Preferred stock sales regulated
Print Edition
CHINA has unveiled rules to guide commercial banks on the sale of preferred stocks as a new financing option for them to meet tougher capital requirements.
The rules, jointly announced by the China Securities Regulatory Commission and the China Banking Regulatory Commission, aim to improve the bank’s capital structure and to promote the development of a multi-layer capital market, a CSRC spokesman said yesterday.
Under the rules, banks need approval from the CBRC first before applying to the CSRC for a stock sale.
Preferred shareholders have a higher claim on a company’s assets and earnings than common stockholders. They generally receive dividends before common shareholders do. But they don’t have voting rights.
Commercial banks, however, have the right to cancel dividend payment to preferred shareholders under any circumstances and this will not be deemed as a default, the CSRC said in a separate statement explaining the new rules.
The preferred stock will be compulsorily converted into common stock on a trigger event, which the CSRC didn’t specify.
The new rules come after the announcement last month of a pilot program that lets qualified companies raise capital through preferred stock.
Chinese banks said last year that they plan to raise capital through new types of debt and equity securities.
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