Research On Risk-Remote Mechanism Of SPV

The risk-remote mechanism of SPV is a mechanism which can prvent SPV from bankrupting and reduce SPV's operational risks by setting up some measures in Asset Securitization. In the mechanism, SPV buy the sponsor's asset and separate asset's risk. Then SPV will sell those asset to investors. The initial SPV can back to mortgage-backed securities in germany in 1676. the SPV did not take shape until the later half of the 20th century. When setting up a SPV, each country use the model of trust and company. Our country prefer the trust model.The bankruptcy-remote mechanism of SPV can prevent itself from bankrupting and merging with other company. In order to avoid bankruptcy, SPV should take four measures. The first is that it should restrict its business scope and can only do some financing activities. It should prohibit activities which is not related Asset Securitization. The second is that the law should restrict its debt. The SPV can not happen debet but some debet which is related Asset Securitization. The third is that its charter should clear that SPV can not apply bankruptcy by itself. In order to pevent SPV from merging with other entitiey, SPV should separate its asset and business from the sponsor. SPV should have name and director and management and financial books by itself. When SPV do business with other entity, it should use its own name and decide the business matter by itself.When SPV do business with sponsor, it should buy asset from sponsor, and it will become the new cerditors of the debetor. The other channel of risk-remote is to abide by some standards when buying asset. People always judge these standards by resource and right to redeen collateral. A really transaction should meet four conditions. The first is that the buyer and seller should express themselves truly. The second is that the asset's risk should transfer when they finish the transaction. The third is that the buyer will own the interst of the asset. The fourth is that the price of transaction should be reasonable.Our country start to study SPV and put it into practice in 1992. Our country did not admit SPV until the april in 2005. America break out sub-preme crisis in 2008. This crisis is related to Asset Securitization. The crisis warn us that we should look out the risk of Asset Securitization when we practice it.