What not to do with a "bad bank"

"You've got to get to grips with the underlying assets as soon as possible to influence them to try to perform better."

That meant the bad bank must employ experts in business sectors such as real estate, while still minimising costs.

"You have to judge how to protect your assets, whether it's worth it, and how you do it. That takes a hell of a lot more work than just monitoring if the loan pays interest," he said.

Sweden's banking recovery gave hope that banks could be cleaned up, well capitalised and properly managed, letting taxpayers recover a big part of their equity injection, Kvarnstroem said.

"You had a small loss from the bad bank, good performance from the focused, good bank and a stabilisation of the system."