Over 80 Approved! Mid-to-Small Banks Concentrate on "Capital Replenishment," Local State-Owned Assets Rush to Support

Small and medium-sized banks continue to increase capital.

The International Financial News reporter noted that as of March 11, at least 82 local small and medium-sized banks have been approved for capital increases this year. Local rural commercial banks, village banks, and credit cooperatives are the main forces behind the capital increases, with local state-owned assets frequently stepping in to assist.

Meanwhile, a few institutions have chosen to “shrink” in the opposite direction.

Experts interviewed pointed out that the recent wave of capital increases among small and medium-sized banks is essentially the result of stricter capital regulation, pressure on asset quality, and insufficient internal capital. Both capital increases and decreases are rational choices based on each bank’s own conditions and strategies.

Intensive Approvals for Small and Medium Banks’ Capital Increases

Since the beginning of the year, a new round of capital increases has swept through small and medium-sized banks. The International Financial News reviewed public information from the China Banking and Insurance Regulatory Commission and its branches, finding that as of March 11, at least 82 banks have had their plans to increase registered capital approved.

On March 10, the Sichuan Financial Regulatory Bureau announced approval of Chengdu Bank’s request to change its registered capital, increasing it by 503 million yuan to a total of 4.238 billion yuan. On the same day, the Jining Financial Regulatory Branch in Shandong issued two approvals for the capital increases of Yutai Rural Commercial Bank and Wenshang Rural Commercial Bank, which were approved to increase their registered capital by approximately 9.06 million yuan and 14.99 million yuan, respectively.

The Sanming Financial Regulatory Branch in Fujian also announced the approval results for Fujian Yong’an HSBC Village Bank’s plan to increase registered capital through share issuance. The bank will issue an additional 15 million yuan to HSBC Bank (Hong Kong) and HSBC will subscribe with 15 million yuan in cash.

Notably, in this wave of capital increases, only a few city commercial banks such as Chengdu Bank, Xinjiang Bank, and Shanxi Bank are involved. Rural commercial banks, credit cooperatives, and village banks are the main players. Many institutions have increased their capital by tens or hundreds of thousands of yuan, with several rural banks and credit cooperatives in Guangxi, Qinghai, and Hebei raising less than 5 million yuan.

Some Small and Medium Banks’ Capital Increase Details Table: Li Ruohan

According to data from the China Banking and Insurance Regulatory Commission, as of the end of Q4 2025, the industry average capital adequacy ratio for commercial banks was 15.46%. For different types of institutions, city commercial banks and rural commercial banks had capital adequacy ratios of 12.39% and 13.18%, respectively.

Shike, an assistant researcher at Fudan Development Research Institute and director assistant at the Fudan Ping An Macroeconomic Research Center, believes that the recent wave of capital increases among small and medium-sized banks is fundamentally driven by stricter capital regulation, pressure on asset quality, and insufficient internal capital.

“The increased regulatory pressure on capital adequacy ratios is the direct cause. Some smaller banks are approaching regulatory red lines in core Tier 1 capital adequacy, making capital increases urgent to meet regulatory requirements. Asset quality-wise, loans are mainly concentrated in county real estate, micro and small enterprises, and local financing platforms, which have seen increased risks over the past few years. If non-performing loans rise, banks need to set aside more provisions, consuming more capital, which further forces them to raise capital,” Shike explained. “Additionally, banks typically raise capital through retained earnings or external financing, but many small and medium-sized banks are experiencing sluggish or declining profits, making it difficult to support capital expansion internally, thus relying on external capital injections.”

Minority Institutions Opt for “Slimming Down”

It is also noteworthy that, in this wave of capital increases, local state-owned assets have heavily entered the scene.

For example, on January 6, the Jiangxi Financial Regulatory Bureau announced approval for Jiangxi Wanli Rural Commercial Bank’s plan to change its registered capital through targeted share issuance, with Nanchang Meiling Agricultural and Forestry Development Co., Ltd. investing 38 million shares, increasing registered capital by 38 million yuan. Similarly, Qinghai Bank increased its registered capital by about 648 million yuan through a share issuance of 648 million shares, with Western Mining Group and Qinghai Provincial Transportation Holding Group gaining shareholder status.

Shike pointed out, “This round of small and medium-sized bank capital increases features ‘local government-led, state-owned platform funding.’ The entry of local state assets aims to stabilize regional financial systems, restore bank credit, and strengthen financial services for the local economy.” He added, “This helps prevent regional financial risks, boost market confidence, activate credit flows, serve the local real economy, and also improve shareholding concentration, streamline shareholder interests, and enhance the board structure, thereby improving bank operational quality.”

However, while many banks are increasing capital, a few are reducing it. On January 19, Shandong Yanggu Rural Commercial Bank was approved to reduce capital by 44.21 million yuan. On January 16, Beijing Mentougou Zhujiang Village Bank also received approval to decrease registered capital from 76.5 million yuan to 73.5 million yuan.

Dong Ximiao, Chief Economist at Zhaolian and Deputy Director of the Shanghai Financial Development Laboratory, pointed out that although bank capital increases and decreases seem opposite, they are both rational choices based on each bank’s own conditions and strategies. Overall, capital expansion remains the mainstream.

“Capital increases better support business expansion and future development, serve the real economy, and prepare for stricter regulation. Strengthening capital also enhances risk mitigation and loss absorption capacity, laying a more solid ‘safety cushion’ for future growth. In recent years, large commercial banks have received special policy funds like the Ministry of Finance’s special national bonds to further boost capital; some small and medium-sized banks have raised capital through private placements, bond issuance, or by introducing state assets to meet business and regulatory needs,” Dong explained. “On the other hand, some banks are ‘shrinking’ in a countertrend, which helps align with shareholder and strategic adjustments, optimize redundant capital, and resolve historical burdens—an essential part of reform and risk mitigation for small and medium-sized banks.”

Reporter: Li Ruohan

Text Editor: Yao Hui