BEIJING, April 1 -- China's central bank will set up a separate account to manage the bank deposit insurance fund until an agency is established, the central government said on Wednesday.

The People's Bank of China (PBOC) will manage the system until an independent agency is established, according to a statement posted on the website of the State Council, China's Cabinet.

The Chinese government announced on Tuesday bank deposit insurance legislation will come into force on May 1. At that time, all financial institutions will be required to pay insurance premiums into a fund which will return savers' deposits if their bank suffers insolvency or bankruptcy.

The scheme is considered a precondition to freeing up deposit rates -- the last step in interest rate liberalization.