China's Commercial Banks Non-performing Assets Securitization Discussed

By the second quarter of 2006, the balance of the bad loans of the commercial banks in China has amounted tol282.72 billion RMB, with the bad loan ratio of 7.53%, among which the number of the four major state-owned commercial banks has reached 1055.76 billion RMB, with the ratio of 9.47%. All of these data are much higher ,compared with international ones. The number is so huge and the situation is so serious that it has already become a hidden danger for the financial system of China.Asset Backed Securitization (ABS) originated from the US, Its concrete operation is a process, during which the original shareholders collect the asset which flow slowly now but could produce predictable and stable funds in the future, and then turn them into flowing securities sold in the capital market. In the past decades, ABS has been considered as one of the most significant innovations in the international financial field. ABS shares the advantage of eventually producing interests for defferent partners in this procession by using structural meatures. Espacially, various work could be suitably allocated among defferent partners, and their advantage in their own fields could be fully applied to.If we can take advantage of the securitization, and then accelerate the bad asset into the products in groups, which can be transferred in the capital market. These asset will flow quicker so that the potential risk of the asset of the banks could be diverted or decentralized, which is very important and helpful to improve the structure of the asset of the commercial banks, to increase the capital adequacy ratio, to accelerate the course of managing the bad asset ,to enrich the products of the capital market and to accelerate the liquidity of the capital in the Financial Market of China.Besides discussing the issues of the fundamental principles, the concrete operational way of the securitization of asset, price setting and the application of securitization in foreign countries, this article also stresses on analyzing the real barriers and potential related problems in the course of securitization of bad assets, and then put forwards some relevant suggestions and Countermeasures , I hope, which will provide some reference for the practice of the securitization of bad asset in our country.