ICBC unit approved to sell 1.63b yuan ABS

The China Securities Regulatory Commission (CSRC) has approved a plan by Industrial & Commercial Bank of China Leasing (ICBC Leasing) to offer 1.63 billion yuan ($261 million) in asset-backed securities (ABS), the company announced Monday.

ICBC Leasing - a wholly-owned subsidiary of ICBC, China's largest commercial lender by asset value - is the country's first financial leasing company owned by a banking institution to offer ABS to investors on the mainland, a development which comes as these leasers search for more funding to expand their operations, according to one of the country's top banking experts.

Specifically, the ABS from ICBC Leasing will be tied to the assets of aviation, rail and shipping projects with high credit ratings. The company offered no timetable for the sale.

In early 2007, Chinese regulators started allowing domestic banking institutions to develop financial leasing businesses under the supervision of the China Banking Regulatory Commission (CBRC). Financial leasing units controlled by trading companies and other non-banking institutions were cleared to operate under the supervision of the Ministry of Commerce in 1981.

China's financial leasing service firms, which buy assets and lease them to clients who can't afford to buy them outright, have made wide inroads with under-funded companies in capital-intensive industries as the country's economy decelerates, Wu Hong, vice president of the China Banking Law Society, told the Global Times.

As of the end of September, the assets owned by China's 19 financial leasers operating at that time under the auspices of the CBRC were together valued at 730 billion yuan, 50 times higher than at the end of 2007, CBRC data show.

"But given that some 90 percent of CBRC-supervised financial leasers' financing comes from bank loans, the nationwide credit crunch China is experiencing has severely impacted the cash flows of these businesses," said Wu.

As the demand for financial leasing services expands in China, regulators have taken steps to provide them with more opportunities to diversify their fundraising operations, explained Wu.