Deposit insurance change mobilizes funds

The government anticipated that nearly 20 trillion won of funds would move among domestic financial institutions as a partial deposit insurance system, which guarantees up to 50 million won of deposits per person, is to be implemented from January next year.

The Ministry of Finance and Economy said in a report submitted to the National Assembly that the amount of deposit that is not protected by the partial deposit insurance at non-blue chip financial institutions such as banks, merchant banks and mutual savings firms would reach 109 trillion won, in line with the lifting of deposit protection from the previous 20 million won to 50 million won. It noted that 15-20 trillion won of deposit would move from insolvent institutions to blue-chip banks.

Still, it is unlikely that deposits at blue-chip banks and massive corporate deposits will move, and deposit transfers from securities companies, insurance companies and credit unions are unlikely as well, the ministry reported. It contended that the projected transfer of 15-20 trillion won is a level that the domestic financial industry can accommodate, noting that it wouldn't trigger chaos in the domestic financial market.

Kwon Soon-Hwal shkwon@donga.com