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Time may be right for rate reform: PBOC chief

By Wei Tian (China Daily)

10:05, March 21, 2012

Conditions in China are "basically mature" for interest rate liberalization and the creation of a deposit insurance system, People's Bank of China Governor Zhou Xiaochuan wrote in an article on Tuesday.

"The results of the restructuring of commercial banks have eliminated their financial weakness and laid the key foundation as we move forward to the next round of interest rate liberalization," Zhou wrote in the central bank-operated China Finance Magazine.

Meanwhile, Zhou said, deposit insurance was an important component of the "financial safety net" in risk control and resolution amid the global financial crisis.

He added that the authorities are studying the launch of such a system when conditions mature.

Deposit insurance protects bank depositors, in full or in part, from losses caused if a bank runs into trouble or fails.

Hu Xiaolian, vice-governor of the central bank, told a recent news briefing that the establishment of such a system is a pre-condition for interest rate liberalization, because it would help keep the banking system stable amid intensifying competition.

Zhou did not give a specific timetable for these reforms.

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