Banks Supplement Capital Through Multiple Channels, Special Treasury Bonds and Market-Based Instruments Work Together

On March 16, the Party Committee of the Financial Regulatory Administration held an expanded meeting. The meeting emphasized promoting state-owned large commercial banks to replenish capital and studying diversified methods to supplement the capital of small and medium-sized financial institutions. After issuing 500 billion yuan in special national bonds to fund four major state-owned banks in 2025, another 300 billion yuan in special national bonds is planned to be issued in 2026 to support these banks’ capital replenishment. Regarding small and medium-sized banks, recent capital replenishment cases show that internal “blood transfusions,” relying on retained earnings to strengthen capital, are weakening. Most are external “blood transfusions,” involving market-based tools such as targeted share issuance, convertible bonds converting to equity, issuance of secondary capital bonds, perpetual bonds, and others.

Industry experts suggest exploring more market-based methods for bank capital replenishment in the future, such as issuing special bonds to establish a long-term mechanism for small and medium-sized banks’ capital support, further enhancing the banking sector’s risk resistance, asset deployment capacity, and ability to serve the real economy.

The Next Round of Special National Bond Funding Is on the Way

This year’s government work report clearly states the plan to issue 300 billion yuan in special national bonds to support the capital replenishment of large state-owned commercial banks. Following the 500 billion yuan in special national bonds issued in 2025 to fund four major state-owned banks, the second batch of funding arrangements for these banks is already underway.

As the first four of the six major banks to receive funding, in 2025, Bank of China, Postal Savings Bank, Bank of Communications, and China Construction Bank raised a total of 520 billion yuan through targeted share issuance, with the Ministry of Finance contributing 500 billion yuan. Industry insiders expect that under the policy approach of “staged, batch, and tailored,” the Industrial and Commercial Bank of China and Agricultural Bank of China, which did not receive funding last year, will attract attention. The planned 300 billion yuan in special national bonds will mainly be used to fund these two banks.

All six major banks are systemically important banks in China, with ICBC, ABC, BOC, CCB, and BOCOM classified as global systemically important banks. This means they must comply with higher regulatory standards and face higher capital adequacy requirements.

Intensive Capital Replenishment by Small and Medium Banks

While the capital replenishment of large state-owned banks is underway, small and medium-sized banks are also actively raising capital.

According to Chengdu Bank’s announcement, the Sichuan Financial Regulatory Bureau recently approved an increase in the bank’s registered capital from 3.736 billion yuan to 4.238 billion yuan. The bank’s convertible bonds will be redeemed early in 2025 and delisted, and the total share count will increase to 4.238 billion shares. Industry analysts note that redeeming convertible bonds is an effective way for listed banks to strengthen capital. After conversion, the equity portion in the bank’s capital structure increases, and debt decreases, thereby improving the core Tier 1 capital adequacy ratio.

Non-listed banks are also rapidly increasing capital. Since the beginning of the year, many city commercial banks, rural commercial banks, and village banks have received regulatory approval for capital increases. For example, Jining Financial Regulatory Bureau recently approved Shandong Jiazhi Rural Commercial Bank to increase registered capital by about 18 million yuan, and Shandong Yutai Rural Commercial Bank by over 9 million yuan. Hubei Bank recently completed a private placement of 1.8 billion shares, raising 7.614 billion yuan, all used to supplement core Tier 1 capital.

At the same time, bond financing is actively progressing, mainly through secondary capital bonds and perpetual bonds. Recently, Dongguan Rural Commercial Bank and Qingdao Bank received approval to issue capital instruments not exceeding 6 billion yuan each.

Strong Demand for Bank Capital Replenishment

“Special national bond funding can alleviate the internal capital pressure faced by large state-owned banks caused by narrowing net interest margins and slowing profits, and improve capital adequacy and risk resistance,” said Zeng Gang, Deputy Director of the National Financial Development Laboratory. He added that special bond funding can also enhance the credit deployment capacity of large state-owned banks, leveraging billions of yuan in credit to better support the real economy and stabilize growth; additionally, it helps solidify the financial “ballast.”

A relevant person from United Credit stated that capital replenishment will significantly enhance the credit deployment capacity of large state-owned banks. During this critical phase of economic transformation, providing capital support to these banks can offer stronger financial backing for national strategic support areas.

In recent small and medium-sized bank capital increases, local state-owned assets have actively participated. Industry analysts believe this lays a solid foundation for the expansion and risk resistance of these banks, not only helping them quickly replenish capital but also providing implicit credit guarantees and regional resource synergy effects. This can help improve the equity concentration of local small and medium-sized banks, standardize operations, improve corporate governance, and more smoothly guide bank lending toward local infrastructure, key industries, inclusive finance, and rural revitalization, aligning financial development with regional growth.

Industry experts also suggest exploring more market-based methods and long-term mechanisms for bank capital replenishment in the future to further promote high-quality development in the banking sector.