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Nonperforming loans and public asset management companies in Malaysia and Thailand

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  • Masahiro Inoguchi

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.

Suggested Citation

  • Masahiro Inoguchi, 2012. "Nonperforming loans and public asset management companies in Malaysia and Thailand," Asia Pacific Economic Papers 398, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:csg:ajrcau:398
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    File URL: https://crawford.anu.edu.au/pdf/pep/apep-398.pdf
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    References listed on IDEAS

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    Cited by:

    1. Dimitris ANASTASIOU, 2022. "Management and Resolution Methods of Non-performing Loans: A Review of the Literature," Springer Books, in: Hachmi BEN AMEUR & Zied FTITI & Wael LOUHICHI & Jean-Luc PRIGENT (ed.), Crises and Uncertainty in the Economy, chapter 0, pages 187-201, Springer.
    2. repec:cnb:ocpubc:geo2021/1 is not listed on IDEAS
    3. Thi-Du Hoang, 2017. "The effects of policies changes on return and volatility in Vietnamese stock market," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(1), pages 69-83, January.
    4. R.J. Powell, 2017. "New perspectives on bank risk in Malaysia," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1326217-132, January.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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