China's central bank has asked commercial banks for their feedback on draft rules for a long-awaited deposit insurance system, Reuters reported today, quoting three industry sources.
China's central bankers have repeatedly forecast the launch of the system recently, which is widely seen as an early step towards the liberation of the interest rate in the country.
Deputy Governor of the People's Bank of China Yi Gang told Xinhua earlier this week that conditions are "ripe" for the debut of such a system that has already adopted in many developed countries.
State-run newspaper the Economic Information Daily said last week the State Council was working on the legislation of the proposed deposit insurance system, and was expected to introduce it as soon as this year.
But Reuters said there is a debate on whether the country should adopt the same insurance rate for all banks. Citing one source with a major state-owned bank, the report said "there was a big debate on whether a unified (insurance) rate or differentiated rates."
The sources said the deposit regime will be compulsory and all commercial banks will pay the same premium rate initially, although banks with better operations will be allowed to pay lower rates in the future.
Mr. Yi Gang told Xinhua that the system will cover a majority of depositors, and benefit the small and medium-sized enterprises. He expected such a scheme can help prevent moral hazard, making banks more cautious in lending.
Source: Reuters
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