China issues draft rules easing issuance of asset-backed securities

SHANGHAI Tue Feb 26, 2013 7:23am EST

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SHANGHAI Feb 26 (Reuters) - China's market regulator issued draft rules on Tuesday that would make it easier for brokerages to package, securitise and resell a wide range of assets from real estate to receivables to commercial paper, opening another channel for liquidity to move into the real economy.

The draft rules did not include a date for implementation and are intended to solicit feedback.

China launched a pilot programme to test asset-backed securities (ABS) in 2005, but the government suspended the programme during the global credit crisis. Mortgage-backed ABS were widely blamed for the onset of the global financial crisis in 2008.

Beijing relaunched the project in 2012 and has gradually expanded the programme since.

The new regulations, published on the website of the China Securities Regulatory Commission (CSRC), would open the market to any brokerage with an asset management license. At present only a few selected brokerages are allowed to create and trade ABS.

The rules also expand the classes of assets that can be securitised to include loans, receivables, infrastructure dividends, commercial paper, stocks, bonds, commercial property and other kinds of real estate.

Once the assets are subdivided into tradeable securities, they may be bought and sold on legally recognised exchanges including the main bourses and over-the-counter markets.

If implemented, the regulations could help the development of Chinese brokerages' asset-management business, which had nearly 1.89 trillion yuan ($303.18 billion) worth of assets under management by the end of 2012, according to data from the Securities Association of China.

It could also help brokerages by giving them alternative products to sell and potentially increasing commission revenues through higher transaction volumes. ($1 = 6.2339 Chinese yuan) (Editing by Robert Birsel)

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