Insurance News
- Nation to launch deposit insurance plan
Date: 3-Aug-2007 Sources: (Shenzhen Daily)
THE central bank said Thursday it will set up a deposit insurance plan to guarantee savings and protect depositors from bankrupt banks, seeking to instill public confidence in the country's financial system.
The People's Bank of China signed Thursday an accord with the U.S. Federal Deposit Insurance Corp. to cooperate on financial services and deposit insurance.
The central bank, custodian of the world's largest foreign-currency reserves, wants to shield the country's 36.9 trillion yuan (US$4.87 trillion) in local-currency deposits from bankrupt banks and maintain public confidence in the financial industry. The assurance plan comes amid increasing calls by government officials for banks to refrain from lending money to stock market punters and real estate speculators.
'There is increasing need to set up the deposit insurance system in China,'' central bank governor Zhou Xiaochuan said. 'The time is ripe to establish the system because the level of China's financial supervision has been improving and the cost of setting up a deposit insurance system is low,'' he said.
About 6.6 percent, or 1.2 trillion yuan of China's total credits were nonperforming at the end of March, an improvement from the 7.3 percent ratio six months earlier. The country's foreign-currency reserves rose to a record US$1.33 trillion at the end of June.
The Federal Deposit Insurance Corp. is happy to provide all necessary support including technology, financial education and examination system to China, the agency's chairwoman Sheila Bair said.
The government has been drafting the legislation needed for setting up the deposit insurance plan since last year. The plan will be provided for China's domestic banks and hasn't considered including overseas banks that operate in the country, Zhou said, without saying when the program will begin.
In another development, Bohai Bank, the first national lender set up in the country in a decade, has won regulatory approval to open a branch in Beijing. The bank has started hiring for the Beijing outlet and will commence operations later this year.
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