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SCMP Reporter

A plan to insure bank deposits on the mainland has been submitted to the State Council and the scheme is expected to be launched next year, according to a central bank official.
People's Bank of China research chief Zhang Jianhua told a conference in Beijing yesterday  that  the authorities started designing the deposit insurance scheme in 2003.
Mr Zhang said that while the scheme would be financed mainly by participating banks, the deposit insurance agency would have the right to borrow from the central bank or the Ministry of Finance.
He said the scheme would cover about 98 per cent of deposit accounts  on the mainland and 40 per cent of  its total household savings.
At the end of last month, the mainland's yuan-denominated deposits amounted to 45.83 trillion yuan (HK$52.04 trillion).
Under the scheme, financial institutions legally allowed to accept deposits have to buy deposit insurance provided by the Central Deposit Insurance Corp. If an insured institution falls, the  corporation will fully or partly compensate depositors.
Governments in the United States, Europe and Asia, including Hong Kong, have introduced or expanded measures to protect depositors after financial services companies globally posted close to US$1 trillion in credit losses and write-downs on subprime-related investments.
JP Morgan analyst Samuel Chen said it was not necessary to launch the scheme on the mainland, given that big banks were state-backed, while  small and medium-sized lenders had no immediate risk of closure or bankruptcy.
Mr Chen also said weaker city credit co-operatives could be taken over by governments, as had happened in the past.
Guo Tianyong, a banking professor at the Central Financial and Economic University in Beijing, said there had been debates in the past few years on the scheme's design.
Mr Guo said the central bank and the China Banking Regulatory Commission had been competing to be its supervisor. 'The firewall of a deposit insurance system is needed to control the risks from banks amid the deepening financial crisis and a  property market downturn.'
A banking source said a deposit insurance company would not be set up until conditions were right but the scheme could be administered by a deposit insurance fund under the central bank in the initial stages.
The source said the system would insure all bank deposits at the beginning of its operation, before moving on to insuring only part of the deposits.
Mr Guo said some advocates favoured covering up to 100,000 yuan in deposit per account holder.
The US raised the insured amount from US$100,000 to US$250,000 per account holder last month to better protect depositors amid the financial crisis.
Safety cover
Total yuan-denominated deposits on the mainland last month stood at: 45.8tr yuan



Mainland deposit insurance scheme expected to be launched next year