Funding

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

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 Unions1	5/10,000

Foot Note

• 1 Credit unions were excluded from the KDIC¡¯s insured financial institutions in 2004, but made special assessment payments from 2006 to 2017. The special assessment rate for credit unions was changed from 1/1,000 to 5/10,000, effective from 2007.

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.

Funding

The Deposit Insurance Fund is funded from the following sources.

Contribution

When an insured financial institution receives a business license or an approval for establishment, it should pay the KDIC an amount calculated by multiplying its paid-in capital or equity investments by a pre-determined rate within the limit of 1/100 (10/100 for merchant banks and mutual savings banks) within one month after the date of business opening. However, in case of a merger or spin-off, there is no need to pay such contributions.

Any person who has obtained authorization for investment brokerage and trading services for collective investment securities only under Article 9.21 of the Financial Investment Services and Capital Markets Act should pay a contribution in the amount obtained by multiplying the minimum equity capital provided for in Attached Table 1 of the Enforcement Decree of the Financial Investment Services and Capital Markets Act by 1/100. However, in case the person who has obtained authorization for investment brokerage and trading services for collective investment securities only has also obtained authorization for the investment brokerage and trading services for other securities under Article 12 of the Financial Investment Services and Capital Markets Act, and if the amount of contribution paid when he/she obtained authorization for investment brokerage and trading services for collective investment securities only falls short of the amount determined under Article 14.1.2 of the Depositor Protection Act, he/she should pay the difference.

Contribution Rates for Each Type of Financial Institutions

Contribution Rates for Each Type of Financial Institutions

Insured Financial Institutions	Contribution Rates
Banks	1/100
Investment Traders and Brokers	1/100
Insurance Companies	1/100
Merchant Banks	1/100
Mutual Savings Banks	5/100
Credit Unions	5/100

Deposit Insurance Premiums

Each insured financial institution should pay the KDIC as annual insurance premiums the amount calculated by multiplying the balance of 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 the rate prescribed in the Presidential Decree not exceeding 5/1,000. (If the amount is less than KRW 100,000, they should pay KRW 100,000 instead.)

Deposit Insurance Premium Rates for Each Type of Financial Institutions

Insurance Premium Rates for Each Type of Financial Institutions

Insured Financial Institutions	Deposit Insurance Premium Rates
Banks	8/10,000
Investment Traders and Brokers	15/10,000 1
Insurance Companies	15/10,000
Merchant Banks	15/10,000
Mutual Savings Banks	40/10,000

Foot Note

• 1 For insured deposits that are held by securities firms (including trusts) in accordance with Article 74.1 of the Financial Investment Services and Capital Markets Act, a 30% discount is offered.

Target Fund System

Under the target fund system, reserve targets are set in advance at a level where the KDIC would have enough resources to deal with losses of a certain amount.
When the reserves reach or exceed the target range, premiums are discounted or exempted, respectively. The system was put in place in January 2009.

Target Reserves for Each Account

• 1 Target reserves are a certain percentage of insurable deposits as of the end of the KDIC¡¯s previous financial year.
• 2 It was impossible to set the target because there was only one insured merchant bank.
• 3 The reserve targets as above are applied from April 2011.

Investment

The Deposit Insurance 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.

On April 1, 2011, the KDIC created the special account for mutual savings banks within the DIF which will remain in place until the problems in the mutual savings banking sector are successfully dealt with. The special account is a temporary measure (effective until December 31, 2026) aimed at restoring the financial health of the mutual savings bank account of the DIF. The account is managed separately from the other accounts in the DIF.

The special account for mutual savings banks is funded from the following resources.