BRIDGE BANK Meaning and
Definition
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A bridge bank is a financial institution that is created as a temporary measure when a failing bank is unable to meet its obligations or faces bankruptcy. It acts as an intermediary institution between the troubled bank and its clients or creditors during a period of transition. The main objective of a bridge bank is to take over the assets and liabilities of the failing bank, stabilize its operations, and ultimately facilitate a smooth transfer of its business to a more stable financial institution.
The bridge bank is typically established and operated by government regulatory bodies or relevant authorities in order to prevent systemic risks and preserve the stability of the financial system. It is often used as a tool to minimize disruptions to depositors, borrowers, and other clients of the failing bank, as well as to maintain confidence in the banking sector.
Once established, a bridge bank assumes control of the assets and liabilities of the troubled bank, including deposits, loans, and other contractual obligations. It may also assume certain management responsibilities to ensure the ongoing operation of the bank until a suitable buyer or resolution plan is identified. The bridge bank serves as a temporary solution, with the ultimate goal being the transfer or resolution of the failing bank's assets and liabilities in an orderly manner.
Common Misspellings for BRIDGE BANK
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Etymology of BRIDGE BANK
The etymology of the term "bridge bank" is as follows:
- Bridge: The word "bridge" comes from the Old English word "brycg", which has Germanic origins. It originally referred to a structure built over a river, body of water, or gap to provide passage or connection between two points.
- Bank: The word "bank" comes from the Old Italian word "banca", which means bench or counter. It was originally used to refer to the physical furniture or table that moneylenders and money changers used to conduct their business. Over time, it came to represent the business of banking and financial institutions.
When combined, the term "bridge bank" is used metaphorically to refer to a financial institution that is created as a temporary measure to provide stability and continuity in the banking system during a financial crisis or when a bank is failing.
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