Beijing, China (Reuters) – The Industrial and Commercial Bank of China said on May 15 that it would be the first Chinese bank to sell total loss-absorbing capacity (TLAC) bonds, valued at 30 billion yuan ($4.15 billion).

Major state-owned lenders in China are under increasing pressure to raise capital, particularly as calls to help local government finance vehicles, property developers, and the economy expand.

The largest bank in the world based on assets said that it would issue 10 billion yuan in six-year notes with conditional redemption at the end of five years, and 20 billion yuan in a tranche of four-year bonds that it can redeem at the end of three years.

The information is contained in a bond prospectus that was posted on the Shanghai Clearing House website on Saturday.

According to the statement, the bank would utilize the money to increase its overall loss-absorbing capability. The offering period is set to run from Wednesday to Friday.

 

When a bank reaches the disposal phase, the TLAC bonds, which are not included in the bank’s capital base, may be written off or converted into common stock.

Five of the largest state banks in the country—including ICBC—have been designated as globally systemically significant institutions, and they are working harder to comply with tighter international capital buffer regulations.

The five lenders have announced intentions to sell a total of 440 billion yuan of TLAC bonds this year to fill a capital gap. Nevertheless, Fitch Ratings said they would have a 1.6 trillion yuan TLAC gap by January 2025.