Tag: delinquent debt

The EBA Lobbies For The Creation Of A European Bad Bank

31 January 2017 – El Economista

On Monday, the European Banking Authority (EBA) urged the European Union (EU) authorities to establish an alternative investment fund to acquire delinquent loans from the European financial sector, with the aim of stimulating economic growth in the region.

In a speech in Luxembourg, the President of the EBA, Andrea Ernie, highlighted that tackling the high level of delinquent debt in the EU – which stands at approximately €1 billion – is an “urgent and viable” issue, according to Reuters.

In this sense, Enria indicated that EU banks may sell some of their non-performing loans to an EU “asset management” company.

Enria proposes assigning an agreed “real economic value” to the non-performing loans sold and for the investment fund that buys them to act as a “bad bank”, given that it would have the obligation to dispose of the assets within three years at their real economic value, rather than at market price.

“If that value is not achieved, the bank must bear the impact at the market price and a public recapitalization must be carried out with all the conditions that accompany the process”, said the President of the EBA.

In this regard, the Managing Director of the European Stability Mechanism (MEDE), Klaus Regling, welcomed the EBA’s initiative and added that the proposal does not involve sharing banking risks between member states, which is something that Germany has firmly opposed in recent years.

“It is likely that the public sector will have to play a role”, said Regling at the event, where he also said that the “bad bank” should aim to acquire up to €250,000 million of non-performing loans.

Original story: El Economista

Translation: Carmel Drake

Echegoyen Explains Sareb’s Performance 3 Years After Its Creation

4 November 2015 – Europa Press

Sareb was created in 2012 and has been granted a period of 15 years to manage and sell all of the assets transferred to it, almost 200,000 in total. It has until 2027 to liquidate them. (…).

Sareb’s President, Jaime Echegoyen, has acknowledged that the company’s progress is “quite slow” in terms of the divestment of assets, but he is confident that sales will be “greater” in the future. “The market is not ready and so, we have to wait”, he added.

Since its creation, Sareb has managed to reduce its volume of problem assets by €7,420 million, which in percentage terms represents 14.7% of its total assets.

Nevertheless, it is now waiting for the right moment to make further write-offs, according to the management team at the organisation.

Evolution of the portfolio

When it was created, the ‘bad bank’ received around 200,000 real estate and financial assets and 400,000 collaterals valued at €50,781 million.

Sareb stresses that its portfolio has transformed since then, with real estate assets gaining in weight, at the expense of financial assets. They explain that this is due to the transformation of the balance sheet, since the performing loans disappear from the portfolio once they have been fully repaid.

Sales to June 2015

During the first half of 2015, Sareb sold 5,345 units to retail clients, at a rate of 30 homes per day, compared with the average of 42 in 2014 as a whole. Moreover, it has seen renewed interest in land, whose sales have multiplied by 3.6x “although their financial impact is still insignificant” in terms of the company’s total revenues.

At 30 June, Sareb’s asset portfolio amounted to €43,361 million, of which 74% corresponded to loans and the remainder, 26% to real estate assets (primarily residential, land and tertiary property). (…).

Servicers

The company’s activity during the first half of the year has been hampered by the entry into operation of four new ‘servicers’ or real estate managers, which has involved the migration of a “huge” volume of loans and properties from the nine originating entities to the servicers’ platforms.

According to Echegoyen, the migration has involved the transfer of all of the information and documentation relating to 162,000 assets, which represents for example, four million documents and 325,000 keys.

Since it began its journey three years ago, Sareb has reduced its volume of problem assets by €7,420 million, and has also repaid €5,400 million of the €50,700 million debt it had to issue in order to acquire the portfolios of loans and properties from the banks affected by the crisis. (…). As such, the company has reduced its perimeter by 14.7% and cut down its debt by more than 11%.

During the same period, Sareb has generated revenues amounting to €10,500 million, has sold almost 30,000 properties to individuals and has managed around 25,000 proposals from companies. Moreover, it has carried out 25 large operations to sell wholesale asset portfolios, mainly loans, an activity that represents just 20% of its turnover.

“Sareb has demonstrated its ability to divest assets and generate revenues”, says Echegoyen, who added that the model “works” and that the company “has become an international point of reference”, as well as an “example” for other countries facing similar crisis situations.

Original story: Europa Press

Translation: Carmel Drake