Fitch Ratings believes China's five global systemically important banks are well-positioned to reach the minimum total loss-absorbing capacity (TLAC) requirements by the 2025 and 2028 deadlines.
The banks, which include Industrial and Commercial Bank of China (SHA:601398, HKG:1398), Bank of China (SHA:601988, HKG:3988), China Construction Bank (SHA:601939, HKG:0939), Agricultural Bank of China (SHA:601288, HKG:1288), and Bank of Communications (SHA:601328, HKG:3328), have been proactive in issuing capital and TLAC debt, Fitch said in a Tuesday release.
The potential TLAC gap has narrowed due to the inclusion of the deposit insurance fund and active capital and TLAC debt issuance, but could still rise as economic challenges and extensive stimulus pressure profitability and risk-weighted asset (RWA) growth.
The banks will tackle these concerns through continued issuance of the more cost-effective TLAC debt, especially as they refinance maturing capital instruments.
The banks are required to reach minimum TLAC requirements of 16% of RWAs by January 2025 and 18% by January 2028.
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