A comparative legal analysis on non-performing loans definition and its sale framework in Malaysia, Thailand, Indonesia and Philippines
List of Authors
  • Premjit Singh Kolwant Singh

Keyword
  • Non-Performing Loans, NPL, Banking Law, Finance Law, ASEAN

Abstract
  • With Covid-19 banking and financial relief measures in the region recently came to an end, it is viewed that non-performing loans ratio’s may increase and there may be a more proactive behaviour by financial institutions in dealing with their non-performing assets including disposing their non-performing loans comprising of both unsecured and secured products by way of sale and purchase to third parties. The purpose of this article is to analyse the current legal definition of non-performing loans in selected Southeast Asian countries together with international organisations recommended definitions. The article will further examine selected Southeast Asian prevailing legislations and regulations that governs the sale of non-performing loans. The author intends to adopt a multi-method research strategy primarily doctrinal legal research as well as qualitative research approach. This article aims to contribute to the legal fraternity and people in general with an overview of the current position in selected Southeast Asian countries.

Reference
  • 1. Act of the Republic of Indonesia Number 7 of 1992 concerning Banking as Amended by Act Number 10 of 1998.

    2. Álvarez, C. (2021, August 6). How is a bank’s credit quality measured? NEWS BBVA. Retrieved September 8, 2022, from https://www.bbva.com/en/how-is-a-banks-credit-quality-measured/.

    3. Analysis on Malaysian Non-Performing Loans and Financing Sale, Effects of Covid-19 and its Legal and Regulatory Framework. (2022, June 30). International Journal of Advanced Research in Economics and Finance. https://doi.org/10.55057/ijaref.2022.4.2.1.

    4. Ari, A. (2019, December). The dynamics of non-performing loans during banking crises: A new database. International Monetary Fund.

    5. Arner, D. W., Avgouleas, E., & Gibson, E. C. (2022, August 9). COVID-19, Macroeconomic and Sustainability Shocks, Moral Hazard and Resolution of Systemic Banking Crises:

    6. Designing Appropriate Systems of Public Support. European Business Organization Law Review. https://doi.org/10.1007/s40804-022-00255-1.

    7. Asian Development Bank. (2022, March). Southeast Asia Rising From the Pandemic. https://www.adb.org/sites/default/files/publication/779416/southeast-asia-rising-pandemic.pdf.

    8. Attachment of Regulation Of The Financial Services Authority Of The Republic Of Indonesia Number 40 /POJK.03/2019 About Asset Quality Assessment Of Commercial Banks.

    9. Banchongduang, S. B. (2021, September 4). Debt Restructuring to be Extended. Bangkok Post. https://www.bangkokpost.com/business/2176239/debt-restructuring-to-be-extended.

    10. Banchongduang, S. B. (2022, August 13). The power of joining forces. Bangkok Post. https://www.bangkokpost.com/business/2367738/the-power-of-joining-forces

    11. Bangkok Sentral Ng Pilipinas. (2021). Report on the Philippine Financial System. https://www.bsp.gov.ph/Lists/Report%20on%20the%20Philippine%20Financial%20System/Attachments/30/StatRep_2Sem2021.pdf.

    12. Bank of Thailand Increases SME Debt Restructuring Options. (2021b, June 16). MPG. https://mahanakornpartners.com/bank-of-thailand-increases-sme-debt-restructuring-options/.

    13. Baudino, P. (2017, October). FSI Insights on Policy Implementation No. 3 - Resolution of non-performing loans – policy options.

    14. CEICdata.com. (2018, June 1). Thailand Non Performing Loans Ratio. https://www.ceicdata.com/en/indicator/thailand/non-performing-loans-ratio.

    15. CEICdata.com. (2018a, June 1). Malaysia Non Performing Loans Ratio. https://www.ceicdata.com/en/indicator/malaysia/non-performing-loans-ratio.

    16. CEICdata.com. (n.d.). Indonesia Non Performing Loans Ratio. https://www.ceicdata.com/en/indicator/indonesia/non-performing-loans-ratio.

    17. CEICdata.com. (n.d.). Philippines Non Performing Loans Ratio. https://www.ceicdata.com/en/indicator/philippines/non-performing-loans-ratio.

    18. Ministerial Regulation (B.E. 2541) Issued under the Emergency Decree on Asset Management Company B.E. 2541.

    19. Constitutional Court of Indonesia, Case No. 77/PUU-IX/2011.

    20. Crispin, S. W. C. (2022, April 4). Thailand’s banks not as healthy as they claim. Asia Times. https://asiatimes.com/2022/04/thailands-banks-not-as-healthy-as-they-claim/

    21. Dabo, M. (2021, February 17). Philippines: new law allows banks to ditch bad loans. Retail Banker International. Retrieved September 8, 2022, from https://www.retailbanker international.com/news/philippines-new-law-allows-banks-to-ditch-of-bad-loans/.

    22. Decree of the Board of Managing Directors of Bank Indonesia Concerning Allowance for Earning Assets Losses No. 31/148/KEP/DIR.

    23. De Haan, J. D. (2021, March). Non-performing loans – different this time? NPL resolution after COVID-19: Main differences to previous crises. europarl.europa.eu. https://www.europ arl.europa.eu/RegData/etudes/IDAN/2021/659645/IPOL_IDA(2021)659645_EN.pdf

    24. Dreyer, M. D. (2020, March 17). Danaharta – Malaysia. Preliminary YPFS Discussion Draft. https://ypfsresourcelibrary.blob.core.windows.net/fcic/YPFS/Dreyer%20Danaharta%20(Malaysia)%2020-03-17_%20PRELIMINARY%20DRAFT.pdf.

    25. Emergency Decree on Asset Management Company, B.E. 2541 (1998).

    26. Financial Institutions Strategic Transfer (FIST) Act (Republic Act No. 11523).

    27. Financial Services Act 2013.

    28. Indonesia Accounting Standards PSAK No. 31.

    29. Islamic Financial Services Act 2013.

    30. Notification of the Bank of Thailand Re: Non-Performing Asset and Rules to be Complied with by Asset Management Companies B.E. 2548 dated 23 December B.E. 2458.

    31. No.:ForNorSor. (21) Wor. 2433/2548 Re: Dispatch of the Notification of the Bank of Thailand Re: Non-Performing Asset and Rules to be Complied with by Asset Management Companies B.E. 2548.

    32. Kose, A. (2021, November). What Has Been the Impact of COVID-19 on Debt? Turning a Wave into a Tsunami. https://openknowledge.worldbank.org/bitstream/handle/10986/366 47/What-Has-Been-the-Impact-of-COVID-19-on-Debt-Turning-a-Wave-into-a-Tsunami.pdf?sequence=1&isAllowed=y.

    33. Lee, J. (2019, March). Nonperforming loans in Asia: Determinants and macrofinancial linkages. Asian Development Bank.

    34. Lee, J. (n.d.). Country Case Studies on Resolving Problem Loans in Asia: Crises, Policies, and Institutions Asian Development Bank.

    35. Malaysia: Non-performing loans. (n.d.). The Global Economy. https://www.theglobaleconomy. com/Malaysia/Nonperforming_loans/.

    36. Medina, A. F. M. (2021, March 17). Philippines Launches FIST Act to Protect Banks and Financial Institutions. ASEAN BriefingA. https://www.aseanbriefing.com/news/philippines-launches-fist-act-to-protect-banks-and-financial-institutions/.

    37. Ministerial Regulation (B.E. 2541) Issued under the Emergency Decree on Asset Management Company B.E. 2541.

    38. No. SorNorSor. (22) Wor. 7/2546 Re: Redefining “Non-Performing Loans” (NPLs) and preparation of reports required to be submitted by commercial banks.

    39. OECD. (2021). Resolution strategies for non-performing loans in the post-COVID-19 landscape.

    40. Paragraph 145 Annex V Reporting on Financial Information, Commission Implementing Regulation (EU) No 680/2014, 16 April 2014.

    41. Park, C. P. (2021, October 3). Lessons learned from Asian experiences: Public AMCs and addressing the NPL problems. JVI.org. https://www.jvi.org/fileadmin/jvi_files/Public_ Lectures/2019/NPL_Resolution_in_Asia/L10_-_Asian_NPLs_CYP_PPT_Oct2019.pdf.

    42. Performance of the Thai Banking System in the Second Quarter of 2022. (n.d.). BOT. https://www.bot.or.th/English/PressandSpeeches/Press/2022/Pages/n4265.aspx.

    43. Post, T. J. (2020, July 16). Banks ask OJK to extend debt relief program amid mounting COVID-19 cases. The Jakarta Post. Retrieved September 8, 2022, from https://www.thejakarta post.com/news/2020/07/16/banks-ask-ojk-to-extend-debt-relief-program-amid-mounti ng-covid-19-cases.html.

    44. Pressure on Malaysian banks’ provision could remain high in next 1-2 years as moratorium expires — S&P Global. (2021, September 29). The Edge Markets. Retrieved September 8, 2022, from https://www.theedgemarkets.com/article/malaysian-banks-provision-pressure-could-remain-high-next-12-years-moratorium-programs.

    45. Raj, A. P. R. (2022, July 27). Scotiabank sells NPLs in industry’s first sale since 2020. The Edge Markets. https://www.theedgemarkets.com/article/scotiabank-sells-npls-industrys-first -sale-2020.

    46. Sangpolsit, N. (2022, January 28). BoT announces conditions to establish JV AMC to handle bad debts. National News Bureau of Thailand.

    47. Shang, Y. (2021). Effects of Pandemic Outbreak on Economies: Evidence From Business History Context. Front. Public Health 9:632043. doi: 10.3389/fpubh.2021.632043

    48. Special Purpose Vehicle (SPV) Act of 2002 (Republic Act No. 9182).

    49. State banks welcome equal treatment with private competitors (2012, October 1). The Jakarta Post. https://www.thejakartapost.com/news/2012/10/01/state-banks-welcome-equal-treatment-with-private-competitors.html.

    50. Third Amendment To Bank Indonesia Regulation Number 20/8/PBI/2018 Concerning Loan To Value Ratio For Property Loans, Financing To Value Ratio For Property Finance, And Advances For Loans Or Motor Vehicles

    51. World Bank. (2021, October). Non-Performing Loans In East Asia And The Pacific Practices and Lessons in Times of COVID-19. https://openknowledge.worldbank.org/bitstream/ handle/10986/36522/Non-Performing-Loans-in-East-Asia-and-the-Pacific-Practices-and-Lessons-in-Times-of-COVID-19.pdf?sequence=1