Issues in the Establishment of Asset Management Companies

Abstract

This chapter discusses the role of asset management companies in facilitating bank restructuring and derives some lessons from recent experiences. It reviews various options and cross-country experiences in dealing with impaired assets during periods of financial crises. It argues that there are alternative strategies for managing and disposing of impaired assets, depending on factors such as the type of asset, size and distribution, the structure of the banking system, and available management capacity in the banks and in the public sector. The chapter concludes that there is no single optimal solution but rather a combination of solutions for each country that may vary over time and for each bank resolution. There are, however, common factors that contribute to the success of asset management companies (AMCs). These include supporting legal and regulatory environment, strong leadership, operational independence, appropriately structured incentives, and commercial orientation.