08 Dec Bad banks: How the good Samaritans for corporates came under the scanner
Synopsis
Asset reconstruction companies, jokingly referred to as scrap dealers in the financial market, were set up to free banks from the burden of stressed loans. Grappling with allegations of having cut sweetheart deals in the messy junk-loans market, these bad banks are trying to salvage their reputation amid the glare of regulators and investigative agencies.
Dealing with bad loans can be messy. It involves recovering money from difficult and often nasty borrowers that high street banks have washed their hands off. It can be a long, tortuous road replete with court feuds, hidden losses, and unpleasant surprises. At the heart of this trade are asset reconstruction companies (ARCs), which trade on bad loans by buying sticky assets from banks to make money out of them. In other words, they are the
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