CHINA is considering injecting up to one trillion yuan (S$183 billion) of capital into its biggest state banks to increase their capacity to support the struggling economy, according to people familiar with the matter.
The funding will mainly come from the issuance of new special sovereign bonds, said the people, asking not to be identified discussing a private matter. The details have yet to be finalised and are subject to change, the people added.
Such a move would be the first time since the global financial crisis in 2008 that Beijing has injected capital into its big banks.
China is rushing to replenish its banks – even though the top six have capital levels that far exceed requirements – after unveiling broad reductions to mortgage rates and slashing key policy rates to revive the economy.
Enlisted to support the economy over the past years, lenders such as Industrial & Commercial Bank of China and Bank of China are now battling record low margins, sinking profits and rising bad debt.
Li Yunze, the nation’s top banking regulator, said earlier this week at a press conference in Beijing that authorities would act to boost core tier 1 capital at its six major commercial banks, without elaborating. The National Financial Regulatory Administration didn’t respond to a request for comment.
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China’s mega banks have been under growing pressure from regulators to shore up the struggling economy by offering cheaper loans to risky borrowers — from real estate developers and homeowners to cash-strapped local government financing vehicles.
Most recently, some of the lenders heeded government calls to pay their first ever interim dividends to support the stock market even as profit growth and margins are sliding.
Funding now is favourable for the
