According to a Reuters analysis, Beijing would be eyeing private capital to bolster the balance sheets of Chinese banks. Authorities wanted its lenders to meet stricter bank capital requirements under Basel III to prevent the need for another government bailout.
Of the 17 listed banks in China, 12 had already said they would be raising CNY 425 billion or USD 69.47 billion through subordinated debt. The country's securities regulator also announced that lenders and other Chinese companies could also offer preferred shares to commercial investors which were non-tradeable. Reuters reported that this could also be a way for the government to pour in directly if private capital proved insufficient.
Head Analyst of China Banks at Daiwa Capital Markets in Hong Kong Grace Wu, however, told Reuters that Beijing's warning of a potential crisis was overdone. "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," she said.
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