Banks told to raise capital to avoid bailout
Threat of crisis from rising bad loans spurs Beijing to push lenders to raise private funds
Faced with warnings about rising bad debts, Beijing is pushing banks to raise private capital in an effort to head off the need for a second government bailout in as many decades.
The hangover from a credit binge that powered the mainland's swift recovery from the global financial crisis, combined with a slowing economy, has prompted expectations of a repeat of the early 2000s, when Beijing shored up its major banks.
Right now, however, the authorities appear focused on pushing banks to bolster their balance sheets by aggressively enforcing new international bank capital requirements, known as Basel III.
Some analysts say warnings of an impending crisis are overdone.
[Beijing] won’t provide this help easily. If you do it easily, it creates very large moral hazard
"We've done some stress test analyses, which find that even under fairly stressed scenarios, the banks - especially the larger banks - will still be making a marginal profit," said Grace Wu, the head China bank analyst at Daiwa Capital Markets in Hong Kong. "So in that sense, they won't even eat into their reserves."