Handling non-performing loans in the banking system: from the viewpoint of public policy

Abstract

The non-performing loans (NPLs) are not only the direct cause of the banking crises but also the main barrier preventing the banking system from the crisis resolution and post-crisis reform of the banking system. The China experiences on NPLs resolution in its banking system indicates that there should be a combination between centralized and decentralized NPLs resolution mechanisms, as well as the development of the market for NPLs trading in the banking system and an appropriate legal framework for securitization of NPLs in order to involve private and foreign investors in the NPLs resolution process.