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Korea Asset Management Corporation (KAMCO): Resolution of Nonperforming Loans in South Korea

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Abstract

During the 1997 Asian Financial Crisis, international capital outflows created a liquidity crisis for Korean financial institutions that had relied on foreign short-term borrowing. Korean financial institutions also faced high levels of nonperforming loans (NPLs) following years of rapid credit growth. The government mandated that the Korea Asset Management Corporation (KAMCO) purchase NPLs from banks over a five-year period starting in November 1997. By November 2002, the agency had acquired NPLs with a total face value of KRW 110.2 trillion ($88.2 billion) for KRW 39.8 trillion. Using innovative asset resolution methods, KAMCO was able to recover at a profit a large portion of the funds invested. When it liquidated the fund in 2013, KAMCO had recovered KRW 48.1 trillion, removing the financial burden to the public caused by earlier losses.

Suggested Citation

  • Nunn, Sharon, 2021. "Korea Asset Management Corporation (KAMCO): Resolution of Nonperforming Loans in South Korea," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 3(2), pages 357-380, April.
    • Handle: RePEc:ysm:ypfsfc:321919
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    File URL: https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=1189&context=journal-of-financial-crises
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    References listed on IDEAS

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    1. Mr. Dong He, 2004. "The Role of Kamco in Resolving Nonperforming Loans in the Republic of Korea," IMF Working Papers 2004/172, International Monetary Fund.
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    More about this item

    Keywords

    Asian Financial Crisis; asset management; Korea; loan resolution; nonperforming loans; KAMCO;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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