Analysis On Legal Relations Of Asset Securitization

In the eyes of the law, asset securitization is a deal arrangement that transfers the creditor's right which lacks of liquidity into right of securities for circulation by establishing series of contracts and building legal relations between parties. In operation process, it usually contains the bodies of law, such as borrower, originator, special purpose vehicle, etc.. The object (asset pool) to which the body's rights and obligations pointed is just the object of the legal relations of asset securitization.The transfer of basic asset is the most important step in the securitization process and risk-remote is the most subtle design in it. So it is the basic legal relations that the right and obligation relations reflected on the original loan, the buy-and-sell relation or trust relation formed in the asset transfer and the legal relations formed in the issuing and operation of securitization products. These legal relations epitomize the asset securitization's characteristics and have furnished primary legal guarantee for it.In addition to the basic legal relations, asset securitization also contains quite a crop of subordinate legal relations. Credit enhancement is a legal innovation system which is specially designed for investor's interests. Based on it, some legal relations are formed, e.g. direct recourse, over-collateralization and so on. Credit rating provides investor with investment reference and provides pricing basis for the issue of securities. In this process, an authorization relation between originator (or special purpose vehicle) and credit rating agency is formed. Moreover, through the entire securitization course, related services, e.g. pay-off service, market intermediary service, keep it running smoothly. Therefore, legal relations of related services have come into being.Chinese practice on securitization has not been improved substantively. And regulations which are necessary adjunct to this project are still on the exploratory stage. In order to eliminate the tension between the market demand of asset securitization and the present legal system of China, we must establish the legal system of securitization as early as possible, which embodies the basic laws of asset securitization as well as complies with China's actual conditions.