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The Third Forum for Asian Insolvency Reform (FAIR). Lampros Vassiliou OECD Lead Consultant for Asian Insolvency. Progress. Pitfalls. Insolvency Pizza. The Hole . The Implementation Gap. Diversified stakeholders. Incentives. Bubble risks. The disposal culture. Emergency measures.

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Presentation Transcript
slide1

The Third Forum for Asian

Insolvency Reform (FAIR)

Lampros Vassiliou

OECD Lead Consultant for Asian Insolvency

Progress

Pitfalls

Insolvency Pizza

The Hole

The Implementation Gap

Diversifiedstakeholders

Incentives

Bubblerisks

The disposal culture

Emergency measures

RegionalTour

Markets changing

Multilateral criteria

New email: lamprosvassiliou@hotmail.com

progress
Progress
  • Restructuring revolution
  • Rehabilitation Laws
  • Out of court workout frameworks
  • Emergency measures – AMCs, RTCs, SPVs etc.
  • Specialized courts and agencies

Lampros Vassiliou

home

the hole
The Hole
  • Corporate sector collapse imminent despite currency contagion
  • Inflated prices and fraud concealed by momentum
  • Distrust attacks finance sector
  • Gov intervenes via deposit guarantee & recapitalisation
  • IMF loans and AMC bonds surrogate for corporate sector losses

Lampros Vassiliou

home

pitfalls
Pitfalls
  • Specialized courts plagued
  • Fictional rescheduling – the Disguised Moratorium
  • Limited real restructuring
  • New wave of reckless/ directed lending
  • Loopholes quickly exposed and abused
  • No liquidation backbone/ creditor rights base

Lampros Vassiliou

home

the implementation gap
The Implementation Gap
  • Civil remedies and secured transactions
  • Prevention of fraud and corporate governance
  • Rescue models outstep practice and culture
  • Inappropriate role of rescue laws as stick
  • Implementation major problem – Enforcement absent – tailored use of remedies

Lampros Vassiliou

home

incentives
Incentives
  • Insolvency laws alone inadequate
  • Triggers for sales – revaluation and provisioning
  • Stagnation now – incentives gone – informal workouts, AMCs
  • Deposit insurance
  • Good guys gone – many crooks left

Lampros Vassiliou

home

emergency measures
Emergency measures
  • AMCs, rapid disposition agencies, RTC funds, CDRCs, SPAVs
  • Limited lives – but remnants in culture
  • New reckless lending – evidence of moral hazard
  • Overliquidity – haircuts, the new dynamic
  • Strong regulators – key to success

Lampros Vassiliou

home

the disposal culture
The disposal culture
  • Focus on disposal rather than restructure
  • Bad banks have not developed
  • FRA - culture of bulk sale
  • Short institutional memories

Lampros Vassiliou

home

insolvency pizza
Insolvency Pizza
  • You know it’s a pizza because…
  • What’s your flavour…
  • The Atkins approach
  • Tastes change with time
  • Different recipes evolve

Lampros Vassiliou

home

bubble risks
Bubble risks
  • Recovery or bubble has come too quick
  • No change in fundamentals – increase in competitiveness
  • Wave of reckless lending –flushed with cash
  • Credits cards madness – fuel for false growth
  • Withdraw of deposit insurance

Lampros Vassiliou

home

diversified stakeholders
Diversified stakeholders
  • AMCs, funds, vultures, traders etc.
  • Each have own agenda at restructuring table
  • Government interference - TPI
  • Government examples – Resona?
  • Predictability – one offs, special cases, test cases, precedents

Lampros Vassiliou

home

multilateral criteria
Multilateral criteria
  • ADB, IMF, Group 30, UNCITRAL, INSOL, World Bank
  • Best practice criteria shaping investment decisions
  • Efficiency, uniformity and conditionality
  • Role as market movers – collective AMC?
  • The FAIR and FIRM

Lampros Vassiliou

home

markets changing
Markets changing
  • Crisis economies declining in activity
  • Some stagnate – Philippines
  • Some too difficult – Indonesia
  • Some waiting – China
  • Some hot – Chinese Taipei
  • Some now moving – Japan
  • Some starting - India
  • US Bankruptcy Act

Lampros Vassiliou

home

country by country
Country by Country

Japan

Korea

LamprosVassiliou

China

Chinese, Taipei

The Third Forum for Asian Insolvency Reform (FAIR)

Pakistan

HongKong

India

Thailand

Philippines

Indonesia

Malaysia

Lampros Vassiliou

home

india
India
  • Next NPL sale boom market
  • Sick Industrial / Companies Act + SARFESI
  • Eradi Committee – National Company Law Tribunal replacing Board for Industrial and Financial Reconstruction
  • Asset reconstruction companies

Lampros Vassiliou

home

pakistan
Pakistan
  • 1997 creditor friendly Recovery Act – 2001 amendment for mortgagee sales
  • 1999 National Accountability Bureau – 30 day default and off to jail – inconsistent application
  • 2000 CIRC, AMC and CIRSU – CIRC in swing
  • Proposed Corporate Rehabilitation Ordinance – advisory committee, DIP entry, audited accounts, automatic conversion

Lampros Vassiliou

home

thailand
Thailand
  • Death of the Financial Sector Restructuring Authority (FRA) and Corporate Debt Restructuring Advisory Committee (CDRAC) + Birth of the Thai Asset Management Corporation (TAMC)
  • Proposals to amend the Bankruptcy Act – still at large
  • Plight of planners and the TPI case - no appeals
  • Tricks + loopholes – SSM, Natural Park, Tanayong

Lampros Vassiliou

home

indonesia
Indonesia
  • Commercial Court – Team 7
  • Jakarta Initiative Task Force (JITF)
  • Indonesian Bank Restructuring Agency (IBRA)
  • Manulife saga
  • APP – Indonesia and China

Lampros Vassiliou

home

philippines
Philippines
  • 1981 - 2000 SEC sojourn
  • Transfer of jurisdiction to courts
  • Reality of distressed and acquired assets
  • Proposed Corporate Recovery & Insolvency Act
  • Corruption of Special Purpose Asset Vehicles
  • Lack of investor interest

Lampros Vassiliou

home

chinese taipei
Chinese Taipei
  • Bulk Sales of NPL portfolios – hot, hot, hot last year
  • Financial Institution Merger Law – bank mergers
  • New Rehabilitation Law – March/April 2004 election – put reform on back burner
  • Taiwan Asset Management Company
  • Financial Restructuring Fund – expanding role beyond insolvent banks

Lampros Vassiliou

home

china
China
  • 1986 Bankruptcy Act – SOEs – Liquidation Committee – more policy directed bankruptcy –

New Foreign Invested Enterprises – Enterprise Committee

  • New Rehabilitation Law - Radical Changchun approach
  • Four asset management companies – provincial barriers – activity started but slow - RMB flotation overwhelming issue – put NPLs on back burner

Lampros Vassiliou

home

hong kong
Hong Kong
  • No rehabilitation law
  • Companies (Corporate Rescue) Bill – 30 day moratorium – provisional supervisor – employee priority – insolvent trading – still dormant
  • Back door listing industry
  • Chinese window companies

Lampros Vassiliou

home

korea
Korea
  • Agreement for the Promotion of Corporate Workouts
  • New Corporate Restructuring Promotion Law (CRPL)
  • Korean Asset Management Corporation (KAMCO) – no limited life – role being redefined - buying housing loans and credit card ports now – 1200 employees
  • Redefining of provisioning rules ended securitizations – true sale – recourse or guarantee clauses in ABS

Korea (cont)

Lampros Vassiliou

korea cont
Korea (cont)
  • CRVs and REITs – CRC Industry – questionable – manipulation of stocks
  • SKG Global - fraud
  • New proposals for consolidated laws – individual rehabilitation and UNCITRAL
  • Reckless lending – credit cards

Home

Lampros Vassiliou

malaysia
Malaysia
  • Bank Mergers – how many anchor banks?
  • Secret to success of CDRC – August 2001 revamp
  • Danaharta / Danamodal – Dato Azman
  • Danaharta – clear procedures – only 3000 odd accounts – special powers challenged – resolution not disposal – loan repaid early - bonds being redeemed – only one securitization – 58% recovery rate

Lampros Vassiliou

home

japan
Japan
  • Long term economic slump- Detailed insolvency & restructuring procedures – effective courts
  • Resolution and Collection Corporation (RCC) – similar to Thai old AMC – very bad portfolio - will need similar orgs after IBRA, Danaharta – loan sales must cover purchase price = problem as land price decline
  • Industrial Revitalization Corp of Japan (IRCJ) – banks reluctant due to valuation – only 6 debtor corps Japan (cont)

Lampros Vassiliou

japan cont
Japan (cont)
  • Deposit insurance – March 2004 lift full blanket – April 2005 – limited coverage – Japan example to region in this experience
  • Need turnaround experts
  • Resona Bank – example of financial crisis management – DICJ bought stock – replaced management
  • Home

Lampros Vassiliou