China NPL scheme hampered by disclosure gaps

Author: Brian Yap | Published: 11 Mar 2016

Chinese regulators have made a last-ditch effort at flushing billions of distressed loans out of its financial system by securitising four percent of its $195 billion bad debt.

But counsel argue that the absence of international ratings coupled with limited public disclosure of risks associated with non-performing loan (NPL)-backed securities will likely deter offshore investors.

Eight regulators including the National Development and Reform Commission (NDRC) jointly issued a notice that it would allow a few qualified financial institutions to issue non-performing-loan-backed securities, which will not be rated by international rating agencies.

 "The question of whether international investors have an appetite for this asset class and the risks associated with it which again will be a function entirely of the price and its risks," said  Berkeley Cox, managing partner of banking and finance at King & Wood Mallesons in Australia.    

This marks the first time...