On The Design Of Chinese Banks' Non-performing Assets Securitization Product

Under the pressure of declining economy and the scale of non-performing assets of commercial banks in China continually increase.The traditional disposal way of nonperforming assets is already unable to meet the demand,the non-performing asset securitization as an innovative way of disposal and calls.In May 26,2016,with the two single product named “ZHONGYU 2016-1” and “HECUI 2016-1” release,marking the suspension of nearly eight years of non-performing asset securitization officially restart.The securitization of non-performing assets have advantage over revitalizing the capital stock of commercial banks,improving the liquidity and profitability of assets,and then achieve the purpose of reducing the pressure on commercial banks.In-depth research on product design of the NPL backed securities,which is the key factor of launching a successful NPL backed securities,is necessary.Moreover,the research can also contribute to a prudent development of Chinese asset securitization market.Firstly,the development of Chinese non-performing asset securitization were summarized,combined with the status quo of Chinese non-performing asset securitization,analyzed and summarized the necessity and feasibility of Chinese non-performing asset securitization restart.Then,based on the analysis of non-performing assets securitization principle,characteristics of the underlying asset pool and trade structure are analyzed.In the course of non-performing assets securitization related institutions and specific operational procedures are introduced in detail.Then,analysis of non-performing asset securitization product design is conducted,from the underlying asset pool,transaction structure,product design,product design three aspects to resolve non-performing asset securitization case “HECUI 2016-1” Based on the analysis of advantages and disadvantages of “HECUI 2016-1”'s product design,the feature of this case is demonstrated from two aspects,namely assets pool design and security design.Meanwhile,disadvantages in realizing economics of scale and separation of participants are proposed.Lastly,after summarizing the lessons in the product design of “HECUI 2016-1”,three practical suggestions are proposed about how to improve the product design of Chinese bank's non-performing asset securitization: it's noted that more attention should be paid in the compliance of asset.Moreover,product structure should be improved in credit enhancement,the separation of participants,as well as incentive mechanism of credit offering institutions.A new attempt is made in the selection of this case,which is more novel,and meaningful to reflect the current situation of non-performing assets backed securities product design,providing reference for the future design of non-performing assets backed securities products.But the case is single,representative,because the limit of time and data,quantitative empirical analysis model for pricing securities valuation in the process of product design is absent,as well as detailed description for the actual operation,enrichment in the content of this paper is necessary in future.