Reasons for Proposal
The purpose of the deposit insurance system is to contribute to the protection of depositors and maintenance of the stability of the financial system. However, the current Act does neither specify a payment deadline for insurance money or provisional payments from the Korea Deposit Insurance Corporation in case of insurance troubles, thus making it difficult to predict the days on which depositors will be paid their insurance money; nor prescribe grounds on which to punish individuals who impersonate depositor protection service providers, etc., resulting in cases where deposit protection is used for criminal purposes through impersonation. Accordingly, this Amendment aims to improve the insurance money payment system by newly inserting an insurance money payment deadline for the Korea Deposit Insurance Corporation to ensure prompt payment, as well as penal provisions to prohibit the impersonation of depositor protection service providers, etc., and punish the violators thereof.
The current Act also protects deposits by prescribing that where an insured financial company undergoes a merger or conversion, the newly established or surviving insured financial company and the insured financial company that no longer exists shall be construed as independent insured financial companies for one year with respect to their deposits. However, where contracts are transferred between insured financial companies, the amount of insurance money is determined by combining the deposits of the transferring and acquiring companies, which may result in the amount of deposit insurance money received in the event of repeated insolvency becoming smaller than it would be for a merger or a conversion. This may raise questions of fairness, making it necessary to regard the companies as being independent for one year in the same manner as mergers and conversions to ensure insurance money is separately received from each company in the event of repeated insolvency.
In addition, money operated as deposits through a specified money trust is not protected on the ground that the nominal depositor is an insured financial company despite the fact that the actual depositors are the trustors (or beneficiaries) of the trust agreement. To address such blind spots in depositor protection, it is necessary to modify such provisions as calculation, etc. of insurance money to ensure that money operated as deposits through a specified money trust is integrated into the deposit insurance system.
On another note, the current Act allows a financial holding company that controls an insured financial company as its subsidiary, etc. under the Financial Holding Companies Act to receive financing. Unlike insured financial companies, however, financial holding companies are not required to enter into a written agreement with the Korea Deposit Insurance Corporation for the implementation of a plan for the normalization of management. The Act also does not prescribe grounds on which to appoint the Korea Deposit Insurance Corporation or its executive or employee as a liquidator or a bankruptcy trustee where the financial holding company files for liquidation or bankruptcy, or grounds on which to establish a financial company to take over business or contracts of a financial holding company or to perform liquidation. Such loopholes in the law restrict the efficient liquidation of, and collection of funds from financial holding companies that control an insured financial company as a subsidiary under the Financial Holding Companies Act. Accordingly, the Amendment modifies provisions concerning financial holding companies that control an insured financial company as a subsidiary under the Financial Holding Companies Act, prescribes standards to relax or revoke provisions of a written agreement for the implementation of a plan for the normalization of management to reflect the level of normalization of an insured financial company or financial holding company, thereby addressing a number of weaknesses of the current Act.
A. Include in deposits, etc. any money raised through bills issued in accordance with Article 366, paragraph 1 of the Financial Investment Services and Capital Markets Act by a merchant bank that has converted to an investment trader/broker (Article 2)
B. Prescribe that no financial instrument except as otherwise whose principal and interest are protected under this Act or any other law shall use "depositor protection" and "deposit insurance," or an expression or a mark simliar thereto; and impose penalties on any person who, in violation of the foregoing, has engaged in impersonation or fundraising through impersonation (Article 7-2, Article 39-2, Article 40, and Article 43)
C. Prescribe that in case of insurance troubles in a bank, merchant bank, or mutual savings bank (hereinafter “banks, etc.”), the Korea Deposit Insurance Corporation shall pay insurance money or provisional payments within a certain period, and that banks, etc. shall retain and manage information necessary for insurance money payment to ensure the prompt payment of insurance money (Article 31, paragraph 3; Article 32-2 and Article 44, paragraph 2)
D. Prescribe that for one year after the date of contract transfer, an insured financial company that has acquired contracts and an insured financial company that transferred the contracts under a contract transfer decision shall be deemed to exist as independent insured financial companies (Article 31, paragraph 5)
E. As for claims, such as deposits, etc., of an insured financial company that is the trustee of a money trust, prescribe that the trustors of the money trust (the person on whom the trust property will devolve after a trust is terminated under Article 101 of the Trust Act where the trust is terminated as of the date of public announcement of the payment of insurance money) shall be construed as the depositors, etc.; and that any debts owed by each trustor to the insured financial company concerned shall be regarded as being set off and removed by the claims, such as deposits etc., of each truster held by the trustee (Article 32 and Article 35-6)
F. Prescribe that the court may appoint the Korea Deposit Insurance Corporation or its executive or employee as a liquidator or a bankruptcy trustee to ensure the efficient liquidation of financial holding companies that control an insured financial company as a subsidiary under the Financial Holding Companies Act; and allow the Korea Deposit Insurance Corporation to establish a liquidation company to carry out liquidation of financial holding companies and, where financing has been provided, require the Corporation and the financial holding company concerned to enter into a written agreement for the implementation of a plan for the normalization of management (Article 35-8, Article 36-3, Article 36-8, and Article 38-5)
Article 7-2 (Prohibition of Impersonation of Depositor Protection Service Providers, etc.)
Article 32-2 (Retention and Management of Depositor Information for Insurance Money Payment) ③ The Corporation may request banks, etc. to submit depositor information to check whether they fulfill the obligation to retain and manage depositor information pursuant to paragraph 1. In such cases, the depositor information requested shall exclude personal information under Article 2, subparagraph 1 of the Personal Information Protection Act and shall be collected in a way of sampling depositors, etc., to the minimum extent necessary for the intended purpose. Any bank, etc. that has received such a request shall immediately submit the relevant information to the Corporation.
Article 44 (Administrative Fines) ② 5. A person who, in violation of Article 32-2, paragraph 3, fails to submit information or submits false information