China to launch deposit insurance in Q1 as PBOC issues rules for deposit certificates trading
Over the weekend Chinese magazine Caixun Century Weekly was cited by Marketwatch to publish information regarding the new steps that Chinese authorities are taking to liberalize deposit rates, which will ultimately lead to Renminbi convertibility. According to unnamed sources in the PBOC China will set up a deposit insurance fund early next year.
This will happen before a deposit insurance company has been set up and the size mentioned amounted to something between 10 and 15 billion Yuan. Banks will be paying insurance premium of in the vicinity of 0.015 – 0.02%. According to the article, in an effort to maintain the small banks’ competitiveness they will not be required to pay up in the near term.
In an official announcement the PBOC stated on Sunday that it has finished the framework under which certificates of deposit can be traded on the local inter-bank market. They will be accessible for trading to banks, funds and other financial companies and will sport for a more liquid funding market which will ultimately lead to a more efficient distribution of funds through the system.
According to the framework released by the PBOC the main issuers of the certificates will be depository financial institutions and they cannot be less than 50 million Yuan in value. The institutions will be reporting directly to the central bank how much they are intending to issue every given year and the trading of the instruments will be conducted within the inter-bank market.
The Chinese authorities are proving that they are quite ambitious in their preparation for a fundamental shift that Yuan exchange rates liberalization is. LeapRate will stay tuned to further developments in the area, so stay tuned.
To read the full article by Marketwatch visit their website here.
For a link to the PBOC statement click here.