Debt Equity Conversions and NPL Securitization in China: Some Initial Considerations
Technical Notes and Manuals, April 26, 2016
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Bibliographic details
- Authors: James Daniel, Jose M Garrido, Marina Moretti
- Published: April 26, 2016
- Series: Technical Notes and Manuals
- DOI: https://doi.org/10.5089/9781513524153.005
Overview
- Authors: James Daniel, Jose M Garrido, Marina Moretti
- Publication date: April 26, 2016
- Series: Technical Notes and Manuals No. 2016/005
- Issue: 005
- Volume: 2016
- Pages: 9
- DOI: https://doi.org/10.5089/9781513524153.005
- ISBN: 9781513524153
- ISSN: 2075-8669
- This Technical Guidance Note should not be reported as representing the views of the IMF. The views expressed in this Note are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Executive summary and main finding
- The note considers the role debt-equity conversions and NPL securitization can play in addressing excessive corporate debt in China and the corresponding burden on banks of impaired assets.
- Main finding: such techniques can play a role, but getting their design right is critical, as is nesting them within a comprehensive, system-wide, plan.
Substantive findings and analysis
- Debt-equity conversions and NPL securitization are potential tools to:
- Address excessive corporate debt.
- Reduce the burden on banks of impaired assets.
- Critical success factors highlighted:
- Proper design of conversion and securitization instruments.
- Integration within a comprehensive, system-wide plan for corporate debt resolution and financial sector repair.
Policy recommendations and implementation considerations
- Design-related recommendations:
- Ensure instruments are carefully structured to address specific asset-quality and corporate-restructuring objectives.
- Align incentives for banks, corporate debtors, and potential investors in converted equity or securitized NPLs.
- System-wide considerations:
- Nest debt-equity conversions and NPL securitization within a broader, comprehensive plan for managing excessive corporate debt and impaired bank assets.
- Coordinate among relevant authorities and stakeholders to manage macro-financial and governance implications.
Subject classifications and keywords
- Subject: Banking; Distressed assets; Financial institutions; Financial sector policy and analysis; Financial services; Loans; Nonperforming loans; Securitization; Stocks
- Keywords: asset; asset quality; bank; bank lending; bank ownership; bank regulation; borrowing; corporate restructuring; Credit; debt; debt-equity conversion; Distressed assets; East Asia; equity; equity holding; Global; governance; insolvency; liquidation; loan; Loans; non-performing; Nonperforming loans; NPL securitization; Securitization; shares; Stocks; TNM
Source: Technical Notes and Manuals 2016, 005 (2016), "Debt Equity Conversions and NPL Securitization in China: Some Initial Considerations", James Daniel, Jose M Garrido, Marina Moretti.
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- Debt-Equity Conversions and NPL Securitization in China—Some Initial Considerations