The Korea Deposit Insurance Corporation (KDIC) held a policy symposium on Aug. 28 under the theme of “Why Deposit Insurance Now? — A New Understanding of Financial Stability.”
The symposium was organized to expand the academic foundation of the deposit insurance system and explore various policy alternatives, building upon the achievements of the book “New Deposit Insurance Theory,” which was released to commemorate KDIC’s 30th anniversary.
“New Deposit Insurance Theory offers an opportunity to reflect on the essence of the deposit insurance system,” KDIC President Kim Seong-sig said in his opening address.
“Until now, the Deposit Insurance System has often been likened to a firefighter that extinguishes a fire when a crisis strikes, leading to a perception that focuses primarily on crisis response functions for depositor protection.”
“KDIC must not confine the existence of the system and the organization to this single role. Instead, the company needs a fundamental shift in perspective to examine the true essence of the system,” Kim emphasized “Amidst structural vulnerabilities inherent in finance, the deposit insurance system quietly safeguards core functions performed by financial contracts during normal times and maintains trust in the entire financial system. KDIC carries out this function.”
“Using this shift in perspective as a starting point, we must now deeply reflect once again on the true meaning of financial stability,” Kim added.
Lim Il-seop, head of the Deposit Insurance Research Institute, made a presentation titled “Deposit Insurance: A Risky Idea.” Lim argued that “the role of deposit insurance should be understood not merely as the protection of depositors, but as the protection of monetary functions performed by deposits which are liabilities of banks.”
Lim further explained that financial stability should be viewed from a new perspective: “not as the soundness of financial institutions themselves, but as a state in which core functions performed by the liabilities of financial institutions are stably maintained.”
Subsequently, Lim moderated a panel discussion. Focusing on defining the roles of deposit insurance and financial safety nets in response to structural changes in the financial landscape, the panelists exchanged a wide range of views on topics such as the vulnerabilities of private money and the role of deposit insurance, the emergence and risks of shadow banking and the direction for developing resolution regimes to maintain the functions of liabilities.
Launch of Deposit Protected Logo in Sept.
KDIC implemented an improvement requiring financial institutions to display either a “Deposit Protected” or “Not Protected” logo on documents such as product information papers and passbooks, making it easier for the public to identify whether a financial product is covered by deposit insurance.
Due to the emergence of complex financial products, financial consumers often found it difficult to clearly determine whether a product was covered by deposit insurance, even when disclosures and explanations regarding deposit insurance status were provided at the time of signing up.
However, going forward, financial institutions must display the “Deposit Protected” logo on the left side of deposit protection notices for covered products.
They also have to display the “Not Protected” logo for products that are not covered, thereby enabling consumers to easily distinguish the deposit protection status of the products.
MOU with Korea Society of Financial Consumers
On Aug. 27, KDIC signed a memorandum of understanding (MOU) jointly with the Korea Society of Financial Consumers, the Financial Supervisory Service, the Korea Inclusive Finance Agency and the KT&G Scholarship Foundation to enhance the asset management competency of college students.
The agreement was established to provide systematic financial education that helps college students who will lead the Korean economy acquire knowledge necessary for financial life and make sound asset management habits.
Under this initiative, the Korea Society of Financial Consumers will oversee the educational program and the KT&G Scholarship Foundation will provide support, while the KDIC and other participating institutions will cooperate in the program’s operation by leveraging their respective expertise and experience in financial education.
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