Insurance system to improve banking

The introduction of the bank deposit insurance system in China will cause significant changes in the banking sector, increasing big banks' savings and putting small banks at a disadvantage. The move also signifies a fundamental change in the regulatory mentality.

Earlier, the government was obliged to keep all banks safe and solvent, but the new deposit insurance system will allow the market to have a bigger say in deciding the future of the banks.

On Sunday, the government issued draft rules on the crucial bank deposit insurance system, which will directly cover deposits of up to 500,000 yuan ($81,433) if banks go bankrupt. Such a scheme will protect 99.63 percent of Chinese depositors, the central bank said.