Top banks eye writedown bonds to shore up capital
Print Edition
WITH banks facing a capital shortfall due to new regulatory requirements, China’s top-five lenders plan to raise 270 billion yuan (US$43.3 billion) through innovative financing instruments this year, according to PricewaterhouseCoopers.
The big-five banks are the Industrial Bank and Commercial Bank of China, China Construction Bank, the Agricultural Bank of China, the Bank of China and the Bank of Communications.
They plan to replenish their capital through writedown bonds, also known as Basel bonds, which are regulatory capital containing writedown provisions that impose losses on investors if the bank’s financial condition deteriorates beyond certain thresholds.
Although the top lenders met the China Banking Regulatory Commission’s regulatory threshold for capital adequacy ratio last year, their ratios have since declined in light of the new requirements, PwC said in a report yesterday.
Last year, China began to phase in stricter international capital requirements, known as Basel III, to boost banks’ buffer against potential losses amid the economic slowdown.
Last week, the securities regulator and the CBRC announced rules to guide banks on the sale of preferred stocks as a new financing option in a bid to improve their capital structure.
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