With mounting pressure as to the possibility that China would choke on its bad debts, Beijing is now requiring banks to provide private capital to shore off the need for a second government bailout in twenty years. The credit binge that assisted China's recovery from the 2008 crisis with the economic slowdown now being experienced had prompted calls to prepare for a state funded bailout of its banking system, similar to what occurred back in 2000.
As of the moment, the government is pushing financial institutions to strengthen their balance sheets through the aggressive enforcement of international bank capitalization requirements collectively known as the Basel III rules.
On the other end of the spectrum, analysts say that the warnings as to a pending crisis are overreaching. One of the pundits is Daiwa Capital markets China bank analyst head Grace Wu, who said, "We've done some stress test analyses, which find that even under fairly stressed scenarios, the banks - especially the larger banks - will still be making a marginal profit. So in that sense, they won't even eat into their reserves."
Around twelve of the seventeen banks listed in China have announced plans to raise CNY425 billion or GBP43.57 billion. This would be funded mainly through subordinate debt.
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