Financial Services Commission and Korea Deposit Insurance Corporation Conduct Joint Simulation Exercise to Prepare for SIFI Resolution

The Financial Services Commission and the Korea Deposit Insurance Corporation announced on the 27th that they conducted a joint simulation exercise to assess the effectiveness of resolution plans prepared for the insolvency situations of Systemically Important Financial Institutions (SIFI).

This exercise was held at the KDIC Cheonggye Hall with the participation of related organizations such as the Financial Supervisory Service, Korea Exchange, and 10 SIFIs (subject to the self-recovery plan and resolution plan system designated by the FSC, including Shinhan, KB, Hana, Woori, NongHyup Financial Group, and Shinhan, KB Kookmin, Hana, Woori, NongHyup Banks).

Notably, this was the second time the exercise was conducted following last year, and it was the first joint simulation exercise with extensive participation from related organizations to discuss mutual policy coordination.

During the exercise, a large-scale bank run scenario similar to the cases of Credit Suisse and Silicon Valley Bank was assumed, and measures to prevent the spread of insolvency and emergency liquidity support plans to avoid financial market turmoil were discussed. Additionally, rapid and efficient resolution methods such as the establishment of bridge banks and the organization of crisis response teams for SIFIs were also reviewed.

Yu Jae-hoon, President of KDIC, emphasized, "To respond swiftly to unprecedented crisis situations such as digital bank runs, it is essential to establish a communication system among related organizations during normal times and to verify it through realistic drills."

The FSC and KDIC stated that they plan to reflect the improvements and supplements identified through this simulation exercise in the formulation of next year's resolution plans and to strengthen the cooperative system among related organizations.

Meanwhile, the SIFI resolution plan is a system established to prepare systematic resolution measures in case financial institutions find it difficult to restore soundness on their own during a financial crisis, and it has been in effect since June 2021.