Banks Replenish Capital Through Multiple Channels, Combining Special Treasury Bonds and Market-Based Instruments

Xue Jin, China Securities Journal

On March 16, the Party Committee of the State Administration of Financial Supervision held an expanded meeting. The meeting emphasized promoting large state-owned commercial banks to replenish capital and exploring diversified methods to supplement capital for small and medium-sized financial institutions. After issuing 500 billion yuan of special national bonds in 2025 to fund four major state-owned banks, another 300 billion yuan of special national bonds are planned to be issued in 2026 to support these banks’ capital replenishment. Regarding small and medium-sized banks, recent capital supplementation cases show that internal “capital raising” through retained earnings is weakening, with most relying on external sources. Market-based tools involved include targeted share issuance, convertible bonds converting to equity, issuance of secondary capital bonds, perpetual bonds, and others.

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

A New Round of Special National Bonds on the Way

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

As the first four of the six major banks to receive capital injection, 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-by-batch, and tailored,” the Industrial and Commercial Bank of China and Agricultural Bank of China, which did not receive injections last year, will attract attention. The planned 300 billion yuan of special 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 large state-owned banks are beginning their capital replenishment, 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, increasing the total share count to 4.238 billion shares. Industry analysts note that redeeming convertible bonds is an effective way for listed banks to boost capital; after conversion, the equity portion in the capital structure increases, and debt decreases, 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 to increase registered capital 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 advancing, mainly through Tier 2 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 injections 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 Research Institute. He added that these bonds can also enhance the lending capacity of large state-owned banks, leveraging trillions of yuan in credit to better support the real economy and stabilize growth; additionally, they help solidify the “ballast stone” role of finance.

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

In recent small and medium bank capital increases, local state-owned assets have actively participated. Industry experts believe this lays a solid foundation for the expansion and risk resistance of these banks, helping them quickly replenish capital, providing implicit credit guarantees and regional resource synergy effects. This can also improve the equity concentration of local small and medium banks, standardize operations, improve corporate governance, and more smoothly guide bank credit toward infrastructure, key industries, inclusive finance, and rural revitalization, aligning financial development with regional growth.

Industry insiders also suggest exploring more market-oriented methods and long-term mechanisms for bank capital replenishment in the future to further promote high-quality development of the banking industry.