What the government did was create a new non-bank entity that would take over the most problematic assets. In this way, the banks were able to clean up their balance sheets, damaged by the 2008 financial crisis. The ultimate goal was for credit to flow back into the economy.
Colloquially, it was called a “bad bank”, since society saw it as something negative, as many thought it was a form of covert aid to banks. In one way or another, it came into operation with the backing of the state.
Let’s see, below, some of the most relevant events in its history.
- This asset management company has its reason for being in the financial crisis of 2008. This produced a situation of high delinquency in Spain, especially in mortgages, which led to its creation.
- Between 2008 and 2011, former president José Luís Rodríguez Zapatero carried out his second term in Spain. In this period the financial crisis was managed differently from other countries such as Germany or Ireland and also the banking sector.
- Thus, in this second government of the PSOE, the so-called “anti-crisis provisions” were used, which turned out to be insufficient. Meanwhile, in the countries mentioned, bad banks were created first and then the banking sector was restructured.
- In 2012, with the government of Mariano Rajoy (PP), the SAREB was created following the instructions of the “troika”. Which was formed by the European Central Bank (ECB), the European Commission and the International Monetary Fund (IMF).
- In 2012 the Council of Ministers approved Royal Decree-Law 24/2012 on the restructuring and resolution of credit institutions that will regulate this bad bank and that sets a period of between 10 and 15 years to purge these toxic assets.
- The Fund for Orderly Bank Restructuring (FROB) contracted the services of Lehman Brothers, PwC and experts in legal matters such as the Cuatrecasas law firm.
Let’s see some of its main features.
- First of all, it is an asset management entity and not a bank. Therefore, it does not have a banking license and cannot lend or acquire deposits.
- The ECB sends Spain a series of indications and limitations to what is established in the royal decree, so that it seeks to guarantee the credit again.
- The nationalized banks whose toxic assets were transferred to the SAREB were BFA-Bankia, Catalunya Banc, Novagalicia Banco and Banco de Valencia.
- These entities had a total of toxic assets valued at 75,000 million euros, which were acquired by the SAREB for 40,000 million euros. The discounts recommended by the European Commission were applied to its price.
- In 2013, the real estate and financial assets managed were valued at more than 50,000 million euros.
- The ESA-95 community rule established that for the indebtedness of that bad bank not to be counted as public debt, a condition must be met, that private capital be greater than 50%.
- This was difficult, since an entity with toxic assets is not an investment that could be attractive.
- The valuation was made taking into account the characteristics, location and other variables, following the recommendations of the Oliver Wyman reports and the adjustments negotiated with the troika by the Bank of Spain.
- Some of the investment entities that formed its share capital in 2012 were Ibercaja, Bankinter or Deutsche Bank, to which were added in 2013 others such as Banco Santander, CaixaBank or BBVA.
- In January 2022, the FROB was the leading shareholder with 45.9% of the shares, followed by Banco Santander with just over 20%. However, private capital was in the majority.
To finish, we are going to see some of the criticisms that were made to the creation of this bad bank.
- Roberto Centeno, a Spanish economist and engineer, was one of his biggest critics. He came to declare that it had been constituted with a crime of fraud of law to hide the mismanagement of the financial sector.
- Carlos Sánchez Mato, an economist, described it as the scam of the century.
- Diego Larrouy, a journalist, considers that the objectives have not been met. The assets have been sold to investment funds at bargain prices and the public debt, which the taxpayers will pay, remains.
- Manuel Gabarre, a lawyer, believes that its creation was a deception of taxpayers.
- Alejandro Inurrieta, an economist, described it as a “deposit of bank crap.”
- Alejandra Jacinto, deputy, said that we do not know what conditions the SAREB is in and that there is an absolute lack of transparency.