Beijing shelves credit card securities
Move points to risk concern as regulator halts issuance of credit card debt issues incautious approach to sector once marked for fast growth
Beijing halted the issuance of credit-card-asset-backed securities (ABS) this week, demonstrating a high degree of caution for the development of a securitised debt market that the government marked out for rapid growth this year.
The China Banking Regulatory Commission announced that it was banning the issuance of credit card ABS, the media reported.
Banks were granted permission to issue securitised debt products starting only last year.
China Merchants Bank earlier this year became the first mainland bank to issue credit card ABS.
"The default rate for credit card debt is higher than for mortgages," said Yang Junhao, a securitisation analyst at ratings agency China Chengxin International. "It's a riskier product. That could be why they stopped it."
Yang also noted that there was a mismatch in the maturity period of credit card debt and the time required to gain approval for issuing the products.
Credit card debt is short-term yet banks need approval from the CBRC and the central bank to issue securitised products, a process that could take months, he said.