BANK of China plans to sell as much as 40 billion yuan (US$5.8 billion) in perpetual bonds, said people familiar with the matter, in what could be China’s first ever issuance of such debt by a lender.

There is no deadline for the deal as approvals are still awaited from regulators, the people said, asking not to be identified as the plans are private. The Financial Stability and Development Committee, a government agency responsible for financial stability, met Tuesday to discuss ways to help banks replenish capital and sell perpetual debt as soon as possible, according to a statement from the People’s Bank of China yesterday.

Lenders need to improve capital buffers as new regulations force them to absorb off-balance-sheet debt, potentially adding to an already swelling pile of soured loans. But lenders face limited funding channels as many listed banks trade below their book value in a bearish stock market.

Stronger capital will also put the banks in a position to increase lending to non-State companies. The government has vowed to support the private sector, which contributes the bulk of national output but has been disproportionately hit by the government’s crackdown on riskier financing.

A perpetual bond is a fixed income security with no maturity date, and the principal will not be repaid.

(SD-Agencies)