The bad bank's success hinges on the price valuation of its toxic assets. Healthy banks shouldn't get pummeled with debt repayment obligations, and taxpayers shouldn't have to contribute an unfair amount to the cleanup either.
The bad bank plan that Spain approved(60% discounts on real estate assets and 43% discounts on property developer loans) looks less aggressive than the EU wanted, but it still allows healthy banks to participate in the bad bank, also known as "Sareb" (Sociedad de Gestión de Activos procedentes de la Reestructuración Bancaria). This looks like a prudent and balanced decision.
Only time will tell if it is sufficient to restructure the sector and provide returns that compensate for the increased price of debt. Tax payers now carry 15.4 billion euros of unrecoverable debt owned by the four nationalized Spanish banks.
