Often overlooked, the aftermath of the Global Financial Crisis and the associated Eurozone crisis saw the implementation of sizable delinquent loan purchase programs through Asset Management Companies (AMCs) in Ireland, Spain and Slovenia.1 In Ireland, the size of the AMC was around 44% of GDP, while in Slovenia and Spain, it was around 16% and 8%, respectively. [...] This has usually happened in the aftermath of major economic and financial crises, such as the Asian Financial Crisis in the late 1990s and the crisis in parts of the eurozone, starting in 2010 (see Fell et al. [...] More holistic analyses face the challenge of empirically capturing the various effects of AMCs, including the repercussions on the balance sheets of the sponsoring state, the participating banks, and the debtors acquired by the AMC. [...] The wedge between the effective cost of debt to the firm, and the total return to the lenders represents the economy-wide inefficiency incurred because of firms deciding to default. [...] The supply of labour by households equals the demand by firms, and the supply of money and bonds by the monetary-fiscal authority equals the demand by households (and potentially the AMC).
Authors
- Pages
- 8
- Published in
- Austria
Table of Contents
- Abstract 1
- Asset Management Companies as an alternative to deal with high Non-Performing Loan NPL stocks 2
- A primer on real life AMCs 2
- Figure 1. decision tree for NPL resolution 3
- Modelling approach 4
- Households Firms 4
- Simulation and Results 5
- Figure 2. Impulse Response Functions to a negative TFP shock with fiscal funding for the AMC 6
- Conclusions 6
- References 7
- About the authors 8
- Reiner Martin Edward OBrien M. Udara Peiris Dimitrios P. Tsomocos 8
