Role and Development of DANAHARTA
Ahmad Zuhairi Mohd Amin
Bank Negara Malaysia
24 May 2005
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
Agenda
1. Background and Overview
2. Approach
3. Progress
4. Going Forward
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
Background and Overview
• Pengurusan Danaharta Nasional Berhad ("Danaharta") was established
by the Malaysian Government in June 1998 to address the nonperforming loans ("NPLs") problem plaguing the banking system
during the Asian financial crisis.
• The NPL resolution agency, euphemistically known as the national
asset management company ("AMC"), was established as a preemptive measure to avert a failure in the banking system.
• Danaharta's objectives are:
– to remove NPLs from the banking system to allow banks to
concentrate on their core business of lending to viable borrowers
(completed in March 2001)
– to maximise recovery from its NPL portfolio (ongoing till 2005)
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
Background and Overview (continued)
• Danaharta started removing NPLs from the financial system in
September 1998 and completed the task in March 2001. This
was done via two modes:
Acquired NPLs
Danaharta acquired NPLs from almost 70 financial institutions
("FIs") nationwide
Total fair purchase price of NPLs: RM8.94 billion
Payment: Via issuance of zero-coupon Danaharta bonds and cash
Managed NPLs
Danaharta was assigned the NPLs of the now defunct Sime Bank
Berhad Group ("Sime Bank Group") and Bank Bumiputra Malaysia
Berhad ("BBMB Group") to manage on the Government’s behalf.
Total price paid by Danaharta: Nil
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
Agenda
1. Background and Overview
2. Approach
3. Progress
4. Going Forward
5
ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
Approach
Remove NPLs from
banking system
Maximise recovery value of
NPLs
Asset management approach
Viable loans
Non viable loans
• Management of borrower
• Management of collateral
• Restructuring
• Rehabilitation
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
Approach (continued)
• In dealing with the NPLs, Danaharta adopts the true AMC approach
that is to actively manage each loan account to attain maximum
recovery. Every NPL account is reviewed to determine the most
appropriate recovery strategy.
• With the implementation of the recovery strategies, recoveries are
then received in the form of cash and non-cash assets i.e.
securities, properties and restructured loans.
• Ultimately, all non-cash recovery assets will be converted into cash,
part of which would be distributed to the FIs that had sold NPLs to
Danaharta (as required by the surplus sharing arrangements agreed
upon during NPL acquisition) and to the Government (in respect of
the Managed NPLs).
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
Agenda
1. Background and Overview
2. Approach
3. Progress
4. Going Forward
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
“More than 90% of total lifetime recovery target collected”
• Danaharta expects to collect about RM30 billion over its lifetime.
As at the end of 2004, Danaharta had already collected more than
90% of the total lifetime recovery target of approximately RM30
billion, which is equivalent to a recovery rate of 59% – comprising
50% for acquired NPLs and 65% for managed NPLs.
• By 31 December 2004, it had received recovery amounting to
RM29.03 billion, of which 81% had been converted into cash.
• Danaharta had a total cash and cash equivalents of RM0.96 billion
as at 31 December 2004. Danaharta had also redeemed RM10.345
billion of the RM11.14 billion bonds it issued.
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
Agenda
1. Background and Overview
2. Approach
3. Progress
4. Going Forward
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
Going forward…
• Danaharta is targeting to wind down its operations by end 2005.
Nevertheless, Danaharta's efforts will continue to strive to achieve
maximum recovery from its NPLs.
• Going forward, Danaharta will focus on collecting recovery,
converting non-cash recovery assets into cash and redeeming the
final tranches of bonds amounting to RM0.795 billion matured on
31 March 2005.
• Being a national AMC, Danaharta is likely to record a loss at its
close, which will be a cost to be borne by the Government.
• However, this cost is small compared to the greater losses Malaysia
would have suffered economically and socially had the banking
system in the country collapsed. Nonetheless, Danaharta strives to
minimise its eventual cost through maximizing the NPL recovery
value.
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
For more information…
Please visit the following website;
Bank Negara Malaysia (Central Bank of Malaysia)
http://www.bnm.gov.my
Pengurusan Danaharta Nasional Berhad
http://www.danaharta.com.my
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China
Thank you
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ASEAN+3 Workshop on Reform and
Development of Banking Sector in China