Fitch Ratings last week said the publishing of securitization rules in China could spur growth in the emerging market over the next two years. However, the agency cautioned that the rules - jointly administered by the People's Bank of China (PBOC) and China Banking Regulatory Commission (CBRC) - currently only apply to financial institutions. Fitch says the exclusion of corporates will limit activity over the short term.
The PBOC and the CRBC have, to date, introduced three ministry level rules, which provide a basic legal framework for ABS issues. "One of the key points of the rules addresses tax and accounting issues, it states that originators can remove the entrusted assets from the balance sheet only if it has transferred at least 95% of the risk and return associated with the entrusted assets," explains Jet Zhou, Fitch's associate director of structured finance in Beijing.