CHINA DRAFTS NEW RULES FOR INVESTMENT IN ABS MARKET

The China Insurance Regulatory Commission (CIRC) is drafting new rules to cover investing by mainland insurers in China’s fledgling asset-backed securitisation (ABS) market. The regulator said that draft proposals had been sent to insurers some time ago and that the CIRC was now awaiting feedback. The draft would restrict mainland insurers from investing more than 2% of their total assets in ABS. Insurers could also see their investments restricted to the ABS issues of commercial banks with ratings of double A or higher. Although investment in alternative classes such as the ABS market is seen as a plus in that it diversifies insurers’ investment away from the Shanghai bourse, the regulator is reportedly mindful of the problems created by the subprime crisis in the US, where opacity and a lack of liquidity in the ABS system contributed to the current credit crunch.