A deposit insurance program is a measure to guarantee that a certain level of deposits are guaranteed by the state even if a bank cannot pay them. The new insurance system is also seen as laying a foundation for interest rate liberalization, as a market-oriented interest rate would force banks to lose built-in interest rate margins and could put depositors at risk. China started to relax its cap on interest rates from last June, lifting the ceiling of deposit rates while lowering the floor on lending rates. Currently, Chinese banks can pay up to 110 percent of the benchmark deposit rate - currently 3 percent a year - and charge loan rates as low as 70 percent of the benchmark level of 6 percent. This ensures that banks are guaranteed a margin of at least 90 basis points. STRONGER RISK CONTROLS In the report, the central bank also pledged to increase flexibility of the yuan's exchange rate as well as to quicken the pace of setting up a key benchmark rate for th...