Sareb: Understanding Spain’s ‘Bad Bank’

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.