South Korean financial sector stability and regulation

South Korea’s financial sector is facing scrutiny regarding institutional stability and rising costs. A parliamentary audit of the Housing and Urban Guarantee Corporation (HUG) revealed significant mismanagement, including the improper approval of project-finance guarantees worth 3.82 trillion won and the under-collection of guarantee fees. The audit noted HUG’s deteriorating finances, with operating losses increasing from 242.9 billion won in 2022 to 2.1924 trillion won in 2024.

Concurrently, the financial sector is protesting proposed hikes to deposit insurance premium rates scheduled for 2028. Research suggests increasing premiums for banks, life insurance, and non-life insurance by up to 3.3 times current rates. While the Korea Deposit Insurance Corporation (KDIC) suggests the impact may be mitigated by the upcoming expiration of a “special contribution fund,” industry representatives argue the proposed increases are excessive and that current research models fail to account for changes following the IFRS17 accounting standard.