BEIJING, Aug. 4 (Xinhua) -- Sheila C. Bair, chairman of Federal Deposit Insurance Corporation (FDIC), has encouraged China to set up a deposit insurance system to ensure the stable development of the country's banking system.

    "Chinese banking industry is developing into the market-based banking system and this transition requires China to set up a deposit insurance system, which helps promote market discipline," Bair said during his recent China visit.

    According to Bair, the market-based banking industry is a stable system that can protect depositors' money, and in particular, help strengthen the ability of smaller and medium sized as well as rural financial institutions to attract more deposit and funding.

    China shall set up strong independent agencies, create additional supervisory tools to keep banks safe and sound, Bair said.

    The deposit insurance system, which involves setting up deposit insurance institutions, aims to protect depositors against financial losses caused by bankruptcy of financial institutions through a risk compensation mechanism.

    Bair met with Chinese financial and political leaders over the past two weeks, and stop in Beijing and Shanghai, and Hunan and Shanxi provinces.

    Zhou Xiaochuan, governor of the People's Bank of China, and Bair signed a memo on strengthening cooperation in financial service and deposit insurance, promoting the sound operation of China's banking sector, and enhancing the exchanges of personnel and information.

China, U.S. cooperate on deposit insurance

    BEIJING, Aug. 3 -- People's Bank of China governor Zhou Xiaochuan signed a memorandum of understanding with U.S. Federal Deposit Insurance Corp (FDIC) Chairwoman Sheila Bair Thursday to cooperate on promoting a deposit insurance system for financial institutions in China.

    China is considering setting up a deposit insurance company and will use the FDIC's experience as a reference, said Zhou, who did not give a specific timetable. Full story

China mulls deposit insurance system

    BEIJING, July 23 -- China's central bank is considering establishing a deposit insurance system in a bid to promote financial stability, news reports said on Monday.

    The People's Bank of China (PBoC) aims to push forward legislation on deposit insurance, the Xinhua News Agency reported, citing information from a central bank meeting.  Full story