China banks need more capital in 2010: report

Chinese banks will need to raise 500 billion yuan (73.2 billion dollars) in 2010 to beef up their defences against bad debt after rampant lending this year, state media reported.

Chinese banks will need to raise 500 billion yuan (73.2 billion dollars) in 2010 to beef up their defences against bad debt after rampant lending this year, state media reported on Monday.

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One of the lessons to be learned from the global financial crisis is the importance of maintaining core capital, which can be best achieved by issuing shares, the Securities Times reported, citing a senior banking regulator.

"Banks are in strong need for the capital markets (to raise funds)," Li Fuan, a director at the China Banking Regulatory Commission, was quoted as saying at a forum over the weekend.

Chinese lenders are under significant pressure to boost their capital base after new loans reached a record 7.4 trillion yuan in the first half of 2009 as banks heeded Beijing's calls to pump money into the economy.

The pace of new lending slowed in recent months but loans are expected to remain high next year.

The regulatory body has previously warned banks that it will impose curbs on banks' business expansion unless they strengthen their defences against bad loans as Beijing tries to put the brakes on the record lending.

It said early this month that the minimum capital adequacy ratio for large banks -- the amount of capital they must hold against their risk -- has been raised from eight to 11 percent.

Small- and medium-sized lenders were told to maintain a capital adequacy ratio of at least 10 per cent.

Concerns that a glut of new share issues could impact market liquidity have helped drag China's stock market down about 3.2 per cent so far this month.

The figure of 500 billion yuan would include 100-200 billion yuan for Agricultural Bank of China, one of China's "Big Four" state banks, which is expected to launch an initial public offering, according to Li.