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					                                                                        SHARING DEPOSIT INSURANCE
                                                                        EXPERTISE WITH THE WORLD




                                Member Profile
       Korea Deposit Insurance Corporation (KDIC)
                         A Founding Member of IADI

                                                                                  SHARING DEPOSIT INSURANCE
                                                                                  EXPERTISE WITH THE WORLD




Korea Deposit Insurance Corporation
(KDIC) was established as a non- capital based special corporation in 1996 under
the Deposit Protection Act. KDIC has continued to fulfill its role as an important
pillar of Korea s financial safet y net by prot ect ing deposit ors and m aint aining t he
stability of the financial system in Korea.
Organization
The KDIC is composed of 10 departments, 11 offices, and 1 regional office with
six hundred thirty staff members.
The Deposit Insurance Committee
The Deposit Insurance Committee is the highest decision- making body of the
KDIC. As such, the Deposit Insurance Committee deliberates and renders
decisions on important matters including the following:
 o Est ablishm ent of basic guidelines for t he Corporat ion s operat ions
 o Review of operation plan for the Deposit Insurance Fund
 o Amendments to the Articles of Incorporation
 o Enactment, amendment and nullification of rules and regulations related to the
   Corporat ion s business obj ect ives
 o Matters related to the budget and to settlement of accounts
  o I ssuance of Deposit I nsurance Fund Bonds ( DI F Bonds ) and DI F Bond
    Repayment Fund Bonds
  o Reduction or postponement of deposit insurance premium payments
  o Actual and provisional payment of insurance claims
  o Approval of payment on estimated insurance claims
  o Financial support for Resolution Financial Institutions
  o Financial support for insured financial institutions
Transactions between Funds, Payment of fees arising from outsourcing, operation
of surplus funds, etc.




                                                                        SHARING DEPOSIT INSURANCE
                                                                        EXPERTISE WITH THE WORLD
The Com m it t ee is com prised of nine individuals in all, including t he President of
the KDIC, who serves as com m it t ee chairm an. Ot her m em bers are: t he vice
m inist er of Finance and Econom y, t he vice m inist er of Planning and Budget , t he
vice chairm an of t he Fin a n cia l Su pe r visor y Com m ission ( FSC ) , and t he
deput y governor of t he Ba n k of Kor e a ( BOK ) . The four rem aining com m it t ee
m em bers are appoint ees com m issioned by t he Minist er of Finance and Econom y.
Of t hat num ber, one com m it t ee m em ber is com m issioned direct ly by t he Minister
of Fina n ce a n d Econom y wit h t he rem ainder recom m ended by t he M in ist e r of
Pla n n ing a n d Bu dge t , t he Chairm an of t he FSC, and t he Governor of t h e BOK
- all of whom are each allowed t o recom m end one com m it t ee m em ber apiece. The
recom m ended m em bers are t hen com m issioned by t he M in ist e r of Fina n ce a n d
Economy.


The Board of Directors
                                                                         SHARING DEPOSIT INSURANCE
The Board of Directors, as the highest executive body of the KDIC, is comprised of WITH THE WORLD
                                                                         EXPERTISE
one president, one vice president, and four executive directors.
The audit or m ay express opinions at board m eet ings, but cannot part icipat e in t he
Board s vot ing process. The president of KDIC is appoint ed by t he Pr e side n t of
t h e Re pu blic of Kor e a on t he recom m endat ion of t he M in ist e r of Fina n ce a n d
Economy. The vice president and execut ive direct ors are appoint ed by t he
Minist er of Finance and Econom y on t he recom m endat ion of t he KD I C President .
The audit or is appoint ed by t he Minist er of Finance and Econom y. Board m em bers
are appoint ed for a period of t hree years and m ay be reappoint ed. The Board
renders decisions on various matters including the following:
o   Matters that require deliberation and decision- making by the Policy Committee
o   Enactment, amendment and nullification of rules and regulations related to the
    operation of the Corporation
o   Mat t ers relat ed t o t he Corporat ion organizat ion and syst em
o   Matters related to the signing, notification and canceling of important contracts
o   Matters related to important court proceedings and arbitrations
o   Other matters that the President of the KDIC deems appropriate


Overview of the Deposit Insurance System in Korea
Following t he enact m ent of t he Deposit or Prot ect ion Act in Decem ber 1995,
deposit insurance operations began on June 1, 1996, with the establishment of the
KDIC. Alt hough it began as an ex- ant e syst em wit h a prot ect ion lim it of KRW 20
m illion for bank deposit ors, financial inst abilit y in t he wake of t he 1997 financial
crisis gave rise t o a t em porary blanket coverage schem e. I n addit ion, t he deposit
insurance coverage was ext ended t o bot h banks and non- bank financial
inst it ut ions, such as m ut ual savings banks ( MSBs) , m erchant banks, securit ies
com panies, insurance com panies, and credit unions. As a result , t his creat ed a
single, com prehensive, and int egrat ed deposit insurance syst em designed t o
enhance financial stability and to ensure public confidence.


The system returned to a limited scheme in 2001 with a protection limit of KRW 50
million. This higher lim it was est ablished t o ensure sust ainable st abilit y in t he
financial m arket . As t he syst em is not wit hout m oral hazard risk, t he KDIC closely
m onit ors bot h financial and non- financial risks of t he insured financial inst it ut ions.
Furtherm ore, t he KDIC has a dut y t o not only prot ect deposit ors, but also
minimize loss of the Deposit Insurance Fund (DIF).
Deposit Insurance
Korea current ly im plem ent s a pa r t ia l de posit pr ot e ct ion syst e m pr ovidin g
lim it e d cove r a ge up t o 5 0 m illion w on pe r de positor. The financial
inst it ut ions eligible for prot ect ion under t he D e posit or Pr ot e ct ion Act ( D PA )
include six areas of business: banks, securities companies, insurance companies
( life and non- life insurance) , m erchant banks, m ut ual savings banks ( MSBs ) and
credit unions ( unt il t he end of 2003) ; credit unions were excluded from coverage
from January 2004.


Insured Deposits and Institutions
All financial inst it ut ions operat ing in Korea under licenses by t he Financial
Supervisory Service and special banks, wit h t he except ion of t he Export - Import DEPOSIT INSURANCE
                                                                             SHARING
Bank of Korea, are required t o be insured by t he KDIC. However, since 2004, t he WITH THE WORLD
                                                                             EXPERTISE
KDI C does not cover credit unions. Also, individual agricult ural and fisheries
cooperat ives current ly are not covered by KDI C. The nat ional federat ions of such
cooperatives, however, are covered by the KDIC.
        Table 1. Number of Insured Financial Institutions (As of March, 2006)
                                          Domestic       Foreign       Total
                       Banks                  18           38            56
              Securities Companies            38           13            51
              Insurance Companies             29           14            43
                 Merchant Banks                2            0            2
              Mutual Savings Banks           112            0           112
                       Total                 199           65           264


            Table 2. Types of Deposits Covered Per Each Financial Sector
                               Demand Deposits, Time and Savings Deposits, Accumulative
Banks
                               Deposits, Principal- Covered Trusts and Secondary Bills
                               Cash Balance of Securities Savings,
Securities Companies
                               Cash Balance of Collateral for Stock Loans on Margin Account
Insurance Companies            Individual Policies, Severance Benefits Policies
Merchant Banks                 Notes Payables, Issued Notes, CMAs
                               Ordinary Deposits, Savings Deposits, Time Deposits,
Mutual Savings Banks
                               Installment Deposits, Credit Installments, Cover Bills
Financial Restructuring
The governm ent - led financial rest ruct uring t hat has been ongoing since t he
financial crisis in lat e 1997 has been carried out in t wo phases. The first phase
dealt wit h financial indust ry rest ruct uring following t he financial crisis, and placed
emphasis on the easing of the corporate sector credit crunch and the restoration of
t he financial syst em . The second phase reform s were im plem ent ed wit h an
em phasis placed on t wo aspect s: a hardware rest ruct uring t hrough early
resolut ion of lat ent insolvencies and a soft ware rest ruct uring                 t hrough
im provem ent of financial supervision and corporat e governance. I t was ult im at ely
successful in reducing syst em ic risk t hrough t he resolut ion of non- viable financial
inst it ut ions and t he inj ect ion of public funds int o viable ones, while rest oring
financial int erm ediat ion t hrough t he resolut ion of accum ulat ed insolvencies. Effort s
were also m ade t o st rengt hen financial indust ry soundness by est ablishing a
                                                                                   SHARING
supervisory syst em t hat com plies wit h int ernat ional st andards. I n consequence, DEPOSIT INSURANCE
wit h t he easing of uncert aint ies in t he financial m arket , t he financial    EXPERTISE WITH THE WORLD
int erm ediat ion was rest ored and foundat ions for t he recovery of t he real econom y
were laid.


Failure Resolution
The KDIC undertakes resolution of failed financial institutions through a variety of
methods including liquidation, deposit payoffs, financial assistance via equity
participation, contribution for acquisition of insolvent institutions, P&As and M&As.


Recovery of Injected Funds
For efficient recovery of public funds injected in respect of insolvent financial
institutions, the KDIC can arrange for its staff to perform the duties of managers
and bankruptcy administrators of such institutions. Also, the KDIC can be
assigned the right to file for liability or damage claim litigation in subrogation of
insolvent financial institutions.


In terms of recovery of injected public funds, the KDIC utilizes a variety of
methods, including but not limited to, sales of NPLs (non- performing loans), sales
of equity through privatization and issuance of exchangeable bonds, block sales,
M&As, etc. Furthermore, the KDIC has the authority to participate in receivership
activities, such as sales of assets from failed financial institutions or settlements of
claims.


MOU Management
The KD I C has t he aut horit y t o inj ect funds int o an ailing or insolvency
t hreat ened financial inst it ut ion, t o help im prove t hat inst it ut ion s financial st at us.
Wit h regards t o financial inst it ut ions t hat have signed m em orandum s of
underst anding ( MOU) wit h t he KDIC t o receive such public funds, t he KDIC
reserves t he right t o review and assess t heir m anagem ent perform ance and t ake
corrective actions.
Cooperation and Exchange with International Organizations
To expand it s horizons in t he area of int ernat ional cooperat ion and exchange, t he
KDIC has act ively part icipat ed in various int ernat ional event s as a m em ber of
I n t e r na t ion a l Associa t ion of D e posit I n su r e r s and has t aken t he
responsibilit ies of t he Vice Cha ir of Re se a r ch a n d Guida n ce Com m it t e e a n d
the Chair of Advisory Group.




Dong- Il Kim         Dong Il Kim, Executive Director of KDIC, Vice Chair of RGC
                     Executive Council member IADI
                                                                             SHARING DEPOSIT INSURANCE
                                                                             EXPERTISE WITH THE WORLD
From 14 to 16 June 2006, KDIC held its International Open House Seoul at
the KDIC headquarters in Seoul. The event commemorated the KDIC s t e n t h
anniversary and shed light on the significant role it has played during and
following the recovery from the financial crisis that hit most of Asia in 1997~98.
More information on this event will be featured in the upcoming IADI Research
Letter


To become a trustworthy partner of the general public, the KDIC has
strengthened its services to depositors by running the Customer Service Desk to
serve the needs of customers effectively, and promptly informing them of inactive
accounts and uncollected dividends to depositors. Meanwhile, the KDIC has built
cooperative ties with farming and fishing villages to support the local rural
communities by providing medical support for students with speech disorders and
free meals to seniors which have no supporting families.

				
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posted:10/6/2011
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