China Development Bank applies to set up firm to securitise home financing
China Development Bank has applied to the State Council for permission to set up a company to sell securitised mortgages in a move that could make residential loans more common and help establish a market for such financial instruments, bank officials said.
The company would buy mortgages from other banks, package them, and auction them to domestic investors. The bank is conducting a trial in Shenzhen and soon will introduce it to other parts of the country.
'Once we get the approval, we will put it into practice,' a senior bank official said.
'We are getting housing mortgages from all the commercial banks. We are working as a retailer or agent.'
Securitisation bundles a group of similar loans into a single security, providing investors with a steady income stream derived from the income paid on the loans.
China has struggled to formalise rules for a securitisation market, which are needed before investors will be comfortable investing in such financial products.
