Resolving Nonperforming Assets Of Commercial Banks In Korea And Its Inspiration

For every banks, there is more or less non-performing assets in the balance sheet. The existence of NPA will affect the efficient operation of banks. Some unfortunate banks were even on the brink of bankruptcy. If most of commercial banks in a country facing this trouble, the national economy and financial system will under a huge risk. Now the problem of NPA and its resolving has attracted worldwide attention. Many researches and discussions about NPA have been arisen in the academic circle.After the Asian financial crisis, the number of NPA in Korea went up with a leap. Many enterprises were facing bankruptcy. The resolving of NPA was imperative. Besides the crisis, overprotective government and the characteristics of financial were triggers also. In order to resolve NPA quickly and get satisfactory profits, Korea's government took a series of measures to support the work. The fact proofs that those measures ensure the quality of resolving. This paper expects to get some enlightenment through the study of the Korea's experience.The definition and relately theories of NPA are in the second chapter Because the angle of the analysis, range of definition, and standards are different, the unified difinition of NPA has not form. In this essay, NPA of commercial banks are illiquid formed as a result of the default of debtor. The relately theories of NPA include the causes of NPA and the means of disposal.In the third chapter, after the discussions of the background, one can get the triggers of NPA in Korea's banks. NPA were at the heart of the financial that engulfed the Korean economy.The fourth chapter is one of the main parts of this essay. It discussed the type and means of disposal in Korea. Cash is king. In order to obtain the maximum profits in the minimum time, government-led resolving was thought to be the most efficient scheme. The government played a leading role in financial and corporate restructuring, including strengthening the legal and regulatory framework, injecting public funds, and setting up new institutions for disposal. Korea Asset Management Corporation(KAMCO) was chosen to manage and dispose NPA.As a "bad bank", KAMCO purchased NPAs from "good bank" with bonds issued by th NPA Fund The choice of a particular method depended on the nature and size of NPA aiming for early resolution and quick cash flows KAMCO obtained the praise of the business by using innovative financial products.The causes of Korean's success are list in the fifth chapter. Although there are still some flaws in the system, considering the economic indicators KAMCO has gained outstanding achievement. Through taking measures in legislation, taxation, establishment of the agency, capital and manpower korea has got a sound market nearly.Since its establishment in 1999, Asset Management Companies of China have made some achievements. But there are still some major issues for urgent solution in the market. So the resolving experiences of Korea is worth learning to China. The last chapter is the summary about it.