China should lower small banks' capital replenishment barriers: People's Daily

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© Reuters. China should lower small banks' capital replenishment barriers: People's Daily© Reuters. China should lower small banks’ capital replenishment barriers: People’s Daily

SHANGHAI (Reuters) – China’s financial regulators should lower barriers for small banks to replenish their capital, and develop more tools to help them raise funds, a commentary in the Communist Party’s official People’s Daily said on Monday.

Listed small and medium-sized banks have a limited ability to raise funds externally and have limited tools for issuing capital replenishment bonds, the commentary said.

“Regulators should consider designing diversified and differentiated means and indicators and implement differentiated regulation to better guide small and medium-sized banks forward on the road of differentiated development,” it said.

Beijing is trying to soothe investor concerns about troubled smaller lenders as economic growth slows to near 30-year lows.

State-backed investors became key shareholders in Harbin Bank (HK:) this month in a $2 billion deal.

Earlier this year, regulators took control of Inner Mongolia’s Baoshang Bank, citing “serious” credit risks and improper and significant illegal use of bank funds.

The newspaper commentary said that only by improving corporate governance and solving problems including shareholder-related transactions and insider control, and improving internal management models can small banks respond to changes in the market environment.

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