BEIJING, May 26 -- The development of a non-performing loan (NPL) securitization market is credit positive because it will provide additional means for banks to dispose of their NPLs, global rating agency Moody's predicted on Thursday.

China Merchants Bank Co. Ltd. and Bank of China Limited last Thursday announced their first-ever proposed securitization of NPLs, which would be issued by the end of May and would be China's first NPL securitization since 2008.

Securitization allows banks to divest a wide range of NPLs, ranging from granular consumer finance portfolios to concentrated corporate loan portfolios.

Securitization provides flexibility and liquidity for banks to remove their NPLs, especially retail NPLs. Existing regulations ban financial institutions from selling their retail NPLs to distressed asset management companies, but there are no such restrictions on securitizing these NPLs, according to Moody's.