2026 Small and Medium-Sized Banks' Multi-Channel "Refueling" Acceleration

How Does State Capital Involvement Change the Shareholding Structure of Banks?

China Economic Journal reporter Qin Yufang reports from Guangzhou

As we enter 2026, the demand for commercial banks to supplement capital through various channels is becoming increasingly urgent.

On March 11, the Guangdong Financial Regulatory Bureau announced that it approved Dongguan Rural Commercial Bank to issue capital instruments not exceeding 6 billion RMB, including subordinated debt and perpetual capital bonds. Qingdao Bank’s application for a capital supplement tool plan has also recently received approval from the local regulatory bureau.

According to an announcement disclosed on the official website of the National Financial Supervision and Administration, since December 2025, more than ten banks, including Industrial Bank, Guangzhou Bank, Dongguan Bank, Chongqing Bank, Kunlun Bank, Qishang Bank, and Zhongshan Rural Commercial Bank, have applied for capital supplement tool plans that received regulatory approval. In particular, local banks such as city commercial banks and rural commercial banks continue to release demand for “blood replenishment” through the issuance of capital supplement tools.

Meanwhile, an increasing number of banks are raising funds through targeted placements to supplement core Tier 1 capital. Recently, Hubei Bank announced its targeted placement plan, indicating that it intends to raise 7.614 billion RMB from 53 legal shareholders, all for the purpose of supplementing its core Tier 1 capital to improve its capital adequacy ratio and enhance its capital strength and risk resistance capability.

According to preliminary statistics disclosed on the official website of the National Financial Supervision and Administration, from January 2026 to now, more than 70 local banks, including Chengdu Bank, Shanxi Bank, and Dongying Bank, have been approved to change their registered capital.

Regarding the reasons behind the intensive “blood replenishment” process initiated by small and medium-sized banks since the beginning of the year, Xue Huiru, Director of Financial Institution Ratings at Fitch Ratings Asia Pacific, analyzes that in recent years, both large and medium-sized commercial banks and small and medium-sized banks like city commercial banks and rural commercial banks have accelerated their capital supplementation pace. “This is driven by both rigid regulatory compliance pressures and the practical need to address profitability and asset quality pressures.”

From the perspective of capital adequacy ratio pressure, Jiang Han, a senior researcher at the Pango Think Tank, points out that the capital adequacy ratios of city commercial banks and rural commercial banks are significantly lower than the industry average for commercial banks, and the capital gap is forcing banks to accelerate “blood replenishment.”

According to the latest data disclosed by the National Financial Supervision and Administration, as of the end of the fourth quarter of 2025, the capital adequacy ratio of commercial banks was 15.46%, with the average capital adequacy ratios for city commercial banks and rural commercial banks at 12.39% and 13.18%, respectively, well below the industry average. In contrast, as of the end of the fourth quarter of 2025, the non-performing loan ratios for city commercial banks and rural commercial banks reached 1.82% and 2.72%, higher than the industry average of 1.50%.

Jiang Han further states that from the perspective of regulatory policy promotion, the Financial Supervision Administration is actively promoting risk resolution and guiding banks to enhance their risk resistance capabilities. Meanwhile, the continuous expansion of banking operations and the increase in asset scales also impose higher requirements on capital adequacy ratios, especially under the policy guidance of serving the real economy, where credit issuance requires sufficient capital support.

Against this backdrop, the trend of small and medium-sized banks intensively “replenishing blood” through various channels will continue to emerge in 2026. Guotai Junan Securities, in its latest research report, analyzes that small and medium-sized financial institutions are expected to continue to advance the disposal of high-risk institutions. As of the first half of 2025, the number of corporate entities for village and town banks, rural credit cooperatives, and rural commercial banks decreased by 180, 82, and 72 respectively compared to the first half of 2024, indicating a significant acceleration in risk clearance. On the other hand, they will also increase capital supplementation efforts through multiple channels to enrich the risk disposal resources and means for local small and medium-sized financial institutions.

From the current state of core capital supplementation, Jiang Han points out that most small and medium-sized banks currently rely mainly on capital expansion for core Tier 1 capital supplementation, and during the capital expansion process, the vast majority are invested by local finances and state-owned capital platforms, with the proportion of state-owned shares significantly increasing, a trend that has become more apparent since 2026.

“From the perspective of optimizing the shareholding structure, the entry of state-owned capital rapidly improves capital adequacy indicators and enhances risk resistance capabilities, while alleviating the dilemma of insufficient contribution capacity from original shareholders, opening up new opportunities for local banks troubled by capital shortages and ineffective governance. For regional economic coordinated development, local state-owned capital and banks form a strategic cooperative relationship, allowing banks to better serve the regional real economy, small and micro enterprises, and rural revitalization, while state-owned capital deepens the integration of financial resources and industrial policies through banking platforms,” Jiang Han states.

Xue Huiru also emphasizes that from the perspective of shareholding structure, some small and medium-sized banks have previously faced issues such as uneven qualifications of shareholders and unstable shareholding structures. The large-scale entry of state-owned capital helps optimize and stabilize the shareholding structure. From a corporate governance perspective, if the entry of state-owned capital can bring more standardized governance concepts and strict risk control requirements, it will improve the corporate governance of some banks. From the perspective of regional economic coordination, the entry of state-owned capital will further deepen the binding relationship between banks and local economies, promoting the coordinated development of finance and local economies.

However, Xue Huiru also states that the potential challenges of this deep binding primarily revolve around the core issue of how to strengthen the control of state-owned shareholders while maintaining the independence and marketization of bank operations. This is essential for fundamentally enhancing the internal capital accumulation capability and risk resistance capability of banks.

Looking to the future, Jiang Han points out that bank capital supplementation is transitioning from a single fiscal dominance to a diversified and sustainable system, and local small and medium-sized banks should seize the policy window period. On one hand, they should actively connect with local state-owned capital platforms to seek financial support; on the other hand, they should explore cooperation with insurance institutions to achieve capital linkage through special asset management plans, share swaps, and other means.

(Editor: Yang Jingxin Review: He Shasha Proofreading: Yan Jingning)