|China Launches Draft Rules for Insurance of Bank Deposits|
China issued draft regulations to introduce a bank deposit insurance system for the first time, the latest in a series of steps to fully liberalise interest rates and allow banks to compete on a wholly commercial basis.
The draft rules, issued by the Legislative Affairs Office of the State Council, China’s cabinet, directly cover deposits of up to 500,000 yuan (US$81,395), according to a notice published on the website of the People’s Bank of China.
The Deposit Insurance Act (DIA), which state media reports have said could start in early 2015, will cover the entire bank savings of 99.63 per cent of all depositers, China’s cabinet said in a separate explanation. Banks have been given until December 30 to comment.
China has considered insuring savers’ deposits for around two decades, but the plans took on new urgency in the past year as the country sought to deepen economic reforms that included removing state controls on interest rates.
Chinese rules allow banks to pay savers no more than 1.2 times a benchmark deposit rate fixed by the central bank.
“Establishment of a deposit insurance system will help to better protect the interests of depositors and maintain public confidence in the financial markets and the banking system,” the State Council said.
Foreign bank branches operating in China, along with the overseas branches of Chinese banks, will not be covered by the scheme, the draft document said.
All banks under the system will be required to set aside capital, to be collected by China’s central bank and administered by a deposit insurance fund, to pay for the scheme.
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Published on our website on Dec.04, 2014