Core Insights - The number of financial institutions participating in deposit insurance in China has decreased from 4,025 at the end of 2020 to 3,554 by June 2025, indicating a consolidation trend in the banking sector [1] - The "14th Five-Year Plan" emphasizes the implementation of a financial security strategy, focusing on risk prevention and resolution in key areas such as real estate and local government debt [1][2] - The financial system has faced complex international and domestic challenges, leading to significant improvements in policy formulation and regulatory execution [3] Summary by Sections Financial Institution Trends - As of June 2025, there are 3,554 financial institutions participating in deposit insurance, a reduction of over 470 from 4,025 at the end of 2020 [1] - The number of high-risk financial institutions has halved from a peak of 649 in Q3 2019, with a notable concentration in rural credit institutions and village banks [3][4] Risk Management and Regulatory Framework - The "14th Five-Year Plan" has focused on preventing and resolving shadow banking risks and managing high-risk financial institutions [2] - The establishment of a financial stability guarantee fund and improvements in the deposit insurance system have been core measures for risk prevention [5][6] Future Directions - The government report for 2025 emphasizes the integrated approach to risk management and the transformation of local small and medium financial institutions [8] - The relationship between risk resolution and institutional transformation is crucial, with a focus on creating a conducive environment for the sustainable development of small and medium banks [9][10]

Core Viewpoint - The article emphasizes the need to strengthen the deposit insurance system in China through market-oriented, legal, and professional risk management measures, building on the achievements of the past decade [1][3]. Group 1: Historical Context and Current Status - Since the implementation of the Deposit Insurance Regulations in 2015, the People's Bank of China has effectively managed the deposit insurance system, which has operated smoothly [1]. - The establishment of the Deposit Insurance Fund Management Company in May 2019 has enhanced the collection of premiums, risk monitoring, early correction, and prevention of bank runs [1]. - Internationally, deposit insurance systems have been established in nearly 150 countries, with 56% of these being legislated and managed by governments [2]. Group 2: Recommendations for Improvement - It is recommended to expedite the enactment of a deposit insurance law to provide a legal foundation for the system to function effectively as a financial safety net [1][3]. - The article suggests expanding the accumulation of the deposit insurance fund and enhancing the resources available for financial risk management [4][5]. Group 3: Financing Mechanisms - Various methods to strengthen the deposit insurance fund's financing mechanisms are proposed, including borrowing from the central bank, issuing bonds, investment operations, and pre-collecting premiums [6][7]. - The experience of Japan highlights the importance of having a robust backup financing mechanism to ensure liquidity during crises [6]. Group 4: Risk Management Functions - The current deposit insurance system has limitations in its risk management functions, such as inadequate information sharing and insufficient early corrective measures [8]. - The article advocates for enriching the risk management functions of deposit insurance, drawing lessons from Japan's experience in enhancing the role of deposit insurance in financial risk management [9][10]. Group 5: Future Directions - The article calls for the establishment of a comprehensive risk management framework that includes various tools for handling financial institution crises, such as takeovers, bridge institutions, and rapid compensation for depositors [10][11]. - It emphasizes the need for deposit insurance to play a central role in risk management, ensuring a collaborative approach with regulatory bodies and the central bank to create a more robust financial safety net [11].