US to Implement Chinese-Style Toxic Asset Buy

A few years ago, the West were criticising the Chinese on this but they are now learning from what the Chinese did then...

US to Implement Chinese-Style Toxic Asset Buy

American lawmakers appear to have shelved the frightful idea of "nationalizing" failing banks. However, they've now settled down to discuss -- from media commentary, frantically -- a plan that mimics the experience of modern Chinese banking regulators: the creation of a "bad bank" to remove toxic assets from the system.

You may remember that the Chinese banking system was (and remains) functionally bankrupt. [This article from 2005 is worthwhile reading.]


Through deft financial sleight-of-hand, a satisfactory percentage of non-performing loans (NPLs) were removed to a state-controlled holding companies (AMCs), thus allowing, among other benefits, quasi-state-owned financial institutions to list on foreign stock exchanges, sporting "acceptable" NPL ratios. But NPLs continue to rise, despite Chinese statistics (read "notorious.") to the contrary. (Whom to believe?)


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