ABSTRACT
To enhance macroeconomic and financial stability, the Korean government enacted the Depositor Protection Act in December 1995, and established the Korea Deposit Insurance Corporation (KDIC) accordingly in June 1996. The primary aim of the KDIC is the protection of depositors. Deposit insurance acts as the guarantor of deposits in case financial institutions become insolvent and thus unable to pay back depositors. Through protecting depositors, it reduces the incidence of bank runs, which, in turn, promotes the stability of the financial system.
