Banks' Bad Assets Disposal And Asset Management Companies To Operate

The problem of non-performing assets has caused great attention. The increase of their quantity is the hidden trouble of economy. How to resolve them to keep healthy,consistent and fast economic development is an important theme in the intersection of the century. The occurrence of Southeast Asian financial crisis,which was brought about by the accumulation of non-performing assets,rang alarm bells to China. Using reference of international experience to dispose non-performing assets as soon as possible is the common understanding. Considering the situation,the central Party Committee and State Council decide to set up Assets Management Corporation(AMC) to dispose non-performing assets technically. The first AMC-Xinda,then Huarong,the Great-wall and Orient AMC were founded one after another. By the end of June 2000,AMC has taken over 1300 billion non-performing assets. How to dispose them and minimize the losses is a difficult question. So this article will research on the dispose of non-performing assets and operations of AMC.Chapter one chiefly analyzes the present situation and cause of formation of non-performing assets. It's estimate that non-performing assets ratio is 25% referring to research of domestic and abroad institutions and the speech of Dai-xiang-long,the president of the People's Bank of China. The article also validates the judgement from the side face by studying the overdue debt ratio of state-owned enterprise. The cause of formation of non-performing assets was studied from multangular aspects. From the aspect of macro-economy,the planed economy and disorder of "overheat period" are key reasons. From the aspect of micro-economy,there are four reasons.(l) Impulsion of risk due to undercapitalization. (2) Desire of expansion with low efficiency. (3) The inherent bug of governance structure of state-owned enterprise. (4) Nonstandard operation of banks. To dispose non-performing assets is great significant:First,it avoids financial crisis;Second,it prevents the bank from weaken the increased loans;Third,it puts the materials which non-performing assets represents into full use;Fourth,it perfects the market economy system;Fifth,it creates new investment channels and financial products.Chapter two discussed the international experience of disposing non-performing assets,the enlightenment to China and the characteristics of reorganization of non-performing assets in China. U.S.A,Japan,South Korea and Poland were chosen to recommend their experiences on disposing non-performing assets. We can learn thefollowing enlightenment:(1) the reorganization should be promoted by government. (2) the government should bear the main losses and (3) the earlier the action be taken,the smaller the expenses of reorganization are,(4) special agencies should be set up. The reorganization of non-performing asset should combine the treatment of existence and keeping away of increment. The treatment should effect a permanent cure. In order to do so,enterprise reform and bank system reform should quicken their steps. The capital market should develop greatly in the course of reorganization. This chapter also studies on the establishment,operation of AMC. AMC is a financial enterprise that disposes non-performing assets technically with independent juridical person status. The four new established AMC capitalized by Financial Ministry,dispose non-performing assets of the four commercial banks separately. AMC will purchase or take over non-performing assets according to par value,then complete their legal procedure.Owing to 1300 billion non-performing assets taken over by AMC,how to dispose them is urgent affair. This article use large space to discuss the ways of disposition. Chapter three analyses on debt-to-equity swap. It's a fierce drug of reorganization. Government defined strict entrance qualifications for the sake of turning bad creditor's right into bad equity. Debt-to-equity swap strengthens the supervision on enterprises,alleviates their interest burden and minimizes social tremble. It also enha...