Securitisation and Bank

 

Contents

METHODOLOGY......................................................................... 2

Statement............................................................................ 3

I.     Close-up at Securitisation....................................................................... 3

1. Definition of Securitisation............................................................................. 3

2. Process of Securitisation................................................................................. 3

A. Process Breakdown................................................................................... 3

B. Explanation on Some Terms..................................................................... 6

3. Benefits from Securitisation........................................................................... 7

A. Cost Effective................................................................................. 7

B. Higher Liquidity............................................................................... 9

C. More Opportunities for Income.......................................................... 9

D. Less Credit Risk and Interest Risk................................................... 10

4. Drawbacks of Securitisation.......................................................................... 10

II.    Development of Securitisation.......................................................................... 11

1.    The United States................................................................................. 11

2.    The United Kingdom.................................................................................... 11

IV. Securitisation and Chinese Banks....................................................................... 12

1.    Present Situation............................................................................... 12

2.    Pricing of Non-Performing Loan...............................................................13

3.    Securitising Fiduciary Loans......................................................................14

4.    Setting up an SPV......................................................................................... 14

A.   A Bad Bank............................................................................. 14

B.   Investment Bank Bloc.......................................................................... 15

5.    Obstacles in the Way................................................................................... 15

V. Conclusion............................................................................................................. 15

Bibliography.......................................................................... 16

 

METHODOLOGY

 

I attempt to give readers some insightful introduction on the nature of securitisation and an objective view of present situation of the reforming Chinese financial sector. These tasks will be carried out in three phases:

 

Phase One: A deep-going investigation and study on the process of securitisation will give the reader a clear mind of how securitisation works. I will provide the definition of securitisation and some generalised explanation, which will be illustrated by a case study to make the process more understandable even to outsiders. Then I will analyse some benefits and drawbacks that securitisation can bring to financial institutions.

 

Phase Two: This phase is a continuing rather than an isolated part of the former one, in which a brief history of its development worldwide will be provided and an outlook that follows seems to be necessary to make the picture complete. This phase will end at a study on some successful practices of securitisation in solving serious bad debt in some ASEAN countries, which serves as foreshadowing knowledge to help highlight the practical situation in Chinese commercial banks in the last part of the article.

 

Phase Three: In the core of the whole article, Chinese actual situation of bad debt suffered by state-owned commercial banks will be revealed. In this part the definition for securitisation will be narrowed down to suit specific topic stated above. By detailed analyses on the necessity and difficulty of securitisation in terms of bank's management and the present situation in the domestic banking industry, the feasibility study of securitisation in China will make a practical view of securitisation in China unfolded to the reader. I will also answer questions such as what kind of attitude we should take in implementing securitisation in China's banking system, what we should do in introducing this complicated experience to Chinese banks.

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