China Banking Regulatory Commission and China Securities Regulatory Commission, Guiding Opinions on the Offering of Preference Shares by Commercial Banks to Replenish Their Tier 1 Capital

Issued: April 3 2014

Main contents: A commercial bank wishing to offer preference shares is required to have a core Tier 1 capital adequacy ratio of not less than the prudential regulatory requirements of the CBRC (Article 1). A commercial bank shall expressly specify in the offer contract that it has the right to cancel the payment of dividends on the preference shares without the same constituting an event of default and that dividends not fully paid to preference shareholders will not accumulate to the next financial year. If a commercial bank decides to cancel the payment of dividends on the preference shares, it shall notify the investors at least 10 working days before the dividend payment date (Article 5). A commercial bank may not offer preference shares with sellback terms (Article 6).

Related legislation: Guiding Opinions on the Launch of the Pilot Project for Preference Shares, Nov 30 2014, CLP 2014 No.1 p.122; and Measures for the Administration of the Pilot Project for Preference Shares, Mar 21 2014, CLP 2014 No.3 p.54