Report: China to Allow Banks to Shed $49B of Asset-Backed Securities


China will allow selected banks to issue asset-back securities (ABS) worth 300 billion yuan ($49 billion) by the end of June next year, expanding a pilot program to support the economy, three industry sources said.

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The People's Bank of China (PBOC) asked 20 banks, including big state banks, to submit their ABS issuance plans at a recent meeting which also involved securities brokerages and trust companies, the sources familiar with the development said.

"The central bank said that the size (of issuance) will be around 300 billion yuan," said a source who declined to be identified.

China Development Bank, a state-owned policy bank, had secured a 100 billion yuan quota, of which half will be used to securitize its railway loans, the sources said.

The PBOC will expand the scheme after the banks complete the issuance by the end of the first half of next year, they said.

China's leaders have pledged to scale up a pilot project for securitization of bank loans as a way to clear space on bank balance sheets for new lending, while also satisfying investor demand for higher-yielding, fixed-income assets.

China relaunched a program to develop ABS last year after it was interrupted by the 2008-2009 financial crisis, but progress has been slow.

China Development Bank sold 10 billion yuan of asset-backed securities last September.

Another policy bank, Agricultural Development Bank of China, sold 1.27 billion yuan worth of such securities on Wednesday.

(Reporting By Zhao Hongmei and Xiaoyi Shao, Writing by Kevin Yao; Editing by Kim Coghill)