In a bid to reinvigorate lumbering banking sector, China released a draft plan to set up a bank deposit-insurance system.
Issued by the Legislative Affairs Office of the State Council, the draft rules directly cover deposits of up to CNY500,000 ($81,395).
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The Deposit Insurance Act (DIA), which is expected to commence in early 2015, will cover the entire 99.63% bank savings of all depositors.
However, the proposed scheme will not include foreign bank branches that are operating in the country, along with the overseas branches of Chinese banks.
In order to pay for the scheme, all banks under the system will have to set aside capital that needs to be collected by the central bank of China.
The capital will also be administered by a deposit insurance fund, which will be allowed to invest in government bonds, central bank notes, as well as financial bonds.
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By GlobalDataAs noted by the draft regulations, in addition to risk rates China’s cabinet will approve standard rates for the insurance program.
Banks and the general public have until 30 December 2014 to comment on the proposal.
