A well-known example of a bad bank was Grant Street National Bank, which was created in 1988 to house the bad assets of Mellon Bank. The financial crisis of 2008 revived interest in the bad bank solution, as managers at some of the world's largest institutions contemplated segregating their nonperforming assets into bad banks.
Federal Reserve Bank Chairman Ben Bernanke proposed the idea of using a government-run bad bank in the recession following the subprime mortgage meltdown in order to clean up private banks with high levels of problematic assets and allow them to start lending again. An alternate strategy considered was a guaranteed insurance plan that would keep the toxic assets on the banks' books but eliminate the banks' risk and pass the risk on to taxpayers.
Investment dictionary. Academic. 2012.
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bad bank — UK US noun [C] BANKING, FINANCE, ECONOMICS ► a bank that takes bad assets (= assets that have lost their value) and bad loans (= debts that are unlikely to be paid back) from other banks or organizations and deals with them in order to help with… … Financial and business terms
Bad Bank — [ bɛt bɛŋk ], die; , s <englisch> (Bank, die schlechte Kredite von anderen Banken übernimmt) … Die deutsche Rechtschreibung
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bad bank — UK / US noun Word forms bad bank : singular bad bank plural bad banks economics a bank created by the state to buy private banks bad debts (= money owed to them that will never be paid) so that the private banks can continue to lend money The… … English dictionary
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bad bank — noun A bank created to specialize in the ownership of defaulted loans and their collection. Syn: collection bank … Wiktionary
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