Fitch Bohua, a subsidiary of Fitch rating, pointed out in a report that since last year, the Chinese government and regulators have issued and implemented a number of support and regulatory policies on the capital of commercial banks, including the issuance of local government special bonds to replenish the capital of commercial banks. The effective implementation of relevant supporting policies and new regulatory regulations will help China's banking industry stabilize and rise in the post-epidemic era, and the capital adequacy ratio and tier one capital ratio of commercial banks are expected to maintain an upward trend in the next two years. The core tier one capital adequacy ratio is expected to stabilize.
As for the rapid upward trend of capital of state-owned banks may slow down under the new rules of total loss absorptive capacity (TLAC), the capital level of joint-stock and local banks is expected to improve.
The TLAC gap of the "four major banks" estimated by Fitch Bohua last year has significantly narrowed year by year, and the future issuance of non-capital debt instruments will help the total loss absorptive capacity of the "big four banks" to meet the target on schedule. There are significant differences in the capital levels of the first batch of systemically important banks (D-SIB), and higher capital requirements will promote the improvement of the overall capital level of D-SIBs. Small and medium-sized banks to issue capital instruments to maintain the upward trend, superimposed by local governments to support the development of small and medium-sized banks to complete the issuance of special bonds, the capital level of small and medium-sized banks is also expected to improve steadily in the future.
Combined with the above, Fitch Bohua believes that the banking capital adequacy index is expected to stabilize and rise. On the other hand, due to the uncertainty of asset quality, the impact on capital still needs to be paid attention to.