On Resolving The Bad Assets Of State - Owned Commercial Banks In China

With the bankruptcy of the savings and loan institutes in the United States, the government had established restructuring trust companies to take over the non-performing assets (NPAs), and the issues of NPAs have got their global recognition ever since the end of the late of 1980's. In the 1990's, Sweden, Norway, Finland, and Denmark in North Europe also plunged into serious NPAs; later, the problems of NPAs in countries in Middle East during their economy transition, Latin America and France also badly harmed the stability of national economy and finance. What's more, the issue of NPAs in Japan, Korea, and countries in South East Asia led to the break out of financial crises at last.Compared with the foreign countries, China's NPAs situations are not rather optimistic. For a long time, banks and financial institutions in China face the problem of swelling NPAs, and the issue is becoming more and more unmanageable. The accumulated and constantly increasing NPAs not only threatens the security of the banking system, but also causes severe obstacle to the whole economic function. In order to bring the situation under control, some steps must be taken as soon as possible.Since NPAs occurred much earlier in foreign countries, the study on their cases will be of some help in understanding China's current NPAs situations, so that a best suitable disposal measures may be found. In this article, the author start with the analysis on the experience of foreign developed courtiers handling the NPAs, plus related theoretical interpretation, combine the discussions on the reasons of NPAs exists in China, the managing process, and the problems, and then put forward some suggestions for related departments who are in charge of dealing with the NPAs.This article consists of eight parts, including preface in the beginning and conclusions in the end. The first Chapter standardises and examines the concepts, connotation and extension, and classification of NPAs, which lays a firm foundation for the analysis hereafter. Chapter Two describes the current situation of China's NPAs from the aspects of scale, characteristics, and imperilment to national economy, emphasizing the severity of this issue. Chapter Three explores the reasons of how NPAs come into being theoretically and empirically, so as to find possible ways to manage them. Chapter Four concludes the deposal process, existing problems and difficulties of China's State Owned Commercial Banks in combating NPAs, and diggingup the root causes and corresponding countermeasures. Chapter Five compares the forming reasons and disposal modes between foreign counties, and drawing some valuable experience and lessons from within. This is also the core part of this article. Chapter Six provides some recommendations and countermeasures to solve the problems of NPAs in China's State Owned Commercial Banks from the analysis above. The massive NPAs have caused great imperilment to national economy in China: 1) the existence of the huge NPAs seriously infected the turnover speed of banking credit capitals and operating revenues; 2) the heavy burden of NPAs makes the banking industry lose faith, which also brings negative impact to the normal development of economy. 3) NPAs also make the banking industry become more and more risky, even probably to the circumstance of "technical bankrupt". These all show us that NPAs reflect the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and net worth of banks. Thus, rising NPAs are a matter of concern for banks. In China, the banking sector is still not strong on the solvency front, so it is important to improve the quality of assets and ensure timely recovery of loans.According to the analysis in this article, there are four principle reasons for the increase NPAs in state commercial banks. Firstly, in the early reform period, Chinese government shifted its financial responsibility for the State Owned Enterprises (SOEs) from the fiscal budget...