"Feichi Jianrong 2019" Green Credit ABS Case Study

Behind the realization of the "30·60" dual carbon goal means a huge demand for green financing,and there is an urgent need to explore more innovative green financial products.Green credit accounts for more than 90% of green financing,and is the main force of green finance.Green credit asset securitization,an innovative green financial product,came into being.However,due to the short development time,our country’s commercial banks still lack relevant experience in issuing this new product,and the issuance enthusiasm is not high.By the end of 2021,our country’s commercial banks have only issued 7 green credit ABS products.It is believed that in the future,with the encouragement of policies and the maturity of the market,our country’s green credit asset securitization market will surely develop rapidly.Based on this background,this paper studies how commercial banks can better develop green credit asset securitization business in the future.This paper selects the first green credit asset-backed securities issued by China Construction Bank in the inter-bank market to introduce the "Bond Connect" mechanism and issue the largest amount of green credit asset-backed securities-"Feichi Jianrong 2019 Phase 1 Green Credit Asset-Backed Securities" as the research object.have a certain representativeness.After a brief introduction to the release background,release elements and release follow-up,it analyzes the reasons for its successful release,release effects and product deficiencies.The study found that there are four reasons for its successful issuance.At the product design level: excellent underlying assets,abundant internal credit enhancement measures,green dual certification,more comprehensive risk information disclosure and introduction of bond connect mechanism;at the sponsor level: main credit High rating,good financial status,rich experience in asset securitization,and perfect green financial system;at the level of relevant institutions: relevant institutions are skilled,experienced and have not experienced default;at the policy level: in line with the direction of national policy advocacy.At the same time,the issuance of products can bring positive internal effects and external effects.However,the products also have some common and special problems.At the product design level: excessive concentration of underlying assets,limited solvency of borrowers,unreasonable interest rate and term setting,lack of external credit enhancement measures and short duration;at the regulatory level: The regulatory requirement of 5% of risk retention,high risk weight of subordinate assets and inconsistent green certification standards increase issuance costs;at the market level: there are low secondary market liquidity,information asymmetry and investors’ green investment Weakness of consciousness.Finally,based on the above analysis,suggestions for commercial banks and regulators are put forward: when commercial banks develop green credit ABS business in the future,they should diversify the concentration of underlying assets,introduce external credit enhancement measures and appropriately extend the issuance period;regulators should better regulate green credit in the future.In the ABS market,the risk weight of green assets held by commercial banks should be reduced,the risk retention ratio of green credit ABS should be reduced or exempted,the information disclosure system should be improved,investors’ awareness of green investment should be cultivated,and a green identification and certification system should be established.