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China central bank ready to unveil deposit insurance

(Xinhua)

09:57, June 08, 2013

BEIJING, June 7 (Xinhua) -- China's central bank said Friday that a long-awaited deposit insurance system is ready to be launched, as conditions are ripe and a consensus has been reached within the government.

The system will help "increase the flexibility of commercial banks in terms of financial business innovation and risk control," the People's Bank of China (PBOC) said in its 2013 financial stability report released Friday.

The report said an implementation plan has been studied and verified.

However, the report does not provide details on the system, such as whether the deposit insurance institution will be a private or government-run entity.

Deposit insurance programs protect bank depositors by guaranteeing that a certain level of deposits can be paid, even if a commercial bank goes bankrupt and cannot pay them.

In the report, the PBOC expressed confidence in the country's economic development, but also highlighted concerns about emerging problems.

"The country's economy is in a favorable condition to maintain sustainable and healthy development," it said, adding that the economic situation will be more complicated in 2013 and macro-economic regulation will face certain difficulties and challenges.

It warned about excess production capacity in some domestic industries, as well as resource and environmental constraints and financial system risks.

Internationally, there are emerging uncertainties haunting the global economy as a result of loosening monetary policies implemented by some major economies that will intensify cross-border capital flows, push up global commodity prices and inflate asset bubbles.

The central bank vowed to improve the formation mechanism for the yuan exchange rate, increase its two-way fluctuation and maintain basic stability.

It also said it will move ahead with interest rate liberation at a gradual pace.

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