A public bad bank must be in a position to address numerous challenges. First, the transparent removal of troubled assets is necessary in order to ensure that the rescued bank has real prospects for a fresh start. Second, the costs of the bailout for the taxpayer should be minimized. Third, no incentives or new opportunities for opportunistic behavior in the future should be created. To do this, the implemented bad bank model should limit the potential for “hold-up” problems while emphasizing to shareholders and executives that entrepreneurial failure is a real possibility
