Application of Depositor Protection Act Confirmed
KDIC: "We Will Continue to Identify Protection Gaps"
The Korea Deposit Insurance Corporation (KDIC) announced on March 3 that, starting this year, the Didim Seed Savings Deposit (a child savings account) will be protected under the deposit protection system.
The Didim Seed Savings Deposit is a child asset-building support project operated by the Ministry of Health and Welfare to help children from vulnerable groups build assets for initial expenses, such as tuition, employment, and housing, when they enter society. As of the end of December last year, approximately 280,000 people were enrolled in the Didim Seed Savings Deposit, with a total balance of 511.5 billion won.
If a child deposits a fixed amount every month into the Didim Seed Savings Deposit, with support from a sponsor or guardian, the local government will match the child's savings by contributing twice the amount saved each month, within a limit of 100,000 won, to a matching fund account. After the child turns 18, the deposit and fund accounts can be withdrawn and used solely for purposes necessary for independence.
Even though children save the entire amount and withdraw it at maturity, the accounts have been opened under the name of the local government so that the government can review the child's monthly savings and smoothly carry out the matching fund operations. As a result, these accounts have been classified as local government deposits.
Because of this, they were excluded from protection under the Depositor Protection Act. This raised concerns that, if a bank was unable to pay out deposits due to management deterioration, children might not be able to recover their savings.
The KDIC reviewed Supreme Court precedents, business agreements, and operating procedures, and concluded that, even though the accounts are in the name of the local government, since the children make the full deposits and the funds are returned to them at maturity, and because the government, local governments, and the entrusted operator Shinhan Bank all agree that the child is the contracting party, the Depositor Protection Act can be applied. Therefore, the KDIC decided to include these accounts under deposit protection.
The KDIC stated, "Donations from the public to the Didim Seed Savings Deposit are steadily increasing, and the eligibility has been significantly expanded to include children from lower-income households, resulting in a growing total amount of child savings. In line with this, applying deposit insurance is highly meaningful, as it represents an upgrade and provides more comprehensive benefits."
The KDIC added, "We will continue to identify protection blind spots to strengthen deposit protection for the public and vulnerable groups, and to enhance the rights and interests of financial consumers through strengthened inclusive finance."
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