According to Xinhua, the China Banking Regulatory Commission is considering accelerating the introduction of bank insolvency regulations. Its official, Yan Jingmin, stated, “In the future, let capital speak. If a commercial bank cannot maintain solvency, it will exit.”
“To allow banks to go bankrupt means the State will not cover the deposits of customers in commercial banks [when the bank goes bankrupt],” added Xinhua. The invisible guarantee by the credit of State will end. The depositors would be compensated by the insurance mechanism established in the bank insolvency regulations.
It was further reported that under the proposed insurance mechanism, the maximum compensation to depositors would be 500,000 yuan. In a panic, Chinese depositors have started to transfer their money in excess of 500,000 to different banks.
Sources:
Xinhua, January 15, 2014
http://news.xinhuanet.com/fortune/2014-01/15/c_126006365.htm
Jinghua Times reprinted by People’s Daily, January 16, 2014 http://finance.people.com.cn/bank/n/2014/0116/c202331-24133060.html