Germany sets in motion plans to create "bad bank"

Germany sets in motion plans to create "bad bank" Berlin - Germany plans to create a so-called bad bank by July to help rid the nation's banks of troubled assets and rebuild confidence in the financial sector, the government announced Monday.

Coming in the wake of banking industry pressure, Berlin is set to unveil further details of its proposals to allow the banks to remove so-called toxic assets from their balance sheets at a meeting Tuesday of industry and government leaders, which is to be chaired by Chancellor Angela Merkel.

Berlin's move to deal with toxic assets, which are linked to the mortgage meltdown in the United States that helped to trigger the credit squeeze and the global economy's plunge into recession, follows similar action in leading economies around the world.

But a German government spokesman again ruled out Monday the creation of new central government authority to handle the toxic assets and insisted that a more decentralized solution involving the financial institutions would have to be found.

However, a final decision is not expect to emerge from Tuesday's meeting between Merkel and the industry leaders with the spokesman saying that further talks between the government and the finance sector needed to take place before the details of the bad bank plan can be completed.

In particular, the spokesman said that there remained difficult questions to resolve. This includes how to decide which assets qualify and how the assets should be valued.

Adding to Berlin's problems in finalizing its bad bank scheme, nations around the world have taken different approaches in dealing with toxic assets, which emerged following the dramatic surge in risky US mortgages over the last nearly two years.

But the Berlin spokesman said that the government planned to finalize the creation of a bad bank scheme by July. (dpa)