Fri. Jul 30th, 2021

Financial Planner

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The floors of the banks bailed out with your money

banks bailed out with your money

Sareb is what has come to be called as the bad bank, which aside from much loan promoter also promotes the construction of real estate and is dedicated to the sale of the entire real estate portfolio that has inherited. When it was decided to bail out the banks after the real estate crisis, the FROB or Orderly Banking Restructuring Fund was set up. The FROB is a financial instrument created to measure the restructuring of the Spanish banking system and all the savings banks that had been expanded by the Crisis.

banks bailed out with your money

Among the actions of the FROB was the Sareb, known as the bad bank but never got to give banking license. The government had to create a vehicle like the Sareb bound by the Memorandum of Understanding (MOU) that had signed with the rest of the EU countries to lend the money to the bank bailout and to continue to function normally.

Let’s look at it another way. With the banking system in bankruptcy, the Government reaches an agreement with the rest of the European partners to lend money to fix it. They lend it with conditions, among others establishing a bad bank in which to group the toxic assets of the banks.

To mount the Sareb the government puts money through the FROB, but it is not the only one. 45% of the capital is public and 55% of the capital is private mainly put by other banks. The banks have to cede to Sareb toxic assets with a heavy discount in exchange for receiving public aid.  The objective of Sareb on its part is to sell everything in fifteen years obtaining 15% profitability. As we can imagine the private partners did not enter with the intention to lose money although they can do it. Now, some actions give to think about if the management is good.

Among other things, they are required to list in an organized market since 80% of their assets have to be real estate rented to three years that cannot be transmitted during their lease period. In addition, 90% of their profits from rental and 90% of their profits from the sale of real estate (in other words, they are intended to function as renters, not as growing real estate). In 2012, the legislation was made more flexible, allowing it to be listed on the MAB and reducing the minimum capital from five to fifteen million.

In order to give us an idea of ​​what they have grown Properties became a component of the Ibex 35. That is to say, a company that only seven years ago could not exist, it was rubbing shoulders with the largest companies in the country, and a year later it was buying what had been one of the great real estate of the country .

So taking out part of your real estate as a does not seem like a bad idea, it is still a tool along with selling its assets through real estate as it has been doing, something that as recognized by its managers has not been very easy to achieve . The stock market, although volatile is growing. In addition, low interest rates make almost any financial instrument attractive, so it is not a bad time to go public.