New institution was necessary to clean out excesses of the last business cycle
The clamour for a “bad bank” had started not long after the discovery of growing distress in large numbers of loans eight years ago. There were two key reasons in support of a bad bank.
First, as there were a large number of lenders to nearly all the defaulting companies, getting them to coordinate on resolution of these loans was a challenge, prolonging the process and bringing down the amount that could be recovered. Lending consortiums would have 25 to 30 lenders, making it difficult to build consensus on next steps.
First, as there were a large number of lenders to nearly all the defaulting companies, getting them to coordinate on resolution of these loans was a challenge, prolonging the process and bringing down the amount that could be recovered. Lending consortiums would have 25 to 30 lenders, making it difficult to build consensus on next steps.