Guaranty Issues of Asset Securitization——On the Legal Nature of Over-collateralization and Its Application Problems in China

During the process of Securitization in the West,especially in the post-crisis era,Over-collateralization(OC) is a powerful method of credit enhancement by lowering the creditor's exposure to default risk,improving the confidence of investors,promoting recovery of liquidity and to some extent,eliminating the negative impact of financial crisis.To draw a lesson from the U.S.financial crisis,OC should be introduced at the initial stage of securitization in China.OC is essentially a debt pledge whose subject is future claims.Under the current legal system,the main legal obstacles in conflict with OC are from Guaranty and Bankruptcy Law.On the one hand,Asset Securitization Law should be developed as soon as possible in order to clear the essence of asset securitization and elaborate transferability and pledge-ability of the original assets;on the other hand,by controlling the OC rate and establishing the spread account,OC can be consistent with the current Bankruptcy Law.