NATIONAL asset management company (AMC), Pengurusan Danaharta Nasional Bhd, has been hailed as one of the more successful AMCs in East Asia in a study by Bank for International Settlements (BIS).
In a paper on public asset management companies in the region, BIS said since the regional financial crisis in 1997, Asian AMCs have taken over substantial volumes of non-performing loans (NPLS), amounting to some 6% to 20% of 2002 gross domestic product.
The Bank for International Settlements was established in 1930. It was originally formed under the Hague Agreements, as were the International Monetary Fund and World Bank.
BIS is an international organisation which fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability.
Damnaharta Senior GM for property Datuk Johan Ariffin
The Indonesian, South Korean and Malaysian AMCs have acquired more than 80% of the NPLs in their systems, while the Chinese, Japanese and Thai AMCs have taken over only 30% to 40% of the banks' NPLs, it added.
In Taiwan and the Philippines, public AMCs have made more limited headway, owing to legislative delays and/or alternative restructuring strategies.
According to BIS, speedy acquisitions of NPLs required strong political will and clear mandated roles for AMCs. An AMC, in assuming the NPLs of financial institutions, is expected to maximise asset recoveries and minimise costs to taxpayers.
Bank Negara's supervisors have put strong pressure on banks to promptly transfer their NPLs. If a bank is not willing to sell a NPL to Danaharta at the offered price, it had to write the NPL down to 80% of the offer price, it said.
Danaharta, established in 1998 to address the NPL problem that plagued the Malaysian banking system in the wake of the regional financial crisis, has incurred a total fair purchase price of RM8.96bil for the NPLs it acquired from almost 70 financial institutions nationwide.
As at Dec 31, 2003, the NPL portfolio stood at RM47.7bil involving 2,564 borrowers and 2,903 accounts.
Its objective is to achieve maximum recovery by adopting the most appropriate recovery strategy on a case-to-case basis. All non-cash recovery assets received will be converted to cash, part of which be distributed to financial institutions (FIs) and to the Government for the managed NPLs.
The balance of the cash will be used to redeem the RM11.14bil bonds (face value) issued to the respective FIs for acquiring the NPLs.
Borrowers with viable loans are given a chance to restructure and rehabilitate their loans according to Danaharta's loan restructuring principles and guidelines.
This arrangement is also beneficial to Danaharta as loan restructuring generally yields higher recovery rates compared with other recovery methods.
For non-viable loans and in cases where borrowers fail to comply with the loan restructuring guidelines, the recovery normally involves the sale of a borrower's business, assets or the underlying collateral.
The methods adopted are foreclosure or sale of collateral, appointment of special administrators and legal action. BY ANGIE NG
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