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| Korea Deposit Insurance Corporation (KDIC) headquarters in central Seoul / Courtesy of KDIC |
The sudden collapse of U.S.-based Silicon Valley Bank (SVB) earlier this month has sent jitters across the Korean banking industry, resulting in increased calls to bolster the country's state-led deposit insurance coverage policy.
The Korea Deposit Insurance Corporation (KDIC), the state-run deposit insurance agency, protects deposits worth up to 50 million won ($38,000) at each bank or financial institution.
However, given that the standard deposit insurance amount has remained at the same level since 2001, questions are being raised as to whether the current cap on the coverage is enough or whether it should be increased.
Proponents calling for an increase in the deposit insurance coverage cap say the state-led insurance agency should factor in the amount of growth posted by the Korean economy during the past two decades.
Actually, other major countries' deposit insurance agencies cover larger amounts of savings per bank.
In the U.S., the Federal Deposit Insurance Corporation (FDIC) protects up to $250,000 in savings per depositor at each insured bank. Deutsche Bundesbank of Germany ensures legal entitlement to compensation of up to 100,000 euros ($107,000) per depositor at each bank. In Japan, the deposit insurance coverage cap is 10 million yen ($74,747).
KDIC is aware of the issue, but its current chief said the final decision on the insurance coverage amount is not something the agency can decide on solely.
"The KDIC does not have any particular stance on the matter, as the issue is not something that we alone can make a decision about. All we can do is provide detailed materials and research results to the parliament and the government," KDIC President Yoo Jae-hoon said during a press conference last week.
But Yoo added that KDIC is heading towards expanding the scope of "savings deposits" that the agency can insure. For instance, the Financial Services Commission (FSC), the country's top financial regulator, said it plans to enable up to 50 million won worth of non-savings products like annuities to be protected by the KDIC, just like savings deposits.
Currently, a task force is delving into the matter of increasing protection on depositors and is slated to present its suggestions and findings to the National Assembly in August. In case the KDIC increases the insurance coverage cap per bank, financial companies' insurance premiums might probably increase as well.
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