Bank of China plans to raise funds for capital boost

Move aims to comply with regulatory requirements based on Basel III agreement.

Bank of China Ltd., the nation’s third-largest lender by market value, may consider fund-raising plans to boost supplementary capital as new regulatory requirements will put constraints on lenders.

A requirement by China’s banking regulator that lenders assign a higher risk weighting to local government loans will have a negative impact on Bank of China’s capital ratio, President Li Lihui told reporters while attending the National People’s Congress in Beijing on Saturday.

Chinese banks raised about $72 billion from sales of stock and convertible bonds last year, after a record expansion of credit in the past two years. The China Banking Regulatory Commission said Feb. 23 it is drafting new capital regulations based on the Basel III agreement and plans to announce them as soon as possible.

“We expect the growth in total social financing and bank lending, including Bank of China’s, to be lower than last year,” Li told reporters. Regulatory measures and the central bank’s reserve ratio rises are putting “relatively big” constraints on banks, he said.

Bank of China has no plan to sell shares to replenish its core capital this year, Li said. He didn’t give details on the fund-raising consideration to boost its supplementary capital. The Beijing-based lender’s tier-1 core capital adequacy ratio stood at 9.35 percent by the end of September and its overall capital ratio was 11.73 percent.

View the full story in Bloomberg.