It is not clear how effective the move will be, though: Sumitomo Mitsui Bank has massive bad debts of its own and has yet to commit fresh funds to Mitsui.

ECONOMIST: From bad to worse

This week the government bailed the bank out, transferring bad debts totalling 8 billion koruna to a state institution.

ECONOMIST: Eastern Europe��s banks: Reversal of fortune | The

Action is also expected in an effort to strengthen the Resolution and Collection Bank, which is meant to dispose of the bad debts left over from failed banks.

ECONOMIST: Hashimoto��s curious comeback

There was also the possibility of setting up a special "bad bank" to take on the "toxic debts" of nationalised banks such as Northern Rock - which could eventually be sold on by the government when market conditions improve.

BBC: Clegg proposes 'government bank'

Indeed, Mr. Osborne seems so confident that the slump is largely cyclical, the result of a euro crisis-induced slump in net trade, rather than structural that last month he flatly rejected a Bank of England recommendation to recapitalize the banks to purge the system of bad debts.

WSJ: U.K. Is New Recruit on Europe's Sick List

The ratio of non-performing loans at north-eastern bank branches is the highest in the country, which is itself so overwhelmed with bad debts that the big state-owned banks need regular injections of capital in order to avoid insolvency.

ECONOMIST: The other China

The announcement came as the bank also this morning reported its six month profits rose 25% as a result of lower bad debts and a recovery in Asian markets.

BBC: Standard Chartered cuts 6,000 jobs

Though India's banks face bad debts, its cloistered financial system, high foreign-exchange reserves and capable central bank mean it is not about to keel over.

ECONOMIST: India��s slowdown

Banco Fator, the investment bank advising the government on the sale, insists that adequate provision has been made for any remaining bad debts, plus any liabilities for staff pensions, tax arrears and other hidden horrors that often come to light when a Brazilian company is sold.

ECONOMIST: Brazilian banks