Bank Restructuring in Asia: Crisis management in the aftermath of the Asian financial crisis and prospects for crisis prevention -Malaysia-

This paper analyzes the bank restructuring process in Malaysia from the currency crisis of 1997 to present. Even though the banking sector in Malaysia had relatively lower NPLs compared to other Asian countries, financial sector suffered financial crisis and various problems emerged. This paper covers topics such as setting up financial restructuring agencies, a scheme of capital injection to weak banks, and a corporate restructuring process conducted by the Malaysian government. Plans of Mergers/ closures of banks, setting up an asset management company, a recapitalization agency, and a corporate debt restructuring committee, such as Pengurusan Danaharta Nasional Berhad (Danaharta), Danamodal Nasional Berhad (Danamodal), and the Corporate Debt Restructuring Committee (CDRC), were accompanied by several policy measures such as an exchange rate system pegged to the U.S. dollar, capital controls, and a fiscal stimulus package. Through these measures, the authorities, to some extent, succeeded in bringing down NPLs and in merging several banks to some extent. The reform was considered basically completed by 2002. The banking sector was reorganized with 10 banking groups, and two of the restructuring agencies were closed by 2003.