2014-11-30

Deposit Insurance Draft

This may be implemented quickly in 2015 if the economy doesn't firm up in the fourth quarter...

China Drafts Bank Deposit Insurance in Move to Free Rates
The government will insure deposits of as much as 500,000 yuan ($81,367) per saver at each bank covered, the People’s Bank of China said in a draft rule on its website yesterday. It didn’t give a start date or detail what premiums banks may pay, saying only that they may differ depending on lenders’ management and risk conditions. The PBOC is seeking feedback through Dec. 30.

Deposit insurance removes an implicit government guarantee behind China’s state-controlled banks and clears the way for the nation to deregulate savings rates, increasing competition for funds. That may exacerbate a liquidity shortage at smaller banks and boost their chance of failure as savings shift to the biggest lenders.

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