The Germany’s Cabinet approved today draft legislation that would help banks remove toxic assets from their balance sheets and boost their liquidity.

The draft legislation, popularly known as the “bad bank” plan, would allow financial holding companies, banks and their subsidiaries transfer structured securities, such as asset-backed securities and collateralized-debt obligations, to a government-backed special-purpose vehicle at a 10% discount to book value. As consideration, the banks would receive bonds in the amount of the transfer value of those assets, guaranteed by Germany’s Financial Markets Stabilisation Fund (SoFFin).

Participating banks would also have to pay SoFFin a risk-adjusted guarantee fee and an annual fee over the 20-year guarantee period. The annual fee will represent the difference between the 90% book value of the securities and the market value of the securities, which is likely to be lower than the book value.