Good Bank - Bad Bank: A Clean Break and a Fresh Start

more+
less-

With global financial markets in varying states of disarray, financial institutions and government officials are seeking to stabilize the banking industry and restore the flow of credit. Financial institutions have been plagued by continuing losses from troubled assets on their balance sheets. The application of mark-to-market accounting results in the announcement of new write-downs each quarter. These write-down announcements sap investor confidence in financial institutions and lead to stock price declines and increased volatility. This chain of events continues to overshadow efforts to refocus attention on business prospects. Over the course of 2008, the scope of troubled assets broadened—from subprime mortgage-related assets, to auction rate securities, to derivatives, to commercial real estate related assets. Uncertainty regarding future losses and a market and asset value “bottom” inhibit private investment in financial institutions.....

.....Although federal assistance may be forthcoming, financial institutions may wish to consider independently

implementing the “good bank-bad bank” model, whereby the core financial institution, or good bank, separates off

troubled assets into a newly formed bad bank. Below, we discuss some of the structuring considerations for good

bank-bad bank models and compare and contrast these to asset guarantee models.

Please see full article for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

more+
less-

Morrison & Foerster LLP on:

JD Supra Readers' Choice 2016 Awards
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
×
Loading...
×
×