New | Capitalisation gap forming between China's biggest banks as Basel deadline looms
Capitalisation gap between mainland's biggest lenders widened in first half, adding to concern some will miss Basel deadline if debt worsens
The capitalisation gap between China's biggest lenders widened during the first half of the year, adding to worries that some will fail to meet a 2018 deadline.
Meanwhile, some mid-sized lenders seemed to ignore the capital-building exercise, designed to hold banks together in a crisis, as they grew risky off-book lending businesses.
Recommendations from the Basel Committee on "common equity tier-one" capital have gradually grown in significance for Chinese lenders as more have been included on a list of banks that Basel deems systemically important to the global financial system.
Agricultural Bank of China, the country's third-largest commercial bank by assets, was added to the list last year, joining Bank of China and Industrial and Commercial Bank of China.The problem for Agricultural Bank was that, as a globally systemically important bank, its core capital adequacy was far behind its Chinese peers at the end of June.
The bank posted a common equity tier-one ratio of 9.3 per cent for the first half of the year, far below the 11.5 per cent target that banks of its calibre will need to achieve by January 1, 2018.
Nomura analyst Sophie Jiang said in a note that rate left Agricultural Bank subject "to a potential capital shortfall by 2018 as a [globally systemically important bank]".
Despite a sharp slowdown in China's banking sector, Agricultural Bank expanded its total assets by 9.3 per cent between January and June, quicker than its peers and a hindrance to its ability to catch up on regulatory capital levels. By comparison, Bank of China's total assets grew by just 6.9 per cent.