Korea Asset Management Corporation

The Korea Asset Management Corporation (KAMCO, 한국자산관리공사) is a perpetual restructuring institution, or bad bank in Korea. KAMCO has purchased and resolved non-performing loans (NPLs) of financial institutions, implemented the restructuring plan of corporations, assisted the financially-underprivileged to restore credit-worthiness, and managed state-owned properties and collected overdue taxes as a quasi governmental entity.

During the past financial crises, KAMCO exerted itself to support financially distressed financial institutions, companies, households, even the government as a nation's economic safety-net.

Key words
KAMCO, asset management company, insolvency, non-performing loan (NPL)

History
KAMCO was established through the expansion and reorganization of the former Korea Asset Management Corp. (KAMC 성업공사) in December 1999, as part of efforts to address the distressed assets of financial institutions and support measures to stabilize the management of firms that were showing signs of insolvency.

Originally, the KAMC was founded in April 1962 under the Korea Development Bank Act, in an effort to provide the Korea Development Bank with a legal basis for collecting overdue bank loans. Since that time, the scope of its business has been gradually expanded.

In August 1997, when the Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset Management Corporation (금융기관 부실자산 등의 효율적 처리 및 한국자산관리공사의 설립에 관한 법률) was enacted, KAMCO was expanded and reorganized in compliance with the new regulations.

The capital of KAMCO had reached 860 billion won as of the end of 2010, financed by the government, the Korea Finance Corporation and financial institutions. Basic operational policies and major matters concerning fund management are determined by the Management Supervisory Committee, consisting of nine members including the CEO of KAMCO, interagency executives and staff members, and outside experts. The KAMCO executives are the CEO, the Executive Vice President, five executive directors and an auditor. The Board of Directors, made up of the CEO, the Executive Vice President and executive directors, resolves major matters concerning the operations of KAMCO.

Businesses
KAMCO is assigned fund management tasks related to the underwriting and liquidation of distressed assets, support for the normalization of firms showing signs of insolvency, management of national property, and support for personal credit, as well as the execution of other related tasks.

Fund Management to Liquidate Distressed Assets
KAMCO performs the task of liquidating distressed bonds and assets underwritten or entrusted to it by financial institutions. To achieve this, the corporation utilizes its own funds, but it also administers the Non-Performing Asset Management Fund and the Corporate Restructuring Fund for more expeditious underwriting and liquidation.

Non-Performing Asset Management Fund
The Non-performing Asset Management Fund was established in November 1997 in order to promptly underwrite and liquidate the distressed bonds of financial institutions stemming from the 1997 Asian currency crisis.

This underwriting effort through the fund was closed in November 2002. Since then, the corporation has underwritten and liquidated the distressed bonds of financial institutions through a unique account. In order to restore the injected public funds the fund has been disposing of residual property and is scheduled to remain in operation until November 22, 2012.

The fund underwrote distressed bonds worth about 111.5 trillion won through November 2002, completing its underwriting task based on the 39.2 trillion won in financial resources raised for that task. The amount retrieved by KAMCO had reached 45.4 trillion won as of the end of 2010, surpassing the original 39.2 trillion won by 6.3 trillion won.

Corporate Restructuring Fund
As the loan default rate among financial institutions ballooned following the currency crisis that swept the world in late 2008, the Corporate Restructuring Fund was set up in May 2009 out of concerns that KAMCO’s funds would be insufficient for effectively managing the potential volume of distressed bonds.

The financial resources for this fund were derived by means of contributions from a variety of entities, including financial companies, money transferred from KAMCO, government contributions, the issuance of Corporate Restructuring Fund Bonds, loans from the Bank of Korea, earnings from the fund’s management and other means. The fund is employed to underwrite the distressed bonds and assets of firms showing symptoms of insolvency and companies subject to structural improvement, as well as to finance companies set up to acquire distressed bonds and assets, and to repay the principal of and interest on Corporate Restructuring Fund Bonds and loans, along with other services.

The fund provided support of nearly six trillion won for distressed bond purchases and other financing until June 2011, and recorded a recovery rate of 16.7 percent, equivalent to 997.8 billion won.

Support to Normalize Insolvent Firms
At the request of financial institutions, KAMCO carries out a range of tasks including the management, disposal, underwriting and liquidation of assets allocated under the self-rescue plans of firms showing signs of insolvency as well as examination and consultation on stabilization of management. It also performs management and sales brokerage of the assets of firms subject to structural improvement, and purchases and liquidates financial institutions to improve their soundness.

Other Services
KAMCO undertakes the agency business of the government, such as the disposal of government-seized properties, management and/or liquidation of state-owned properties, and liquidation of corporate bodies taken over by the government.

The corporation also performs the tasks of investigating the property of persons responsible for repayment of non-performing bonds and debts, and operating real estate-related trust businesses related to companies subject to structural improvement. It in addition conducts personal credit funding programs to help delinquent borrowers repair their credit standings.