China’s forthcoming implementation of Total Loss Absorbing Capacity TLAC rules is shaping up to be one of the biggest developments the international bond markets will witness this decade and for the central government, potentially one of its greatest going global’ tests.
At issue is how the country’s big four banks will be able to raise all the capital they need, given that China’s domestic bond market remains too shallow to absorb it all. The quartet has also not cultivated a deep international investor base to compensate.
The net result may be wider pricing and an issuance shock, unless the government ups the regulatory incentives.
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