BEIJING, July 18 (Reuters) - Chinese regulators will allow more banks to issue asset-backed securities (ABS) in a bid to activate credit to support the slowing economy, industry sources said.
Big banks will be allowed to issue ABS and a quota on such issuance will be scrapped, said the sources, citing new rules being formulated by the China Banking Regulatory Commission (CBRC) and the China Securities Regulatory Commission (CSRC).
But the government will control the pace of the securitisation programme to ward off possible risks, the sources said.
The recent interbank cash crunch underscored the central bank’s reluctance to pump more money into the economy and banks have been told to better use existing credit through financial innovations such as asset securitisation.
China Development Bank, a state-owned policy bank, sold 10 billion yuan ($1.6 billion) of credit-backed securities last September, re-launching a programme disrupted by the global financial crisis.
ABS gained notoriety during the global financial crisis for the part they played in the U.S. subprime mortgage collapse, but China’s ABS products are much simpler and do not have the complex derivatives that trashed the global financial system.
In May 2012, three related regulators issued a joint notice reviving the ABS programme. The People’s Bank of China, the CBRC and the Ministry of Finance set an initial quota, allowing banks to issue up to a combined 50 billion yuan in ABS. ($1 = 6.1353 Chinese yuan) (Reporting by Shengnan Zhang and Kevin Yao; Editing by Robert Birsel)