China’s banking and insurance regulator is considering lowering the threshold at which insurance companies buy perpetual bonds issued by banks as part of efforts to replenish banks’ capital and defuse financial risks.

The regulator is considering either an appropriate adjustment to the threshold or its complete removal, an official at the China Banking and Insurance Regulatory Commission (CBIRC) said at a press briefing on Friday.

Perpetual bonds are a type of debt with no fixed repayment date. Issuers can either pay interest indefinitely, or until they choose to pay back the debt. Accounting regulations allow perpetual bonds to be treated as equity rather than liabilities on balance sheets.

Currently, insurance companies in China are not allowed to buy perpetual bonds issued by banks with total assets of less than 1 trillion yuan ($142.6 billion).

At the encouragement of policymakers, more banks in China have issued perpetual bonds this year in a bid to top up their capital. In addition, since January the CBIRC has allowed insurance funds to buy perpetual bonds issued by commercial banks with the aim of “serving the real economy, defusing financial risks, and expanding the allocation range of insurance funds.”

Read the full story on Caixin Global later today.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

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