Today, the Shanghai Stock Exchange (SSE) and China Government Securities Depository Trust & Clearing Co., Ltd. (CDC) respectively issued the “Notice of Relevant Issues About Trading of Ping An Bank No. 1 Petty Consumer Loan Assets Backed Securities” and the “Notice of Relevant Issues About Providing Issuance Support, Registration, Custody, and Clearing Services for Ping An Bank No. 1 Petty Consumer Loan Assets Backed Securities”. Meanwhile, Ping An Bank Co., Ltd., as the sponsor, Huaneng Guicheng Trust Corporation Ltd. (Huaneng Guicheng Trust), as the issuer and the trustee, Guotai Junan Securities Co., Ltd. (Guotai Junan Securities) as the lead underwriter, jointly launched the issuance work of RMB2.631 billion credit assets backed securities in total on the SSE, which marked a debut of the credit assets backed securities product on the SSE and a major progress made in the expanded trial of credit asset securitization in China.
Credit asset securitization is regarded as an important instrument for currently vitalizing idle bank credit, putting vitalized capital into weak economic sectors and key economic fields, and fueling the development of the real economy. It was specified in the “Guiding Opinions on Economic Restructuring, Transformation, and Upgrading” issued by the General Office of the State Council in last July that we should gradually boost the regular growth of credit asset securitization, and vitalize capital for the development of micro and small enterprises as well as the economic restructuring. Last August, it was decided at the Executive Meeting of the State Council that the trial of credit asset securitization should be expanded, and quality products of credit asset securitization could be listed and traded on the exchange, which would not only speed up the turnover of bank capital but also provide more choices for investors. The listing and trading of Ping An Bank’s credit assets backed securities on the SSE was a vigorous move of the competent authority to implement requirements at the Executive Meeting of the State Council and expand the pilot of credit asset securitization. It will contribute to the growth of the credit asset securitization market, the diversity of the investors of credit assets backed securities, and the decentralization of the risks in the banking system. Since the pilot business of credit asset securitization in China was launched in the inter-bank market in 2005, majorities of the investors have been banks and bank wealth management products, with risks of credit assets still clustering in the banking system instead of being decentralized. Issuance and trading of quality products of credit asset securitization on the SSE could contribute to making full use of the diversified investors on the SSE, guiding funds, securities companies, insurance companies, non-financial-institution investors to subscribe for credit assets backed securities, propelling the increase of investors, and spreading risks in the banking system. Furthermore, investment preferences of various investors will be conducive to further boosting transactions and enhancing liquidity of the secondary market.
A market insider held that Ping An Bank’s credit assets backed securities made dramatic innovation in both selection of fundamental assets as well as issuance and trading modes, which provided a good model for the follow-up expanded trial of credit asset securitization. In addition, it explored and built a new model for the interflow of China’s bond markets and exerted a profound influence on the Chinese bond market’s long-term growth.
For the fundamental asset of Ping An Bank’s credit assets backed securities, the in-pool asset is petty consumer loans issued by Ping An Bank to domestic residents, which is included into an innovative fundamental assets category in the pilot of credit asset securitization. This phase of securities product has the following characteristics. First, the fundamental asset boasts good decentralization. The fundamental asset pool involves 96,187 sums of petty consumer loans from 93,021 loan borrowers. These loans in the normal category are distributed in 16 municipalities or provinces such as Guangdong, Fujian, Jiangsu, Shanghai, and Shandong with the average contract amount for a single loan up to RMB41,300 and the weighted average residual term up to 2.12 years. Besides, the loan borrowers are well decentralized as well. Second, the fundamental asset has credit and guarantee insurance. PingAn Property & Casualty Insurance Company of China, Ltd. provides credit and guarantee insurance for all the in-pool assets. When any in-pool asset breaks a contract, PingAn Insurance will repay in full amount the loan principal and interest within the time limit stipulated in relevant insurance contract. Third, an array of internal measures on credit enhancement, such as prime/sub-prime, excess spread and excess cash flow coverage, are taken to achieve a win-win situation for the sponsor and investors. Currently, China’s credit asset securitization mainly involves bank loans to enterprises and public institutions, instead of housing mortgage loans and automobile consumptive loans in the fundamental assets category. The securitization of Ping An Bank petty consumer loans not only increases a fundamental assets category for China’s credit asset securitization, but also explores a new business mode for expanding the individual consumption business of commercial banks and increasing the consuming capacity of residents.
For the arrangement for the issuance regulation, this phase of securities product abandoned the former double-examination system. The China Banking Regulatory Commission (CBRC) examines and approves the product according to the existing regulatory rules, and then it is listed and traded on the SSE. Thus, the efficiency of issuance examination and approval is greatly increased. Relevant institutional business, risks and capital management, as well as product design and trading documents are implemented according to the CBRC’s relevant regulatory rules, and are regulated by the CBRC. Listing and trading, information disclosure, and other issues of asset-backed securities go through self-regulation according to relevant rules of the SSE, and are regulated by the China Securities Regulatory Commission. In terms of the trading clearing system, CDC deals with registration, custody and clearing for the credit assets backed securities of Ping An listed and traded on the SSE, which builds a new market organization mode for China’s bond markets. According to relevant business notice, the financial institutions, the wealth management products issued by financial institutions, QFIIs/RQFIIs, and non-financial-institution legal persons which meet the requirements of investor suitability management for credit assets backed securities can subscribe for the products and trade in the SSE secondary market after opening a bond account in CDC. The market holds that the business mode of listing and trading of credit assets backed securities on the SSE with their registration and custody on CDC will help issuers and investors independently select trading sites of credit assets backed securities, realize united registration and custody of products, and enhance the market efficiency. It is a great step to propel the interflow and innovation of China’s bond markets.
According to sources, the total size of Ping An Bank No. 1 Petty Consumer Loan Assets Backed Securities is RMB2.631 billion, with Huaneng Guicheng Trust as the issuer and the trustee, and Guotai Junan Securities as the lead underwriter. The product has 3 levels (all issued by way of book building): 01 level in class A (rated AAA), 02 level in class A (rated AAA), and class B (unrated), with the issuance lines respectively up to RMB1.21 billion (45.99%), RMB1.341 billion (50.97%), and RMB79,855,239 (3.04%). The product will be listed and traded on the SSE soon.
