Core Viewpoint - The secondary capital bond market for commercial banks is experiencing a rare divergence, with large banks actively redeeming old bonds while some small and medium-sized banks are opting not to redeem, highlighting the varying capital adequacy levels and operational conditions across the banking sector [1][3][6]. Group 1: Market Dynamics - Large banks such as Bank of China and China Construction Bank have fully redeemed billions in secondary capital bonds, indicating a strategic move to optimize their capital structure [3][4]. - In contrast, smaller banks like Fuxin Bank and Nanchang Rural Commercial Bank have chosen not to exercise their redemption rights, raising concerns about their capital adequacy and operational health [1][4][5]. Group 2: Regulatory Environment - Regulatory bodies are responding to the trend of non-redemption by proposing that banks must report any decision not to redeem bonds within 24 hours, signaling a focus on maintaining market stability and transparency [6][8]. - The introduction of a rapid reporting mechanism aims to mitigate potential risks associated with non-redemption, which could lead to increased scrutiny of the banks' financial health [6][8]. Group 3: Capital Adequacy Challenges - Many small and medium-sized banks are facing pressure on their capital adequacy ratios, with some nearing regulatory limits, which complicates their ability to redeem old bonds without risking their capital positions [5][7]. - The declining effectiveness of existing bonds as capital supplements over time adds to the urgency for these banks to find alternative capital-raising strategies [5][7]. Group 4: Strategic Responses - Small and medium-sized banks are encouraged to diversify their capital sources, including the issuance of perpetual bonds and engaging in equity financing to strengthen their capital bases [7][8]. - A focus on regional or sector-specific strategies may help these banks avoid the pitfalls of homogeneous competition and enhance their capital efficiency [8].