Regulation Over The Negative Externalities Of The Bankruptcy-Remote Mechanism Of Asset Securitization

As an important financial innovation emerging in the 1970s, asset securitization has evolved into a new financing instrument prevailing in global capital market, because of possessing at the same time the characteristics of asset credit financing, structured financing and off-balance sheet financing. The bankruptcy-remote mechanism is the key in asset securitization, which can prevent the securitized assets from being influenced by the originator's bankruptcy and guarantee the interests of the ABS being paid to investors according to the arrangement of the securitization. This dissertation, which is centered on protecting the interests of the originator's unsecured creditors, begins with the analysis of the negative externalities of the bankruptcy-remote mechanism, and tries to find the methods protecting the interests of the originator's unsecured creditors from two perspectives of economics and law, by adopting the research methods of economics analysis, comparative analysis and inductive analysis. And then the author put forward the design of the legal system of China, which can restrain the negative externalities of the bankruptcy-remote mechanism, in order to balance the interests between the originator, the investors and the originator's creditors.This dissertation includes five parts besides the preface and the conclusion:The first part of the dissertation presents the basic problems of asset securitization and bankruptcy-remote mechanism. At the first, the author introduces the basic conceptions, the operation course, the legal essence and the main types of asset securitization, and defines the structure of asset securitization on which this dissertation studies. And then, the author presents the unique value of the bankruptcy-remote mechanism by comparing with secured financing.The second part of the dissertation analyses the negative externalities of thebankruptcy-remote mechanism. The author expounds the conceptions of "externalities" and "negative externalities" in economics at first, and then elaborates on the threat of bankruptcy-remote mechanism to the originator's unsecured creditors from two aspects: it will reduce the amount of assets that can be used to repay the debt;and it will raise the business risk of the originator. All of these has proved the necessities of protecting the creditors by legal system.The following two parts try to seek the methods to restrain the negative externalities of bankruptcy-remote mechanism from the perspectives of economics and law.The third part of the dissertation creatively adopts the methods that are used to solve the problem of negative externalities in economics to settle a problem on law, and put forward that the two methods of private market and extending the fiduciary duty of a corporation's board of directors to creditors can internalize the negative externalities of bankruptcy-remote mechanism. The author explains the theoretical foundation of "extending the fiduciary duty of a corporation's board of directors to creditors" and disposes of the most difficult problems in it, by comparing it with the traditional theories of the Trust Law and the Company Law.At the beginning of the forth part, the author introduces the legal systems protecting a corporation's creditors in the traditional Civil law and Company Law. Then the author improves the above-mentioned methods according to the characteristics of asset securitization, and proposes the legal system to protect the originator's unsecured creditors.The last part of the dissertation is mainly to propose the feasible scheme of restraim'ng the negative externalities of bankruptcy-remote mechanism in China, according to the current conditions and legislation situations of our country.