1. ^aPeople's Bank of China, 32 Chengfang Street, West District, Beijing, P.R. China
2. ^bDepartment of Economics and Finance, Northern Kentucky University, Nunn Drive, Highland Heights, KY 41099, U.S.A. E-mail: yhuang616@gmail.com

Abstract

This paper proposes that the establishment of supervisory function in China's deposit insurance is an urgent task of the country's financial regulators and it becomes an indispensable component in a sound financial supervisory system. An important supplement to the banking regulatory system and aiming to protect depositors against financial losses caused by bankruptcy of financial institutions through a risk compensation mechanism, the implementation of supervisory function in deposit insurance helps to fulfill supervisory goals in the banking industry. Meanwhile, we argue that the supervisory responsibilities of the prospective deposit insurance agency in China are to some extent different from those of the existing banking regulatory institution, and therefore will not cause overlap in regulation or overuse of regulatory resources.