To promote the innovation of asset-backed note (ABN) and the healthy and sustainable development of the market, NAFMII invited senior officials from the supervisory authorities, relevant market players and experts to hold a workshop on innovation of ABNs on October 16, 2012, exploring the introduction of the trust mode to the ABN. Among those present at the workshop were representatives from trust companies, issuers, lead underwriters and market investors as well as legal experts. Min Luhao, Deputy Director of Non-banking Financial Institutions Supervision Department under China Banking Regulatory Commission (CBRC), attended the workshop. The workshop was presided over by Feng Guanghua, Vice Secretary-general of NAFMII.

Mr. Min pointed out that the interbank market has made obvious achievements in market development and compliance, driven by PBC and NAFMII. The interbank market provides a valuable platform for issuers, investors and intermediaries, and trust companies have always been willing to be involved in the interbank market business. Introducing trust institutions will conduce to the development of the interbank market. What products trust companies can provide for the interbank market totally depends on professional characteristics of trust companies and market recognition. As always, the supervisory authorities will back trust companies to participate in product innovation in the interbank market upon the principle of “risk controllability, cost accountability, and complete information disclosure”.

Enterprises, financial institutions and legal experts present at the workshop discussed the importance of the launch of the ABN to liquidizing remnant assets of enterprises and enhancing utilization efficiency of such assets, as well as the concrete route of introducing the trust mode to ABN and relevant issues.

The attendees believe China’s urbanization move will necessitate infrastructure construction on a large scale, and investment demand will push up financing demand. Such financing method as loan and issuance of unsecured bonds that increase the debt ratio of enterprises cannot totally satisfy the requirement of China’s urbanization campaign. What’s more, sustainable financing of enterprises with high debt ratio will also become more and more difficulty. Therefore, liquidizing assets with market value in the existing infrastructures, pooling future cash flows of these assets, and launching ABNs with financial engineering technology can support construction in more fields relating to people’s livelihood and promote China’s urbanization process. This is a financial innovation based on the collective wisdoms of market members. The launch of ABN will create vast space for enterprises with large existing assets, which will make finance support the real economy in a more timely and effective manner.

The workshop made special exploration into such issues as issuers’ intent to disclose asset statements, multiple taxation after introduction of the trust mode to ABN, and how to protect the rights and interests of investors after introduction of the trust mode. The institutions and experts expressed many constructive opinions on the introduction of the trust mode to the ABN product.

Vice Secretary-general Feng Guanghua said in his concluding speech that the launch of the ABN product is a beneficial attempt of NAFMII to meet the strong demand of market members for innovation, and is an important move to enhance the efficiency of existing assets of enterprises, provide a new financing channel for enterprises, and drive the development of the debt financing market in depth. The first ABNs adopt the account isolation mode, which is decided by the market.. NAFMII opens the door to the participation of trust companies in the ABN innovative business, and will as always back market participants to engage in continuous product innovation under the registration system framework, so long as enterprises, lead underwriters, investors and other players recognize trust companies. Next step, NAFMII will actively explore roadmaps and seek recognition and support from relevant supervisory authorities to solve accounting and legal issues, multiple taxation, functional boundary between trust companies and lead underwriters, and trading and circulation of trust products on the interbank market after the introduction of the trust mode to the ABN.