## Two Approaches to Resolving Nonperforming Assets During Financial Crises

_IMF Working Papers, February 1, 2000_

## Source details

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## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/30/two-approaches-to-resolving-nonperforming-assets-during-financial-crises-3460/index.md)
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## Bibliographic details
- Authors: David Woo
- Published: February 1, 2000
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451845174.001

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### Summary
- The paper examines two approaches that emerged during the recent Asian financial crisis to resolve nonperforming assets: the creation of asset management companies (AMCs) and the development of out-of-court centralized corporate debt workout frameworks.
- It investigates the respective roles of these two approaches, evaluates their strengths and weaknesses, and seeks to benchmark best practices in their design.
- The unprecedented rise in nonperforming assets during the crisis tested the limit and capacity of existing asset management infrastructure, prompting policymakers to consider these new approaches.

### Key Findings and Themes
- Two central approaches defined the core asset management setting in countries most seriously affected by the crisis:
  - Asset management companies (AMCs).
  - Out-of-court centralized corporate debt workout frameworks.
- The paper focuses on:
  - Roles of asset management companies.
  - Asset resolution process.
  - Debt workout mechanisms.
  - Issues concerning distressed assets and market value assessment.
- Geographic and topical emphasis includes East Asia, foreign exchange considerations, and banking sector implications.

### Evaluation: Strengths and Weaknesses
- The paper evaluates strengths and weaknesses of both AMCs and out-of-court debt workouts (details presented in the full working paper).
- Considerations include institutional capacity, governance (AMC board, AMC management, AMC subsidiary), and the ability to handle large volumes of nonperforming assets.

### Best Practices and Design Benchmarks
- The paper seeks to benchmark best practices in the design of:
  - Asset management companies and their governance structures.
  - Centralized out-of-court corporate debt workout frameworks.
- Emphasis on designing processes to improve resolution speed, preserve market value, and coordinate creditors and banks (lead bank roles referenced).

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## Content in this bundle

- **Two Approaches to Resolving Nonperforming Assets During Financial Crises - WP/00/33**
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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/two-approaches-to-resolving-nonperforming-assets-during-financial-crises-3460_