At This Stage Of China's System Of Asset Securitization Arrangements

Asset securitization was created in U.S. during 1970's. This technique once solved the crisis of liquidity of savings and loans institutions who supply individuals with home mortgage especially. And it helped South Korea to dispose plenty of bad assets after financial crisis of Southeast Asia. Although commercial banks of China have not yet encountered with the difficulty of liquidity by far, the proportion of retail business of bank especially the home mortgage will be larger and larger with all-round opening up of financial industry of our country. Until then the problem of liquidity certainly will threaten the normal work of commercial banks. So we must take precaution to prevent the problem. And there are a lot of bad assets in the state-owned banks. Therefore it is very significant to financial system and even economic operation to study asset securitization.The technique of asset securitization has been mature enough and used widely in many countries but it is in an early stage of development in our country.The past research is mostly from the angle of the design of transaction structure of asset securitization or the angle of financial tool and the literature of studying this problem from the angle of institutional arrangement is little. In China, as Li Yang said, asset securitization develops so slowly not because of technology but because of institution. Because a lot of laws and regulations related to asset securitization have not yet been established or perfected, there are many uncertain factors during the transaction of asset securitization, for example, the design of transaction structure, the legal position of asset-backed securities, corresponding accounting standards, tax institution and credit system. All of these factors may increase the transaction cost of asset securitization and even make the cost so high that sponsors and investors lose enthusiasm to taking up asset securitization. Then how to decrease the cost and keep enthusiasm of all participants becomes a critical problem. According to the opinion of New Institutional Economics, the transaction cost of some particular institutional arrangement depends on other institutional arrangement such as law, habit and ideology and so on. This paper regards asset securitization as an institutional arrangement and analyzes the bottleneck restrictions of securitizing widely in China using normative and qualitative means. Especially this paper analyses how law institution, accounting institution, tax institution and credit institution affect the transaction cost of asset securitization. And this paper proposes that the government should establish or perfect these four institutions as soon as possible. It will decrease the transaction cost of asset securitization, increase the attraction to all participants of asset securitization and accelerate popularity and application of this technique in China.