BOC to replenish capital

08:49, November 25, 2009      

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Bank of China Ltd., China's third largest bank by market value, is studying various options to replenish its capital to meet new guidelines on the capital adequacy ratio issued from the China Banking Regulatory Commission (CBRC).

Although the bank has no detailed plans to disclose yet, it respects the CBRC's requirements on capital ratios and will improve capital planning, Bank of China said Tuesday in a statement.

On Monday the CBRC posted on its website that banks, whose capital adequacy ratio are less than 10 percent, and banks which cannot make "practicable" plans for replenishing capital, will face restrictions on market access, FDI outflow as well as business expansion.

Bank of China's capital adequacy ratio fell to 11.63 percent by Sep 30, from 13.43 percent at the end of last year, after it lent out 1.4 trillion yuan in new loans in the first nine months, the most among the country's lenders. Its core capital adequacy ratio stood at 9.37 percent as of Sep 30.

"With China's pace of credit growth, banks' capital will be drained very quickly and that leaves little room for cushioning if asset quality worsens," said Sheng Nan, a Shanghai-based analyst at UOB-Kayhian Investment Co.

Credit risks are growing after lenders doled out a record 8.67 trillion yuan of loans in the first nine months to help finance a government stimulus package, the CBRC said in October.

Bank of China President Li Lihui said in August that the financial institution is considering plans to replenish its capital and maintain the capital adequacy ratio at an "appropriate" level.

Source: Global Times
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