China Banking Regulatory Commission requires all the commercial banks to hold more than 75% of their capital as core. PHOTO PROVIDED TO CHINA DAILY

China's banking regulators may raise large commercial banks' capital adequacy ratio to 11.5 percent from an earlier 11 percent level, people familiar with the matter confirmed.

The 21st Century Business Herald said on Friday that the regulators may ask the country's top five banks to apply the increase.

"The regulators meanwhile requires all the commercial banks to hold more than 75 percent of their capital as core, or Tier 1 capital, which comprises equity and disclosed reserves," sources said.

But they added that the capital adequacy ratio requirement for smaller banks would remain at 10 percent.

The new requirement may trigger a new round of fundraising plans by major Chinese lenders, including the two largest - the Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB) - analysts pointed out.

By September 2009 the capital adequacy ratio of ICBC and CCB were respectively 12.6 percent and 12.11 percent. ICBC and CCB, both of which possess relatively abundant capital, have not released any financing plans yet.

"The two banks may need to draw up additional financing plans this year with the new ratio requirement," Zhang Qi, analyst with Haitong Securities said.

The risk-weighted assets of China's big four banks are estimated at 19.5 trillion yuan($2.86 trillion). The 0.5 percentage point rise in the capital adequacy ratio will demand 97.5 billion yuan of net capital, according to Jin Lin, a financial industry analyst with Orient Securities.

If one fifth of the 97.5 billion yuan can be raised via the issuance of bonds, then at least 78 billion yuan are needed through equity financing, the analyst told Xinhua News Agency.

The Bank of China and Bank of Communications have already put forward additional financing plans valued at 82 billion yuan.

Several other major lenders, including China Merchants Bank and Shanghai Pudong Development Bank, announced fundraising plans in the capital market in order to meet the tightening ratio requirement.

But CCB chairman Guo Shuqing said on Friday he had not received any word from the authorities about a capital adequacy ratio increase.

Industrial insiders revealed that the banking regulator last week also warned banks to raise their threshold in mortgage lending in order to prevent the emergence of bad loans.

"Lenders are required not to issue mortgage merely based on collateral without ensuring that their primary source of repayment is adequate," the industry insiders said. "It also requires banks to keep a close eye on the value of collateral in mortgage lending."