China is to adopt a deposit insurance scheme to better protect savers and free up interest rates.
The Legislative Affairs Office of China’s State Council published a set of draft regulations containing 23 articles on its website on Sunday to solicit public opinion until December 30, 2014.
Financial institutions will be required to pay insurance premiums to a special fund and an agency will be set up to manage the money. Domestic banks’ overseas branches and foreign banks’ China branches are exempt.
The fund will pay maximum compensation of 500,000 yuan (81,500 U.S. dollars) per depositor if a bank suffers insolvency or bankruptcy.
The People’s Bank of China (PBOC), the country’s central bank, said 99.6 percent of Chinese depositors saved less than this sum.
Banks will cover losses more than 500,000 yuan with their own assets, according to the regulations.
The new agency will make detailed rules on how to manage the fund and set insurance premium rate for different banks based on how riskily they run their business.
Well-informed sources told Xinhua that the scheme will likely be implemented as early as at the beginning of 2015.