Alistair Darling says that plans to establish a “bad bank” have not been ruled out, merely put on ice for the time being.

The plan was introduced in January, with the aim of ‘ring-fencing’ toxic bank asset and insuring banks against heavy losses on assets that are difficult to trade.

What Mr Darling Said…

The Treasurer told the House of Lords Committee: “We’ve certainly not closed the door on a ‘bad bank’ if that is necessary.”

He added that in his opinion: “we still need to look at a range of options” that are available.

He also claimed that the boardroom of financial institutions needed to change, asking the House of Lords Economic Affairs Committee to query the liabilities they are taking on.

He said: “That means, to my mind, the whole culture in boardrooms of financial institutions has to change.”
 
He claimed that executives and non-executives “are not just there for the ride. And indeed if some of these institutions had asked more questions about what was going on perhaps we might not have got into this difficulty.”

What the Government did to help in 2008…

Billions of pounds of taxpayers money was put into the banking system last year to keep it going, including money going into Lloyds TSB, Royal Bank of Scotland (RBS) and HBOS.

The government also made Bradford and Bingley and Northern Rock private banks.

What the Government are doing to help  in 2009…

The government is continuing to try and solve the cash crisis problem. Last month they introduced another package of a list of measures in order to encourage banks to lend to businesses and individuals.

One of these new policies included was the idea of setting up insurance for banks against losing more money from bad debts at the beginning of the credit crisis – the “bad bank”.

Initially, it was thought that setting up a “bad bank” would take too long, and it would be difficult to fairly price such toxic assets.

The Bank of England is also extending its scheme whereby they loan money to banks, who in return let the Bank hold onto their dodgy assets for a year.
 

What Do You Think?

Is the “bad bank” plan a good idea? Is it right that the plans have been put on hold? Should executives be asking more questions about their business?