The financial encyclopedia uses cookies to improve your user experience. Find out more here!




Bad bank


A financial institution that is specifically set up to hold bad or toxic assets. The purpose of founding a bad bank is to remove problem assets from the balance sheets of other banks, so permitting the banks to return to regular activities. The formation of bad banks has been used as a method of containing banking crises.


Reference: Oxford Press Dictonary of Economics, 5th edt.