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Deposit Insurance established by central bank

The People's Bank of China has established a Deposit Insurance Department to prepare for the setting up of a national deposit insurance system.

Wei Jianing, Vice Director of the Development Research Centre under the State Council, told a May 8 financial forum.The deposit insurance system will protect the profits of depositors and help maintain financial stability should a bank suffer a failure and debt payments are needed.

The insurance fees will be supplied by relevant financial organisations and will be paid out to an organisation when it faces crisis or bankruptcy.

Incidents that have led to this move include the Hainan Development Bank closure in June 1998, where the government allocated 3.4 billion yuan to alleviate the crisis, and last year, when Lin Qian, the chairman of the board of Xunda City Credit Cooperative in Zhejiang Province embezzled 60 million yuan, which led to a run on the bank. The central bank then had to move to prop up the bank.