(Yicai) May 15 -- Industrial and Commercial Bank of China has become the country’s first global systematically important bank to issue total loss-absorbing capacity bonds.

ICBC today began to sell CNY30 billion (USD4.1 billion) of TLAC non-capital bonds in the Chinese mainland, of which CNY20 billion are four-year fixed-rate notes and CNY10 billion are six-year fixed-rate bonds, with a minimum subscription of CNY10 million (USD1.4 million), the state-owned lender said on May 11.

ICBC, the country’s biggest bank, also said it has the right to overissue up to CNY10 billion of the bonds.

The Basel-based Financial Stability Board released TLAC standards establishing minimum requirements for instruments and liabilities that should be held by G-SIBs in November 2015 and reviewed them in July 2019.

According to the requirements, the TLAC of G-SIBs should amount to at least 16 percent of risk-weighted assets and 6 percent of the leverage ratio from next year, rising to at least 18 percent and 6.75 percent, respectively, from 2028.

Issuing TLAC non-capital bonds will help big commercial lenders coordinate their capital adequacy ratios, meet the requirements, save on regulatory compliance costs, and enhance their ability to weigh risks, according to industry insiders.

Before repaying the principle and interest on TLAC bonds, issuers need to pay those of so-called excluded liabilities. But they need to repay the bonds before paying off qualified capital instruments of various levels, such as tier-1 and tier-2 capital instruments and hybrid capital bonds.

TLAC non-capital bonds are similar to tier-2 capital bonds in terms of target investors, which are mostly large state-owned banks, joint stock banks, and their wealth management units, financial institution sources told Yicai. But given the changes to risk weighting in the new capital market regulations, it remains to be seen whether banks' proprietary businesses will be keen to take part in such product investments, the insiders added.

China has five G-SIBs: Agricultural Bank of China, Bank of China, China Construction Bank, ICBC, and Bank of Communications. The latter was added to the list by the FSB in the latest edition published last November.

In addition to ICBC, Bank of China set out plans to issue TLAC non-capital bonds on May 13. It will issue CNY30 billion worth from tomorrow.

The other three Chinese G-SIBs have not yet disclosed any TLAC bond issuance plans. But based on their previous announcements, they are expected to issue as much as CNY440 billion (USD60.8 billion) worth in Chinese yuan or other currencies of the same value.

ICBC opted to issue all of its TLAC non-capital bonds in the Chinese mainland, while the four other lenders will issue such bonds both onshore and offshore.

Editors: Tang Shihua, Futura Costaglione