Partial deposit insurance system could spur next turmoil

The government¡¯s partial deposit insurance system, which would be implemented from next year, may develop into a turmoil like in the medical case, due to negligent preparation and the immaturity of the plan.

The government plans to hold a meeting of the financial development review committee Thursday and confirm details of the insurance system. However, the committee itself is known to be in disagreement about the 20 Million Won limit of the insurance system.

Economic experts recommend a more flexible system citing the cases of Japan, Sweden and Finland, which have also switched from the total deposit system to the partial deposit system.

Finance and economic minister Jin Nyum is determined to go ahead with the partial deposit insurance system and he plans to announce details next week. However, the financial sector and the economic experts are advocating that the conditions are not favorable in Korea for the system to be implemented.

Officials of the financial research institutes also asserted that the countries that have switched from the total deposit system to the partial deposit system have proceeded with the switch on the precondition that the financial reforms in their countries have completed and the financial markets have fully recovered. The officials asserted that Korea has not yet satisfied the preconditions for the partial despot insurance system. Consequently, different opinions exist even in the review committee that would determine details of the partial deposit insurance system.

Park Hyeon-Jin witness@donga.com