China to let banks sell off loans
BEIJING — China will unveil a new trading platform which will allow banks to sell off loans to other investors — laying the groundwork for a potential bailout and recapitalisation of a banking system rife with bad assets.
The China Banking Regulatory Commission will introduce a so-called “credit transfer platform” in the country’s interbank market, which includes banks as well as non-bank financial institutions and large companies, three sources with knowledge of the situation told Reuters.
http://www.todayonline.com/chinaindia/ch...sell-loans
Isn't this similar to securitisation?
And just curious is there so much bad loans in China's system
Introducing bad loans into the china banking system? That sounds risky to me...
I just wonder who is gonna buy the loans
could be just left hand passing right hand
or some tricks to get the toxic out of china banks
however the poison still stays in china
(10-08-2013, 08:00 PM)felixleong Wrote: [ -> ]I just wonder who is gonna buy the loans
could be just left hand passing right hand
or some tricks to get the toxic out of china banks
however the poison still stays in china
You will be surprised that there are people(not necessary inside China alone) specialised in buying such bad loans. I remember during the AFC, DBS had to sell off their bad loans at something like 15-20cents to the dollar. A major hair cut but necessary to make it healthy again. The fact that China have to do this means they finally biting the bullet and get rid of a lot of bad loans to make the banking system healthy again.
which Chinese banks are in great need to sell off their toxic bad debts? anyone know?
Who would want to buy bad loans in the first place? What's the gains. Obviously there are or else such transactions would not have taken places. I cannot see it. Can anyone say how this works?
there r all sorts of players in the market, definitely there will be buyers
Everything which produces a cash flow should have value no matter how low the value is, it has value.
So for the potential nonperforming loans to be sold by potential Chinese banks.
The loans are nonperforming which still produces cash flow or will produce cash flow.
If the loans are sold at too cheap a price, a lot of people are going to buy them at their own fair price.
There is nothing wrong with securitization, but price matters. Just value investment, buying over valued good company does not make a value investment, but a speculation.
This is a brilliant move. This is akin to asking your neighbours to see if anyone wants to buy your "trash". There would always be buyers if the yield is high enough.
Those non-performing loans can be packaged with better performing loans to create some exotic loans to be sold off.
The Chinese are learning the game fast from their US counterparts!
(11-08-2013, 12:15 PM)freedom Wrote: [ -> ]Everything which produces a cash flow should have value no matter how low the value is, it has value.
So for the potential nonperforming loans to be sold by potential Chinese banks.
The loans are nonperforming which still produces cash flow or will produce cash flow.
If the loans are sold at too cheap a price, a lot of people are going to buy them at their own fair price.
There is nothing wrong with securitization, but price matters. Just value investment, buying over valued good company does not make a value investment, but a speculation.