Study On Bank Credit Assets Securitization Accounting

Facing the challenge of financial disintermediation and the alarming message send by the subprime mortgage crisis of America, China's banks have been doing finacial innovation vigorously these years, dominated by credit asset securitization.The accounting issue is a key point in credit asste securitization. Author study from this point of view, expecting to improve the chinese accounting principal on bank credit asset securitization. The main conclusions of the study are as follows:First conclusion:the accounting recognition method used in credit asset securitizatioin is comprehensive recognition.This method accords with the need of China's credit asset securitization practise with forsight.It also has some deficiencies like the practise of this method is hard, it is too much of a guide that lack detailed specification. We should take the SPE consolidation issue into account, and continuely keep an eye on the potential new recognition method internationally, in order to revise and perfect the accounting recognition principal of credit asset securitization.Second conclusion:on the accounting measurement of credit asset securitization, China use the mixed mode. It uses the fair value to record the newly acquired financial asset and financial liability in the process of asset transform. But the measurement of new financial asset or liability which have no fair value is not stipulated. Given the technical problem of getting fair value, the mixed mode suits the reality of China's practise by far. And it is possible to implement a complete fair value measurement, when the technique issue is solved. Besides, considering the credit asset already under securitization, we should provide measurement of new financial assets and liabilities when their fair value cannot be acquired.Third conclusion:the consolidation of SPE is an important issue. By far, China's practise has avoided it by taking the form of SPT, which seems practible in the short term. But the capital collection allowence for SPT is limited, and the complete bankruptcy segregation cannot be implemented. Though SPC contains higher inspection risk, it can practise complete bankruptcy segregation. So SPC will be a necessary choice for a healthy credit asset securitization, with the relevant policies and laws been perfected. Therefor, the Company Law should be revised to provide guidance for SPC setup and running.Forth conclusion:the other two issues of bank credit asset securitization accounting are that the information explosure has been insufficient and the responsibility of bank on information explosure is not stipulated. We should make specification on bank's reponsibility of information explosure in credit asset securitization, comfirm its role. Combine the guidance and detailed practise in the accounting principal, satisfy the needs of the securitization market, and inforce the risk information explosure of credit asset securitization.Fifth conclusion:the treasury department value the research on asset securitization accounting issue. On September 2004, the treasury department accounting office drafted On the Accounting Practise of Financial Institutions's Financial Asset Ttransform, and on May 2005 published Accounting Practise of Credit Asset Securitization. This rule has eight capters, making a complete regulation on accounting practise of sponsor, SPE, consignee, capital custody institude, loan service, and invest company. In 2006, the treasury department published CAS22 and CAS37, drawing a complete and detailed regulation on the accounting practise of financial asset transform. Though these rules act positively in regulating, the lack of a specialized asset securitization accounting principal has lead to unavoidable problems. Both recognition and measurement of securitization accounting are comprehensive, which gives birth to many contradictions. On the practise level, there are difficulties in estimation of risk and benefit, the confirmation of proportion of fair value between continued involvement and noncontinued involvement. To develop a better regulation on asset securitization accounting, it is highly recommended to setup a specialized accounting principal.