The Financial Services Commission announced that the government approved a set of legislative revision bills raising the maximum deposit protection coverage to KRW100 million from KRW50 million previously at the cabinet meeting held on July 22. The increased deposit protection coverage will take effect from September 1, 2025. Since the Depositor Protection Act was revised on January 21 this year raising the minimum deposit protection level to KRW100 million, the FSC and related ministries had worked on amendments to six Enforcement Decrees, which were approved at the cabinet meeting today.
Therefore, starting from September 1 this year, the maximum deposit protection coverage in the case of a financial company turning insolvent will be raised to KRW100 million for banks, savings banks, insurance companies, and financial investment businesses that are covered by the Korea Deposit Insurance Corporation (KDIC) under the Depositor Protection Act. Moreover, mutual finance businesses—credit unions, agricultural cooperatives, fisheries cooperatives, forestry cooperatives, and community credit cooperatives—that are covered by their own federation funds will also be subject to the increased deposit protection limit of KRW100 million.
Principal-protected savings and installment savings products will be covered up to KRW100 million regardless of when the account was opened. However, investment products such as funds that are linked to the performance of fund management will not be covered. In addition, retirement pension plans, pension savings, and accident insurance payments that are handled separately within the same financial company will also be subject to the increased deposit protection coverage.
Since the increase in deposit protection coverage will take effect for the first time in 24 years since 2001, it is expected that depositors will be entitled to enhanced protection of their savings and there will increased credibility over financial market stability. Moreover, consumer convenience will be improved as depositors will no longer have to park their savings with different deposit institutions concerned about the limited deposit protection level.
Meanwhile, since the announcement of revision proposal in May this year, the financial authorities and related organizations have been closely monitoring money movements and the potential impact on markets resulting from the increased deposit protection coverage. Depositors may relocate their savings to the financial companies offering higher interest rates and certain financial companies may undergo liquidity and soundness problems as a result. In this regard, the authorities will also make continuous efforts to effectively manage the soundness in the nonbanking sector.
The FSC and the KDIC will take steps necessary to make sure that the increased deposit protection coverage is seamlessly implemented. The authorities will supervise financial companies with thorough preparation to make sure that consumers are well aware and notified about the change in deposit protection coverage. In the second half of this year, the authorities will take steps to find an appropriate level of deposit insurance premium rates for financial companies, and the updated deposit insurance premium rates will come into effect from 2028.