China releases new guideline for commercial banks

China on Friday released a revised guideline for commercial banks on the issuance of preferred shares to replenish Tier 1 capital, banks' core capital that includes equity capital and disclosed reserves.

Regulators made the revisions to encourage banks to raise capital-adequacy levels and increase loans to better support the real economy, said the China Banking and Insurance Regulatory Commission (CBIRC) in a press release.

The real economy refers to the part of the economy that produces goods and services.

Under the revised guideline, unlisted banks with more than 200 shareholders may issue preferred shares without having to get listed on the National Equities Exchange and Quotations, a Chinese over-the-counter system for trading shares of small and medium-sized enterprises, as long as they meet the requirements for the issuance of preferred shares and prudent regulation.

The new guideline, jointly released by the CBIRC and the China Securities Regulatory Commission, further clarified regulatory requirements for banks on compliance, equity management, information disclosure, and financial auditing.

The revisions will promote commercial banks, especially small and medium-sized banks, to replenish capital through multiple channels.

This will help non-listed banks improve their credit extension ability, thus providing more financial support for privately owned companies and small businesses, and enhance the ability of commercial banks to serve the real economy, said the CBIRC.