Santander's purchase of Popular bears an eerie resemblance to Lloyds' 2008 purchase of fellow UK bank HBOS, where a healthy bank was cajoled by government and regulators into buying a distressed bank. Will Santander be infected by the Popular's toxic assets in the same way that Lloyds was following its ill-advised purchase of HBOS? Popular wasn't the only reminder that many of Europe's banks remain in rag order. On June 1 the EU finally approved a "precautionary" recapitalisation of MPS, Italy's third-largest bank, by the Italian Government. MPS has €26bn of defaulting loans on its balance sheet with last July's European Banking Authority stress test estimating that it had a capital shortfall of €8.8bn. Although the Italian government approved the MPS recapitalisation last December, the EU has dragged its feet, arguing that the bank's bondholders, and possibly its depositors, should share some of the pain.