1. KDIC’s Differential Premiums and Policy Initiatives
2017 Biennial IADI Research Conference
- Regulators’ Roundtable
Bumgook Gwak
Chairman and President
Korea Deposit Insurance Corporation
Basel, Switzerland, 2 June 2017

2. Designing an Effective Financing Regime for Deposit Insurance
Distribution of Risks
Implications for Policy Initiatives

3. Low level of Regulatory Impact High level of Regulatory Impact
Distribution of Risks
Low level of Regulatory Impact
Deposit-based premiums
Loose capital requirement
High level of Regulatory Impact
Risk-based premiums
Tight capital requirement
Shadow Banks
Commercial Banks
risky asset
Shadow Banks
Commercial Banks
risky asset

4. Implications for Policy Initiatives
Accuracy and credibility of the premium schemes in response to changes in policies market environment
Cooperation with regulators that are responsible for prudential supervision of commercial banks
Balanced regulatory measures: deposit insurance premiums & capital requirement
Re-defining the scope of deposit insurance coverage
A fair distribution of risks within the financial system

5. The Differential Premium System of KDIC
History
Assessment Overview
Challenges and Future Plans

6. History – Differential Premiums
1996: Establishment of KDIC
1999: Initial review for introduction
2009: Legislation
2014: Came into force
2017: Full-scale implementation
5-year grace period
Adaptation period

7. Assessment Overview Application Evaluation Criteria
Calculation of premiums : Annual basis
Absolute evaluation - 3 categories
Evaluation Criteria
Fundamental (80%)
Crisis responsiveness (40%)
Capital adequacy
Liquidity
Asset management
(20%)
Asset quality
Loss-absorbing capacity (20%)
Earnings
Supplementary (20%)
Financial risk Management
(10%)
Other quantitative factors
Other risk management
Compliance, regulatory penalties etc.

8. Challenges and Future Plans
Amendment of Evaluation Model
Regular reviews: every 3 to 5 years
Consulted with member institutions, their associations & academia.
The current model has been modified in 2016.
Communication with member institutions
Opening a forum for public consultation
Holding workshops industry by industry
Providing each member institution with detailed evaluation results
Increasing gaps between categories
Introduced mild gaps to mitigate the burden of increased premiums at the beginning
To expand the premium gaps gradually in the upcoming years

9. Thank You for Your Attention
Bumgook Gwak
Chairman and President
Korea Deposit Insurance Corporation (KDIC)
Cheonggyecheon-ro 30, Jung-gu
04521 Seoul, Korea