DISCLOSURE REQUIREMENTS FOR TRANSFERS OF NPLS TO ASSET MANAGEMENT COMPA-NIES

11/01/2004

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In an order dated 19 July 2004, the Financial Supervisory Commission set out disclosure re-quirements for banks intending to transfer non-performing loans (NPLs) to asset manage-ment companies, or to commission asset man-agement companies to handle their NPLs. The main points are as follows:

A bank may provide information on its NPLs to an asset management company that meets the following conditions:

1.The asset management company must en-sure that persons coming into contact with such data do not reveal loan information; it must have rigorous data protection meas-ures; and it must not use the data in any improper manner.

2.The asset management company must have established internal control mechanisms, and must carry out checks at regular and irregular intervals.

The NPL data transferred should not include data on loans for which the borrower is under no legal performance obligation to the bank.

Where a bank intends to set up an asset man-agement company as a joint venture with an-other entity, and intends to make its capital contribution in the form of its NPLs, if the bank needs to supply data on its NPLs to its prospective joint-venture partner in order for the latter to assess their value, the prospective joint-venture partner must meet the above conditions.