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Financial authorities call for global cooperation to prevent crisis
By Park Hyung-kiPublished : May 14, 2013 - 20:09
The role of deposit insurers has become increasingly important as the global financial markets face a shorter cyclical crisis amid low regulatory barriers on cross-border trading and transactions.
Financial authorities are urging for more global coordination and collaboration among deposit insurers as their role has become bigger than the traditional task of protecting depositors from possible bank collapses or theft and preventing bank runs whenever a crisis erupts.
They are further expected to maintain financial stability and order, as well as market confidence, a responsibility greatly expanded since the scheme of deposit protection was adopted in Europe and the U.S. during a banking fiasco in the 1930s.
Financial authorities are urging for more global coordination and collaboration among deposit insurers as their role has become bigger than the traditional task of protecting depositors from possible bank collapses or theft and preventing bank runs whenever a crisis erupts.
They are further expected to maintain financial stability and order, as well as market confidence, a responsibility greatly expanded since the scheme of deposit protection was adopted in Europe and the U.S. during a banking fiasco in the 1930s.
Sharing the experience of state deposit guarantee operations and risk management would be key to the sustainability of the global financial markets, and was an inevitable part of the 11th annual meeting and conference of the International Association of Deposit Insurers held this week, said Kim Joo-hyun, chairman & president of Korea Deposit Insurance Corp., on Tuesday.
The two-day meeting, hosted by KDIC in Seoul under the theme of “Key Elements of Deposit Insurance and Challenges in Practice,” brought together some 70 executives of deposit insurers from 25 countries to discuss their expanded tasks and challenges, as well as find solutions to mend any holes in their protective systems.
Financial Services Commission chairman Shin Je-yoon stressed in his keynote speech that a sound risk management system needed to be put in place amid the growing interconnection of economies, and that it was important for deposit insurers to implement preemptive measures with governments to prevent financial defaults.
KDIC, one of the founding members of the IADI, shared its experience of facing a series of mutual savings bank scandals, and how that made apparent faults that needed to be fixed in the system for deposit protection.
This year’s event also lent support to emerging economies such as Mongolia, Laos and Myanmar that seek to establish deposit insurance systems.
By Park Hyong-ki (hkp@heraldcorp.com)
