Bank of China issues record $6.5b in contingent capital

Bank of China (BoC) sold US$6.5 billion of contingent capital Thursday, marking the largest such issuance worldwide to date and the first ever by a Chinese bank, Reuters reported. The so-called additional Tier 1 preference shares are instruments which behave like bonds and convert into common equity if a bank’s core capital falls below certain trigger ratios. As slow growth and bad debts build up, China’s banks are rushing to repolinish their balance sheets to meet the tough new global bank capital regulations known as Basel III. China’s four biggest lenders are expected to issue US$20 billion worth of additional Tier 1 and 2 capital by year’s end, according to Fitch Ratings.