President Gwak Bum-gook of Korea Deposit Insurance Corp.(KDIC) said the company will sell its stake in Woori Bank as soon as possible to privatize the bank. The state-run insurance firm owns 51.04 percent of the bank’s outstanding shares.
But he said there is no change in the company’s plan to sell around 4 percent of its stake to an individual or business firm who can hold on to the shares long-term so that no one investor or business would be a dominant stakeholder of the bank.
Under such a plan, the KDIC has been contacting such potential buyers as ADIC of Abu Dhabi, and other state wealth funds in the Middle East and has received responses, the company said.
The CEO said they cannot speed up the sale as the buyers have to go along with their moves. In an attempt to dump the majority stake in the bank, they also considered selling the stake en bloc in the domestic market.
He said the bank’s share price fell to the 10,000 won per share levels from 11,200 won a week ago, which presents a good time to sell those shares at the stock market.
The KDIC sold its 7.5 percent stake in Hanwha Life, but it still has 15.25 percent in the life insurance firm, which the deposit insurance firm had to get rid of following the end of the stake holding period come April 28 next year.
CEO Gwak also plans to focus on risk control in his management policies, along with the recovery of the company’s investment funds, as risks from excess household debt and corporate debt could hit at any time and the company should be ready for it.
In August, Gwak said the company provided a special training session to employees who don’t have experiences in corporate restructuring, and he has been considering a training program for KDIC employees and employees of the financial firms, including banks, so that they can cooperate better when they need it.
When a financial institution becomes unable to repay its depositors due to business suspension or bankruptcy, the whole financial systems, as well as the depositors, are affected. To prevent such an incident, Korea enacted the Depositor Protection Act (DPA) and put in place a depositor protection scheme.
As its name implies, deposit insurance works like any other type of insurance: A number of people with the same risk profile establish a fund during normal times in preparation for an emergency or disaster. Similarly, the Korea Deposit Insurance Corporation (KDIC), established under the DPA, collects insurance premiums from insured financial institutions during normal times, sets up a fund, and in case of a failure, makes deposit payouts on behalf of an insured financial institution.
Deposit insurance is a public scheme that is implemented under law to protect depositors, so that when there are not enough funds to make deposit payouts, the KDIC may issue bonds and access alternative funding sources to acquire necessary financing.
The KDIC’s funds have separate accounts for banks, investment traders and brokers, life insurance companies, non-life insurance companies, merchant banks, mutual savings banks and credit unions (only in the case of the Deposit Insurance Fund Bond Redemption Fund). These accounts are managed separately.
Though between-account transactions within the same fund are allowed, transactions between the Deposit Insurance Fund and the Deposit Insurance Fund Bond Redemption Fund are prohibited.
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