FSC Holds 'Mutual Finance Policy Council' to Address Increase in Deposit Protection Limit

The Financial Services Commission announced that it held the first Mutual Finance Policy Council on May 28, presided over by Secretary General Kwon Daeyoung.

During the meeting, participants reviewed the current status of preparations for the increase in deposit protection limits in the mutual finance sector. They discussed the schedule for raising the deposit protection limit, the necessary preparations for the industry, and measures by financial authorities to strengthen risk management in anticipation of the higher limits. The soundness and liquidity status of each institution was also checked.

Secretary General Kwon stated, "The deposit protection limit for all financial institutions, including the mutual finance sector, will be raised to 100 million won starting September 1. Taking into account recommendations from international organizations, the need to prevent confusion among financial consumers, and to avoid sudden fund movements, it has been decided that the mutual finance sector will also simultaneously increase the deposit protection limit from 50 million won to 100 million won starting in September."

He emphasized, "Despite efforts by financial authorities and related organizations to manage risks preemptively in response to the deterioration in soundness and profitability in the mutual finance sector over the past two years, the sector still faces challenging conditions. It is essential to thoroughly assess and manage the risks that the increase in the deposit protection limit may pose to the mutual finance sector."

He added, "We know from experience that excessive competition for deposits leads to interest rate distortions and further deterioration in soundness. Therefore, close cooperation among related organizations is more important than ever to ensure that fund movements resulting from the increase in the deposit protection limit do not place an undue burden on the mutual finance sector."

The meeting was attended by officials from the Ministry of the Interior and Safety, the Ministry of Agriculture, Food and Rural Affairs, the Ministry of Oceans and Fisheries, the Korea Forest Service, the Financial Supervisory Service, the Korea Deposit Insurance Corporation, and the central associations of mutual finance (including credit unions, agricultural cooperatives, fisheries cooperatives, forestry cooperatives, and Saemaeul Geumgo).