Deposit insurance system 存款保险制度
A deposit insurance system protects depositors from losing their money in case a bank goes bankrupt. It functions about the same as insurance for individuals in that banks regularly contribute to a fund, from which money will be drawn to cover depositor losses if a bank cannot repay its debts. The system allows insolvent banks to be wound down in a controlled and orderly way with minimum impact on other financial institutions, thus keeping a failure from wreaking havoc on the financial market. This system is widely viewed as a prerequisite for a liberal interest rate regime that allows banks to decide their own deposit and lending interest rates. The central bank has been working for years to establish a deposit insurance system. A draft plan it announced in late November offered protection of up to 500,000 yuan for every person per bank.
In the news
The People’s Bank of China published a draft plan on November 30 for establishing a deposit insurance system that will cover more than 99 percent of all deposits with banks in the country. It will apply to both yuan and foreign-currency denominated deposits and cover all deposit-taking banking financial institutions in the country.