Chinese Commercial Banks Issue Nearly 600B Yuan in Tier-2 Capital bonds as Smaller Lenders Continue to Face Pressure

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Commercial banks in China have stepped up efforts to replenish their capital levels via bond issuance since the start of 2020.

Since the start of the year Chinese banks have issued nearly 600 billion yuan (approx. USD$91.1 billion) in tier-2 capital bonds, already exceeding the full year amount for 2019, according to data from iFinD.

A total of 46 Chinese banks have issued 56 tier-2 capital bonds, raising 595.58 billion yuan in funds, as compared to a full year sum of 592 billion yuan in 2019. The latest was a 40 billion yuan issuance of tier-2 capital bonds made by ICBC last week.

Out of these 46 issuers only nine were big state-owned banks or joint-stock banks, while the remaining were all municipal commercial banks and rural commercial banks, accounting for over 80% of the total.

Jin Yi (靳毅), chief macro-bond analyst at Guohai Securities, said to Securities Daily that many banks, and small and medium-sized banks in particular, continue to face sizeable capital replenishment pressure.

Chinese regulators are supporting the use of more diversified capital replenishment methods by lenders, with a large number of small and medium-sized banks recently adopting the tactic of issuing both tier-2 capital bonds and perpetual bonds in tandem.

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