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BIZCHINA / Center
China, US cooperate on deposit insurance
By Song Hongmei (chinadaily.com.cn)
Updated: 2007-08-03 11:57
People's Bank of China governor Zhou Xiaochuan signed a memorandum of
understanding with US Federal Deposit Insurance Corp (FDIC) Chairwoman
Sheila Bair yesterday to cooperate on promoting a deposit insurance
system for financial institutions in China.
China is considering setting up a deposit insurance company and will use
the FDIC's experience as a reference, said Zhou, who did not give a
specific timetable.
According to the memorandum, the central bank will cooperate with the
FDIC in deposit insurance as well as financial services and financial
management.
The time is ripe for China now to establish a deposit insurance system,
as the country has?further opened up its financial sector and improved
its supervision, said the central bank in a statement released yesterday.
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Zhou said a deposit insurance system would promote development in China's
financial market by boosting the confidence of those who put their money
into smaller, local banks.
The current lack of deposit insurance in China is mainly due to the fact
that most banks in the country are State-owned, and offer?guarantees to
depositors, analysts said.
Deposit insurance has been suggested by policy makers to protect
deposits, in full or in part, in the event of banks' inability to pay
deposits.
Established during a Great Depression banking crisis in the 1930s, the
FDIC insures customers' deposits with a US$51 billion fund. Coverage
includes up to US$100,000 for each depositor and US$250,000 in retirement
accounts.
Deposits in foreign branches of US banks, however, are not covered by the
FDIC.
The FDIC also assesses insurance fees to banks based on risk levels.
Currently, nearly 100 countries have official deposit insurance systems.
(For more biz stories, please visit Industry Updates)
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