At least four of the 30 largest banks in China by assets may need to raise fresh capital under the latest proposal from the country's central bank to monitor domestic financial institutions that are systemically important, according to an analysis by S&P Global Market Intelligence.
In S&P's analysis of large lenders that disclose common equity Tier 1 ratios, Hua Xia Bank Co. Ltd., Bank of Nanjing Co. Ltd. and Bank of Hangzhou Co. Ltd., China Guangfa Bank Co. Ltd. do not meet the minimum CET1 requirement for domestic systemically important financial institutions, or D-SIFI. (HENGFENG BANK CO. Ltd. also does not meet the target but was excluded from the analysis given its latest available data is from 2016.) Bank of Ningbo Co. Ltd. and Huishang Bank Corp. Ltd. are among the nine banks that posted CET1 ratios at or just above the statutory minimum.
The People's Bank of China said in November that it would categorize at least 30 banks, 10 securities brokerages and 10 insurers as D-SIFIs, which means that these would be subject to a minimum CET1 ratio of 8.5%, compared to 7.5% for all other institutions. The central bank did not disclose whether or when the names of the D-SIFIs would be revealed.
Chinese regulators last compiled a D-SIFI list in 2012, categorizing lenders along the lines of international practice that takes into account such factors as asset size, complexity and liquidity.
With the list of Chinese lenders classified as D-SIFIs now set to grow, the higher capital requirements may restrict the sector's overall lending capacity, potentially hampering their ability to support national economic growth targets.
China's four largest banks — Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. — are included in the Financial Stability Board's group of global systemically important banks, or G-SIBs. They are already subject to a CET1 ratio minimum of 8.5%.
As of Dec. 18, US$1 was equivalent to 6.89 Chinese yuan.
To find a bank's capital adequacy data, insert the name of the company in the top search box and go to the Capital Adequacy, under Templated Financials on the left panel. Here is an example for Bank of China Ltd.