MNI reports (on Monday) that the establishment of a deposit insurance scheme for China’s banking system could be delayed until next year because of ongoing turf wars between various regulators.
- A delay could mean that the broader plan to liberalize China’s interest rate regime may be pushed back
- A deposit insurance scheme has been identified as a key step along the path to a fully liberalized interest rate regime
- Insurance would give some level of protection to depositors “before the PBOC removes the ceiling on deposit rates and theoretically ushers in a new phase of bank competition”
- Further delay could threaten other reform plans … “the removal of the government-mandated ceiling on deposit rates is considered one of the most important — and risky — steps towards Beijing’s goal of letting the market play a “decisive” role in resource allocation”
