Bank Negara: Banks can sell NPLs as part of risk management

KUALA LUMPUR: Banks can dispose off non-performing loans (NPLs) as part of their risk management practice, Bank Negara said. Disposal of NPLs provides the flexibility for banks to manage their loan portfolio effectively and efficiently to maximise recovery to protect depositors' interest, the central bank said.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/6/21/business/11519970&sec=business
Published: Jun 21, 2012

“Any recovery action must be in accordance with the law,” it said in reference to a recent news report on banks selling NPLs to foreign parties.

Bank Negara said the report was inaccurate and misleading.

The number of NPLs sold as stated in the report was grossly overstated, it said, adding that since 2005, NPLs sold totalled less than RM3bil.

Bank Negara said banks were permitted to sell their NPLs to non-banking entities provided the sale was made in accordance with the requirements of the guidelines on the disposal and purchase of NPLs which are issued under the Banking and Financial Institutions Act (Bafia) 1989.

Under the guidelines, banks can only sell NPLs to locally-incorporated companies and the purchaser must be majority-owned by domestic shareholders as the buyer is subject to the 49% foreign equity cap.

Banks were also required to undertake necessary measures to inform the borrower of the NPLs' sale, Bank Negara said.

“NPLs sale made in accordance with the guideline requirements does not contravene Bafia and does not affect any debt restructuring agreements,” it added. - Bernama