Perpetual bonds raise tax, balance sheet issues for Chinese banks

Author: Karry Lai | Published: 16 Jan 2019

Plans are underway for perpetual bond sales in China – but issues around tax and how they should be treated on balance sheets remain.

While China’s Financial Stability and Development Committee has given the green light for banks to banks to use this instrument to raise funds, further clarity is needed from the China Banking and Insurance Regulatory Commission (CBIRC) and China Securities Regulatory Commission (CSRC) on the technical details. Bank of China has announced its plans to sell an estimated $5.8 billion of perpetual bonds over the next two years.

According to Nicholas Zhu, VP at Moody’s Beijing, while perpetual bonds have been issued by a few corporates, they are new for banks and detailed rules will be issued by the CBIRC and CSRC to clarify how they are to be issued and purchased, including details on...