China regulator: banks should boost capital with profits

Banks unable to use retained earnings should bolster capital with rights offerings, Zhu, assistant to the chairman of the securities regulatory, said Sunday at a briefing in Beijing. Rights offering are preferable to sales of subordinated or convertible bonds, with private placements and public share sales least favored, Zhu said.

China's banks are in need of capital this year after extending a record 9.59 trillion yuan (US$1.4 trillion) of new loans in 2009, following the government's decision to scrap lending caps as part of efforts to fight off the effects of the global financial crisis. Four Chinese banks have announced plans to raise 87 billion yuan from rights offer since December.

The government has set a new loans target of 7.5 trillion yuan this year. Premier Wen Jiabao warned March 5 of “latent risk” in China's banks as concerns rise about possible bad loans made during last year's credit boom.

China Merchants Bank Co., the nation's fifth-largest by market value, has received regulatory approval to raise 22 billion yuan from a rights issue. Bank of Communications Ltd. also plans to raise as much as 42 billion yuan in a rights offer. Bank of China Ltd. and Huaxia Bank Co. have announced plans to sell convertible bonds and subordinated bonds to replenish capital.

The nation's 11 largest publicly traded lenders may need to raise as much as a combined 368 billion yuan to keep their capital adequacy ratios at 12 percent, according to BNP Paribas SA estimates.

The securities regulator's Zhu also said the agency is discussing the possibility of scraping the current approval system for initial public offerings and instead allowing companies to sell shares publicly after registering with stock exchanges.

“Changing from an IPO approval system to a registration practice is a topic we will definitely touch on,” Zhu said. The issue will be on the regulator's tasks as it continues reforms of the IPO process, he said.

Companies planning public offerings must currently seek approval from a listing panel and get final approval from the stocks regulator before they can start an initial share sale in China.

The regulator began reforming the IPO system last year with the abolishment of a price-to-earning ceiling for the price of IPO shares.

Subscribe to The China Post and save 25%. Click here

SharePrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email