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When the financial supervisory authority issues an order for suspension of deposit payments for a bank in financial distress, the KDIC conducts a due diligence of its assets to see if the bank is capable of restoring its business to profitability. If not, arrangements are made for a third-party sale, etc. If such efforts fail and bankruptcy becomes inevitable, the KDIC reimburses depositors. Usually, it takes two to three months after the date of the insurance contingency before the KDIC makes a decision to make deposit payouts.
When a financial institution has its license revoked, is dissolved, or becomes bankrupt, the KDIC reimburses depositors at their request.
A transfer of contracts means that the assets and liabilities of the failed financial institution are transferred to another healthy institution under an order from the financial supervisory authority or an agreement between the concerned parties. But not all assets and liabilities are necessarily transferred. The scope of assets and liabilities transferred can change depending on detailed terms and conditions of the transfer agreement. For deposit obligations that are not transferred, the KDIC pays depositors.
When a financial institution is merged with another institution, all of its assets and liabilities are transferred to the acquiring institution. After the merger, depositors of the merged institution can access their funds as usual.