Restructuring of the Public Enterprise after the Crisis : The Case of Deposit Insurance Fund
- Restructuring of the Public Enterprise after the Crisis : The Case of Deposit Insurance Fund
- Hahm, Sangmoon
- Issue Date
- Series/Report no.
- KDI Working Paper Series;02-01
- This paper studies the issues concerning fund management aspects for the KDIC. More
specifically, this paper examines the current financial status of the Korean deposit
insurance fund, the optimal size of the deposit insurance fund, a design of the deposit
insurance system to minimize any excessive risk taking, and investment strategies to
enhance the fund stability.
Briefly, this paper finds that the deposit insurance fund is not viable and the KDIC has
no hope of making a full redemption by itself. A loss sharing rule between the
government and the KDIC should be resolved as soon as possible to enhance the
stability of the deposit insurance system. As a basic strategy for fund management,
KDIC should adopt a target zone with feedback. This will reduce the volatility of
premiums. To minimize excessive risk taking, KDIC should adopt a risk based
premium system, a premium structure that reflects the different risks impose on the
KDIC. The premiums may be based on CAMELS ratings as well as some market
signals. Finally, the KDIC should reinsure a portion of insurance funds using domestic
and foreign financial market instruments in order to hedge against catastrophic losses
resulting from mega bank failures and/or financial crises.
- Files in This Item:
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.