‘Bad banks’ work best alongside capital injections – BIS

‘Bad banks’ do save floundering lenders – but only when accompanied with capital injections, a study by the Bank for International Settlements (BIS) shows.

A survey of European ‘bad banks’ – the shorn off units of troubled firms that are filled with toxic assets – found they only helped their parent firms recover when used in conjunction with public or private bailouts.

Those lenders that segregated unwanted assets into ‘bad banks’, but did not receive a capital injection, saw virtually no