Bad Banks are typically Government sponsored Asset Reconstruction Companies (ARCs) setup with the primary objective of cleaning up bank balance sheets. Unlike private ARCs, the Bad Banks are setup as a one-time measure with the primary objective of reducing the build-up of Non-Performing Assets (NPAs) post a financial or economic crisis. India is the latest jurisdiction to setup a Bad Bank with the establishment of the National Asset Reconstruction Company Ltd. (NARCL). In this policy brief, we compare the design and historical experience of Bad Banks in other jurisdictions with the newly setup NARCL across dimensions relating to legal character, government control, objectives, funding sources, resolution process and level of haircuts. We perform this analysis for the Resolution Trust Corporation in US, Securum and Retrieva in Sweden, Korea Asset Management Company in South Korea and Fondo Bancario de Protección al Ahorrro in Mexico. Using the insights from our comparative analysis, we identify certain design flaws in NARCL and propose some policy measures to rectify them.
The full brief is available here.
Cite this Item:
Neelam, A., George, D., Bhattacharya, D., & Srinivas, M. (2021). A Brief Comparison of the Bad Bank Experience across Jurisdictions. Retrieved from Dvara Research.
Neelam, Amulya, et al. “A Brief Comparison of the Bad Bank Experience across Jurisdictions.” 2021. Dvara Research.
Neelam, Amulya, Deepti George, Dwijaraj Bhattacharya, and Madhu Srinivas. 2021. “A Brief Comparison of the Bad Bank Experience across Jurisdictions.” Dvara Research.