Boao Forum for Asia Annual Conference 2017 Session Summary(No. 12)

Transcription

1 Boao Forum for Asia Annual Conference 2017 Session Summary(No. 12) Boao Forum for Asia Institute March 24, 2017 Session 7 Asset Securitization: the Good and Bad Time: 8:57-10:15, March 24, 2017 Venue: ICC, Level 1, Dong Yu Grand Ballroom A Moderator: Yibing WU, Senior Managing Director, Temasek Holdings Panelists: CHEN Zhiwu, Professor of Finance at Yale University; Victor & William Fung Professor in Economics at University of Hong Kong Michael R. GRUPE, Executive Vice President for Research and Investor Outreach,The National Association of Real Estate Investment Trusts (NAREIT) LI Jiange, Director-General of Sun Yefang Foundation; Chancellor, Guangdong Technion Israel Institute of Technology Jim STONE, Chairman, Plymouth Rock Assurance; Former Chairman, US Commodity Futures Trading Commisssion ZHANG Xuyang, Vice President, Baidu 1

2 Key points: Asset securitization is similar to transportation tools such as automobiles, for which it is very important to control the brake and the steering wheel. The procedures of asset securitization and its transparency are the key to risk control, and the course of assessing investment opportunities and risks should be complete so that investors can prevent risks as much as possible. Asset securitization itself is a very good thing. We should correctly understand its advantages and disadvantages. Mistakes are inevitable, but one should not give up trying for fear of failure. Asset securitization can use big data to do a good job in information disclosure, thus achieving better rating and pricing. Synopsis: Asset securitization is a very important issue. Its beauty is that it can introduce some traditional and non-liquid assets into the financial system. In the course of asset securitization, how to provide adequate transparency and conduct proper regulation so that asset securitization can truly play an efficient and stable role and serve the economy is a problem that should be resolved in the course of all asset securitization. Asset securitization per se will not give rise to a crisis, and risks should be controlled and monitored continuously in the course of asset securitization. 2

3 Asset Securitization: Its Good and Bad CHEN Zhiwu noted that asset securitization can alleviate banks pressure in capital liquidity and increase the amount of fund supply. Since the 2008 Financial Crisis, and actually from the 2007 Subprime Crisis, the whole transaction chain has been prolonged, the principal-agent problem has arisen, and we have seen more and more irresponsible behaviors. But we should not give up trying for fear of failure. Michael R. GRUPE pointed out that as asset securitization per se is not a product but a process formed by different parts, a problem in one part may trigger a difficult situation. Developing securitization can establish more effective capital allocation methods. Importance should be attached to full information disclosure in this process. Jim STONE deemed that asset securitization is similar to transportation tools such as a car, for which it is very important to control the brake and the steering wheel. To guarantee its fine operation, not a single part in asset securitization should have any problem. The credit investigation and rating and disclosure by credit rating agencies in the course of asset securitization are very important, but of course quantity and concentration should also be well managed. 3

4 How Should Asset Securitization Be Properly Regulated LI Jiange deemed that the first round of debt-to-equity swap in the 1990s was accompanied with the achievements of state-owned enterprise reform as well as some problems. The intensity of state-owned enterprise reform in this round of debt-to-equity swap is far from being adequate, and the central government stressed that in this round of debt-to-equity swap, the method of market economy should be used to replace administrative and government subsidies. ZHANG Xuyang pointed out that the asset securitization products publicly offered by banks amounted to 330 billion Yuan in 2014, 610 billion Yuan in 2015, and 840 billion Yuan in China has many asset management products and bank products, which are also a course of securitization. The course of securization represents a change in business mode, and it is hoped that China can draw upon lessons from Europe and America to reduce leverage ratios through accounting standards and institutional design and make assets more transparent and disclosure more faithful through big data application. 4

5 Analysis of The Current Situation of Asset Securitization in China CHEN Zhiwu pointed out that asset securitization in China now has three characteristics: first, the term of asset securitization in China is not very long, and the benefits that securitization can bring are relatively limited, unable to resolve the liquidity problem of bank capital; second, the main players of asset securitization in China are banks, which are at the same time fund providers, and it is paradoxical for fund providers to do asset securitization; third, the problem as to which should be held more accountable, financial institutions or those acquiring loans by cheating, is not reflected on in China. 5