Progress in Deposit Insurance System to
Take Lead in Maintaining Financial Stability

The Korea Deposit Insurance Corporation (KDIC) has contributed to overcoming the Asian financial crisis successfully and fulfilled its role as a deposit insurer and an important pillar of Korea's financial safety net.
Last year was very meaningful to the KDIC in that year 2006 was the 10th anniversary of the KDIC. As a way to commemorate the anniversary, the KDIC promoted its achievements both at home and abroad. The KDIC also paved the way to take a step forward for another 10 years.
Most meaningful outcome of last year is that the KDIC built a solid foundation for the introduction of new systems - a target fund system and a differential premium rate system - in an effort to further develop the deposit insurance system. By implementing more efficient resolution strategies and methods for resolving insolvent mutual savings banks, the KDIC could maintain the stability of regional economies and Korea's financial market for the working class.
Regarding the sale of its stake in Korea Life Insurance, the KDIC filed for arbitration with the International Court of Arbitration so as to create an environment where fair and transparent transactions can be made. Furthermore, the KDIC endeavored to maximize the recovery of public funds through the conversion of redeemable convertible preferred shares of Shinhan Financial Group as well as the capital reduction with or without consideration of Seoul Guarantee Insurance Co., Ltd.
With the aim of preventing moral hazards for the management of public funds injected financial institutions and enhancing enterprise value, the KDIC took various measures including signing memorandums of understanding (MOUs) with outside directors of the financial institutions. For the maximization of dividends of creditors, the KDIC promoted expeditious completion of bankruptcy proceedings, and for those accountable for failure of financial institution, the KDIC conducted strict and thorough investigations.
Moreover, to broaden its horizons in the area of international cooperation and exchange, the KDIC actively participated in various international events as a member of International Association of Deposit Insurers (IADI) and stretched out its cooperative ties to a number of organizations, such as Financial Services Compensation Scheme (FSCS) of UK, European Forum of Deposit Insurers (EFDI), and Securities Investor Protection Corporation (SIPC) of US.
The KDIC will continue to dedicate itself to proactively protect depositors and promote a sound financial system in Korea.
Initially, with the purpose of promoting sound management of financial institutions and maintaining the viability of Deposit Insurance Fund, the KDIC will continue to improve the deposit insurance system by adopting advanced systems - a differential premium system and a target fund system. In 2007, by analyzing potential effects on the market that the adoption can bring about, the KDIC will take measures that would minimize any possible negative effects and contribute to the successful launch of the systems.
In order to minimize the loss of the funds, the KDIC will engage in the resolution of failed financial institutions in an early stage. Also, by adopting a prompt resolution system which can expedite the resolution process prior to the suspension of operations of insolvent financial institutions; the KDIC seeks to focus on reducing inconveniences imposed on depositors substantially.
In addition, the KDIC will make an effort to realize the integrated deposit insurance system in this time of financial consolidation and convergence. With rapid changes in the financial environment and the advent of complex financial products, the KDIC will rethink the overall framework of current deposit insurance system and reinforce it to protect a wide range of financial consumers including securities investors and policyholders.
Lastly, the KDIC will continuously dedicate itself for successful completion of its last phase of financial restructuring with sales of its stake in Woori Financial Group and Shinhan Financial Group. With regard to managing MOUs signed with public funds injected into financial institutions, the KDIC will perform its role as a major shareholder while ensuring that the financial institutions are managed independently. By doing so, the KDIC will carry its responsibility given by the public faithfully. Besides, in the investigation of insolvency related persons and entities, the KDIC will strive to take the lead in establishing economic justice by holding them responsible for their misconduct while ensuring fairness of its operation through avoiding them to be innocent victims.
If the KDIC can accomplish its goal to regenerate it as an advanced integrated deposit insurer successfully, it will become the world's leading expert institution on ongoing risk surveillance and prompt resolution. nw

By Choi Jang-Bong
Chairman & President
Korea Deposit Insurance Corporation