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China halts securitisation of bad loans

(Agencies)
Updated: 2009-02-25 10:34

China's banking regulator has suspended banks' efforts to securitise non-performing loans, as the US subprime crisis aroused concern over such products, the 21st Century Business Herald reported on Wednesday.

Related readings:  Use US Treasury securities to borrow  'Negative' outlook for securities brokers in 2009  Securities dealers in China may see 40% fall in profits

Regulators fear that Chinese who invest in bad asset-backed securities would be vulnerable to losses due to pricing ambiguity amid the current economic crisis, the newspaper said, citing unidentified officials at the China Banking Regulatory Commission. Securitisation of normal loans will not be affected, the article said.

China's asset-backed securities market has just taken root. The government kicked off a pilot programme in March 2005 and so far 11 institutions have issued a combined 60 billion yuan ($8.7 billion) of such securities, the newspaper said.

China Construction Bank and two Chinese companies specialising in purchasing non-performing loans have issued four batches of securities backed by non-performing assets, it said.