| Ever since commercial banks come into being, the bank crises have become an incessant obsession. The worst ones are those accompanied by increased bad assets. Furthermore, the global financial systems are closely connected and crises couldn't be segregated. In the end of 1980s, to fence against financial risk and deal with large amount of non-performing assets has become a priority for governments and financial institutions.In March 1999, the Xinda asset management corporation (AMC) is established to take over the bad assets of China Construction Bank, which indicates a new solution to the bad assets of the big four. Then there leaves the problems of the medium and small financial institutions. The issue becomes an urgent as the WTO turns around the corner.Such a concern constitutes the author's motivation to assess the topic. The more appealing fact is that there're plenty of AMC-mode successes in banking assets restructuring, which facilitates his writing process.As our supervisory institution has not yet employed AMC-mode to solve the bad assets of medium and small institutions, the author attempts to apply a comparative methodology.As treasury owned corporations, the big four AMCs purchase the bad assets of the big four in face value. Such a transaction will relay the cost to government finally. In other words, the treasury shoulders on the loss caused both by political negligence and bad bank management. Compared to the solution to the bad assets of the big four, there're two concerns we should take into account:a) Whether the treasury could afford the loss caused by the bad assets of the medium and small institutions.b) Whether the tax-payers should be responsible to the loss caused by unsatisfactory management.The thoughts on the two issues are his basic logical presumptions. The main clue of the dissertation is as following: current issues on bad assets of medium and small financial institutions; solution conditions and theoretical preparation; exploratory research on solution modes.1. Current issues on bad assets of medium and small institutionsThe first part of the chapter focuses on the necessity of the development of medium and small institutions and the emergency to solve their bad assets problems. The second part analyzes the origin of the bad assets issue.The definition of the medium and small financial institution is non-security corporations and insurance companies, which mainly serve the local medium and small enterprises, such as city commercial banks, city credit union and rural credit unions.To foster medium and small financial institutions will promote the financial system, support medium and small enterprises and create a balanced local economic institution. The great absolute amount and high ratio of bad assets of medium and small financial institutions constitute a hidden heart attack to state economy. What's more, the issue also restricts the expansion ability of monetary policy and decreases the pace of economic development.The same as that of the big four, the origin of the bad assets of the medium and small institutions also possesses social, institutional, historical and political characteristics. 2. Solution conditions and theoretical preparationMost countries choose M&A to solve the banking bad assets problems. Mostly, they choose AMC. The article discusses the AMC mode's rationale and the merits of relying on such a mode to solve the bad assets.Compared to AMC, SAMC seems to lack the financial resources to cover the losses. No evidences suggest that treasury could solve such a problem. Under such a restrictive condition, the solution focuses on the following two key issues:a) How to price the assets when we couldn't purchase them with face value.b) How to share the loss among local governments, financial institutions and creditors.A further survey on real world conditions tells us that we should understand the following principles:a) Local government support is imperative;b) Market exit is a necessity;c) Market... |
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