South Korea’s state-run depository insurance company said it will consider raising the threshold of protection money for depositors to better reflect the current size of the local economy.

The Korea Depository Insurance Corp. provides protection of up to 50 million won ($44,000) in principal and interest per depositor, should a financial institution go bankrupt. The protection covers accounts in commercial banks, brokerages, insurers and savings banks.

 
“The threshold has been maintained for the past 15 years since 2001. We need to thoroughly review the insured amount and insured interest rate,” said KDIC President Gwak Bum-gook in a parliamentary audit Thursday.

Rep. Kim Kwan-young of the People’s Party noted the threshold of 50 million won was set based on Korea’s gross domestic product per capita in 2001, which was 13.5 million won. Although GDP per capita has more than doubled to 30.8 million won last year, the threshold has remained unchanged, he said.

Consequently, the ratio of GDP per capita to the depository protection threshold was down from 3.7 in 2001 to 1.6 last year. In advanced nations, the ratio is higher, usually at between 2.5 and 4.5, Kim said. In the US, the ratio went up to 4.5 with the protection threshold rising to $250,000 from $100,000 in the wake of the 2008 global financial crisis.

Local media outlet Money Today has reported the threshold might double to 100 million won, but an official at the KDIC said it was groundless.

“Nothing has been decided yet, and we don’t know when we can make any conclusion,” Kang Ho-seong, head of the risk management and planning team at the KDIC told The Korea Herald.

With prolonged low interest rates, Korean depositors with more than 50 million won savings have increasingly turned to savings banks which offer higher interest rates at about 2 percent than first-tier commercial lenders with the mid-1 percent range.

According to data by the KDIC, deposits of more than 50 million won per account at savings banks surged 87 percent to hit 5.08 trillion won as of June, from two years prior. From the previous quarter, the amount rose 15 percent.

The combined net income of 79 savings banks jumped 74 percent to reach 483.7 billion won in the first half of 2016 from a year earlier, data by the Financial Supervisory Service showed.

By Kim Yoon-mi (yoonmi@heraldcorp.com)