Core Viewpoint - The secondary capital bond market for commercial banks is experiencing a rare divergence, with large banks redeeming old bonds while some small and medium-sized banks choose not to redeem, highlighting the varying capital adequacy levels and operational conditions among banks [1][2][3]. Group 1: Large Banks' Actions - Major banks like Bank of China and China Construction Bank have announced full redemptions of their secondary capital bonds, optimizing their capital structure by replacing old debt with new [2][3]. - As of September 2025, the 10-year government bond yield remains around 1.8%, while the interest rates on bonds issued in 2020 are significantly higher, ranging from 4% to 4.73%, prompting banks to redeem high-interest old bonds to reduce financing costs [2][3]. Group 2: Small and Medium-Sized Banks' Decisions - In contrast, several small and medium-sized banks, such as Fuxin Bank and Nanchang Rural Commercial Bank, have opted not to exercise their redemption rights, indicating potential capital adequacy issues [3][4]. - These banks face pressure as their capital adequacy ratios approach regulatory limits, with Nanchang Rural Commercial Bank reporting a capital adequacy ratio of 10.34% as of the end of 2024, nearing the regulatory threshold [4]. Group 3: Regulatory Response - Regulatory bodies are responding to the trend of non-redemption by requiring banks to report any decision not to redeem secondary capital bonds within 24 hours, indicating a recognition of the potential risks associated with these decisions [5]. - This regulatory move aims to mitigate information asymmetry and prevent localized risks from spreading, as non-redemption could raise market concerns about a bank's operational health [5]. Group 4: Future Strategies for Small Banks - Small and medium-sized banks are encouraged to diversify their capital replenishment strategies, including the use of perpetual bonds and other methods to strengthen their capital base [6]. - Improving equity structures and attracting strategic investors or local government funds are also suggested as effective ways to bolster capital [6]. - The ongoing divergence in the secondary capital bond market reflects deeper structural changes in the banking industry, with a pressing need for small banks to enhance their growth capabilities and develop unique business models to survive [6].