived to influence the Valuer’s judgement in carrying out Valuation 3, within the meaning of Article 41(2) of Delegated Regulation 2016/1075.

323    Furthermore, the applicants submit that the Valuer had a material financial interest in keeping Banco Santander satisfied with a negative valuation of Banco Popular. They submit that the fact that the compensation is paid by the SRF rather than Banco Santander ignores the reality that, if the ongoing proceedings before the Court for annulment of the resolution scheme were successful, Banco Santander might be compelled to pay a higher price for Banco Popular. It is therefore in Banco Santander’s interest that Valuation 3 does not reveal a substantially higher value of Banco Popular’s recoveries in insolvency than that found in Valuation 2.

324    In the contested decision, the SRB noted that, considering the purpose of Valuation 3, which is to determine whether the affected shareholders and creditors would have received better treatment in hypothetical normal insolvency proceedings, Valuation 3 could not have an effect on the sale of Banco Popular and could not adversely affect the position of Banco Santander. The SRB found that the only effect of Valuation 3 was ultimately on the SRB, in so far as it would be required to pay compensation through the SRF in case of a difference in treatment.

325    It should be noted that the applicants do not claim that the outcome of Valuation 3 has an influence on the legality and legitimacy of the decision to place Banco Popular under resolution as well as the outcome of that resolution, namely the sale of Banco Popular to Banco Santander.

326    In addition, it should be recalled that Valuation 2 had a different purpose to that of Valuation 3, namely to estimate the total value of Banco Popular for a potential purchaser in connection with the application of the sale of business tool. Thus, the estimate of the value of Banco Popular’s assets in hypothetical normal insolvency proceedings carried out in Valuation 3 is not capable of calling into question the assessment carried out in Valuation 2.

327    Last, according to the last subparagraph of Article 85(4) of Directive 2014/59, where it is necessary to protect the interests of third parties acting in good faith who have acquired shares of an institution under resolution by virtue of the use of resolution tools, the annulment of a decision of a resolution authority is not to affect any subsequent administrative acts or transactions concluded by the resolution authority concerned which were based on the annulled decision.

328    Accordingly, contrary to what the applicants submit, the possible annulment of the resolution decision cannot lead to a change in the conditions of the sale of Banco Popular to Banco Santander. Therefore, in any event, the sale of Banco Popular to Banco Santander for the price of EUR 1 cannot be called into question and the outcome of Valuation 3 is immaterial in that regard.

329    Furthermore, at the hearing, the applicants referred to the impact that the annulment of the contested decision could have on criminal proceedings brought before the Spanish courts.

330    In that regard, it is sufficient to note that the Court of Justice has held that both an action for damages and an action for a declaration of nullity essentially require that the credit institution or investment firm under resolution, or the successor of those entities, compensate shareholders for the losses incurred as a consequence of the exercise by a resolution authority of the write-down and conversion powers in relation to liabilities of that institution or firm, or require that it reimburse in full the sums invested during the subscription of shares that have been written down as a result of that resolution procedure. Such actions would call into question the entire valuation upon which the resolution decision is based because the breakdown of the capital forms part of the objective data for that valuation. As noted by Advocate General Richard de la Tour in points 82 and 95 of his Opinion, the resolution procedure itself as well as the objectives pursued by Directive 2014/59 would thus be frustrated (judgment of 5 May 2022, Banco Santander (Resolution of Banco Popular), C‑410/20, EU:C:2022:351, paragraph 43).

331    Therefore, in so far as Valuation 3, whatever its outcome, could not affect Banco Santander’s situation, the applicants are incorrect in claiming that the Valuer had an interest in favouring Banco Santander.

332    It follows that the applicants have not established that the SRB made a manifest error in considering that the services provided by the Valuer to Banco Santander did not establish that there were actual or potential material interests that could influence or be reasonably perceived to influence its judgement, within the meaning of Article 41 of Delegated Regulation 2016/1075.

333    Accordingly, the second complaint must be rejected.

(3)    The third complaint, relating to the fact that the Valuer had carried out Valuation 2

334    The applicants claim that the previous involvement of the Valuer in the resolution process could have influenced its judgement. Valuation 3 appears to have been engineered to reach a conclusion consistent with the assessment of difference in treatment set out in Valuation 2. They maintain that the SRB had opportunities to appoint another valuer.

335    It must be observed that that complaint concerns the second part of Valuation 2, which contains a simulation of a liquidation scenario and is intended, in accordance with Article 20(9) of Regulation No 806/2014, to estimate the treatment that each class of shareholders and creditors would have been expected to receive if the entity covered by the resolution action were wound up under normal insolvency proceedings under Spanish law.

336    First of all, it should be noted that no provision of Regulation No 806/2014 or Delegated Regulation 2016/1075 expressly precludes Valuations 2 and 3 from being carried out by the same valuer.

337    Next, it follows from the contested decision that, during the right to be heard process, some of the affected shareholders and creditors submitted comments on the independence of the Valuer, which was, according to them, compromised by the fact that it had had carried out both Valuation 2 and Valuation 3. The SRB noted that some of them maintained that the Valuer sought to ratify the conclusions of the ‘no creditor worse off’ analysis that it had performed in Valuation 2.

338    The SRB stated that Valuations 2 and 3 were conducted for different purposes and therefore used different approaches. Valuation 2 aimed, pursuant to Article 20(5) of Regulation No 806/2014, to inform the resolution action by estimating the economic value of Banco Popular’s assets and liabilities at the resolution date, while Valuation 3 aimed to estimate the treatment of the affected shareholders and creditors in hypothetical insolvency proceedings, that is to say, on a gone concern basis, in accordance with Article 20(18)(a) of that regulation.

339    The SRB noted that the legal framework did not prevent it from appointing the same valuer to conduct different valuations for the same resolution case and that such appointment per se did not impair the independence of the valuer.

340    The SRB stated that, while the ex-ante estimate of the treatment of the affected shareholders and creditors in hypothetical insolvency proceedings included in Valuation 2 had been performed within a specific timeframe and on the basis of the information available to the Valuer before resolution, that is to say, mainly the information available on 31 March 2017, Valuation 3 was performed on the basis of more granular information as at 6 June 2017, on the date of close of business, when available. The SRB considered that, in the light of the different information used as a basis for those assessments, as well as the different purpose thereof, the Valuer could well have reached different conclusions.

341    In the contested decision, the SRB also stated that the applicable legal framework recognised that the provisional estimate of the treatment that the affected shareholders and creditors would have been expected to receive if the entity were wound up in the context of Valuation 2 could not be as precise as the Valuation 3 assessment for several reasons, namely, inter alia, the time constraints and the lack of data as close to the resolution date in the context of Valuation 2. Thus, in accordance with Article 20(9) of Regulation No 806/2014, Valuation 2 was to include an ‘estimate’ of that treatment, whereas, in accordance with Article 20(17) of that regulation, Valuation 3 was required to ‘determine’ it. The SRB stated that the mere fact that the provisional estimate contained in Valuation 2 and Valuation 3 were similar with respect to the outcome but were based on different assumptions could not be considered in itself sufficient evidence that Valuation 3 had not been performed in line with the legal requirements.

342    In addition, first, it should be noted that, in Valuation 2, the Valuer expressed several reservations as to the reliability of the liquidation scenario simulation set out therein.

343    In that regard, in Valuation 2, the Valuer stated that it did not have all the necessary information and data or sufficient time to make a more than merely illustrative estimate at that stage. It stated on several occasions that there were several uncertainties underlying the liquidation scenario simulation and that, when more precise information became available, it would be able to refine its assumptions and prepare a more ‘robust’ and reliable liquidation scenario.

344    The applicants cannot therefore maintain that the Valuer was not independent on the ground that it considered itself bound by the findings of Valuation 2.

345    Second, in Valuation 2, the liquidation scenario simulation in respect of Banco Popular was based on the data available on 31 March 2017 and provided for a three-year scenario. In Valuation 3, the Valuer relied on the unaudited financial information of 6 June 2017 or, if that information was unavailable, on the information of 31 May 2017, in order to establish three distinct liquidation time scenarios.

346    Thus, in Valuation 3, the Valuer did not merely confirm the outcome of the simulation set out in Valuation 2.

347    In that regard, for example, in Valuation 2, the total of the realisation of Banco Popular’s assets for creditors, in the case of a three-year liquidation scenario, was estimated at between EUR 120.9 billion in the best-case scenario and EUR 116.5 billion in the worst-case scenario. In Valuation 3, for the three-year liquidation scenario, the valuation of the assets led to a different outcome, namely EUR 101.546 billion in the best-case scenario and EUR 97.593 billion in the worst-case scenario.

348    The mere fact that the Valuer reached the same conclusion, namely that the affected shareholders and creditors would not obtain any recovery in the event of Banco Popular’s liquidation, is not sufficient to establish that it considered itself bound by its assessment made in Valuation 2 when it carried out Valuation 3.

349    It is clear that the applicants’ argument that the Valuer sought to confirm Valuation 2 in Valuation 3 is contradicted by the content of those valuations.

350    It follows that the applicants have not established that the SRB erred in considering that the fact that the Valuer had carried out Valuation 2 did not call into question its independence in carrying out Valuation 3 or its appointment as an independent valuer. In that regard, the argument that the SRB could have appointed another valuer is ineffective.

351    Accordingly, the third complaint must be rejected.

352    It is apparent from the analysis of the second part of the present plea that the applicants have not raised any arguments capable of calling into question the SRB’s conclusion that the Valuer was independent within the meaning of Articles 38 and 41 of Delegated Regulation 2016/1075.

353    It follows that the second part and, accordingly, the second plea in its entirety must be rejected.

4.      The third plea, alleging that the SRB improperly delegated to the Valuer the decision-making powers conferred on it by Regulation No 806/2014

354    The applicants submit that the contested decision, which involves a wide discretion as to whether the shareholders and creditors affected by the resolution decision are to receive compensation, was adopted by the SRB on the basis of Valuation 3, which was carried out by a private entity. They maintain that, in the contested decision, the SRB merely summarised Valuation 3 and the Clarification Document, namely the essential aspects of the exercise of the discretion whether to compensate the applicants or not. The delegation to the Valuer of the assessment of all issues relating to the valuation without reviewing the underlying data or the comments of the affected shareholders and creditors, and without checking the manifestly inconsistent assumptions detailed in the first plea, is contrary to the principle laid down in the judgment of 13 June 1958, Meroni v High Authority (9/56, EU:C:1958:7).

355    The applicants claim that the SRB did not offer any evidence that it had conducted anything more than a cursory review of Valuation 3 and that it examined only the Clarification Document drawn up by the Valuer and not the comments submitted by the affected shareholders and creditors in relation to Valuation 3. The SRB did not depart from Valuation 3, and the decision as to whether the affected shareholders and creditors were entitled to compensation was effectively taken by the Valuer, which exercised the SRB’s decision-making power. They submit that the principle laid down in the judgment of 13 June 1958, Meroni v High Authority (9/56, EU:C:1958:7), applies where the SRB’s powers, even if they are clearly defined executive powers, are delegated to the Valuer without proper supervision by the SRB.

356    As a preliminary point, it should be noted that the Treaties do not contain any provision providing for the conferral of powers on an EU body, office or agency. Thus, no mention is made of agencies in either Article 290 TFEU, which provides for delegation of rule-making in legislative acts to the Commission, or Article 291 TFEU, which confers implementing powers on the Member States, the Commission, and in some limited circumstances the Council (Opinion of Advocate General Jääskinen in United Kingdom v Council and Parliament, C‑270/12, EU:C:2013:562, point 75).

357    It is therefore the case-law, and in particular the judgment of 13 June 1958, Meroni v High Authority (9/56, EU:C:1958:7), which laid down the principles governing the delegation of powers, and then the judgment of 22 January 2014, United Kingdom v Parliament and Council (C‑270/12, EU:C:2014:18), which applied those principles to cases where powers have been conferred on an agency by the EU legislature.

358    In paragraph 41 of the judgment of 22 January 2014, United Kingdom v Parliament and Council (C‑270/12, EU:C:2014:18), the Court of Justice stated that, in the judgment of 13 June 1958, Meroni v High Authority (9/56, EU:C:1958:7), it had emphasised, in essence, that the consequences resulting from a delegation of powers are very different depending on whether it involved clearly defined executive powers the exercise of which could, therefore, be subject to strict review in the light of objective criteria determined by the delegating authority, or whether it involved a ‘discretionary power implying a wide margin of discretion which [could], according to the use which [was] made of it, make possible the execution of actual economic policy’.

359    The Court of Justice added that it had also stated in the judgment of 13 June 1958, Meroni v High Authority (9/56, EU:C:1958:7) that a delegation of the first kind could not appreciably alter the consequences involved in the exercise of the powers concerned, whereas a delegation of the second kind, since it replaced the choices of the delegator by the choices of the delegate, brought about an ‘actual transfer of responsibility’. As regards the case which gave rise to the judgment of 13 June 1958, Meroni v High Authority (9/56, EU:C:1958:7), the Court of Justice held that the powers delegated by the High Authority to the bodies in question by Decision No 14-55 of 26 March 1955, establishing a financial arrangement for ensuring a regular supply of ferrous scrap for the common market (OJ 1955 8, p. 685), gave those bodies ‘a degree of latitude which implied a wide margin of discretion’, which could not be considered compatible with the ‘requirements of the Treaty’ (judgment of 22 January 2014, United Kingdom v Parliament and Council, C‑270/12, EU:C:2014:18, paragraph 42).

360    It follows from that case-law that Regulation No 806/2014 may confer on the SRB clearly defined executive powers the exercise of which may, therefore, be subject to strict review in the light of objective criteria, but that that regulation cannot confer powers on the SRB where it involves a discretionary power implying a wide margin of discretion.

361    It should be noted that, in the present case, the applicants do not raise a plea of illegality in respect of Regulation No 806/2014. They do not claim that the SRB, as an EU agency, exercised a discretionary power that should have been exercised by an EU institution. Nor do the applicants claim that the SRB’s executive powers are not clearly defined in Regulation No 806/2014 or that the SRB infringed Regulation No 806/2014 by exceeding the powers conferred on it by that regulation.

362    It follows that the applicants’ arguments criticising the SRB for conferring a decision-making power on the Valuer cannot establish an infringement of the principles relating to the delegation of powers laid down in the judgment of 13 June 1958, Meroni v High Authority (9/56, EU:C:1958:7).

363    Furthermore, as regards the applicants’ argument that the SRB delegated its decision-making power to the Valuer, it must be recalled, first of all, that the decision not to grant compensation to the affected shareholders and creditors was adopted by the SRB, not by the Valuer.

364    Next, Article 76(1)(e) of Regulation No 806/2014 expressly provides that the SRB’s decision as to whether the affected shareholders and creditors are eligible for compensation must be based on the results of an independent valuation provided for in Article 20(16) of that regulation. In addition, the content of that valuation is governed by Article 20(17) and (18) of Regulation No 806/2014 and the criteria relating to the methodologies for valuation of difference in treatment are laid down in Delegated Regulation 2018/344.

365    Thus, pursuant to Regulation No 806/2014, the economic and technical aspects of the valuation of the treatment which the affected shareholders and creditors would have received if Banco Popular had been subject to normal insolvency proceedings had to be assessed by an independent valuer and not by the SRB itself. Contrary to what the applicants claim, the fact that the SRB entrusted the Valuer with carrying out Valuation 3 cannot be construed as a delegation of its power to adopt the decision.

366    Last, before adopting a decision on possible compensation for the affected shareholders and creditors, the SRB must verify that the valuation carried out by the independent expert complies with the requirements of Regulation No 806/2014 and Delegated Regulation 2018/344 and, also, that that expert meets the independence requirements laid down in Delegated Regulation 2016/1075.

367    In that regard, first, the fact that the SRB approved the conclusions of Valuation 3 cannot be interpreted as a failure by the SRB to monitor compliance with the requirements with which the independent valuer must comply when carrying out the valuation.

368    Second, the applicants’ argument that the SRB merely summarised Valuation 3 and the Clarification Document and that it did not review the comments of the affected shareholders and creditors relating to Valuation 3 is contradicted by the content of the contested decision.

369    In Section 4 of the contested decision, the SRB assessed the independence of the Valuer in the light of the requirements of Article 20(1) of Regulation No 806/2014 and Chapter IV of Delegated Regulation 2016/1075 and, in Section 6.2.1 of the contested decision, it responded to the ‘comments related to the independence of the Valuer’.

370    In Section 5 of the contested decision, entitled ‘Valuation 3 Report’, the SRB, after summarising the content of Valuation 3, considered that Valuation 3 complied with the requirements of the applicable legal framework, in particular those laid down in Article 20(17) of Regulation No 806/2014 and Article 3, Article 4(1) to (5) and Article 6(a) and (b) of Delegated Regulation 2018/344, and that it was sufficiently reasoned and comprehensive to form the basis for a decision under Article 76(1)(e) of Regulation No 806/2014.

371    In Section 6.2.2 of the contested decision, the SRB responded to the ‘comments on the content of the Valuation 3 Report’ relating, inter alia, to the information and assumptions used in Valuation 3, to the liquidation scenario and to the methodology taken into account by the Valuer. As regards the assessment of the various asset classes carried out in Valuation 3, the SRB examined whether it remained valid in the light of the comments of the affected shareholders and creditors and the Clarification Document.

372    It results from the foregoing that the applicants are incorrect in claiming that the SRB improperly delegated to the Valuer the decision-making powers conferred on it by Regulation No 806/2014.

373    It follows that the third plea must be rejected and, accordingly, the action must be dismissed in its entirety.

IV.    Costs

374    Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicants have been unsuccessful, they must be ordered to bear their own costs and to pay those incurred by the SRB, in accordance with the form of order sought by the SRB.

375    Under Article 138(1) of the Rules of Procedure, the Member States and institutions which have intervened in the proceedings are to bear their own costs. The Kingdom of Spain must therefore bear its own costs.

On those grounds,

THE GENERAL COURT (Third Chamber, Extended Composition)

hereby:

1.      Authorises Bybrook Capital Badminton Fund LP to substitute itself for Cairn Global Funds PLC and Cairn Special Opportunities Credit Master Fund Limited as applicant.

2.      Authorises PIMCO Global Cross-asset Opportunities Master Fund LDC to substitute itself for PHFS Series SPC – PHSF VII SP as applicant.

3.      Dismisses the action.

4.      Orders ACMO Sàrl and the other applicants whose names appear in the annex to bear their own costs and to pay those incurred by the Single Resolution Board (SRB);

5.      Orders the Kingdom of Spain to bear its own costs.

Delivered in open court in Luxembourg on 22 November 2023.

Table of contents

I. Background to the dispute

II. Forms of order sought

III. Law

A. Admissibility

B. Substance

1. Preliminary observations

(a) The scope of the review carried out by the Court

(b) Admissibility of the evidence annexed to the reply

2. The first plea, alleging manifest errors of assessment concerning the assessment of the length of the insolvency period and Banco Popular’s performing loans, non-performing loans, real estate assets and legal contingencies

(a) The first part, concerning the length of the liquidation scenario

(1) The first complaint, alleging a misunderstanding of Law 22/2003

(2) The second complaint, alleging failure to take a longer liquidation period into account

(b) The second part, concerning the valuation of the performing loans

(1) The first complaint, relating to the reclassification of performing loans as non-performing loans

(2) The second complaint, relating to the prepayment assumptions for performing loans

(i) Performing corporate loans

(ii) Performing mortgage loans

(3) The third complaint, relating to the new delinquencies in respect of the remaining performing loans

(4) The fourth complaint, relating to the discount rate on the sale of the remainder of the performing loans portfolio

(c) The third part, concerning the valuation of the non-performing loans

(d) The fourth part, concerning the valuation of the real estate assets

(e) The fifth part, concerning the valuation of the legal contingencies

3. The second plea, alleging that the SRB made a manifest error of assessment in appointing the Valuer as an independent valuer

(a) The first part, alleging that the SRB did not examine whether the Valuer was independent

(b) The second part, alleging that the Valuer was not independent within the meaning of Article 38 of Delegated Regulation 2016/1075

(1) The first complaint, relating to the links between the Valuer and Banco Popular

(2) The second complaint, relating to the links between the Valuer and Banco Santander

(3) The third complaint, relating to the fact that the Valuer had carried out Valuation 2

4. The third plea, alleging that the SRB improperly delegated to the Valuer the decision-making powers conferred on it by Regulation No 806/2014

IV. Costs

*      Language of the case: English.

1      The list of the other applicants is annexed only to the version notified to the parties.

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