An Investigation Into The Management,Disposal And Related Countermeasures For Non-performing Assets

Non-performing assets are the natural products during the development process of banks in the market economy. It is different only in the amount of non-performing assets among banks. As commercial banks survive and develop in the face of fierce competition, it is impossible for banks to completely eliminate the emergence and existence of non-performing assets. The factors which make bad debts in banks happen include bank’s internal management, changes in the macroeconomic situation, government’s policy orientation, legal and credit environment of the society and so on. It not only affects the bank’s operations, but also endangers the economic and financial security if bad bank assets are not disposed of properly, so prevention against and control of non-performing assets and their accumulation become a major economic issue with common concern in our world.Objective:To explore the main ways to manage and dispose non-performing assets in Chinese banks, to point out the imperfect aspects of the legal system about the non-performing assets’management and disposition, to sum up the main methods for preventing and reducing non-performing assets for the healthy development of Chinese banks, to provide a reference for AMC’s choice of their restructuring and development roads, to protect the legitimate rights and interests of creditors, and to maintain and improve Chinese banks and financial asset management companies’ operating efficiency.Method:To sum up, to conduct factor analysis of the mechanism through which non-performing assets are generated and of the major causes of bad assets in banks:the increasing risks involved, the economic transition, the pressure of interest on loans, lack of creditworthiness, financial accounting-based, loose management, policy factors, performance evaluation factors, collusion between the clerks in banks and other people outside the banks, etc. To conclude the financial factors, social factors, legal and other comprehensive factors and so on which result in non-performing assets. Here the financial factors include accrual and revenue recognition principle, FIFO inventory accounting law, provision for bad debts, the bank’s financial evaluation indicators, corporate financial arrangements and so on; social factors consist of institutional factors, old ideas, policy factors, lack of social creditworthiness, etc.; other combination of factors comprise project risk factors, the interest burden of loans, poor internal management in banks.To point out, through comparative analysis of the differences between Chinese financial companies and foreign professional institutions in dealing with non-performing assets, the exception in Chinese banking sector such as the number of institutions, organizational forms, acquisition pricing of non-performing assets, acquisition types of bad assets, categories of non-performing assets bought, business areas, operating objectives, legal status and so on. To demonstrate the deep institutional reasons, which resulted in non-performing assets, through a detailed description of the evolution of Chinese banks and a comparison of characteristics of the banking business and fund application in enterprises between Chinese and foreign economic systems.To account for how to choose the paths of non-performing assets’disposal method and indicate that the choice of asset disposal resides in the specific characteristics of non-performing assets and their economic and political environment. Here especially used case analysis of factors resulting in non-performing assets, and the main problems encountered in managing and disposing non-performing assets, and is combined with the choice analysis of non-performing assets disposal ways.Conclusion:The choice of non-performing assets disposal is mainly determined by its own characteristics; market economic system is not only the institutional factor which results in non-performing assets generated, but also the institutional environments which manage and dispose the non-performing assets must face; the major coping strategies for reducing non-performing assets and the main problems which should be noted by financial institutions in distributing, managing and disposing loans are derived from the market economy environment.