Caixin
Oct 22, 2016 04:06 PM

Green Light Given for More Local Asset Management Companies

(Beijing) – China’s banking regulators have relaxed some restrictions on local government-run asset management companies (AMC) in an attempt to further clear up the mounting bad debts at the provincial level, says a report by Shanghai Securities News, run by state-owned Xinhua news agency.

According to a policy adjustment document recently been handed down by China Banking Regulatory Commission (CBRC) to local governments, a second local AMC is permitted if the provincial level government finds it necessary, the report by Shanghai Securities News says.

Asset management companies, often called “bad banks”, are set up to receive bad debt from institutions and recover as much money as they can from the assets by selling or restructuring them or applying other workout methods.

Previously, only one AMC was allowed to be set up on the provincial level, according to a policy rolled out by China’s Ministry of Finance in conjunction with CBRC in 2013.

The new document points out several conditions that need to be met to establish the extra local AMC, including a relatively large amount of outstanding bad loans, a relatively rapid increase of non-performing assets in the area, the satisfactory operation of the existing AMC and whether it has played a role in rejuvenating local businesses.

In addition, the regulatory authority also lifted the rule that banned local AMCs from transferring bad assets to other institutions. The previous policy only allowed AMCs to dispose of bad asset by restructuring the debts.

The Shanghai Securities News reports that the coastal cities of Qingdao and Xiamen have already set up their own AMCs on the city level.

Contact reporter Dong Tongjiain (tongjiandong@caixin.com); editor Ken Howe (kennethhowe@caixin.com)

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