Liquidity will be tight and financing costs will stay high during the next year, Bank of China Ltd predicted in a recent report, China Business News said.

The report said that the year-on-year growth rate of M2 will fall to 13 percent in 2014 while inter-bank renminbi interest rates will stay at a high level. As a result, it will be hard for financing costs to fall.

The first batch of private banks is expected to be approved in the beginning of 2014, the report said. Applicants from Beijing, Shanghai, Shenzhen and Zhejiang have a higher chance of getting approval.

"The development of private banks is but a gradual process. With the marketization of interest rates, banks with weaker risk controls are going to be mired in operational difficulties. Therefore, an exit mechanism, especially a deposit insurance system, needs to be put in place," said the report.

Wen Bin, head of the international finance research team, said that the deposit insurance system will be introduced in the first half of 2014.