A Study On Non-performing Assets Backed Securitization Of Commercial Banks

China released abundant liquidity by breaking through financial credit limit in order to keep prudential growth of economy after 2008 global economic crisis.Because of this,some industries accumulated a large amount of economic bubbles and heavy production surplus.As the growth of macro economy slows down and financial liquidity shrinks,credit risk of real economy especially middle and small-sized enterprises exposed because of high financial leverage and operation cost.While balance amount and percentage of commercial banks' non-performing loans(NPL)broke record,non-performing loan provision coverage ratio and capital adequacy ratio both descended.The fact that the credit quality and the risk control capability became poorer and weaker affected healthy development of financial system.If effective measurement is not taking out,China might have systematic financial crisis.Under the background of financial deleverage,traditional disposing methods of non-performing loans fail to meet the demand of economic structural adjustment according to past experience.Assets Backed Securitization(ABS),a procedure that Special Purpose Vehicle(SPV)issued a security based on cash flow by an assets pool which bought from originator,has about half-century practical experience in western countries.It was widely used in disposing non-performing loans during financial crisis in America,Japan and South Korea with optimistic effectiveness.Commercial banks,as originators in the procedure,mainly sold normal credit assets to special purpose vehicles.Regulatory agents including People's Bank of China,China Banking Regulatory Commission(CBRC)and China Securities Regulatory Commission(CSRC)etc.issued “Views on Financial Support for Industrial Increase,Structure and Benefits”,proposing a few financial institutions to initiate non-performing assets backed securitization,and 18 commercial banks were approved.Based on domestic and overseas professionals' research and Ronald Mckinnon's finance repression theory,the author points out dilemma what commercial banks face.The paper introduces traditional disposal methods and their disadvantages,and it also explains theories,participants and procedure of assets backed securitization.Huaxia Bank,a member on pilot list,is a representative of national joint-stock commercial banks.This paper chooses Huaxia Bank's first non-performing assets backed securitization as a study case,analyzing its basic information and driving forces.It further studies the security's structure,assets pool,credit enhancement,value assessment and credit rating.Through the case study,assets backed securitization in disposing commercial banks' non-performing loans can not only broaden methods of assets disposal and promote working frequency,but also optimize allocation of financial resources.Last but not the least,commercial banks' revenue structure can be improved and capital adequacy ratio can be released at the same time.In the end,the paper concludes that non-performing assets backed securitization can solve commercial banks problems and it does have the effect of anti-finance repression.For the sake of better development of assets backed securitization in China,the author gives a few constructive suggestions after comprehensive analysis in laws,status of special purpose vehicle,liquidity of secondary market,regulations of finance and tax management and finance factor market.