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Junk securities Bad Bank

With the sole purpose of saving the parent bank from the risk of default, and now with the task of treating the wound opened by the state economist crisis has given rise to toxic assets.

They are but those titles were issued in the face of shaky mortgages, which often suffer from missed payments by borrowers, creating a synthetic discompose for other titles such as Collateralized Bond obligation, these CDOs were born by combining many "pieces "loans, loans for housing for enterprises, these securities so complicated that it is no longer the negotiations are still in the budgets of the banks, that can record the depreciation, if the losses are substantial and may untouched the income of the bank.

Of course, under current market value of these securities are actually a weight in the belly of the banks, who may use or state aid or may create a bad bank.

What is a Bad Bank?

It’s a company created specifically to get out of trouble the bank, taken over by the state, only to release the Bank from these toxic assets in order to continue their work, these securities do not know how they are evaluated and if we relate the current market value, banks could lead to a real failure, and are assessed by the state, which raises the value, this being the only option for disposal, waiting patiently until market conditions improve and that there is a clear difference between the price and the market value of those securities.