Abstract: This paper briefly introduces the concept and basic transaction structure of asset securitization. This paper analyzes the present situation and problems of asset securitization in China from six aspects: market classification, development motivation, bank motivation, product pricing, sponsors and basic assets, and puts forward some suggestions on unifying the laws and trading rules of asset securitization, expanding the scope of investors, enhancing the liquidity of asset-backed securities and paying attention to controlling risks.

[Keywords:] Asset Securitization Status and Problems

First, the concept and basic transaction structure of asset securitization

As early as 1977, American investment banker Lewis S.Rainer used the term "asset securitization". But so far, various definitions have not been unified. Professor Schwartz of Duke University in the United States defines it as: "In securitization, enterprises partially decompose themselves, isolate illiquid assets from the overall risk of the enterprise, and then raise funds in the capital market based on assets, and the financing cost is lower than that of direct debt financing or equity financing." This concept clearly puts forward two goals of asset securitization, one is to reduce the financing cost, and the other is to isolate the risks brought by those "illiquid" assets.

The transaction structure of asset securitization is complex, but the basic structure remains unchanged. As shown in figure 1, in a typical asset securitization transaction, the sponsor creates financial assets, then selects assets and assembles them into an asset pool, and transfers this asset pool in two ways: first, the sponsor transfers the asset pool to the trustee in exchange for the transfer certificate of the ownership rights and interests of the underlying assets; Second, the promoters transfer the asset pool to the commercial trust trustee or special purpose vehicle (SPV), who issues debt instruments secured by the asset pool and uses the raised funds to pay the promoters the price of the transferred assets.

Second, the status quo and problems of asset securitization in China

1. development course

China's asset securitization started late and can be traced back to 1992. At that time, 800 mu of land and 200 million yuan of real estate investment coupons were issued in Danzhou Community, Sanya City, with real estate sales and deposit interest income as investors' income sources.

For financial institutions in China, the real beginning of asset securitization was the successful issuance of two written test transactions from June 5, 2005 to February 2005. The two transactions are mortgage-backed securities of China Construction Bank and CLO of China National Development Bank. After years of efforts by the People's Bank of China, the China Banking Regulatory Commission and other government agencies, the above two transactions involving securitization assets totaling about 7.2 billion yuan have become possible. After that, domestic banks tried to securitize water assets in succession. In 2008, CCB issued the first non-performing asset-backed securities in China-Jianyuan 2008- 1 Restructured Asset Securitization.

For non-financial institutions, China Unicom, as the initiator, completed the first transaction of enterprise asset management plan in August 2005. As the plan manager, securities companies have issued different series of asset-backed beneficiary certificates by setting up special asset management plans. This is a landmark event of enterprise asset securitization in China. In the following year, eight special asset management plans were born one after another, and the scope of "basic assets" was extended to all kinds of accounts receivable or future cash flows (corresponding income rights) related to highway toll collection, equipment leasing, electricity sales, infrastructure construction and equity transfer.

China's credit risk and working capital are highly concentrated in the banking industry. According to statistics, about 90% of financing comes from banks. The direct financing channels of enterprises from the domestic capital market are not completely smooth (such as issuing corporate bonds or stocks), and the amount of direct financing of enterprises is far from enough compared with the scale of bank loans. It is helpful to reduce the high concentration of credit risk in the banking industry and reduce the problem of excessive social mobility, making asset securitization one of the necessary means of risk and capital redistribution.

2. The current situation and problems of asset securitization in China.

At present, asset securitization in China is divided into enterprise asset securitization (also known as special asset securitization) and credit asset securitization (that is, narrow asset securitization). Mainly presents the following characteristics:

(1) Asset securitization is divided into two ways, and the inter-bank bond market and the securities market are naturally separated. Restricted by the separate supervision system, asset securitization is divided into two parts, one is bank credit asset securitization, and the other is enterprise asset securitization. The two asset securitization products are approved by different regulatory authorities, listed and circulated in different trading places, and different regulatory rules apply.

The Securities Regulatory Commission completely digested the asset securitization of enterprises into the securities industry for management, and the asset securitization of bank credit can only be issued and traded in the inter-bank market, resulting in the situation that the asset securitization products with bank credit are not traded in the unified market. Faced with a single structure and a limited number of investors, the CSRC's accounting and legal definitions of enterprises are not clear enough. CBRC's approval procedures for securitization products are complex and slow.

(2) The overall liquidity is excessive, and banks lack the executive power. With regard to asset securitization, there is a lot of discussion about increasing liquidity in China at present, which is probably to convert future cash flow into recent liquidity. The fact is that the high savings rate caused by limited investment channels makes the liquidity of domestic banks too sufficient. The gap between deposits and total bank loans is still widening. The advantages of asset securitization in this respect are not attractive to the banking industry as a whole. Of course, we can't generalize.

For the big banks, such as the Big Four and Bank of Communications, some have just invested in listing, and some have surplus deposits, but for many relatively small joint-stock commercial banks, the demand is urgent. A fast-growing bank must constantly have funds to find new markets. Banks such as Minsheng, Shanghai Pudong Development Bank and Xingye need to improve the liquidity of credit assets to support the development of more new customers and pursue new profits. We can see that on September 1 1 2007, Shanghai Pudong Development Bank launched the "Shanghai Pudong Development Bank Credit Asset Securitization Trust" product, and several other companies are also preparing to carry out asset securitization business.

(3) Long-term leading spread profit, not giving up vested interests. For the credit assets that account for the absolute majority of financing, the current profit model of domestic banks is mainly interest margin. At present, the interest difference between deposits and loans is nearly 400 basis points, which is more than twice the world average. After the asset securitization was sold, 200 points were gone. China's loan is 23.6 trillion yuan, and 200 basis points is equivalent to 472 billion yuan. Of course the bank doesn't want to. Commercial banks can get higher returns without asset securitization. Even if you get back the cash, it is difficult to find a better yield project than the loan. In the words of Qian, vice president of Bank of Communications, "We are definitely not interested in asset securitization at present." For many banks, the development of asset securitization is first and foremost an attempt of financial innovation.

(4) There are defects in the trading system and problems in securitization pricing. Asset securitization faces an asset pool, which requires the homogeneity of the underlying assets, that is, the maturity, structure and income risks are close, and the number of assets must be large enough to meet the principle of risk dispersion. In fact, in the Kaiyuan credit asset-backed securities issued by CDB in 2005 and 2006, the basic assets are diversified, involving many industries such as electric power, communication, infrastructure, transportation and media. So there are many problems in pricing.

Unlike ordinary fixed-income products such as corporate bonds, treasury bonds and financial bonds, which pay interest quarterly and the principal is finally settled, asset-backed securities settle the principal and interest quarterly, which leads to the gradual decrease of the amount of creditor's rights represented by bonds with the same face value over time. Because customers in the asset pool may repay in advance, the principal and interest paid to the owners every quarter are not fixed. If the repurchase spans two settlement cycles, there will be pricing problems for bonds.

In addition, market pricing should follow the basic market rules. Because there are few investors under the current institutional framework, the sponsors of asset-backed securities face the threat of greatly discounted prices. The rising interest rate environment this year has caused great pressure on the issuance of asset-backed securities. For example, Shanghai Pudong Development Bank, the first asset securitization business, finally only guaranteed capital. Judging from the issuance of asset-backed securities in previous issues, it is more prominent for banking institutions to hold asset-backed securities with each other. The risk transfer cannot be realized, and the risk of the original assets remains in the banking industry.

(5) The investment in the primary market is limited, the secondary market has not yet formed, and the liquidity of asset-backed securities is poor. Compared with the tempting arguments about securitization, such as adjusting the asset-liability structure and increasing the liquidity of assets in theory, the pilot of credit securitization is embarrassing. First CDB, then Shanghai Pudong Development Bank, the key is that investors are too limited, and asset securitization of various companies will follow, which will inevitably raise the rate of return and lead to bank losses. For ICBC, CITIC, Xingye, Minsheng, China Merchants Bank and so on. The water test is about to begin, and the embarrassment of Pufa may continue to be staged.

Judging from the situation in the secondary market, the transaction of asset-backed securities is very light, few institutions transfer through transactions, and most institutional investors choose to hold them until maturity. As shown in Figures 3 and 4, by 2006, there were only six transactions of credit asset-backed securities, accounting for only 2% of the total issuance. Although enterprise-specific asset-backed securities are obviously superior to credit asset-backed securities, they still show insufficient liquidity in the secondary market of asset-backed securities. On the one hand, it is difficult for issuers to find counterparties in the market, on the other hand, asset-backed securities themselves do not have the repurchase function. So the current liquidity is out of the question.

On June, 2008, 65438+ 10/1,China CIRC issued the Notice on Insurance Institutions Investing in Credit Asset-backed Securities (Draft for Comment) to insurance companies and insurance asset management companies. The Opinion Draft requires that the credit asset-backed securities invested by insurance companies can only be asset securitization products initiated by banking financial institutions, which are temporarily limited to AA-level or AA-level priority securities, and the investment quota is limited to 2% of the total assets at the end of last year. Although insurance companies were allowed to invest in credit asset-backed securities at first, the quota was limited and the supply of products was limited, which made insurance institutions generally dull.

(6) The contradiction between supply and demand of basic assets leads to the bottleneck of market operation. According to the basic theory, the basic assets to be securitized should generally be normal assets that can bring stable expected returns in the future, with the purpose of regulating liquidity risk in a market-oriented way. However, in reality, promoters tend to regard non-performing assets as the basic assets in the securitization product structure. If there is a problem with the solvency of assets, it will not only affect the effect of asset securitization, but also greatly increase its own operating costs, and even affect the timely and full payment of product securities.

Of course, the pace of market recognition and securitization is gradual. After issuing mortgage-backed security twice in 2005 and 2006, in 2008, CCB issued the first non-performing asset-backed securities in China-Jianyuan 2008- 1 Restructured Asset Securitization. More and more securitized products, faced with limited investors, will have more and more stringent requirements on yield and maturity, making it more difficult to issue securities.

(7) Asset securitization leads to subject monopoly and the advantages of asset securitization disappear. Qualified sponsors are quite different in theory and practice. Only institutions and enterprises with leading scale and asset quality will be considered in the first or second round of applications. However, it is not these large institutions or enterprises that urgently need to solve the liquidity and capital demand through asset securitization in the capital market. Those enterprises and institutions that are in urgent need of liquidity compensation are still unable to obtain actual benefits, and the funds flow to large enterprises that are still within the banking system or are easy to borrow.

3. Prospects and suggestions for asset securitization in China.

Generally speaking, the innovation and reference of asset securitization in China is greater than its function and effectiveness. However, the existing problems may still accumulate risks, create speculation and limit innovation in practice. In view of the above problems, the following three suggestions are put forward:

(1) Make special legislation on asset securitization, establish unified rules for issuance, listing and trading, and establish a special and unified legal system for asset securitization; Adapt to the new pattern of mixed operation, strengthen coordination among regulatory agencies, and form a good external environment for the development of asset securitization. Due to the current system of separate operation and supervision in China's financial market, asset securitization is divided into two parts. The asset securitization products we issue, whether credit asset securitization products or enterprise asset securitization products, all use the basic principles of trust. Under the same mechanism, we should unify the rules for asset securitization supervision. For example, the unification of accounting treatment, preferential tax policies, trading rules and trading markets reflects the deep-seated problems of supervision and coordination under the new pattern of mixed finance.

(2) Expand the scope of investors and enhance the liquidity of asset-backed securities. In China's existing financial structure, the lack of trading means and the singleness of investment varieties have created the high-risk stock market of high savings banks. A large number of funds and investors only have a few investment varieties, which will inevitably lead to further deterioration of the financial structure and a large accumulation of bank risks. Asset securitization is one of the greatest financial innovations in the last century. Without a wide range of investors, even if all banks carry out asset securitization business, all enterprises will open up asset securitization projects. The risk will not only be dispersed and resolved, but will be aggravated by the mutual shareholding of individual large capital holders. Without good liquidity and sufficient primary and secondary trading markets and processes, asset prices cannot be correctly estimated and realized. With the process of interest rate marketization and the change of savings institutions, the spread space is gradually narrowing, and unreasonable transactions will bring more business risks.

(3) The subprime mortgage crisis in the United States is imminent. At present, China has an overall excess of liquidity under the condition that the system and process are not perfect enough. Reduce the possibility of unnecessary non-performing assets and interest rate sensitivity risk diffusion, and gradually implement multi-level and multi-category asset securitization process.

(4) Compared with large state-owned banks, more financing needs are aimed at smaller banks and enterprises with better growth. When examining and approving, the CSRC and the CBRC should consider the balance of risk and return, carry out asset securitization business fairly and reasonably, integrate high-quality assets, build a reasonable scale of bank credit and enterprise-specific fund securitization business, effectively solve financing problems, improve financial structure and reduce financing costs.

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