The government takeover of Baoshang Bank in May put China’s national deposit insurance fund to the test for the first time since it was set up more than four years ago.

On the day of the takeover, the central bank created the Deposit Insurance Fund Management Co. Ltd. to manage the 100 billion yuan ($14.5 billion) deposit insurance fund. Before that, there was no way for the deposit insurance fund to inject funds into Baoshang Bank, a person close to the central bank told Caixin. 

Now the takeover has thrown a spotlight on doubts that continue to plague the nascent deposit insurance system, including the fund’s small size relative to the country’s total deposits, vague responsibilities described by deposit insurance regulations, and a lack of independence from the central bank.

Read Caixin's in-depth coverage here.

Contact reporter Teng Jing Xuan (jingxuanteng@caixin.com)