China’s Big Four State-owned banks – Industrial and Commercial Bank of China (ICBC), Bank of Communications (BoCOM), China Construction Bank (CCB) and Bank of China (BoC) – are likely to issue Rmb 300 billion of subordinated debt to boost their capital ratios ahead of privatisation over the next two years. ICBC is expected to issue bonds as early as the Spring. The China Banking Regulatory Commission (CBRC) authorised the issue of subordinated debt late last year.
In a separate development, the Asian Development Bank (ADB) has undertaken to finance the investment banks that bid for the non-performing loans owned by the Big Four and other State-owned companies. It will finance banks such as Citigroup, Goldman Sachs, Morgan Stanley, UBS, and JP Morgan, who buy the assets at a fraction of their nominal value. The aim of the ADB is to encourage other private sector bidders to come forward, and so accelerate the resolution of the Chinese banking crisis.