China Pushes for Global Systemically Important Banks to Improve Total Loss-absorbing Capacity via Bond Issues


China’s financial regulators have issued new rules to facilitate the use of bond issues by the country’s global systemically important banks (G-SIB’s) to improve their total loss-absorbing capacity.

The People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) jointly issued the “Notice on Matters in Relation to Global Systemically Important Banks Issuing Total Loss-absorbing Capacity Non-capital Bonds” (关于全球系统重要性银行发行总损失吸收能力非资本债券有关事项的通知) at the end of April.

Regulators said the Notice aims to “raise the total loss-absorbing capacity of G-SIB’s in order to further strengthen the stability of the Chinese financial system.”

The Notice “provides a basis for the orderly organisation of bond issuance work by G-SIB’s,” with provisions covering definitions, order of payments, loss absorbance methods, information disclosures, issuance pricing and registration and custody.

“Total loss-absorbing capacity non-capital bonds are a key tool for the total loss absorbing capacity of G-SIB’s meeting standards, and are already widely used, with comparatively mature development,” said the official news outlet for China’s financial regulatory agencies.

“Looking at the realities for China, promoting total loss-absorbing capacity non-capital bonds is a necessary measure for China’s G-SIB’s to satisfy the regulatory requirements for total loss-absorbing capacity, and have major significance for raising the ability of big commercial banks to service the real economy and withstand risk, as well as the strengthening of China’s financial system stability.”