China is set to take direct control of national asset management companies which were originally established to manage the non-performing loans from the state-owned «big four» banks.
The four national asset management companies (AMC) were originally set up in 1999 to buy and imagine non-performing loans (NPL) from the four financial giants – Bank of China, ICBC, CCB and Agricultural Bank of China.
Since then, the four AMCs have extended activities beyond bad debt into banking, insurance and securities, leading to worries about potential risks. This was especially the case after the chairman Lai Xiaomin of Huarong, one of the four AMCs, was charged for taking bribes in 2018 after cash-stuff vaults were reportedly found in his apartment. Lai had allegedly channeled funds from Huarong into privately-owned companies with risky investments.
According to a «Caixin» report, greater control can be expected as a new holding company will be established to oversee the four national asset managers. The intention is to «isolate AMC risk from the Ministry of Finance» – the largest shareholder of the four firms. The head of the new holding company, the report added, will be given an administrative rank equivalent to a deputy minister.
More NPL Players
Restructuring aside, China’s NPL market has recently seen the entrance of new players.
Earlier this month, regulators approved the establishment of the new state-owned China Galaxy Asset Management, bringing the total number of national AMCs to five. And in February, the country welcomed the first foreign NPL manager as Oaktree Capital entered the market due to surprise inclusion in the last U.S.-China phase one trade deal.
