Deposit assurance limit to exceed 20 million won

The deposit assurance system, which is expected to be implemented next year, will go into effect on schedule, but the assurance limit will be increased from the original figure of 20 million won.

The financial development review committee had a morning meeting Thursday at the KFB building in Myeongdong, where participants decided to deliver their opinion to the Ministry of Finance and Economy.

The MOFE's banking regulation section chief, Yoon Yong-Ro, revealed the committee's position was that the implementation date should not be delayed but the assurance limit should be raised to around 30-50 million won. Regarding the deposit assurance limit, there were some difference of opinion between committee members, but a consensus was reached on the implementation date.

A member of the committee remarked that as the restructuring of the financial and corporate sector are expected to be completed by the end of this year, delaying the implementation date could plunge the market into state of disorder. In addition, if the assurance limit is raised too much, there is concern of moral hazards in relation to depositors, and foreign investors may question Korea's determination to implement restructuring.

A few committee members raised concerns that any delay in the implementation timing may in fact completely wipe out the scheme and in turn adversely affect restructuring.

Some committee members belonging to the insurance section committee stated that deposits over the 20 million won limit should be guaranteed by other financial institutions, which would mean the introduction of a mutual assurance system.

On the other hand, Minister of Finance and Economy Jin Nyum stated at a press conference that raising the assurance limit over 20 million won may be seen as a scheme to benefit the rich and hence he was negative on doing so.

Choi Young-Hae moneychoi@donga.com