As part of its strategy to minimise financial risks, the mainland will set up a deposit insurance scheme for banks, starting with small and medium-sized concerns, according to People's Bank of China governor Dai Xianglong. Speaking at the three-day China Business Summit in Beijing organised by the World Economic Forum, Mr Dai said the central bank had been looking into similar experiences in the United States and other countries to see how they could be adapted to suit the mainland banking system. 'We are definitely going to implement the scheme and are in the process of drawing up the plan, although I know Hong Kong does not have a similar plan. 'We will start a trial on a gradual basis with small and medium-sized banks,' Mr Dai said, adding that the date of implementation depended on how fast the plan was drawn up. The revelation comes as the central bank aims to approve the establishment of another 100 new commercial banks with shares held by local governments and enterprises across the country in the next few years. So far, it has given licences to more than 100 local banks, most of which came into being as the result of mergers of urban financial co-operatives in the big cities. Analysts said there was a need to protect depositors against bank collapses given the rapid increase in the number - and role - of smaller banks in the reform of the banking system. Mr Dai hinted the four big state-owned banks - Agricultural Bank of China, Bank of China, China Construction Bank and Industrial and Commercial Bank of China - might be exempted from the scheme. 'The state-owned commercial banks have government credit backing and absorb about 800 billion yuan [about HK$744.48 billion] in deposits each year, so liquidity is not a problem,' he said. Thomas Macy, Price Waterhouse mainland financial services practice chairman, said: 'The scheme works well when it is aimed at small depositors as big depositors are usually sophisticated enough to understand risks.' Mr Dai said a trial to get banks to reclassify loans into five categories according to international standards would start in Guangdong at the end of the month. 'We will use international standards to reclassify loans into five types as normal, special mention, sub-standard, doubtful and loss, which will in a timely fashion and accurately reflect the quality of assets of commercial banks.' This is one of three important tasks the central bank had to carry out this year to strengthen its supervisory and regulatory oversight of a wobbly banking system to avert a financial crisis. In addition, it must set up a regional central bank network to remove administrative intervention of local governments in banking and finance, and it must apply prudential management principles established by the Basle-based Bank for International Settlements to domestic institutions. Mr Dai said plans were afoot to allow banks to raise the ratio of provisions for bad debt, from this year's 1 per cent.