Bitter Pill

Upcoming laws to buyout dud loans of financial institutions, has wide ranging powers including prison terms for directors who fail to comply and powers to the asset management company to takeover a firm if its debts fall below 75 percent of its assets.
However, critics say the draft piece of legislation is riddled with holes, and is unlikely to tackle the growing bad debts problem that is strangling the financial industry.rn

rnThe proposed National Asset Management Company Act (NAMC), will be registered under the Companys Act No: 17 of 1982 and will operate as a bank within the Recovery of Loans by Banks (Special Provisions) Act: No: 4 of 1990.rn

rnThe concept of Asset Management Companies became popular during the East Asian crisis, where financial regulators set up specific firms to tackle dud loans that were crippling the safety and soundness of financial institutions and the financial system as a whole.rn

rnAsset management companies buyout dud loans from financial institutions