The State Will Have To Assume The Bill Of The Sareb And Will Shoot The Public Debt To 120% Of GDP

The 2012 bank bailout continues to take its toll on taxpayers almost a decade later. Specifically, an invoice for 35,000 million euros that the State will have to assume once the debt maintained by the Company for the Management of Assets from Bank Restructuring (Sareb) is now computed as public debt.

This is what Eurostat establishes, which now requires reclassify the call bad bankin which a large part of the toxic assets of the entities rescued in 2012 were grouped with the aim of selling them and making them profitable at a better price to pay precisely this rescue.

With this decision, the 35,000 million euros of debt that Sareb maintains will be considered public debt and will be added to the rest of the Treasury debt as of 2020. The impact of the measure will also extend to the dà © vated of the State in a percentage yet to be specified but which will be equivalent to the negative equity that Sareb has at the end of 2020.

In 2019, Sareb’s negative net worth exceeded 7,000 million euros, to which should be added the losses that are accounted for last year. This makes it possible to advance that the impact on deficit “will be well above” that amount, they point out from the Government, although the final amount will be known after the approval of the bad bank accounts scheduled for next week.

The ratio deuda / PIB 2020. Public debt amounted to 117.1% of GDP in 2020 and when adding the impact of 35,000 million from Sareb it will climb to 120%, above the initial forecast of 118.8% of the Government.

“Gradual” decision

Sareb was born in 2012 with the aim of draining through it all the toxic elements from the balance sheets of the savings banks and banks that were then at risk of bankruptcy in Spain. The entity was set up with 55% private capital -formed by other banks- while the remaining 45% remained in the hands of the State, precisely to prevent the debt from being computed in public accounts.

At that time, both the Government of Mariano Rajoy As the Bank of Spain calculated that this vehicle could yield a return of 15%, however, the passage of time has left those forecasts on paper and at the end of 2019 its negative net worth exceeded 7,000 million euros.

Sareb’s reclassification is a “gradual” decision that has been negotiated with Eurostat since 2018 as a result of the regulatory changes that govern the accounting of this type of companies at the European level. But not only that. The accumulation of losses in this period has ended up consuming all the initial capital and has also been definitive because one of the conditions in its origin was that the company did not register significant losses.

In addition, according to sources close to the negotiation, there are other factors that have weighed on the evolution and results of the bad bank, for example, that in origin the difficulties of the instrument were “underestimated”, the increase in transfer prices in these years and other decisions that now, seen in perspective, seem less successful, such as contracting a derivative insurance or the role of servicersduring this time.

Beyond 2027

The reclassification will not have any other impact on the organization or operation of Sareb, as well as on the management of its real estate portfolio. The objective continues to be to obtain resources to pay off the debt, so that as Sareb’s asset portfolios are sold, that part of the State’s debt will also be reduced.

The other issue on the table has to do with the life span of Sareb herself. Initially it was raised with an expiration date, the year 2027, but now it is not ruled out that this horizon goes further and the sources consulted assure that it would be “logical” to consider at least this option.