Pedestrians walk past an outlet of Bank of Nanjing in Nanjing, Jiangsu province. [Photo provided to China Daily]
Since the beginning of 2026, a number of small and medium-sized Chinese banks have increased their registered capital through share issuances and capital injections to enhance risk resilience and improve their capacity for sustainable development and support for the real economy.
Last month, Bank of Zhangjiakou increased its registered capital by about 15 percent, from 10.56 billion yuan ($1.56 billion) to 12.15 billion yuan. Bank of Nanjing announced on May 19 that its registered capital had been raised from 10.01 billion yuan to 12.36 billion yuan. Bank of Hangzhou disclosed on May 16 that its registered capital had increased from 5.93 billion yuan to 7.25 billion yuan.
As of Thursday, approximately 120 small and medium-sized Chinese banks had received regulatory approval to increase their registered capital this year.
Analysts said the latest wave of capital raising among these banks reflects mounting pressure to replenish capital. Increasing registered capital is one of the key ways for smaller banks to improve capital adequacy ratios and strengthen their ability to withstand risks. Capital increases are necessary not only to meet regulatory requirements, but also to prevent regional financial risks, maintain lending capacity and better support the real economy.
Data from the National Financial Regulatory Administration show that as of the end of the first quarter, the capital adequacy ratio of China’s city commercial banks stood at 12.09 percent, below the 15 percent level for commercial banks (excluding foreign bank branches). Their nonperforming loan ratio was 1.85 percent, higher than the 1.51 percent level for commercial banks. Rural commercial banks had a capital adequacy ratio of 12.85 percent and a nonperforming loan ratio of 2.79 percent.
Dong Ximiao, chief economist at Merchants Union Consumer Finance and deputy director of the Shanghai Institution for Finance and Development, said that capital adequacy is a key indicator of the operational strength of small and medium-sized banks and is crucial to their sound development, their ability to absorb losses and their capacity to withstand risks.
At a meeting held on March 16, the NFRA called for research into diversified channels for replenishing the capital of small and medium-sized financial institutions. Dong said authorities should support smaller banks in establishing long-term capital replenishment mechanisms, broaden their capital-raising channels, innovate capital instruments, and enhance their ability to replenish capital effectively, particularly common equity tier 1 capital.
He suggested expanding the scope of local government special bonds for bank capital replenishment and extending their utilization period. Special sovereign bonds, he said, should be allocated with a focus on key city commercial banks on a case-by-case basis.
Banking industry experts believe that capital replenishment should be combined with institutional and governance reforms. They said capital increases should not merely be viewed as one-off measures to fill capital shortfalls, but rather as opportunities for banks to optimize asset structures, reshape profit models and improve internal governance.
Lou Feipeng, a researcher at Postal Savings Bank of China, suggested that small and medium-sized banks prioritize allocating new capital to national strategic sectors, rather than simply using the funds to offset bad debts. He also recommended using the capital-raising process to establish genuinely market-oriented operating mechanisms, resolve issues such as proxy shareholding arrangements, optimize asset-liability structures, expand intermediary business, strengthen earnings retention capabilities, and establish robust long-term capital replenishment mechanisms.
Local State-owned capital emerged as the dominant force in this latest round of capital replenishment among smaller banks. The entry of the capital not only helps banks replenish tier 1 capital but also facilitates regional resource coordination. This can help stabilize funding sources, boost market confidence and support banks in resolving nonperforming assets, said a report by Dagong Global Credit Rating.
Tanks to chinadaily.com.cn
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