SVB Bankruptcy Raises Depositor Anxiety
Ruling Party: "Funds Locked Up for Over 20 Years"
Opposition: "Bill Submitted to Fully Protect Depositors"
The ruling and opposition parties are united in their call to raise the depositor protection limit from the current 50 million won to over 100 million won. Following the recent collapse of the U.S. Silicon Valley Bank (SVB), concerns about the financial market have increased, and related legislation is expected to gain momentum.
On the 21st, Seong Il-jong, the Policy Committee Chair of the People Power Party, said at a floor strategy meeting held at the National Assembly, "In response to the recent bankruptcy of the 16th largest U.S. bank, SVB, the U.S. government decided to guarantee all deposits regardless of the protection limit," adding, "This incident strongly suggests that it is time to reconsider the depositor protection limit in our country."
According to Chair Seong, the depositor protection limits in major advanced countries are approximately 330 million won in the U.S., about 140 million won in the European Union, and around 100 million won in Japan. He explained, "Since the limit was raised from the previous 20 million won to 50 million won in 2001, it has remained unchanged for over 20 years. It is necessary to expand the protection limit to keep pace with the times and prepare for financial crises." He further noted, "Especially in our country, continuous economic growth over the past 20 years has more than doubled the GDP per capita from $15,736 in 2001 to $32,661 in 2022." The amount of deposits exceeding the depositor protection limit in Korea increased annually from 976 trillion won in 2018 to 1,504 trillion won last year in 2022.
Kim Seong-hwan, the Policy Committee Chair of the Democratic Party, also stated at a press briefing at the National Assembly on the same day, "Currently, depositor protection covers up to 50 million won, but we plan to increase this to 100 million won and, if necessary, propose policies similar to the U.S. that protect all depositors (deposit amounts)." They also plan to push for an amendment to the Financial Consumer Protection Act (led by Floor Leader Park Hong-geun) that would impose overdue interest only on delinquent loans, not on the entire principal.
The Democratic Party also plans to introduce legislation related to protection policies covering all depositors (deposit amounts), similar to the U.S.
Both ruling and opposition parties have previously proposed amendments to the Depositor Protection Act to expand the depositor protection limit. The amendment, led by Joo Ho-young, the floor leader of the People Power Party, which was introduced the day before, includes provisions to set the insurance payout limit at 100 million won or more, differentiated by financial industry sectors, and to review its appropriateness every five years. It aims to expand the insurance payout limit and establish a system that allows adjustments to an appropriate level.
Earlier, Hong Seok-jun of the same party submitted an amendment in March last year to set insurance payout limits separately by financial industry and financial products, raising the protection limit to over 100 million won for banks and insurance.
Within the Democratic Party, Park Seong-jun proposed an amendment to legally require the Korea Deposit Insurance Corporation to determine the insurance payout limit every five years through a resolution of the Deposit Insurance Committee, thereby adjusting the limit every five years. Shin Young-dae also led an amendment to set the depositor protection limit at 100 million won or more, considering per capita GDP, and to differentiate insurance payout limits by financial industry sectors for sound financial management.
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