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Management of Deposit Insurance Funds

  • 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.
  • Under the Public Fund Redemption Plan announced by the government in 2002, it was decided that assets and liabilities related to financial restructuring would be separated from the Deposit Insurance Fund (DIF) on January 1, 2003 to set up a new fund called the DIF Bond Redemption Fund. The DIF Bond Redemption Fund is used for completing the financial restructuring process and recovering related public funds. It was also decided that the DIF would be funded with insurance premiums paid after 2003 to deal with insurance contingencies that occur after 2003.

Funding

The DIF Bond Redemption Fund is funded from the following sources.

  • Contributions from the fund for the redemption of public funds under Article 4 of the Public Fund Redemption Fund Act
  • Funds raised by issuing DIF Bond Redemption Fund bonds
  • Borrowings from the government, Bank of Korea, insured financial institutions and other agencies designated by the Presidential Decree
  • Special assessments
  • Funds raised by collecting claims
  • Funds recovered from financial assistance provided for the resolution of failed financial institutions
  • Investment profits of the DIF Bond Redemption Fund and other revenues
Special Assessment

Special assessments are the contributions mandated by law that insured financial institutions are required to pay for 25 years from 2003 to 2027 in accordance with the Public Fund Redemption Plan to repay the public fund assistance they received for financial restructuring. Insured financial institutions should annually pay to the KDIC the amount of money obtained by multiplying the balance of their deposits, etc. (in the case of insurance companies, the amount of money determined by the Presidential Decree in consideration of the liability reserves under Article 120 of the Insurance Business Act) by such rate as determined by the Presidential Decree within the limit of 3/1,000 (If the amount is less than KRW 100,000, they should pay KRW 100,000 instead.)

Special Assessment Rates for Each Type of Financial Institutions
Special Assessment Rates for Each Type of Financial Institutions
Insured Financial Institutions Special Assessment Rates
Banks 1/1,000
Investment Traders and Brokers 1/1,000
Insurance Companies 1/1,000
Merchant Banks 1/1,000
Mutual Savings Banks 1/1,000
Credit Unions 5/10,000

Investment

The Deposit Insurance Fund Bond Redemption Fund is preferentially invested in bonds, such as government/public bonds within the scope where stability, profitability, and liquidity are guaranteed. The purchased bonds, in principle, are held until maturity. To maintain the stability of the funds, investment in performance-based products, with no principal guarantee, is prohibited, while investment in MMF beneficiary certificates of investment pools for public funds is allowed.

There are pre-determined percentages for investment in each of the above categories - bonds, MMF beneficiary certificates of investment pools for public funds and deposits. However, the percentages can be adjusted to a certain degree so that the funds are managed flexibly to cope with unexpected market conditions.