(Yicai) Jan. 4 -- Chinese commercial banks are expected to issue more than CNY1.7 trillion (USD238.7 billion) of perpetual bonds and second-tier capital bonds amid rising capital demand, Cnstock.Com reported today, citing industry insiders.

The high need to supplement capital is due to rare redemptions of perpetual bonds and new capital management regulations.

It will be a general trend for banks to issue second-tier capital bonds and perps this year, per Industrial Securities. Banks will issue around CNY770 billion (USD108.7 billion) of perpetual bonds and about CNY950 billion of second-tier capital bonds during the year, it predicted. The second tier of capital refers to a layer of banks' mandatory reserves, part of which can consist of subordinated term debt.

Fifteen commercial banks, including the Bank of China and the Agricultural Bank of China, are about to redeem nearly CNY570 billion of perps, marking the first time lenders called such debt instruments with no fixed maturity since issuance in 2019, according to data that Chinabond.Com disclosed on Jan. 2.

If issuers never call perps they risk facing rising financing costs caused by uncertain benchmark interest rates in the following five years, as well as some other negative impacts, an insider said to Cnstock.Com.

Moreover, China implemented new rules for commercial banks' capital management on Jan. 1, which adds to their need for caution.

The requirements were raised so lenders have to supplement their capital reserves, per Dong Ximiao, chief researcher of CMB-China Unicom Consumption Finance.

The rising capital demand shows on the market already as the BoC was recently approved to issue CNY450 billion worth of perpetual bonds and second-tier capital bonds.

Editor: Emmi Laine