On The Mechanism Of Asset - Backed Securitization Risk Control

In April 2007 when the second largest US subprime mortgage lender--New Century Financial Corp filed to the court for bankruptcy protection,it signaled the onset of the sub-prime mortgage market crisis(hereinafter refereed to as "subprime mortgage crisis"),which,since then,frantically rages the global capital market through the integrated chain of the international financial market with increasingly intense influence,thus ultimately triggering off a world financial crisis with the US as the epicenter,negatively affecting many countries and regions in the world, particularly countries in Europe and Japan,etc.To delve into the reasons behind,the current author thinks that the asset securitization representing the financial instruments and financial innovation system which are passionately sought after by those countries severely hit the abovementioned financial disaster is one of the vital reasons.This research paper,through the meticulous analysis of the role played by the asset securitization in the American subprime mortgage crisis, the comparative study of the traditional risk isolation mechanism and systematic cybernetics analysis,etc.,puts forward the construction of the risk control mechanism of the asset securitization on the basis of rigorous laws and regulations,which mainly involves the following four aspects, firstly,the qualified assets under the risk control mechanism of the asset securitization;secondly,the SPV construction under the risk control mechanism of the asset securitization;thirdly,the asset transfer under the risk control mechanism of the asset securitization;fourthly,the limited level-level issuance under the risk control mechanism of the asset securitization.And subsequently,this paper also gives the detailed discussion about the above arguments one by one:1.The qualified assets under the risk control mechanism of the asset securitization.The paper proposes the concept of "qualified assets", analyzes the problems concerning the legal standards of the basic assets with the view of controlling the asset risks arising from the risks of the original debtors. 2.The SPV construction under the risk control mechanism of the asset securitization.The SPV construction represents the core of the technology of the asset securitization and a very important process to realize the risk control by designing the bankruptcy isolation mechanism.This paper holds that the organizational forms of SPV in effectively controlling securitization risks are respectively SPC and SPT through the extensive analysis of the domestic and overseas organizational forms of SPV.3.The asset transfer under the risk control mechanism of the asset securitization.The asset transfer is the vital procedures to isolate the bankruptcy risk of the founders,which mutually constitutes the core of the risk control mechanism with the construction of SPV,representing the important components of the bankruptcy isolation mechanism.The legal ways of asset transfer are such four forms as debt conversion,subordinate participation,transfer and trust.Based on the careful analysis and demonstration,this paper categorizes asset transfer into sale-based asset transfer and trust-based asset transfer in accordance with the legal attribute of asset transfer and proposes that the new legal standard of asset transfer is "True Sale or True Trust".4.The limited level-level issuance under the risk control mechanism of the asset securitization.In view of not only utilizing the superiority of direct financing from the capital market by means of the technology of asset securitization but also effectively controlling negative impacts of too many issuances of asset-backed securities,this paper proposes the concept of limited level-level issuance so as to guarantee that the issued asset-backed securities genuinely reflect the basic assets and control risks caused by the ambiguous and unrestrained innovative financial derivatives.Last but no the least,this paper analyzes the insufficiency of the legal environment of China's asset securitization and puts forward some suggestions and the main contents conceming the exclusive legislation for asset securitization.