Bank of China Prepping Relaunch of NPL Securitization Pilot

The Bank of China recently announced that it is actively preparing for China’s relaunch of a pilot program on non-performing loan (“NPL”) securitization, according to a China Daily article.

The People’s Bank of China and the China Banking Regulatory Commission named six Chinese banks as the first participants to explore NPL securitization with $50 billion yuan ($7.7 billion) set as the initial quota.

Zuji Wang, President of the China Construction Bank Corporation explained, "The China Banking Regulatory Commission is doing research on NPL securitization. Once the policy framework comes out, each bank will start selling its own NPL securities at roughly the same time. Like other banks, we're also conducting studies on this type of products."

A recent Fitch Ratings report stated, “Prospective Chinese NPL securitization transactions will be challenging for investors due to hard-to-predict cash-flows and an uncertain judicial process. These factors may make such transactions difficult to rate at an investment grade level on an international rating scale."

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