December 26, 2018 / 7:43 AM / 7 months ago

UPDATE 1-China seeks to let banks issue perpetual bonds "soon" to replenish capital

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SHANGHAI/BEIJING, Dec 26 (Reuters) - China is seeking to expedite the issuance of perpetual bonds by commercial banks looking to raise funds and replenish their capital, said a top-level government body.

China hopes lenders can start selling perpetual bonds “as soon as possible”, the government’s Financial Stability and Development Committee (FSDC) said in a statement.

The FSDC held a meeting to discuss the issue on Tuesday, according to the statement, which was posted on the website of the central bank on Wednesday.

Many Chinese banks need to replenish capital to meet increasingly stringent capital rules as they face growing pressure to write off bad loans and heed government calls to aid a struggling economy amid a prolonged Sino-U.S. trade war.

Beijing’s deleveraging drive has also pushed banks to move so-called shadow loans back onto their balance sheets, effectively pressuring lenders to seek new funds to meet capital adequacy requirements.

But Chinese lenders face limited funding channels as many listed banks trade below their book value in a bearish stock market.

A perpetual bond is a fixed income security with no maturity date, and is a relatively low-cost form of fund-raising already deployed by banks in other countries.

China’s banking regulator said in March that it would broaden tools for commercial banks to replenish their capital to boost their ability to support economic growth and deal with external shocks. (Reporting by Samuel Shen in SHANGHAI and Ryan Woo in BEIJING Editing by Shri Navaratnam)

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