China has proposed “establishing a binding system for Prompt Corrective Action to deal with financial risks”. As a core component of Prompt Corrective Action, China’s current deposit insurance system is confronted with the dilemma of insufficient capacity to deal with financial risks. The primary causes lie in the ambiguous legal status of the Deposit Insurance Agency, the unclear division of powers and responsibilities between the Deposit Insurance Agency and other regulatory authorities, and a lack of necessary powers for the Deposit Insurance Agency. Legislation should define the legal status of the Deposit Insurance Agency as an independent regulatory authority, delineate the boundaries of responsibilities between the Deposit Insurance Agency and banking supervisors in the process of early risk identification and resolution, and grant the Deposit Insurance Agency powers to obtain information, conduct bank examinations, issue risk warnings, adjust insurance premium rates, and recommend early corrective actions to banking supervisors.

Gao Xiaowen, Lou Jie. Dilemmas and Responses to the Failure of Prompt Corrective Action by the Deposit Insurance Agency. Academic Journal of Business & Management (2026), Vol. 8, Issue 3: 79-87. https://doi.org/10.25236/AJBM.2026.080309.

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