Asset management companies, non-performing loans and systemic crisis: A developing country perspective

Nigeria's response to its 2009 banking crisis, which indicated exogenous and endogenous local and global risk factors for non-performing loans (NPLs), included the apparent orthodoxy of establishing an asset management company (AMCON). This article examines the justifications for and effectiveness of AMCON as a mechanism for resolving NPLs in a developing economy. Having compared Nigeria and Korea, the article argues that relief, restructuring, rehabilitation, recovery, resuscitation, responsibility, restitution and reoccurrence prevention, expressed as RE = 7 X Re-Re, are critical goals. Doubting a one-size-fits-all model for resolving systemic banking crises, this article suggests a contextual approach that considers asset characteristics, operative legal and regulatory environment, and market capacity.