In Finance, What Is an Unqualified Opinion?

Financial asset securitization commodities, with financial assets as the basis for issue and the participation of asset packaging and credit rating agencies, provide a public investment tool with limited risk, high liquidity and stable returns.

Financial asset securitization commodities

Right!

Financial asset securitization commodities, with financial assets as the basis for issue and the participation of asset packaging and credit rating agencies, provide a public investment tool with limited risk, high liquidity and stable returns.

Chinese name

Financial asset securitization commodities

Distribution basis

monetary assets

Risk

limited

fluidity

Higher

There are many types of financial asset securitization products, which are classified as follows:

Differentiated by securitization subject assets: corporate loan claims, house loan claims, cash card claims, credit card receivables, auto loan claims, general corporate receivables, bond claims, lease claims, etc. Differentiated by securitization subject assets: corporate loan claims, house loan claims, cash card claims, credit card receivables, auto loan claims, general corporate receivables, bond claims, lease claims, etc.

According to the order of compensation: they are divided into priority order (higher credit rating, higher possibility of principal interest compensation), and secondary order benefit securities (or vice versa). According to the order of compensation: they are divided into priority order (higher credit rating, higher possibility of principal interest compensation), and secondary order benefit securities (or vice versa).

According to the issue period, it is divided into medium and long-term beneficiary securities with a term of more than one year (the general term is mostly between 1 and 7 years) and short-term beneficiary securities with a term of less than one year. According to the issue period, it is divided into medium and long-term beneficiary securities with a term of more than one year (the general term is mostly between 1 and 7 years) and short-term beneficiary securities with a term of less than one year.

Distinguish by means of distribution: open recruitment (sale to an unspecified majority), or private placement (sale target, number of people, transfer restrictions have certain regulations). Distinguish by means of distribution: open recruitment (sale to an unspecified majority), or private placement (sale target, number of people, transfer restrictions have certain regulations).

(I) Risk Isolation

From the structure of securitization of financial assets, we learn that assets have been transferred from founding institutions to trusts or special purpose trusts / companies. Usually, a lawyer will also issue a certificate of true sale, or an accountant will recognize the balance sheet from The legal accounting structure ensures that asset claims and their security rights, as well as related rights and obligations, have been completely transferred to the special purpose trust / public shelf. In the future, if the founding institution encounters operational difficulties or financial crisis, these risks have been isolated from the beneficiary securities / asset-based securities and will not affect the quality of the beneficiary securities / asset-based securities. Securities isolation will not affect the quality of the beneficial securities / asset-based securities.

Due to the nature of risk isolation, a founding institution with a low credit rating (such as BBB) can issue beneficiary securities with a higher credit rating (such as A) through its asset securitization conduit mechanism if it has good quality assets. Not only increase funding channels and reduce capital costs, but also benefit from the flexible use of asset and liability management.

(2) Credit enhancement

The second characteristic of securitization of financial assets is to repackage the potential risks of assets through credit enhancement to improve the quality of beneficiary securities. When the cash flow of assets is unstable, there are still guarantees such as guarantees to enable investors Can receive dividends and principal on time as stipulated in the contract.

Credit enhancement is mainly divided into external credit enhancement and internal credit enhancement. External credit enhancement provides financial institutions with guarantees or credit insurance. Internal credit enhancement includes excess guarantees, primary / secondary order structure, reserve accounts, excess spreads, Exchange of hedging and asset replacement.

(3) Risk diversification

Financial asset securitization is based on a group of claims. The number usually ranges from tens to hundreds. It must be strictly screened and measured by quantitative models. It has met the requirements for moderate risk dispersion, especially those that affect asset quality. Important conditions, such as the geographical distribution of housing collateral in housing loans and the fragmentation of the corporate loan industry, will make appropriate allocations in the securitized asset portfolio.

When investing in a company's corporate debt, when the company's credit situation deteriorates and it is unable to pay its debts, the corporate debt immediately faces a high risk of default; financial asset securitization corresponds to a group of assets. When a single debt defaults, The proportion of the overall group is relatively small, and after the securitization of the stakes, each investor owns only a small portion of the total securitized commodities, so the effect of risk diversification is achieved.

(IV) Credit rating

According to the regulations on securitization of financial assets, publicly-funded beneficiary securities or asset-based securities are subject to letter evaluation. However, in terms of the currently launched cases, in order to enhance product advantages and increase investment incentives, each securitization case has undergone a credit rating.

When doing asset securitization rating, credit rating agencies will conduct understanding and evaluation in various aspects based on the quality of the asset portfolio of the product, the degree of dispersion, structure design, cash flow analysis, participating institutions, and legal framework, and finally give credit ratings. And regularly review changes in credit quality and make adjustments to credit ratings if necessary. Regularly review changes in credit quality and make adjustments to credit ratings if necessary.

(5) Low default rate

Due to the aforementioned advantages of financial asset securitized commodities, together with the special design of the commodity structure, the risk can be repackaged, so that the main securities can obtain higher credit ratings. The default rate is also compared with other fixed income commodities. low.

(VI) Transparent asset portfolio

When financial asset securitization is issued, it will disclose important information about the asset portfolio in the public prospectus or investment prospectus, such as mortgage loan securitization will provide loan quota, term, mortgage interest rate, loan quota, past default record and house value ratio (LTV : Loan to Value) and other important information statistics tables, investors can use this to make assessment and confirmation of asset quality.

(7) Tax burden advantages

Taxation regulations for domestic financial asset securitization commodities. Interest on the distribution of beneficiary securities or asset-based securities is deducted by 6% based on the amount of the distribution. When the interest income is actually distributed, the trustee is the withholding agent, which is 6%. The withholding tax is separated from taxation and is not included in the investor's comprehensive income or profit-making business income. Taxation is not included in the investor's comprehensive income or profit-making business income. Compared with other fixed income commodities, the tax burden ratio is lower than that of other fixed income commodities, which is a considerable investment incentive.

(8) Expansion of investment fields

The underlying assets of financial asset securitization are housing loans, car loans, corporate loans, credit card receivables, lease claims, etc. These were originally consumer financial or corporate financial assets of financial institutions. After securitization, they became other legal entities. Or a tool that a natural person can invest in, which virtually expands the investment field. Under the current financial situation, the yield of bonds is relatively low, and at a time when the economic situation is unclear, financial asset securitization commodities have opened another investment path, and financial innovation is encouraged. Commodities can be flexibly designed to respond to demand, expanding finance Market depth and breadth. The depth and breadth of the field.

Even with the investment of more and more good financial assets and commodities, inevitably there are still many investment risks. The following are some of the most commonly encountered securitized commodity investment risks. ^[1]

(1) Country risk: If you invest in a country's financial goods

For example, according to a survey report by the US credit rating company S & P, since 1975, a total of 85 countries have fallen into a substantial debt crisis. However, these debts are mainly borrowed through the foreign currency of the banking system; in contrast, there are only four examples of reversing foreign currency denominated bonds issued through public offerings (as shown in Table 1).

Table 1 Crisis of foreign currency debt reversals of major government governments

	Public debt
Avoid billing	Mexico (1995) South Korea (1997) Thailand (1998) Brazil (1999)
Debit	Pakistan (1999) Ecuador (1999-2000) Ukraine (2000) Argentina (2000?)

Argentina has issued about 50 billion US dollars of public debt, compared with Ukraine (1.3 billion US dollars) that had previously been debited, the impact is even more profound. In the past crises in Mexico and South Korea, due to the strong intervention of the International Monetary Fund, it was possible to avoid account reversals, but recent examples in Argentina show the national risk of securities investment.

(II) Risk of dependence on experts

In various financial asset securitization transactions, investors rely to a large extent on unreserved opinions or certificates provided by lawyers, accountants and other experts. The purpose of hiring experts is to reduce specific risks in transactions. However, these expert opinions may themselves be a risk.

In fact, the bankruptcy case of the American energy company ENRON in December 2001 can be said to have shocked the corporate, financial and accounting communities in the United States. The bankruptcy caused more than 4,000 employees to lose their jobs, and thousands of retirement savings were put to waste.

A subsequent investigation revealed that the company's accounting firm, Anderson, had destroyed Enron's related documents before receiving a subpoena from the Securities and Exchange Commission in October 2001.

This incident caused everyone to pay attention to the problems that may arise from the risk of relying on experts, and once again brought everyone's attention to the related issues of accounting treatment and statement disclosure.

(3) Risk of legal invalidity

If an asset-based security is confirmed to be invalid, the issuer will no longer have the obligation to pay the security holder. For example, the exemptions or exceptions to asset securitization provided by the United States Investment Corporation Act state that if an issuer is subsequently declared "unregistered as an investment company under regulations," all securities of that issuer will be considered invalid.

In addition, investment risks also include other unexpected risks such as a decline in credit ratings and fraud.