BEIJING/SHANGHAI (Reuters) - China has approved 27 second-tier banks to sell asset-backed securities through a streamlined registration system, sources with direct knowledge of the matter said late on Tuesday, allowing the banks to raise capital without tipping yet more cash into China's brimming money supply.
Official data shows that Chinese banks issued 277 billion yuan in ABS products in 2014, nearly doubling the roughly 140 billion they floated a year earlier.
The 27 banks, which included Ping An Bank (SZ:000001) and Shanghai Pudong Development Bank (SS:600000), now need only to register with the regulator to float ABS products from now on, the sources, told Reuters late on Tuesday.
Under the previous system, issuers had to apply to regulators for a review and approval before they could issue asset-backed securities. The issuer sells securities created by packaging together a pool of underlying assets, typically car loans or credit-card balances, which are difficult to sell individually.
China's State Council, the cabinet, has over the past two years pushed banks to use ABS to invigorate their existing assets to help the government to curb rapid growth in money supply, with the broad M2 supply has now reaching a record high of more than 121 trillion yuan (13 trillion pounds).
The first-tier Chinese banks, mainly the big four state-owned banks, such as the Industrial and Commercial of China (SS:601398) and China Construction Bank (SS:601939), are managed by a different bureau under the China Banking Regulatory Commission (CBRC) and are expected to win similar approval soon, said the sources, who could not be quoted by name as they are not authorised to speak to media.
CBRC officials declined to comment immediately.
By allowing ABS products to be issued via a registration system Beijing has demonstrated its policy readiness to establish market-oriented mechanisms to issue securities.
There are also plans to migrate the management of initial public offerings (IPOs) of shares to a registration-based system, similar to those used in major developed markets, from the current approval system.
