Board of Audit and Inspection: "Need to Diversify Deposit Insurance Fund Investment Assets"

Audit on Deposit Insurance Fund Management... "97% of Managed Assets in Deposits and Bonds, Low Utilization for Crisis Response"

[Asia Economy Reporter Ryu Jeong-min] The Board of Audit and Inspection has revealed that there is a need to diversify the operating assets of the Deposit Insurance Fund to secure timely funding during a financial crisis.

On the 8th, the Board of Audit and Inspection released the full public audit report titled "Management Status of the Deposit Insurance Fund." This audit was conducted to examine the operational status of the Deposit Insurance Fund and the appropriateness of the depositor protection system, aiming to contribute to the stable management of the fund and protection of depositors.

The Board of Audit and Inspection stated, "the Financial Services Commission and the Korea Deposit Insurance Corporation limit the operation methods of the Deposit Insurance Fund under the 'Surplus Fund Operation Regulations' to purchasing government and public bonds and deposits at insured financial institutions, managing 97.3% (12.3 trillion won) of operating assets in deposits and bonds."

[Image source=Yonhap News]

The Board of Audit and Inspection explained, "Deposits may be difficult to withdraw if banks face liquidity crises, and bonds are expected to decline in price due to supply-demand imbalances during large-scale short-term sales." This means that an operation focused on deposits and bonds may have limited utility in crisis response.

In this regard, the Board of Audit and Inspection notified the Financial Services Commission Chairman and the President of the Korea Deposit Insurance Corporation to prepare measures to diversify the operating assets of the Deposit Insurance Fund so that assets can be recovered promptly and necessary funds can be raised in the event of a financial crisis.

Meanwhile, issues were also revealed in the operation of the bankruptcy foundation for recovering funds supporting insolvent savings banks.

The Board of Audit and Inspection pointed out, "The Korea Deposit Insurance Corporation dispatches employees to the bank bankruptcy foundation to oversee major tasks such as asset sales and bond recovery," and "although the workload has decreased, personnel expenses increased by 1.18 billion won."

The Board of Audit and Inspection instructed the President of the Korea Deposit Insurance Corporation to prepare measures to adjust the workforce size when the bankruptcy foundation's workload decreases. Additionally, they were notified to establish integrated management and closure promotion plans to ensure the bankruptcy foundation can be concluded in a timely manner.

This content was produced with the assistance of AI translation services.