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IT Infrastructure for Depositor Reimbursement
Korea Deposit Insurance Corporation
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Table of Contents
I. KDIC’S IT System for DI Payment
II. Considerations in Building an IT System for DI Payment
III. Conclusion
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I. KDIC’s IT System for DI Payment
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Risk Surveillance Fund
Management
Resolution Recovery/
Investigation
Management & Support
KDIC’s Application Systems for Business Use
4
KDIC’s Application Systems for Business Use
Risk Surveillance Fund
Management Resolution
Recovery/ Investigation
Insured FIs’ Information Analysis System
Risk-based Premium System
Deposit Trend Reporting System
Risk Surveillance Model System
Fund Management & Investment System
Premium Calculation System
Digital Budget & Accounting System
International Financial Reporting Standards
INTEGRATED RESOLUTION INFORMATION SYSTEM
Investigation & Lawsuit against Failed FIs
Bankruptcy Claims & Dividend Info System
Bankruptcy Assets Management System
Examination & Inspection MOU Management System
Electronic Bond Auction System
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Overview of IRIS
IRIS : Integrated Resolution Information System
Supports all resolution processes : resolution planning, management of resolution
proceedings, payment of deposit insurance, etc.
Purpose
To ensure the systematic and efficient conduct of resolution proceedings
To increase depositors’ convenience through prompt payment of deposit insurance
History
14-month development period (Jul. 2007 ~ Sept. 2008) with nearly KRW 2.4 billion in development fees
December 2008 : Started to be used for making payments at agent banks’ teller counters
January 2009 : Began online payment services
August 2011 : Enhanced to enable the handling of many requests simultaneously
December 2012 : Functional improvement related to online payment services
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Overall Map of IRIS
I R I S
Common Tech. Environment
EXTERNAL SYSTEMS
Security
Failed Bank Resolution Cases - Case files, Documents
Resolution Planning
Resolution - Valuation, Bid, Asset Recovery Information
Check & Upload Data and Calculation
Follow-up Management Payment
Payment* Mgmt
Certification Authority
* Interim, DI, Advance Dividends
Electronic Transaction Intermediary (Firm Banking)
Agent Bank
USERS
Depositor (Online Claims)
Agent Bank Staff (Offline Claims)
KDIC Staff
Online claims
Offline claims
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IRIS’s Key Functions for DI Payment
Data management, Calculation and Interim Deposit Payment, DI Payment and Payment of Advance Dividends & Account Settlement
Managing the list of deposits (depositors) held back from payment
Managing the expiration date of DI claims
Enabling agent banks to enter claims in the system and make payments
Viewing of data and filing of claims over the Internet
System operation management including firm banking services
Users must go through an approval process to reimburse deposit insurance payment or change the ledger , and IRIS makes a log of every data modification
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Relevant Staff for DI Payment
KDIC Staff Members in Charge of DI Payment, etc.
Depositor Reimbursement Team (6 members)
• Three full-time examiners
• 16 other staff members on standby in case many FIs fail at the same time
Information System Team
• Two full-time staff members to manage the deposit insurance payment system
Agent Banks
Agreements with six commercial banks to provide payment services
In case of an insurance event, payments can be handled quickly by utilizing the
branch networks and human resources of the agent banks.
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Sector Before 2003
‘03-04 ‘05-06 ‘07-10 ‘11-13 Total
Merchant Banks 19 - - - - 19
Securities Firms 4 - - - - 4
Savings Banks 70 2 3 9 28 107
Credit Unions* 327 - - - - 327
Total 420** 2 3 9 28 457
* Credit unions were excluded from KDIC coverage in 2004 when the Depositor Protection
Act was revised. Now they are protected by their own fund.
** Includes resolutions just after the Asian Financial Crisis in 1997
Number of FIs for which the KDIC paid deposit insurance by sector
Number of Financial Institutions for Which the KDIC Paid Deposit Insurance
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Payment of Deposit Insurance for 28 Failed Savings Banks (2011 ~ 2013) (Number of people, KRW bil.)
# of People Amount
Amount of Deposits
Total 1,771,485 36,493
Under the Coverage Limit 1,699,575 36,070
Above the Coverage Limit 71,910 423
Types of Payment
Interim Deposit Payment 862,200 11,892
DI Payment 72,038 2,265
Advance Dividends 63,882 78
Account Settlement of Advance Dividends
17,868 21
Recent Cases
Almost 50% of people filed claims online.
IRIS handled 47,000 claims per hour and, at the maximum, can support 100,000 concurrent
users.
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II. Considerations in Building an IT System for DI Payment
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1. Integrated Management
Scope of support, control system
2. Multiple Payment Methods
Teller counter, Internet, mail, ATM, etc.
3. Reduction of Payout Period
Quicker preparation, prompt payment after announcement of payment
4. Capacity to Handle Payments
Flexibility of operation, stability
Key Considerations
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1. Integrated Management System
IT services for calculation of claims only
Agent banks managed payment services and the payment ledger
- Regular reporting to the KDIC
Insufficient control of agent banks’ DI payment or data modifications.
Before IRIS
Comprehensive services for calculation of claims, payment, data change, etc.
The KDIC manages payment services and the payment ledger
- Agent banks log onto IRIS to do their job
Control of key work processes such as data registration, change and deletion (approval, log creation)
Now
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1. Integrated Management System
Before IRIS
Examination and calculation of DI claims
DI payment (Agent banks)
- Interim payment - DI payment
Agent Bank Failed Bank
Electronic ledger of deposits
KDIC Copy of the Payments
ledger
Depositor
Electronic ledger of deposit
insurance payments
1 2
3
4
Electronic ledger of deposit
insurance calculation
Off-Line
On-Line
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1. Integrated Management System
After IRIS
Examination and calculation of DI claims
Payment - Interim payment - DI payment - Advance dividend payment
Follow-up Management - Withholding payment (or its cancellation), Reflecting changes in the system due to inheritance of claims, resolution of a lawsuit, etc.
Control of each process from determination of the amount of claims, to payment to each depositor, and to post-management
Account settlement - Settlement of advance dividend payments after the exact amount of dividends due to each depositor is determined.
Agent Bank
Failed Bank
Electronic ledger of deposits
KDIC
Depositor Electronic ledger of deposit
insurance
Direct Application
Application on Behalf of
the Depositors
1
2
2
Depositor
On-Line
Off-Line
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1. Integrated Management System
Necessity of Establishing an Integrated Management System
Maintaining data integrity
Control of the payment process
Real-time payment monitoring
The ability to have multiple agent banks
The ability to provide standardized payment services
Easier to provide multiple payment methods
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2. Multiple Payment Methods
Payment Methods
Teller Counter : Payment or money transfer at agent bank teller counters
Internet : Receipt of claims and payment via the Internet
Post : Sending of a check through mail
ATM : Payment or money transfer at ATMs
Etc.
Choice of Payment Methods Depending on Circumstances
Depositor Characteristics : Preferred transaction methods, geographical location, amount of deposits
National IT Infrastructure: IT environment for financial transactions, Internet penetration, etc.
Characteristics of FIs : Types of troubled financial institutions, types of services agent banks can provide
Institutional characteristics
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3. Reduction of Payout Period
The IADI, in Core Principle 17, requires members to be able to reimburse depositors promptly and have the means necessary. The recommended time period is one month.
- The global trend is shortening the preparatory period. [U.S.(immediate payment), EU(within 20 days), UK (within 7 or 20 days) ]
Challenges in Making Prompt Payments
The start point of preparatory work for DI payment
It takes long to obtain data necessary for the calculation of DI claims.
Data inaccuracy makes it necessary to examine and verify data many times.
Inadequate IT systems for data verification and calculation and payment of deposit insurance.
Start of interim payments within 4 days after suspension of operation
- Determination of resolution method after bank closure
- Payment of deposit insurance after the decision on resolution method
Start of DI payment the next business day after suspension of operation
- Resolution method is determined and all preparatory work is completed before the bank is closed
Now Before 2012
How the preparatory period for DI payment of KDIC has changed
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3. Reduction of Payout Period
What is Necessary to Reduce the Preparatory Period
IT Systems of Member FIs
• To quickly create data the deposit insurer needs to determine the amount of claims due to each depositor
IT Systems of the Deposit Insurer to Verify Data
• To verify data submitted by the failed financial institution and calculate deposit insurance claims
Regular Operation
• Regular reporting of data by member financial institutions and verification of the data by the deposit insurer and, if necessary, on-site checks
• Access to data for the deposit insurer before or immediately after the occurrence of an insurance event and start of preparations for DI payment
Institutional Arrangements
• Legal powers for the deposit insurer to gain timely access to data necessary for the calculation of claims
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3. Reduction of Payout Period
What is necessary to shorten the period from start of payment to actual payment
Speed of claims processing : Ability to process a large number of claim filings
Speed of payment : Real-time money transfer
KDIC (IRIS)
The depositor’s account to receive the payment
Electronic Transaction Intermediary
Agent Banks
Firm Banking • Firm banking services
- Computer systems of a company(IRIS) and a financial
institution are connected through communications
networks so that banking services (e.g. real-time
money transfer) can be conducted online.
- When a request for payment goes through, the
money can be wired real-time to the depositor’s
account through firm banking services.
- KDIC can be connected with multiple agent banks,
which increases IRIS’s processing speed and disaster
handling capacity.
DI Claims
M O N E Y
T R A N S F E R
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4. Capacity to Handle Payments
Changes in the Environment
Failures of larger FIs : Number of depositors (thousands → hundreds of thousands)
Payment to depositors of several failed financial institutions at the same time
Technological advances : Depositors’ expectations for immediate reimbursement
(enhanced convenience of financial transactions)
Need to develop response measures in case of IT failure at an agent bank
Off-Line only
One agent bank
No IT system for payment
(Calculation only)
On-Line & Off-Line
One agent bank
IT system(IRIS)
- Static(small)
On-Line & Off-Line
Six agent banks
IT system(IRIS)
- Variable
~ 2008 2008.12 ~ 2011 After 2nd half of 2011
How the KDIC’s payment handling capacity has changed
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III. Conclusion
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What to Consider?
Recommendations for IT System Development
Support all business processes related to DI payment
• A system which can allow control of key processes and ensure data
integrity is recommended.
Provide convenient payment methods
Functions to reduce the preparatory period for DI payment
Sufficient processing capacity and stability
Other Considerations
Institutional pre-conditions including law
Cooperation with agent banks and member FIs
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KDIC’s Mid-to-long Term Plan
Further development of IT System
To be able to make payments to customers of other types of financial
institutions besides savings banks
To secure enough capacity to be able to handle reimbursement of depositors of
a very large financial institution
Stronger ex-ante monitoring
Stronger monitoring of data created by member institutions which will be used
for the determination of claims in the event of their failure
Simulation training based on the contingency plan
Institutional Improvement
Will specify in law by what time DI payment should begin
Will assess what institutional requirements are needed to meet the payout
period and improve the current system
Thank you for your kind attention!
