China Smaller Lenders May See CNY5.34 Tln Cap Shortage: Herald

Chinese small and medium-sized banks could face as much as CNY5.34 trillion capital gap by 2022 as their hidden non-performing loans pile up due to policies deferring loan repayments for SMEs weakened by the pandemic, the 21st Century Business Herald reported citing a report by China Securities. Banks are accelerating capital replenishment since August to refinance with convertible bonds, private placement, perpetual bonds, as well as local government special bonds. The gradually exposed corporate credit defaults, increased non-performing assets and demand for write-off have accelerated capital consumption, the newspaper said citing Wen Bin, chief researcher of China Minsheng Bank. Many smaller banks are seeking capital because regulators want to treat them as "critical financial institutions" and place them under closer watch, with stricter requirements over capital and leverage ratios, the newspaper said.