Study Of The Legal Issues Of Asset Securitization

Asset Securitization is one of the most essential financial tools for financial innovation in the international financial fields. Since came out from U.S.A in 1970s, it developed very fast .The mortgage-backed securities market became the second market in U. S. A. In Europe and Asian, asset securitization is used widely . In 1970, the newly established Ginnie Mae began to "pass-through" securities publicly. This marked the birth of structure financing. To the end of 1980s, securitization has not only include the MBS but also the credit card accounts receivable, defective loan, lease expense receivable and other form of financial assets. The bankruptcy remoteness mechanism distinguishes it from other financing instruments. Asset transfer and the establishment of SPV are the two main pillars of the bankruptcy remoteness mechanism. Securitization enhances the status of pledge under the security system, provides for economic actors and capital market the efficiency which cannot be achieved by the then system.Asset securitization is the process of collecting and gathering assets which are lack of liquidity but have a estimated stable cash flow in the future into an asset pool, and convert the assets to securities which is tradable and exchangeable in the financial market through reconstructionand financing. Securitization is the process to float bonds and finance them on capital market backed by predictable cash flow. It seems like backed by assets, but in fact, it is backed by cash flow that are on the base of assets, which is the essence of securitization. As a creation of financial instrument, securitization is different from traditional financial means such as, stock financing, bonds financing.By making an exposition of the economical implication of assets securitisationand its profits and risks analysis in this article, it is showed that being a credit intermediary, the assets securitisation is bringing changes to the traditional financialsystem which used to rely mainly on bank intermediary, exerting a great influence to the financial market; it can bring about benefit to all participant bodies by raising theliquidity of assets and dispersing risks; and it is the main measure for reducing risks to keep away from risks and raise credit. The realization of assets securitisational benefit as well as the dispersion of risks presupposes a rigorous and complicated design of thestructure and working procedure of assets securitisation transaction. There is much experience in other countries on assets securitisation that we can make use of asreference.The successful experience of international assets securitization can be summarized like this: a complete law system; a social credit system; encouragement of investment; and a moderate participant of government.