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Chinese regulators propose expansion of banks' capital-raising toolkit

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Chinese regulators propose expansion of banks' capital-raising toolkit

China's financial regulators proposed an expansion of the capital-raising tools available to the country's commercial banks in order to support the banking system and strengthen banks' ability to support the real economy.

Under the proposed changes, banks will be allowed to raise capital through new types of capital instruments, including perpetual debt, convertible bonds and loss-absorbing debt instruments, according to a joint statement published March 12 by the China Banking Regulatory Commission, the China Securities Regulatory Commission, the China Insurance Regulatory Commission, the People's Bank of China and the State Administration of Foreign Exchange.

The regulators also aim to expand the investor base for commercial banks and examine investment strategies adopted by investors such as social security funds, insurance companies, securities companies and other institutions with respect to commercial bank-issued capital instruments. The authorities also plan to reduce issuance costs borne by banks and concentration risks faced by them.

Further, the regulators proposed to improve the process for approval and issuance of capital instruments.

The changes are aimed at expanding fundraising channels available to banks, increasing the ability of the country's banking sector to absorb external shocks and creating a capital market infrastructure that is conducive to adopting innovation by banks in raising capital.