Preface

Asset securitization is an important financial tool for Chinese commercial banks to realize operating transformation under the background of interest rate liberalization. It is also an useful method in revitalizing stock assets in supply-side structural reform. However, subprime crisis in the U.S. has revealed that poor regulation of securitization-based shadow banking system could result in potential risks, which leads to several worries in developing asset securitization in China. Therefore, it is necessary to analyze asset securitization and its effects in depth, so as to deepen related understanding of asset securitization.

This book contains five parts. The first part includes introduction and literature review. Introduction introduced basic concepts of asset securitization, analyzed its role in financial system and its influence on traditional credit intermediation. Literature review summarized a bunch of literatures of asset securitization, including its origination from the perspective of supply and demand, its relationship with financial stability. The second part introduced asset securitization practices in the U.S., European Union and Japan, including their main products, characteristics, existing problems and enlightment on China's asset securitization practices. The third part introduced the development of asset securitization in China, profile of Chinese shadow banking system, similarities and differences between securitization-based shadow banking in the U.S. and Chinese shadow banking system. In the fourth part, we analyzed the impact of asset securitization on commercial banks' profi tability and stability, and discussed its influence paths from the perspective of Dupont decomposition, using panel data from American banking industry. On the profi tability side, there was a signifi cant positive relationship between a bank's securitization extent and its profi tability presented by ROE. More specifi cally, the more vigorous of a bank's securitization activity, the higher of the bank's leverage and asset turn ratio, the lower of the bank's profit rate. Global financial crisis had a more negative shock on banks with securitization activity. On the stability side, there was a signifi cant negative relationship between a bank's securitization extent and its stability presented by Z-score. In addition, we analyzed the impact of wealth management products (WMP) on commercial banks' profi tability and stability, using panel data from 14 Chinese commercial banks. On the profi tability side, there was a significant positive relationship between WMP issuance and ROE for big banks. More specifically, the more vigorous of a bank's WMP issuance activity, the higher of the bank's leverage, asset turn ratio and profi t rate.There was a signifi cant negative relationship between WMP issuance and ROE for small and medium-sized banks. More specifi cally, the more vigorous of a bank's WMP issuance activity, the higher of the bank's leverage and asset turn ratio, the lower of the bank's profi t rate. On the stability side, there was a signifi cant negative relationship between WMP issuance and stability for all banks. The fi fth part analyzed the signifi cance of developing securitization in China, and proposed some advices for its healthy development in China.