China Banking Regulatory Commission, Guidelines for Measuring the Regulatory Capital in Connection with Risk Exposure in Asset Securitisation of Commercial Banks
中国银行业监督管理委员会商业银行资产证券化风险暴露监管资本计量指引
March 11, 2010 | BY
clpstaff &clp articles &Banks required to conduct due diligence investigation on the underlying assets of securitisation.
Issued: December 23 2009
Effective: January 1 2010
Interpreting authority: China Banking Regulatory Commission
Applicability: The Guidelines apply to the measurement of regulatory capital for credit risk exposure in the banking book arising from asset securitisation transactions of banks subject to Basel II under the Guiding Opinion for Implementing Basel II in the Banking Industry in China and other commercial banks that implement Basel II on a voluntary basis (Article 2).
Main contents: Where a commercial bank provides credit support to asset securitisation transactions and such credit support has been reflected in its rating by external agencies, the bank shall measure its regulatory capital in accordance with the relevant provisions of these Guidelines on unrated exposure in asset securitisation, and not the external rating (Article 11).
Commercial banks may use the methods specified in these Guidelines to measure the regulatory capital in connection with risk exposure in asset securitisation only if they have conducted the requisite due diligence on the underlying assets and the following criteria are met:
(1) they shall have ongoing, comprehensive understanding of the risk characteristics of the risk exposure in asset securitisation on and off their balance sheets and the underlying assets;
(2) they shall be able to obtain in a timely manner the relevant information of the underlying assets, including the type of assets, the creditworthiness of the borrower, the ratio of all overdue assets, default rate, prepayment rate, types of collaterals or pledges provided for the underlying assets and their ownership, the average mortgage and pledge rates as well as the industry and geographical distribution; and
(3) they shall have comprehensive understanding of the characteristics of the asset securitisation transaction structure that may have a major impact on its risk exposure, including credit enhancement, liquidity support, the definition of default relevant to the transaction, all types of triggering mechanisms and the repayment arrangement for asset-backed securities. Commercial banks that fail to meet these criteria shall deduct the risk exposure in asset securitisation from the regulatory capital (Article 14).
Related legislation: PRC Banking Regulation Law (Revised), Oct 31 2006; and PRC Commercial Banking Law (Revised), Dec 27 2003
clp reference:3610/09.12.23promulgated:2009-12-23effective:2010-01-01This premium content is reserved for
China Law & Practice Subscribers.
A Premium Subscription Provides:
- A database of over 3,000 essential documents including key PRC legislation translated into English
- A choice of newsletters to alert you to changes affecting your business including sector specific updates
- Premium access to the mobile optimized site for timely analysis that guides you through China's ever-changing business environment
Already a subscriber? Log In Now