(Yicai Global) Dec. 3 -- China Construction Bank, one of the country’s ‘Big Four’ banks, is to replenish its Asset Investment Company’s capital with CNY30 billion (USD4.6 billion) as regulators introduce a capital adequacy ratio, or the proportion of capital to risk, of 5 percent for AICs to mitigate risk.

“AICs’ capital adequacy ratio should reach 5 percent by the end of this year, 6 percent next year and 8 percent in 2022, according to the latest regulatory requirements,” the Securities Times’ new media platform Brokerage China reported today, citing an industry insider. Previously there had been no set limit.

The only way to meet this standard is through an increase in capital, the insider said. CCB said yesterday that it will inject CNY15 billion into CCB Financial Assets Investment at first, with the rest to follow later.

Other banks are expected to follow suit, Brokerage China reported.

AICs invest in debt-to-equity assets to help reduce leverage in the real economy. China has five AICs, each run by one of the five biggest state-owned banks. The AIC buys non-performing assets from the bank, and in this way removes the bank from the equation to deal with the struggling company directly.

The five AICs had performed debt-to-equity swaps to the tune of CNY1.4 trillion (USD213 billion) as of the end of last year. Their capital-to-risk asset ratios stood at between 2 percent and 3 percent, the insider said.

CCB Financial Assets posted net profit of CNY287 million (USD43.7 million) at the end of 2019 and total assets of CNY102.7 billion (USD15.6 billion). It has registered capital of CNY12 billion.

Editor: Kim Taylor