BEIJING, Feb. 14 (Xinhua) -- Commercial banks in China are likely to speed up capital supplement via multiple channels under the positive government policy support, and thus promote China's banking industry to better serve the real economy.
The government decision on support capital supplement by commercial banks was made due to massive decline in capital adequacy ratio of commercial banks in China, which has limited the financial support to private, small and micro enterprises.
It is noted that 26 of A-share listed banks have disclosed their financial results for the third quarter of 2018, of which 12 of banks have seen declined capital adequacy ratio, while another 8 of banks have seen decline in core tire-one capital ratio.
During the transition period of new rules on asset management and financial management, asset accounts such as inter-bank assets and off-balance sheet financial products need to be transferred to the balance sheet of deposit and loan business, therefore bringing pressure on capital occupation.
Under such circumstance, there has been large demand in the short and medium term for the capital supplement of commercial banks, especially for the small and medium-sized urban commercial banks, rural commercial banks and joint-stock banks with high credit risk.
Encouraged by government policy, commercial banks in China are likely to see faster approval amd issuance of emerging capital supplement tools, such as perpetual bond issuance.
As of December 20 of 2018, China has issued 1.75 trillion yuan worth of perpetual bonds and 1.62 trillion yuan worth of permanent bonds in stock, while banks account for a relatively low proportion of perpetual bonds issuer, data showed from Haitong Securities Co,. Ltd.
Meanwhile, the innovative exploration of capital supplement of commercial banks is expected to obtain more policy support, as well as investors are expected to strengthen their capacity on capital and share expansion of banks.
the State Council proposed to introduce long-term investors, such as funds and annuities to participate in the capital expansion, to support financial subsidiaries of commercial banks invest in capital supplement bond, and to encourage foreign-funded financial institutions to participate in China's bond market.
The financial analysts predict that the relevant policies for bank proprietary or financial subsidiary on investment of perpetual bond are expected to usher in beneficial development.
Beside, commercial banks are expected to exert more power of the capital market via capital supplement tools such as initial public offering, share allotment, and private offering. The latest information released by the China Securities Regulatory Commission (CSRC) shows that 13 of banks are lining up for A-share Initial Public Offerings (IPOs). (Edited by Jiang Feifan)
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