Regulators may begin pilot securitization program

Regulators are expected to begin a pilot program in which China’s banks would be authorized to convert their loans into securities to free up capital for further lending, The Wall Street Journal reported. Senior bank executives say the program could allow banks to transfer as much as RMB50 billion (US$7.9 billion), or about 1% of the total loan balance of Chinese banks, from their lending books into securities, allowing them to lend more. Regulators entertained the idea of securitization six years ago, but the financial crisis in the US – brought on in part by souring securitized debt – halted the plans. With banks already saddled with loans from the last round of stimulus, the program is being cautiously implemented now to allow space for further bank-channeled stimulus. “Regulators are taking a very cautious approach to securitization. The emphasis is on being up lending to sectors that are in line with China’s priorities,” said one bank executive.