THE Shanghai Stock Exchange has set conditions for listed banks to issue bonds on the bourse for the first time, in a move to offer banks a new channel to boost capital.

    The China Securities Regulatory Commission (CSRC) and China Banking Regulatory Commission (CBRC) said in November that listed banks would be allowed to issue debt on Shanghai and Shenzhen bourses for the first time, in a step aimed at helping lenders meet tougher new capital adequacy requirements.

    The Shanghai bourse Friday issued specific guidelines, saying that 19 Shanghai, Shenzhen and Hong Kong-listed lenders, as well as banks in the process of applying for listings, would be permitted to issue bonds both via public offerings and private placements.

    Domestic banks are facing increased pressure to raise funds after the banking regulator began phasing in stricter capital adequacy requirements last year in line with global rules on bank capital known as Basel III.

    China has implemented the Basel rules aggressively as it seeks to boost banks’ ability to absorb an expected rise in bad loans as the economy slows.

    The subordinate bonds described in the rules — sometimes known as Basel bonds — will count as regulatory capital because they contain write-down provisions that impose losses on investors if the bank’s financial condition deteriorates beyond certain thresholds.

    Twelve listed banks have announced plans to raise about 425 billion yuan (US$70.19 billion), largely through subordinate bond issues. But until now, banks were only permitted to issue bonds on the Shanghai-based interbank market. (SD-Agencies)