SHANGHAI: China yesterday moved closer to introducing deposit insurance, a long-awaited economic reform seen as a way to impose greater market discipline on the country’s banks.
The People’s Bank of China (PBoC), the central bank, published draft rules for deposit insurance but did not say when they would be implemented.
The State Council, or cabinet, has set a one-month period to seek public comment on the rules, the official Xinhua news agency said. Other state media said the scheme could be implemented early next year. Deposit insurance was aimed at “protecting the legal rights and interests of depositors, promptly preventing and resolving financial risk and protecting financial stability,” according to the draft rules posted on the website of the PBoC.
Analysts said the move would force China’s banks, the vast majority of them state-owned, to operate more in line with market principles and to be more competitive.
“The deposit insurance plan will require banks to shoulder their own operational risks and depositors will probably choose to put their money in banks with greater safety for deposits,” Liu Dongliang, a senior analyst for the financial markets department of China Merchants Bank, said.
The plan raises the possibility that China might even allow a bank to collapse, a prospect long ruled out by analysts on expectations of a government rescue. AFP
