CHINA’S four biggest banks may have to raise up to US$400 billion to meet new global capital rules, an onerous task that could pressure them to slow down lending at a time when the government wants them to help prop up economic growth.

    The Financial Stability Board (FSB) this week finalized rules for ensuring banks do not become “too big to fail,” a pledge made by the Group of 20 major economies after governments spent more than US$1.5 trillion rescuing financial firms in the 2008 financial crisis.

    The reforms require the world’s 30 systemically important banks, known as GSIBs, to hold a buffer of capital that can be written down to protect taxpayers if the bank goes bust.

    This layer of Total Loss Absorbing Capacity, or TLAC, comprises a large chunk of debt and comes on top of banks’ core Basel capital requirements.

    China has four GSIBs: Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China and China Construction Bank, which was added to the GSIB list only last week.

    Industry insiders and analysts said the four big banks would need to raise a total of between US$350 billion and US$400 billion to comply with the rules, but they were unlikely to do this until after 2020.

    In a note published ahead of Monday’s announcement, James Antos, an analyst at Mizuho Securities in Hong Kong, said China’s banks would suffer the “greatest burden” in meeting the requirements because they currently held minimal senior debt.

    “Since these banks are majority owned by Central Government agencies, we are not convinced that adding debt is entirely appropriate. We think TLAC will boost costs for China’s big four banks without adding much in the way of depositor protection.” (SD-Agencies)