Basel III more meaningful at home than globally for Chinese banks
BOC set to lead wave of share issues to boost capital amid doubts over threat to global risk
Bank of China is set to issue its first tranche of Basel III-compliant preferred shares, the beginning of what is set to be a wave of similar issuances from mainland banks worth about 310 billion yuan (HK$392.3 billion).
More banks, and other state firms, are expected to enter the market with the hybrid securities that were introduced by mainland regulators in April.
For the banks, the goal of issuing the shares is to boost capital adequacy to match the third round of international banking standards known as the Basel accords. During the interim reporting season in August, mainland banks stressed their progress in meeting Basel III deadlines, in 2018 and 2019.
Basel III was instituted in the wake of the global financial crisis with the hope of stemming the next systemic meltdown.
But experts are asking why China is being drawn into a scheme that is explicitly meant to counteract systemic risk in the global financial arena.
Mainland banks are big - by assets, the biggest in the world. They are also connected through their off-balance-sheet lending practices to great levels of systemic risk. But the banks' risks are not global.