A Study On Trust Process Of Loan Securitization In China

In recent years, great sum of non-performing loan drops shadow on bankingbusiness in China even its sustained good performance. Many methods, such asjoint-stock reform and listed approval, are adopted by banks in China to refund thecapital, dilute non-performing loans, and improve asset liquidity and operatingeffectiveness. As a result of financial innovation, asset securitization enjoying highrecognition worldwide plays an important role in dealing above cases of the bank.Especially loan securitization, a new financing practice, makes it possible for the bankto finance directly on its loan asset by acting not only a loan provider but an assetseller. In this way, loan assets no matter good performing or non-performing could besecuritized by discounted or assembled. Application of asset securitization has theadvantages in improving asset quality, developing a new approach to raise fund,allocating credit risks, refunding the capital and stabling finance system.In view of special purpose vehicle (abbreviated as SPV), asset securitizationcould be processed by creating a legal entity in form of company, trust or limitedpartnership. In China, limited partnership is not a legal entity. Special purposecompany (abbreviated as SPC) has uncertain performance in processing assetsecuritization due to legal issues, accounting practices and market operationalefficiency. To China's practice, the paper highlights two principles which be takenfirst in choosing an effective SPV, max institutional adaptability and marketoperational effectiveness. Consequently, the paper addresses its core question underabove two principles: whether SPT process is practicable, effective, and widelyapplicable to asset securitization in China, cherishing the hope to develop a moreapplicable process for the prosperity of asset securitization in China.The paper focuses on institutional allowance and market demand of SPT processof asset securitization in China by concluding, deducting and system analyzing. Inaddition, case study is carried out with theoretic approach to analyze asset-backedtrust products in China market. In overall conclusion, the paper addresses itsconclusion that SPT process is practicable, effective, and widely applicable to assetsecuritization under present institutional bindings of China.