The Korea Deposit Insurance Corporation (KDIC) announced on Nov. 27 that it conducted a mock resolution exercise involving the Financial Supervisory Service (FSS), the Korea Exchange, and 10 systemically important financial institutions (SIFIs).
SIFIs are 10 companies selected by the Financial Services Commission (FSC) under the Financial Industry Structure Improvement Act.
They are Shinhan, KB, Hana, Woori, and Nonghyup Financial Groups and Shinhan Bank, KB Kookmin Bank, Hana Bank, Woori Bank and NongHyup Bank.
In case an SIFI becomes insolvent and cannot restore its financial soundness on its own, every year the KDIC establishes a resolution plan to systematically liquidate a financial institution after receiving approval from the FSC.
The mock exercise is also conducted to ensure the plan works smoothly in real-life situations.
This was the second such exercise, following the first one held for SIFIs in 2023.
The first joint exercise involved major related organizations to discuss mutual policy coordination.
The FSC and other organizations simulated a large-scale bank run and a hypothetical SIFI resolution, similar to the Credit Suisse (CS) and Silicon Valley Bank (SVB) cases in the United States.
They presented and discussed each organization’s response measures in the event of a failure.
The measures included those to prevent the spread of failures and emergency liquidity support to prevent financial market disruptions.
They also discussed ways to strengthen communication channels and enhance coordination among the organizations.
They discussed quick and efficient resolution methods such as the establishment of a bridge bank, and examined SIFIs’ responding units to cope with crises in preparation for resolution.
Exchange of Letters of Intent on Cooperation with Japan’s FSA
On Nov. 13, the KDIC announced that its Chairman Yoo Jae-hoon held a meeting with Commissioner Ito Hideki of the Financial Services Agency (FSA) in Tokyo, Japan on Nov. 12.
The FSA is responsible for planning and administering financial policies and regulations.
It is also in charge of prudential supervision and examination of financial institutions and as the resolution authority, carries out the resolution of failed institutions.
Recognizing the need for cross-border coordination in the event of the failure of an international bank with presence both in Korea and Japan, the two organizations agreed to have an exchange of letters aimed at facilitating cooperation and information-sharing concerning resolution planning and implementation of resolution measures.
Currently, six Korean banks have locally incorporated entities or branches in Japan while three Japanese banks have branches in Korea.
In the area of resolution, the FSA is the third foreign resolution authority with which the KDIC has made cooperative arrangements, following the US Federal Deposit Insurance Corporation and the EU’s Single Resolution Board.
KDIC Chairman Attends 23rd IADI AGM
From Nov. 11 to 15, KDIC Chairman Yoo attended the 23rd Annual General Meeting of the International Association of Deposit Insurers (IADI) held in Tokyo, Japan.
Yoo took part in IADI’s key decision-making processes including electing a new member to the Executive Council and voting on plans to reorganize the Secretariat and the Association’s governance structure.
Yoo also spoke on a panel at the accompanying International Conference, the theme of which was “Future-proofing the Core Principles - Raising the Bar for Deposit Insurance Systems,” and talked about Korea’s resolution regime for failed financial institutions and resolution cases from past financial crises.
At the same time,
Yoo had meetings with senior deposit insurance officials from Kyrgyzstan, Thailand and Japan, held on the sidelines of the AGM and International Conference. It helped the KDIC to expand its global networks.
Additionally, Yoo’s meeting with the Chairman of the Japan Investor Protection Fund led to discussions about ways to increase exchange and cooperation between the two organizations in a range of areas related to investor protection.
Furthermore, the KDIC newly inked a memorandum of understanding with the Polish Bank Guarantee Fund to reinforce bilateral cooperation in banking and finance.
Going forward, the KDIC will strive to lead global discussions on deposit insurance reform initiatives and related research at IADI as a member of the Executive Council.
_IADI 연례컨퍼런스.jpeg)
