(CBN - Global) May 11 -- The Bank of China [SHA:601988] admitted on May 9 that it is preparing a pilot scheme to bundle non-performing assets (NPAs), or loans that may default, into securitized products.
Beijing-based Bank of China, one of the five biggest state-owned commercial lenders in the country, is the first listed bank in China to publicize its involvement in an NPA securitization program.
NPAs at the bank totaled CNY1.18 trillion (USD182 billion), accounting for 1.59 percent of its total assets as of the third quarter of last year, according to data released by the China Banking Regulatory Commission (CBRC). Its outstanding non-performing loans (NPLs), those which borrowers cannot repay, are expected to reach CNY1.26 trillion in the final quarter of 2016, corresponding to an NPL of 1.67 percent.
Credit asset securitization was relaunched in 2012 after being suspended with the onset of the financial crisis. It was piloted in 2005.
The CBRC approved pilot NPA securitization in the second half of last year at six banks: Banks of China, Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), China Construction Bank (CCB), Bank of Communications (BoC) and China Merchants Bank (CMB).