China to launched deposit insurance

SHANGHAI: Apr 2: China launched deposit insurance to help protect bank customers from May 1.

Deposit insurance will ‘protect legal rights of depositors, allow timely prevention and resolution of financial risk (and) preserve financial stability’, according to a statement posted on government’s website.

The long-awaited plan, which was first announced in November through release of draft rules, could help force China’s banks — most of which are state-owned — to operate in line with market principles and be more competitive, analysts say.

Such insurance raises the possibility that Chinese authorities could allow a bank to fail, but analysts widely expect government would bail out troubled lenders to prevent social protests.

Under the rules, the maximum compensation will be ($81,400).

State media say that would cover 99 per cent of China’s depositors.