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Partial deposit guarantee to take effect next year

Posted October. 02, 2000 21:25,   


The government has decided to bring into effect a system of guaranteeing the payment of a specified amount of savings in the event of the failure of a bank or similar financial institution beginning next year. The ceiling of guaranteed deposit payment including interest has been set at 20 million per person, but it is likely to be revised upward. This and other related specifics will be finalized and made public next week.

Finance and Economy Minister Jin Nyum told the press Oct. 2 that the partial guarantee system will be enforced from January as planned, and detailed provisions for a possible increase of the amount to be guaranteed will be worked out next week through careful consideration of possible side-effects, which could include concentration of money into superior banks with consequent depletion of funds from inferior mutual trust funds or integrated financing houses.

Some critics say readjustment of the guarantee limit is a step back from the promised financial reform, Jin said, but "reform for the sake of reform" might entail a serious adverse impact. " What is necessary is a reform conducive to the intended objective." This indicates the likelihood of a raise in the ceiling of deposit guarantee. Upon hearing the opinion of the Banking Development Council by the end of the week the finance minister is expected to finalize a specific program to facilitate the introduction of the system.

According to Jin, the plan for the generation of additional public funds for the bailout of sinking enterprises, estimated at around 40 trillion won, and regulations for the Public Fund Control Commission will be submitted to the State Council on Oct. 10. The meeting of economic ministers to be called on Oct. 4 will be devoted to reviewing the implementation of restructuring pledged for September by the new economic policymakers in the second half of the present administration and its defects, and also formulating the reform plan for October, he said.

Kwon Soon-Hwal shkwon@donga.com