State-owned Commercial Banks Non-performing Assets Securitization Legal Environment

Asset securitization is a process of using a series of arrangement to design the assets that lack of liquidity into negotiable securities. The non-performing assets of state-owned commercial banks is mainly owed for the government intervention in the age of planned economy and the laggard system of the management control of state-owned commercial banks. The abundant exist of non-performing assets of state-owned commercial banks have been greatly bobbling the reform of state-owned commercial banks and even badly infecting the financial security of our country. With the progress of the world financial market and in comply with China's entry into WTO, the non-performing assets securitization become possible to state-owned commercial banks.Non-performing assets securitization is made up of five parts: assets combination, real sale, security product design, security underwriting and sale, pay principal and interest. The law relationship of assets securitization includes the affiance relationship between founder-member and mandatary, invest relationship between mandatary and investors, assure relationship between mandatary and credit-enhancement institutions, and substitute relationship between mandatary and other institutions. The legal environment of non-performing assets of state-owned commercial banks include the legal environment of the engagers in the non-performing assets market, the legal environment performance of non-performing assets securitization and the legal environment of accountant and tax. By analysis we can see that the present legal environment can basically meet the need of non-performing assets securitization. The provisions that need great amendments mainly include the special purpose vehicle, the protection of the benefits of investors and the transfer of non-performing assets. If non-performing assets securitization of state-owned commercial banks want to operate much better, the important thing we have to do is to do more things to optimize the legal environment, like bring better provisions of special purpose vehicle, make better laws to protect the benefits of investors, absorb more international experience to regulate the transfer of non-performing assets.