(Yicai) Nov. 14 -- The initial public offering pipeline for Chinese banks has been stalled for nearly three years, with several small and mid-sized lenders unable to go public due to financial and regulatory challenges.

Seven banks await listing approval, with only Hubei Bank and Jiangsu Kunshan Rural Commercial Bank under active review, while 15 others are still in the pre-IPO guidance stage. Three lenders pulled their applications earlier this year.

The Shenzhen Stock Exchange stopped its review of Maanshan Rural Commercial Bank in July after the bank voluntarily withdrew. Earlier this year, Bozhou Yaodu Rural Commercial Bank, also based in Anhui, and Jiangsu Haian Rural Commercial Bank similarly retracted their applications.

Many small and medium-sized banks face challenges such as high non-performing loans, limited profitability, and complex regulatory hurdles. IPOs, a key source of capital replenishment, appear increasingly out of reach for them. Bank of Lanzhou, the last lender to go public in the Chinese mainland in January 2022, raised CNY2.03 billion (USD319 million).

Concerns over poor business performance and asset quality among smaller banks are significant reasons for the IPO freeze, banking industry experts told Yicai. Regulators have also tilted the priority for listings toward the technology and innovation sectors, they noted.

To lessen the obstacles in the way of bank listings, regulators could ease shareholder requirements, streamline the approval process, and help small and mid-sized lenders attract qualified investors, according to Dong Ximiao, chief researcher at Merchants Union Consumer Finance.

Dong also proposed allowing these banks to issue preferred stock, perpetual bonds, convertible bonds, and tier-2 capital bonds. Capital-boosting bond sales by banks with distinctive business models could also be considered, he said.

Zeng Gang, director of the Shanghai Financial and Development Laboratory, recommended that regulators explore differentiated requirements while maintaining prudent oversight, proposing a moderate relaxation of capital constraints for smaller banks to better support local economies.

Editors: Tang Shihua, Emmi Laine