Legal Perspective Of The True Sale System In Asset Securitization

Asset-backed securitization has been a huge innovation of finance for years in current financial market. It is referred as finance channel that demand an originator transfer its asset or asset portfolio that generates steady streams of cash in the future to special purpose trust via true sale. This financial channel can take fully advantage of premature debt or those assets which lack of liquidity; accomplishes remote bankruptcy and effectively prevent double taxing. Therefore, it became very popular all around the world for those reasons since its birth in U.S.1970s.True sale is the core of asset-backed securitization in China. CSRC and CB issued <Credit Asset Securitization Pilot Management Approach>in2005,which specified the mean by which an originator transfer its base asset to special purpose trust has to be true sale. Yet for the reason that true sale is a foreign concept and was born in a very distinct legal environment form what China has today, it is very hard to simply use it, which also brings about the situation that there are so many pilots but so little legal base in China.Facing the ramification of globalization in finance, China has to come up with a better, high-ranked, and above all, suitable legal system for true sale. This is the main reason of the formation of this article.This article used induction, analytical reasoning and deduction, around35000letters. The introduction presents the main concept and process of asset-backed securitization, follows with the universal trait of true sale, discussing the concept of true sale and its position in asset-backed securitization in China.Chapter one introduced basic concept and procedure of asset securitization so as to focus on the general quality of true sale legal system, discussed the concept of true sale from its core and its status among general asset securitization of China.Chapter two introduced qualified participators of true sale:originator and SPV. It narrated their qualification feature and entrance of the system, especially for the utmost important SPT, method adoption here in China is elaborately explained so as to better introduce the remote bankruptcy effect of true sale.Chapter three introduced the recipient of the legal act, the qualified assets. Not every asset that generates stable future cash flow can become the assets of securitization. Through talking about the legal feature and transferability, it makes clear this. Besides, it still brings out the question of credit enhancement.Chapter four introduced the type of true sale and re-characterization and claw-back risk. Did further analysis through making clear the fact that the basic asset of true sale is receivables about the proper transfer mode in China and relevant problems concerning the transfer.Solution summarized all above problems mentioned and gave proper advises.