Sareb: Understanding Spain’s ‘Bad Bank’

Born out of the 2008 financial crisis, Spain's so-called 'bad bank,' known as Sareb, may surprise you with its potential impact on addressing the country's housing crisis.

What is Sareb?

La Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria, commonly known as Sareb, is a financial institution that takes on ‘bad’ assets from other banks. In Spain, it’s often referred to as “el banco malo” – the bad bank.

Sareb earns this nickname because it acquires toxic assets and unpaid loans from banks that need to offload them to clean up their balance sheets. However, Sareb is not a predatory bank buying up debts for profit. Instead, it utilizes some of these assets for constructive purposes, including promoting lines of credit to businesses and families and offering social housing.

Funding for Sareb’s activities typically comes from private investors, public funds, or the institution itself.

Initially, Sareb was created to rescue the vast number of Spanish real estate assets, such as defaulted loans and unfinished construction projects, following the 2008 financial crisis. If you’ve spent time in Spain, you might have noticed half-finished building sites, such as hotels, apartment complexes, or golf courses, that emerged during the property boom and are now a common sight across the country.

The creation of Sareb was one of the European Union’s conditions for Spain to receive a financial rescue package after the crisis. Initially established as a private company, Sareb quickly came to manage nearly 200,000 bad assets valued at over €50 billion, according to Sareb’s figures.

In 2022, the Spanish government converted Sareb into a public institution. In recent years, its role has evolved from merely buying bad assets (which it still does) to also promoting affordable housing.

What Does Sareb Actually Do?

Unlike traditional banks that offer mortgage loans and deposit schemes, Sareb primarily buys assets from other banks at reduced prices due to their decreased value, aiming to cancel the associated debt. This process allows banks to clean up their accounts, though they incur losses, while Sareb acquires a portfolio of flats, houses, plots of land, unfinished developments, and other property assets.

As a result, Sareb has a vast portfolio, including around 50,000 homes, along with numerous unfinished developments and plots of land.

Can I Buy a House from Sareb?

Not directly. Sareb does not sell homes straight to customers. Instead, you can visit the Sareb website, where you can search for properties in your town or province. The website provides links to real estate agencies that partner with Sareb to sell these properties to conventional buyers. Therefore, to view and purchase these properties, you’ll need to go through one of these partnered agencies rather than directly through Sareb.

In July, Carlos Cuerpo, Spain’s Minister of Economy, Commerce, and Business, announced that Sareb’s board of directors had approved the ‘Vienna Project,’ a social housing initiative aimed at constructing approximately 10,600 affordable rental homes.

“We are talking about more than 130 plots of land that will allow the construction of some 10,600 affordable rental homes,” he explained in an interview on RNE.

This ‘Vienna Project’ is part of a broader objective previously announced by the Minister of Housing, Isabel Rodríguez, which aims to build over 180,000 state-owned homes for affordable rental.