Bank to Issue Securities to Increase Money Supply
In a step forward in their efforts to create more bank assets the Ping An Bank Co. will be the first company to issue an asset backed securities on a domestic market, which will give them and make bank assets more liquid so the loans can be created without even increase money supply. A medium sized bank, the Ping An Bank will be allowed to issue 2.63 billion yuan worth of securities that is backed by small loans to consumers which in turn will be listed on the Shanghai Stock Exchange.
Several sources said that market regulators have planned to grant quotas from 300 to 400 billion yuan to firms in order to sell asset backed securities in the coming years as a tool to lure risk away from the banking system in turn reducing the chance of a financial crisis as the economic growth further slows down and bad loans increases. This signals that the asset backed securities is coming to the Shanghai Stock Exchange for the very first time and its expansion of a program that will utilize the country’s asset securitization is making major progress.
The asset back securities previously limited only to the interbanking market in China and is only trade by major institutional investors. The move will expand the securities trading to smaller institutions that will help expand the investment groups, simultaneously improve liquidity on the secondary market and disperse the risk in the banking system.