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A taxonomy of asset management companies

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Abstract

This study proposes a taxonomy for asset management companies to facilitate conceptualization, classification, and measurement. Accordingly, the study qualitatively analyzes variations in the types of assets transferred to asset management companies, the transfer pricing mechanism, and the extent of risk conveyance. The study uses a cross-country setting to analyze differences in corporate structure, resolution mandate, capital structure, and legal status of asset management companies. Through country-specific case illustrations, the study discusses the merits and demerits of different classification features. The study develops a list of feasible design feature combinations for an asset management company.

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Notes

  1. The definition of troubled assets transferred to AMCs varies across countries, with most countries treating loans that are past due for 90 days as NPAs. Some countries have defined troubled assets as loans delinquent beyond 6 months (Malaysia, China) and Korea has used a more expansive definition that includes restructured loans. Please refer to Singh [17] and Bholat et al. [32] for a detailed discussion on divergence in the NPL definition.

  2. Government-guaranteed bonds attract zero risk weightage in risk-based capital assessment.

  3. A separate special purpose trust was established for each pool of troubled assets. Due to the trust structure, the benefits of cross-collateralization were not available to the selling bank.

  4. We do not consider internal units of bank mandated to deal with carved out NPAs as a type of AMC. These internal units are under the same corporate structure and management influence. We find it difficult to rationalize that they are anything but a department of the bank.

  5. The concerns of political interference leading to reduced institutional independence have also been expressed for centralized AMCs in developing countries. The case studies of AMCON and FOBAPROA document these instances.

  6. The intent behind the shareholding structure of NAMA was to avoid consolidation with public accounts.

  7. REFCORP was a public–private partnership that issued zero coupon bonds to satisfy its funding obligations.

  8. A “going concern” is a business that functions without the threat of liquidation for the foreseeable future.

  9. We rely upon success of such transaction by Danaharta in Malaysia.

  10. This statement will be true in almost all jurisdictions that follow minimum corporate governance standards.

  11. For example, the Indonesian parliament expressed unwillingness to sell strategic assets to foreign investors through its AMC, Indonesian Bank Restructuring Agency (19).

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  1. Indian Institute of Management, Prabandh Nagar, Lucknow, India

    Ashish Pandey

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Pandey, A. A taxonomy of asset management companies. J Bank Regul 23, 199–209 (2022). https://doi.org/10.1057/s41261-021-00156-2

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