On a certain date, the non-performing asset industry received a significant document – the State Financial Supervisory and Administration Bureau issued the "Measures for the Management of Non-Performing Asset Business of Financial Asset Management Companies" (hereinafter referred to as the "Non-Performing Asset Management Measures"). On a specific date, a department head from the State Financial Supervisory and Administration Bureau answered reporters' questions regarding the "Non-Performing Asset Management Measures."

Why was the "Bad Asset Management Measures" introduced at this time, and what are the noteworthy aspects within it?

First, as a national industry management regulation, the "Non-performing Asset Management Measures" were introduced, clarifying the position of the non-performing asset industry within China's financial sector and even the broader Chinese economy. When the non-performing asset industry reaches a certain market scale, needs to take on significant responsibilities in economic activities, and faces various complex factors requiring further development and standardized management, the "Non-performing Asset Management Measures" come into being.

The relevant departmental head of the State Financial Supervisory and Administration Bureau responded to reporters' questions, emphasizing: "Leveraging professional expertise to address risks in financial institutions and real economy enterprises, effectively maintaining the stable operation of the national economy." "Taking into account the significant changes in the risk characteristics of financial institutions' assets, to align with relevant policies, the scope of asset acquisition by financial asset management companies will be orderly expanded, aiding in the revitalization of existing assets in financial institutions..." "Exerting the functions of financial rescue and counter-cyclical regulation, playing a positive role in preventing and化解financial risks, and supporting the development of the real economy under the new circumstances."

The "Measures for the Administration of Non-performing Assets" affirm the significant role of the non-performing asset industry in today's economic environment. It clearly states that under current circumstances, the non-performing asset industry operates at the level of "effectively maintaining the stable operation of the national economy," undertaking the functions of resolving risks and supporting industries for financial institutions and the real sector. This includes policy coordination following changes in the financial landscape. The responsibilities of the non-performing asset industry encompass "financial rescue" and "counter-cyclical adjustment."

The Chinese non-performing asset industry originated from the "Big Four" (financial asset management companies) and was derived from state-owned banks' policy-driven operations, with government forces playing a leading role throughout. Under such circumstances, China's non-performing asset industry does not have a separate management approach but is instead governed by existing financial regulations. However, over the years of practice, the industry has been actively promoting the commercialization transformation of relevant institutions, aiming to drive the development of the non-performing asset industry through market-oriented operations. The current "Non-Performing Asset Management Measures" continues to pave the way for marketization "under the guidance of regulatory authorities."

The relevant department head of the State Financial Regulatory Administration responded to reporters' questions, emphasizing: "Cultivating differentiated core competitiveness, playing a counter-cyclical救助性 role, and particularly exerting a positive effect in the reform and risk mitigation of small and medium-sized financial institutions."

The development process of China's bad asset industry is also a process of continuous market liberalization. From the four major, five major (financial asset investment companies) to local institutions across various provinces and municipalities, and then to numerous non-licensed investment institutions, including the emergence of the Yineng Center, a multi-tiered market system has been formed. The advantage of marketization is efficiency and vitality. Therefore, one of the basic goals is to stimulate market vitality through the "Bad Asset Management Measures."

The current "Measures for the Management of Non-performing Assets" consists of chapters and articles. The content covered, whether it emphasizes "focusing on primary responsibilities and core business," or detailing standards and acquisition processes, or addressing issues of significant concern such as "orderly expansion of the scope of financial non-performing asset acquisitions," essentially aims to complete the professional construction of the non-performing asset industry. In other words, it clarifies definitions, determines the professional interpretations of specific categories, terms, and scopes within the field of non-performing assets. For instance, the "Measures for the Management of Non-performing Assets" explicitly lists types of non-performing assets that can be purchased. It specifies that "the term 'significant depreciation' refers to assets that cannot maintain their value or create value for the holder, and the market price is significantly lower than the principal or face value of the debt-type assets."

The relevant department head of the State Financial Supervisory and Administration Bureau answered questions from reporters, emphasizing: "In an orderly manner, broaden the scope of financial non-performing assets that financial asset management companies can acquire, allowing them to purchase restructuring assets held by financial institutions and other assets that have already experienced credit impairment, thereby helping financial institutions revitalize their existing assets and release more credit resources to support key areas prioritized by national policy guidelines."

The "Measures for the Management of Non-Performing Assets" are an extension of the national financial regulatory authorities in their financial management work. They must adhere to both the general principles of financial management and the industry rules specific to the non-performing asset environment, providing a professional management environment tailored to the industry. For instance, the General Provisions explicitly stipulate four principles (compliance principle, prudence principle, openness principle, and rationality principle), which are adapted to the specific environment of non-performing assets.

The establishment of specialization leads to standardized outcomes. The first result of standardization is the standardization of operations. Enterprises related to non-performing assets will implement according to the requirements of the "Non-Performing Asset Management Measures." The "Non-Performing Asset Management Measures" are detailed and specific, allowing for direct implementation. While achieving operational standardization, management also achieves standardization. The requirements of the "Non-Performing Asset Management Measures" are also clear regulatory assessment points, which national financial management authorities can use to supervise and adjudicate the specific operations of enterprises related to non-performing assets.

The relevant departmental head of the State Financial Supervision and Administration Bureau responded to reporters' questions, emphasizing that "The Measures" are based on the principles of compliance with laws and regulations and openness and transparency. They incorporate the practical experience of financial asset management companies in recent years and the requirements of the bad asset market, detailing the operational norms for the entire process of bad asset acquisition, management, and disposal. The Measures clarify regulatory requirements for key stages such as due diligence, disposal pricing, and disposal announcements, guiding financial asset management companies to enhance their professional capabilities in acquiring and disposing of assets, while balancing comprehensive considerations of asset value, economic value, and social value.

As stated in the General Principles, the "Principle of Reasonableness" is explicitly defined: "When conducting non-performing asset business, one should scientifically and reasonably choose disposal methods, improve efficiency, reduce costs, optimize resource allocation, and balance comprehensive considerations of asset value, economic value, and social value." Therefore, for relevant enterprises engaging in non-performing asset business, this is an inescapable constraint. Once deviating from the rules or taking non-compliant actions, one may potentially violate the provisions.

In summary, the "Measures for the Administration of Non-Performing Assets" is a professional management document issued to promote the standardized development of the market against the backdrop of the scaled-up non-performing asset market and its significant economic responsibilities. It will play a foundational supporting role in encouraging industry development and safeguarding further in-depth reforms in the industry.