The facility would also provide short-term loans, according to the Financial Services Commission, and it could be functional by late 2023 if legislative adjustments and other preparations go smoothly.
It stated that no taxpayer funds would be required. The KDIC would use its resources, which are already supported by deposit insurance premiums, to extend guarantees and loans by charging fees.
According to the commission, South Korea has several policy tools to deal with financial crises, but the new plan aims to prevent them.
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The South Korean economy suffered greatly during financial crises in the late 1990s, as well as in 2008 and 2009, as financial firms became illiquid and struggled to meet obligations. The authorities assisted them in recapitalizing, but the damage had already been done.
The commission emphasized that the current financial system was sound.
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