Deposit Protection Limit Raised from 50 Million Won to 100 Million Won from September

[Financial News] From September 1, the deposit protection limit will be raised from the current 50 million won to 100 million won.
The Financial Services Commission announced on the 22nd that the amendment to six presidential decrees, including the Enforcement Decree of the Depositor Protection Act, which includes raising the deposit protection limit, was approved at the Cabinet meeting and will be implemented from September. This increase is being made for the first time in 24 years since 2001.
Not only the deposit protection limit for banks, savings banks, insurance, and financial investment sectors protected by the Korea Deposit Insurance Corporation, but also the deposit protection limit for mutual finance protected by each central association under individual laws will be simultaneously raised to 100 million won. Accordingly, after September 1, if a financial company or mutual finance cooperative or vault faces difficulties in paying deposits due to bankruptcy, depositors will be protected up to 100 million won.
Principal-guaranteed products such as savings and installment savings will be protected up to 100 million won regardless of the time of subscription, including both principal and interest. However, products linked to performance, such as funds, will not be protected.
Considering the social security nature, retirement pensions, pension savings, and accident insurance payments, which apply separate protection limits from general deposits, will also be protected up to 100 million won.
The Financial Services Commission stated, "It is expected that depositors will receive better protection for their assets and trust in the stability of the financial market will increase," adding, "The inconvenience of depositors who have distributed deposits across multiple financial companies under the deposit protection limit will also be resolved."
Meanwhile, the financial authorities plan to monitor the market impact following the increase in the deposit protection limit in cooperation with related institutions. 
As depositors relocate their deposits to financial companies with relatively higher interest rates, some financial companies may experience difficulties in liquidity and soundness, so they are focusing on monitoring deposit balances and other factors.
To prevent funds from flowing into high-risk loans and investments due to the inflow of funds into savings banks and mutual finance with relatively higher interest rates than banks, the soundness management of the secondary financial sector will also be strengthened.
In addition, they will check the industry's preparation status to ensure that deposit protection target products are properly displayed on passbooks or mobile apps, and will begin reviewing appropriate deposit insurance premium rates.
Meanwhile, the new deposit insurance premium rate will be applied from the contributions in 2028, considering the burden on the financial sector.
sjmary@fnnews.com Seo Hye-jin Reporter