Chinese banks are preparing to raise tens of billions of dollars in fresh capital to meet tightened regulatory requirements following an unprecedented expansion of new loans this year, according to people familiar with the matter.

The China Banking Regulatory Commission, the banking regulator, has warned it will refuse approvals for business expansion and limit banking operations if the large state lenders do not meet the capital adequacy requirements.

The amount of capital raised by China's 11 largest listed banks to meet the more stringent standards will total at least Rmb300bn ($44bn), according to estimates from BNP Paribas.

China's banking regulator “is definitely aware of potential asset quality issues and is pushing for higher capital adequacy requirements to offset deterioration in asset quality”, said Dorris Chen, a BNP Paribas analyst.

Following government orders to prop up the domestic economy in the face of the global financial crisis, Chinese banks extended a record Rmb8,920bn in loans in the first 10 months of the year, up Rmb5,260bn from the same period a year earlier.

The surge in new loans resulted in a record fall in the banks' core capital adequacy ratios from just over 10 per cent at the end of last year to 8.89 per cent by the end of September, a decrease that has worried the regulators.

Bank of China has been the most aggressive lender this year, adding more than Rmb1,000bn in new loans in the first half of the year alone. The bank told the Financial Times yesterday that it is “actively considering various options to replenish capital to achieve its sustainable development”.

BNP Paribas estimates BOC would have to raise Rmb137bn to maintain its capital adequacy rates into next year and beyond.

Credit Suisse estimates that Bank of Communications, the country's fifth-largest lender by assets, in which HSBC holds close to 20 per cent, will have to raise about Rmb27bn over the next year.

China Minsheng Bank raised $3.8bn in an initial public offering in Hong Kong last week while Industrial Bank and China Merchants Bank plan to raise Rmb18bn and Rmb22bn respectively through rights issues.

The banking regulator said the majority of Chinese commercial banks meet current capital adequacy requirements but will have to review their asset quality and ensure they continue to meet regulatory requirements.

The banks will be able to raise money through a variety of methods, including capital injections from existing shareholders such as state holding companies or selling new shares to the public. The capital raising is unlikely to dilute the state's ownership of the banks.