Capital Replenishment and Credit Supply: Empirical Evidence from Banks’ Issuance of Perpetual Bonds

Hao Gao ()
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Hao Gao: Jinan University, School of Economics

A chapter in Proceedings of the 2025 3rd International Conference on Digital Economy and Management Science (CDEMS 2025), 2025, pp 429-435 from Springer

Abstract: Abstract Commercial banks are crucial in serving the real economy, with bank capital as the foundation. However, strict regulations and the need to bring off- balance-sheet activities back on-balance-sheet pose challenges. This makes it hard for banks to achieve “regulatory stability” and “steady growth” simultaneously, impeding monetary policy transmission. In 2019, the central bank supported banks in issuing perpetual bonds to replenish other Tier 1 capital and created the CBS tool. Using data from 2015–2022 on banks’ perpetual bond issuance and bank and enterprise financial reports, and applying the multi-period difference-in-differences method, this paper finds that banks’ issuance of perpetual bonds significantly boosts bank credit growth and corporate lending. The effects are more evident for weaker banks and stronger enterprises.

Keywords: Bank perpetual bond; Capital replenishment; Bank credit; Enterprise loan (search for similar items in EconPapers)
Date: 2025
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DOI: 10.2991/978-94-6463-770-0_49

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