Spain endorses 'bad bank' idea

9 July 2012

Spain is willing to create a 'bad bank' to hold all of its distressed assets.

The move is intended to secure a $125 billion aid package from Europe as it seeks to help its ailing lenders.

It has yet to be outlined how these assets would be valued after they have been transferred to the one location.

If the deal is successful, it will offer the embattled Iberian nation the opportunity to recapitalize its banks and prevent it from needing a full-blown bailout.

According to the Financial Times, government ministers are willing to create a sector-wide body that will make it easier for the EU to monitor how the rescued banks are performing.

It is part of the eurozone's desire to have a unified system for bank supervision.

The Republic of Ireland already has a state-run bad bank - the National Asset Management Agency - and it buys toxic mortgages from debt-plagued lenders.

By Claire Archer

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