Bad bank

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Bad bank

A government owned entity that takes over and liquidates toxic assets from failed or declining financial institutions to leave them with a clean balance sheet. The strategy was last used during the Savings and Loan crisis of 1980s where this entity was called the Resolution Trust Corporation.

Bad Bank

A bank to which a bank holding company transfers non-performing assets from the banks it owns. This reduces the risk to which the transferring banks are exposed, which in turn increases their credit quality. A bad bank is also called a collection bank.
References in periodicals archive ?
Global consulting firm, McKinsey & Company, said that China needs to encourage more bad banks in order to assist the disposal of bad assets.
GGGD rose from 80.9% of GDP in 2013 to 84.3% in 2014 and to 86.4% in 2015 following the inclusion of the liabilities of the bad banks on the public balance sheet.
London: Heta creditors' rejection of an offer from the Austrian authorities prolongs uncertainty over the bad bank's resolution and the solvency of the State of Carinthia, but Austria's general government debt figures already fully capture the associated liabilities, Fitch Ratings says.
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.
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.
The bill for assets acquired by bad banks has traditionally been footed by governments -- i.e.
The ECB said that it has no objections to Germany's plans to separate toxic assets in its banks into special government-backed 'bad banks'.
Bad banks have been used successfully to cleanse banking systems in Ireland and Spain, and one is being created in Slovenia.
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.