Asset securitization is a financial innovation
aimed to improve liquidity and raise funds. It is a technology and process of
structuring illiquid assets that can produce predictable and stable cash flows,
reallocating risks and benefits, providing corresponding credit guarantees, and
ultimately issuing securities to raise funds with the illiquid assets as
underlying assets. In a narrow sense, asset securitization generally refers to
securitization of credit assets, including mortgagebacked asset securitization
(MBS) and assetbacked securitization (ABS). The asset securitization discussed
in this CRI report mainly means securitization of credit assets.
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China credit assets securitization
pilot began in 2005. Regulatory agencies first issued Administration of Pilot
Projects for Credit Assets Securitization Procedures and Measures for the Pilot
Supervision and Administration of the Credit Assets Securitization of Financial
Institutions, followed by credit assets securitization and mortgage
securitization carried out by China Development Bank and China Construction
Bank with an issuing scale of CNY 7.196 billion. The issuing scale in 2006 was
CNY 11.58 billion. In 2007, with the introduction of relevant regulations on
information disclosure of credit assets securitization and interbank market
collateral repo transactions of assetbacked securities, credit assets
securitization entered the pilot expansion phase, with continuously increasing
scale, extending to nonperforming assets. The issuing scale in 2007 was CNY 17.808
billion and that in 2008 was CNY 30.201 billion, including the first
nonperforming asset securitization product issued by China Construction Bank,
which further enriched the categories of asset securitization.
At the end of 2008, a total of 11
promoters conducted 16 pilot business operations of credit securitization, with
a total issuing scale of CNY 66.785 billion. Whether in quantity or scale,
credit securitization enjoyed a small proportion in the market of bonds.
In 2008, as the international financial
crisis broke out and domestic macroeconomic financial policies were adjusted,
regulatory agencies slowed down the issuing speed in the market out of prudence
and concern over asset securitization risks and suspended nonperforming asset
securitization pilot at the end of 2008.
In February 2012, People's Bank of
China declared that it would continue to promote such financial innovations the
securitization of credit assets. On May 17, 2012, People's Bank of China, China
Banking Regulatory Commission, and Ministry of Finance jointly issued Notice on
Matters Concerning Further Expansion of Credit Assets Securitization Pilot,
restarting the credit assets securitization, with an amount of CNY 50 billion.
In September 2012, China Development
Bank first restarted China credit assets securitization with CNY 10.166 billion
ABS products. On October 30, 2012, Bank of Communications commissioned Zhonghai
Trust Co., Ltd. to issue CNY 3.034 billion “First Issue of Credit Assetbacked
Securities of Bank of Communications, 2012”. Bank of China also plans to issue
credit assets securitization products recently and has obtained approval from
the central bank.
The restart of credit assets
securitization expanded to nonbank financial institutions. On November 19, 2012,
ICBC Financial Leasing Co., Ltd. issued the first asset securitization product
of financial leasing enterprises, followed by companies offer automobile
financing and loans in November 2012. The two product designs launched by
Shanghai GM and SAICGM were similar. The designs were both classified into
preferential assetbacked securities A and subprime assetbacked securities B.
In addition to banks, securities
traders have also begun to pay attention to this market. Different from banks,
securities traders are mainly involved in asset securitization of enterprises,
issuing assetbacked securities through special asset management plans.
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