ML-Implode News - Smells Like Subprime (CHINA DEBT REPACKAGING)

On Monday, Bloomberg News reported that China will allow domestic banks to issue as much as 50 billion yuan ($7.6 billion) of asset-backed securities that would be paid back using the proceeds from nonperforming loans. (Yes, you read that correctly.) The structure they're employing is similar to the method that was used to repackage subprime mortgages in the U.S. ahead of the global financial crisis.
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Many of the instruments are helping banks disguise or unload their exposure to troubled companies in the same way issuance of asset-backed securities helped U.S. and British lenders mask their exposure to souring home payments as loans became delinquent.

Ironically, China had pretty much banned asset-backed securitiesÂ until 2013 because of what happened during the credit crisis. Since authorities began allowing them again, they've spread like wildfire.Â Official data indicateÂ that 593 billion yuan of ABS were sold last year, 79 percent more than in 2014. Less comprehensive Chinabond data show some 678 billion yuan being issued over the past two years...

Relevant:

Smells Like Subprime (CHINA DEBT REPACKAGING)