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Document Type

Case Study

Case Series

Broad-Based Asset Management Programs

JEL Codes

G01, G28

Abstract

The combination of the collapse of a midsize bank due to fraud and the failure to meet projected exports exposed weakness in the Thai economy in 1996. Pressure on the baht grew in 1997, and the Thai government attempted to defend its currency by depleting foreign reserves. Thailand floated the baht in July 1997, which triggered a financial crisis. The government encouraged financial institutions to establish institution-specific asset management companies to address nonperforming loans (NPLs), which peaked in 1999 at 47.7% of total loans. Despite those efforts, NPL levels remained high. In 2001, the government created the Thai Asset Management Company (TAMC) to purchase and restructure NPLs. The focus was on reviving debtor companies to enable them to repay their debts. State-owned banks and state-led AMCs were required to transfer most of their NPLs to the TAMC; private banks and AMCs were required to transfer relatively large, multi-creditor loans. The TAMC could restructure debt, reorganize businesses, and foreclose and dispose of property. Transferring institutions were jointly liable with the TAMC for the profit or loss on the management of the transferred assets; the TAMC had a predefined profit/loss-sharing arrangement to be calculated at the fifth and 10th years of operations. The TAMC was required to cease operations in June 2011 and complete liquidation by June 2013. Over its 10-year lifespan, TAMC acquired assets with a book value of 780 billion baht (approximately $17.3 billion) for an approximate total purchase price of 265 billion baht.

Date Revised

2021-06-30

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