Yoo Jae-hoon, President of the Korea Deposit Insurance Corporation, noted on 2nd that the introduction of the 'Financial Stability Account System' to preemptively address the insolvency of normal financial companies and the 'Rapid Resolution System' for insolvent financial companies is urgent.
President Yoo stated this during the '29th Anniversary Ceremony' held at the Cheonggye Hall of the Korea Deposit Insurance Corporation in Jung-gu, Seoul.
Yoo said, "Recently, uncertainty in our economy and financial markets has intensified amid the turmoil of the trade war with rising tariffs in the U.S. and China's backlash, and key factors making our financial market unstable include the low growth trend due to a slowdown in growth potential and the uncertainty of geopolitical risks."
Yoo emphasized that "the recent financial crisis tends to develop quickly and is difficult to predict," stating, "In this regard, it is urgent to introduce a financial stability account to preemptively address the insolvency of normal financial companies before a financial crisis occurs." The financial stability account refers to a separate account that uses the corporation's funds to proactively support financial companies facing liquidity crises.
He also noted, "It is necessary to introduce a rapid resolution system that can promptly and effectively organize insolvent financial companies before the insolvency of individual financial companies transfers to the entire financial system." The rapid resolution system allows for the swift sale of insolvent financial companies without seeking the consent of stakeholders such as shareholders.
Regarding the protection of financial contract holders, he said, "Financial market crises lead to the withdrawal of financial products such as deposits and insurance by consumers, which in turn creates a vicious cycle that causes the financial market to collapse," and emphasized that effective protection measures must be established to address blind spots in principal-protected financial products and to protect against new types of products.
He added, "We must prepare to respond without wavering to the changing financial environment by establishing a new fund system, including the appropriate target fund size following the increase in the deposit protection limit in September."