[Exclusive] KDIC Fund Liabilities Projected to Fall 98.3% to KRW 55.8 Billion by End-2030

From KRW 3.2902 Trillion to KRW 55.8 Billion

Repayments Funded by Bankruptcy Dividends and Deposit Insurance Premiums

98% of Liability Reduction Concentrated This Year and Next

Assuming Savings Bank Special Account Ends at Year-End

The Korea Deposit Insurance Corporation's (KDIC) Deposit Insurance Fund liabilities are projected to fall 98.3%, from KRW 3.2902 trillion at the end of last year to KRW 55.8 billion at the end of 2030. This is because the KDIC is repaying bonds issued to secure funds for restructuring during the savings bank crisis, among other liabilities, with deposit insurance premium income and proceeds from recovering support funds.

According to the KDIC's "2026-2030 Mid- to Long-Term Financial Management Plan," submitted to the government on November 9, its consolidated liabilities are expected to decrease by KRW 2.3724 trillion this year and KRW 805.4 billion next year. The annual reductions will then taper off to KRW 36.1 billion in 2028, KRW 15.2 billion in 2029, and KRW 5.3 billion in 2030. About 98% of the total reduction is therefore concentrated this year and next. If the plan proceeds as scheduled, liabilities will fall to KRW 917.8 billion at the end of this year and KRW 112.4 billion at the end of next year. The KDIC assumed there would be no additional financial support for restructuring beyond the resolution of existing insolvent non-life insurers.

Most of the funds for repaying the liabilities will come from fund income. The KDIC plans to raise KRW 3.2056 trillion, about 99% of the total reduction, through deposit insurance premium income and dividends from savings bank bankruptcies, among other sources. It intends to recover as much as possible of the funds previously used in savings bank restructuring by selling assets held by bankruptcy estates. Some of the remaining funds needed for repayment will be raised through short-term bond issuance and borrowing.

The mid- to long-term liability projections are based on the assumption that the special account for savings bank restructuring will not be extended and will end at the close of this year under current law. The special account was established in 2011 to share the costs of restructuring, incurred during the large-scale savings bank insolvency crisis, across all financial sectors. Under the arrangement, all deposit insurance premiums paid by savings banks and 45% of those paid by other financial sectors are used to repay the liabilities incurred at the time. When the special account's operations end at the close of this year, the KDIC's general account for savings banks will take over the special account's remaining deficit. This means that, as the shared funding arrangement in which other sectors contributed to deposit insurance premiums comes to an end, premiums paid by the savings bank sector will become the main source for covering the deficit.

At a National Assembly Political Affairs Committee audit on October 19, KDIC President Kim Seong-sik said that if the special account is not extended, its remaining deficit of about KRW 1.5 trillion will be added to the general account's existing deficit of about KRW 2 trillion. Although the Deposit Insurance Fund's consolidated liabilities will fall to KRW 55.8 billion at the end of 2030, the savings bank general account will still face a separate repayment burden. Loans between accounts within the fund are eliminated in the consolidated financial statements, but the repayment obligation will remain on the individual books if the savings bank general account takes over those loans. Kim said the savings bank sector pays about KRW 400 billion in annual deposit insurance premiums and estimated that it would take around 10 years to eliminate the general account's deficit.

The Financial Services Commission is pursuing a plan to extend the special account's operating period through the end of 2027, allowing premiums from other financial sectors to be allocated to the account for one more year to clear the remaining deficit. An amendment to the Depositor Protection Act, sponsored by Democratic Party of Korea lawmaker Yoo Dong-soo, remains pending before the Political Affairs Committee after its first subcommittee on bill review decided in September to continue deliberations. Meanwhile, deposit insurance premium income totaled KRW 2.5126 trillion last year, up KRW 141.1 billion, or about 6%, from KRW 2.3715 trillion in 2024. Taking into account the increase in the deposit protection limit, financial authorities are recalculating the premium rate, aiming to apply the new rate in 2028.

This content was produced with the assistance of AI translation services.