Chinese State Bank Issues $1.3 Billion In Mortgage-Backed Securities On Blockchain

The state-owned Bank of Communications (BoCom) in China has successfully started to issue residential mortgage-backed securities (RMBSs) with the help of a blockchain network.

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The state-owned Bank of Communications (BoCom) in China has successfully started to issue residential mortgage-backed securities (RMBSs) with the help of a blockchain network.

BoCom uses Juicai Chain to issue securities

The bank, which was ranked the fifth largest in the country in the recent S&P Global survey, has been able to make use of an independently developed platform called the Juicai Chain to issue 9.3 billion yuan worth of RMBSs worth roughly $1.3 billion USD.

China Securities Times reported that with the blockchain network already in place, holders of mortgage securities have been given the power to track and access assets, manage cash flow and take care of business transactions on the network.

The report further added that by making use of the blockchain network, the bank is looking to reduce the risk associated with loan transactions. It will also reduce the RMBS issuance time and make it easy to authenticate the assets involved.

The document for the transaction revealed that the Bank of Communications is the primary issuer with China International Capital Corporation taking its place as the lead underwriter and book runner for the issuance.

The document also mentioned other co-underwriters which include the Industrial and Commercial Bank of China and China Merchants Bank.

Making use of blockchain technology means that the credit data is now available on a distributed network, allowing all parties involved in the issuance process to view up-to-date information and conduct due diligence.

It would also enable transactions to be carried out in a peer-to-peer fashion, the report further added.

A residential mortgage-backed security is mostly comprised of mortgage loans that are owned and controlled by financial institutions. These institutions classify the loans into tranches, with risks and returns serving as the basis for the classification.

Last month, local media outlet Xinhua reported that BoCom first unveiled the Jucai Chain blockchain platform four months ago. It was designed to cater to asset-backed securities as the bank looks to speed up the process of issuing the loans.

The bank proceeded to transfer their mortgage data for securities onto the blockchain network.

Other banks in China looking to use similar technology

BoCom would not be the only bank in China to make use of blockchain technology to issue securities, with other commercial banks in the country making plans to utilize various asset-backed security issuances with the help of distributed networks.

The Agricultural Bank of China back in July successfully completed the issuance of a loan worth $300,000 via a blockchain network.

In addition to that, Zheshang Bank, one of the largest privately held commercial banks in China, announced last month that it successfully issued securities worth $66 million via its developed blockchain network.

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