CHINA has approved 27 second-tier banks to sell asset-backed securities through a streamlined registration system, sources with direct knowledge of the matter said late Tuesday, allowing the banks to raise capital without tipping yet more cash into China’s brimming money supply.

    Official data show that Chinese banks issued 277 billion yuan (US$45.26 billion) in asset-backed securities products in 2014, nearly doubling the roughly 140 billion yuan they floated a year earlier.

    The 27 banks, which included Ping An Bank and Shanghai Pudong Development Bank, now need only to register with the regulator to float asset-backed securities products from now on, the sources said.

    Under the previous system, issuers had to apply to regulators for a review and approval before they could issue asset-backed securities.

    The issuer sells securities created by packaging together a pool of underlying assets, typically car loans or credit-card balances, which are difficult to sell individually.

    China’s State Council, the Cabinet, has over the past two years pushed banks to use asset-backed securities to invigorate their existing assets to help the government curb rapid growth in money supply, with the broad M2 supply has now reaching a record high of more than 121 trillion yuan.

    The first-tier banks, mainly the four big banks, such as Industrial and Commercial Bank of China and China Construction Bank, are managed by a different bureau under the China Banking Regulatory Commission (CBRC) and are expected to win similar approval soon, said the sources.

    By allowing asset-backed securities products to be issued via a registration system, the government has demonstrated its policy readiness to establish market-oriented mechanisms to issue securities. (SD-Agencies)