What Makes a Good "Bad Bank"? The Irish, Spanish and German Experience

Stephanie Medina Cas and Irena Peresa

No 36, European Economy - Discussion Papers from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: This paper examines the experience of three asset management companies (AMCs) or "bad banks" established in the euro area following the 2008 global financial crisis. Specifically, it studies NAMA, Sareb and FMS Wertmanagement (FMS). These AMCs were set up to purchase growing nonperforming loans on banks’ balance sheets with the aim of their eventual disposal. The study seeks to identify factors that support an AMC’s success. It also analyses the impact of the European regulatory framework, including the Eurostat rules, State-aid regulations and bank resolution rules, on the AMCs’ design. It also reflects on the way recent changes to EU bank resolution rules now limit the involvement of State aid in AMCs. The study finds that the type of assets transferred and the macroeconomic environment are crucially important for successful asset disposals. The paper also focuses on additional success factors, such as clean asset documentation, a solid valuation process, efficient asset servicing, a strong legal framework and skilled staff. Though challenges remain, the three AMCs have contributed to banking sector stabilisation as they have been undertaken alongside bank restructuring measures. The financial backing of the authorities, decisive in the cases analysed, has however come at a fiscal cost.

JEL-codes: F39 G01 G28 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2016-09
New Economics Papers: this item is included in nep-eec
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://economy-finance.ec.europa.eu/publications/ ... german-experience_en (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:euf:dispap:036

Access Statistics for this paper

More papers in European Economy - Discussion Papers from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission Contact information at EDIRC.
Bibliographic data for series maintained by ECFIN INFO ().