* Banks allowed to sell bonds on stock exchange for first
* Banks could only issue to interbank market previously
* New 'Basel bonds' count as regulatory capital under new
* Exchange allows public floats and private placements
SHANGHAI, Jan 10 The Shanghai Stock Exchange has
set conditions for listed banks to issue bonds on the bourse for
the first time, in a move to offer banks a new channel to boost
The China Securities Regulatory Commission (CSRC) and China
Banking Regulatory Commission (CBRC) said in November that
listed banks would be allowed to issue debt on Shanghai and
Shenzhen bourses for the first time, in a step aimed at helping
lenders meet tougher new capital adequacy requirements.
The Shanghai bourse on Friday issued specific guidelines via
its Twitter-like microblog, saying that 19 Shanghai-, Shenzhen-,
and Hong Kong-listed lenders, as well as banks in the process of
applying for listings, would be permitted to issue bonds both
via public offerings and private placements.
Chinese banks are facing increased pressure to raise funds
after the banking regulator began phasing in stricter capital
adequacy requirements last year in line with global rules on
bank capital known as Basel III.
China has implemented the Basel rules aggressively as it
seeks to boost banks' ability to absorb an expected rise in bad
loans as the economy slows.
The subordinate bonds described in the rules -- sometimes
known as Basel bonds -- will count as regulatory capital because
they contain write-down provisions that impose losses on
investors if the bank's financial condition deteriorates beyond
Twelve listed banks have announced plans to raise about 425
billion yuan ($70.19 billion), largely through subordinate bond
issues. But until now, banks were only permitted to issue bonds
on the Shanghai-based interbank market.
The latest rules say that bonds floated publicly by banks
can be listed on the exchange, while the number of investors for
privately placed bonds must not exceed 200.
Individual investors must have at least 500,000 yuan
($82,645) in net assets in their exchange account to trade
banks' listed bonds, while institutions must have 1 million
yuan, the rules say.
Banks, securities brokerages, funds, trusts, insurers,
qualified foreign institutional investors (QFII) are among those
can buy and "transfer" banks' privately placed bonds.
China's bond market has grown rapidly in recent years, but
the market remains fragmented, with different bond types and
trading platforms subject to different regulators.
While the CSRC regulates "company bonds" issued by listed
firms in stock exchanges, the People's Bank of China oversees
the interbank market. The top economic planner, the
National Development Commission, also has power to approve
so-called enterprise bonds issued by state-owned firms.
While bond trading in the bourses is dominated by retail
investors and smaller financial institutions such as brokerages
and mutual funds, the interbank market is dominated by
commercial banks. The two markets have been segregated since
1996, when regulators launched a campaign to clamp down on
speculation by banks in the stock exchanges.
The China Development Bank became the first
Chinese bank to sell bonds on the stock exchange last month, but
those bonds do not have write-down provisions and will not boost
CDB's regulatory capital.
($1 = 6.0550 Chinese yuan)
(Reporting by Lu Jianxin and Gabriel Wildau; Editing by