Public asset management companies in East Asia

FSI Papers
February 2004

Foreword

It is a pleasure for me to introduce the third occasional paper published by the Financial Stability Institute. The purpose of these papers is to create an awareness of, and provide information on, topics of interest to financial sector supervisors. For this third paper in our series, the Financial Stability Institute is pleased that a member of its own staff worked closely with our colleagues at the BIS Representative Office for Asia and the Pacific. This joint effort has produced a paper that describes the use of government owned asset management companies to reduce the level of problem assets in banking systems. In doing so, it draws on the recent experiences of several Asian countries as they worked to deal with problem assets arising from the Asian financial crisis.

The paper examines the common characteristics and differences in the Asian government owned asset management companies. By looking at the framework for the establishment of each country's asset management company, the transfer of assets to it, its resolution of those assets and financing issues, the authors are able to identify a number of important factors that contribute to the successful operation of an asset management company. The issues discussed in this paper are critical for not only banking supervisors, but also others who are involved in financial sector stability since asset management companies are typically only used in response to significant banking sector problems.

The issues raised in this paper will be discussed at a highlevel meeting of central bankers, banking supervisors and other government officials being held in Bangkok in February 2004.