PING An Bank Co. will become the first domestic company to issue asset-backed securities (ABS) on a domestic exchange, a major step forward in official efforts to make bank assets more liquid so that loans can be made without increasing money supply.

    Ping An Bank, a medium-sized Shenzhen-based lender, will soon issue 2.63 billion yuan (US$424 million) worth of securities backed by small loans to consumers, which will be then listed on the Shanghai Stock Exchange.

    Market sources have said that regulators plan to grant quotas totalling 300 to 400 billion yuan for firms to sell asset-backed securities in coming years as a tool to shift risk away from the banking system, reducing the chances of a financial crisis as economic growth slows and bad loans increase.

    “The issue signals that ABS will come to the Shanghai Stock Exchange for the first time and that the expansion of a program to expand our country’s asset securitization has made major progress,” the exchange said late Sunday.

    Asset-back securities have previously been limited to the interbank market in China and were only traded by major institutional investors. This new move will expand ABS trading to smaller institutions such as brokerages and mutual funds, as well as to retail investors.

    “This will expand the product’s investment groups, disperse banking system risk and simultaneously improve liquidity in the secondary market,” the bourse said. (SD-Agencies)