China's largest State-owned commercial bank by assets announced on Thursday it will invest 12 billion yuan ($1.75 billion) to set up a wholly owned asset management company specialized in debt-to-equity swaps.

The board of directors of the Industrial and Commercial Bank of China Ltd approved the proposal, which needs regulatory approval.

The others of the "Big Five" State-owned commercial banks are also planning to establish their own asset management arm, said people with knowledge of the matter.

Last month, Agricultural Bank of China Ltd announced that its board of directors had approved the proposal to set up a wholly owned subsidiary, ABC Asset Management Co, in Beijing with a registered capital of 10 billion yuan.

"After the subsidiaries are established, they will raise funds for debt-to-equity swaps from qualified institutional and individual investors. The sources of money will include insurance funds, pension funds and industrial investment funds that can make long-term investments," said Zhang Minghe, who leads the debt-to-equity swap business of China Construction Bank Corp.