Financial institutions of banks may get bond approval

The People's Bank of China, the central bank, will encourage financial institutions belonging to the banking sector to issue creative and new types of bonds to supplement capital ahead of the tighter international regulatory standards that will come into effect from Jan 1, 2019.

An announcement published on the PBOC website said that "financial institutions belonging to the banking sector can explore and issue bonds to enhance their total loss-absorbing capacity (TLAC)."

The TLAC standard was designed and approved by the Financial Stability Board - an international body that monitors and makes recommendations about the global financial system, in 2015, for global systemically important banks (G-SIBs), to ensure they have sufficient loss-absorbing and recapitalization capacity if they fail. It aims to minimize impact on financial stability and avoid exposure of public funds to losses.