Spain’s bad bank sues banks over portfolio of debt

MADRID, November 26 (Reuters) – Spain’s bad bank said on Friday it sued Spanish lenders, such as Caixabank (CABK.MC) and Sabadell (SABE.MC) in a court in Madrid, seeking to recover interest payments negative on its 34.5 billion euro senior debt portfolio.

The institution, created to take over bad debts from the 2012 financial crisis and known by its Spanish acronym Sareb, has repurchased more than 50 billion euros ($ 56.52 billion) in real estate and other assets. poisonous to nine savings banks.

In exchange, it issued a debt taken out by the State for the same amount. After having sold 15.9 billion euros of all the debt issued, Sareb still holds 34.5 billion euros of senior debt.

Sareb’s senior debt is referenced on the 3-month Euribor plus a spread which may in no case exceed 2%.

In its original design, there was no floor, but in 2015, when interest rates turned negative and the ECB did not accept negative coupon bonds as collateral in its liquidity facilities , it introduced a 0% floor in its emissions.

In 2017, the ECB changed its criteria and accepted negative yield bonds as collateral.

Sareb is now asking to be able to remove the floor and charge lenders negative interest on his senior debt. On Friday, he said he filed a complaint in the best interest of Spanish taxpayers.

Spain’s state rescue fund FROB has a 45.9% stake in Sareb, while the rest is mostly owned by banks.

A spokesperson for Sareb said that in 2020 the bad bank missed 145 million euros because the floor was in place.

Sabadell declined to comment on Friday, while Caixabank said whether or not the bonds should bear negative interest had been decided after agreement between the parties following arbitration in October 2018.

“The ruling was that the bonds should not bear negative interest at that time or in the future,” Caixabank said.

($ 1 = 0.8846 euros)

Report by Jesús Aguado; edited by Emma Pinedo and Elaine Hardcastle

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