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    CBIRC and CSRC Revise Guidelines for Preferred Stock Issuance by Banks

    July 19, 2019

    CBIRC and CSRC jointly issued the guidelines on “Commercial Banks’ Issuance of Preferred Stock for Tier-1 Capital Replenishment (Revised).” This would help to further broaden the channels for capital supplementation by commercial banks, thus facilitating increase in capital adequacy level and credit supply by banks. This guidance shall come into force from the date of issuance. Also published were certain questions and answers (Q&As) on the revised guidelines.

    The guidelines stipulate that, for a commercial bank to issue preferred shares, it shall file an application for issuance with CBIRC. The administrative licenses involved in the issuance of preferred shares by commercial banks, such as capital supplements and amendments to the articles of association, shall be accepted, reviewed, and decided by the relevant regulatory authorities in China. After obtaining the approval document from CBIRC, the commercial bank shall file an application for issuance with CSRC. Commercial banks may not issue preferred shares with resale terms. The exercise of redemption rights by commercial banks shall comply with the relevant provisions of the Measures for Capital Management of Commercial Banks (Trial). The guidelines consist of 10 articles and the key revisions include the following:

    • On the precondition that the conditions of issuance and the requirements of prudential regulation are met, unlisted banks with cumulative shareholders exceeding 200 can directly issue preferred stock, without getting listed on the National Equities Exchange and Quotations or NEEQ.
    • Requirements of compliance, equity management, information disclosure, and auditing have been further specified.

    The scope of this revision is for non-listed banks. The large state-owned commercial banks and most of the national joint-stock commercial banks in China are listed banks. Prior to this revision, these banks have been able to issue preferred shares in accordance with the relevant regulations of the State Council, CSRC and CBIRC. Most city commercial banks and rural commercial banks are non-listed banks. According to the Measures for the Supervision and Administration of Unlisted Public Companies, non-listed banks with more than 200 shareholders meet the standards of non-listed public companies. Preferred stocks may be issued directly if the conditions of issuance and prudential regulatory requirements are met. Non-listed banks are mainly small and medium-size banks.

    The revised guidelines can facilitate commercial banks, especially the medium and small ones, to replenish capital via multiple channels and help unlisted banks to raise their capital adequacy levels. It can also promote commercial banks to further strengthen financial support to the private-owned, micro, and small enterprises and better serve the real economy.


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    Effective Date: July 19, 2019

    Keywords: Asia Pacific, China, Banking, Securities, Preferred Stock, Tier 1 Capital, Q&A, Capital Adequacy, Disclosure, Guidelines, CBIRC, CSRC

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