Coronavirus loans default: Treasury eyes plan for ‘bad bank’

The Treasury is weighing plans for a “bad bank” to hold stakes in bailed-out businesses amid fears that nationally significant firms could fail in the Covid-19 crisis.

The plans, which are at an early stage, range from creating an “asset resolution” scheme to recoup value for taxpayers, to a sovereign wealth fund. The plans echo the Labour government’s establishment of a bad bank during the 2008 financial crisis, when UK Financial Investments (UKFI) was set up to manage the mortgage books of Northern Rock and Bradford & Bingley after they collapsed.

UK Government Investments, an offshoot of the Treasury that took over UKFI and manages the state’s stake in NatWest, is spearheading the plans. Sources said it was in talks with senior City bankers about

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