One of the focal points of financial reform is to improve the mechanism of risk management for financial institutions. Therefore, deposit insurance system will be established this year. ANBOUND research team believes that the establishment of deposit insurance system is still contradicting with the interest groups. The introduction of this system is most likely skewed towards large scale state-owned banks, thus it might increase the operating cost of the small and medium banks as well as private banks in the short run. However in the long run, it will have more good than harm. It will help address the monopoly issue amongst the large scale state-owned banks in the market. The introduction of deposit insurance system lies on government's determination rather than technological barrier. No doubt that the system will not be perfect during the initial launch but it can be used to test the market and gradually rectified by actual operation process.