2016/10/3 Establishment of AMCs(1999) AMCs and NPL Disposal Four AMcs were established to take npls off from Establishment of AMCs(1999) SOCBs books Banks Time of SOCBs sell NPLs to AMCs by purchasing bonds issued Establishment by AMcs PBoc provides loans to AMCs to cover the difference China Development Bank Apr. 20, 1999 between NPLs disposed by SOCBs and the bonds issued by AMCs Huarong oc7.99 ABC oet|8.999 PBoC recalls the same amount of loans from socBs AMCs and NPL Disposal AMCs and NPL Disposal Changes in Balance Sheets of AMcs, PBC, and socBs as to NPL Disposal During 1999-2000 中园东方意产管理公司 中国看 ora+1394 RMB 1. 4 trillion NPL disposed to AMCs from big four in 1999. AMCs and NPL Disposal Market-oriented Banking System (2002-2007) The disposal of NPL did not eliminate NPL. China entered WTO in Dec 2001, and promised to It just stripped the NPl from commercial banks open the financial market in 5 years balance sheets and moved it to AMCs'B/S. The b/S quality of commercial banks had been improved for further reform The AMCs are more specialized in handing the NPL by reselling or recovering it. on, toreign t d pinal d loans that cannot be recovered are losses in h得 thone engenho geir gande and AMC and subsidized by MOF 122016/10/3 12 Establishment of AMCs(1999) • Four AMCs were established to take NPLs off from SOCBs’ books. • All AMCs are financed by MOF. • SOCBs sell NPLs to AMCs by purchasing bonds issued by AMCs. • PBoC provides loans to AMCs to cover the difference between NPLs disposed by SOCBs and the bonds issued by AMCs • PBoC recalls the same amount of loans from SOCBs. 2-67 AMCs and NPL Disposal • Establishment of AMCs(1999) AMC Banks Time of Establishment Orient BOC Oct.15,1999 Cinda CCB and China Development Bank Apr.20, 1999 Huarong ICBC Oct.17,1999 Great Wall ABC Oct.18,1999 2-68 AMCs and NPL Disposal 2-69 Non- Performing Loans RMB 1.4 trillion NPL disposed to AMCs from big four in 1999. AMCs and NPL Disposal 2-70 AMCs and NPL Disposal • The disposal of NPL did not eliminate NPL. • It just stripped the NPL from commercial banks’ balance sheets and moved it to AMCs’ B/S. • The B/S quality of commercial banks had been improved for further reform. • The AMCs are more specialized in handing the NPL by reselling or recovering it. • Bad loans that cannot be recovered are losses in AMC and subsidized by MOF. 2-71 Market-oriented Banking System (2002-2007) • China entered WTO in Dec 2001, and promised to open the financial market in 5 years. 2-72