The 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.

PBOC has carried out research looking into this matter, according to the report.

Deposit insurance is a measure introduced by policy makers to protect deposits, in full or in part, in the event of banks being unable to pay deposits. The insurance can maintain public confidence in the financial system and prevent bank runs, thus helping promote financial stability.

The United States was the first country to establish an official deposit insurance scheme, during the Great Depression in 1934. Currently, nearly 100 countries have such an arrangement in place.

The lack of deposit insurance in China is related to the fact that most of the banks in the country are State-owned, which offer confidence to depositors, analysts said.

(China Daily July 23 2007)