Top five Chinese banks submit plans to bolster capital ratios

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: China’s five largest banks submitted plans to regulators for raising money after unprecedented lending eroded their capital, according to four people with knowledge of the matter.

Industrial & Commercial Bank of China Ltd, China Construction Bank Corp, Bank of China Ltd, Agricultural Bank of China and Bank of Communications Ltd told the China Banking Regulatory Commission how they can bolster capital ratios after the watchdog evaluated their finances last week, the people said. Lenders were told to estimate potential deficits in 2010 based on their own loan forecasts and capital ratio targets, they said.

Bank shares fell in Hong Kong trading on Tuesday after Bank of China said it’s studying “various options” to replenish capital. The five lenders extended a record 4.7 trillion yuan ($688 billion) of loans in the first nine months, driving China’s economic growth to an annual 8.9% rate in the third quarter even as rivals worldwide reined in credit.

“With China’s pace of credit growth, banks’ capital will be drained very quickly and that leaves little room for cushioning if asset quality worsens,” said Sheng Nan, a Shanghai-based analyst at UOB-Kayhian Investment Co.

Bank of China shares fell 4% in Hong Kong, the biggest drop in two months. Construction Bank slipped 3.4%, the steepest decline since May 13. ICBC and Bank of Communications also slipped. Agricultural Bank isn’t publicly traded.

The fundraising plans submitted by banks are informal and may change, the people said. Spokespeople at China Construction Bank and Bank of Communications declined to comment. Officials at Agricultural Bank and ICBC weren’t immediately available.

Lenders from Japan to the U.K. are raising money after $1.72 trillion of writedowns and credit looses prompted calls from regulators for tougher capital requirements. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, said last week it may seek as much as 1 trillion yen ($11.3 billion) selling common stock.

Lloyds Banking Group Plc, the biggest UK mortgage lender, plans to raise a record £13.5 billion ($22.3 billion) in the country’s largest rights offering. About half of bank losses from the global financial crisis has yet to be revealed, International Monetary Fund Managing director Dominique Strauss-Kahn said on Monday. Banking systems “remain undercapitalised” in many advanced economies, he said.