Ningyao Ye

Ningyao Ye

Profile

I obtained Bachelor of Law from East China University of Political Science and Law, and then, I went to University of Glasgow and obtained Master of Law.

LLM International Commercial Law in University of Glasgow with Merit

LLB  Intellectual Property  in East China University of Political Science and Law

What are my plans once I have completed my PhD?

I would like to continue my career in academia.

View my publications

Research interests

In modern financial markets, the banking industry plays an essential role for countries’ economic growth and financial stability as one insolvent bank could trigger a ‘domino effect’ in the whole financial system.  Thus banking instability has become a major issue in financial markets. Consequently, in order to maintain financial stability and public confidence, deposit insurance has emerged and become significantly important for the financial system as it is a part of the financial safety net. Nowadays, more than one hundred countries have installed deposit insurance systems, while, many countries gained experiences from the recent global financial crises and realised the importance of having an effective deposit insurance system. In particular, building an effective deposit insurance system has increasingly drawn the attention from many international financial organizations at international level and a consensus of good practices and reforms of deposit insurance has been gradually reached.

Besides, China has transited from implicit deposit insurance to explicit deposit insurance system since 2015, but it still at the crossroads, thereby this thesis compares deposit insurance between the United States, the United Kingdom and China in order to give critical suggestion for improvement of China’s deposit insurance system.

The earliest record of deposit insurance in US was in 1829 in New York State. Subsequently, from 1829 to 1917, 14 states adopted deposit insurance schemes at state level to protect depositors from economic disruptions and losses, eventually, by the early 1930, all schemes had closed due to the lack of workable mechanism. Due to the increasingly number of bank failures in the United States between 1886 and 1933, the Congress had proposed 150 deposit insurance plans; finally, in 1933, the panic and confidence reached verge of the collapse, as a result, in pursuing financial stability and market confidence, the Federal Deposit Insurance Corporation (FDIC) was created by the Banking Act of 1933. So far FDIC is still playing a leading role around the world.

The UK did not have a formal deposit insurance scheme before 1982, previously, major banks were unwilling to accept the introduction of deposit insurance, especially the flat-rate premiums, which was argued that healthy and safe banks had to subsidise for risky and small banks. By 1982, the formal deposit insurance scheme was introduced into effect as an outcome of increasingly concerns of depositor protection, whereas protection was barely offered to individuals and companies with co-insurance, at that time, in fact, the building societies provided informal deposit insurance for depositors in pursuing stability as it had experienced rapidly growth since 1970, until 1986, the building societies were officially included in formal deposit insurance scheme. Currently, under the Deposit Insurance Schemes Directive and the Financial Services and Markets Act 2000 (FSMA), the independent Financial Services Compensation Scheme (FSCS) was created to pay off for insured depositors.

China has proposed a deposit insurance scheme as a part of financial reform since issuance of Decision of the State Council on Reform of the Financial Systemin 1993. However, due to vigorous lobbying from state-owned banks, the official implementation of Deposit Insurance Regulationwas delayed to 2015. In banking reform of China, the key issue is the marketization of state-owned banks as they have been ‘time bomb’ for China’s economy and government. China’s banking system has been administered by government for a long time, thus the fragility of China’s banking system is sceptical; banking system becomes a drag on the Chinese financial reform.  Back to 1999, the State Council decided to establish these fully state-owned asset management companies. The primary objective of four asset management companies was to transfer non-performing loans from the state-owned banks’ balance sheets. Initially, Ministry of Finance (MOF) and People’s Bank of China (PBOC) offered capital and additional funds separately to asset management companies for acquiring non-performing loans. Until the end of 2006, as casted by CBRC, the recovery rate of cash and recovery rate of asset were 20% and 24% respectively. Therefore, in fact, it is equally to say that the government and taxpayers have afforded the cost of non-performing loans that brought by state-owned banks, which puts banking system on the verge of crisis. 

Indeed, as a progressive result of banking reform in terms of market-oriented banking system and interest rate liberalisation, it is needless to say that deposit insurance scheme is needed for current China financial market in achieve economic growth and feasible reform. At current stage, the Financial Stability Bureau of the PBOC has been temporary appointed as Deposit Insurance Fund Manager by the State Council; coverage limit is RMB 500,000 and premiums rate is less than 0.016%. Until the end of 2016, deposit insurance fund reached RMB 23.8 billion. However, there is little official documentation on the governance and mandates of Chinese deposit insurer, thus mandates and operation mechanism of Financial Stability Bureau in deposit insurance are unclear. In academia, despite many articles analysing the deposit insurance, only a few researchers talk about Chinese deposit insurance system. 

All in all, compared with experienced deposit insurance system in the US and the UK, deposit insurance system in China is totally new and different, which is still under the test; additionally, the ultimate goal of China’s banking reform is the market orientation and liberalisation of interest rate, such as the transition from state-owned to privatised and modern banks. Therefore, with the deepening of economic reform, institutional design of deposit insurance should find out the special resolution to cope with the special situations in China’s banking system and should carefully consider the political, economic and cultural specifics of China. Simultaneously, applicable experiences and methods from the US and UK, especially those with an advanced banking market, should be adopted.