Mainland China authorities clash over securities launch
Central bank criticised as asset-backed product is blocked, with investors saying such securities had been approved as part of financial reform
The mainland's first asset-based securities product has been caught in the crossfire between the securities and the banking authorities, in the latest example of a lack of policy co-ordination among the regulators.
A Ping An asset-backed security worth 2.6 billion yuan was expected to list on the Shanghai Stock Exchange last week before the People's Bank of China put a stop to it.
The product was expected to open the floodgates for several hundred billion of yuan fundraising via securitisation.
The central bank's intervention triggered criticism, with the investment community calling it unnecessary since the cabinet has already given its nod to a market-driven asset-backed securities sector.
The products are assets or loans pooled into financial instruments that can be sold to general investors. They were at the centre of the credit bubble of the mid-2000s and the financial crisis that followed in 2008.
Beijing has been encouraging financial institutions to issue asset-backed securities since last year, hoping to create a new financing channel for companies amid a tightening of monetary policy.
Ping An Bank, a unit of insurance giant Ping An Insurance, this month filed an application for credit-backed securities to the Shanghai exchange, which operates under the China Securities Regulatory Commission, but did not inform the PBOC about it.
After blocking the launch, the PBOC insisted the suspension was in compliance with the central government's policy directive.
"Credit-backed securitisation is correlated to monetary policy and a stable and coordinated development of the financial market," it said. "Institutions should file ABS issuance plans to the central bank beforehand."
It said the registration procedure is different from the approval process, under which issuing an asset-backed security is subject to central bank approval.
The CSRC could not be reached for comment.
Market observers said the power struggle among regulators is a major stumbling block to an overhaul of the mainland's finance industry, one of the primary goals of the government.
In 2007, the State Administration of Foreign Exchange said it would allow mainland residents to directly buy Hong Kong stocks under a "through train" scheme. The plan was aborted in deference to the CSRC's concerns over a massive capital outflow from the mainland.
In the past couple of years, the CSRC has found itself pitted against other powerful bodies regarding control over the private equity industry. There have also been reports of the central bank locking horns with the China Banking Regulatory Commission over the capital crunch in the banking system a year ago.
"The regulating bodies don't appear to openly fight each other on policy issues," said a Shenyin Wanguo Securities official who asked not to be identified. "But they are resistant to sharing power with other agencies."
This is the reason Beijing has been working on a mega financial regulatory body encompassing the banking, securities and insurance regulators to facilitate reforms. But even after a decade of planning, that idea is nowhere near getting off the ground.