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A bridge bank is a temporary institution created by a financial regulator or government to take over and manage the operations of a failed or failing bank until a more permanent solution, such as a sale or merger, can be arranged. The purpose of a bridge bank is to maintain critical banking services, protect depositors, and preserve the value of the failed bank's assets while ensuring stability in the financial system.
If a regional bank fails due to insolvency, the government might establish a bridge bank to assume the failed bank's assets and liabilities temporarily, ensuring that customers continue to have access to their accounts while a long-term solution is found.
• A bridge bank is a temporary institution created to manage a failing bank’s operations.
• Ensures continuity of banking services and protects depositors.
• Operates until a more permanent solution, such as a sale or merger, is arranged.
The main purpose is to maintain critical banking services and protect depositors while a long-term solution is found for a failing bank.
A bridge bank operates temporarily, usually until the failing bank’s assets can be sold, merged, or otherwise resolved.
A bridge bank is typically established by financial regulators or the government in response to a bank failure.
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