Legal Issues Of Asset Securitization Research

Securitization enjoys the reputation as one of the most creative financing instruments in the capital market. It is the bankruptcy remoteness mechanism that distinguishes securitization from other financing instruments. Asset transfer and the establishment of SPY are the two main pillars of the bankruptcy remoteness mechanism of securitization. The application of securitization enhances the status of pledgee under the security system, protects the security interests of investors from being influenced, undermined or jeopardized by a possible bankruptcy procedure, and provides for economic actors and capital market the efficiency which cannot be achieved by the then system.With respect to the current law of China, there are still lots of loopholes and ambiguities in terms of pledge of creditor's right. The realization of the secured interests will be postponed for the possible bankruptcy. We need to transplant securitization into China to insulate the secured interests of pledgee from the potential bankruptcy and to offset the unsoundness of the security system, specifically, the pledge system. On the other hand, China fails to provide the comprehensive legal system to support the application of securitization. There are still lots of legal obstacles for a complete running of securitization. Since securitization is not a must for the current economy of China, we can make some transitional arrangements, such as secured transaction, quasi off-balance-sheet financing, trust financing and cross-border securitization, to pave the way for the all-round application of securitization in China in terms of securitization technique, market support and legal support. The application of cross-border securitization surely will bring along significant implications for the full transplantation of securitization in China.