Study On Credit Card Receivables Securitization

Credit card portfolio is gradually increasing due to the expanding and rapiddevelopment on credit card business of national commercial banks. The grand total ofcredit limit based on nationwide has already reach to4.57trillions Yuan at the end of2013, increase of31.17%comparing with last year. However, the expansion ofportfolio scale will bring much more potential risks, since the outstanding of creditamount is up to1.84trillion Yuan at the end of accounting year, increasing61.8%comparing with last year. The current situation to commercial banks is credit cardportfolio has already crunch big part of bank assets. This is a big challenge but anegative impact to national commercial banks, therefore, how to make use of AR oncredit card to an added value product? Credit card ABS immerged. Due to the paymentcharacter of credit card that is purchase first but payment later, this varied the asset ofbanks and makes asset unstable. Therefore, discussion on credit card ABS implementis very important among commercial banks. In developed countries, credit card ABS isone of the very important tools to increase capital adequacy ratio, to reduce cost offinancing and to control bad asset of banks. In China, approaching time of opening thefinancial fields, national commercial banks is trying to seize more credit card marketsin order to reduce competitive pressure from foreign banks. During recent year,national bank takes more actions on Retail Banking fields. Therefore, credit cardbusiness is the key sector to get more word to say in this market. According to businessexperience from foreign banks, credit card business introduces considerable profit andis the main motivation of national banks to make no efforts on expanding credit cardbusiness. Recent experience shows that most of foreign banks in credit card businessacts credit card ABS on card debt via portfolio packed and sold, which to ensure asteady cash flow. Credit card ABS speeds up the recovery of cash gets more space todevelop new business and reduces the risk borne by banks. It’s an inevitable trend ofcredit card business in China. Credit card portfolio has its nature and banks need tore-arrange the AR to secure ABS implement. This paper aiming to provide referenceson national development on credit card ABS based on comprehensive analysis in thisfield.