Home > Securitization > News on Securitization > Securitization in China > NAFMII releases draft rules for a Securitisation Instrument for non-financial users
8th August, 2012 :
While the structured finance industry in China was still waiting for People's Bank Of China's ("the bank") Pilot Securitisation Program to come to effect as announced by the bank sometime in April this year, the National Association of Financial Market Institutional Investors (NAFMII) took a step ahead and released draft rules for a securitisation instrument for non-financial issuers. The move seems to trigger China's securitisation market as NAFMII's Asset backed medium term notes (ABNs), as they are christened, are receiving a positive response from the market and SMEs would definitely try to bank on this opportunity.
ABNs can be offered via public offering or private placement under the draft guidelines after registration at the NAFMII. It would provide the much-needed alternative to traditional bank lending, the primitive method of financing in china. To add up to its advantages, ABNs ("the notes") would also suit the business models of corporates with a lower rating as they can avail cheap funding putting in good assets into ABNs. NSFMII being a self-regulatory organization, it is also apprehended that the approval process might be easier and the notes might prove attractive to non-financial enterprises.
However, a key issue unaddressed by the draft rule is how to isolate the assets secured from the Originator. The authorities have adopted a wait and watch approach to this question. Without the resolution of this regulatory conflict, it would be very challenging for the new securitisation program to succeed. .
Industry participants hold a range of views regarding the regulatory regime for ABNs but primarily it is evident that China is encouraging its SMEs to tap the new financing instrument by laying down minimum financial status requirements for the issuers.
[Reported by: Abhijit Nagee]