Recently, China Merchants Bank (CMB) has gained approval of refinancing after Shanghai Pudong Development Bank. Meanwhile, People’s Bank of China and Bank of Communications have issued the refinancing projects. The comments about refinancing boom at this time.

The main logic of these comments is, as considerable loan issued and rising supervision requirement, commercial banks need more money. For listed banks, stock market is the ideal place to raise funds. In this case, refinancing is expected to boom. Once the capital is insufficient, banks will seek solution in stock market, but it is a time bomb. However, the logic above is found very inaccurate after analysis. 

First, the project of capital supplement among banks has been planned. Shanghai Pudong Development Bank issued Capital Layout Notice, in last April, board of directors approved the proposal of strategic development, and it has proposed the principles of diversified and different capital supplement. In the Allotment Specification of China Merchants Bank, it has proposed the same capital layout.

In fact, according to Notice on Capital Supplement for Commercial Banks, banks are required to scientific and feasible layout of capital supplement and sustainable and dynamic system of capital supplement. Then, these layouts should be submitted to board of directors. It means that in regard to capital supplement system, supervision divisions have already proposed requirements on capital management and capital control.