Nonperforming loans and public asset management companies in Malaysia and Thailand

Masahiro Inoguchi

Asia Pacific Economic Papers from Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University

Abstract: This paper explores the factors which eliminated the nonperforming loan (NPL) problem in Malaysia and Thailand following the 1997 Asian Financial Crisis. The number of NPLs which expanded in the aftermath of the crisis, has since declined in most Southeast Asian countries. Although previous studies have explored the causes of the increase in NPL numbers, few have analysed the factors that contributed to the reduction in their number in Asia. In Malaysia and Thailand, authorities put in place a number of measures to manage NPLs. As a vehicle to acquire NPLs from banks, Malaysia established the Pengurusan Danaharta Nasional Berhad (Danaharta) in 1998, while Thailand established the Thai Asset Management Corporation (TAMC) in 2001. We analyse whether the characteristic features of banks, improvements in macroeconomic conditions, and facilities for purchasing loans caused a reduction in the number of NPLs in Malaysia and Thailand. The results suggest that selling loans to a public asset management company was effective in reducing the number of NPLs in Thailand. However, while macroeconomic conditions influenced the decline in NPL ratios in Thailand, in Malaysia, good performing commercial banks and large commercial and investment banks generally had smaller NPL ratios throughout and following the crisis.

JEL-codes: G21 O16 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (4)

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