HONG KONG - China Merchants Bank (CMB) will raise up to 35 billion yuan ($5.4 billion) in a Hong Kong and Shanghai rights issue, it said on Monday, as a lending spree during the financial crisis drained its capital.

China's sixth-largest bank by market value will issue up to 2.2 shares for every 10 existing shares, it said in a statement posted on the Hong Kong stock exchange.

The subscription price of the rights issue will be at a discount to the market price of both the Shanghai- and Hong Kong-listed shares, and will be determined after consultation with shareholders, it added.

Other banks such as Industrial and Commercial Bank of China , the world's most valuable, have also raised funds during the past two years to meet tougher capital requirements and strengthen their balance sheets.

The fundraising was widely expected by the market, with media reports in Hong Kong saying last week that the bank was expected to raise 10-20 billion yuan.

China Merchants' capital adequacy ratio stood at 10.91 percent at the end of March, just above the regulatory minimum of 10.5 percent. If the lender is defined by regulators as being systemically important, it would be subject to even higher capital requirements.

Its Hong Kong-listed shares closed 0.8 percent higher at HK$18.16 on Monday, while its Shanghai shares slipped 0.23 percent to 12.98 yuan.