On the Day Deposit Protection Was Raised... Kwon Daeyoung Criticizes Banks: "Hard to Accept High Interest Margins" (Comprehensive)

Deposit Protection Limit Raised from 50 Million to 100 Million Won
First Increase in 24 Years Since 2001
Stronger Protection for Depositors, Less Inconvenience from Splitting Deposits
Kwon Daeyoung: "Banks Should Focus on Productive Finance

Kwon Daeyoung, Vice Chairman of the Financial Services Commission, is speaking after opening a deposit account in relation to the implementation of the 100 million won deposit protection limit at the Hana Bank headquarters in Jung-gu, Seoul on September 1, 2025. Photo by Kang Jinhyung

On September 1, the first day the deposit protection limit was raised to 100 million won, Kwon Daeyoung, Vice Chairman of the Financial Services Commission, visited a bank and criticized the banking sector's practice of focusing on interest margins between deposits and loans.

Vice Chairman Kwon visited the Hana Bank headquarters branch in Jung-gu, Seoul that morning, personally signed up for a deposit product, and checked the bank's preparations for the implementation of the new system.

He said, "As the official in charge of responding to the 2011 savings bank crisis, I have directly experienced the importance of the deposit insurance system, so I find the increase in the deposit protection limit after 24 years to be very meaningful. I am here today to inform the public about the implementation of the system and to see for myself whether banks have prepared well."

He continued, "With the implementation of the 100 million won deposit protection limit, depositors' valuable assets will be more strongly protected. Not only will the inconvenience of having to disperse deposits be reduced, but the stability of the financial market will also be enhanced."

He added, "We cannot ignore the criticism that, while economic recovery is delayed and the difficulties of vulnerable groups are increasing, only the banking sector is enjoying high profitability based on interest margins between deposits and loans. If the gap between deposit and loan interest rates felt by the public continues even as the base rate is lowered, it will be difficult to accept."

Vice Chairman Kwon emphasized, "I ask the financial sector to review the level and structure of additional interest rates. It is a demand of the times that funds should be supplied to productive sectors, moving away from the business practice of focusing on interest margins between deposits and loans."

He also explained that the government will promote measures such as facilitating loan refinancing, revising early repayment fees, and revitalizing the right to request interest rate reductions.

Meanwhile, while the increase in the deposit protection limit is expected to strengthen the financial safety net and reduce the inconvenience of dispersing deposits, there are also concerns that it could lead to a concentration of funds in the secondary financial sector.

The government and the market believe there is a high possibility that, as the deposit protection limit is raised, funds will flow into savings banks, which offer higher deposit interest rates compared to commercial banks. About 90% of all deposits in savings banks are within the protection limit, so the impact of the system change will be significant and depositors are likely to respond quickly. According to a report submitted by the Financial Services Commission and the Korea Deposit Insurance Corporation to the National Assembly, if the deposit protection limit is raised to 100 million won, deposits at savings banks could increase by 16% to 25%.

However, according to government monitoring, there has not yet been a noticeable concentration of funds. As of the end of July, the balance of deposits at savings banks was 100.9 trillion won, which has increased slightly since the announcement in May of the deposit protection limit increase, but is still lower than at the end of last year (102.2 trillion won). The deposit balances of mutual financial institutions such as credit unions, NH Nonghyup, and Suhyup have also been steadily increasing, but at an average rate, and the total deposit balance of commercial banks, where outflows were a concern, has not deviated significantly from the five-year average level.

An official from the Financial Services Commission stated, "We are operating a permanent task force to respond to the increase in the deposit protection limit. We will manage the implementation of the system while communicating with the financial industry, and, together with related agencies such as the Financial Supervisory Service, we will continue to monitor the movement of funds."

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