Legal Analysis On Foreign Capital Participating In Dealing With Bank's NPLs

This paper is divided into four chapters along with a conclusion.The first chapter is "the background of foreign capital's participation in disposing bad assets of domestic banks" .It mainly introduces the definition of non-performing assets. And, the causes and scale of China's banks'bad assets .It points out that the bad assets of banks, particularly high non-performing assets of state-owned banks in China have a direct impact on the stability of the financial system and to a certain extent, causing some obstacles to the healthy development of the economy. Later, the paper analyzes the legal reasons why foreign capital want to participate in the disposal of non-performing assets in China. It focused on three reasons:firstly, the relevant laws promulgated in China made the participation of foreign capital possible; secondly,to avoid certain legal restrictions on foreign investment made the disposal of non-performing assets a strategic tool;thirdly, to participate in domestic capital market is the ultimate purpose of disposing bad assets. Finally, the article cited several major manners of disposing bad assets by foreign investors.The second chapter focuses to analyze the problems foreign investor faces in disposing non-performing assets in the current legal system. The first section focuses on government control, including the main participants ,access restriction on certain industry and the treatment of foreign investments. Section two pointes out some of the legal obstacles in the operations in the process of disposing bad assets. It mainly identifies ways of forming a Sino-foreign joint venture in disposing bad assets after fixing on foreign buyers by action or biding, portfolio sell of non-performing assets and bad-asset-backed securitization . Among those, the third part analyzes in a more detailed way about bad-asset-backed securitization, introducing the concept and operation process of bad-asset-backed securitization. At last, it points out the legal problems encountered in the offshore bad-asset-backed securitization.As Korea marches in the disposal of non-performing assets in Asia and the Asset Management Company of Korea accumulates a lot of experience in the disposal of non-performing assets .Also, The South Korean government gives a lot of legislative support in the disposal of non-performing assets. Moreover, the causes of non-performing assets in South Korea and China are in common in certain aspects, therefore, The third chapter introduces Korean experiences in legislation and operational methods using foreign capital on the disposal of non-performing assets ,hoping China would learn from them.Chapter four of this paper puts forward some legal thoughts to improve the use of foreign funds in disposing bad assets.It expatiates both improving the existing legislation and drafting of new laws. It tries to bring forward some leads to resolve the problems from seven aspects,such as treatment of foreign investments ,the set up of Sino-foreign asset management company ,the legal orientation of four AMCs in China, the pricing system of non-performing assets ,the supervision of asset transfer , foreign exchange controls and information disclosure.Finally ,the paper concludes that resolving bad assets of banks can not be done in one day. It needs long-term efforts of the banking and the legal professionals.