To respond to the potential rapid 'money move' that may occur in the secondary financial sector following the increase of the deposits protection limit to 100 million won, the Financial Services Commission will launch a permanent monitoring task force (TF).
According to the financial sector on the 11th, the Financial Services Commission plans to organize a permanent monitoring TF related to fund movement together with the related agencies such as the Korea Deposit Insurance Corporation and the Bank of Korea. The TF will be established to monitor and respond to the fund flow slanting toward the secondary financial sector around the date when the deposits protection limit is set to increase on September 1 of this year. The Financial Services Commission is also set to begin TF activities simultaneously with the legislative notice for changes to the Deposits Protection Act implementation decree within this month.
A Financial Services Commission official noted, "After the legislative notice, the timing of the increase in the deposits protection limit will be widely known to general consumers, so we believe there is a possibility of fund movement even before September." The official added, "We will strengthen monitoring related to fund movement at the TF level and take necessary measures."
The deposits protection amount, which had remained at a limit of 50 million won per financial institution, will increase to 100 million won for the first time in 24 years. The Financial Services Commission believes that a large sum of money may move to the secondary financial sector following the increase in the deposits protection limit. Savings banks and mutual finance sectors typically offer high-interest savings products compared to regular banks. Consumers who have kept their money within 50 million won in the secondary financial sector due to asset stability concerns can now safely deposit up to 100 million won. According to a research report disclosed by the Financial Services Commission and the Deposit Insurance Corporation, it is estimated that deposits at savings banks could increase by about 16-25% if the deposits protection limit is raised to 100 million won.
There are concerns within the financial sector that, before and after the increase in the deposits protection limit, the secondary financial sector may engage in a high-interest special promotion competition, leading to excessive expense outlays. Additionally, there are worries that an increase in the received balance within the secondary financial sector could lead to an expansion of high-risk lending operations, such as real estate project financing (PF). The Financial Services Commission is expected to carry out TF activities considering such scenarios.