The proposal for a European bad bank to tackle the high level of non-performing loans and clean up some banking institutions has generated debate and various positions. The authors of this report, Karel Lannoo (CEPS), Markus Demary and Matthias Diermeier (Cologne Institute for Economic Research), Gerard Arqué and Enric Fernández (CaixaBank Research), address the question from their respective perspectives.
_ “A banking system with outstanding amounts of non-performing loans on its balance sheets will tend to provide less financing to the economy at higher interest rates”
_ “Asset management companies have historically been very helpful in resolving banking crises. This tool has been successfully used in Ireland and Spain”
_ “The same reluctance to sharing risks that is hampering the development of a European deposit guarantee fund would also prevent a rapid agreement on a EU-wide bad bank”
_ “Suggestions for an EU-wide bad bank create false expectations that, whatever happens, state money will continue to be used to bail out and to protect banks”