Definition from Wiktionary, the free dictionary
Possibly derived from a usage by Walter Bagehot in Lombard Street: "The cardinal maxim is, that any aid to a present bad bank is the surest mode of preventing the establishment of a future good bank."
- (banking, economics) A bank created to specialize in the ownership of defaulted loans and their collection.
1992, Business Week:
- And Grant Street National Bank, as the bad bank is called, ... The bad bank and its 75 workout specialists proved adept at unloading sorry loans
1999, Benton E. Gup, International banking crises, page 249:
- In the 1980s, another method of problem resolution emerged, known as a good-bank, bad-bank split model.