What are waste effects?

Also known as 'toxic paper', refers to securities or financial instruments whose value has sharply declined, making them very risky or even virtually worthless. This term became particularly popular during the 2007-2008 financial crisis, when many complex financial products, such as certain types of mortgage loans (subprime mortgages), significantly decreased in value and caused substantial losses for the holders of these securities.

Toxic assets can have a major impact on the balance sheets of financial institutions, as they are difficult to sell without incurring significant losses. As a result, they can seriously jeopardise the stability of a bank or another financial institution. In some cases, these assets are placed in a 'bad bank' to limit the negative influence on the financial markets and to give the affected institutions a chance to recover.