Abstract
This study proposes a taxonomy for asset management companies to facilitate conceptualization, classification, and measurement. Accordingly, the study qualitatively analyzes variations in the types of assets transferred to asset management companies, the transfer pricing mechanism, and the extent of risk conveyance. The study uses a cross-country setting to analyze differences in corporate structure, resolution mandate, capital structure, and legal status of asset management companies. Through country-specific case illustrations, the study discusses the merits and demerits of different classification features. The study develops a list of feasible design feature combinations for an asset management company.
Similar content being viewed by others
Notes
The definition of troubled assets transferred to AMCs varies across countries, with most countries treating loans that are past due for 90 days as NPAs. Some countries have defined troubled assets as loans delinquent beyond 6 months (Malaysia, China) and Korea has used a more expansive definition that includes restructured loans. Please refer to Singh [17] and Bholat et al. [32] for a detailed discussion on divergence in the NPL definition.
Government-guaranteed bonds attract zero risk weightage in risk-based capital assessment.
A separate special purpose trust was established for each pool of troubled assets. Due to the trust structure, the benefits of cross-collateralization were not available to the selling bank.
We do not consider internal units of bank mandated to deal with carved out NPAs as a type of AMC. These internal units are under the same corporate structure and management influence. We find it difficult to rationalize that they are anything but a department of the bank.
The concerns of political interference leading to reduced institutional independence have also been expressed for centralized AMCs in developing countries. The case studies of AMCON and FOBAPROA document these instances.
The intent behind the shareholding structure of NAMA was to avoid consolidation with public accounts.
REFCORP was a public–private partnership that issued zero coupon bonds to satisfy its funding obligations.
A “going concern” is a business that functions without the threat of liquidation for the foreseeable future.
We rely upon success of such transaction by Danaharta in Malaysia.
This statement will be true in almost all jurisdictions that follow minimum corporate governance standards.
For example, the Indonesian parliament expressed unwillingness to sell strategic assets to foreign investors through its AMC, Indonesian Bank Restructuring Agency (19).
References
Caprio G, Klingebiel D. 1999. Episodes of borderline and systemic financial crises. The World Bank. mimeo; 1999
Valencia F, Laeven L. 2012. Systemic banking crises database; an update. IMF Working Papers.;12(163):12–63.
Haley, U.C. 2000. Corporate Governance and Restructuring in East Asia: An Overview. Seoul Journal of Economics. 13: 225–251.
Campbell, A. 2007. Bank insolvency and the problem of nonperforming loans. Journal of Banking Regulation. 9 (1): 25–45.
Claessens, S., S. Djankov, and D. Klingebiel. 2001. Financial restructuring in East Asia: halfway there? Resolution of Financial Distress: An International Perspective on the Design of Bankruptcy Laws. 2001: 229–259.
Kane, E.J. 1990. Principal-agent problems in S&L salvage. The Journal of Finance. 45 (3): 755–764.
Woo MD. 2000. Two approaches to resolving nonperforming assets during financial crises. International Monetary Fund.
Bank for International Settlements. (2002). Supervisory guidance on dealing with weak banks. Available from http://www.bis.org/publ/bcbs88.pdf/ [Accessed 20 July 2020]
Hryckiewicz, A. 2014. What do we know about the impact of government interventions in the banking sector? An assessment of various bailout programs on bank behavior. Journal of Banking & Finance. 1 (46): 246–265.
Klingebiel D. 2000. The use of asset management companies in the resolution of banking crises: Cross-country experience. The World Bank.
Terada-Hagiwara A, Pasadilla GO. 2004. Experience of Crisis-Hit Asian Countries: Do Asset Management Companies Increase Moral Hazard?. PIDS Discussion Paper Series.
Gandrud C, Hallerberg M. 2013. Bad Banks as a Response to Crises: When Do Governments Use Them, and Why Does Their Governance Differ?. Available at SSRN 2241290.
Hoshi, T., and A.K. Kashyap. 2010. Will the US bank recapitalization succeed? Eight lessons from Japan. Journal of Financial Economics. 97 (3): 398–417.
Cerruti C, Neyens R. 2016. Public asset management companies: a toolkit. The World Bank; May 31.
Ighomwenghian K. 2011. Another look at purchase of Zenon, others’ N275b loans by AMCON. Available at https://www.proshareng.com/news/Bad%20Debtors/Another-look-at-purchase-of-Zenon,-others%E2%80%99-N275b-loans-by-AMCON/15431
Fitch. Fitch Revises MPS's Rating Watch to Evolving On Impaired Loan Spin-off. Available from: https://www.fitchratings.com/research/structured-finance/covered-bonds/fitch-revises-mps-rating-watch-to-evolving-on-impaired-loan-spin-off-02-07-2020 [Accessed 20 July 2020].
Singh D. 2020. European Cross-Border Banking and Banking Supervision. Oxford University Press USA-OSO.
Nygaard, K. Finland’s Asset Management Company Arsenal. Available from: https://ypfsresourcelibrary.blob.core.windows.net/fcic/YPFS/Nygaard%20Finland%E2%80%99s%20Asset%20Management%20Company%20Arsenal%20(Finland%20NFC)%2019-12-31%20PRELIMINARY%20DRAFT%20-%203-20-20.pdf [Accessed 20 July 2020].
Fung B, George J, Hohl S, Ma G. 2003. Public asset management companies in East Asia-Case studies. Bank of International Settlements Occasional Papers.
Felson, H.M. 1997. Closing the book on Jusen: An account of the bad loan crisis and a new chapter for securitization in Japan. Duke LJ. 47: 567.
Pandey, A. 2019. High bids and low recovery: A possible case for non-performing loan auctions in India. IIMB Management Review 31 (3): 250–257.
Kahn, C., and A. Winton. 2004. Moral hazard and optimal subsidiary structure for financial institutions. The Journal of Finance. 59 (6): 2531–2575.
Biles, J.J. 2010. Chronicle of a debt foretold: Mexico’s FOBAPROA debacle and lessons for the US financial crisis. Progress in Development Studies. 10 (3): 261–266.
Calomiris C, Klingebiel D, Laeven L. 2004. A taxonomy of financial crisis resolution mechanisms: cross-country experience. The World Bank; 2004 Aug 19.
Allen, F., and A.M. Santomero. 2001. What do financial intermediaries do? Journal of Banking & Finance. 25 (2): 271–294.
Hanc, G. 1998. The banking crises of the 1980s and early 1990s: Summary and implications. FDIC Banking Rev. 11: 1.
Federal Deposit Insurance Corporation, Resolution Trust Corporation (US). Managing the Crisis: The FDIC and RTC Experience 1980–1994. Federal Deposit Insurance Corporation; 1998.
Josel WM. 1990. The Resolution Trust Corporation: Waste Management and the S& (and) L Crisis. Fordham L. Rev. S339., 59.
Thrift Depositor Protection Oversight Board. 1996. Annual Report of the Thrift Depositor Protection Oversight Board and The Resolution Trust Corporation for the Calendar Year 1995. Washington DC: Thrift Depositor Protection Oversight Board.
Mishkin FS, Eakins SG. 2006. Financial markets and institutions. Pearson Education.
He D. 2006. The role of KAMCO in resolving nonperforming loans in the Republic of Korea. In Bank Restructuring and Resolution 2006 (pp. 348–368). Palgrave Macmillan, London
Bholat, D., R.M. Lastra, S.M. Markose, A. Miglionico, and K. Sen. 2018. Non-performing loans at the dawn of IFRS 9: regulatory and accounting treatment of asset quality. Journal of Banking Regulation. 19 (1): 33–54.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
The author states that there is no conflict of interest.
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Pandey, A. A taxonomy of asset management companies. J Bank Regul 23, 199–209 (2022). https://doi.org/10.1057/s41261-021-00156-2
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1057/s41261-021-00156-2