PBOC unveils deposit protection scheme with 500,000 yuan coverage
Move seen as precursor to further financial reforms, including an end to interest rate controls and letting market forces dictate which lenders fail
In a major step towards financial sector reforms, the People's Bank of China has proposed a coverage ceiling of 500,000 yuan (HK$630,850) for mainland bank depositors.
Under a draft proposal issued yesterday on the nation's maiden deposit insurance scheme, depositors will be covered for up to 500,000 yuan of deposits.
The compensation for deposits beyond that amount will come from selling the bank's assets.
The proposed 500,000 yuan maximum payout for any depositor at any bank would protect the deposits of 99.63 per cent of mainland depositors, said the consultation document posted on the website of the State Council's Legislative Affairs Office.
Foreign banks' mainland units and mainland banks' overseas units are not covered by the scheme.
The mainland had 49.9 trillion yuan of personal deposits and 53.7 trillion yuan of corporate time and demand deposits in October, according to the PBOC.
"To establish and regulate a deposit insurance scheme so that depositors are protected and financial risks can be reduced and financial stability maintained, the PBOC has drafted the rules for consultation," the official statement said.