China launches NPL securitization

China has launched nonperforming loan securitization to encourage private capital to participate in the NPL market by breaking the old framework of using banks for bad asset disposal, which relies mainly on the four State-owned asset management companies.

Bank of China Ltd and China Merchants Bank Co Ltd issued their first-ever NPL-backed securities products last week since China restarted nonperforming asset securitization after halting the business in 2009.

Bank of China, the nation's fourth-largest commercial lender by assets, sold 301 million yuan ($46 million) of asset-backed securities, including 234.78 million yuan of senior tranche with a fixed coupon rate of 3.42 percent and 66.22 million yuan of equity tranche.