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RPS 2005-01: Experience of Crisis-Hit Asian Countries: Do Asset Management Companies Increase Moral Hazard?

This paper examines the performances of Asian asset management companies (AMCs). The analysis reveals that the AMCs vary significantly in their design and performances. The authors claim that AMCs can trigger moral hazard-inspired bank lending, especially when the mode of transfer of nonperforming loans (NPLs) from banks to AMCs entails little cost to banks. The new centralized AMC, the Thai Asset Management Company (TAMC), on the other hand, decreased the new NPL ratio, suggesting that TAMC provokes no adverse moral hazard effect on financial institutions. In addition, they find that the same institutional consideration significantly decreases new NPL in foreign banks and finance companies.

Philippine Institute for Development Studies
Authors Keywords
Terada-Hagiwara, Akiko; Pasadilla, Gloria O.; Asian financial crisis; bank restructuring; asset management company (AMC); Thailand; moral hazard; nonperforming loans (NPLs);
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Published in 2006 and available in the PIDS Library or Downloaded 929 times since November 25, 2011
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