On The Asset Securitization Legal System Innovation And Build

As one of the most important and newly-emerged financing forms in the world, Assets Backed Securitization (ABS) has enjoyed high growth for the last three decades, and is the result of combination of derivative security and financing techniques.Many legal modes are available for reference to build the legal system in China, and many legal issues are involved. The most important of ABS market is the design of risk isolation system, including the two following aspects: first, set up SPV for bankruptcy isolation - the core structure of the ABS legal system. On one hand, the transaction scope of SPV should be restricted in order to distance SPV from bankruptcy; on the other hand, SPV should be thoroughly independent from the sponsors, service business, and so on, to avoid "entity combination". Second, transfer the assets in form of "real sale." Assets transfer should observe the related standards on "real sale" in the accounting regulations, and only based on this, can the requirements of risk isolation in bankruptcy law be met. Although there exist legal obstruction and system gaps, in carrying out ABS in China, it is still feasible to set up qualified SPV in terms of company. Other legal issues involved in ABS include service contract, credit upgrading, and such related legal issues as securities classification, legal jurisdiction, and marketing procedures in issuing and trading securitized products.The entire process of ABS covers almost all the branches in the field of economic law, such as contract law, company law, bankruptcy law, law of trusts, banking law, assurance law, tax law, law of real estate, accounting act, and foreign exchange control system; thus, the legal issues involved in ABS constitute a large-scale project of building the legal system. Since there is no specific law for ABS in China, and part of the existing law conflicts with ABS, to develop ABS in our country, the legislation departments should use the experiences of developed countries for reference, make a new law or make great adjustment of existing laws, and establish a new legal system suitable for the development of Chinese ABS on the basis of profound study on the legal traditions and present situation in China.