The Financial Services Agency plans to subject foreign banks' branches in Japan to its deposit insurance system to enhance depositor protection, sources said Monday.

The deposit insurance system protects up to ¥10 million in ordinary deposit principal and interest per depositor in the event a Japanese bank fails. Japanese banks are required to pay deposit insurance premiums to fund the system.

The system already covers foreign banks that have Japanese subsidiaries, which are now limited to Citibank of the United States and Shinhan Bank of South Korea.

Left out of the system as of last May were 57 other foreign banks operating branches with yen-denominated deposits totaling about ¥3.1 trillion at the end of March, the FSA said.

The agency plans to propose that these bank branches pay the same rate of deposit insurance premiums for yen-denominated deposits as Japanese banks for depositor protection, the sources said.

The FSA intends to submit a bill to the Diet next year, they said.