Establishing an AMC to purchase people’s debt: Issues to consider (Current Issue No.3570)

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The government's concept of establishing an asset management company (AMC) to purchase non-performing loans (NPLs) from the system, particularly the consumer debt of individual debtors, reflects its awareness of the complexity of NPL problems, which have increased dramatically following several crises.
Although the purpose of establishing a new AMC resembles that of the Tom Yum Kung Crisis in terms of its focus on separating NPLs from the system, the issues in this round are different. These include the fact that substantial NPLs incurred by both businesses and individuals have undergone debt restructuring and assistance measures from both commercial banks and the government. Additionally, there are high uncertainties seen in current economic conditions and income of debtors. Other related issues that must be taken into account include the cost of debt management as the focus is on resolving massive numbers of individuals’ debtors, while there are problems of moral hazard among debtors, and the need to address income-related issues to ensure sustainable debt resolution.
Finally, the effectiveness of establishing a new AMC to resolve NPLs in Thailand’s financial system may depend on the design of the business model and its details, which may emerge later.

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