South Korea proposes to raise the maximum deposit protection coverage to KRW100m ($72,000) from the current level of KRW50m from 1 September this year according to a media release by the Financial Services Commission (FSC).
The FSC issued a preliminary notice of legislative revisions in this regard on 15 May 2025. The revision proposal will be open for public comments from 16 May to 25 June 2025.
The rule is proposed to be revised for the first time in 24 years. The increased deposit protection limit will apply to both banks and savings banks whose deposit protection is covered by the Korea Deposit Insurance Corporation (KDIC) and mutual finance institutions whose deposit protection is covered by their own federation funds.
Thus, from 1 September 2025, depositors are guaranteed deposit protection of up to KRW100m in the event of a financial company turning insolvent or bankrupt and becoming unable to pay their deposits.
This will not only help to strengthen protection for depositors but also alleviate the inconvenience of having to spread out savings across multiple financial institutions. Moreover, it will raise the domestic deposit protection level on par with those seen in major overseas countries and push up the overall volume of insured deposits, which will help to shore up confidence about financial market stability.
Moreover, retirement pension plans, pension savings, and accident insurance payments that are currently treated separately within the same financial company will also be subject to the same level of increase in deposit protection limit to KRW100m from the current level of KRW50m.
Meanwhile, there will be subsequent steps taken by the FSC and the KDIC to find an appropriate level of deposit insurance premium rates for financial companies considering an expected increase in insured deposits. Financial companies will be subject to new deposit insurance premium rates from 2028.
Also, through the continuous operation of a taskforce, the FSC will closely monitor money moves and potential impact on markets. The financial authorities will particularly focus on the potential liquidity and soundness problems arising at certain financial companies as depositors may move their money to those offering higher interest rates and more stability.
Moreover, the FSC will seek to introduce a financial stability vehicle under the deposit insurance scheme to pre-emptively provide liquidity and capital support to the financial companies undergoing difficulties but operating in normal conditions. The authorities will also look into ways to ensure prudential management in the non-banking sector.