This year, at least seven city commercial banks have secured regulatory approval for capital increases, with an additional four announcing plans to raise capital through share issuances or capital instruments. Yi-Fu Fu, a special researcher, pointed out that these capital injections are driven by a combination of factors including capital pressure, stricter regulatory requirements, business expansion, and the need to enhance risk resilience. According to data from the National Financial Regulatory Administration, in the fourth quarter of 2025, city commercial banks recorded the lowest capital adequacy ratio among all types of commercial banks, falling below the industry average of 15.46%.
In this round of capital raising, local state-owned entities have emerged as the primary investors. Yuan Shuai, Deputy Director of the Investment Department at the China Urban Development Institute, noted that state-owned capital participation helps prevent regional financial risks while strengthening local governments' ability to guide financial resources. However, Wenxi Bai, Deputy Chairman of the China Enterprise Capital Alliance, cautioned against potential issues such as excessive intervention and the lack of exit mechanisms following state capital involvement.
Concentrated Capital Increases for City Commercial Banks
On March 7, Bank Of Chengdu Co., Ltd. (601838.SH) announced that it had received approval from the Sichuan Financial Regulatory Bureau to increase its registered capital from 3.736 billion yuan to 4.238 billion yuan. In addition to Bank Of Chengdu Co., Ltd., six other city commercial banks have received approvals for capital increases this year, based on publicly disclosed regulatory information.
On January 4, the Xinjiang Financial Regulatory Bureau approved an increase in Xinjiang Bank’s registered capital from 7.906 billion yuan to 12.223 billion yuan. On the same day, the Sichuan Financial Regulatory Bureau approved Ya'an Commercial Bank to raise its capital by 957 million yuan, bringing it to 2.857 billion yuan. On January 6, the Qinghai Financial Regulatory Bureau approved Qinghai Bank to increase its capital by 648 million yuan, raising it to 3.205 billion yuan. On January 7, the Shandong Financial Regulatory Bureau approved LinShang Bank to raise its capital by 640 million yuan, bringing it to 5.073 billion yuan. On January 21, the Shandong bureau also approved Dongying Bank to increase its capital by 447 million yuan, raising it to 4.843 billion yuan. On February 10, the Shanxi Financial Regulatory Bureau approved Shanxi Bank to adjust its registered capital from 25.894 billion yuan to 27.309 billion yuan.
Several other city commercial banks have announced plans to replenish capital through share issuances or capital instruments. On January 4, the Hebei Regulatory Bureau approved Baoding Bank’s plan to issue 250 million shares. On January 9, the Guangdong Financial Regulatory Bureau approved Guangzhou Bank to issue capital instruments of up to 10 billion yuan. On January 23, BANKOFJIUJIANG (06190.HK) announced that it had received letters of intent from the Jiujiang Municipal Finance Bureau and Industrial Bank Co.,Ltd. (601166.SH) to subscribe to its domestic shares. On February 10, Hubei Bank disclosed in a private placement report that it had completed a定向增发 of 1.8 billion shares, raising 7.614 billion yuan and increasing its registered capital to 9.412 billion yuan.
Among all commercial banks, city commercial banks face relatively greater pressure to replenish capital. Recent data from the National Financial Regulatory Administration shows that in the fourth quarter of 2025, the capital adequacy ratios for city commercial banks, private banks, rural commercial banks, joint-stock banks, state-owned banks, and foreign banks were 12.39%, 12.55%, 13.18%, 13.58%, 18.16%, and 20.36%, respectively. City commercial banks had the lowest ratio, below the industry average of 15.46%.
The primary reasons for capital increases among city commercial banks include capital pressure, tightening regulations, business expansion, and the need to bolster risk resilience. Fu explained that on one hand, city commercial banks generally face capital adequacy pressure and must meet stricter regulatory requirements to enhance their ability to withstand risks, particularly amid economic fluctuations affecting asset quality and non-performing loans. On the other hand, rising demand for business expansion, credit distribution, inclusive finance, and regional services requires sufficient capital to support scale and structural optimization. Additionally, some banks with fragmented ownership structures and inefficient governance can use capital injections to optimize equity and improve governance, laying a foundation for long-term stable development and better service to local economies.
Local State-Owned Capital Participation
Notably, local state-owned entities have played a major role in this round of capital injections. Among the banks mentioned, Xinjiang Financial Investment Group subscribed to 3.777 billion shares in Xinjiang Bank; the Ya'an Economic and Technological Development Zone Finance Bureau participated in Ya'an Commercial Bank’s capital increase; Western Mining Co.,Ltd. (601168.SH) and Qinghai Transportation Holding Group invested in Qinghai Bank; the Shanxi Provincial Department of Finance injected capital into Shanxi Bank, acquiring a 5.18% stake; 53 corporate shareholders participated in Hubei Bank’s private placement, 35 of which were newly added state-owned entities; and Industrial Bank Co.,Ltd. and the Jiujiang Municipal Finance Bureau expressed intent to subscribe to BANKOFJIUJIANG’s domestic shares.
According to the "Small and Medium-Sized Bank Development Report 2025" released by the Shanghai Finance and Development Laboratory, since 2024, over 30 city commercial banks have undergone capital increases, with various state-owned entities, particularly local ones, becoming the primary investors. The report highlights that state capital participation not only strengthens banks' capital bases and enhances market confidence but also improves corporate governance through board appointments and other channels, helping to standardize related-party transactions and mitigate risks such as improper benefit transfers.
Yuan emphasized that as key financial hubs supporting local economies, the stability of city commercial banks directly affects financing for small and micro enterprises and the progress of infrastructure projects. When these banks face capital pressure, state capital intervention can quickly reinforce risk defenses and prevent regional financial instability. It also enhances local governments' ability to steer financial resources toward key industries and public welfare projects, ensuring alignment between financial resources and regional development strategies.
Bai acknowledged that state capital involvement can promote governance optimization, business transformation, and the establishment of long-term capital replenishment mechanisms, potentially reshaping regional financial ecosystems. However, he warned against excessive intervention and the absence of clear exit strategies. He suggested that city commercial banks should combine capital replenishment with institutional reforms to gradually transition from relying on external support to achieving self-sustaining growth.
Yanxi Chen, Chief Strategy Officer at Guangzhou Siyide, analyzed that as some city commercial banks shift from "privately led" to "state-controlled," balancing strengthened oversight with market vitality and avoiding excessive administrative interference will be crucial for future governance.