Bulletin: Bank of Communications' Increased Systemic Importance Demands Higher Capital

HONG KONG (S&P Global Ratings) Nov. 28, 2023--The Financial Stability Board's designation of Bank of Communications Co. Ltd. (BoCom) as a global systemically important bank (GSIB) doesn't change our view of its creditworthiness. A systemically important bank is one whose failure might trigger a financial crisis. The status may enhance BoCom's global reputation, but it puts pressure on the China-based bank to raise more capital over the next three years. We estimate BoCom (A-/Stable/A-2) will face a capital shortage of Chinese renminbi 431 billion over that period. This considers the 4.9 percentage point (ppt) gap between its capital adequacy ratio and the requirement for total loss absorbing capacity, as of end-June 2023. Funding the gap could be challenging for BoCom.

...November 28, 2023 HONG KONG (S&P Global Ratings) Nov. 28, 2023--The Financial Stability Board's designation of Bank of Communications Co. Ltd. (BoCom) as a global systemically important bank (GSIB) doesn't change our view of its creditworthiness. A systemically important bank is one whose failure might trigger a financial crisis. The status may enhance BoCom's global reputation, but it puts pressure on the China-based bank to raise more capital over the next three years. We estimate BoCom (A-/Stable/A-2) will face a capital shortage of Chinese renminbi 431 billion over that period. This considers the 4.9 percentage point (ppt) gap between its capital adequacy ratio and the requirement for total loss absorbing capacity, as of end-June 2023. Funding the gap could be challenging for BoCom. It took the big four Chinese banks about four years to raise capital adequacy ratios by 2-4 ppts in 2022. The slower asset growth required to close the capital adequacy gap may benefit BoCom's risk-adjusted...

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