New regulatory supervisory structures in China will reduce the risk of issuing auto-lease backed securities on the secondary market, and Moody’s Investor Services anticipates the change will increase volume.
Although in the short-term regulations will be more stringent on certain companies, ultimately in the long term, the changes should increase growth, according to Moody’s.
Under the new structure, leasing companies that were previously regulated by the Ministry of Commerce (MOFCOM) are now supervised by the China Banking and Insurance Regulatory Commission (CBIRC), according to the report.
Previously, non-bank institutions were regulated by the CBIRC, while corporations fell under MOFCOM. The new rules consolidate all enforcement under CBIRC.
The change will actually place higher entry thresholds and more comprehensive capital requirements on leasing companies, but more lenders will now be able to issue under the Credit Asset Securitization (CAS) scheme.
There is a higher level of standardization and transparency in the CAS issuances, Moody’s said, which will reduce the risk of issuance and allow more lease ABS volume to flow into the market despite the tighter regulatory environment.
