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Meanwhile, presidential candidate and Diko leader, Nicolas Papadopoulos, yesterday brought up the idea of setting up a bad bank that would buy all the NPLs from the three local banks, thus ridding them of the problem.
Now, they have decided the creation of a bad bank is the solution to the NPL problem and one that will save the Co-op Central Bank about which all our politicians have a soft spot.
Global consulting firm, McKinsey & Company, said that China needs to encourage more bad banks in order to assist the disposal of bad assets.
If there is one thing that shows the extremity of stress that India's banks, especially government-owned, are facing, it is the increasing frequency with which these two words - Bad Bank - are being used in North Block, home to the finance ministry.
For instance, at a recent pre-Budget meeting with Finance Minister Arun Jaitley, some economists proposed the setting up of a Bad Bank to get rid of the banking system's Rs 8 lakh crore stressed assets.
The deal would create a so-called bad bank in line with EU rules on state aid.
The proposal to create an asset management company, or bad bank, using remaining funds from the Hellenic Financial Stability Fund (HFSF), to deal with NPLs is potentially positive for the banks' asset quality.
The future of the bad bank, which will now be known as Northern Rock (Asset Management), has been less certain as it is responsible for over pounds 50bn of mortgages deemed to be at a higher risk of default.
PERHAPS the splitting of the Bank of Cyprus into a good bank and a bad bank should have been done last summer when the idea was first mooted by the Governor of the Central Bank Panicos Demetriades.
Government-backed bad banks have traditionally been vehicles of moral hazard.
Bad banks have been used successfully to cleanse banking systems in Ireland and Spain, and one is being created in Slovenia.
Global Banking News-2 July 2009-ECB does not have objections to bad bank plans(C)2009 ENPublishing - http://www.