China's Commercial Banks' Bad Assets Evaluation System Designed For Asset Securitization

Chinese commercial banks have formed huge amount of non-performing loans during economy transition, which needs immediate disposal. However, commercial banks' dependence disposal way aided by financial appropriation and subrogation to equity way that adopted by Assets Management Corporation, cannot meet economic requirements. It is under such conditions that academic circle and practice circle advise adopting asset securitisation way to dispose non-performing loans. To implement non-performing loans securitisation scheme, the first step is to evaluate and classify bad assets. Therefore, the paper sets about to design a set of asset securitisation-oriented non-performing loans evaluation system. In process of fulfilling the task, it carries out the following researches in detail:Firstly, the paper analyzes characteristics of Chinese commercial banks' non-performing loans, advances that it do not have the ability to produce cash flow, which means the traditional evaluation way, through evaluating continual cash flow creation ability, unfit for Chinese commercial banks' non-performing loans' evaluation. Then, it traces back to the experience of former non-performing loans' practices, utilizing institutional transition theory, brings forward way of thinking of realisation-based non-performing loans evaluation. Following the method, the paper analyzes factors that influence bad assets, upon which it selects evaluation indexes, and utilizes Analytic Hierarchy Process, designs Chinese commercial bank non-performing loans evaluation system, calculates the indexes' weight, and eventually fulfills the system design. In the end, the paper makes sample bad assets to testify the scientific and operative character of the system. It also discusses the assets classification and evaluation system program realization, all these works lays a good foundation for Chinese non-performing loans' securitisation.