China Allows Bad-Asset Managers to Tap More Banking Assets
Listen to the full version
China is allowing its four state-owned bad asset managers to acquire a broader range of financial assets as the country ramps up efforts to revive non-performing assets in its banking sector.
China’s National Financial Regulatory Administration (NFRA) notified its local branches and financial institutions last month that the four national asset management companies (AMCs) would be allowed to acquire financial assets from large and joint-stock banks, expanding the scope of assets they could acquire, Caixin learned from multiple sources.
Unlock exclusive discounts with a Caixin group subscription — ideal for teams and organizations.
Subscribe to both Caixin Global and The Wall Street Journal — for the price of one.
- RELATED
- DIGEST HUB
Digest Hub
Back
- China's state-owned asset managers are now permitted to acquire a wider range of financial assets from large and joint-stock banks to address non-performing assets in the banking sector.
- The National Financial Regulatory Administration (NFRA) has expanded the scope for these asset management companies, allowing them to deal with more categories of distressed debts.
- This policy change is part of efforts to stabilize China’s $63 trillion financial system, which has been impacted by slow economic recovery and a prolonged property crisis.
China has broadened the operational scope of its four state-owned asset management companies (AMCs) to include a wider range of financial assets from larger banks, enhancing their role in addressing non-performing assets within the banking sector [para. 1][para. 2]. These AMCs, established after the Asian financial crisis in the late 1990s, were initially created to manage bad loans primarily from state-owned enterprises that had burdened major lenders with potential insolvency [para. 4]. Their primary function is to purchase distressed debts and optimize recovery through various means such as selling or restructuring these assets [para. 5].
The recent policy update by China’s National Financial Regulatory Administration (NFRA) allows these AMCs to now acquire assets from all five categorized risk levels—normal, special mention, substandard, doubtful, and loss—where previously they mainly dealt with the last three categories considered non-performing [para. 3][para. 7]. This expansion is part of a broader strategy to mitigate risks in China's $63 trillion financial system which has been under strain due to slow economic recovery pre-pandemic and ongoing real estate crises leading to increased defaults and bad loans [para. 6].
In 2022, guidelines were issued encouraging these AMCs to also focus on smaller and medium-sized banks, aiming at a more comprehensive inclusion of financial institutions under their purview. The latest directive further extends this reach allowing them to handle riskier assets from larger banks as well [para. 8]. This move is intended not only for better management of bank risks but also aims at revitalizing these risky assets effectively [para. 9].
Overall, this strategic adjustment signifies a robust approach by Chinese regulatory bodies towards maintaining stability and confidence in its vast financial landscape by empowering specialized entities like AMCs to play a crucial role in asset revitalization and risk management across an expanded array of financial institutions.
- China Great Wall Asset Management Co. Ltd.
- China Great Wall Asset Management Co. Ltd. is one of the four state-owned asset management companies (AMCs) created by China after the late 1990s Asian financial crisis. Its primary role is to purchase distressed debt from banks, aiming to recover funds through asset restructuring, sales, or other debt recovery methods. This helps manage and mitigate financial risks within China's banking sector.
- China Huarong Asset Management Co. Ltd.
- China Huarong Asset Management Co. Ltd. is one of the four state-owned asset management companies (AMCs) in China, established to buy bad loans from banks following the Asian financial crisis in the late 1990s. Its primary role is to acquire distressed debt and attempt to recover funds through asset sales, restructuring, or other methods to manage non-performing assets.
- China Cinda Asset Management Co. Ltd.
- China Cinda Asset Management Co. Ltd. is one of the four state-owned asset management companies (AMCs) in China, established to purchase non-performing loans from banks following the Asian financial crisis in the late 1990s. Its primary role is to manage and recover distressed debt, contributing to stabilizing China's financial system.
- China Orient Asset Management Co. Ltd.
- China Orient Asset Management Co. Ltd. is one of the four state-owned asset management companies (AMCs) in China, established to buy bad loans from banks following the Asian financial crisis in the late 1990s. Its primary role is to acquire distressed debt and attempt to recover funds through selling, restructuring, or other methods to manage non-performing assets effectively.
- PODCAST
- MOST POPULAR
Sign in with Google
Sign in with Facebook
Sign in with 财新