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Asset Securitization: Whose Feast?
Huang Song Recently, the China Securities Regulatory Commission promulgated the Administrative Provisions on Asset Securitization Business of Securities Companies (Draft for Comment) (hereinafter referred to as the Administrative Provisions). Many market participants believe that management regulations are good for securities companies, but not necessarily good or even bad for other financial institutions, and securities companies may occupy their business areas.

This is a misunderstanding. Of course, securities companies, as financial consultants of asset securitization business and underwriters of securitization products, can obtain various benefits by setting up a "special asset management plan" as a special purpose vehicle (SPV). This will undoubtedly expand the business income sources of securities companies and reduce their dependence on stock underwriting and brokerage business. However, asset securitization business is not only beneficial to securities companies, but also to other financial institutions. Because financial institutions can be the original owners (sponsors), special purpose carriers and investors of asset securitization, and benefit from it.

From the perspective of financial institutions as the original owners (sponsors), administrative regulations further extend the original owners from the original enterprises to financial institutions. The management regulations clearly state that commercial banks, insurance companies, trust companies, fund management companies, futures companies, securities finance companies and other financial institutions are encouraged to issue asset-backed securities. All the above institutions will benefit from asset securitization.

First of all, it can increase the liquidity of assets and improve the efficiency of capital use. Financial institutions, as sponsors, turn assets with poor liquidity such as loans into cash with high liquidity through asset securitization, thus obtaining new channels to solve the problem of insufficient liquidity.

Secondly, improve the ability of asset-liability management and optimize the financial situation. Asset securitization can solve the mismatch between assets and liabilities of financial institutions.

Third, realize low-cost financing. The traditional financing method is supported by the overall credit of the financier, while asset securitization is supported by the basic assets. Financial institutions will really sell assets higher than the overall credit of institutions to special purpose carriers, and realize the independence of asset credit and the overall credit of financial institutions, thus achieving lower-cost financing.

From the perspective of financial institutions as special purpose carriers, the Management Regulations not only allow the adoption of special asset management plans of securities companies, but also reserve space for the introduction of other forms of carriers such as funds, special purpose trusts (SPT) and special purpose companies (SPC). This can bring channel income to funds and trust companies. In addition, after the formal implementation of administrative regulations, asset securitization under the supervision of the CSRC will accelerate its development, which will also force the accelerated development of credit asset securitization under the supervision of the People's Bank of China and the China Banking Regulatory Commission. At present, the securitization of credit assets takes the form of special purpose trust, which will undoubtedly further increase the channel income of trust companies.

From the perspective of financial institutions as investors, management regulations allow asset securitization products to be transferred in stock exchanges, the inter-agency quotation transfer system of China Securities Association, the over-the-counter market of securities companies and other trading places recognized by China Securities Regulatory Commission, which makes it possible for various financial institutions to invest in asset securitization products.

Asset securitization products can meet the needs of investors with different risks, returns and maturity preferences through structural grading. Specifically, asset securitization products are not single securities, but different grades of securities are designed by dividing and combining cash flows. Different grades of securities have different priority repayment orders, thus providing diversified investment varieties with risks, returns and maturities, and providing a huge space for financial institutions to spread risks, improve returns and innovate investment portfolios.

In addition, asset securitization also provides the possibility for financial institutions to enter the originally impossible investment field.

From the experience of foreign countries, banks are the biggest motivation and the most important initiator of asset securitization, and insurance companies are the most important investors in asset securitization. At present, the four major domestic commercial banks have no incentive for asset securitization because of their sufficient liquidity, while small and medium-sized commercial banks have a strong demand for asset securitization, but it is often difficult to obtain opportunities for credit asset securitization. Asset securitization of securities companies provides them with a new choice other than credit asset securities, but it obviously needs the consent of CBRC first. At present, China's insurance companies are greatly restricted from investing in asset securitization products, and adopt the way of one thing and one discussion. Lack of insurance company, the most important investor, is undoubtedly not conducive to the development of asset securitization in China.

(The author is the Secretary-General of Peking University Financial and Industrial Development Research Center)