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Developments in the Chinese securitisation market

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Abstract

In 2012 China has reignited the pilot securitisation programme. Between 2005 and 2008 the Chinese securitisation market began to develop significantly after introduction of the pilot securitisation programme. The new pilot securitisation programme in 2012 has some new additional features to the pilot securitisation programme in 2005. This article compares the pilot securitisation programme in 2005 and in 2012.

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Notes

  1. 《中国人民银行、中国银行业监督管理委员会、财政部关于进一步扩大信贷资产证券化试点有关事项的通知》(银发[2012]127号)(Notice on Relevant Matters Concerning Further Expanding the Pilot Securitisation of Credit Assets) 17 May 2012.

  2. 《证券公司资产证券化业务管理规定》(Provisions on the Administration of Securities Companies’ Asset Securitisation Business) 15 March 2013.

  3. In an RMBS transaction, securities backed by loans secured with residential property will be normally issued. http://www.nasdaq.com/investing/glossary/r/residential-mortgage-backed-securities. Accessed at 14:06 CET on 16 July 2013. Security in this context means an “instrument that signifies an ownership position in a corporation (a stock), a creditor relationship with a corporation or governmental body (a bond), or rights to ownership such as those represented by an option, subscription right and subscription warrant”. Dictionary of Finance and Investment Terms, John Downes & Jordan Elliot Goodman, 6th edn., 2003.

  4. See Mao 2004.

  5. 《证券公司客户资产管理业务试行办法》(Interim Measures on the Administration of Customer Asset Management Business by Securities Companies) 18 December 2003.

  6. 《信贷资产证券化试点管理办法》(Administration of Pilot Projects for Securitisation of Credit Assets Procedures) 22 April 2005.

  7. 《金融机构信贷资产证券化试点监督管理办法》(Measures for the Pilot Supervision and Administration of the Securitisation of Credit Assets of Financial Institutions) 7 November 2005.

  8. See Rosenthal and Ocampo 1988, p. 3. Securitisation is “the carefully structured process whereby loans and other receivables are packaged, underwritten, and sold in the form of securities (instruments commonly known as asset-backed securities).”

  9. The first auto loan securitisation was completed by GMAC-SAIC Automotive Finance Co. on 18 January 2008.

  10. For more information, please refer to chapter 2 of the Administration of Trust Corporation Procedure 2007 《信托公司管理办法》, 中国银行业监督管理委员会令(2007年第2号).

  11. 《财政部、国家税务总局关于信贷资产证券化有关税收政策问题的通知》(Notice of the Ministry of Finance and the State Administration of Taxation on Announcing Several Abolished and Expired Regulatory Documents on Business Tax) 16 May 2005.

  12. 《企业会计准则第23号——金融资产转移》(财会[2006] 3号) (Accounting standard for Business Enterprises 23—Financial Instruments: Recognition and Measurement) 15 February 2006.

  13. Pursuant to Article 13 of the Notice on Relevant Matters Concerning Further Expanding the Pilot Securitisation of Credit Assets, a beneficiary certificate represents the claims of a beneficiary against the trustee in respect of any rights and benefits arising from the trust to which such beneficiary certificates relates. Such beneficiary certificates can be transferred, traded or inherited in accordance with Article 13 of the Notice on Relevant Matters Concerning Further Expanding the Pilot Securitisation of Credit Assets.

  14. An off-balance sheet transaction means that the securitised assets can be treated as a sale to the asset manager in accordance with the relevant provisions of the Accounting standard for Business Enterprises 23—Financial Instruments: Recognition and Measurement and can therefore be removed from the balance sheet of the originating corporations; whereas an on-balance sheet transaction means that the securitised assets cannot be treated as a sale to the asset manager in accordance with the relevant provisions of the Accounting standard for Business Enterprises 23—Financial Instruments: Recognition and Measurement and can therefore not be removed from the balance sheet of the originating corporations.

  15. For more information, see McMahon and Back 2013.

  16. 《关于规范银信理财合作业务有关事项的通知》(2010年72号文) (Notice of the China Banking Regulatory Commission on Regulating Matters concerning the Wealth Management Cooperation between Banks and Trust Companies) 12 August 2010.

  17. 《商业银行资本充足率监督检查指引》(The Guidelines on the Supervision and Inspection of the Capital Adequacy Ratios of Commercial Banks) 4 December 2009.

  18. The Guideline was in line with the revised Basel Capital Accord released in July 2009 (the “Basel III”) that included standards for calculating capital for incremental risk in the trading book (quoted from the CBRC website).

  19. See China Economic Review 1 May 2010.

  20. Originator is an owner of existing or future income-producing assets from its obligors, which are identified by the originator to raise funds through securitisation. These assets typically represent rights to payments at future dates (usually referred to as “receivables”) and they normally have predictable performance and value data. See Schwarcz 1994.

  21. See Basel Committee on Banking Supervision (June 2006): International Convergence of Capital Measurement and Capital Standards, A Revised Framework Comprehensive Version, Basel Committee on Banking Supervision, paragraph 199, http://www.bis.org/publ/bcbs128.pdf, accessed 14 April 2013.

  22. It is the combination of a loan from a bank and a trust with a trust company. It is a type of wealth management product provided by a bank and a trust company together.

  23. See Miao and Li 2011.

  24. See Shi 2010.

  25. 《中国银监会关于进一步规范银信理财合作业务的通知》(Notice of CBRC on the Relevant Matters concerning the Bank-Trust Cooperative Product) 11 August 2010.

  26. Article 1 of the Credit Assets Regulation does not explain which kind of structures of securitisation would be treated as simple and clear, neither does it explain what the terms re-securitisation and synthetic securitisation mean. The general market understanding of a securitisation with a simple structure is a securitisation so-called “a traditional securitisation” as defined in paragraph 539 of the International Convergence of Capital Measurement and Capital Standards, A Revised Framework Comprehensive Version, Basel Committee on Banking Supervision, June 2006 (http://www.bis.org/publ/bcbs128.pdf). Re-securitisation is explained as “securitisation of securitisation exposures” in paragraph 633 of the International Convergence of Capital Measurement and Capital Standards, A Revised Framework Comprehensive Version, Basel Committee on Banking Supervision, June 2006 (http://www.bis.org/publ/bcbs128.pdf); whereas paragraph 540 of the International Convergence of Capital Measurement and Capital Standards, A Revised Framework Comprehensive Version, Basel Committee on Banking Supervision, June 2006 (http://www.bis.org/publ/bcbs128.pdf) explains that a synthetic securitisation is “a structure with at least two different stratified risk positions or tranches that reflect different degrees of credit risk where credit risk of an underlying pool of exposures is transferred, in whole or in part, through the use of funded (e.g. credit-linked notes) or unfunded (e.g. credit default swaps) credit derivatives or guarantees that serve to hedge the credit risk of the portfolio. Accordingly, the investors’ potential risk is dependent upon the performance of the underlying pool”.

  27. Servicer means an entity, which provides debt collection services for the underlying assets in a securitisation transaction. It is very often that the seller of the underlying assets in a securitisation transaction will act as servicer for the same securitisation transaction due to data protection constraints.

  28. 《证券公司资产证券化业务管理规定(征求意见稿)》[Provisions on the Administration of Securities Companies Asset Securitisation Business (draft of seeing public feedback)] 27 February 2013.

  29. For definition and explanation of OTC trading markets please see Dodd 2008.

  30. Tianjin Financial Assets Exchange serves as a trading platform for financial assets, especially for non-performing loans, financial company state-owned equities and credit assets. For more information, please see http://www.tjfae.com/Overview.htm.

  31. 《关于境外人民币清算行等三类机构运用人民币投资银行间债券市场试点有关事宜的通知》(Circular regarding the pilot scheme for investment in the interbank bond market by offshore Renminbi clearing banks and other eligible offshore institutions in Renminbi) 16 August 2010.

  32. 关于实施《合格境外机构投资者境内证券投资管理办法》有关问题的规定 (Provisions on Issues Relevant to the Implementation of the Measures for the Administration of Securities Investments in China by Qualified Foreign Institutional Investors) 27 July 2012.

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  1. Banking and Finance and EMEA China Group, Baker & McKenzie, Munich, Germany

    Shengzhe Wang

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Wang, S. Developments in the Chinese securitisation market. China-EU Law J 3, 275–287 (2014). https://doi.org/10.1007/s12689-013-0034-4

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