Design Of China's Deposit Insurance System Under New Banking Regulation

With the development of the reform, hazards in the finance system are relieving gradually. Problems about both stability of bank system and protection of savers increasingly become a public focus. The common way abroad is to set up the Deposit Insurance System (DIS) and regard the DIS as an important approach of finance Regulatory. So it is necessary to build China's DIS according to foreign practice. This strategy conforms to not only the international convention but a certainty choice for banks in China. In 2003, State Council of the People Republic of China have decided to set up China Banking Regulatory Commission(CBRC); Standing Committee of National People's Congress discussed and issued The Banking Regulatory Act. Therefore, under the new finance regulatory in which the People's Bank of China(PBC) carries out the monetary policy and the CBRC performs the function of Regulatory, the DIS will both coordinate the central bank's monetary policy which can smooth the monetary conduction mechanism and make the banks become real market sectors and avoid their moral hazards. This article discusses the issue from two points of view which are the regulatory and the market sectors. It comprises three sections:The first section states the theory basis of the DIS. During the reform process,the bank system of China accumulates a great deal of low quality assets due to the institutional factors ,however,theinterior defect of finance system make it possible that the crisis bursts out.Under the circumstance of asymmetric information,the "infection effect"of single bank's bankrupt will cause a large Conventional saving theory shows that deposit cannot convert to unfaltering invest because of the absence of protection.As a result,the economy growth is limited to a low level.After applying the DIS,deposit will convert to stable invest due to the powerful guarantee and economy will achieve equilibrium at a high level.The second part introduces the operation mechanism of DIS abroad,such as America,Britain,Japan and Hong Kong,It mainly states the dynamic development of the DIS in these contries and provides experience for China by international comparison.The third part demonstrates the relevant issue about instituting the DIS and the necessity of it,as well as the existing defect in the banking industry.The last section mainly discusses how to design the mode of China's DIS. Under the new management in which the PBC carries out the monetary policy and the CBRC performs the function of regulatory, the article discusses the DIS's target from two points of view which are the regulatory and the market sectors. Then, it analyzes the targeting orientation and function, institutional orientation, insurance range, insurance pattern, premium rate and standard of compensation of the China's DIS.