Analysis On The Risk Retention Of Credit Assets Securitization

The purposes of this paper are to evaluate whether China's risk retention rules of credit assets securitization effectively improve the quality of credit asset-backed security products,to excavates the factors which influence the practice of credit risk retention and to make some reasonable suggestion of risk retention rules.The first chapter of this paper analyzes the system of risk retention rules of credit assets securitization.The risk retention rules of China,US and EU,come up after the Subprime Crisis.The detail rules differ from areas to areas.The risk retention system contains provisions of the subjects,measure,proportion,exemption,etc.The ratio and measure of risk retention are the core of the rules.Besides,some other rules,such as accounting rules and disclosure rules,also impact the effectiveness of risk retention rules.The second chapter of this paper analyzes the empirical data of the credit assets-backed security products issuing in China,examines whether China's risk retention rules have improved the quality of loans in the pool of underlying assets.This part finds out that China's current risk retention rules have not improved the quality of loans.There are three potential answers to the results:(1)regulation by assimilation and crowding out effect may distort the behavior of originators;(2)the cost of risk retention inhibits the effectiveness of loan screening and verification technologies;(3)simple rules are not adequate for complex types of asset-backed security products.The third chapter of this paper examines which factors have an impact on the risk retention behavior of the originators.The result displays that the type of underlying assets,the purpose of issuing,and the characteristics of the originators have significant impacts on the proportion and measure of risk retention.After all,this paper proposes three suggestions:(1)formulating elaborate rules basing on the type of underlying asset;(2)replacing bright-line legal rules with open-ended legal standards;(3)establishing exemption rules for specific subjects and products.