Go Seung-beom "Financial Industry Changes Require Improvement of Deposit Insurance System"

On the 23rd, Ko Seung-beom, Chairman of the Financial Services Commission, held a meeting with Kim Tae-hyun, President of the Korea Deposit Insurance Corporation, financial experts, and heads of financial associations at the Korea Deposit Insurance Corporation in Jung-gu, Seoul. The meeting was convened to gather opinions from various sectors before preparing future improvement plans for the deposit insurance system.

[Asia Economy Reporter Song Hwajeong] Ko Seung-beom, Chairman of the Financial Services Commission, emphasized that the deposit insurance system must also be improved in line with changes in the financial industry, such as the growth of the non-bank sector and the emergence of new financial services due to the convergence of finance and IT. He also stated that an expansion of the deposit protection limit is necessary due to the increase in financial asset holdings.

On the 23rd, Chairman Ko held an 'Expert and Financial Sector Meeting for the Improvement of the Deposit Insurance System' at the Korea Deposit Insurance Corporation to gather opinions from various sectors before preparing improvement plans for the deposit insurance system.

Chairman Ko mentioned the need to strengthen the financial stability function of the Deposit Insurance Corporation amid growing concerns about potential risk factors and stated that he would review improvements to the deposit insurance system through broad opinion gathering in line with changes in the financial industry.

Chairman Ko pointed out, "The non-bank sector is rapidly growing, and new financial services are emerging continuously due to the convergence of finance and IT. The expansion of short-term funding markets in the non-bank sector (such as RP, ABCP) and the emergence of new financial services like prepaid electronic payment methods are weakening the crisis response of traditional deposit insurance institutions, which focus on protecting deposits." He added, "There is also a need to expand the deposit protection limit due to the increase in economic scale and financial asset holdings."

Chairman Ko stated, "We must carefully review with relevant experts whether there are any shortcomings in the current deposit insurance system in minimizing blind spots in financial consumer protection and maintaining financial market stability." He added, "In this process, it is also necessary to consider the characteristics of each financial sector that pays deposit insurance premiums and the plans for settling and repaying past restructuring costs."

Professor Kang Kyunghoon of Dongguk University, who attended the meeting, said, "During the future review process of deposit insurance system improvements, deposit insurance premium rates and deposit protection limits need to be examined from various perspectives as they may affect the competitive structure among financial sectors." He emphasized, "Also, as digital finance spreads, the role of traditional deposits is shrinking, and various investment instruments that can replace them are emerging, so the deposit insurance system must prepare for this trend."

Professor Joo Sohyun of Ewha Womans University mentioned, "Consumer protection should be one of the most important policy goals in the current financial market, and changes in consumer environments such as demographic structure and the proportion of financial assets should be considered when reviewing changes to the deposit protection limit."

Professor Kim Woochul of the University of Seoul said, "Various factors must be considered to calculate an appropriate deposit insurance premium rate, and especially sufficient review is needed regarding the handling plan for the deposit insurance bond repayment fund, which is scheduled to end in 2027."

Kim Taehyun, President of the Korea Deposit Insurance Corporation, stated, "I agree with the recognition that there is a need to establish a more effective system in line with the expansion of economic scale and changes in the financial environment." He added, "Together with the Financial Services Commission, we will conduct sufficient reviews through external research projects and public-private joint task force (TF) discussions and prepare improvement plans by August next year."

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