In response to a suggestion by chairman of the House Finance committee Nicolas Papadopoulos that the government create a bad bank, Georgiades said he continues to consider such a vehicle “useful”, adding that it carries several unanswered questions relating to its funding.

An asset-management company would take over collateralised distressed loans from banks at a discounted price, and proceed to either try to salvage the loan or liquidate the collateral.

Although the issue was tabled years ago, the consensus was that the country’s stretched finances could not handle further strains.

On Tuesday, Georgiades dispelled the theory, laying out the real reason the government had been opposed to funding a bad bank. “It is not up to the Troika to decide what counts as public debt, but certainly government funding, that is the taxpayer footing the bill, is not an easy call to make,” he said.

“Right now there is private-sector funding, and perhaps the prospect of raising private cash to fund such a vehicle should be explored,” he added.

Source: Cyprus Mail