(Yicai) Nov. 12 -- Industrial and Commercial Bank of China and Agricultural Bank of China have moved closer to raising CNY260 billion (USD38.7 billion) through share sales after clearing a key bourse review, advancing one of China's broadest recapitalization efforts in its financial sector in recent years.

ICBC and ABC received clearance from the Shanghai Stock Exchange, the lenders announced separately yesterday. The share sales are part of a broader CNY300 billion capital injection by China's finance ministry into eight major state-owned financial institutions to bolster their capital and strengthen their ability to support the real economy.

The two banks' financing plans still require registration approval from the China Securities Regulatory Commission before they can proceed, Zhou Guannan, chief fixed-income analyst at Huachuang Securities Research Institute, told Yicai.

The funds are expected to arrive at the two major lenders in the fourth quarter, Zhou said, noting that four other large state-owned commercial banks completed a similar capital injection process in less than three months last year.

Other recipients have also made progress toward securing regulatory approval. Insurer People's Insurance Group of China (PICC) announced yesterday that its financing plan had passed the SSE's review, while reinsurer China Reinsurance Group Corporation said in late October that it had received registration approval from the securities regulator.

Before a private placement can be completed, it must pass several stages, including board review and public disclosure, shareholder approval, sponsor filing, exchange review and regulatory registration, Zhou explained. These are followed by capital payment and verification, as well as the registration and custody of newly issued shares.

Special Bond Issuance to Fund Capital Injections

The government is funding the capital injections through special treasury bond sales.

The finance ministry issued CNY150 billion of the bonds on Oct. 8, with the proceeds earmarked for the eight institutions. A second tranche of CNY150 billion is scheduled for issuance on Nov. 18.

The program is among China's broadest financial sector recapitalization efforts in recent years, aimed at strengthening core capital, supporting the real economy and improving resilience against financial risks, according to the institutions' earlier announcements.

Under plans first disclosed in September, ICBC aims to raise CNY100 billion and ABC CNY160 billion through share sales, with the finance ministry contributing a combined CNY200 billion and tobacco giant China National Tobacco Corporation and its subsidiaries providing the remaining CNY60 billion (USD8.9 billion).

The remaining CNY100 billion in government funding will go to six other institutions: insurance giants China Life Insurance Group, PICC and China Taiping Insurance Group; policy lender Export-Import Bank of China; export credit insurer China Export & Credit Insurance Corporation; and China Reinsurance Group. The allocations were outlined in announcements issued by the institutions earlier this year.

Editors: Tang Shihua, Emmi Laine