Losses in Bank Balance Sheets and Assets Management Companies: Assessment of Turkey

Abstract

Tough financing conditions, a contractionary economy, asset quality deterioration, capital, liquidity and funding problems cause serious problems in the banking sector. The existence of non-performing loans is one of the important items that cause deterioration of the banks' current situation. While the growth of nonperforming loans not only wherret banking activities, but also affects the economy negatively. Loans that are defined as “Non-Performing Loans” and which are likely to turn into non-performing loans are considered as bad loans in banking. Cleaning the such bad loans from the banks’ balance sheets relief the situation of the banks and on the other hand creates a favorable environment for the economy. One of the time honored practice for cleaning the “Non-Performing Loans” from the banks’ balance sheets is asset management companies. In this study, non-performing loans in banks were discussed and asset management companies, which are considered as the gateway to this situation, were examined. Asset management companies are the companies that buy financial receivables that have become suspicious and have problems in collection and try to collect them by settling with debtors. Asset management companies buy bad loans, finance the bank or company, negotiate with borrowers, and play a financial and operational role in structuring. In this study, non-performing loans in banks were discussed and asset management companies, which are considered as the gateway to this situation, were examined.

Keywords

• banking system
• non-performing loans
• asset management company
• debt restructuring