We examine the impact of China’s newly implemented deposit insurance policy on the risks and returns of listed Chinese commercial banks. Using a standard event study methodology, we find a positive and statistically significant influence of deposit insurance policy announcement on shareholders’ wealth of listed Chinese banks, especially when volume-weighted average stock returns are analyzed. Further analysis shows that joint-equity banks benefit more from the announcements. Using the Z-score and liquidity ratio as proxies of bank risks, we find that deposit insurance policies tend to increase bank risks, probably due to the moral-hazard problem.