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China Plans to Capitalize Its Big Commercial Banks
China is planning to capitalize its big commercial banks, which are struggling with record low margins. In the press conference organized yesterday, Chinese authorities flagged that they will increase the core tier 1 capital at its six major commercial banks, along with a slew of other measures to shore up the real estate market and the economy. Regulators also reduced how much banks need to hold in reserves and a cut to the key policy rate. It would be the first time since 2008 that authorities have injected capital into one of its big banks. The CET1 ratio of the six major state-owned banks, which includes Industrial & Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of Communications, Bank of China and Postal Savings Bank of China has fallen slightly, but remains at an overall high level. On average, the ratio was 11.77% at end of June, above the 8.5% level required for China’s systemically important banks, according to Bloomberg.
Dollar bonds of these banks traded stable.
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