Good Bank - Bad Bank Separation
From Open Risk Manual
Definition
Good Bank - Bad Bank Separation is a resolution technique where all non-performing and other sub-quality assets of a weak bank are sold at market values to a separate company specially set up for this purpose.
The company - referred to the bad bank - will need to be capitalised by the government or deposit insurer, and has the objective of managing the assets to maximize cash inflows. The remaining part of the bank is referred to as the “good bank”. Recapitalisation will be needed if no share capital remains. The good bank should now focus on correcting operational weakness and its ongoing banking activities. Alternatively, the good bank can be offered for sale. [1]
References
- ↑ BCBS, Supervisory Guidance on Dealing with Weak Banks, March 2002
