Research On The Credit Enhancement System Of Asset Securitization

In the subprime mortgage crisis in 2007,asset securitization was considered to be an important cause of the financial crisis.In subprime loans as the foundation assets securitization,the sponsors through credit enhancement to improve the credit rating of underlying assets,and gets a good credit rating to promote the sales of asset-backed securities.However,the purpose of the sponsors is to package rather than guarantee the payment of the asset-backed securities.Through the risk transfer function of asset securitization,the originator transfers the risk of the underlying assets to the credit enhancement and investors.The above process greatly breeds the moral hazard of the sponsors,and reduces the effectiveness of the credit enhancement to guarantee the payment function of the asset-backed securities.After the subprime mortgage crisis,countries restarted asset securitization business.In 2016,China witnessed the first asset securitization default event.In the event,an AA+ rated asset-backed security was still in default.We start to think about China's asset-backed securitization credit enhancement system.There are many problems in the credit enhancement system of asset securitization in China.Firstly,there is no amount of credit enhancement,which affects the validity of credit enhancement to some extent.Secondly,the imperfect information disclosure of the credit enhancement system of asset securitization leads to the failure of investors and credit rating agencies to respond accordingly.Thirdly,the credit enhancement system has no review requirement on the new category of credit enhancement.Fourthly,the credit enhancement system of asset securitization is not clear whether the originator can participate in the credit enhancement.Finally,the credit enhancement system of asset securitization has not established the relevant risk transmission system.In view of the above problems,the author puts forward some suggestions.Firstly,the credit enhancement system should stipulate the proportion of credit enhancement.The credit rating system should be based on a credit rating that covers the proportion of the amount that covers the amount of the assets supported by the securities,and the proportion of the amount to guarantee the cash payment of the assets supported by the assets and the proportion of the amount to be established to guarantee the payment of the assets supported by the assets.Secondly,the credit rating system should improve the provisions on information disclosure,The three stages of the initiation,continuation and termination of information enhancement are disclosed.It is worth that in information disclosure,the balance between the investor's right to know and the burden of information disclosure should be reached.Thirdly,a review of the new categories of credit rating should be set up in the credit rating to respond to the increasing credit rating and to ensure the effective function of the new credit rating.The establishment of review provisions in credit rating shall be based on the evaluation opinions of credit rating,which is in line with the requirements of decentralization in China.Fourthly,it is clearly pointed out that the credit enhancement system should be clear that the sponsors can participate,not only meet the requirements of risk retention,but also help to save the cost of issuance.Finally,the credit rating system should pay close attention to the issue of risk transmission,which can establish the capital requirements for the promoters to fulfill their duty of disclosure to the credit increasing persons,to provide the credit increase to the credit level,and to the maximum proportion of the credit rating holders to take on the risk.