Asset Securitization Theory And Its Application In China

Asset securitization is the most important and the fastest-developing financial innovation tool in the world financial sector for the last three decades. It has become a widely accepted way of financing in the international capital market. International operational experience has shown that asset securitization can gave great impetus to the development of commercial banks, securities markets and real estate industry.In order to adapt to the trends of international financial securitization and the requirement of developing china's own financial and securities market, we should take reference to and apply the financial innovation tool, and establish an operational mechanism that suits Chinese characteristics. Based on a systematic analysis of the operational mechanism of asset securitization, this paper focuses on the theory of asset securitization and explores how to use it in china's banking sector and secure an operational environment required.This paper is composed of five parts. Part one makes a clear definition of asset securitization and looks into its background and recent development in the world. Part two introduces the partners and the operating procedures involved in asset securitization, and thoroughly analyses the key procedures including real sale, bankruptcy remote, credit enhancement and credit rating.Part three and part four make up of the key part of this paper. Part three discusses the reasons and incentives for securitization, and introduces and analyses several important theories. Part four is about risks analysis. This part investigates the huge potential risks in asset securitization by focusing on the securitization procedure, and analyzes the methods of manipulative accounting statements through securitization transactions by using case study on Enron bankruptcy. The evidence shows that there are several fundamental differences between Enron's transactions and the true, legitimate securitization. On the basis of examinations, we also put forward some views and perspectives, hoping to attribute to the healthy development of securitization in our country.Part five elaborates on the operational thinking that mortgage-bakedsecuritization can be implemented by Chinese banks. This part also proposes operating framework and procedures, analyses conditions and environment, and puts out suggestions.