The Rationality And Perfection Of China’s Deposit Insurance System

Banking plays an important role in the contemporary financial system,and the banking sector is also easy to accumulate risk.So most countries have established financial security net,of which deposit insurance system is one important part.For a long time,implicit deposit insurance has protected China from bank runs,because the government will pay to the depositors if a bank is bankrupt.As the economy continues to develop and the reform of the financial system has been deepened,it’s not suitable for China anymore.Currently,with gradual opening of banking sectors and the deepening of financial reform,banking sectors have increasingly became competitive,and some small financial institutions are likely to exit the market or to be integrated.Thus there is an urgent need to introduce the deposit insurance system to avoid the negative effect of financial institution failures,and to effectively inhibit the infectious risk among banks to prevent bank runs,thereby to protect the interests of depositors and maintain financial stability.Explicit deposit insurance system was implemented in May 2015,which was another big move in the process of China’s financial reform.Based on the review and summarize the literature on deposit insurance,first of all,this paper analyzes the reason why China adopts this system at present and whether the environment is good enough.It turns out that China’s macroeconomic performance is perfect and the economic structure is becoming optimized.China’s banking is a global leader in the total bank assets position.The regulatory environment is being improved.The legal system is relatively complete.Therefore in a word,it is available for China to introduce the deposit insurance system currently.But there are still some areas that need improvement and perfection,such as serious banking homogenization,low competition,overlapping and blank field of regulatory system,and the lack of relevant laws and regulations for failed banks to exit orderly,and so on.Based on the backgrounds and design elements of the deposit insurance system in other countries,as well as the full analysis of China’s own institutional environment,the paper explains the deposit insurance system design with Chinese characteristics,from the way of the established process,the purpose of the regulation,the main contents of the regulation,and the consistency of object and content.Then the paper analyzes the background and content of deposit insurance system in the United States and Japan,and pointes out the implications for China.One is that.the functional system-of explicit deposit insurance inplementing agencies is ex ante regulation and compensation-afterwards.The other is that it’s important to establish a legal basis related to the deposit insurance system,so that there is a good interface between the law and the deposit insurance system.Finally this paper pointes out several regulatory focus on the implementation process of deposit insurance.