Ping An Bank's 80 billion capital tool has been approved by the China Banking and Insurance Regulatory Commission, the highest approved quota for this year so far. In the first half of the year, seven banks were approved for a total of 137 billion yuan in capital tool issuance, with regulatory approval accelerating in the second quarter.
The largest capital instrument issuance quota for bank institutions this year has been approved.
On July 1st, the website of the China Banking and Insurance Regulatory Commission disclosed that the China Banking and Insurance Regulatory Commission has approved Ping An Bank's capital instruments issuance of 80 billion yuan, including Tier 2 capital bonds and capital bonds with no fixed term. The approval date is June 25, 2024.
According to incomplete statistics by Cailian Press reporters, in the first half of this year, the China Banking and Insurance Regulatory Commission and various local financial regulatory bureaus successively approved the capital instruments of 7 commercial banks including Guangzhou Bank, Bank of Chengdu, Fudian Bank, Bank of Hangzhou, Qinhuangdao Bank, Taizhou Bank, and Ping An Bank, with a total approved amount of 137 billion yuan.
Among them, Ping An Bank has the largest capital instrument issuance approved and is also one of the few joint-stock banks approved by the regulatory agency this year.
Approval of Ping An Bank's 80 billion capital instrument issuance
As stated in the approval document, the China Banking and Insurance Regulatory Commission requires that Ping An Bank can independently determine the issuance time, batch, and scale of the 80 billion yuan capital instruments approved, and complete the issuance within 24 months after approval. The document also revealed that the capital instruments to be issued by Ping An Bank include Tier 2 capital bonds and capital bonds with no fixed term (i.e. perpetual bonds).
In addition, according to Xingye Asset Management, the principal repayment order and interest payment order of Tier 2 capital bonds are after depositors and general creditors and before equity capital, other Tier 1 capital instruments, and hybrid capital bonds. The purpose of issuing Tier 2 capital bonds is to increase capital to meet capital adequacy ratio regulatory requirements.
In addition, for bank issuers, perpetual bonds can not only supplement other Tier 1 capital and enhance risk resistance, but also optimize capital structure and improve credit deployment capabilities. Wen Bin, chief researcher at China Minsheng Bank, said that perpetual bonds are included in equity, which can reduce the bank's asset-liability ratio and achieve the goal of improving capital structure and adjusting financial leverage.
According to the capital management plan (2024-2028) of Ping An Bank Co., Ltd. disclosed at the third interim shareholders' meeting in 2023, the Capital Rules of Commercial Banks (new capital rules) have officially landed, and more refined requirements have been made for the management and capital measurement of various risks of domestic banks. To continuously meet various capital regulatory laws and policies, commercial banks need to further improve their capital adequacy ratio targets.
According to Ping An Bank's plan, the capital adequacy ratio targets for all levels from 2024 to 2028 are: to gradually increase the capital adequacy ratio in stages while meeting regulatory requirements, and strive to maintain the core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio, and total capital adequacy ratio not less than 8.8%, 10.4%, and 12.5%, respectively.
Ping An Bank stated that during the planning period, the bank will comprehensively consider factors such as market environment, financing efficiency, and financing cost, and steadily and orderly promote the issuance of various capital instruments, continuously enrich and improve capital replenishment channels, enhance capital strength, optimize capital structure, control capital costs, and continuously improve the long-term mechanism of capital replenishment.
According to Ping An Bank's first quarter report in 2024, as of the end of March this year, Ping An Bank's core Tier 1 capital adequacy ratio was 9.59%, Tier 1 capital adequacy ratio was 11.26%, and total capital adequacy ratio was 13.79%, all above regulatory requirements and have reached Ping An Bank's capital adequacy ratio targets.
The cumulative approved quota exceeded 133.5 billion yuan in the first half of the year, with approvals accelerating in the second quarter.
Since the second quarter of this year, commercial banks' "blood supplement" actions have accelerated.
According to the website of the China Banking and Insurance Regulatory Commission, the China Banking and Insurance Regulatory Commission and various local financial regulatory bureaus approved the capital instrument issuance of 7 commercial banks in the first half of this year, with a total approved amount of 137 billion yuan. In terms of approval date, it is mainly concentrated in May and June; in terms of institution type, it is mainly city commercial banks.
Specifically, in June alone, four banks had their capital instruments approved. In addition to Ping An Bank's approval, on June 24th, Taizhou Bank and Qinhuangdao Bank were approved for capital instrument issuance, with amounts not exceeding 3.5 billion yuan and 1.5 billion yuan, respectively; On June 7th, Bank of Hangzhou was approved for capital instruments not exceeding 30 billion yuan.
In addition, on May 31 this year, Fudian Bank was granted 3 billion yuan in capital instruments; on May 27, Bank of Chengdu was granted capital instruments not exceeding 15 billion yuan. On March 28 this year, Guangzhou Bank was granted capital instruments not exceeding 4 billion yuan.
It is worth mentioning that the bank institutions that have been approved for capital instruments except for Ping An Bank are all urban commercial banks of various regions. Among them, several urban commercial banks such as Taizhou Bank, Qinhuangdao Bank, Bank of Hangzhou, Fudian Bank, and Bank of Chengdu were required in the regulatory documents to strengthen capital management, enhance capital constraints, and ensure capital conservation and effective utilization.
Industry insiders pointed out that currently, the overall capital adequacy ratio of commercial banks in China remains at a relatively high level, but there are differences between different banks, and some small and medium banks are under greater pressure to supplement capital.
In early June of this year, the Party branch of the Shareholding and Urban Commercial Bank Department of the China Banking and Insurance Regulatory Commission published an article entitled "Working Hard to Write a New Chapter of Supervision for Shareholding Banks, Urban Commercial Banks, and Private Banks", which pointed out that it is necessary to focus on the impact of the decline in net interest margin on the endogenous capital replenishment ability of banks, carry out serious research, actively study feasible measures to supplement capital, and enhance the ability of capital to offset risks.