Korea Deposit Insurance Corporation

Established in 1996, to protect depositors and maintain the stability of the financial system, Korea Deposit Insurance Corporation (KDIC) is striving to achieve its mission to be “the world’s leading expert institution on ongoing risk surveillance & prompt resolution.” The major functions of KDIC can be classified into five categories such as insurance management, risk surveillance, resolution, recovery, and investigation.

Organisation

KDIC is composed of 10 departments, 11 offices, and 1 regional office with six hundred thirty staffs. The highest decision-making body of KDIC is the Deposit Insurance Committee, which is chaired by the President of KDIC. It makes a decision on key matters like establishing the basic guidelines of KDIC operations and reviewing the operations of the deposit insurance fund. The Board of Directors is made up of a Chairman and President, a Vice President, an Auditor and four Executive Directors.

Deposit Insurance System in Korea

The Depositor Protection Act in Korea was enacted in December 1995. In accordance with this act, KDIC was established in 1996, and right before the Asian financial crisis took place in 1997, the deposit insurance system was established. Since then, the deposit insurance system has made major achievements through the KDIC's work in financial restructuring, stabilization of the financial market and protection of depositors. Before the application of the Depositor Protection Act, all the financial depository institutions had been protected through their own protection funds or implicit deposit protection schemes. Now KDIC, as the sole integrated financial protection corporation in Korea, insures five different kinds of financial institutions through the Depositor Protection Act, including banks, securities companies, insurance companies (life/non-life), and mutual savings banks, whereas credit unions were excluded from coverage in January 2004. The total number of insured institutions stood at 264, with the flat-rate premium system according to type of institution, and the amount of insured deposits totaled 685 trillion won by year-end 2005. The coverage limit is 50 million won, which is almost US$50,000, including the principal and interest. For the resolution, KDIC applies diverse methods to the financial institutions, such as equity participation, deposit payoffs, contributions, asset purchases, loans and bridge-bank. As well, KDIC performs insolvency investigations of default debtors and default debtor corporations to create an environment in which responsible corporate governance becomes firmly entrenched and the burden on the public reduced through effective recovery of funds. Establishing ongoing surveillance system is also the major function of KDIC. KDIC tries to control risks - that insured financial institutions are exposed to - through identification, measurement, confirmation of risk, with the methods of inspections, joint examination with the Financial Supervisory Service (FSS). If facts are found that may lead to occurrences of risk events in the examination, KDIC is vested with the authority to request the Financial Supervisory Commission (FSC) to take proper corrective actions.