MAJOR Chinese banks are likely to drive debt issuance in the Asia-Pacific in the coming months, as regulatory requirements and lower capital accumulation from profits push them to tap capital markets for funding needs, said S&P Global Market Intelligence on Thursday (May 4).

Analysts expect the four largest Chinese banks, designated as global systemically important banks (G-SIBs), to begin issuing total loss-absorbing capacity (TLAC) securities in the near future in order to meet regulatory capital requirements stipulated by the central bank.

Under solvency regulations applied by the People’s Bank of China, the G-SIBs are required to have a minimum TLAC of 16 per cent of their risk-weighted assets by 2025, and 18 per cent by 2028. 

S&P Global Ratings in January estimated that about US$550 billion would be needed before the banks could meet these capital requirements.

“The major funding channel for Chinese banks will be in the onshore market,” said Andy Suen, co-head of Asia ex-Japan fixed income at global asset manager PineBridge Investments.

S&P Global Market Intelligence data showed that of the US$21.11 billion raised by Apac banks through debt securities in March, over half was amassed through debt issued by two major Chinese lenders – Bank of China and China Construction Bank.

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Banks with lower capital accumulation through profits may also be driven to raise capital in the market, said Gary Ng, senior economist at Natixis CIB, who noted that profits for Industrial and Commercial Bank of China registered a 1.9 per cent decline in Q4 last year to 94.66 billion yuan (S$18.4 billion).

“With the stronger emphasis on financial risks, other Chinese banks may also be asked to beef up their capital ratios,” Ng added.

Apac banks raised a total of US$16.43 billion via share sales in March, the highest in more than a year. This was mainly due to two billion-dollar secondary offerings from Japan Post Bank and Postal Savings Bank of China.