China’s Bank of Communications Issues $1.3 Billion Securities on Its Proprietary Blockchain
The Bank of Communications, one of China’s largest state-owned commercial banks, has successfully completed a major issuance of residential mortgage-backed securities (RMBS) on a blockchain, local news outlet Securities Times reported on September 27.
The banking giant issued 9.3 billion yuan worth of RMBS, which is equivalent to $1.3 billion, via its proprietary blockchain asset securitization platform called “ Jucai Chain”.
According to the official announcement that details the issuance, China International Capital Corporation was the lead underwriter and book runner for the offering. Other co-underwriters included the Industrial and Commercial Bank of China and China Merchants Bank.
A residential mortgage-backed security (RMBS) is comprised of a pool of mortgage loans created by financial institutions, which packages these loans into tranches depending on their risks and returns , and then sell to investors.
This is reportedly the first launch of blockchain-based RMBS in the market. By uploading credit data of mortgages and asset information onto the distributed network, all parties involved in the loan are able to complete complete asset screening, due diligence, cash flow measurement, and other business operations on the chain, in an effort to reduce operational risks and also speed up the issuance process, along with ensuring authenticity and effectiveness of the disclosure to the maximum extent.
Jucai Chain was launched by the Bank of Communications in June, and the bank started the first phase of issuing digital RMBS in the following month.It began to conduct RMBS due diligence on the chain in August, according to Xinhua News.
In the future, Jucai Chain plans to apply the cutting edge technology to every link of Asset Backed Securities(ABS) product operations, including assets screening, due diligence, product design, sales and issuance,and duration management. Besides, the bank will develop several smart analysis tools for risk-based pricing,cash flow analysis and pressure test.
In May, the Bank of Communications issued its first blockchain-based letter of credit . As of July 26, the bank has issued 20 domestic letters of credit worth 156 million yuan, according to paper.cn.
Other commercial banks in China have also rolled out various asset-backed security issuances via blockchain network. For example, the Agricultural Bank of China, China’s fourth largest bank, issued a loan worth $300,000 based on blockchain in July.