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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."


bad bank (plural bad banks)

  1. (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.



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