Business
China Contemplates $142 Billion Capital Injection into Major State Banks: A First Since 2008 Financial Crisis
China is considering infusing $142 billion into its leading banks, marking the first such move since the 2008 financial crisis. The majority of the funds are expected to be raised through new special sovereign bonds, according to insiders.
China is contemplating pumping as much as 1 trillion yuan (equivalent to US$142 billion) into its largest state-controlled banks. The aim is to bolster their ability to aid the faltering economy, as per individuals with knowledge of the situation.
The six biggest government-owned banks in China, which include the Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, Bank of Communications, and Postal Savings Bank of China, may each get a funding boost of 100 billion yuan, according to an insider who spoke to the Post.
The primary source of the funding is expected to be the release of new special sovereign bonds, according to anonymous sources who requested privacy due to the sensitive nature of the topic. The specifics of this plan are still under review and may be altered, the same sources indicated. This action would mark Beijing's first infusion of capital into its major banks since the worldwide financial crisis.
China is swiftly working to boost its banks, despite the fact that its six major banks already have capital levels significantly above the necessary requirements. This comes after introducing sweeping cuts to mortgage rates and drastically reducing important policy rates in a bid to stimulate the economy. Banks such as ICBC and Bank of China, which have been instrumental in supporting the economy over previous years, are now grappling with unprecedentedly low margins, plummeting profits, and increasing non-performing loans.
Earlier this week, Li Yunze, the country's chief banking supervisor, announced plans to boost core tier 1 capital in its six key commercial banks, without going into detail. The National Financial Regulatory Administration did not offer a response to a request for comment.
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