There are several methods that can be used to assist with the bank and corporate restructuring, the use of which depends on the interaction between the insolvency law and the regulated industry, the regulatory framework for the regulated industry, and the history of the regulation and administration of such regulated industries in the given jurisdiction. Asset management companies have thus been set up as a method of restructuring this industry by way of managing various levels of non-performing loans. It is imperative for banks to not only wait for a financial crisis in order to resolve their non-performing loans, but it is important for them to analyze their financial sector and eliminate their non-performing loans in an orderly manner. But as is the case, most of these asset management companies are created as a result of the corporate financial crisis and are often wound down when the financial crisis is resolved.
The Hong Kong Monetary Authority is one such asset management company that was set up in Hong Kong, Asia, as an approach to corporate difficulties that were being faced by banks in Hong Kong.
It also details the number and types of stakeholders who are involved in the business and their roles in this respect. Hence in the event that a debtor begins to experience financial difficulties, these asset management companies allow for the bank to maintain their financial facilities to this person by ensuring that they have got sufficient liquidity to continue trading. Hence they do not quickly put the borrower into receivership or issue a demand of payment but continue to support this debtor until it is considered that they are no longer able to operate.
These companies also work closely with the debtor to ensure that they have up-to-date information and analysis of their activities to ensure that any conflicts of interest are handled on time.
Privacy and confidentiality are also maintained by all the parties during these stages, also allowing for the demands on the borrower for information to be reasonable. These asset management companies overtime review and evaluate the financial information, business forecasts, and cash flow analysis as it pertains to the business of the borrower in order to assess their financial capabilities. This is produced as a report which is presented to the relevant stakeholders, after which in the event of excessive liabilities, as in the case of non-performing loans, preparation of liquidation is initiated. This forms the basis for the restructuring plan with which the bank is fully advised. This allows for the development of a cash monitoring system that protects the interest of the banks to ensure that they avoid a financial crisis as a result of these non-performing loans.