Sareb

Sareb is the bad bank of the Spanish government. Its purpose is to manage and disinvest high-risk assets that were transferred to it from the four nationalized Spanish financial institutions (BFA-Bankia, Catalunya Banc, NGC Banco-Banco Gallego and Banco de Valencia). The company was formed in 2012.

The main drivers of the 2008–2014 financial crisis in Spain were the weaknesses, lending practices and failures of the savings banks in Spain. It had its roots prior to 2008 which the credit crunch and sovereign crisis have exacerbated. With the Spanish Royal Decree-Law 24/2012 of 31 August 2012, Sareb was created. The Fund for Orderly Bank Restructuring (FROB) held a majority shareholding of the financial institutions which in the judgement of the Bank of Spain require restructuring or winding up in accordance with Spanish Law 9/2012 (Banco Mare Nostrum, CEISS, Caja3 and Liberbank). Private shareholders own 55% of Sareb and the remaining 45% is held by the FROB.

The creation of a separate asset resolution entity was an idea proposed by foreign specialists. Their proposals were initially contested and resisted by the Spanish authorities but later accepted as being the appropriate response to the crisis

Sareb was established as a condition set by the European Union in exchange for aid of up to 100 billion euros to the Spanish banking sector. It was designed and developed from the work of three independent specialists: Oliver Wyman, BlackRock and European Resolution Capital (ERC).

Sareb functions as a bad bank, acquiring property development loans from Spanish banks in return for government bonds, primarily with a view to improving the availability of credit in the economy. Over the 15 years Sareb has to dispose of all of its assets, its main objective will be to maximise its profitability. However, it does not possess a banking license. Sareb enjoys legal advantages which do not apply to other Spanish limited liability companies (Spanish: Sociedad Anónima), such as status as a preferential creditor for subordinated debt over other creditors. The Spanish central bank is to establish the exact price of assets transferred to the institution by Spanish banks.