SHANGHAI—China Everbright Bank Co.'s long-delayed initial public offering plan has been approved by China's securities regulator, clearing the way for the bank to raise up to 20 billion yuan ($2.9 billion) from the offering in Shanghai next month, said person familiar with the situation.

The mid-sized bank's IPO, which is set to be China's second-largest this year after that of Agricultural Bank of China Ltd. earlier this month, has been delayed since 2008 because of the effects of the global financial crisis, and was further delayed this year by AgBank's dual listings in Shanghai and Hong Kong that raised $19.23 billion.

Concerns that demand for Everbright's IPO will be weak following the AgBank deal were played down by analysts, who said China's stock market will have recovered in August following a 27% slump in the first half, while the bank has decided to sell 3 billion shares to cornerstone investors.

"The market will be favorable, if Everbright Bank launches its IPO in August as planned," said Li Bin, an analyst at Guolian Securities Co.

Everbright Bank said last week it would sell up to 6.1 billion yuan-denominated A shares ahead of its Shanghai listing. An overallotment option could raise the size of the offering to 7 billion shares, according to its preliminary prospectus.

The bank is the latest lender to seek fresh funds in the equities market to meet stricter capital requirements following last year's unprecedented lending binge.

According to Everbright Bank's preliminary prospectus, its capital adequacy ratio (CAR) rose to 10.39% at the end of last year after it raised 11.5 billion yuan through a private placement in August. But the person familiar with the situation said Monday its CAR has fallen below the 10% minimum requirement set by the country's banking regulator since then.

Apart from the share sales from AgBank and Everbright, Bank of China Ltd. has said it plans a 60 billion yuan rights issue in Shanghai and Hong Kong and China Construction Bank Corp. is planning a 75 billion yuan rights issue in both markets.

Everbright Bank said it has hired China International Capital Corp., Shenyin & Wanguo Securities Co. and China Jianyin Investment Securities Co. to underwrite the Shanghai IPO.

The China Securities Regulatory Commission couldn't immediately be reached for comment.

—Wynne Wang contributed to this article.

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