Home > Deposit Insurance > Overview
When a financial institution becomes unable to repay its depositors due to business suspension or bankruptcy, the whole financial systems as well as the depositors are affected. To prevent such an incident, Korea enacted the Depositor Protection Act (DPA) and put in place a depositor protection scheme.
As its name implies, deposit insurance works like any other type of insurance: A number of people with the same risk profile establish a fund during normal times in preparation for an emergency or disaster. Similarly, the Korea Deposit Insurance Corporation (KDIC), established under the DPA, collects insurance premiums from insured financial institutions during normal times, sets up a fund, and in case of a failure, makes deposit payouts on behalf of an insured financial institution.
Deposit insurance is a public scheme that is implemented under law to protect depositors, so, when there are not enough funds to make deposit payouts, the KDIC may issue bonds and access alternative funding sources to acquire necessary financing.