A Study On The Legal Control Of Risks In China's Credit Card Securitization

With the rapid development of China' s economy, and the adjustments of commercial bank business and profit structure, China' s credit card business has been prosperous in recent years. Credit cards are widely accepted by Chinese. All of this lays the foundation of securitization of credit card (SCC). This paper sets to carry out a research on (SCC).Due to the uncertainty in credit consumption and credit card holders, in designing the scheme of SCC, both the systematic risks in assets securitization and credit risk should be taken into consideration. Systematic risks include the designing of capital pool, selection of SPV models, real selling of assets, isolation of risk, credit enhancement and ratings, breaching of obligations, accelerated debt maturity, double taxation, and the choice of intermediaries, regulation and risk prevention. In the process of SCC, the first key element is the selection of SPV models. Different models represent different legal characteristics, determining different risks of assets transfer and the nature of securities, thus influence subsequent tax arrangement. Credit risk originates from card holders' vacation, consumption ability and preferences, credit records and their geographic distribution. Their debt paying ability influences the quality of the capital pool and the stability of future cash flow.Currently, China' s practice prefers SPT, the strength lies in completion of assets isolation, and the drawback is, in the legal framework, the limited models of SPV available. Credit enhancement is a key link to SCC. Additionally, A lack of legislation on assets "real selling","over pledge" and "recourse" undermines risk prevention. In the process of SCC, we need laws on governance and supervision on SPV, disclosure of information, securities issuing, and credit rating, management on cash flow, and securities trading and delivery.After taking a survey on securitization in the US, the UK and Japan, this paper believes the rule of law in finance, in the capital market, and sound legal framework on credit consumption, credit registry system, as well as securitization laws collectively contribute to the prosperity of securitization. And this paper continues to analyze the securitization practices, risk prevention and legal controls in the US, to make proposals to improve risk control system in China.