China c.bank drafts rules on deposit insurance system-sources

Friday, 29 Nov 2013 | 12:33 AM ET

BEIJING, Nov 29 (Reuters) - China's central bank has asked commercial banks for feedback on draft rules for a long-awaited deposit insurance system, three industry sources said on Friday, amid a debate on whether the country should adopt the same insurance rate for all banks.

People's Bank of China Vice Governor Yi Gang said earlier this week that China's central bank intends to introduce a deposit insurance system as soon as possible, paving the way for the liberalisation of deposit rates.

The central bank held a meeting with senior executives from commercial banks over the draft rules on the deposit insurance system on Wednesday, the sources said.

"There was a big debate on whether a unified (insurance) rate or differentiated rates," said one source with a major state-owned bank who declined to be named.

PBOC officials were not immediately available for comment.

Reuters reported in June that China will make commercial banks pay into a fund to back the deposit insurance system.

The deposit insurance 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, the sources said.

Beijing is concerned some smaller lenders could come under pressure as banks compete for deposits in a more open regime, and a deposit insurance scheme would help protect depositors.

Earlier this year, the central bank removed controls on lending rates.

(Reporting by Beijing newsroom; Editing by Simon Cameron-Moore)