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China set to launch deposit insurance

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Financial Times, 28/11/14
Gabriel Wildau in Shanghai
 
China is poised to launch a nationwide deposit insurance scheme, a crucial step towards removing an implicit guarantee that the government will not allow banks to fail.
 
The long-awaited plan will insure deposits up to a maximum limit of Rmb500,000 ($81,336), a threshold that will fully cover about 98 per cent of depositors in Chinese commercial banks, local media reported on Friday, citing unnamed central bank officials.
 
The rollout of deposit insurance, scheduled for January, will also help pave the way for authorities to deregulate bank-deposit interest rates.
 
Deregulation is expected to unleash competition among banks as they use higher deposit rates to lure customers. Deposit insurance will mitigate the risks of deregulation by protecting most depositors from losses if their bank raises rates too aggressively and goes bankrupt.
 
 
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