China’s banks seen launching US$60 billion of loss-absorbing bonds to align with PBOC’s guidelines
- ICBC will raise 30 billion yuan (US$4.2 billion) and BOC will borrow 30 billion yuan via such issuances this week as key banks line up deals worth around 440 billion yuan
- The PBOC has required China’s key banks to have a minimum total loss-absorbing capacity of 16 per cent of their risk-weighted assets by 2025, and 18 per cent by 2028
Two of China’s largest banks unveiled plans to sell total loss-absorbing capacity (TLAC) bonds this week, as Chinese lenders draw up plans to sell these newly introduced securities to strengthen their balance sheets and meet the central bank’s solvency regulations.
State-owned lender the Industrial and Commercial Bank of China (ICBC), the world’s largest bank by assets, said it will raise 30 billion yuan (US$4.2 billion) and Bank of China (BOC), another government-owned bank, said it will borrow 30 billion yuan via such issuances.
The bonds, a type of bail-in instrument designed to ensure that G-SIBs (global systemically important banks) can transfer losses to investors and can be converted to equity shares when it is determined that the issuer’s business is no longer viable.
Beijing-based ICBC will issue 20 billion yuan worth of four-year bonds and 10 billion yuan worth of six-year bonds on Wednesday in an offering to be lead managed by Citic Securities, according to a notice published on the website of Shanghai Clearing House, a central securities depository. BOC said it will also issue 20 billion yuan worth of four-year TLAC bonds and 10 billion yuan worth of six-year TLAC bonds on Thursday.
China’s five biggest state-owned lenders, including China Construction Bank, the Agricultural Bank of China, Bank of China, and Bank of Communications expect to sell 440 billion yuan of TLAC bonds to meet solvency requirements, the banks have said in their quarter-end capital plans.
