This Announcement is made on the following matters to further regulate the risk retention behavior of the originators of credit asset securitization, protect the legitimate rights and interests of investors, and promote the sustainable and sound development of asset securitization business:
1. The originator of a credit asset-backed security shall retain a certain proportion of credit risks of the underlying asset, and the proportion should be no less than 5 percent.
2. The originator of a credit asset backed security shall retain credit risks of the underlying asset according to the following requirements:
1) It shall hold a certain proportion of the credit asset backed security it has originated, and the proportion shall be no less than 5 percent of total volume of the issue.
2) Its holding of the lowest tranche of the security shall be no less than 5 percent of the volume of the tranche.
3) If the originator holds tranches other than the lowest tranche, it shall hold a certain percentage of the volume of each tranche, and in the same percentage.
4) The originator shall hold the various tranches of the credit asset backed security it has originated for no less than the duration of each tranche.
5) Other requirements of the People’s Bank of China (PBOC) and the CBRC (China Banking Regulatory Commission).
3. The originator of a credit-asset backed security may decide on the specific arrangements of retaining credit risks in a flexible way based on the actual circumstances. In principle, the originator should serve as the loan service provider of the credit asset securitization and honor the obligations as defined in the loan service contract.
4. This Announcement is to be implemented on the day of its release. In the case of inconsistency between the provisions in the policy and regulation released in the earlier stage of the pilot program and this Announcement, provisions in this Announcement shall prevail at this stage where the pilot program is being expanded.
Originators of credit asset backed securities should, in accordance with the requirements of this Announcement, further improve the management of credit asset securitization business, and do a good job in retaining risks in the credit asset backed security it has originated. The relevant departments will continue to make in-depth studies on the conditions for exemption of risk retention and the risk weight of the holding of the lowest tranche of the asset backed security, and further improve the mechanism of risk retention by originators. Please promptly report to the PBOC and the CBRC when any problem or situation arises in the implementation of this Announcement.