State-owned Commercial Bank Credit Asset Securitization Issues Discussed

Ever since the 1990s , there have been increasing demand for the capital with the rapid development in China . But the bad debt ratio of state─owened commercial banks ( SOCBs) has gone up dramatically , which directly cuts down their capability of making loans . So it is of great importance for the reform of the domestic investment and finance system.In the first place, asset securitization as the biggest innovation from the banking system has been developing for 30 years abroad , and foreign banks have acquired a lot of experience on it ,which will put great pressure upon domestic commercial banks after China's entrance to WTO. In the second place, the high bad debt ratio and credit asset's lack of fluidity are disturbing the SOCBs. The above enviorment analyses provide external and internal reasons for asset securitization in the state─owened commercial banking system . Finally, the rapid development of socialist market economy , the more and more obvious international trend and the large amount of saving deposits have all laid a solid foundation for the reform. Credit asset securitization is a process of converting the credit asset in short of fluidity that can produce stable cash inflow into negotiable securities. Asset securitization involves such elements as originator , issuer , investor, issurance institution, credit aeest administrative institution and so on . A complete procedure of asset secutitization includes eight steps. First , decide on the target asset of securitization to constitute a asset pool. Second , set up a special─purposed vehicle (SPV) specialized in securitization that buys the credit asset mentioned above from banks .Third, perfect the internal trading structure , then rating it internally. Fourth , enhance credit rating of the asset─backed securities. Fifth , after the external credit rating , sell the securities to underwriters. Sixth, after obtaining the issuring income, SPV pays off the banks mentioned above for the price of credit assets . Seventh, the asset─backed securities go public . Eighth, while paying for all other services related to the securitization, SPV pays back the principal and interest of asset─backed securities to investors.A thorough research is worthy of being caried out on how to solve the problems possibly encountered in the course of securitization and it will be stated as following: First, the credit asset which is capable of being securitilized must have such characters as stable cash inflow and low bad debt ratio; Second, set the price for credit asset either taking account of the asset's book value , or through bilateral negotiation and public auction ; Third, the method of net present value can be used as the basic tool of setting the selling price for the securities; Fourth, as to the reform of financial accounting rules, account for the profit or loss of the securitization in accordance to wether it is treated as selling bonds or borrowing debts; Fifth, while raising the credit rating of the securities , the Minstry of Finance and state—owened commercial banks have the obligation to provide guarantee for the securitization; Sixth, the security market should take in such participating bodies as commercial banks, insurance companies, security companies, investment banks, security investment funds, enterprises and ordinary residents , especiallly foreign funds.In the end, this thesis attempts to give a detailed discription for the practice of SOCBs'credit asset securitization. The credit asset securitization will do a lot of good not only to the developement...