Regulation on Supervision of Banking Business (140225)english.fss.or.kr/fss/eng/Regulation/R21.pdf · and announced by the FSC as prescribed in Article 1-7 (3) of the Decree shall

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The English translation of the financial supervisory regulations is not official and is intended for reference only. Neither the FSC nor the FSS is responsible for the correctness of the English translation, and the reader is advised to refer to the most up‐to‐date regulations in Korean.

REGULATIONON

SUPERVISION OF BANKING BUSINESS

Wholly Amended on Dec. 29, 2000, FSC 2000-118Amended on Jul. 2, 2001, FSC 2001-38

Sep. 4, 2001, FSC 2001-62 Dec. 19, 2001, FSC 2001-105

Apr. 2, 2002, FSC 2002-12 May 1, 2002, FSC 2002-20Sep. 23, 2002, FSC 2002-58Nov. 13, 2002, FSC 2002-74Nov. 27, 2002, FSC 2002-77Dec. 18, 2002, FSC 2002-79

Jan. 3, 2003, FSC 2002-86 Apr. 16, 2003, FSC 2003-25

Jul. 16, 2003, FSC 2003-36 Sep. 26, 2003, FSC 2003-45Dec. 31, 2003, FSC 2003-59 Mar. 5, 2004, FSC 2004-9

Mar. 31, 2004, FSC 2004-14 Jun. 30, 2004, FSC 2004-40

Oct. 7, 2004, FSC 2004-51Dec. 15, 2004, FSC 2004-57Mar. 30, 2005, FSC 2005-12 Jun. 29, 2005, FSC 2005-27 Jul. 19, 2005, FSC 2005-34Nov. 30, 2005, FSC 2005-56Dec. 29, 2005, FSC 2005-62

Mar. 16, 2006, FSC 2006-14 Aug. 31, 2006, FSC 2006-49

Nov. 16, 2006, FSC 2006-76 Nov. 30, 2006, FSC 2006-82

Dec. 28, 2006, FSC 2006-87 May 3, 2007, FSC 2007-24

Jun. 28, 2007, FSC 2007-50 Jul. 26, 2007, FSC 2007-94

Aug. 30, 2007, FSC 2007-113Dec. 13, 2007, FSC 2007-147

Dec. 28, 2007, FSC 2007-156 Mar. 28, 2008, FSC 2008-8 Jul. 21, 2008, FSC 2008-18

Nov. 7, 2008, FSC 2008-29 Feb. 2, 2009, FSC 2009-9

Apr. 15, 2009, FSC 2009-25Jun. 24, 2009, FSC 2009-34Aug. 26, 2009, FSC 2009-50

Oct. 9, 2009, FSC 2009-58Dec. 31, 2009, FSC 2009-65 Jul. 27, 2010, FSC 2010-23Aug. 18, 2010, FSC 2010-25

Sep. 15, 2010, FSC 2010-31 Nov. 5, 2010, FSC 2010-39

Jun. 20, 2011, FSC 2011-12 Jun. 26, 2012, FSC 2012-12

Aug. 8, 2012, FSC 2012-18Dec. 26, 2012, FSC 2012-31

Jul. 3, 2013, FSC 2013-22Dec. 17, 2013, FSC 2013-44

Feb. 11, 2014, FSC 2014-6

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Feb. 25, 2014, FSC 2014-7

CHAPTER IGENERAL PROVISIONS

Article 1 (Purpose)

The purpose of this Regulation is to prescribe matters necessary for the implementation of matters under the control of the Financial Services Commission (hereinafter, the "FSC") concerning the supervision of banks, which are prescribed by the Banking Act (hereinafter, the "Act") and the Enforcement Decree thereof (hereinafter, the "Decree"), the Foreign Exchange Transactions Act and the Enforcement Decree thereof, the Korea Development Bank Act and the Enforcement Decree thereof, the Industrial Bank of Korea Act and the Enforcement Decree thereof, the Export‐Import Bank of Korea Act and the Enforcement Decree thereof, the Agricultural Cooperatives Act and the Enforcement Decree thereof, the Fisheries Cooperatives Act and the Enforcement Decree thereof, the Act on the Establishment, etc. of Financial Services Commission (hereinafter, the "FSC Establishment Act") and the Enforcement Decree therof, the Act on the Structural Improvement of the Financial Industry and the Enforcement Decree thereof, and other relevant Acts and subordinate statutes.

[This Article Wholly Amended on Nov. 5, 2010]

Article 2 (Scope of Equity Capital)

(1) Equity capital under Article 2 (2) of the Act and Article 1‐2 of the Decree shall be computed by subtracting deductible items from capital under subparagraph 1 (a) of Article 1-2 of the Decree (hereinafter referred to as "common equity capital"), capital under item (b) of the said subparagraph (hereinafter referred to as "other core capital") and supplementary capital based on the individual financial statement of a bank. <Amended on Jul. 3, 2013>

(2) The scope of common equity capital, other core capital, supplementary capital and deductible items under paragraph (1) shall be as prescribed in Appendix 1, and specific standards for calculation of individual items shall be prescribed by the Governor (hereinafter referred to as the "Governor") of the Financial Supervisory Service (hereinafter referred to as the "Financial Supervisory Service") established pursuant to the FSC Establishment Act: Provided, That the total amount of Capital B of Korean branches of foreign banks shall be acknowledged as equity capital. <Amended on Jul. 3, 2013>


Article 3 (Scope of Credit Extension)

The scope of credit extension under Article 2 (2) of the Act and Article 1‐3 of the Decree shall be as prescribed in Appendix 2.

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Article 4 (Request for Submission of Data)

The Governor may request banks and shareholders thereof for necessary data in order to ascertain whether a person is the person who is exercising de facto influence under Article 1-6 of the Decree. <Amended on Jul. 3, 2013; Feb. 11, 2014>


CHAPTER IIAUTHORIZATION, REPORTING, ETC.

Section 1Authorization

Article 5 (Authorization of Banking Business)

(1) Those who intend to receive authorization for banking business as prescribed in Article 8 of the Act shall submit an application for authorization determined by the Governor and accompanying documents under Appendix 2-6 to the FSC.

(2) The detailed requirements for authorization for banking business determined and announced by the FSC as prescribed in Article 1-7 (3) of the Decree shall be as listed in Appendix 2-2.

(3) The FSC that has received an application under paragraph (1) shall confirm the corporate registration certificate through the joint use of the administrative information under Article 36 (1) or (2) of the Electronic Government Act.

(4) The Governor shall confirm whether the details of application under paragraph (1) are authentic, and examine whether the details of application meet the requirements for authorization under Article 8 of the Act, Article 1-7 (3) of the Decree and paragraph (2) of this Article in consideration of the opinions collected from interested parties, etc.

(5) Where the FSC has received an application as prescribed in paragraph (1), it shall determine whether to grant authorization for banking business within three months (one month, where preliminary authorization under Article 11-2 of the Act has been granted), and notify the applicant of the result and reason in writing without delay. In such cases, it may request supplementation if such application has deficiencies.

(6) Where the period of examination under paragraph (5) is calculated, any of the following periods shall not be counted in the period of examination:

1. Period needed to be supplied with necessary data from other institutions, etc. in order to confirm whether the applicant meets the requirements in subparagraphs of Article 8 (2) of the Act;

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2. Period of supplementation, where a request is made to supplement deficiencies in the application for authorization as prescribed in paragraph (5);

3. Period until a lawsuit or procedures for investigation, examination, etc. are completed where a criminal lawsuit is pending against a shareholder (referring to a shareholder who has to obtain approval from the FSC in order to hold shares of a bank: Provided, That where private equity funds, etc. are the shareholders, the employees or special purpose company thereof shall be included) of an entity that intends to obtain authorization for banking business, or investigation, examination, etc. by the FSC, the Fair Trade Commission, the National Tax Service, the Prosecutors' Office, the Financial Supervisory Service, etc. are underway, and the details of such lawsuit, investigation, examination, etc. are recognized to be likely to exercise enormous influence over the examination of authorization.

(7) Where the FSC has received an application for authorization as prescribed in paragraph (1), it shall have the Governor make a firsthand investigation by a method, such as interviews, etc. with the interested parties, promoters or executives if necessary to confirm the details of application, and the applicant shall actively cooperate therewith.

(8) Where the FSC has imposed conditions as prescribed in Article 1-7 (4) of the Decree when it authorized banking business, the Governor shall confirm whether such conditions are observed.

(9) In order to collect opinions of the interested parties, etc. concerning the details of application for authorization under paragraph (4), the FSC shall announce the applicant, date of application, details of application, method and deadline of submitting opinions, etc. on the website.

(10) The FSC shall notify the applicant for authorization of an opinion recognized as unfavorable to him/her from among opinions collected as prescribed in paragraph (9), and may allow such applicant to defend himself/herself within a specified period.

(11) The FSC may hold a public hearing, when it is recognized to be necessary, including where authorization for banking business is likely to have significant influences on the financial market, etc.

(12) An entity that has received authorization for banking business as prescribed in Article 8 of the Act shall commence business within six months from the date it received such authorization: Provided, That where the FSC has separately determined a time limit or has extended a time limit upon the application of the entity that received the authorization for banking business, it may commence business within such time limit.

(13) Any entity that intends to obtain preliminary authorization for banking business as prescribed in Article 11-2 of the Act shall submit an application for preliminary authorization determined by the Governor and accompanying documents under Appendix 2-6 to the FSC.

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(14) Where the FSC has received an application for preliminary authorization as prescribed in paragraph (13), the Governor shall examine whether such applicant can meet the requirements under paragraph (2), and the FSC shall determine whether to render preliminary authorization within two months and notify the applicant the results and reasons in writing without delay. In such cases, if deficiencies exist in the application for preliminary authorization, the FSC may request the supplementation thereof.

(15) Paragraphs (2) through (11) shall apply mutatis mutandis to the methods of and procedures for examining preliminary authorization applied under Article 11-2 of the Act. In such cases, "authorization" shall be deemed "preliminary authorization."

(16) Other necessary matters, such as application forms, etc. under paragraphs (1) and (13) shall be determined by the Governor.


Article 5-2 (Authorization for Merger, etc.)

(1) Any entity that intends to obtain authorization for an act falling under any subparagraph of Article 55 (1) of the Act shall submit an application for authorization determined by the Governor and accompanying documents under Appendix 2-6 to the FSC.

(2) The detailed requirements for authorization under Article 55 (1) of the Act determined by the FSC as prescribed in Article 24-7 (4) of the Decree shall be as listed in Appendix 2-3.

(3) Other necessary matters, such as application forms, etc. under paragraph (1) shall be determined by the Governor.

(4) Article 11-2 of the Act and Article 5 (3) through (16) of this Regulation shall apply mutatis mutandis to the authorization for an act falling under any subparagraph of Article 55 (1) of the Act.

[This Article Newly Inserted on Nov. 5, 2010]

Article 5-3 (Authorization for Merger or Conversion under the Act on the Structural Improvement of the Financial Industry)

(1) Any entity that intends to obtain authorization for merger or conversion of banks as prescribed in Article 4 (1) of the Act on the Structural Improvement of the Financial Industry shall submit an application for authorization determined by the Governor and accompanying documents under Appendix 2-6 to the FSC.

(2) The detailed matters concerning standards for the examination of merger or conversion under Article 4 (3) of the Act on the Structural Improvement of the Financial Industry determined by the FSC under Article 4 (6) of the same Act shall be as listed in Appendix 2-4.

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(4) Articles 8 (5) and 11-2 of the Act and Article 5 (3) through (16) of this Regulation shall apply mutatis mutandis to the authorization for the merger or conversion of banks under Article 4 (1) of the Act on the Structural Improvement of the Financial Industry.


Article 5-4 (Authorization, etc. for Establishment, etc. of Foreign Bank Branches)

(1) Any entity that intends to obtain authorization in order to establish or close a branch of a foreign bank (hereinafter, "foreign bank branch") in the Republic of Korea under Article 58 (1) of the Act shall submit an application for authorization determined by the Governor and accompanying documents under Appendix 2-6 to the FSC.

(2) The detailed requirements for authorization under Article 58 (1) of the Act determined by the FSC under Article 24-8 (3) of the Decree shall be as listed in Appendix 2-5.


(4) Article 11-2 of the Act and Article 5 (4) through (16) of the Regulation shall apply mutatis mutandis to authorization for the establishment or closure of a foreign bank branch under Article 58 (1) of the Act.


Article 6 (Procedures for Authorization)

Procedures for authorization under Articles 5, 5-2, 5-3 and 5-4 shall be as listed in Appendix 2-7.


Article 7 (Performance of Duties of Authorization)

Where the Governor deems it necessary to evaluate the appropriateness of business plans, etc. concerning the examination of authorization under Articles 5, 5-2, 5-3 and 5-4, he/she may organize and operate an evaluation committee.


Article 8 (Consultation, etc. on Authorization)

The Governor may guide entities that intend to obtain authorization under Articles 5, 5-2, 5-3 and 5-4 in all inquiries, such as procedures for authorization, standards for

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examination, application documents, accompanying documents, etc. in writing, or have an interview or conference with such entities.


Section 2Reporting

Article 9 (Reporting on Decrease in Capital)

(1) Where the FSC has received a report under Article 10 (1) of the Act, the Governor shall examine whether it conforms to the following standards:

1. That the inevitability of a decrease in capital is recognized;

2. That it is not likely to pose an obstacle to the protection of depositors and creditors.

(2) The Governor may request banks to submit additional data necessary for the determination under Article 2 (2) of the Decree within a specified period. In such cases, such period shall not be counted in the period of examination under Article 2 (2) of the Decree.

(3) The procedures for reports under Article 10 (1) of the Act, documents necessary for reports and other necessary matters shall be determined by the Governor.


Article 10 (Reporting on Establishment of Overseas Subsidiaries, etc.)

(1) "Cases below standards prescribed and announced by the FSC" referred to in subparagraph 1 (a) of Article 3-3 of the Decree means cases where the total capital ratio (referring to the ratio of total equity capital to risk weighted assets) is not more than 10/100, the core capital ratio (referring to the ratio of core capital to risk weighted assets) is not more than 7.5/100, or the common equity capital ratio (referring to the ratio of common equity capital to risk weighted assets) is not more than 5.7/100. <Amended on Jul. 3, 2013>

(2) "Standards determined and announced by the FSC" referred to in subparagraph 1 (b) of Article 3-3 of the Decree means the 3rd grade in the evaluation of management status under Article 33.

(3) "Juristic person of a scale exceeding that publicly announced by the FSC in consideration of the equity capital, etc. of a relevant bank" referred to in the part other than the items of subparagraph 2 of Article 3-3 of the Decree means a juristic person that has an equity capital as at the end of the latest business year exceeding 2/100 of the amount obtained by summing up the common equity capital and other core capital of a bank as at the end of the latest business year. <Newly Inserted on Feb. 11, 2014>

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(4) "Juristic person below investment grade determined and publicly announced by the FSC" referred to in subparagraph 2 (a) of Article 3-3 of the Decree means a juristic person below B+ (including the grade equivalent thereto; hereafter the same shall apply in this Article) in the credit ratings by an internationally recognized credit rating agency (hereafter, "credit rating" in this Article) and a juristic person without credit rating. <Amended on Feb. 11, 2014>

(5) "Juristic person below the standards determined and prescribed by the FSC" referred to in subparagraph 2 (b) of Article 3-3 of the Decree means following juristic persons: <Newly Inserted on Feb. 11, 2014>

1. A juristic person that receives evaluation of management status according to Acts and subordinate statutes applicable thereto and obtains a grade below 3rd grade or corresponding grade as a result of evaluation of management status under Article 33;

2. A juristic person that fails to receive evaluation of management status according to Acts and subordinate statutes applicable thereto and of which debt ratio exceeds 200/100.

(6) "Countries less than qualified for investment determined and announced by the FSC" referred to in subparagraph 4 (a) of Article 3-3 of the Decree means countries below B+ in credit rating or without credit ratings. <Amended on Feb. 11, 2014>

(7) Where the FSC has received a report under Article 13 (3) of the Act, it shall have the Governor examine following subparagraphs: <Amended on Feb. 11, 2014>

1. Whether the estimated financial statement and outlook for earnings for the initial three years are appropriate in view of the business plan;

2. Whether plans for raising funds are appropriate;

3. Whether the reported details are likely to inflict damage to the management soundness of banks or the stability of the financial market, etc.

(8) The documents necessary for the preliminary report of establishment plans under Article 13 (2) of the Act and other necessary matters shall be determined by the Governor. <Amended on Feb. 11, 2014>

[This Article Wholly Amended on Nov. 5, 2010][Enforcement Date: Jan. 1, 2015] Article 10 (1)

Article 10-2 (Reporting, etc. on Relocation of Foreign Bank Branches)

(1) Where the FSC has received a report that foreign bank branches or agencies are to move to other Cities or Dos as prescribed in Article 58 (3) of the Act, it shall have the Governor examine whether such foreign bank branches or agencies meet the following standards:

1. That the appropriateness of business plans after the relocation of branches is recognized;

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2. That the relocation of branches shall not be likely to undermine the protection of those conducting financial transactions, such as domestic depositors.

(2) Where the FSC has received a report on the establishment of the office of a foreign bank as prescribed in Article 58 (3) of the Act, it shall have the Governor examine whether such foreign bank meets the following standards:

1. That the supervisory authorities of the home country have given lawful consent to the establishment;

2. That such bank obtained authorization for banking business from the home country and has been systematically supervised by the supervisory authorities;

3. That the general management status of such foreign bank is good and its international credibility is recognized.

(3) The documents necessary for reporting under Article 58 (3) of the Act and other necessary matters shall be determined by the Governor.


Section 3Recognition of Operating Funds

Article 11 (Operating Funds of Foreign Bank Branches)

(1) The operating funds of foreign bank branches prescribed in Article 26 of the Decree shall be classified into Capital A and Capital B.

(2) The funds falling under subparagraphs 1 through 3 of Article 26 of the Decree shall constitute Capital A under paragraph (1).

(3) Each branch of foreign banks shall have at least three billion won for Capital A.

(4) The total of the following funds shall constitute Capital B under paragraph (1), however, it shall not exceed 200/100 of the total capital on the balance sheet:

1. Funds in Korean won kept and managed by a foreign bank branch after selling funds in foreign currency to the Bank of Korea on condition of repurchase;

2. Funds managed by a foreign bank branch in Korea from among the funds that it borrowed from its head office or foreign branch on condition that repayment is to be made after one year (hereafter, "long-term loan between head office and branch" in this Article).

(5) The funds prescribed in paragraph (4) 2, which are managed in Korea, shall be calculated by subtracting the increase in the amount under the following

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subparagraphs compared with that of the previous month from the loan with the repayment period exceeding one year or adding the decrease in the amount under the following subparagraphs compared with that of the previous month to such loan:

1. Monthly average balance of the funds that a foreign bank branch has lent to its head office or foreign branch;

2. Monthly average balance of the funds in Korean won kept and managed after selling funds in foreign currency to the Bank of Korea on condition of repurchase.

(6) Notwithstanding paragraph (5), where the Governor judges that the long-term loan between head office and branch under paragraph (4) 2 cannot be deemed to have been managed in Korea in consideration of the details of fund operation of a foreign bank branch, he/she may exclude it from Capital B.

(7) Foreign bank branches shall submit relevant data, such as the details of borrowing and repayment of long-term loan between head office and branch prescribed in paragraph (4) 2, contracts, the written confirmation of money transfer, etc. to the Governor.

(8) Where a foreign bank has more than one branch in Korea, the total of operating funds of such branches shall be deemed the capital of such foreign bank.


Article 12 (Preservation of Domestically Held Assets)

(1) A foreign bank branch, when domestically held assets fall short of the amount equivalent to its operating funds, shall make up the difference within ninety (90) days from the date of occurrence of such difference.

(2) All the assets in Korean won and foreign currency being operated by a foreign bank branch in Korea shall constitute the domestically held assets as prescribed in paragraph (1).

(3) Where the Governor recognizes it necessary, he/she may issue a preservation order pursuant to paragraph (1) even before the period prescribed in paragraph (1), and in such cases, foreign bank branches shall implement such preservation order within thirty (30) days from the date it received such preservation order.

(4) The preservation under paragraphs (1) and (3) shall be conducted by retrieving assets held in foreign countries or by the supply of funds from the head office, and the relevant foreign bank branch shall make a report on the result of preservation to the Governor without delay.


Article 13 (Recognition of Operating Funds)

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(1) In recognizing the operating funds of foreign bank branches, consideration shall be given to the management soundness and the capital adequacy of such foreign bank branches.

(2) Article 9 shall apply mutatis mutandis to the recognition of reduction of Capital A.

(3) Where a foreign bank branch intends to obtain the recognition of Capital A, it shall submit an application or report to the Governor, as determined by the Governor.

(4) The FSC shall recognize Capital A of the first branch of a foreign bank and the reduction of Capital A of a foreign bank branch, and Capital B under Article 11 (4) shall be deemed to have been recognized by the FSC.

(5) Capital A that has not been prescribed in paragraph (4) shall be recognized by the Governor: Provided, That any increase in Capital A or the transfer of reserves into the Capital A shall be deemed to have been recognized by the Governor when a report on the results of implementation is made.


CHAPTER IIISTOCKHOLDING OF BANKS

Section 1Approval, etc. for Owning Stocks in Excess of Stockholding Limit

Article 14 (Reporting on Stockholding by Same Person)

(1) "Matters determined and publicly announced by the Financial Services Commission" referred to in Article 4-2 (2) 5 of the Decree means plans to hold additional stocks hereafter and other matters determined by the Governor.

(2) Any person who intends to report the status of stockholding by a bank or changes in the rate of stockholding as prescribed in Article 4-2 (3) and (4) of the Decree shall submit a report in the form determined by the Governor and accompanying documents to the Governor.

(3) "Days determined and publicly announced by the Financial Services Commission" referred to in Article 4-2 (3) of the Decree means the following days:

1. Holidays;

2. Workers' Day under the Designation of Workers' Day Act;

3. Saturdays.


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Article 14‐2 (Period Excluded from Handling Period of Approval for Stockholding)

"Period determined and publicly announced by the Financial Services Commission" referred to in the proviso to Article 4-3 and the proviso to Article 10 (4) of the Decree means any of the following periods: <Amended on Feb. 11, 2014>

1. Period in which deficiencies in the application for approval are to be supplemented;

2. Period for receiving necessary data from other institutions to verify whether requirements for approval are satisfied;

3. Period until a lawsuit or procedures for investigation, examination, etc. are completed where a criminal lawsuit is pending against the same person, etc., or investigation, examination, etc. by the FSC, the Fair Trade Commission, the National Tax Service, the Prosecutors' Office, the Financial Supervisory Service, etc. are underway, and the details of such lawsuit, investigation, examination, etc. are recognized to be likely to exercise enormous influence over the examination of authorization;

4. Period during which, due to natural disasters or other reasons, it is impossible to notify an applicant of the grounds for disapproval.


Article 14‐3 (Requirements for Owning Stocks by Stockholders Exceeding Stockholding Limit and Non-Financial Business Operators)

(1) "Standards determined by the Financial Services Commission" referred to in Appendix 1 of Article 5 and Appendix 2 of Article 11 (2) of the Decree shall be as listed in Appendix 2‐8. <Amended on Feb. 11, 2014>

(2) Deleted. <Amended on Feb. 11, 2014>







Article 14‐4 (Approval, etc. for Exceeding Stockholding Limit by Same Person)

(1) "Documents determined and publicly announced by the Financial Services Commission" referred to in Article 8 (3) 6 of the Decree means the following: <Amended on Feb. 11, 2014>

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1. Documents proving that the person intending to obtain approval is not a non-financial business operator prescribed in Article 2 (1) 9 of the Act;

2. Documents proving that loans extended to a person intending to obtain approval by a bank subject to the acquisition of stocks as of the date of application do not exceed the limit prescribed in Article 35-2 (1) of the Act;

3. Documents analyzing whether the same person is appropriate to be the controlling stockholder by owning stocks of a bank and analyzing the influence he/she has over the soundness of such bank and the efficiency of the financial industry;

4. Other documents necessary for the examination of requirements for approval determined by the Governor.

(2) Where the same person intends to hold stocks of a bank after obtaining approval from the FSC as prescribed in Articles 15 (3), 15-3 (2), 16-2 (2) and 16-2 (3) of the Act (including cases in which such person re-acquires stocks), he/she shall submit an application for approval determined by the Governor and accompanying documents to the FSC. <Amended on Feb. 11, 2014>

(3) Where the same person who has filed an application as prescribed in paragraph (2) is unable to submit documents by which appropriateness for the requirements under Articles 5 and 11 (2) of the Decree is ascertainable due to Acts and subordinate statutes or policy of the relevant country, a written confirmation issued by the government or supervising institution of the relevant country may substitute for such document: Provided, That the written confirmation shall include the statements that the submission of the relevant documents is restricted and that the requirements under Articles 5 and 11 (2) of the Decree are satisfied. <Amended on Feb. 11, 2014>

(4) Where the FSC has received an application for approval under paragraph (2), the Governor shall examine whether the same person meets the requirements prescribed in Articles 15 (5), 15-3 (7), 16-2 (2) and 16-2 (3) of the Act, and the FSC shall determine whether to grant approval and notify the applicant of results in writing. <Amended on Feb. 11, 2014>

(5) Where additional data, such as supplementary documents, are necessary in examining the requirements for approval, the Governor may request the applicant to submit such data.

(6) The person who has obtained approval as prescribed in paragraph (4) shall acquire stocks within six months from the date of approval: Provided, That where the FSC determines a separate period, or the extension of such period has been obtained from the FSC, this shall not apply.

(7) Where the same person has acquired stocks as prescribed in paragraph (6), he/she shall report such fact to the FSC without delay.

(8) Other necessary matters, such as the form of application for approval under

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paragraph (2) and the form of reports under paragraph (7), shall be determined by the Governor.


Article 14‐5 (Grounds for Approval of Exceptions)

"Cases prescribed and publicly announced by the Financial Services Commission" referred to in Article 15 (7) 4 of the Act means cases where the capital ratio of the relevant bank falls under any of the following. <Amended on Jul. 3, 2013>

1. Total capital ratio: Where the ratio is below 8/100; 2. Core capital ratio: Where the ratio is below 6/100;3. Common equity capital ratio: Where the ratio is below 4.5/100.


Article 15 (Approval, etc. for Stockholding by Private Equity Fund)

(1) "Persons falling under the standards determined and publicly announced by the Financial Services Commission" referred to in the proviso to Article 10 (2) 3 (b) of the Decree means persons who perform the economic obligation or who are exempt from such obligation in accordance with the Standards for Bearing Financial Obligation by Large Stockholders of Insolvent Financial Institution of the Financial Services Commission.

(2) "Amount determined and publicly announced by the Financial Services Commission" referred to in Article 10 (2) 4 (a) of the Decree means 500 billion won.

(3) "Amount determined and publicly announced by the Financial Services Commission" referred to in Article 10 (2) 4 (b) of the Decree means 300 billion won.

(4) "Standards determined and publicly announced by the Financial Services Commission" referred to in Article 10 (2) 5 of the Decree means the following standards:

1. A company which has never been subject to the measures of warning to an institution or heavier measures for the recent 3 years, as it falls under any subparagraph of Article 278 (1) of the Financial Investment Services and Capital Markets Act or any subparagraph of Appendix 6 of the same Act;

2. A company which has not undergone rehabilitation procedures under the Debtor Rehabilitation and Bankruptcy Act or has not brought on public criticism due to unsound financial transactions and asset operation for the recent five years;

3. A person which is not registered in the comprehensive credit information collection agencies under the Use and Protection of Credit Information Act as a customer who exchanged information disrupting financial order or a person who failed to repay its debts within the

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agreed period for the recent five years;

4. A corporation which does not show signs of insolvency under the Corporate Restructuring Promotion Act.

(5) "Information or data determined and publicly announced by the Financial Services Commission" referred to in Article 10 (3) 5 of the Decree means the following information or data:

1. The current condition of another private equity fund, where the executive partner of a private equity fund works as an employee, and of the employees;

2. The current condition of a special purpose company, whose shareholder or employee is another private equity fund, where the executive partner of a private equity fund works as an employee, and of the shareholders or employees;

3. Details of investment by a private equity fund, etc.


Article 15‐2 (Extension of Period for Disposal of Stocks Held by Non-Financial Business Operators)

(1) A non-financial business operator who intends to extend the disposal period of the stocks held pursuant to the proviso to Article 16‐2 (5) of the Act shall submit written applications determined by the Governor and accompanying documents to the FSC.

(2) The extended period prescribed in paragraph (1) shall not exceed the period stipulated by the disposal order issued pursuant to the main sentence of Article 16‐2 (5) of the Act.


Article 15‐3 (Approval, etc. for Conversion Plan)

(1) A non-financial business operator who intends to obtain approval for a plan to convert itself into an entity other than non-financial business operator as prescribed in Article 16‐2 (3) 1 of the Act (hereinafter, "conversion plan") shall submit a written application for approval determined by the Governor and accompanying documents to the FSC.

(2) Where the FSC has received an application for approval under paragraph (1), the Governor shall examine whether such application meets the requirements in Article 11‐2 of the Decree and Article 15‐4 of this Regulation, and the FSC shall determine whether to grant approval and notify the applicant of the result in writing.

(3) Where it is necessary for the examination prescribed in paragraph (2), the Governor may request the applicant to complement data or submit additional

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data.

(4) With respect to approval for a conversion plan, procedures for approval and other necessary matters in addition to those prescribed in paragraphs (1) through (3) shall be determined by the Governor.


Article 15‐4 (Requirements for Approval for Conversion Plan)

Specific standards for the approval of the conversion plan pursuant to Article 11‐2 (3) of the Decree are as follows:

1. That the method and time frame for disposal of each non-financial company shall be specified;

2. That the disposal intention of the holder of a non-financial company’s stocks (including shares; hereafter the same shall apply in this Article) shall be verifiable through the board of directors' approval of the disposal plan, affidavit of disposal certified by the notary public, etc.;

3. That the amount, time frame, method, etc. of capital increase, if intended, of the financial company shall be specified;

4. That the disposal of a non-financial company’s stocks or capital increase of a financial company shall not be restricted by relevant laws or agreements between stockholders, etc.


Article 15‐5 (Appraisal, Checkup, etc. of Conversion Plan, etc.)

(1) The Governor may have at least two (2) specialized organizations including the person prescribed in paragraph (2) 1 perform appraisal of the conversion plan prior to approval by the FSC under Article 15‐3 (2).

(2) Specialized organizations to perform the appraisal of the conversion plan shall be those falling under any of the following subparagraphs:

1. Accounting corporation established under the Certified Public Accountant Act;

2. Credit information business engaged in credit evaluation in accordance with the Act on Use and Protection of Credit Information.

(3) Any of the following entities shall not be specialized organizations prescribed in paragraph (2), unless the Governor acknowledges it inevitable:

1. Accounting corporation under suspension of business in accordance with the Certified Public Accountant Act;

2. Accounting corporation under restriction of auditing business for a

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specific company in accordance with the Act on External Audit of Stock Companies: Provided, That where the relevant specific company is not a non-financial business operator whose conversion plan is to be evaluated, the same shall not apply;

3. Credit information business under suspension of credit evaluation business in connection with its business conducted by the FSC;

4. Entities providing or having provided services within the recent two (2) years to a non-financial business operator;

5. Entities having special relationship prescribed in subparagraphs of Article 1‐4 (1) of the Decree with a non-financial business operator.

(4) A non-financial business operator whose conversion plan was approved shall make a report to the Governor on a quarterly basis on the performance of the conversion plan by the end of the following month of each quarter, as determined by the Governor.

(5) The Governor shall review the performance of the conversion plan, report to the FSC on the checkup results and then publicly disclose them.


Article 15‐6 (Preventing Conflict of Interests of Fund)

"Agency determined and announced by the Financial Services Commission" referred to in Article 16-2 (3) 3 (b) of the Act means the Financial Supervisory Service.


Article 15‐7 Deleted. <on Nov. 5, 2010>

Section 2Supervision of Large Stockholders

Article 16 Deleted. <on Feb. 11, 2014>

Article 16‐2 (Examination of Eligibility of Stockholders, etc. Exceeding Stockholding Limit)

(1) Stockholders exceeding stockholding limit, etc. shall submit information and data necessary for the examination of eligibility prescribed in Article 16-4 (1) of the Act to the Governor, as determined by the Governor.

(2) Where necessary for the examination prescribed in paragraph (1), the Governor may request banks, stockholders exceeding stockholding limit, etc. to provide necessary data or information.

(3) The Governor shall make a report on the results of examination of qualifications for stockholders exceeding stockholding limit, etc. to the FSC.

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(4) Other matters necessary for examination, such as the form of data to be submitted by stockholders exceeding stockholding limit, etc. shall be determined by the Governor.


Article 16‐3 (Exceptions to Foreign Banks, etc.)

(1) Requirements for excluding a foreign corporation (or an institution equivalent thereto, including an organization or association recognized by the Financial Services Commission; hereafter the same shall apply in this paragraph), whose stocks or investment shares are directly or indirectly owned by a foreign bank, etc. pursuant to Article 16-5 (1) of the Act, from the scope of the same person shall be as follows: <Amended on Jul. 3, 2013>

1. A foreign corporation which is suitable for international operation activities, in terms of the total amount of assets and the size of business and has a high international credit rating;

2. A foreign corporation which continues to show the total capital ratio of not less than 8/100, the core capital ratio of not less than 6.0/100 and the common equity capital ratio of not less than 4.5/100 in accordance with the BIS standards for the recent three years, or a foreign corporation which receives investment grade ratings or higher from an internationally recognized credit rating agency, satisfying standards concerning financial soundness determined by the relevant foreign financial supervisory institution;

3. A foreign corporation which is under enough supervision related to the soundness, etc. of the relevant foreign bank, etc. by the relevant foreign financial supervisory institution;

4. The FSC shall be in cooperation with the relevant foreign financial supervisory institution, including the exchanges of information;

5. A foreign corporation being excluded from the scope of the same person shall not own the stocks of a foreign bank, etc. directly or indirectly: Provided, That where it is confirmed that a foreign bank, etc. exercises a controlling power over a foreign corporation, the same shall not apply.

(2) Any one who intends to apply for approval pursuant to Article 16-5 (1) of the Act shall submit a written application for approval determined by the Governor and accompanying documents to the FSC.

(3) The Governor may request an applicant to submit necessary data, where additional data, such as supplementary documents, are necessary in examining the requirements for approval.


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Article 16‐4 (Credit Extension to Large Stockholders, etc.)

(1) "Other inevitable reasons as deemed by the Financial Services Commission" referred to in Article 20‐5 (4) 5 of the Decree means any of the following subparagraphs:

1. Guarantee payment under payment guarantee;

2. Increase in bond payment guarantee, caused by increased interest rate;

3. Changes in the balance sheet items of a bank;

4. Changes in the scope of credit extension in accordance with Article 3;

5. Emergence of new large stockholders;

6. Reduction in the stockholding ratio by large stockholders.

(2) A bank shall submit a plan requiring approval by the FSC pursuant to Article 20‐5 (4) of the Decree to the Governor within one (1) month from the date the cause occurs (from the date the bank recognizes it in cases of a cause under paragraph (1) 5 and 6).

(3) The single transaction amount under Article 20‐5 (5) of the Decree shall be calculated, for each single individual or legal entity, based upon the amount agreed upon (referring to the amount paid for acquisition by each sales agreement in case of bond acquisition provided under Article 20‐5 (6) of the Decree; hereinafter the same in this Article) in the credit extension agreement (including renewal, refinancing, and extension of the existing agreement): Provided, That where a multiple number of agreements with each single individual or legal entity are reached on the same day, the single transaction amount shall be calculated based upon the total amount of each individual agreement.

(4) A bank shall report to the Governor on the status of credit extension made to large stockholders pursuant to Article 35‐2 (4) and (5) of the Act, as determined by the Governor.

(5) "Matters determined and publicly announced by the Financial Services Commission" referred to in Article 20‐5 (7) of the Decree means proposed usage, terms and conditions such as maturity, interest rates applied, etc., type of security and appraised value, and other special covenants for each credit extension, and the financial institution shall disclose total credit extension on all large stockholders as well as credit extension on each single individual or legal entity.


Article 16‐5 (Limit on Acquisition of Equity Securities Issued by Large Stockholders, etc.)

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(1) No bank shall acquire equity securities that are not traded on the securities market (referring to the securities market under the Financial Investment Services and Capital Markets Act or any similar market in a foreign country) from among equity securities issued by large shareholders in excess of 5/1,000 of the equity capital of the bank.

(2) To extend the term for disposing of equity securities issued by large stockholders pursuant to the proviso to Article 20‐6 (3) of the Decree, the application for extension shall be submitted to the FSC via the Governor.

(3) The single transaction amount provided under Article 20‐6 (4) of the Decree shall be calculated based upon the amount paid for acquisition by each sales agreement: Provided, That where a multiple number of sales agreements are made on the same day, the single transaction amount shall be calculated based upon the total amount paid for acquisition by all sales agreements.

(4) Where a bank has acquired equity securities issued by large stockholders falling under Article 35‐3 (4) and (5) of the Act, it shall submit a report thereon to the Governor, as determined by the Governor.

(5) "Matters determined and publicly announced by the Financial Services Commission" referred to in Article 20‐6 (5) of the Decree means the following matters, and the relevant bank shall disclose its acquisition of equity securities issued by large stockholders with classification by each large stockholder:

1. Purpose of acquisition;

2. Percentage of equity securities owned as of the end of quarter year;

3. Market value of equity securities owned as of the end of quarter year;

4. Price of disposal and status of profit or loss therefrom where equity securities owned have been disposed of during the relevant quarter year.


Article 16‐6 (Restrictions on Transactions with Large Stockholders, etc.)

(1) "Where classified as falling short of the standards determined and publicly announced by the Financial Services Commission as the result of evaluation of credit risk of the relevant large stockholder pursuant to the standards for classification of asset quality determined and publicly announced by the Financial Services Commission" referred to in Article 20‐8 (1) 2 of the Decree means cases classified as "substandard or below" as the result of asset quality classification conducted pursuant to Article 27.

(2) Where large stockholders fall under any subparagraph of Article 20‐8 (1) of the Decree, a bank shall report such fact to the Governor without delay.


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CHAPTER IVCORPORATE GOVERNANCE

Article 17 Deleted. <on Nov. 5, 2010>

Article 18 Deleted. <on Dec. 31, 2009>


Article 20 (Ascertainment of whether Qualifications for Executives are Satisfied)

Where a bank intends to appoint any executive (hereafter referred to "executive" in this Article) under Article 18 (1) of the Act, it shall ascertain whether a candidate satisfies the qualifications prescribed in Articles 18 and 22 (7) of the Act and Articles 13 and 15 of the Decree, and, where making a report under Article 84 after appointing such executive, it shall also submit a report on the results of such ascertainment to the Governor. <Amended on Aug. 8, 2012>


Article 21 Deleted. <on Sep. 23, 2002>


Article 23 (Operation, etc. of Board of Directors)

(1) A standing member of the audit committee shall not assume any duty other than that of an audit committee member.

(2) The Governor may determine matters pertinent to the public announcement on the bank’s transactions with the stockholders or executives who nominate outside director candidates (limited to those appointed as outside directors) to the outside director nomination committee and other matters necessary for the administration of the board of directors.


Article 23-2 (Appointment or Dismissal of Compliance Officers)

The FSC shall have the Governor receive a notice on the appointment or dismissal of compliance officers of banks prescribed in Article 17-3 (3) of the Decree.


Article 24 (Internal Standards of Corporate Governance)

(1) "Entity designated by the Financial Services Commission" referred to in Article 17-4 (2) of the Decree means the Korea Federation of Banks.

(2) Where a bank has established or modified internal standards of corporate governance as prescribed in Article 23-4 (3) 1 of the Act, it shall publicly

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announce such fact.

(3) A bank shall publicly announce the present condition of operating the board of directors, etc. under the internal standards of corporate governance by not later than the end of the month next to the month in which the regular general meeting of stockholders is held under Article 23-4 (3) 2 of the Act.


CHAPTER VBUSINESS AFFAIRS OF BANKS

Article 25 (Incidental Business Affairs)

(1) "Standards determined and publicly announced by the Financial Services Commission" referred to in Article 18 (1) 1 of the Decree means cases in which the area of real estate to be rented is less than one time the area used directly: Provided, That the following cases shall be excluded:

1. Where it is constructed inevitably due to the construction administration of an administrative agency which grants permission on condition that the construction of a certain number of floors or higher is performed by reason of urban planning, cityscape, etc.;

2. Where real estate has become surplus due to the closure, reduction, etc. of business offices for the acquisition of asset, merger or business rationalization from among the real estate being used which is already owned or on lease, cases in which such real estate is rented until it is sold or a lease contract is terminated.

(2) "Business affairs determined and publicly announced by the Financial Services Commission" referred to in Article 18 (1) 4 of the Decree means the following business affairs: <Amended on Feb. 11, 2014>

1. Sales agency service for bullion coins (gold coins, silver coins, medals in the shape of a gold coin and medals in the shape of a silver coin), gold bullion and silver bullion, sale, purchase and lease of gold bullion, and development and sale of gold-related financial products;

2. Related services, such as the issuance of electronic tax invoices for another person and authorization, etc. thereof.

(3) The Governor shall determine necessary matters, such as application forms necessary for reports under Article 27-2 (2) and (3) of the Act, accompanying documents under Article 18 (2) 5 of the Decree, etc.


Article 25-2 (Concurrent Business Affairs)

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(1) "Derivative-linked securities determined and publicly announced by the FSC" referred to in Article 18-2 (2) 2 of the Decree means gold accounts and silver accounts. <Amended on Feb. 11, 2014>

(2) "Business affairs determined and publicly announced by the Financial Services Commission" referred to in Article 18-2 (4) 8 of the Decree means the following business affairs: <Amended on Aug. 8, 2012>

1. Credit information service;

2. Business of a bond administration company under Article 480-2 of the Commercial Act;

3. Sales agency services for the mutual aid for small enterprises and small enterprisers under Article 115 of the Small and Medium Enterprise Cooperatives Act (limited to cases where the Korea Federation of Small and Medium Business has had prior consultation with the Financial Supervisory Service on the terms and conditions of the relevant mutual aid).

(3) The Governor shall determine necessary matters, such as the report forms necessary for reports under Article 28 (2) of the Act, accompanying documents, etc.


Article 25-3 (Management of Conflict of Interests)

"Cases determined and publicly announced by the Financial Services Commission" referred to in Article 18-3 (2) 2 (a) of the Decree means the following cases:

1. Where information open to many and unspecified persons is provided;

2. Where information on financial investment instruments falling under any of the following items is provided:

(a) State bonds, local bonds, special bonds;

(b) Collective investment securities of short-term financial collective investment schemes;

(c) Securities bought or sold according to repurchase agreements;

(d) Equity securities of subsidiaries, etc. (referring to the subsidiaries, etc. under the proviso to the part other than subparagraphs of Article 37 (2) of the Act; hereinafter, "subsidiaries, etc.") of the relevant bank, which have not been listed in the securities market;

(e) Stock certificates issued by the Korea Exchange, the Korea Securities Depository or securities finance corporations, which have not been listed on the securities market;

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(f) Financial investment instruments traded under acknowledgement by the Governor that the conflict of interests from the relevant trading is unlikely to occur, which is inevitable in order to maintain the soundness of management, such as cases in which trading is conducted to avoid possible damages from lawsuit, etc.;

(g) Other financial investment instruments traded under acknowledgement by the Governor that the conflict of interests following the exchange of information is unlikely to occur;

3. Where information is supplied as all the following requirements are met, such as that appropriate reasons for providing the relevant information exist and approval of the compliance officer has been obtained, etc.:

(a) That the executive or employee providing information has appropriate reasons for providing the relevant information;

(b) That the information to be provided shall be limited to the minimum extent necessary for the performance of duties;

(c) That approval from the executive or employee in charge of the relevant duties and from the compliance officer shall be obtained in advance;

(d) That the records concerning the provision of information shall be maintained and managed;

(e) That the executive or employee who has been provided with information shall not use the relevant information for a purpose, other than the relevant duties;

4. Where information on the total amount of securities, kinds of securities and total amount by item is provided, in response to the investment consultation on financial investment instruments.


CHAPTER VIMAINTENANCE OF SOUND MANAGEMENT

Section 1Standards for Management Guidance

Article 26 (Management Guidance Ratios)

(1) Banks shall maintain the following management guidance ratios in accordance with Article 34 of the Act: Provided, That in cases of banks of which total loans in Korean won is less than two trillion won in the last month of the immediately preceding quarter, the management guidance ratio referred to in

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subparagraph 3 shall not apply: <Amended on Jul. 3, 2013>

1. Minimum capital ratios provided in Appendix 2-9 concerning common equity capital ratio, core capital ratio and total capital ratio;

2. Ratio of current assets in won currency to current liabilities in won currency (hereinafter, "won currency current ratio"): At least 100/100;

3. Ratio of loans in won to deposits received in won (excluding negotiable certificates of deposit): 100/100 or less.

(2) Detailed criteria on the calculation of ratios under paragraph (1) shall be determined by the Governor: Provided, That the ratio under paragraph (1) 1 shall be based on the consolidated statement of financial position of banks, and the method for preparing consolidated statement of financial position, the method for calculating capital ratio, etc. shall be determined in consideration of the standards proposed by the Bank for International Settlements. <Amended on Jul. 3, 2013>

(3) The Governor may have a bank, for which management guidance ratio under paragraph (1) is likely to deteriorate or which is judged to have vulnerabilities in the management as the result of management status analysis and evaluation conducted as prescribed in Article 33, submit a plan or an agreement for its improvement or make a management improvement agreement with the relevant bank: Provided, That in cases of a bank that is already under the measures of management improvement recommendation, management improvement requirement, or management improvement order pursuant to Articles 34 through 36, this shall not apply.

(4) Where capital ratio of a bank is less than capital ratio provided in Appendix 2-10, which includes capital that a bank should additionally maintain to improve the banks' ability to absorb losses (hereinafter referred to as "capital conservation buffer"), the distribution of profits (including the payment of the relevant interest of capital securities on which interest may not be paid optionally among core capital), stock buyback and the payment of performance-based bonuses (including stock options) shall be restricted to the limits under Appendix 2-11. <Newly Inserted on Jul. 3, 2013>

(5) Necessary matters concerning procedures for restriction, etc. under paragraph (4) shall be prescribed by the Governor. <Newly Inserted on Jul. 3, 2013>


Article 27 (Asset Quality Classification, etc.)

(1) A bank shall regularly classify the quality of its assets, etc. owned into five (5) different categories of "normal," "precautionary," "substandard," "doubtful," and "presumed loss" considering the debt‐repayment capability of the borrowers and the details of financial transactions, etc. and then accumulate and maintain the adequate level of allowance for credit loss (including reserve for payment guarantee, allowance for unused commitment, and bad debt reserve; hereinafter, "allowance for credit loss, etc.").

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(2) For classification of asset quality and accumulation of allowance for loan loss, etc. referred to in paragraph (1), a bank shall establish its own standards for asset quality classification, for accumulation of allowance for credit loss, etc. including the standards for evaluating borrowers’ abilities to repay debts by reflecting the standards prescribed in Appendix 3 and Article 29.

(3) A bank shall submit a report on the standards established pursuant to paragraph (2), asset quality classification under such standards and the results of accumulating allowance for credit loss, etc. to the Governor.

(4) The Governor may examine the appropriateness of asset quality classification and of the accumulation of allowance for loan loss, etc. of a bank and where they are judged to be inappropriate, he/she may request it to correct them.

(5) To secure the appropriateness and objectivity of asset quality classification and accumulation of allowance for loan loss, etc. under paragraph (1), a bank shall establish and operate a necessary internal control system including independently operating credit review function, etc.

(6) A bank shall maintain good quality of its assets through the early write‐off of the assets classified as "doubtful" or "presumed loss" (hereinafter, "bad assets") pursuant to paragraph (1).

(7) Where the Governor recognizes that the result of write‐off of bad assets held by a bank is inadequate, he/she may order such bank to write off a certain bad asset.


Article 28 (Assets subject to Forward Looking Criteria)

"Assets, etc. owned" referred to in Article 27 (1) means the following assets and includes such relevant assets booked in trust accounts or merchant banking accounts (including assets in cash management accounts; hereinafter the same shall apply):

1. Claim for indemnity, such as loans, advance for payment on guarantee (hereinafter, "loans") occurred by lending money by agreement of repaying such money with the purpose of collecting interest, etc. for economic gains in whatever form, such as title;

2. Payment guarantee, the principal liability of which is fixed (hereinafter, "fixed payment guarantees");

3. Securities;

4. Lease assets;

5. Suspense receivable or account receivable;

6. Interest receivable;

7. Other assets, etc. recognized by a bank to be in need of forward looking criteria.

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Article 29 (Standards for Accumulating Allowance for Credit Loss, etc.)

(1) A bank shall accumulate allowance for assets, etc. owned according to the "Korean International Financial Reporting Standards" prescribed in Article 32 (1), and where each amount calculated by the classification of quality prescribed in the following subparagraphs (in cases of a bank that employs internal rating-based approach of the Bank for International Settlements, if the total of the following amounts falls short of the estimated loss calculated by utilizing the internal rating-based approach, each estimated loss calculated by classification of quality for assets, etc. owned to which the relevant subparagraphs apply) exceeds the amount of allowance by classification of quality corresponding thereto, the difference shall be accumulated for bad debt reserve every time the accounts are settled (including temporary settlement of account for each quarter): <Amended on Aug. 8, 2012; Feb. 11, 2014>

1. The total of the following amounts in accordance with the

classification of quality for the loans, claims in financial leasing, advance payment in financial leasing, temporary payment in credit nature and accrued interests in both banking and merchant banking accounts:

(a) At least 0.85/100 of assets classified as "normal": Provided, That at least 0.9/100 shall be accumulated in cases of construction business (F), wholesale and retail trade business (G), lodging and restaurant business (H) or real estate and rental business (L) by the Korea Standard Industrial Classification under the Statistics Act;

(b) At least 7/100 of assets classified as "precautionary"; (c) At least 20/100 of assets classified as "substandard": Provided,

That at least 10/100 of an asset for which a bank's preferential right to redemption (hereinafter referred to as "redeemable preference asset") is acknowledged pursuant to the Corporate Restructuring Promotion Act or Article 180 (2) of the Debtor Rehabilitation and Bankruptcy Act;

(d) At least 50/100 assets classified as "doubtful": Provided, That in the case of redeemable preference assets, at least 25/100 thereof;

(e) 100/100 of assets classified as "presumed loss": Provided, That in the case of redeemable preference assets, at least 50/100 thereof;

(f) Notwithstanding items (a) through (e), where the Government of the Republic of Korea or a local government is a borrower or in cases of call loans, bonds bought with repurchase agreements, loans to banks, and foreign currency loans to banks among the loans classified as "normal", 0 won may be applicable;

2. Notwithstanding subparagraph 1, the total of the following amounts in accordance with the classification of quality for housing loans:

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(a) At least 1/100 of assets classified as "normal";(b) At least 10/100 of assets classified as "precautionary";(c) At least 20/100 of assets classified as "substandard";(d) At least 55/100 of assets classified as "doubtful";(e) 100/100 for assets classified as "presumed loss";

3. Notwithstanding subparagraph 1, the total of the following amounts for card assets (referring to claims arising from credit cards, debit cards or prepaid cards):

(a) The total of the following amounts in accordance with the classification of quality for card loan assets (claims excluding revolving assets among the claims occurred from financial accommodation for credit card members, such as cash service and card loan) and revolving assets (claims incurred by credit card members due to the carryover of the settlement of balance after making a partial payment of the payable amount under separate agreements with credit card companies):

(i) At least 2.5/100 of assets classified as "normal";(ii) At least 50/100 of assets classified as "precautionary";(iii) At least 65/100 of assets classified as "substandard";(iv) At least 75/100 of assets classified as "doubtful";(v) 100/100 of assets classified as "presumed loss";

(b) The total of the following amounts in accordance with the classification of quality for card assets, other than assets falling under item (a):

(i) At least 1.1/100 of assets classified as "normal";(ii) At least 40/100 of assets classified as "precautionary";(iii) At least 60/100 of assets classified as "substandard";(iv) At least 75/100 of assets classified as "doubtful";(v) 100/100 of assets classified as "presumed loss";

4. The total of the amounts calculated at the basic rate prescribed in subparagraph 1 (a) through (e) in accordance with the classification of quality for the payment guarantee (including indorsed notes) as of the settlement date. In such cases, it shall be calculated based on the amount converted at the credit conversion rate in Appendix 3‐2;

5. The total of the following amounts for the unused commitment. In such cases, it shall be calculated based on the amount converted at the credit conversion rate under Appendix 3‐2:

(a) Available commitments for corporate loan: Total of the amounts calculated at the basic rate prescribed in subparagraph 1 (a) through (e) in accordance with the classification of quality;

(b) Available commitments for household loan: Total of the amounts calculated at the basic rate prescribed in items of subparagraph 2 in accordance with the classification of quality;

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(c) Available commitments for credit card loan: Total of the amounts calculated at the basic rate prescribed in items of subparagraph 3 in accordance with the classification of quality.

(2) Where the accumulated bad debt reserve exceeds the bad debt reserve to be accumulated as of the settlement date when bad debt reserve under paragraph (1) is to be accumulated, the bad debt reserve as much as such excess amount may be written back; where unappropriated deficit exists, the accumulation of bad debt reserve shall begin from the moment unappropriated deficit is appropriated. A bank shall make public the accumulated amount of bad debt reserve (where the accumulation of bad debt reserve has not been determined as of the time of temporary settlement of account for quarter year, the estimated amount to be accumulated) in the financial statement at every settlement of accounts.

(3) Notwithstanding paragraphs (1) and (2), the Governor may require any bank to accumulate the total amounts of expected loss as special allowance for credit loss, etc. by the end of a relevant quarter in the event when a financial accident under the Regulation on the Examination and Sanctions against Financial Institutions has occurred and led or is expected to lead to losses exceeding the amounts equivalent to 1/100 of equity capital as of the end of the previous month.

(4) Where forward looking criteria for the relevant expected loss is finalized after a bank accumulates special allowance for credit loss, etc. as prescribed in paragraph (3), the bank may write back such special allowance for credit loss, etc. and accumulate allowance for credit loss, etc. pursuant to paragraphs (1) and (2).


Article 29‐2 (Risk Management on Housing Mortgage Loans)

(1) A bank, when dealing with housing mortgage loans, shall abide by LTV (Loan‐To‐Value ratio), DTI (Debt‐To‐Income ratio) and other restrictions, etc. on granting housing mortgage loans and extensions of maturity provided for in Appendix 6 in order to maintain the sound management pursuant to Article 34 of the Act.

(2) Where the Governor deems it urgently necessary in view of the management soundness of banks, the Governor may adjust LTV and DTI provided for in Appendix 6 within the limit of adding or reducing 10 percentage points. In such cases, the Governor shall immediately report the details of such adjustment to the FSC.

(3) The detailed criteria on calculation methods and applicable objects of the LTV and TDI prescribed in paragraph (1), and the details of handling housing mortgage loans and limitations on extending maturity shall be subject to the determination of the Governor.


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Article 29‐3 (Management Guidance Standards concerning Voluntary Conveyance, etc. of Assets)

(1) Where a bank voluntarily conveys assets, or sells, exchanges assets or grants credit (hereinafter referred to as "voluntary conveyance, etc. of assets" in this Article) under remarkably unfavorable conditions to such bank in the light of normal terms and conditions of business to a person (hereinafter referred to as "public service corporation, etc." in this Article) excluded from a person who has a special relationship with a large stockholder pursuant to Article 20-5 (8) of the Decree, the bank shall comply with the following:1. It shall obtain approval from the board of directors before it makes a

voluntary conveyance, etc. of assets;

2. Where it has made a voluntary conveyance, etc. of assets, it shall post such voluntary conveyance using the Internet homepage, etc.;

3. It shall administer internal control standards including procedures, etc. for checking and evaluating appropriateness on voluntary conveyance, etc. of assets;

4. It shall report the current status, the results of checking and evaluation of appropriateness, etc. on voluntary conveyance, etc. of assets to the board of directors every year;

5. Where it makes a voluntary conveyance, etc. of assets to a public service corporation, etc. on condition that such public service corporation, etc. uses such assets for its essential business under the Act based on which the public service corporation, etc. has been incorporated, but its business is not suitable to the business provided by the Act based on which it has been incorporated, the bank shall discontinue a voluntary conveyance, etc. of assets;

6. No benefit in return shall be provided, i.e., the bank (including the bank, its affiliated companies and its executives and employees) receives favorable treatment from the business of the public service corporation, etc., and where a benefit in return is provided, the bank shall discontinue a voluntary conveyance, etc. of assets ;

(2) Where a bank makes a voluntary conveyance, etc. of assets under paragraph (1), it shall immediately report such voluntary conveyance, etc. to the Governor and submit a detailed statement of revenues from donations and expenditures issued by the relevant public service corporation, etc. to the Governor at least once a year

(3) Necessary matters concerning procedures, methods, etc. for paragraphs (1) and (2) shall be prescribed by the Governor.

[This Article Wholly Amended on Jul. 3, 2013]

Article 29‐4 (Provision and Receipt of Profits)

(1) Where a bank provides or receives money, articles, benefits, etc. (excluding articles and meals of which economic value is 30,000 won or less per

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occasion or expense for congratulation or condolence, condolence flowers or garlands of which economic value is 200,000 won or less per piece; hereafter the same shall apply in this paragraph) to or from the other party to a transaction (limited to cases in which the other party to a transaction is a juristic person or organization; including executives and employees thereof) with regard to duties under Articles 27, 27-2 and 28 of the Act, it shall, in advance, make a report to a compliance officer (where no compliance officer exists, referring to an auditor, etc. or a person corresponding thereto; hereafter the same shall apply in this paragraph) and keep records on the purpose of provision, details of provision, date of provision, and records on a person who is provided with or provides money, articles, benefits, etc. for five years from the date the bank provides or is provided with money, articles, benefits, etc.: Provided, That where making an advance report to a compliance officer is difficult, an ex post facto report may be made.

(2) Where a bank provides the other party to a transaction (including executives and employees where the other party to a transaction is a juristic person or organization) with money, articles, benefits, etc. worth more than one billion won with regard to duties under Article 27, 27-2 or 28, it shall, without delay, announce matters prescribed by the Governor on the website, etc.

[This Article Newly Inserted on Feb. 25, 2014]

Article 30 (Risk Management System, etc.)

(1) A bank shall establish a system for ensuring a timely recognition, assessment, monitoring, and control of various risks arising in all kinds of transactions and for evaluating and managing appropriateness of its inside capital, as prescribed by the Governor.

(2) For efficient risk management, a bank shall set up and operate an adequate risk‐bearing limit and transaction limit by department, transaction or person in charge.

(3) A bank shall assess and manage credit risk (including risk of placing too much emphasis on credit), operation risk, market risk, risk of interest rate in non‐trading position (banking book), liquidity risk, risk of strategy and reputation and other various risks which may occur in transactions for each type.

(4) A bank shall comprehensively recognize and monitor any significant change in risks in connection with its subsidiaries, etc.

(5) The Governor may evaluate the risk management, appropriateness of inside capital and management system of banks, and reflect the results thereof in his/her supervisory and examining functions.


Article 31 (Risk Management Organization)

(1) The board of directors of a bank shall deliberate and decide on following

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matters concerning risk management and take such matters into consideration in making decisions: Provided, That if necessary for efficient risk management, a committee for risk management in the board of directors (hereinafter, the "committee") may be established and operated for such duties: <Amended on Feb. 25, 2014>

1. Establishment of basic policy on risk management consistent with the management strategy;

2. Determination of risk levels which the bank can bear;

3. Approval of limit on optimum investment or limit on loss allowance;

4. Establishment and revision of regulations on risk management;

5. Results (situations of overseas subsidiaries and overseas branches shall be taken into consideration; results shall be deliberated and decisions shall be made thereon at least once every six months) of stress testing (hereinafter referred to as "stress testing") according to the methods determined by the Governor;

6. Capital management plans and fundraising plans related to stress testing results;

7. Forward looking criteria, loan loss provisioning standards, etc. (situations of overseas subsidiaries and overseas branches shall be taken into consideration).

(2) A bank shall set up a risk management unit for comprehensive management of the risks which may occur in its business and support of the board of directors (including the committee) and the management.

(3) The risk management unit in paragraph (2) shall be independent of other business departments and perform the following duties:

1. Examination and analysis on operation status of risk limit;

2. Operation of the risk management information system;

3. Timely presentment of risk management information to the board of directors (including the committee) and the management.


Article 32 (Accounting Standards and Settlement of Accounts)

(1) Every bank shall comply with the accounting standards (hereinafter, the "Korean International Accounting Standards") laid down by adopting the international accounting standards of the International Accounting Standards Board under Article 13 (1) 1 of the Act on External Audit of Stock Companies in accounting and preparing financial statements.

(2) Detailed criteria pertaining to accounting and the kinds and presentation orders of accounting titles other than those determined in the Korean International

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Accounting Standards under paragraph (1), as well as calculation standards of foreign currency accounts requested by the Enforcement Decree of the Foreign Exchange Transactions Act, shall be determined by the Governor.

(3) "Consolidated financial statements set by the Financial Services Commission" referred to in Article 41 (1) of the Act means the consolidated balance sheet and the consolidated income statement.

(4) Where a bank intends to extend the deadline of the public disclosure pursuant to the proviso to Article 41 (1) of the Act, it shall submit necessary documents, such as those describing the kinds of financial statements subject to extension, time limit, and the reasons thereof, and shall obtain approval from the Governor within two (2) months from the date of settlement.

(5) Where a bank allows the public to view financial statements to be announced as prescribed in the main sentence of Article 41 (1) of the Act through the website of the Korea Federation of Banks, it shall be deemed an announcement in the electronic document under Article 65‐2 of the Act. In such cases, matters by which it is identifiable that such announcement has been made by the relevant bank shall be included.


Section 2Evaluation of Management Status and Timely Corrective Measures

Article 33 (Analysis and Evaluation of Management Status)

(1) The Governor shall analyze the management status of banks and thereby supervise the soundness of management practice.

(2) The Governor may evaluate the management status through the examinations of financial institutions, and reflect the results thereof in his/her supervisory and examining functions.

(3) The management status evaluation under paragraph (2) shall be performed for each financial institution as of the date of examination in accordance with the classification of sectors as prescribed in any of the following subparagraphs, and then comprehensive evaluation shall be performed taking into consideration the evaluation results by section: <Amended on Aug. 8, 2012>

1. Head office of a bank or an overseas subsidiary corporation of a bank: Capital adequacy, quality of assets, appropriateness of management, profitability, liquidity, and risk management of the relevant bank or overseas subsidiary corporation of the relevant bank;

2. A foreign bank branch in Korea or an overseas branch of a bank: Risk management, operation and internal control, compliance, and asset quality of the relevant branch.

(4) Detailed evaluation items and weight of evaluation of each sector under

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paragraph (3) shall be set forth in Appendix 5. <Amended on Aug. 8, 2012>

(5) The head offices of banks, foreign bank branches in Korea, and overseas branches and overseas subsidiary corporation of banks shall be subject to the evaluation of management status pursuant to paragraph (2), and the ratings of evaluation shall be classified into five (5) grades: 1st grade (strong), 2nd grade (satisfactory), 3rd grade (less than satisfactory), 4th grade (deficient), and 5th grade (critically deficient).

(6) The detailed matters with respect to the management status evaluation pursuant to paragraph (2) shall be determined by the Governor and in such cases, the Governor may take into consideration the management status of affiliate companies that are subject to consolidation in calculating the ratio of equity capital to risk‐weighted assets under Article 26 (1) 1.


Article 34 (Management Improvement Recommendation)

(1) Where a bank falls under any of the following subparagraphs, the FSC shall recommend such bank to take necessary measures: <Amended on Jul. 3, 2013> 1. Where total capital ratio is less than 8/100, core capital ratio is less

than 6.0/100 or common equity capital ratio is less than 4.5/100;

2. Where the overall rating is 1st, 2nd, or 3rd grade, whereas the rating for asset quality or capital adequacy is 4th or 5th grade as a result of the management status evaluation conducted pursuant to Article 33;

3. When a bank is obviously adjudged to be below the standards under subparagraph 1 or 2 above due to occurrence of serious financial accidents or bad loans.

(2) Necessary measures under paragraph (1) means all or some of the following measures:

1. Improvement in manpower and organizational management;

2. Cost reduction;

3. Efficient management of business offices;

4. Restrictions on investments in fixed assets, entries into new business areas, and new capital investments;

5. Disposals of bad assets;

6. Increases in, or reductions of paid‐in capital;

7. Restrictions on dividends payment;

8. Allocation of special allowance for credit loss, etc.

(3) Where the FSC makes a recommendation pursuant to paragraph (1), it shall

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issue a letter of precaution or warning to the relevant bank or executives responsible for it.


Article 35 (Management Improvement Requirement)

(1) Where a bank falls under any of the following subparagraphs, the FSC shall require such bank to take necessary measures: <Amended on Jul. 3, 2013>

1. Where total capital ratio is less than 6/100, core capital ratio is less than 4.5/100 or common equity capital ratio is less than 3.5/100;

2. Where the overall rating is 4th or 5th grade as a result of the management status evaluation conducted pursuant to Article 33;

3. When a bank is obviously adjudged to be below the standards under subparagraphs 1 or 2 above due to occurrence of serious financial accidents or bad loans;

4. When a bank subject to the management improvement recommendation pursuant to Article 34 (1) does not faithfully implement its management improvement plans.

(2) Necessary measures under paragraph (1) means all or some of the following measures:

1. Closure, consolidation, or restriction on the establishment of new business offices;

2. Reduction of organizational size;

3. Restrictions on holding risk assets and disposals of assets;

4. Restrictions on the level of deposit interest rates;

5. Divestitures of subsidiaries;

6. Demand on the replacement of executives;

7. Partial suspension of business;

8. Formulating plans on mergers, entries as a subsidiary under a financial holding company under the Financial Holding Companies Act (hereinafter, "financial holding company") (including cases of being subsidiaries after establishing a financial holding company independently or jointly with other financial institutions), acquisitions by third parties, or transfers of all or part of business;

9. Matters under Article 34 (2).


Article 36 (Management Improvement Order)

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(1) Where a bank falls under any of the following subparagraphs, the FSC shall order such bank to take necessary measures within a time frame it prescribes, and the Governor shall check within two (2) months the performance of, and compliance with, the implementation after receiving an implementation plan reflecting the details of such measures within that time frame set by the FSC: <Amended on Jul. 3, 2013>

1. Insolvent financial institutions prescribed in subparagraph 2 of Article 2 of the Act on Structural Improvement of Financial Industry;

2. Where total capital ratio is less than 2/100, core capital ratio is less than 1.5/100 or common equity capital ratio is less than 1.2/100;

3. When a bank already subject to the management improvement requirement under Article 35 (1) seems to be in a difficult situation to continue its normal operation because it has not implemented, or can hardly implement significant matters of its management improvement plan even though it was urged to do under Article 39 (6) due to its failure to implement them.

(2) Necessary measures under paragraph (1) means all or some of the following measures: Provided, That measures, such as the suspension of all business affairs, the assignment of all business affairs, the transfer of all contracts and the retirement of all stocks, shall be limited to cases where a bank is an insolvent financial institution under paragraph (1) 1, or where it falls short of the standards mentioned in paragraph (1) 2 and is certain to damage either the soundness of the credit system or the interest of depositors:

1. Retirements of all or some of the issued stocks;

2. Suspension of duties against executives and new appointments of administrators;

3. Mergers or entries into as a subsidiary under a financial holding company (including cases of being subsidiaries after establishing a financial holding company independently or jointly with other financial institutions);

4. Transfers of all or parts of businesses;

5. Acquisition of the relevant bank by a third party;

6. Suspension of business within six (6) months;

7. Transfers of all or parts of contracts;

8. Matters under Article 35 (2).

(3) Notwithstanding paragraph (1), the FSC may order an increase or decrease of its capital to a bank already subject to the management improvement recommendation under Article 34 (1) or management improvement requirement under Article 35 (1), for which the Government or the Korea Deposit Insurance Corporation decides to make capital investments because such bank

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seems not able to normally conduct business without the support of outside funds.


Article 36‐2 (Providing Reasons, etc.)

When the FSC takes any action pursuant to Articles 34 through 36, it shall present the relevant grounds and reasons to the relevant bank.


Article 37 (Postponement of Timely Corrective Measures)

Where a bank satisfying the standards for timely corrective measures prescribed in any subparagraph of Article 34 (1), 35 (1) or 36 (1), is judged to be unable to meet such standards within a short time due to capital increase, disposal of assets or other grounds corresponding thereto, the person authorized to take measures may postpone such measures for a specific period.


Article 38 (Emergency Measures)

(1) If a bank is recognized to significantly undermine the interests of depositors as it falls under any of the following subparagraphs, the FSC may take emergency measures for removing such danger: Provided, That in cases of being unable to convene the FSC, its Chairperson may first take necessary emergency measures, and then report the details of such measures by convening the FSC without delay:

1. Shortage of reserves and assets for future payment to depositors, default of external debts, and other similar situations due to the rapid deterioration of liquidity;

2. Where it is impossible and difficult to conduct normal business due to unexpected accidents, such as shutdown, suspension of business, bank run, and labor disputes;

3. Where bankruptcy or insolvency is highly expected.

(2) Necessary emergency measures under paragraph (1) means all or some of the following measures:

1. Restriction on taking deposits and granting credits;

2. Suspension of payment to all or some of deposits;

3. Prohibition of debt‐repayment;

4. Disposal of assets.

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Article 39 (Submission and Evaluation of Management Improvement Plan, etc.)

(1) A bank subject to the management improvement recommendation or management improvement requirement under Articles 34 and 35 shall submit its plan, consistent with the management improvement recommendation or the management improvement requirement (hereinafter, "management improvement plan"), to the Governor within a time frame set by the authority that issues such action, not exceeding two (2) months after getting such action.

(2) Decision whether to approve the plans submitted pursuant to Articles 34 (1) and 35 (1) shall be made by the FSC within one (1) month from its successful submission: Provided, That if deliberation by the management evaluation committee under paragraph (3) is delayed, approval decision may go beyond not exceeding fifteen (15) days.

(3) For a plan submitted according to a management improvement recommendation, or management improvement requirement pursuant to Articles 34 and 35, the Governor shall undergo deliberation by the management evaluation committee comprised of outside professionals in advance prior to making an approval decision under paragraph (2): Provided, That this shall not apply in the event of emergency or deliberation deemed unnecessary by the Governor.

(4) Where the management evaluation committee deliberates in advance prior to making an approval decision under paragraph (3) above, the management evaluation committee may have the relevant bank attend to hear the opinion thereof.

(5) When regarding a plan submitted by a bank pursuant to Article 34 (1) as unfeasible, the FSC shall disapprove it. In such cases, the FSC shall require all or some of the measures under Article 35 (2) and finally decide whether it approves or not after making the relevant bank submit the plan reflecting the details of measures concerned within a specified period.

(6) Where a plan submitted by a bank as prescribed in paragraph (4) or Article 35 (1) is recognized as unfeasible, the FSC shall disapprove of it. In such cases, the FSC shall require all or some of measures mentioned in Article 35 (2) and require the relevant bank to submit the plan reflecting the details of measures concerned within a specified period. In addition, the FSC may, if feasibility is not recognized in the plan, demand or order some of measures under Article 36 (2) to be implemented.

(7) A bank, which has obtained approval for a management improvement plan pursuant to paragraph (2), shall submit the quarterly implementation result of its plan to the Governor by the tenth (10th) day of the following month after the end of each quarter. When adjudging the result of its plan is insufficient or inadequate due to the changes of the related system or as such, the Governor may take necessary measures, such as the correction of a management improvement plan, prompt performance within a limited period, etc.

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(8) Where the Governor requests a bank, which has received requests for management improvement, to correct the essential matters of a management improvement plan or urges such bank to comply with such requests within a specified period under paragraph (7), he/she shall report, in advance, the details thereof to the FSC.

(9) Paragraphs (2) through (5) may apply mutatis mutandis where a bank has filed a management improvement plan after revising the important matters thereof under paragraph (6).

(10) Paragraphs (2) through (8) may apply mutatis mutandis where a bank has filed a plan reflecting the management improvement order under Article 36 (1).

(11) The Governor shall determine specific matters pertaining to the organization and operation of the management evaluation committee under paragraph (3).


Article 40 (Implementation Period of Management Improvement Plan)

(1) The period for implementing a management improvement plan by a bank subject to the management improvement recommendation under Article 34 shall be within one (1) year from the date of approval.

(2) The period for implementing a management improvement plan by a bank subject to the management improvement requirement under Article 35 shall be within one (1) year and six (6) months from the approval date. In such cases, where a bank subject to the management improvement recommendation under Article 34 receives the management improvement requirement in the course of implementing the plan, the period shall be counted within one (1) year and six (6) months from the date on which the management improvement plan for such recommendation is approved.

(3) Where a bank is urged by the Governor to implement the plan within a specified period pursuant to Article 39 (7), the period mentioned in paragraphs (1) and (2) may be exceeded: Provided, That the exceeding period shall be within the period set forth in paragraph (1) or (2).

(4) Where a bank subject to the management improvement recommendation, management improvement requirement, or management improvement order under Articles 34 through 36 makes a substantial improvement in its management through an early achievement of the important matters in its management improvement plan, including increase of capital, resolution of bad credits, etc., the proper authority may alleviate corrective actions or exempt the implementation thereof.

(5) Where recognizing that a bank subject to the management improvement recommendation, management improvement requirement, or management improvement order under Articles 34 through 36 has made a sufficient improvement in its management conditions after the expiration of the implementation period of the management improvement plan, the proper authority shall notify such bank of the completion of the measures concerned.

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Where its management conditions fall under Article 34 (1), 35 (1) or 36 (1), the proper authority shall take an additional measure, such as management improvement recommendation, management improvement requirement, or management improvement order in accordance with the same Articles.


Article 41 (Publication of Management)

(1) A bank shall publicly announce the following matters within three (3) months from the settlement date, pursuant to Article 51 of the Act: Provided, That publication on the result of provisional closing on a quarterly basis shall be made within two (2) months from the date of settlement:

1. Matters on organization and manpower;

2. Matters on financial statement, profit and loss;

3. Matters on financing and operation of funds;

4. Matters on management indicators regarding soundness, profitability, productivity, etc.;

5. Matters which influence bank management, such as management policy and risk management.

(2) The specifics of items and methods for the publication of the matters prescribed under paragraph (1) shall be complied with the Uniform Management Publication Standards of Financial Business determined by the Chairperson of the Korea Federation of Banks.

(3) If a bank's soundness is, or is likely to be, remarkably damaged by the occurrence of any of the following, the bank shall make public announcement of the details thereof: Provided, That where such bank or a bank holding company under Article 2 of the Financial Holding Companies Act (hereinafter referred to as "bank holding company") to which such bank belongs is a listed corporation under Article 9 (15) 3 of the Financial Investment Services and Capital Markets Act, and submits a report on material facts in accordance with Article 161 of the aforesaid Act or makes public announcement in accordance with the Rules on Public Announcement determined by the Korea Exchange pursuant to Article 391 of the aforesaid Act, such public announcement may be omitted: <Amended on Feb. 25, 2014>

1. Where bad loans, financial accidents or other events arise;

2. Where measures on the management improvement recommendation, etc. are imposed under Articles 34 through 38;

3. Where the liquidity ratio of Korean won under Article 26 (1) 2 or the loan-to-deposit ratio under Article 26 (1) 3 has been violated;

4. Where any event which may result in material changes in the financial structure of the bank arises;

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5. Where any event which may result in material changes in the management environment of the bank arises;

6. Where any event which may result in material changes in the assets of the bank, etc. arises;

7. Where any event which may result in material changes in claim‐obligation relationship of the bank arises;

8. Where any event which may result in material changes in investment and contribution relationship of the bank arises;

9. Where any event which may result in material changes in loss and profit structure of the bank arises;

10. Where any other event which may result in material changes in management of the bank arises.

(4) The subjects, details, methods, timing, etc. of publication under paragraph (3) shall be determined by the Governor.

(5) Where a bank makes publication of matters prescribed under paragraphs (1) through (3) without due diligence through false statements or omissions of material facts of information, the Governor may require the relevant bank of re‐publication or correction.

(6) A bank shall report the following matters to the ordinary general meeting of stockholders:

1. Change of non‐performing loans in the pertinent fiscal year;

2. Obligor companies with increased non‐performing loans in the pertinent fiscal year (at least 2 billion won for nationwide commercial banks, and at least 1 billion won for regional banks);

3. Obligor companies whose loan and guarantee amounts are at least 10 billion won with an newly agreement on a debt rescheduling in the pertinent fiscal year and details of the debt‐rescheduling;

4. Details of contribution amounts in the pertinent fiscal year;

5. Results of management evaluation concerning the business performance and financial status of subsidiaries, etc.


Section 3Valuation and Calculation of Assets and Liabilities for

Determining Insolvent Financial Institutions

Article 42 (Banks subject to Valuation)

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Any bank that falls under any of the following subparagraphs shall be subject to the valuation and calculation of assets and liabilities for the determination of an insolvent financial institution under subparagraph 2 of Article 2 of the Act on Structural Improvement of Financial Industry: <Amended on Jul. 3, 2013>

1. A bank whose asset quality has drastically deteriorated due to the occurrence of major financial accidents or large non‐performing loans and thus the Governor adjudges that its liabilities may exceed its assets;

2. A bank whose total capital ratio is less than 4/100, core capital ratio is less than 3.0/100 or common equity capital ratio is less than 2.3/100;

3. A bank whose rating of the sections the Governor prescribes proves fifth (5th) grade (critically deficient) following the management status evaluation under Article 33.


Article 43 (Scope of Valuation)

(1) In principle, each account title in the assets and liabilities of the balance sheet (including trust account) of a bank as of the end of the most recent month shall be subject to valuation and calculation under Article 42 except any of the following:

1. Reserves for adjusting asset values (referring to loan loss reserves, reserves for depreciation, and other allowances);

2. Assets and liabilities of trust accounts without principal guarantee agreements.

(2) With respect to the off-balance accounts in the balance sheet of a bank, the following items shall be subject to valuation and calculation:

1. Payment guarantee;

2. Credit extension commitment;

3. Loans sold under repurchase agreement.


Article 44 (Valuation Criteria)

(1) The assets, liabilities, and off-balance accounts subject to valuation and calculation pursuant to Article 43 shall be valued in accordance with the following criteria:

1. For items where the book value reflects the market value, the valuation shall be based upon the book value;

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2. For items where the book value fails to reflect the market value, the valuation shall be based upon the market value or the real value subtracted by the estimated amount of loss;

3. For off-balance accounts, the estimated amount of loss shall be calculated and appropriated as liability.

(2) The detailed criteria on the valuation and calculation of each item in assets, liabilities, and off-balance accounts under paragraph (1) shall be determined by the Governor.


Article 45 (Valuation Procedures)

(1) The Governor may request a bank subject to valuation and calculation to submit the materials necessary for the valuation of the assets and liabilities, and may conduct on‐site inspection of the assets and liabilities when necessary.

(2) Where a bank falls under subparagraph 2 of Article 42, the Governor shall conduct the valuation and calculation of its assets and liabilities in every quarter until total capital ratio reaches at least 4/100, core capital ratio reaches at least 3/100 and common equity capital ratio reaches at least 2.3/100. <Amended on Jul. 3, 2013>



Section 4Issuance of Bonds

Article 47 (Sanctions)

(1) Where a bank has issued bonds, etc. (hereinafter, “financial bonds”) in violation of Article 19 of the Decree, the Governor may take measures, such as suspending issuance for a specified period and reducing the issuance limit, among others, against it.

(2) Where a bank has issued bonds, etc. in violation of Article 19 of the Decree, the FSC shall have the Governor examine whether to take measures under paragraph (1).


Article 48 (Reporting)

(1) A bank shall submit a report on the results of issuance of financial bonds to

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the Governor according to the procedures and forms determined by the Governor.

(2) The Governor shall report to the FSC the results of issuance of financial bonds, etc. by banks as of the end of June and December every year.


Section 5Subsidiaries and Subsidiary Banks

Article 49 (Business Categories of Subsidiaries, etc.)

"Business categories determined by the Financial Services Commission" referred to in Article 37 (2) of the Act means the following: <Amended on Aug. 8, 2012; Feb. 11, 2014; Feb. 25, 2014>

1. Banking business under the Banking Act;

2. Any of the following types of business under the Financial Investment Services and Capital Markets Act:

(a) Financial investment business;(b) Merchant banking business;(c) Business of a collective investment scheme;(d) Business of a general administration company;(e) Business of a company with an objective of holding equity shares of private equity funds;

2-2. Business of operating and allocating money, etc. after raising them by means of private placement, which falls under Article 6 (5) 1 of the Financial Investment Services and Capital Markets Act;

3. Insurance business under the Insurance Business Act;

4. Mutual savings and banking business under the Mutual Savings Banks Act;

5. Specialized credit financial business under the Specialized Credit Financial Business Act;

6. Credit information business under the Use and Protection of Credit Information Act;

7. Banking computerization business and banking research service directly related to performance of banking business;

8. Factoring business;

9. Business of a special purpose company for asset-backed securitization and asset management business under the Asset-Backed Securitization Act;

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10. Business of a special purpose company for mortgage-backed bonds under the Special Purpose Companies for Mortgage-Backed Bonds Act;

11. Business designated by competent administrative authorities as eligible for private investment pursuant to Article 8-2 of the Act on Private Participation in Infrastructure (limited to cases where the business is operated through a company falling under Article 51-2 (1) 9 of the Corporate Tax Act);

12. Procurement of equity capital by a bank (limited to cases where the business is established only for the procurement of the equity capital of the relevant bank that owns the total number of its outstanding voting stocks or equity shares);

13. Other business categories operated by overseas subsidiary corporations in the relevant countries, which correspond to those listed in subparagraphs 1 through 12;

13-2. Business of bank holding company or business corresponding thereto operated by an overseas subsidiary in the relevant country;

14. Other business affairs recognized by the FSC, which correspond to those listed in subparagraphs 1 through 12.


Article 49‐2 (Special Exceptions to Private Equity Fund)

Where a bank has in excess of 30/100 equity stake in a company, etc. falling under any of the following (hereafter referred to as "company, etc." in this Article) as an executive officer or a general partner with unlimited liability or limited partner with limited liability of the company, etc. (a general partner with unlimited liability and a company, etc. with the same investment target shall be deemed a company, etc.), the company, etc. shall be deemed a subsidiary, etc. under Article 37 (2) of the Act:

1. A private equity fund under the Financial Investment Services and Capital Markets Act;

2. A small and medium business start-up investment cooperative under the Support for Small and Medium Enterprise Establishment Act (limited to cases in which the contents of Article 269 (4) of the Financial Investment Services and Capital Markets Act are reflected in the bylaw and observed);

3. A venture business investment association under the Specialized Credit Finance Business Act (limited to cases in which the contents of Article 269 (4) of the Financial Investment Services and Capital Markets Act are reflected in the bylaw and observed);

4. The Korea Venture Fund under the Act on Special Measures for the Promotion of Venture Businesses (limited to cases in which the

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contents of Article 269 (4) of the Financial Investment Services and Capital Markets Act are reflected in the bylaw and observed).

[This Article Wholly Amended on Feb. 11, 2014]

Article 50 (Requirements for Investment in Subsidiaries, etc.)

(1) "Requirements determined and publicly announced by the Financial Services Commission" referred to in Article 37 (2) 2 of the Act means the following requirements: <Amended on Jul. 3, 2013>

1. The management status of the relevant bank shall be Grade 1 or 2 as a result of the recent management status evaluation conducted pursuant to Article 33, and shall meet the following requirements;

(a) Total capital ratio shall be at least 8/100, core capital ratio shall be at least 6/100 and common equity capital ratio shall be at least 4.5/100 as of the end of the previous year;

(b) The won currency liquidity ratio as of the end of the previous year shall be at least 100/100;

(c) The loan-deposit ratio as of the end of the previous year shall not be more than 100/100;

2. The management status of subsidiaries, etc. in which the relevant bank (excluding subsidiaries, etc. approved pursuant to Article 51) has already invested shall be Grade 1, 2, or 3 as a result of the management status evaluation conducted as of the latest fiscal year.

(2) Notwithstanding paragraph (1), any of the following cases shall be regarded as satisfying the requirements prescribed in paragraph (1) 1 and 2:

1. Where stocks issued following the capitalization of reserves or revaluation reserves are distributed by subsidiaries, etc.;

2. Where the subsidiary stocks are issued as profit dividends.

(3) The result of the evaluation of management status of subsidiaries, etc. under paragraph (1) 2 shall be classified into five (5) grades: First (1st) grade (strong), second (2nd) grade (satisfactory), third (3rd) grade (less than satisfactory), fourth (4th) grade (deficient), and fifth (5th) grade (critically deficient), and the detailed matters on the evaluation of management status shall be determined by the Governor.


Article 51 (Approval for Investment in Non‐Financial Subsidiaries)

(1) Where a bank intends to own equity securities exceeding 15/100 of the issued voting stocks of a company not belonging to business categories (hereinafter, "non‐financial company") under Article 49 pursuant to Article

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37 (2) of the Act, (including where a bank owning equity securities exceeding 15/100 of the issued equity securities of a company intends to own additional equity securities issued by such company), it shall submit an application for approval in attached Form 1 to the FSC by thirty (30) days before the proposed acquisition date: Provided, That if a bank exceeds the said limit by reason of changes, etc. in the number of issued voting equity securities, even though it has not acquired additional equity securities, it may apply for approval within fifteen (15) days after such reason occurs. <Amended on Aug. 8, 2012>

(2) Notwithstanding Article 50 (1), where any of the following banks applies for approval in order to own equity securities exceeding 15/100 of the issued voting stocks of a non‐financial company as prescribed in paragraph (1), it shall be regarded as satisfying the requirements under Article 50 (1): <Amended on Jul. 3, 2013>

1. Where total capital ratio is at least 8/100, core capital ratio is at least 6/100 and common equity capital ratio is at least 4.5/100;

2. Where a bank obtains approval of a management improvement plan pursuant to Article 39 (2) though it does not fall under subparagraph 1.

(3) The duties of approval shall be delegated to the Governor except for cases in which a non‐financial institution, of which equity securities a bank intends to own as prescribed in paragraph (1), is an affiliate of one of the top five business groups by total asset from among the business groups, for which restrictions on mutual investment and debt guarantee are imposed as designated pursuant to Article 14 of the Monopoly Regulation and Fair Trade Act and Article 17 of the Enforcement Decree of the same Act, and the Governor shall make a report of the results of approval to the FSC every quarter.


Article 52 (Limit of Credit Extension, etc. to Subsidiaries, etc.)

(1) Where a bank exceeds the standards under Article 21 (5) of the Decree due to a reason prescribed in subparagraphs of Article 21 (7) of the Decree even though it has not extended any additional credit, it shall submit a plan to conform to such standards to the Governor within one (1) month from the date such reason occurs.

(2) "Other reasons determined and publicly announced by the Financial Services Commission" referred to in Article 21 (7) 4 of the Decree means any of the following reasons:

1. Occurrence of advances for customers;

2. Increase in corporate bond guarantees due to a rise in interest rate;

3. Changes in titles of accounts on the balance sheet of banks;

4. Changes in the extent of credit extension under Article 3;

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5. Where equity shares exceeding 15/100 of the issued voting stocks of a non-financial company under Article 51 (1) are to be held;

6. Where a bank does not fall under Article 21 (6) of the Decree any longer.

(3) "Reasons determined and publicly announced by the Financial Services Commission" referred to in Article 21 (8) 3 of the Decree means any of the following reasons:

1. Preferential treatment to subsidiaries, etc. without justifiable grounds;

2. Infringing on the independence and soundness of management of subsidiaries, etc.;

3. Exercising influence on subsidiaries, etc. or customers to conduct a transaction which is likely to lead to the conflict of interests.

(4) The extension of a period under the proviso to Article 21 (11) of the Decree shall be examined by the Governor and determined by the FSC.

(5) The FSC may take necessary measures, such as imposing restrictions on transactions between a bank and its subsidiaries, within the minimum extent necessary for the sound management of banks, etc.


Article 52‐2 (Subsidiary Banks' Holding Stocks Issued by Parent Bank, etc.)

(1) If a subsidiary bank holds stocks issued by its parent bank, etc. due to a reason under Article 21 (9) of the Decree, it shall submit a report thereon to the Governor, as determined by the Governor.

(2) Where a subsidiary bank intends to have the period to dispose of stocks issued by its parent bank, etc. extended under the proviso to Article 21 (10) of the Decree, it shall make an application for extension to the FSC.

[This Article Wholly Amended on Nov. 5, 2010]Article 52‐3 (Subsidiary Bank's Credit Extension to Parent Bank, etc.)

(1) Where a subsidiary bank exceeds the limit prescribed in Article 21 (11) of the Decree due to a reason in Article 21 (12) of the Decree, it shall make a report to the Governor within one (1) month from the date it exceeded such limit, as determined by the Governor. The same shall apply to the extension of the period in excess as prescribed in paragraph (3).

(2) The Governor shall report to the FSC on the status of excess in the credit limit of the subsidiary bank in accordance with paragraph (1) on a quarterly basis.

(3) "Where it is deemed inevitable in view of the size of credit extension by a subsidiary bank" referred to in the proviso to Article 21 (11) of the Decree

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means any of the following subparagraphs:

1. Where repayment of credit already extended is unfeasible within the term as the credit extension have not matured;

2. Where causes provided for in Article 20‐5 (4) 1 or 2 of the Decree continue for a long time, and management of the parent bank, etc. in receipt of the credit extension may adversely be affected if the repayment of the credit extension is enforced;

3. Where there are similar reasons to those of subparagraphs 1 and 2 and the Governor recognizes that the subsidiary bank's asset quality would not significantly be affected even with the continuance of the excess.

(4) Where the period in which credit extension exceeds the limit is to be extended as prescribed in the proviso to Article 21 (11) of the Decree, the period to be extended shall be within one (1) year.


Article 52‐4 (Proper Security Standards, etc.)(1) "Percentage determined and publicly announced by the Financial Services

Commission according to the kinds of securities" referred to in Article 21 (14) of the Decree means any of the following subparagraphs:

1. Deposits and installment savings, claims on the Government and the Bank of Korea, claims guaranteed by the Government and the Bank of Korea, and claims secured by the securities issued or guaranteed by the Government and the Bank of Korea: 100/100;

2. Debts receivable from local governments under the Local Autonomy Act, local public enterprises under the Local Public Enterprises Act (limited to enterprises in which case any deficit, if incurred, shall be compensated for by the Government or a local government according to a relevant policy), and public institutions under the Act on the Management of Public Institutions (hereinafter, "public institutions"), debts guaranteed by a public institution, and debts secured by securities issued or guaranteed by a public institution: 110/100;

3. Assets other than those prescribed in subparagraphs 1 and 2: 130/100.

(2) Where the ratio falls below those provided under paragraph (1) as a result of depreciation and amortization of the assets secured pursuant to paragraph (1), physical damages, and reduced market value, etc., it shall be in congruence within the required ratio within one (1) month from the date of the shortfall: Provided, That in cases caused by any of the following reasons, the Governor may extend the period:

1. Changes in the scope of credit extension;

2. Shortage of security without fault on the side of the parent bank, etc.

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caused by inextricable reasons, such as rapid changes in the economic circumstances.

(3) Notwithstanding paragraph (1), any of the following assets shall not be secured as proper security:

1. Asset prescribed in Article 21 (16) of the Decree;

2. Claims on the subsidiary bank and parent banks, etc., claims guaranteed by the subsidiary bank and parent banks, etc., and claims secured by the securities issued or guaranteed by the subsidiary bank and parent banks, etc.


Article 52‐5 (Standards for Inferior Assets, etc.)

(1) "Assets determined and publicly announced by the Financial Services Commission" referred to in Article 21 (16) of the Decree means assets classified as "precautionary" or below in accordance with Article 27.

(2) Article 21 (9) of the Decree and Article 52 (2) of this Regulation shall apply to transactions between subsidiary banks and parent banks and activities of subsidiary banks and parent banks.


Article 53 (Loans Extended to Executives or Employees of Subsidiaries, Parent Bank, etc.)

(1) "Petty loans determined by the Financial Services Commission" referred to in Article 37 (3) 3 of the Act and Article 21 (13) 2 of the Decree mean loans prescribed in Article 56 (1) 1 and 2: Provided, That the terms and conditions of the loans shall be identical to those applied to general customers.

(2) When calculating loans prescribed in paragraph (1), Article 56 (2) shall apply mutatis mutandis.


Article 54 (Approval for Owning other Companies’ Equity Securities)

Where a bank and a financial institution (referring to a financial institution prescribed in subparagraph 1 of Article 2 of the Act on Structural Improvement of Financial Industry) belonging to the same business group (referring to a business group prescribed in subparagraph 2 of Article 2 of the Monopoly Regulation and Fair Trade Act) as that of such bank intend to own equity securities of other companies (including equity shares) pursuant to Article 24 (1), (4) and (5) of the Act on Structural Improvement of Financial Industry, they shall submit a written application for approval in attached Form 2 to the FSC without delay. In such cases, the FSC may have the Governor examine the requirements for the relevant approval. <Amended on Aug. 8, 2012>

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Article 54‐2 (Scope of Stocks Issued and Calculation Method of Stockholding Ratio, etc.)

(1) The issued voting stocks specified in Article 24 (1) and (5) of the Act on Structural Improvement of the Financial Industry means the issued stocks excluding the non‐voting stocks specified in Article 344-3 (1) of the Commercial Act. <Amended on Feb. 25, 2014>

(2) The stockholding ratio specified in Article 24 (1) and (5) of the Act on Structural Improvement of the Financial Industry means the ratio represented by the number of voting stocks issued of the company whose stocks are owned by the relevant financial institutions belonging to a single enterprise group, divided by the total number of voting stocks issued of that company.

(3) In calculating the stockholding ratio under paragraph (2) above, the following stocks shall be included in and added to the number of stocks owned by the financial institutions belonging to a single enterprise group:

1. Stocks of another company that are owned by a private collective investment vehicle by one investor (referring to a collective investment instrument of which investor is one person, which is a private collective investment instrument under Article 9 (19) of the Financial Investment Services and Capital Markets Act; hereinafter the same shall apply) or a publicly offered collective investment vehicle by one investor (referring to a collective investment vehicle of which investor is one person, which is not a private collective investment instrument; hereinafter the same shall apply);

2. Stocks of another company acquired by the trust company with the funds of the specified monetary trust entrusted by the financial institution belonging to a single enterprise group or the stocks of another company entrusted by the financial institution belonging to a single enterprise group with the trust company.


Article 54‐3 (Emergency Reasons)

(1) “Cases prescribed and publicly announced by the Financial Services Commission” referred to in Article 6 (3) 5 of the Enforcement Decree of the Act on Structural Improvement of the Financial Industry means each of the following cases under which there is no time for obtaining approval from the Financial Services Commission: <Amended on Jun. 24, 2009>

1. Where a financial institution owns stocks of any company as dividends in kind distributed at the dissolution or any similar event of a private equity fund under Article 9 (18) 7 of the Financial Investment Services and Capital Markets Act, in which another financial institution in the same conglomerate has invested;

2. Where a financial institution belonging to a single enterprise group

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acquires the stocks of a company engaging in private investment business defined in Article 24 (6) 1 (b) of the Act on Structural Improvement of the Financial Industry or the stocks of a real estate investment company under the Real Estate Investment Company Act;

3. Where a financial institution belonging to a single enterprise group acquires the stocks by way of a debt‐to‐equity swap for the loans, etc. to any of the following companies:

(a) A company for which a decision to commence rehabilitation proceedings under the Debtor Rehabilitation and Bankruptcy Act (hereinafter, "rehabilitation proceedings") has been made;

(b) A company for which proceedings for administration of creditor financial institutions commenced under the Corporate Restructuring Promotion Act or a company which has been subject to work‐out proceedings under an agreement made by and between financial institutions for promotion of corporate restructuring (hereinafter, "company subject to work-out proceedings").

[This Article Newly Inserted on May 3, 2007]

Article 54‐4 (Review of Requirements for Limit Excess Stockholders)

(1) The Governor shall examine related documents, etc. in the course of its review as to whether the requirements for limit excess stockholders are satisfied every other year, and then report the results of its review to the FSC after the end of each settlement term in respect of the limit excess stockholders pursuant to subparagraph 3 of Article 6‐2 of the Enforcement Decree of the Act on Structural Improvement of the Financial Industry: Provided, That if it is found, as a result of the review, that the limit excess stockholder holding excess stocks fails to satisfy the requirements for excess holding of stocks, then the Governor shall report such to the FSC immediately.

(2) Notwithstanding paragraph (1) above, the Governor may examine from time to time whether the requirements for excessive holding of stocks under subparagraphs of Article 24 (6) of the Act on Structural Improvement of the Financial Industry are satisfied, if it deems necessary due to change in the ratio of the total number of the issued voting stocks of another company owned by the financial institution belonging to a single enterprise group or for any other reason.

[This Article Newly Inserted on May 3, 2007]

Section 6Engagement in Prohibited Business Affairs


Article 56 (Loans to Executives or Employees of Banks)

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(1) "Petty loans determined by the Financial Services Commission" referred to in subparagraph 6 of Article 38 of the Act means the following: <Amended on Sep. 15, 2010>

1. General loans: Less than 20 million won (including benefits);

2. Housing loans (including general loans): Less than 50 million won;

3. Loans for loss compensation from financial accidents (including general loans and housing loans): Less than 60 million won.

(2) The calculation of the loan amounts under paragraph (1) and other necessary matters shall be determined by the Governor.



Article 58 (Disposal of Non‐Business Purpose Assets)

(1) A bank shall dispose of its assets, which are prohibited from holding by the Act or which are acquired through the exercises of security rights such as mortgage rights, (hereinafter, "non‐business purpose assets") from among possessions or assets, within one (1) year from the date of failing to meet the Act: Provided, That when a financial institution has made a report on the disposal postponement due to the failure or suspension of public auction, it shall dispose of such assets within one (1) year from the date of reports on postponement.

(2) The Governor shall determine whether an asset in question is considered to be non‐business purpose asset or not.

(3) When any asset is turned out to be non‐business purpose pursuant to paragraph (1), the bank shall report the details to the Governor without delay.

(4) A bank shall provide internal guidelines concerning the sales procedure, sales methods, etc. to enhance fairness in disposing of non‐business purpose assets under paragraph (1).


Article 59 (Exemption of Limit on Securities Investment)

Where a bank holds the stocks of any of the following companies by exchanging loans, etc. for stocks as prescribed in Article 11 (6) 1 of the Act on Structural Improvement of Financial Industry, such stockholding shall not be deemed the acquisition of securities prescribed in subparagraph 1 of Article 38 of the Act:

1. A company for which a decision to commence rehabilitation proceedings has been made;

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2. A company subject to work-out proceedings;

3. Any other company in the progress of normalization jointly promoted by banks.


Article 59‐2 (Exceptions to Asset Management)

(1) Where a bank intends to acquire collective investment securities for the purpose of entrusting a collective investment business entity under Article 8 (4) of the Financial Investment Services and Capital Markets Act with the operation of assets (hereinafter, "collective investment business entity"), such bank shall comply with the following standards:

1. That the investor shall be a bank, which is a private collective investment vehicle by one investor;

2. That it shall be conducted in accordance with asset management guidelines specifying the purpose of asset management, operating strategy such as major investment targets, investment restrictions, performance assessment, and termination of contract;

3. That the following items shall be included in the internal control standards under Article 23‐3 (1) of the Act and Article 17‐2 (1) of the Decree:

(a) Matters pertaining to the standards and procedures for appointment and dismissal of the collective investment business entity;

(b) Matters pertaining to the appraisal of asset management performance of the collective investment business entity;

(c) Matters pertaining to the organization responsible for monitoring appropriateness of the collective investment business entity’s activities;

(d) Matters pertaining to developing a system for integrated management of the assets that a bank directly operates in securities, etc. and the assets of a private collective investment vehicle by a single investor;

(e) Other matters needed for the sound asset management by banks.

(2) Paragraph (1) 2 and 3 shall apply mutatis mutandis to the public collective investment vehicle by a single investor.


Article 59‐3 (Exceptions to Insurance Solicitation)

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Where a bank solicits insurance after filing registration as an insurance agency or insurance broker under the Insurance Business Act, the following items shall be included in the internal control standards required to operate pursuant to Article 23‐3 (1) of the Act and Article 17‐2 (1) of the Decree:

1. Matters pertaining to the standards and procedures for appointment and dismissal of an affiliated insurance company;

2. Matters pertaining to the selection standards of the insurance products to be sold;

3. Matters pertaining to where the responsibility lies in respect of complaints and disputes which shall be included in the affiliation agreement entered into with an insurance company;

4. Matters pertaining to the protection of customers, if the affiliation agreement with an insurance company is terminated;

5. Matters pertaining to the prevention of unfair activities relating to the sale of insurance products.


CHAPTER VIISUPERVISION OF SOUNDNESS OF FOREIGN EXCHANGE

Section 1Registration of Institutions Dealing in Foreign Exchange

Article 60 (Institutions Dealing in Foreign Exchange)

"Institutions dealing in foreign exchange" referred to in this Chapter means institutions that have registered the business of foreign exchange pursuant to the main sentence of Article 8 (1) of the Foreign Exchange Transactions Act.

Article 61 (Requirements for Registration)

(1) "Financial soundness criteria applied to the relevant financial institution set by the Financial Services Commission" referred to in Article 13 (2) 1 of the Enforcement Decree of the Foreign Exchange Transactions Act shall be as follows: <Amended on Jul. 3, 2013>

1. Minimum capital standard under Article 9 of the Banking Act;

2. Standards for minimum compliance ratio provided in Article 26 (1) 1 (a).

(2) When the Minister of Strategy and Finance requests the confirmation of fulfillments of the registration requirements under Article 13 (3) of the Enforcement Decree of the Foreign Exchange Transactions Act, the Governor

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shall confirm it in accordance with the standards mentioned in paragraph (1).

Article 62 (Modification of Registration)

(1) An institution dealing in foreign exchange shall, when it intends to establish or close its domestic offices conducting foreign exchange affairs or to change its addresses pursuant to Article 16 (1) of the Enforcement Decree of the Foreign Exchange Transactions Act, submit a report to the Governor at least seven (7) days before the date thereof.

(2) The details of report under paragraph (1) shall be determined by the Governor.

Section 2Management of Soundness of Foreign Exchange Affairs

Article 63 (Exchange Rate Risk Management)

(1) Under subparagraph 2 of Article 21 of the Enforcement Decree of the Foreign Exchange Transactions Act, an institution dealing in foreign exchange shall confirm whether the limit on the overbought amounts and oversold amounts of foreign exchange (hereinafter, the "limit on foreign exchange position") is well complied or not on the basis of balance every business day: Provided, That the foreign exchange position on Saturdays or holidays of the New York foreign exchange market shall be made on the basis of average balance aggregated with the foreign exchange position of the following business day.

(2) When an institution dealing in foreign exchange violates the limit on foreign exchange position, it shall report the fact to the Governor within three (3) business days from the date of violation.

Article 64 (Liquidity Risk Management)

(1) An institution dealing in foreign exchange shall manage its assets and liabilities denominated in foreign currency by classifying them based on each residual maturity prescribed in subparagraph 4 of Article 21 of the Enforcement Decree of the Foreign Exchange Transactions Act, and maintain the liquidity ratio in foreign currency prescribed in the following subparagraphs:

1. Ratio of assets within three (3) months of residual maturity to liabilities within three (3) months of residual maturity: 85/100 or above;

2 Ratios of maturity mismatch between assets and liabilities in foreign currency:

(a) Ratio of liabilities exceeding assets to total assets, when the residual maturity is due less than seven (7) days: 3/100 or below;

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(b) Ratio of liabilities exceeding assets to total assets, when the residual maturity is due less than one (1) month: 10/100 or below.

(2) The method of classifying residual maturity, the scope of assets and liabilities, and the method of ratio calculation under paragraph (1) shall be determined by the Governor.

(3) When a ratio falling under subparagraphs of paragraph (1) is calculated, assets shall be calculated by multiplying the value of each asset by the liquidation weight for each type of assets under Appendix 7. <Newly Inserted on Dec. 31, 2009>

Article 64-2 (Holding of Riskless Assets Denominated in Foreign Currency)

(1) Each institution dealing in foreign exchange shall hold not less than amounts falling under any of the following subparagraphs as riskless assets denominated in foreign currency:

1. Borrowings which mature within one (1) year × 2/12 × [1 - the lowest rollover rate];

2. 2/100 of the total assets denominated in foreign currency (referring to

the assets denominated in foreign currency in the balance sheet for the previous quarter; hereinafter the same shall apply).

(2) The scope of riskless assets denominated in foreign currency pursuant to paragraph (1) shall be bonds issued by the central bank or government of a nation whose credit rating granted by the internationally recognized credit-rating agencies is A or equivalent thereto (hereinafter, "A grade"), deposit money of the central bank, company bonds of A grade or above, deposit money in financial institutions of A grade or above, or assets equivalent thereto, which are determined by the Governor.

(3) The scope of borrowings which mature within one (1) year pursuant to paragraph (1) shall be finance debentures issued in foreign currency, borrowings in foreign currency, call money in foreign currency, foreign bonds sold under repurchase agreements, or borrowings equivalent thereto, which are determined by the Governor.

(4) The lowest rollover rate pursuant to paragraph (1) 1 is the ratio of a relevant financial institution's amount of borrowings (excluding overnight borrowings; hereinafter the same shall apply) with maturities of one year or less that are newly procured during a month to the amount of borrowings with maturities of one year or less that mature during the same month and refers to the average rate for the lowest three (3) months during a period determined by the Governor.

(5) Necessary matters, other than matters falling under paragraphs (1) through (4), shall be determined by the Governor.

[This Article Newly Inserted on Dec. 31, 2009]

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Article 65 (Management of Funding Resources for Mid- and Long-Term Loans in Foreign Currency)

(1) When an institution dealing in foreign exchange makes a foreign currency loan with maturity of one (1) year or longer, 100/100 or more of such loan amount (including securities held to maturity in foreign currency; hereafter the same shall apply in this Article) shall be covered by foreign currency fund borrowed with maturity of more than one (1) year pursuant to subparagraph 4 of Article 21 of the Enforcement Decree of the Foreign Exchange Transactions Act: Provided, That this shall not apply where the outstanding amount of foreign currency loans is less than 50 million U.S. dollars. <Amended on Dec. 31, 2003; Dec. 31, 2009; Jul. 27, 2010>

(2) The scope of foreign currency loan and foreign currency borrowing stipulated in paragraph (1) shall be determined by the Governor.

Article 66 (Management of Offshore Business)

(1) Where an institution dealing in foreign exchange borrows foreign currency funds from non‐residents under Article 3 (1) 13 of the Foreign Exchange Transactions Act (hereinafter, "non‐residents") and lends them to non‐residents pursuant to subparagraph 5 of Article 21 of the Enforcement Decree of the Foreign Exchange Transactions Act (hereinafter, "offshore business"), it shall establish offshore business accounts to book those transactions separately from other transactions.

(2) Funding and operating methods in offshore business accounts under paragraph (1) shall be as follows:

1. Funding

(a) Borrowing from non‐residents or other offshore business accounts;

(b) Receiving deposit from non‐residents or other offshore business accounts;

(c) Issuing foreign currency securities abroad;

(d) Selling bonds denominated in foreign currency to non‐residents;

2. Operating:

(a) Loans or deposits to non‐residents and other offshore business accounts;

(b) Underwriting or purchase of foreign currency securities issued by non‐residents.

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Article 67 (Internal Management of Financial Institutions)

(1) An institution dealing in foreign exchange shall establish and operate its own internal management standards by types of risks arising from foreign exchange transactions, such as country risk, large credit risk, foreign currency liquidation risk, market risk, and others pursuant to subparagraph 7 of Article 21 of the Enforcement Decree of the Foreign Exchange Transactions Act. <Amended on Dec. 31, 2009>

(2) Where an institution dealing in foreign exchange intends to newly establish and alter its risk management standards mentioned in paragraph (1) or conduct foreign exchange transactions exceeding the standards, it shall refer the matter to its internal risk management committee for a resolution.

(3) The Governor shall establish exemplary standards for each type of the risks mentioned in paragraph (1), and may request correction of the risk management standards of an institution dealing in foreign exchange where they are deemed inappropriate.

Article 67-2 (Risk Management of Foreign Derivatives Transactions)

(1) Each institution dealing in foreign exchange shall independently establish and operate standards to manage risks arising from foreign derivatives transactions (hereinafter, "standards to manage risks arising from foreign derivatives transactions").

(2) Standards to manage risks arising from foreign derivatives transactions under paragraph (1) shall include matters which the Governor determines by considering the following matters: <Amended on Feb. 25, 2014>

1. Any institution dealing in foreign exchange shall check whether a party to a transaction (Provided, That persons falling under Article 9 (5) 1 through 3 of the Financial Investment Services and Capital Markets Act and parties to transactions equivalent thereto, who are determined by the Governor, shall be excluded; hereafter referred to as "other party to a transaction" in this Article) uses transactions in order to evade risks pursuant to subparagraph 1 of Article 186-2 of the Enforcement Decree of the Financial Investment Services and Capital Markets Act, when it is engaged in the transaction of foreign derivatives (limited to currency forwards, currency options, and foreign derivatives equivalent thereto, from among foreign derivatives pursuant to subparagraph 20-2 of Article 1-2 of the Regulations on Foreign Exchange Transactions, which are determined by the Governor; hereinafter, "foreign derivatives transactions");

2. Any institution dealing in foreign exchange shall establish a ceiling on transactions by party to transactions and operate foreign exchanges by considering the balance of foreign derivatives transactions already concluded with other institutions dealing in foreign exchange.

(3) The Governor may request institutions dealing in foreign exchange to revise or correct standards to manage risks arising from foreign derivatives transactions,

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when it is necessary for the soundness of institutions dealing in foreign exchange.

[This Article Newly Inserted on Dec. 31, 2009]

Article 68 (Preclusion)

(1) The provisions under this Chapter shall not apply to consignment accounts, such as trust accounts of an institution dealing in foreign exchange.

(2) Articles 64, 64-2, 65, and 67 (excluding the standards for the management of liquidity risk in foreign currency) shall not apply to domestic branches of foreign banks. <Amended on Dec. 31, 2009; Jul. 27, 2010>

Section 3Sanctions against Violation of Regulation on Soundness of

Foreign Exchange Affairs

Article 69 (Sanctions against Violations of Limit on Foreign Exchange Position)

(1) The Governor shall impose a sanction pursuant to the following subparagraphs against an institution dealing in foreign exchange who violates the limit on foreign exchange position under Article 63:

1. When violating once within the last one (1) year from the date of violation: Caution;

2. When violating twice within the last one (1) year from the date of violation: Reduction of the limit on foreign exchange position by daily average amount for the number of days of the violation.

(2) Where an institution dealing in foreign exchange falls under any of the following subparagraphs, the reduction of the limit on foreign exchange position shall be twice as much as that under paragraph (1) 2:

1. When violating at least three (3) times within the last one (1) year from the date of violation;

2. When violating on purpose;

3. When reporting under paragraph (1) has not been made within three (3) business days from the first date of violation.

(3) When imposing a sanction pursuant to paragraphs (1) and (2), the Governor may exempt, postpone, or remove the sanctions in the event that reasons for exceeding the limit are deemed inextricable, such as a decrease in the equity capital.

(4) The Governor may take measures, such as a caution, a correction order or a reduction of limit on foreign exchange position for a specified period against an institution dealing in foreign exchange, which does not comply with the reporting requirements or makes a false report.

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Article 70 (Sanctions against Violations of Liquidity Ratio in Foreign Currency, etc.)

(1) Where an institution dealing in foreign exchange fails to achieve and maintain the ratios or amounts prescribed under Articles 64, 64-2 and 65 twice or less during the past one (1) year (four (4) times or less during the last one (1) year with respect to the ratio prescribed under Article 64 (1) 2 (a)), it shall submit an explanatory statement and achievement plan to the Governor, as determined by the Governor.

(2) Where an institution dealing in foreign exchange fails to achieve and maintain the ratios or amounts prescribed under Articles 64, 64-2 and 65 at least three (3) times during the last one (1) year, the minimum required ratios adjusted upward as listed in the following subparagraphs shall be applied to the institution dealing in foreign exchange, notwithstanding Articles 64 and 65:

1. Ratios prescribed under Article 64 (1) 1:

(a) Failure to achieve and maintain three (3) times during the last one (1) year: 90/100 or above;

(b) Failure to achieve and maintain four (4) times during the last one (1) year: 95/100 or above;

2. Ratios prescribed under Article 64 (1) 2 (b):

(a) Failure to achieve and maintain three (3) times during the last one (1) year: 5/100 or below;

(b) Failure to achieve and maintain four (4) times during the last one (1) year: 0/100 or below;

3. When the frequency of violations of the amount prescribed in Article 64-2 (1) is three times for the past one (1) year: Not less than amounts falling under any of the following items:

(a) Borrowings maturing within one (1) year × 3/12 × [1 - the lowest rollover rate (the lowest rollover rate under Article 64-2 (1) 1)];

(b) 3/100 of the total assets in foreign currency;

4. Failure to achieve and maintain the ratio prescribed in Article 65 (1) three (3) times during the last one (1) year: 105/100 or above.

(3) When an institution dealing in foreign exchange falls under subparagraphs 1 through 3 from among the following subparagraphs, it shall suspend new borrowings in foreign currency with maturity of less than three (3) months (except the call money with maturity of less than thirty (30) days), and when it falls under subparagraph 4, it shall suspend new loans in foreign currency with maturity of over one (1) year until it achieves each ratio in the same

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subparagraph:

1. Failure to achieve and maintain the ratios prescribed in the items of paragraph (2) 1 or Article 64 (1) 1 at least five (5) times during the last one (1) year: 95/100 or above;

2. Failure to achieve and maintain the ratio prescribed in Article 64 (1) 2 (a) at least five (5) times during the last one (1) year: 3/100 or below;

3. Failure to achieve and maintain the ratios prescribed in the items of paragraph (2) 2 or Article 64 (1) 2 (b) at least five (5) times during the last one (1) year: 0/100 or below;

4. Failure to achieve and maintain the ratios prescribed in paragraph (2) 4 or Article 65 (1) at least four (4) times during the last one (1) year: 105/100 or above.

(4) The Governor may recommend exemption or forbearance of sanctions, or removal of already enforced sanctions to the FSC for an institution dealing in foreign exchange who is subject to the sanctions prescribed under paragraph (2) or (3), where the reason of violation is recognized as inextricable due to deterioration of domestic or foreign economic and financial conditions: Provided, That in cases of sanction exemption, it shall not be counted in the frequency of violation.

(5) Where an institution dealing in foreign exchange fails to achieve and maintain the ratios prescribed in Articles 64, 64-2 and 65 at least twice during the last one (1) year, the Governor may take additional necessary actions to the institution, such as shortening the length of reporting cycle provided under Article 72.


Article 71 (Reporting on Sanctions)

When imposing sanctions against an institution dealing in foreign exchange pursuant to Articles 69 and 70, the Governor shall report the status of sanctions to the FSC within one (1) month after the end of every quarter.

Section 4Reporting on Foreign Exchange


(1) An institution dealing in foreign exchange shall report the following matters to the Governor: <Amended on Dec. 31, 2009; Jul. 27, 2010>

1. The current status of assets and liabilities in foreign currency, and liquidity ratio in foreign currency by remaining maturity as of the end of each month;

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2. The current status of maturity of borrowings in foreign currency as of the end of each month;

3. The current status of financing and operation of funds in foreign currency as of the end of each month;

4. The current status of riskless assets held in foreign currency as of the end of each quarter;

5. Other matters determined by the Governor for the soundness of institutions dealing in foreign exchange.

(2) The Governor may, if necessary for the sound operation of an institution dealing in foreign exchange, require the institution to report the following matters: <Newly Inserted on Jul. 27, 2010>

1. The current status of assets and liabilities in foreign currency and the foreign currency liquidity ratio for each remaining maturity as of each business day;

2. Other matters specified by the Governor.

(3) Articles 69 and 70 shall not apply to the current status reported by an institution dealing in foreign exchange pursuant to paragraph (2). <Newly Inserted on Jul. 27, 2010>

(4) The procedure for reporting under paragraphs (1) and (2), report forms, and other necessary matters shall be determined by the Governor. <Newly Inserted on Jul. 27, 2010>

CHAPTER VIIICREDIT RISK MANAGEMENT

Article 73 (Reasons for Exceeding Credit Limit, etc.)

(1) When intending to exceed the credit limit pursuant to Article 20‐3 (1) 3 of the Decree, a bank shall apply for approval to the FSC through the Governor: Provided, That it shall be viewed as having been approved if the exceeding is caused by credit extension forwarded within the pre‐committed line of credit, such as overdraft loan.

(2) "Cases recognized by the Financial Services Commission" referred to in Article 20‐3 (2) 5 of the Decree means any of the following cases:

1. Merger with, transfer of business to or takeover of business from a financial institution prescribed in subparagraph 1 of Article 2 of the Act on Structural Improvement of Financial Industry;

2. Transformation into another type of a financial institution prescribed in subparagraph 1 of Article 2 of the Act on Structural Improvement of Financial Industry;

3. Occurrence of guarantee payment;

4. Increase in the amount of corporate bond guarantees due to the increase in interest rate;

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5. Changes in account titles on the balance sheet of a bank;

6. Changes in the scope of credit extension under Article 3.


Article 74 (Reporting on Exceeding Credit Limit, etc.)

(1) A bank shall submit a report to the Governor within fifteen (15) days from the date of occurrence on exceeding the limits under Article 35 (1), (3) or (4) of the Act due to reasons stipulated under Article 20‐3 of the Decree or Article 73 of this Regulation. This shall also apply to where a bank intends to extend the period of the limit exceeding in accordance with Article 20‐4 of the Decree or Article 75 of this Regulation.

(2) The Governor shall make a report on the current status of managing the limit of credit extension by banks prescribed in paragraph (1) to the FSC every quarter.

(3) Matters concerning the details, etc. of reporting in cases of exceeding the limit prescribed in paragraph (1) shall be determined by the Governor.


Article 75 (Reasons for Extending Period of Exceeding Credit Limit)

(1) "Cases recognized by the Financial Services Commission" referred to in subparagraph 3 of Article 20‐4 of the Decree means cases where legal proceedings for collection against borrowers are under way.

(2) When a financial institution intends to extend the period of exceeding the credit limit pursuant to Article 20‐4 of the Decree, the period of such extension shall be within one (1) year.


Article 76 (Management of Large Credit Extension)

(1) A bank shall examine whether it complies the limit on the total amount of large credit extension stipulated under Article 35 (4) of the Act based on the balance at the end of every month, and submit a report on figures of large credit extension to the Governor every quarter.

(2) A bank shall implement internal guidelines for management and control of large credit extension that include the following:

1. The establishment of computerized system which enables it to properly monitor present conditions in large credit extension at all times;

2. The self‐screening system which enables it to control and prevent occurrence of large credit extension.

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(3) The Governor may, if it is deemed necessary for a bank to effectively operate and manage its internal guidelines under paragraph (2) or there is any concern to violate the limit due to sudden increase in the sum of large credit extension, require the bank to take necessary measures to stay within the limit on the total amount of large credit extension.

(4) Any details concerning reporting, etc. necessary for the management of large credit extension by banks shall be determined by the Governor.



Article 78 (Principles for Credit Management)

(1) A bank shall ensure that credit quality is maintained and secured as follows:

1. Credit risk evaluation to be conducted in the strict manner by analyzing the borrower's risk characteristics, financial conditions, and debt servicing capability going forward, etc.;

2. Appropriate amount of loan to be extended by comprehensively reviewing and analyzing the borrower's purpose of loan, required amount of loan, and the period in requirement of loan;

3. Misappropriation of loan to another purpose to be prevented by strict monitoring the usage of the loan extended;

4. On‐going monitoring of the borrower's change in credit status and debt servicing capability, and appropriate actions thereof to be taken;

5. Prevention of loan concentration by diversification of credit extension by industry and customer group.

(2) A bank shall operate an internal system for sound credit review and duties of approval so that the credit risk can be evaluated and managed appropriately at a stage prior to credit extension. <Amended on Aug 8, 2012>

(3) A bank shall operate an internal system for sound credit review and ex post facto management of credit extension so that the changes of credit risk may be evaluated and managed appropriately after extending the credit. <Newly Inserted on Aug. 8, 2012>

(4) A bank shall prepare internal regulations on processing business affairs and the procedures therefor so that the credit review under paragraph (2) and the ex post facto management of credit extension under paragraph (3) can be conducted efficiently, and, at the same time, establish an internal system, such as designation of an organ that will perform such duties and specific segregation of duties among organs concerned. <Newly Inserted on Aug. 8, 2012>

(5) A bank shall establish and operate an internal system for minimizing losses

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from accounting fraud (referring to preparing and publicly announcing financial statements or consolidated financial statements in contravention of the standards for accounting referred to in Article 13 of the Act on External Audit of Stock Companies; hereinafter the same shall apply) committed by a borrower. <Newly Inserted on Aug. 8, 2012>

(6) The Governor may set detailed matters to be included in the internal system under paragraphs (2) through (5). <Newly Inserted on Aug. 8, 2012>

(7) A bank shall report to the Governor on the details of operation of ex post facto management of credit extension, such as adjustment of credit rating and records of providing guidance over management improvement (workout), as prescribed by the Governor. <Newly Inserted on Aug. 8, 2012>


Article 79 (Highly‐Indebted Business Group)

(1) The Governor shall designate a business group whose ratio of total credits extended from financial institutions as of the end of the preceding year compared to total credits on their B/S of financial institutions as of the end of the year before the preceding year is 75/100,000 or higher (hereinafter, "highly‐indebted business group") and its affiliated companies, and notify all financial institutions of the designations: Provided, That if a company appointed by the Governor in consideration of the company’s substantial rank, such as its asset size, influencing power within the business group, etc., among other affiliated companies (hereinafter, "lead company") falls under any of the following subparagraphs, the business group may not be designated as, or may be excluded from, a highly‐indebted business group: <Amended on Feb. 25, 2014>

1. A company under Article 17 (1) 1 or 2 of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act;

2. A company that filed an application for the commencement of rehabilitation proceedings under the Debtor Rehabilitation and Bankruptcy Act;

3. A company that filed an application for the commencement of bankruptcy proceedings under the Debtor Rehabilitation and Bankruptcy Act;

4. A company that is under creditor financial institutions’ (or creditor banks’) joint control and management pursuant to the Agreement between Financial Institutions for Corporate Restructuring Promotion (enacted June 25, 1998) and subsequent agreements, or the Corporate Restructuring Promotion Act.

(2) A financial institution under paragraph (1) means any of the following: <Amended on Aug. 8, 2012>

1. A bank under the Banking Act;

2. The Nonghyup Bank Credit under the Agricultural Cooperatives Act

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(hereinafter, "Nonghyup Bank");

3. Credit business department at the National Federation of Fisheries Cooperatives under the Fisheries Cooperatives Act;

4. The Korea Development Bank under the Korea Development Bank Act;

5. The Export‐Import Bank of Korea under the Export‐Import Bank of Korea Act;

6. The Industrial Bank of Korea under the Act on Industrial Bank of Korea;

7. A merchant bank under the Financial Investment Services and Capital Markets Act;

8. An insurance business company under the Insurance Business Act;

9. A credit specialized financial company established under the Credit Specialized Financial Business Act.

(3) Credit extension in paragraph (1) means any of the following:

1. Credit extension prescribed in Appendix 2 in cases of financial institutions under paragraph (2) 1 through 6;

2. Credit extension prescribed in Appendix 23 of the Regulation on Financial Investment Business in cases of financial institutions under paragraph (2) 7;

3. Credit extension prescribed in Appendix 1 of the Regulation on Supervision of Insurance Business in cases of financial institutions under paragraph (2) 8;

4. Principal receivable among lease assets, credits extended to new technology, financial assets with credit nature, machinery installment financing, privately placed corporate bonds and commercial papers in cases of financial institutions under paragraph (2) 9: Provided, That credit extension whose repayment of principal and interest are guaranteed by the financial institutions prescribed in paragraph (2), the Government, local governments, public institutions, Korea Export Insurance Corporation, Korea Credit Guarantee Fund, Technology Credit Guarantee Fund and Industry‐Based Credit Guarantee Fund shall be excluded.

(4) Subparagraph 2 of Article 2 of the Monopoly Regulation and Fair Trade Act shall apply mutatis mutandis to the extent of business groups and their affiliated companies prescribed in paragraph (1).

(5) Details, such as reporting on entry into, and exclusion from, the highly‐indebted business group of a company shall be determined by the Governor. Where there is any delay for the entry of a company into a certain highly‐indebted business group who is deemed to satisfy the requirements for it

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without any reasonable causes, the Governor may consult with the primary creditor bank and approve the entry of a company into the highly‐indebted business group.


Article 80 (Selection and Change of Primary Creditor Bank)

(1) A bank shall designate the primary creditor banks for the highly‐indebted business group and its affiliated companies (hereinafter, "primary creditor banks") as prescribed by the Governor, and the primary creditor bank of the lead company of a certain highly‐indebted business group shall concurrently become the primary creditor bank of the highly‐indebted business group.

(2) The primary creditor bank of a highly‐indebted business group shall determine the primary creditor bank of affiliated companies of the group after consultation and consent with other creditor banks of each company: Provided, That the Governor shall determine the primary creditor bank of each company where the primary creditor bank of the group and other creditor banks of each company fail to determine it on their consultation.

(3) An affiliated company of a highly‐indebted business group may change its primary creditor bank with the consent from its current primary creditor bank. When there is a change in primary creditor bank, the new primary creditor bank shall submit a report on this change to the Governor.

(4) When it is deemed necessary to supervise effectively credit extension business of banks, the Governor may change the primary creditor bank of affiliated companies of a highly‐indebted business group after considering the opinions of related banks.


Article 81 (Restriction on Giving Debt Guarantees by Affiliate Companies)

(1) No financial institution shall give credit to a company affiliated with a highly‐indebted business group (excluding its overseas subsidiary corporations; hereafter the same shall apply in this Article) against a debt guarantee restricted pursuant to Article 10‐2 of the Monopoly Regulation and Fair Trade Act (hereinafter, “debt guarantees”) from another company (excluding companies engaged in finance business or insurance business) affiliated with such highly‐indebted business group: Provided, That any renewal of agreement for the prolongation of maturity of the existing debt guarantee shall not be deemed a new debt guarantee.

(2) Credit referred to in paragraph (1) means the following subparagraphs in the bank account and trust account:

1. Loans in won;

2. Loans in foreign currency;

3. Domestic banker's usance;

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4. Guarantee payment;

5. Confirmed payment guarantees.

(3) The primary creditor bank shall develop a plan to reduce the outstanding balance of debt guarantee extended by an affiliated company in question, at the time of selecting a company of a highly‐indebted business group, as determined by the Governor, and shall submit a report on the performance thereof to the Governor by the twentieth (20th) day of the month next to the end of every half year.


Article 82 (Functions of Primary Creditor Banks)

(1) A primary creditor bank shall comprehensively and effectively collect and manage all kinds of information necessary for credit monitoring on the highly‐indebted business group or its affiliated companies. Financial institutions shall mutually cooperate and exchange such information with an initiative of a primary creditor bank.

(2) A primary creditor bank shall devise and implement settlement measures by way of establishment of the creditor banks’ council together with other creditor banks when credits to a highly‐indebted business group or its affiliated companies are likely to be bad loans due to difficulties in their business.

(3) A primary creditor bank shall consistently monitor and guide the highly‐indebted business group and its affiliate companies to lead them to improve their financial structures.

(4) A primary creditor bank, together with other creditor banks, shall take necessary action, as determined by the Governor, against those companies which fail to comply with measures provided under paragraph (3).

(5) The Governor choose not to apply the provisions under paragraphs (1) through (4) against those affiliate companies, when it is deemed necessary in consideration of the characteristics of the business area they belong to.


Article 83 (Prohibition of Departure from Korea against Persons Causing Losses to Banks)

(1) Where any company with credit extension is expected to cause loss of at least 5 billion won to banks for reasons, such as dishonor, bankruptcy, and inability of normal operation, a bank (including a credit guarantee institution; hereafter the same shall apply in this Article) may request the Government through the FSC to prohibit departure from Korea against persons necessary for securing claims among the following:

1. Representative with actual responsibility in management;

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2. Actual owner who substantially controls the company;

3. Joint and several guarantor whose guarantees amount is at least 5 billion won.

(2) The requesting period for the prohibition of departure from Korea under paragraph (1) shall be within six (6) months: Provided, That when necessary for the preservation of claims, the extension of such prohibition period may be requested once, in principle, within six (6) months.

(3) When a person, requested the prohibition of departure from Korea under paragraph (1), turns out later to fall under any of the following subparagraphs, a bank shall request the Government without delay through the FSC to remove such prohibition:

1. When no assets are discovered as hidden even after investigations on that;

2. When the financial institution finds that additional measures to preserve claims are practically impossible;

3. When the procedures to preserve claims through the acquisition and liquidation of a relevant company are completed;

4. When the continuous prohibition of departure from Korea is recognized as unnecessary.

(4) The Governor may determine matters necessary for creditor banks to secure claims against persons causing losses to banks.


CHAPTER IXSUPERVISION, EXAMINATION, ETC.

Section 1Reporting


(1) "Offices" referred to in subparagraph 4 of Article 47 and Article 58 (3) of the Act means facilities, other than a business office, in which a bank has employees stationed permanently to collect and supply information on banking business, to examine trends in finance and economy, to communicate with a head office, branches or customers, etc.

(2) "When it falls under the matters determined and publicly announced by the FSC" referred to in Article 24-2 (2) 4 of the Decree means any of the following subparagraphs: <Amended on Aug. 8, 2012>

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1. Where a local bank changes a business district;

2. Where a bank implements matters authenticated, permitted, registered, etc. as prescribed by finance-related Acts;

3. Where any change of a person who is subject to the application of the qualifications for an executive under Article 12 of the Decree exists.

(3) The Governor shall examine whether the details reported pursuant to Article

47 of the Act conform to the following standards, and where a bank fails to conform to the standards, he/she may recommend such bank to correct or complement it: <Amended on Aug. 8, 2012>

1. That it shall not be contradictory to the relevant laws and regulations;

2. That it shall not infringe on the nature of a stock company;

3. That it shall not be likely to menace the sound management of a bank (in cases of a local bank, including complying with the purpose of its establishment, such as development of local economy);

4. That it shall not infringe on the rights and interests of customers of a bank.

(4) The procedures for reporting, form of reporting and accompanying documents referred to in Article 47 of the Act shall be determined by the Governor.


Article 84-2 (Frequency of Reporting)

Where it falls under any of the following subparagraphs as prescribed in the proviso to Article 26-2 (2) of the Decree, the Governor shall report it to the FSC without delay: <Amended on Aug. 8, 2012; Feb. 11, 2014>

1. Where he/she has received a report necessary for confirmation of stockholding of a bank or changes in its stockholding ratio under Article 15 (2) of the Act;

2. Deleted. <on Feb. 11, 2014>

3. Where he/she has received a report on changes in the information or data under Article 15-4 of the Act;

4. Where he/she has recommended correction, complementation or modification under Articles 84 (3) and 86-2 (2);

5 through 7. Deleted. <on Aug. 8, 2012>


Article 84-3 (Reporting)

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(1) The Governor shall report on important matters concerning the implementation of this Regulation to the FSC.

(2) Banks shall report on matters necessary for the implementation of this Regulation, as determined by the Governor.


Section 2Protection of Rights and Interests of Bank Customers

Article 85 (Terms and Conditions for Financial Transactions subject to Application)

Terms and conditions for financial transactions (hereinafter, "terms and conditions") in this Section means the details of contracts, regardless of its title or form, which are prepared by banks in advance for entering into financial agreement with a great number of users: Provided, That the provisions of this Section shall not apply to the terms and conditions relating to the operation of concurrent business which are prescribed separately by the relevant Acts and subordinate statutes.


Article 86 (Standards for Preparation and Operation of Terms and Conditions)

(1) A bank shall prepare and operate terms and conditions pursuant to the following standards: <Amended on Nov. 5, 2010>

1. It shall prepare the terms and conditions according to the principle of good faith;

2. It shall protect the rights and interests of bank customers to the maximum;

3. It shall have the sound financial transaction order maintained;

4. It shall not violate the relevant Acts and subordinate statutes, such as the Regulation of Standardized Contracts Act;

5. It shall determine basic standards concerning the preparation and operation of terms and conditions, such as the procedures for establishing and modifying terms and conditions, methods of management of terms and conditions, announcement of terms and conditions, and education of executives and employees;

6. Where it establishes or modifies terms and conditions, it shall have a compliance officer examine whether the details thereof violate the relevant laws, infringe on the rights and interests of bank customers, likelihood of the occurrence of disputes, etc.

(2) The Governor may determine detailed matters necessary for banks to determine standards concerning the preparation and operation of terms and

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conditions as prescribed in paragraph (1).


Article 86-2 (Submission, etc. of Terms and Conditions)

(1) Where a bank intends to establish or modify terms and conditions as prescribed in Article 52 (5) of the Act, it shall submit documents necessary to understand such terms and conditions and details thereof to the Governor by not later than ten (10) business days prior to the scheduled implementation date: Provided, That in any of the following cases, such documents may be submitted within ten (10) days from the establishment or modification of such terms and conditions:

1. Modification of terms and conditions to expand the rights and interests of customers or reduce the obligations of customers;

2. Establishment or modification of terms and conditions, the details of which are the same as or similar to those of the terms and conditions already reported to the Governor;

3. Establishment or modification of terms and conditions determined by the Governor, which has no unfavorable effect on the rights, interests or obligations of customers.

(2) The Governor shall examine terms and conditions submitted pursuant to paragraph (1) and may recommend the relevant bank to modify the terms and conditions where he/she recognizes it necessary to modify the details of the terms and conditions in order to maintain the sound financial transaction order.

(3) The bank that has been recommended to make modifications pursuant to paragraph (2) shall report to the Governor on whether it accepts such recommendation.

(4) Banks shall announce the terms and conditions or the modified details thereof on the website so that bank customers may readily search and use them.

(5) The Governor may determine the methods of and procedures for reporting on and announcement of the establishment or modification of terms and conditions and other necessary matters.

(6) The Governor shall notify the terms and conditions submitted as prescribed in paragraph (1) to the Fair Trade Commission every quarter year; the Fair Trade Commission shall promptly notify the Governor of whether such terms and conditions fall under Articles 6 through 14 of the Regulation of Standardized Contracts Act, etc.


Article 87 (Standards for Examination)

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The Governor shall examine whether the terms and conditions submitted by a bank include any of the following:

1. Clause permitting exemption of legal responsibility of a bank caused by intentional or gross negligence of a bank;

2. Clause restricting the extent of compensation for losses of a bank or shifting risks which shall be borne by the bank to the customers without justifiable grounds;

3. Clause unreasonably imposing customers with obligations for excessive compensation for losses, such as compensation for retardation;

4. Clause excluding or restricting customers’ rights of rescission or cancellation allowed by laws;

5. Clause that may impair the interests of customers by granting to a bank the rights of rescission or cancellation not stipulated by laws or by easing conditions of a bank to exercise them;

6. Clause authorizing a bank to unilaterally decide and change the terms of payment, obligations of customers, or other matters without justifiable grounds;

7. Clause excluding or restricting customers' rights allowed by laws, such as the right to defend, the right to set off, and the right to subrogate, without justifiable grounds;

8. Clause unduly accelerating due date originally granted to customers without justifiable grounds;

9. Clause unfairly restricting customers from making any contracts with third parties;

10. Clause unduly impairing the interests of customers through unreasonable fiction with respect to the declaration of intention of the bank and customers;

11. Clause unfairly impairing the interests of a guarantor or a security provider by imposing excessive or ambiguous obligations on them;

12. Other clause violating the relevant provisions of relevant laws, such as the Regulation of Standardized Contracts Act.


Article 88 (Prohibition against Putting Restraints)

(1) "Credit transactions" referred to in subparagraphs of Article 24-4 (1) of the Decree means any of the following:

1. Loans in won;

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2. Payment guarantees for security for loans from among payment guarantees in won, payment guarantees for bond issuance, guarantee for commercial bills, and acceptance of trade bills;

3. Acceptance of private placement bonds from among purchase of securities substituting for credit extension to a specific enterprise, and purchase of secured bills;

4. Loans in foreign currency.

(2) Restrictions on the rescission or withdrawal of a bank product (referring to a bank product under Article 24-4 (1) 1 of the Decree; hereafter the same shall apply in this Article) contrary to the will of a borrower prescribed in Article 24-4 (1) 2 of the Decree means placing restrictions on the rescission or withdrawal of a bank product by establishing a security right on the bank products without consent from borrowers or by electronically registering it as an account in need of attention or an account in question without justifiable grounds. <Amended on Feb. 11, 2014>

(3) "Small and medium enterprises determined and publicly announced by the FSC" referred to in Article 24-4 (1) 5 of the Decree means small and medium enterprises excluding the small and medium enterprises running financial business, insurance and pension business, and service business related to finance and insurance on the Korean Standard Industrial Classification under the Statistics Act the and small and medium enterprises affiliated with a highly-indebted business group from among small and medium enterprises under Article 2 (1) of the Framework Act on Small and Medium Enterprises. <Newly Inserted on Feb. 11, 2014>

(4) "Persons related to a borrower determined and publicly announced by the FSC" referred to in Article 24-4 (1) 5 of the Decree means the representatives, executives, employees of the small and medium enterprises under paragraph (3) (hereafter referred to as "small and medium enterprises" in this Article) and their family members (referring to spouses and lineal blood relatives under Article 779 (1) 1 of the Civil Act; hereafter the same shall apply in this Article). <Newly Inserted on Feb. 11, 2014>

(5) "Small and medium enterprises who are borrowers, other borrowers determined and publicly announced by the FSC and persons related to borrowers" referred to in Article 24-4 (1) 6 of the Decree means small and medium enterprises who are borrowers, individuals with low credit ratings who are borrowers (persons falling under the credit rating of grade 7 or below by a credit rating agency under Article 9 (17) 3-2 of the Financial Investment Services and Capital Markets Act as a result of credit rating) and the representatives and executives (referring to registered executives pursuant to the Commercial Act and excluding external executives) of small and medium enterprises from among persons related to borrowers. <Newly Inserted on Feb. 11, 2014>

(6) "Acts falling under the requirements determined and publicly announced by the FSC" referred to in Article 24-4 (1) 6 of the Decree means following acts: Provided, That where the fact that an act is objectively acknowledged as falling under the standards determined by the Governor as the likelihood of occurring a problem to the protection of relevant borrower is judged to be

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low, such case shall be excluded: <Newly Inserted on Feb. 11, 2014>

1. Sale of deposit, installment savings, mutual installment deposits, money trusts falling under any of the following, mutual aid funds for small enterprises and small enterprisers under Article 115 of the Small and Medium Enterprise Cooperatives Act (hereinafter referred to as "mutual aid funds for small enterprises and small enterprisers") and securities under Article 65 of the Commercial Act (including certificates of deposit, bank debentures, bonds with repurchase agreement, prepaid cards under the Specialized Credit Finance Business Act, electronic prepayment means under the Electronic Financial Transactions Act, gift certificates, etc., and excluding Onnuri gift certificates under subparagraph 12 of Article 2 of the Special Act on the Development of Traditional markets and Shopping Districts; hereafter referred to as "securities" in this Article) of which monthly revenue calculated by a method determined by the Governor within one month before and after the date credit is extended exceeds the amount of credit: (a) Money trusts falling under any of the subparagraphs of

Article 4-82 (1) of the Regulation on Financial Investment Business;

(b) Money trusts operated by an operational method under the subparagraphs of Article 25 (1) of the Enforcement Decree of the Guarantee of Workers' Retirement Benefits Act;

2. Sale of money trusts not falling under any of the items of subparagraph 1, mutual aid funds (excluding mutual aid funds for small enterprises and small enterprisers), insurance and collective investment schemes within one month before and after the date credit is extended.

(7) “Acts determined and publicly announced by the FSC" referred to in Article 24 (1) 7 of the Decree means an act falling under any of the following: <Amended on Feb. 11, 2014>

1. Acts that put actual restrictions on a borrower's use of funds by using a third party's name with regard to a credit transaction or through a business office other than the business office in which credit transaction is conducted or through another financial company;

2. Acts with which a bank urges a person falling under any of the following to subscribe to or purchase bank products against the person's will with regard to a transaction in which, by a method under Article 418 (2) of the same Act, the person is allocated with different classes of shares without voting rights or with limited voting rights under Article 344-3 (1) of the Commercial Act that can be retired using a company's retained earnings under Article 345 (1) of the same Act, or with different classes of shares with which a shareholder under Article 345 (3) of the same Act may demand redemption of shares to the company (hereinafter referred to as "redeemable preference share"):

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(a) A company issuing redeemable preference shares (hereafter referred to as "issuing company" in this Article);

(b) Where an issuing company is a small or medium-sized enterprise, the representative, executives and employees of the issuing company and their family members.

(8) With reference to the provisions of Article 24-4 (1) 1, 2, 5, 6 and 7, banks shall prepare and operate an internal control system that can prevent restraints, such as examining periodically whether an act falls under restraint, etc. in consideration of the loan size of borrowers, credit rating, etc. <Amended on Feb. 11, 2014>

(9) Where the Governor suggests the FSC to impose a fine for negligence on a bank or the executives or employees thereof for violation of the provisions of Article 24-4 (1) 1, 2, 5, 6 or 7, he/she shall follow Appendix 9 notwithstanding Article 20 (2) of the Regulation on the Examination and Sanctions against Financial Institutions and Appendix 3. <Newly Inserted on Feb. 11, 2014>


Article 88-2 (Prohibition, etc. against Requesting Unreasonable Security or Guarantee)

(1) Requesting comprehensive collateral security or comprehensive fixed collateral without justifiable grounds prescribed in Article 24-4 (1) 3 of the Decree means any of the following: <Amended on Aug. 8, 2012>

1. Requesting comprehensive collateral security where a bank obtains security from a borrower or a third party: Provided, That only where all of the following requirements are fulfilled, such security may be managed as comprehensive collateral security: (a) The borrower shall be an enterprise (including an individual

enterprise) having long-term business relations continuously with the relevant bank;

(b) The bank shall fully explain the effect of establishment of the comprehensive collateral security to the security supplier, and the security supplier shall agree to the establishment of the comprehensive collateral security;

(c) The bank shall prepare and keep a material that can specifically verify the fact that comprehensive collateral security is objectively convenient for the security supplier;

2. Requesting de facto comprehensive collateral security by determining the types and scope of liabilities subject to guarantee where a bank obtains guarantee from a borrower or a third party;

3. Requesting comprehensive collateral security where a bank obtains guarantee from a borrower or a third party: Provided, That only where such person is judged to be the real owner of an enterprise (including oligopolistic stockholders), such guarantee may be managed as comprehensive collateral security.

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(2) Where a third party supplies deposits, installment savings or beneficiary right of money trust deposited in the relevant bank as security with reference to Article 24-4 (1) 4 of the Decree and limits obligation from joint liability on guarantee within the extent of provided security, it shall not be deemed an unfair business practice.

(3) Any of the following activities shall be deemed an unfair business practice under Article 24-4 (1) of the Decree, as prescribed in Article 24-4 (4) of the Decree:

1. Requesting a borrower for security and additional loan guarantee of an affiliated company, or requesting overlapping loan guarantee of affiliated companies in excess of the ordinary ratio of loan security;

2. Receiving a blank check in connection with loan extension or misusing the right to fill out a blank check for security;

3. Requesting a hired executive of a borrower company to stand security on joint responsibility;

4. Requesting guarantee of a joint guarantor for a loan in addition to the payment guarantee of a financial institution with public trust, such as a credit guarantee of the Korea Credit Guarantee Fund, being taken as security: Provided, That even where a joint guarantor stands guarantee for unavoidable reasons, the fact that the surety obligation of such joint guarantor is limited to the part unsecured by such credit guarantee shall be clearly stated;

5. Directly or indirectly requesting bank customers or interested persons for money, articles, benefits, etc. in connection with duties unreasonably by a bank or executives or employees thereof, which fall under any of the following:

(a) Where gains, such as money, etc. that the bank has been supplied are contrary to the normal rules of the society or obstruct the impartial performance of duties;

(b) Where it is performed through irregular contracting of financial products with the other party, etc.;

6. Matters necessary for the sound financial order, protection of rights and interests of bank customers, etc. in addition to matters prescribed in subparagraphs 1 through 5 may be determined by the Governor.


Article 88-3 (Confirmation on whether to Continue Establishment of Collateral Security)

Where debt-repayment for a credit transaction for which collateral security has been established is completed, the relevant bank shall confirm the security supplier whether to maintain the establishment of the collateral security.

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[This Article Newly Inserted on Aug. 8, 2012] Article 89 (Public Announcement, Explanation, etc. of Conditions for Financial

Transactions)

(1) A bank shall publicly announce or publicly announce comparing the following matters on the Internet website, etc. as prescribed in Article 24-4 (2) 1 of the Decree: Provided, That in cases of concurrent business under Article 28 (1) of the Act, matters prescribed by the relevant Acts and subordinate statutes shall apply: <Amended on Dec. 26, 2012; Feb. 25, 2014>

1. Matters concerning interest (including additional interest rate of loan);

2. Matters concerning incidental expenses;

3. Matters concerning the rescission of contracts;

4. Matters concerning restrictions on transactions;

5. Matters concerning the protection of depositors;

6. Matters which bank customers have to pay attention to (including compensation for delay, such as rate of compensation for delay, amount of compensation for delay, etc.);

7. Important terms and conditions of contracts.

(2) No bank shall perform any of the following activities when publicly announcing terms and conditions, etc. for contracts of financial transactions under paragraph (1):

1. Conclusively indicating matters that have not yet been concluded in connection with transactions in bank products;

2. Indicating that its products have a comparative advantage over other financial products without presenting any specific ground and detail;

3. Using expressions likely to give rise to misunderstandings or disputes.

(3) Where a bank concludes a contract or solicits a bank customer to enter into a contract as prescribed in the main sentence of the part other than the items of Article 24-4 (2) 2 of the Decree, it shall provide such bank customer with data in which matters in subparagraphs of paragraph (1) are stated and explain the details thereof to such bank customer: Provided, That in cases of concurrent business in subparagraphs of Article 28 (1) of the Act, matters prescribed by the relevant Acts and subordinate statutes shall apply.

(4) A bank shall obtain confirmation that the details are explained under paragraph (3) by one or more methods from among taking signature of bank customer, taking name and seal thereof, taking voice recording and notes or methods determined by the Governor, and shall keep and manage it.

(5) When a bank explains important details of a product as prescribed in the main sentence of the part other than the items of Article 24-4 (2) 2 of the

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Decree, it shall not give an explanation by falsifying or distorting (referring to providing bank customers with conclusive judgment of uncertain matters or informing bank customers of details likely to make them misunderstand that such details are certain) matters likely to have serious influences over the reasonable judgment of bank customers or over the value of the relevant product (hereinafter, "important matters"), or omit important matters.

(6) "Cases determined and publicly announced by the Financial Services Commission" referred to in the proviso to the part other than the items of Article 24-4 (2) 2 of the Decree means any of the following:

1. Cases in which a basic contract is concluded and transactions are conducted continuously and repetitively according to the terms and conditions of such contract;

2. Cases in which a contract is renewed with the same terms and conditions as the one already concluded;

3. Indicating an intention that a bank customer refuses to be provided with information, etc. on bank products or to be given explanation therefor by documents, telegraphs, facsimiles, email or other electronic communication methods similar thereto, or by methods determined by the Governor;

4. Other cases determined by the Governor.

(7) The period in which a bank customer can apply for perusal as prescribed in Article 24-4 (3) of the Decree shall be three years after the termination of a contract.

(8) No bank shall perform any of the following activities likely to inflict losses on bank customers or cause financial disputes under Article 24-4 (4) of the Decree: <Amended on Aug. 8, 2012>

1. Actually restricting the rescission or withdrawal of deposits, installment savings, money trusts, etc. deposited in the relevant bank by a method, such as not delivering deposit receipts and keeping deposit receipts;

2. Modifying the terms, conditions, etc. of insurance products, such as the methods of paying insurance premiums, which a bank sells as insurance agency contrary to the will of a borrower;

3. Providing special benefits in connection with the relevant bank products, such as special treatment of deposit interests when a bank sells insurance products;

4. Deleted; <on Aug. 8, 2012>

5. Not complying with the following provisions on the acquisition of real estate that conflicts with urban planning as security:

(a) Acquisition shall be conducted within the extent that does not

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hinder the preservation of claims, such as conclusion of compensation amount through an urban planning project implementer;

(b) Reasonable standards for acquisition of security shall be established and implemented, where compensation amount cannot be confirmed;

6. Not complying with the following provisions on loans, the security for which is an aggregate building under the Act on Ownership and Management of Condominium Buildings:

(a) In principle, a loan shall be extended only for the funds for constructing the building taken as security;

(b) A loan shall be extended after taking measures for protection of vested rights of third parties, including occupants or occupants-to-be;

7. Not complying with the following provisions on handling a cashier's check on which a report on an accident has been filed:

(a) Payment shall be suspended, where a report on an accident, such as theft or loss, of a cashier's check presented for payment within the limit of time for presentment for payment under Article 29 of the Check Act (hereinafter, "limit of time for presentment for payment") has been filed;

(b) Payment shall be made to the last holder of the check, if a

person who has reported on an accident fails to submit a document confirming that the legal proceedings, such as public summons under Article 521 of the Civil Act or lawsuit for requesting the delivery of the check, are under way to the bank within five (5) business days after making an accident report;

(c) Where the check is presented for payment after the lapse of the limit of time for presentment for payment, the bank shall arrange the accident reporter or the presenter for payment to take a fixed legal process promptly or arrange reconciliation between the parties concerned;

8. Not stating separately the details of an unsettled check or bill issued by another bank (excluding any cashier's check, remittance check, money order, and National Treasury check), if it exists at the time a certificate of outstanding debts of an overdrawn account is issued;

9. Requesting a security money for an accident report, where the accident reporter applies for a certificate of nonpayment for the nullification judgement due to loss or theft, etc. of a cashier's check;

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10. Not complying with the following provisions on the transaction of derivatives provided for in Article 3 (2) 2 of the Financial Investment Services and Capital Markets Act (excluding transactions conducted on terms and conditions for financial transactions under Article 85):

(a) A bank shall conduct transactions which are judged as appropriate taking into consideration business characteristics, financial status, level of financial transactions, purpose of the relevant transaction, degree of understanding products, risk management ability of the other party to the transaction (excluding financial institutions under Article 10 (2) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act and persons falling under Article 10 (3) 3, 9, 12 and 13 of the Enforcement Decree of the same Act) and kinds of products, etc.;

(b) A bank shall actively provide the other party to the transaction the information necessary and sufficient for making reasonable decisions on the relevant transaction, if it offers a transaction to him/her or if a transaction offer is received from him/her;

(c) A bank shall notify the other party to a transaction of important information on the transaction, including important factors that cause effect on risk and potential loss inherent in the transaction, in a manner appropriate for him/her so that he/she can appraise the structure and risk of the transaction; and in cases of a transaction of atypical derivatives prescribed by the Governor (hereinafter, "transaction of atypical derivatives"), it shall notify the risks inherent in the transaction, explaining them transaction by transaction; and in cases of a transaction of atypical derivatives which has a high volatility of profit and loss considering contract term, liquidity, etc., it shall explain the details of change of valuation profit and loss in addition to the simple change of cash flow caused by the change of financial variables, when it explains the risk of loss to the other party to the transaction;

(d) A bank shall check before concluding the contract whether the party to the transaction has legitimate authority for the relevant transaction;

(e) The imposition of various expenses related to the transaction shall be done impartially, and, in cases of a transaction of atypical derivatives, the price information for each inherent transaction (referring to the transaction price for customers or other information corresponding thereto) shall be provided;

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(f) In cases of a transaction of atypical derivatives, a bank shall send a report on appraisal of transactions as at the end of each month after the conclusion of the contract to a back office of the other party to the transaction;

(g) A bank shall keep all the materials sent to or received from the other party to the transaction for the relevant transaction, such as documents received for the check referred to in item (d), contract (including documents annexed thereto), documents related to the terms and conditions of the contract such as the certificate of conclusion of the relevant transaction, written explanation of product, and offers, and data, etc. related to the approval of the transaction obtained inside the relevant financial institution (including regional headquarters, main office, etc., in cases of a branch of a foreign bank).

(9) The Governor may determine the details and methods of public announcement, methods of providing bank customers with information and data, forms of data to be provided to bank customers and other detailed matters, with respect to provisions falling under paragraphs (1) through (8).


Article 90 (Advertisements, etc.)

(1) Where a bank advertises bank products as prescribed in Article 24-5 (3) of the Decree, it shall include matters under the following classifications in the advertisement:

1. Cases of bank products concerning duties referred to in Article 27 (2) 1 of the Act: Interest rates, conditions for participation, other matters having serious influences over the rights and responsibilities of bank customers;

2. Cases of bank products concerning duties referred to in Article 27 (2) 2 of the Act: Interest rates, incidental expenses and other matters having serious influence over the rights and responsibilities of bank customers;

3. Cases of bank products concerning duties, other than those listed in subparagraphs 1 and 2: Incidental expenses, methods of determining profits and losses, such as earning rates, risks inherent in products, conditions for participation and other matters having serious influences over the rights and responsibilities of bank customers;

4. Other matters that the Governor determines, which are necessary to protect bank customers, in addition to those prescribed in subparagraphs 1 through 3.

(2) Notwithstanding paragraph (1), where all the matters to be advertised under subparagraphs 1 through 4 cannot be indicated due to limitation on the size of advertisement or hours of advertisement in cases of print advertising, such

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as a newspaper and magazine, and broadcast advertising, such as television and radio, a part thereof may be omitted: Provided, That in such cases, guidance that bank customers are to refer to the data provided to them for omitted matters as prescribed in Article 89 (3) by all means shall be indicated.

(3) Where a bank advertises bank products as prescribed in Article 24-5 (3) of the Decree, it shall not use a phrase that is likely to give rise to a misunderstanding or dispute falling under any of the following subparagraphs:

1. Expressions indicating the best or uniqueness, such as the highest, finest, lowest, first in Korea, only our bank, etc. without definite grounds;

2. Expressions having the nature of misunderstanding or dispute, such as guaranteed, promptly, certain, etc.;

3. Indicating that conditions for transaction are definite even though such conditions for transaction are differently applicable to different parties to transaction, etc., or expressions that are likely to give rise to misunderstanding that such conditions for transaction are applicable to everyone;

4. Expressions indicating that the interest rate or earning rate is definite even though the interest rate or earning rate may vary according to the price fluctuation of fundamental assets, such as currency, stocks, and bonds, or fluctuation of a certain index;

5. Expressions that are likely give rise to disputes by omitting details unfavorable to bank customers or by indicating such details smaller than benefits or by laying stress only on the benefits;

6. Expressions indicating that matters in the relevant product having serious influence over the rights and interests of bank customers are distorted, exaggerated, omitted or made vague.

(4) The period during which relevant records, such as the advertising details of bank products are preserved as prescribed in Article 24-5 (2) and (3) of the Decree shall be the period during which such bank products continue to exist.

(5) The Governor may determine detailed matters necessary for advertising methods, procedures, etc. therefor in addition to those prescribed in paragraphs (1) through (4).


Section 3Prevention of Financial Accidents

Article 91 (Prevention of Financial Accidents)

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(1) A bank shall establish and implement preventive measures and internal standards to curb the occurrence of financial accidents tailored to its business situations, and, in such cases, the following matters shall be included therein:

1. Matters concerning the management of business offices;

2. Matters concerning the affairs of cash transport;

3. Matters concerning data processing affairs;

4. Matters concerning self-auditing of the bank;

5. Matters concerning credit card business;

6. Matters concerning the prevention of money laundering;

7. Matters concerning the management of overseas branches and overseas subsidiary corporations;

8. Matters concerning the self-inspection of business offices (referring to an inspection conducted by business offices themselves to inspect whether their duties are performed in accordance with the laws, regulations and internal rules; hereinafter the same shall apply).

(2) For independently performing audit affairs, a bank shall have a prior consultation with the audit committee for personnel affairs of an employee belonging to a department in charge of inspection, have the efficiency rating of such personnel done solely by the audit committee, and endow the audit committee with part of the authority over the efficiency rating of a person in charge of surveillance.

(3) Each business office of a bank shall have an employee in charge of

self-inspection.

(4) A bank shall appoint an employee in charge of internal control, such as law-abiding monitoring, (hereinafter, "person in charge of internal control") at each overseas branch or overseas subsidiary corporation, and no person in charge of internal control shall concurrently engage in duties, other than internal control: Provided, That, where it is inevitable for him/her to concurrently engage in any other duty on account of the scale or human resources structure, etc. of an overseas branch or overseas subsidiary corporation, such holding of concurrent duties may be permitted only if the additional duty has little possibility of a financial accident.

(5) A bank shall accurately record the details of transactions with customers in fixed forms (including computerized processing forms) in order of their occurrence.

(6) The Governor shall determine detailed standards for the matters prescribed in

subparagraphs of paragraph (1).

[This Article Wholly Amended on Aug. 8, 2012]

Article 91-2 (Prohibited Matters, etc.)

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(1) The executives and employees of a bank shall be prohibited from conducting any of the following:

1. Excessive competition conducted in an unjust manner, such as

provision of, or pretending to provide, a profit exceeding normal level, in performing business affairs under Articles 27, 27-2 and 28 of the Act;

2. Paying a check or bill issued by another bank which has high possibility of an accident before it is settled by exchange;

3. Issuing a cashier's check or a negotiable certificate of deposit in advance or processing deposit without a source document;

4. Inducing deposits through the issuance of abnormal certificates of

deposit or other bills of debt;

5. Lending, guaranteeing, taking over or borrowing, etc., money, etc. privately to or from a customer in connection with business affairs or recommending such deal;

6. Involving directly or indirectly in a private financing, evasion of taxes, accounting manipulation, unfair inside transaction, camouflage of financial ability or money laundering, etc. of a customer by handling the business affairs related to issuance, sale and purchase, etc. of a deposit secured loan, negotiable certificate of deposit, or securities in an anomalous or abnormal manner, etc.;

7. Assisting, or involving in, an unlawful or anomalous transaction in transacting foreign exchange, derivatives, etc.

(2) An employee of a bank may conduct any of the following acts, only if

confirmation by a person responsible for overall control over the audit and approval by the head of the business office are obtained. In such cases, he/she shall maintain a book and keep record of the details of the matters handled by him/her:

1. Handling a deposit at his/her convenience, such as payment of a

deposit without a passbook or personal seal impression;

2. Keeping the personal seal, passbook, etc. of a customer;

3. Paying or receiving a deposit without passing through a counter.

(3) A bank shall take custody of personal seals, passbooks, etc. referred to in paragraph (2) 2 in a thorough manner.

[This Article Newly Inserted on Aug. 8, 2012]

CHAPTER XEXCEPTIONS TO KOREA DEVELOPMENT BANK, ETC.

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Article 92 (Exceptions to Korea Development Bank)

(1) Articles 5 through 9, 10-2, 11 through 13, 25 through 25-3, 26 (1) 3 and (3), Articles 33 through 37, 39, 40, 42 through 48, 50, 51, 54, 54-2, 59, 64-2 and 74 shall not apply to the Korea Development Bank (hereinafter, "KDB").

(2) The standards for qualifications of permanent members of the audit committee under Article 23-2 (3) of the Act shall apply to the auditor of KDB.

(3) With respect to KDB, the won currency liquidity ratio under Article 26 (1) 2 shall be 70/100 or above.

(4) Notwithstanding Article 29 (1), KDB shall not accumulate allowances for credit loss against an amount equivalent to security from among claims against any of the following institutions, claims guaranteed by such institution, claims secured by securities issued or guaranteed by such institution:

1. Central governments or central banks of OECD member countries;

2. Local governments;

3. Public institutions, in which investments made by the Government reaches or exceeds 50% of its paid-in capital: Provided, That the Industrial Bank of Korea under the Industrial Bank of Korea Act, the Export-Import Bank of Korea under the Export-Import Bank of Korea Act, and banks under Articles 2 and 5 of the Banking Act shall be excluded.

(5) "Total amount of investments" referred to in the latter part of Article 35‐6 (1) 7 of the Enforcement Decree of the Korea Development Bank Act means the amount calculated on the basis of acquisition value including the amount of investment from a trust account with principal repayment guarantee.

(6) When the KDB invests in its subsidiaries, etc., it shall report such fact to the Governor without delay.

(7) Subsidiaries, etc. in this Article (including the application of Articles 52 and 53 to the KDB) means companies engaging in a business category classified under Article 49, of which at least 15/100 of the outstanding voting stocks is owned by the KDB.


Article 93 (Exceptions to Industrial Bank of Korea)

(1) Articles 5, 5-2, 5-4, 9 through 13, 20, 23, 25-2, 25-3, 26 (1) 3 and (3), 32 (3) through (5), 33 through 37, 39, 40, 42 through 48, 51, 54, 54-2, 59 and 74 shall not apply to the Industrial Bank of Korea (hereinafter, "IBK").

(2) "Types of business specified by the Financial Services Commission" referred to in the former part of subparagraph 7 of Article 30-3 of the Enforcement Decree of the Industrial Bank of Korea Act means the types of business

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specified in Article 49, and "requirements prescribed and publicly announced by the Financial Services Commission" referred to in the parenthesis in the latter part of the same subparagraph of the same Article means the requirements prescribed in Article 50: Provided, That in applying Article 50 (excluding the loan-deposit ratio under Article 50 (1) 1 (c)), "results of management status evaluation" referred to in paragraph (1) 1 of the same Article shall be construed as "results of evaluation of soundness" under Article 97, while "won currency liquidity ratio" referred to in item (b) of the same subparagraph of the same Article shall be construed as "won currency liquidity ratio" under Article 92 (3).

(3) Notwithstanding the main sentence of Article 41 (1), the IBK may make public disclosure of the facts prescribed in subparagraphs of the same paragraph of the same Article within one month from the date on which it submits a report on settlement of accounts to the FSC, and specific items and the method of public disclosure shall be determined in detail by the Chairperson of the Korea Federation of Banks, taking into account the purposes of establishment of the IBK and the characteristics of its business.

(4) Unless prescribed otherwise in this Regulation, Article 92 (3) through (7) shall apply mutatis mutandis to the IBK.


Article 94 (Exceptions to Export-Import Bank of Korea)

(1) Articles 4 through 25-3, Article 26 (1) 2 and 3, and (3), 32 (3) through (5), 33 through 48, 50, 51, and 52‐2 through 52‐5, proviso to Article 53 (1), Articles 54, 59, 64-2, 74, and 79 through 90 shall not apply to the Export-Import Bank of Korea (hereinafter, "Eximbank").

(2) The Governor may forbear to order the Eximbank to write‐off specific bad assets pursuant to Article 27 (7) if it judges that the order may cause any diplomatic or commercial problems. <Amended on Aug. 8, 2012>

(3) Notwithstanding Articles 65 (1), 70 (2) 4 and (3) 4, the following subparagraphs shall apply to the Eximbank:

1. Rate under Articles 65 (1): At least 90/100;

2. Rate under Articles 70 (2) 4: At least 95/100;

3. Rate under Articles 70 (3) 4: At least 95/100.

(4) Except as otherwise provided for in this Regulation, Article 92 (4) through (7) shall apply mutatis mutandis to the Eximbank.


Article 95 (Exceptions to Nonghyup Bank)

(1) Articles 5, 5-3, 5-4, 10-2, 11 through 13, 26 (3), 33 through 37, 39, 40, 42

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through 48, 54, 54-2 and 59 shall not apply to the Nonghyup Bank. <Amended on Aug. 8, 2012>

(2) When having taken measures against the Nonghyup Bank pursuant to Article 38, the FSC shall notify the Minister of Agriculture and Forestry thereof without delay. <Amended on Aug. 8, 2012>

(3) "Financial business" referred to in the proviso to Article 137 (2) of the Agricultural Cooperatives Act means the business type under Article 49, and "aggregated amount of investment" means the amount calculated on the basis of acquisition value including the amount of investment from a trust account with principal repayment guarantee.

(4) When applying Article 56 to the Nonghyup Bank, the loans of agricultural policy funds to the executives who are members of the Nonghyup Bank shall be excluded. <Amended on Aug. 8, 2012>

(5) Deleted. <on Aug. 8, 2012>

(6) Except as otherwise provided for in this Regulation, Article 92 (3), (6) and (7) and the latter part of Article 93 (3) shall apply mutatis mutandis to the Nonghyup Bank. <Amended on Aug. 8, 2012>


Article 96 (Exceptions to National Federation of Fisheries Cooperatives)

(1) Articles 4 through 9, 10-2, 11 through 23, 26 (1) 3 and (3), 33 through 37, 39, 40, 42 through 48, 50, 51, 52‐2 through 52‐5, 54, and 59 shall not apply to the banking business division of the National Federation of Fisheries Cooperatives (hereinafter, "NFFC").

(2) Except as otherwise provided for in this Regulation, Article 95 (2) through (6) shall apply mutatis mutandis to the NFFC.

(3) In applying Article 38 of the Act to the NFFC, real estate for business purposes referred to in subparagraphs 2 and 3 of the same Article shall be limited to real estate used in the credit business sector: Provided, That real estate which cannot be clearly distinguished by each business sector shall be allocated appropriately under reasonable standards, such as the standard number of persons of each credit business sector. <Newly Inserted on Aug. 8, 2012>


Article 97 (Evaluation, etc. of Soundness of KDB and others)

(1) The Governor shall evaluate the soundness of management through the examination of headquarters, overseas branches and overseas subsidiaries of the KDB, IBK, Eximbank, Nonghyup Bank and NFFC (hereinafter, "KDB and others"), and it may reflect the results of evaluation on supervision and examination affairs. <Amended on Aug. 8, 2012>

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(2) The evaluation of soundness under paragraph (1) shall be performed as of the examination date in accordance with the classification of sectors as prescribed in one of the following subparagraphs, and then comprehensive evaluation shall be performed based on the results of evaluation by section; and the evaluation thereof shall be classified into five (5) categories of first (1st) grade, second (2nd) grade, third (3rd) grade, fourth (4th) grade, and fifth (5th) grade: <Amended on Aug. 8, 2012>

1. The head offices of the KDB and others, and overseas subsidiary corporations of the KDB and others: Capital adequacy, quality of assets, compliance with laws and regulations, risk management and profitability (excluding the Eximbank) and liquidity of the relevant KDB and others or the whole of overseas subsidiary corporations of the KDB and others;

2. Overseas branches of the KDB and others: Quality of assets,

compliance with laws and regulations, and risk management of the relevant branches.

(3) The items of soundness evaluation and the weight of evaluation of each sector under paragraph (1) are as set forth in Appendix 4, and other detailed matters for soundness evaluation shall be determined by the Governor. <Amended on Aug. 8, 2012>

(4) Where the KDB and others are viewed as having the possible aggravation of management guidance ratio under Article 26 (1) 1 or 2 (including loan-to-deposit ratio under Article 26 (1) 3, in cases of the Nonghyup Bank) or as having the management weaknesses as a result of soundness evaluation conducted pursuant to paragraph (1), the Governor may take such measures as requiring the submission of plans or commitments for the management improvement of the KDB and others. <Amended on Aug. 8, 2012>

(5) Where the KDB and others fall under any of the following subparagraphs, the FSC may require them to take necessary measures after consultation with the Minister(s) in charge: <Amended on Jul. 3, 2013>

1. Where total capital ratio is less than 8/100, core capital ratio is less than 6/100 or common equity capital ratio is less than 4.5/100;

2. Where the overall rating resulted from the soundness evaluation under paragraph (1) is Grade 4 or 5, or where the overall rating is Grade 1, 2, or 3 and the asset quality is Grade 4 or 5;

3. When it is certain to be below the standards under subparagraph 1 or 2 due to the occurrence of large financial accidents or bad assets.

(6) Necessary measures under paragraph (5) means all or some of the following measures: Provided, That measures under subparagraphs 10 and 11 shall be applicable only to the NACF and NFFC, respectively: <Amended on Aug. 8, 2012>

1. Improvement on organizational management;

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2. Restriction on fixed asset acquisition or new investment in another company;

3. Disposal of bad assets;

4. Increase or reduction in capital;

5. Restriction on profit sharing;

6. Establishment of special allowance for credit loss, etc.;

7. Restrictions on holding risky assets and disposal of assets;

8. Restrictions on the level of deposit interest rates;

9. Reorganization of subsidiaries prescribed in Article 92 (8) (including cases to which the same provisions apply mutatis mutandis);

10. Matters prescribed in subparagraphs of Article 165 (1) of the Agricultural Cooperatives Act;

11. Matters prescribed in subparagraphs of Article 171 (1) of the Fisheries Cooperatives Act.

(7) Where KDB, etc. meeting the standards prescribed in any subparagraph of paragraph (5) are deemed unlikely to meet the standards within a short time by expanding capital or selling assets, or reasons corresponding thereto are recognized to exist, the FSC may postpone such measures for a certain period.

(8) Notwithstanding Articles 92 (1), 93 (1), 94 (1), 95 (1) and 96 (1), Articles 39 and 40 may apply mutatis mutandis to the submission of an implementation plan following the measures set under paragraph (5) and the implementation period of the plan.


Article 98 (Submission, etc. of Business Report by KDB and others)

(1) KDB and others shall submit to the Governor a report on their business performance every month in a form prescribed by the Governor by the end of the following month. <Amended on Dec. 19, 2001>

(2) A representative, a person in charge or its agent shall sign and seal a report to be submitted under paragraph (1).

(3) A report under paragraph (1) may be submitted in an electronic document form through an information and communication network (referring to an information and communication network under the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc.). <Newly Inserted on Sep. 23, 2002>

(4) KDB and others shall submit any information and materials required by the

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Governor needed to carry out his/her duties. <Amended on Sep. 23, 2002>

CHAPTER ⅪSUPPLEMENTARY PROVISIONS

Article 99 Deleted.



Article 102 (Deadline for Reexamination)

Under the Regulations Concerning the Issuance and Management of Directives and Established Rules (Presidential Directive No. 248), measures, such as maintenance, repeal, or amendment of this Regulation after an examination of changes in Acts or subordinate statutes, or in current conditions, occurring after the issuance of this Regulation, shall be taken by June 30, 2015: Provided, That as for Article 79 (1), the validity shall be examined on the date falling on every fourth year starting from March 1, 2014 (referring to the period until February 28 of every fourth year) and take improvement measures, etc. <Newly Inserted on Aug. 26, 2009; Jun. 26, 2012; Aug. 8, 2012; Feb. 25, 2014>

ADDENDA

Article 1 (Enforcement Date)

This Regulation shall enter into force on January 1, 2001: Provided, That the annulment of paragraph (2) (Exceptions to Classification for Asset Quality regarding Companies subject to Workout Plans) of Addenda (September 17, 1999) shall enter into force on December 31, 2000, and the footnotes of relevant items in loan administration among non‐qualitative evaluation items of asset quality evaluation sector under Appendix 4 shall enter into force on April 1, 2001.

Article 2 (Transitional Measures)

(1) Notwithstanding Article 40, the performance period granted during the management improvement recommendation or management improvement measures requirements shall apply to financial institutions subject to the management improvement recommendation or management improvement requirement under the former Regulation as of June 12, 1998.

(2) A financial institution shall submit to the Governor the performance report on the detailed plans prepared under Article 2 of Addenda (February 5, 1999) to Act No. 5745 and approved by the Financial Services Commission by the

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twentieth (20th) day of the following month at the end of every quarter.

(3) A financial institution extending credits in excess of the limit prescribed in Article 52 (1) as of May 24, 1999 shall meet the requirements under this Regulation until March 31, 2002, and submit to the Governor a report on performance of its detailed plans for meeting the requirements under this Regulation by the twentieth (20th) day of the following month at the end of every quarter.

(4) Where a financial institution, for which a management improvement plan has been approved as of January 1, 2000 pursuant to Article 39 (2), have made a contract with the FSC concerning the management improvement plan in order to receive a financial support from the Government and other relevant entities, the management improvement plan is deemed to have been corrected in accordance with Article 39 (6) and (7).

(5) Notwithstanding Article 52 (1), the credit limits to each subsidiary shall be 20/100 and 15/100 of equity capital for KDB and IBK, respectively, and the credit limits to all subsidiaries shall be 40/100 and 30/100 of equity capital for KDB and IBK, respectively.

(6) Where a financial institution has a loan exceeding the limit of petty loans prescribed in Article 53 (1) after it acquires stocks in excess of 15/100 of the issued voting right of a non‐financial institution in accordance with Article 51 (1), it shall meet the provisions of the same Article and paragraph by June 30, 2001.

(7) The amount of loans from NACF under the former Agricultural Cooperatives Act extended to executives and employees of the National Livestock Cooperatives Federation (“NLCF”) under the former Livestock Cooperatives Act, and the amount of loans from NLCF under the former Livestock Cooperatives Act extended to executives and employees of NACF under the former Agricultural Cooperatives Act before the Agricultural Cooperatives Act (enacted on September 7, 1999, Act No. 6018) enters into force shall be excluded from the scope of petty loans under Article 56.

Article 3 (Applicable Period)

(1) Article 51 (2) shall be valid until June 30, 2001.

(2) The provisions of the proviso to Article 73 (1) shall be valid until the end of 2002.

Article 4 (Application Mutatis Mutandis of Acts and Subordinate Statutes)

When applying this Regulation to KDB and others, the "Act" or "Enforcement Decree" quoted shall be deemed Acts and subordinate statutes related to KDB and others.

Article 5 Deleted. <on Dec. 19, 2001>

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Article 6 (Applicability to Calculation of Aggregated Amount of Investment to Subsidiaries)

Notwithstanding the amendments of Article 92 (5) (including cases to which the same provisions apply mutatis mutandis), the amount of investment in insolvent financial institutions determined by the Act on the Structure Improvement of Financial Institutions for the stability of financial market before the date this Regulation enters into force shall be excluded in calculating the aggregated amount of investment to subsidiaries in accordance with the provisions of the same Article and paragraph.

ADDENDA <Jul. 2, 2001>


This Regulation shall enter into force on July 2, 2001: Provided, That the amended provisions of Article 32 (2) shall enter into force on October 1, 2001.

Article 2 (Applicability to Capital B Funds' Recognition of Long‐Term Loans from Head Office)

Long-term loans from a head office to be recognized as Capital B Funds pursuant to Article 10 (4) 2 shall apply to loans newly borrowed after this Regulation enters into force.

ADDENDA <Sep. 4, 2001>


This Regulation shall enter into force on September 30, 2001.

Article 2 (Transitional Provisions)

Article 70 shall not apply to those who violate the amended provisions of Article 65 and its enforcement rules from the enforcement date of this Regulation until December 31, 2001.

ADDENDA <Dec. 19, 2001>


This Regulation shall enter into force on the date of its promulgation: Provided, That the amended provisions of Article 70 shall enter into force on January 1, 2002.

Article 2 (Transitional Measures)

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With respect to Kookmin Bank, the won currency liquidity ratio shall be 90/100 until October 31, 2002 notwithstanding Article 26 (1) 2 of this Regulation.

ADDENDUM <Apr. 2, 2002·>

This Regulation shall enter into force on the date of its promulgation: Provided, That the amended provisions of Appendix 4 shall enter into force on June 1, 2002.

ADDENDUM <May 1, 2002>

This Regulation shall enter into force on the date of its promulgation.




Article 2 (Transitional Measures on Acquisition Limit of Stocks Issued by Large Stockholders)

(1) A financial institution holding stocks issued by large stockholders in excess of the limit under the amended provisions of Article 16‐4 (1) as at the time this Regulation enters into force, shall meet the limit within one (1) year from the date this Regulation enters into force.

(2) A financial institution falling under the main sentence of Article 6 of the Addenda to the amended Banking Act (Act No. 6691) shall submit to the Governor a statement on stockholding and a plan for disposing of the stocks held in excess within one (1) month from the date this Regulation enters into force.

(3) Where a financial institution intends to extend the term for disposing of the stocks issued by large stockholders pursuant to the proviso to Article 6 of the Addenda to the amended Banking Act (Act No. 6691), it shall submit an application for extension with the FSC via the Governor in accordance with the amended provisions of Article 16‐4 (2).

Article 3 (Applicability to Qualifications of Executives)

The amended provisions of Articles 17 through 19 shall apply to nominees for executive directorship after this Regulation enters into force.

ADDENDUM <Nov. 13, 2002>

This Regulation shall enter into force on the date of its promulgation: Provided, That the amended provisions of Appendix 4 shall enter into force on January 1, 2003.

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ADDENDUM <Dec. 18, 2002>

This Regulation shall enter into force on January 1, 2003.

ADDENDA <Jan. 3, 2003>



Article 2 (Applicability)

In applying Article 59‐2 with respect to the private or public investment fund with a single investor created prior to this Regulation entering into force, the amended provisions of Article 59‐2 (1) 2 shall apply only to the additional acquisition of the beneficiary certificates, etc. of the private or public investment fund with a single investor after this Regulation enters into force.

ADDENDUM <Apr. 16, 2003>


ADDENDUM <Jul. 16, 2003>

This Regulation shall enter into force on the date of its promulgation: Provided, That the amended provisions concerning the preferred stocks redeemed in Appendix 1 shall apply to the said stocks issued after the date this Regulation enters into force.

ADDENDUM <Sep. 26, 2003>



This Regulation shall enter into force on April 1, 2004.

ADDENDUM <Mar. 5, 2004>


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ADDENDUM <Jun. 30, 2004>

This Regulation shall enter into force on September 30, 2004.

ADDENDUM <Oct. 7, 2004>





This Regulation shall enter into force on April 30, 2005.






Article 2 Omitted.

Article 3 (Amendments of other Regulations)

“Monetary receivables” in sub‐classification of Trust Account – Annotations to B/S (Loan Receivables) shall be amended to “monetary receivables, privately placed bonds” and “bills bought, privately placed bonds” in sub‐classification of Trust Account – Annotations to B/S (Securities) shall be amended to “bills bought”, respectively, in Appendix 2 of the Regulation on Supervision of Banking Business.



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ADDENDUM <Aug. 31, 2006>







This Regulation shall enter into force on December 31, 2006.

ADDENDA <May 3, 2007>



Article 2 (Transitional Measures on Post Approval of Holding Stocks in other Companies)

“Cases prescribed and publicly announced by the FSC” referred to in Article 2 (1) 5 of the Addenda to the amended Enforcement Decree of the Act on Structural Improvement of the Financial Industry (Presidential Decree No. 20024) means each of the following cases under which there is no time for obtaining the approval by the FSC:

1. Where a financial institution belonging to a single enterprise group owns the stocks with the proceeds in kind arising from the dissolution of the private equity fund defined in Article 144‐2 of the Act on Business of Operating Indirect Investment and Assets in which the said financial institution belonging to a single enterprise group invests;

2. Where a financial institution belonging to a single enterprise group owns the stocks of a company engaging in private investment

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business defined in Article 24 (6) 1 (b) of the Act on Structural Improvement of the Financial Industry or the stocks of a real estate investment company under the Real Estate Investment Company Act;

3. Where the stocks are owned by way of a debt‐to‐equity swap for the loans, etc. to any of the following companies:

(a) A company for which it is determined to commence rehabilitation procedures under the Debtor Rehabilitation and Bankruptcy Act;

(b) A company which has been subject to work‐out procedures under the agreement among financial institutions for promotion of corporate restructuring.






Article 2 (Transitional Measures on Conclusion of Housing Mortgage Loan Agreement)

This Regulation shall not apply to loans for which legally binding contracts were entered into with debtors (including developers or associations for rebuilding or redevelopment) before the date this Regulation enters into force.




This Regulation shall enter into force on December 31, 2007.




This Regulation shall enter into force on the date of its announcement.

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ADDENDUM <Jul. 11, 2008>

This Regulation shall enter into force on the date of its announcement.

ADDENDA <Nov. 7, 2008>



Article 2 (Transitional Measures concerning Extension of Suspension Period for Disposition of Residential Houses)

(1) The amended provisions of subparagraph 4 (b) of Appendix 6 annexed hereto shall also apply to loans for which a special agreement under the aforesaid item was made before this Regulation enters into force: Provided, That the foregoing shall not apply to cases where a loan is under follow-up administration because of the enforcement of acceleration clause after the expiration of the special agreement term and where a financial institution is unable to convert such a loan into a normal loan (referring to suspending imposition of overdue interest and discontinuing legal proceedings; hereafter the same shall apply in this Article).

(2) If a financial institution is able to convert a loan under follow-up administration because of the enforcement of acceleration clause after the expiration of a special agreement term, the period during which the loan has been under follow-up administration (the period during which overdue interest has been imposed) shall be excluded in determining the deadline for the disposition of a residential house.

Article 3 (Transitional Measures concerning Restriction on Corporate Loans Secured by Mortgage on Apartment in Speculation Zone)

The amended provisions of subparagraph 7 of Appendix 6 annexed hereto shall not apply to corporate loans secured by mortgage on an apartment located in a speculation zone and acquired on or before July 1, 2005.

ADDENDUM <Feb. 2, 2009>

This Regulation shall enter into force on the date of its announcement: Provided, That the amended provisions of Appendix 1 annexed hereto shall apply to the calculation of equity capital as at December 31, 2008 or thereafter.

ADDENDA <Apr. 15, 2009>



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Article 2 (Special Cases for Accumulation of Allowances for Assets subject to Prior Adjustment of Debts)

(1) Notwithstanding Article 29, assets classified as "precautionary" and eligible for the assistance in credit recovery under Chapter VII (Prior Adjustment of Debts Owed by Debtors of Multiple Debts) of the Agreement on Assistance in Credit Recovery entered into between the Credit Counselling and Recovery Service and creditor financial institutions may be treated as equivalent to assets classified as "normal" for the purpose of accumulating allowances therefor, if the repayment thereof is made in compliance with the relevant repayment plan for six months after they are finally confirmed as eligible for the assistance in credit recovery: Provided, That such assets may be treated as equivalent to assets classified as "precautionary" for the purpose of accumulating allowances therefor after an application for the assistance in credit recovery is filed, except where such assets are not approved as eligible for the assistance or the assistance becomes invalid.

(2) Assets classified as "normal" at the time when an application for the assistance in credit recovery under paragraph (1) is filed shall not be treated as past-due debts, unless and until repayment is delayed after filing the application for the assistance in credit recovery.

ADDENDA <Jun. 24, 2009>



Article 2 (Special Cases for Accumulation of Allowances for New Credit Extension under the Corporate Restructuring Promotion Act)

Notwithstanding Article 29, assets classified as "substandard" "doubtful" or "presumed loss," which are entitled to have preferential repayment right pursuant to Article 13 of the Corporate Restructuring Promotion Act, may be accumulated not less than 50/100 of the allowances to be accumulated by assessing the size of estimated losses.



ADDENDUM <Oct. 9, 2009>

This Regulation shall enter into force on October 10, 2009.


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This Regulation shall enter into force on the date of its promulgation: Provided, That the amended provisions falling under any of the following subparagraphs shall enter into force on the date determined in the relevant subparagraph:

1. Amended provisions of Article 32 (1) and (2): January 1, 2011;

2. Amended provisions of Articles 64 (3) and 64-2: July 1, 2010;

3. Amended provisions of Articles 65, 67, 67-2, 68, 70 and 72: January 1, 2010.

Article 2 (Applicability concerning Qualifications of Executives)

The amended provisions of Articles 17 and 19 (1) shall apply beginning with the first executive or outside director appointed after this Regulation enters into force.

Article 3 (Applicability and Exceptions to Korean International Financial Reporting Standards)

(1) The amended provisions of Article 32 (1) and (2) shall apply beginning with the first fiscal year beginning on or after January 1, 2011.

(2) Notwithstanding paragraph (1), the relevant subparagraphs shall govern the following cases: <Amended on Aug. 8, 2012>

1. The Eximbank: The amended provisions of Article 32 (1) and (2) shall apply beginning with the first fiscal year beginning on or after January 1, 2012;

2. The Nonghyup Bank and the National Federation of Fisheries Cooperatives: The amended provisions of Article 32 (1) and (2) may apply beginning with the first fiscal year beginning on or after January 1, 2014;

3. Foreign bank branches: With regard to financial statements of the previous fiscal year, marked in comparison to the financial statements of the fiscal year beginning on or after January 1, 2011, the Accounting Standards for Banking Business under the provisions before amendment may apply.

(3) The Financial Services Commission shall enact or revise accounting standards, which may apply to the Eximbank, the Nonghyup Bank, and the National Federation of Fisheries Cooperatives, and the relevant provisions in the Regulation on Supervision of Banking Business by December 31, 2010, where the Korean International Financial Reporting Standards do not apply, pursuant to paragraph (2) 1 and 2. <Amended on Aug. 8, 2012>

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This Regulation shall enter into force on August 1, 2010.

Article 2 (Transitional Measures concerning Standards for Management of Liquidity Risk in Foreign Currency)

(1) Each domestic branch of a foreign bank shall prepare the standards for the management of liquidity risk in foreign currency under Article 67 (1) pursuant to the amended provisions of Article 68 (2) within three months (hereinafter, "transitional period") after this Regulation enters into force.(2) Notwithstanding paragraph (1), each domestic branch of a foreign bank may extend the transitional period, subject to consultation with the Governor.





This Regulation shall enter into force on November 18, 2010: Provided, That the amended contents other than those amending "financial institution" to "bank" in Article 27 (1) through (5), the amended contents other than those amending "financial institution" to "bank" in Article 28, the amended contents other than those amending "financial institution" to "bank" in Article 29, amended contents in Appendix 1, amended contents in 4. (a) of Appendix 2, contents amending 'balance sheet", "consolidated balance sheet", "income statement" and "consolidated income statement" to "statement of financial position", "consolidated statement of financial position", "statement of comprehensive income" and "consolidated statement of comprehensive income" in Articles 11 (4), 16-4 (1) 3, 26 (2), 32 (3), 43 (1) and (2), 52 (1) 3, 73 (2) 5, 79 (3) 4, attachment to Appendix 2-2 and schedule 1 of Appendix 2-3 shall enter into force on January 1, 2011.

Article 2 (Applicability of and Exceptions to Korean International Accounting Standards)

(1) Notwithstanding Article 32 (1) and (2), the Eximbank, NACF and NFFC that do not adopt the Korean International Accounting Standards in accordance with the applicability and exceptions concerning the Korean International Accounting Standards under Article 3 of Addenda (dated December, 31, 2009) shall adopt the accounting standards for banking industry effective as of December 31, 2010, and the detailed standards and accounting standards for foreign exchange account determined by the Governor until the Korea International Accounting Standards are adopted. Subparagraphs 1039 (financial

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products: recognition and measurement), 1107 (financial products: public announcement), 1027 (consolidated financial statements and separate financial statements) and 2012 (consolidation: special purpose companies) from among the Korean International Financial Reporting Standards shall be preferentially adopted, however, detailed standards therefor shall be determined by the Governor.

(2) The Eximbank, NACF and NFFC may apply the accounting standards for banking industry pursuant to the provisions before amendment to the financial statements for immediately previous financial year which are recorded and compared in the financial statements for the financial year that begins for the first time after January 1, 2011.

ADDENDA <Nov. 5, 2010>


(1) This Regulation shall enter into force on November 18, 2010.

(2) Notwithstanding paragraph (1), the amended provisions of Article 25-2 (1) shall begin to apply only to a bank that sells gold accounts as prescribed in Article 18-2 (2) 2 of the Decree as at the date this Regulation enters into force from the date on which authorization for modification under Article 16 of the Financial Investment Services and Capital Markets Act was obtained by such bank.

(3) Notwithstanding paragraph (1), the amended contents other than the contents that amend "financial institution" to "bank" in Article 27 (1) through (5), amended contents other than the contents that amend "financial institution" to "bank" in Article 28, amended contents other than the contents that amend "financial institution" to "bank" in Article 29, amended contents other than the contents that amend "special allowances for credit loss" to "special allowances for credit loss, etc." in Article 34 (2), amended contents other than the contents that amend "special allowances for credit loss" to "special allowances for credit loss, etc." in Article 92 (4), amended contents other than the contents that amend "special allowances for credit loss" to "special allowances for credit loss, etc." in Article 97 (6), amended contents in Appendix 1, amended contents in 4 (a) of Appendix 2, amended contents other than the contents that amend "enterprise accounting principle" to "Korean International Financial Reporting Standards" in Appendix 3-2 shall apply on January 1, 2011.

(4) Notwithstanding paragraph (1), the amended provisions of Articles 86 (1) 5 and 88 shall enter into force on January 1, 2011.

Article 2 (Transitional Measures concerning Sale of Gold Accounts)

A bank selling gold accounts as at the date this Regulation enters into force may engage in the sale of gold accounts as the development and sale of financial products relating to gold prescribed in Article 25 (2) 1 until it receives authorization for modification under Article 16 of the Financial Investment Services and Capital

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Markets Act.

Article 3 (Transitional Measures concerning Credit Extension)

The credit extended by a bank to its subsidiary before this Regulation enters into force shall be included in the items to be excluded in calculating credit extension in 2. of Appendix 2 until it withdraws credit extension when the limit of credit extension to a large stockholder is calculated as prescribed in Article 35-2 of the Act.

Article 4 (Applicability and Exceptions to Korean International Accounting Financial Standards)

(1) Notwithstanding Article 32 (1) and (2), the Eximbank, Nonghyup Bank and NFFC that do not adopt the Korean International Accounting Standards in accordance with the applicability and exceptions concerning the Korean International Accounting Standards under Article 3 of Addenda (dated December 31, 2009) shall adopt the accounting standards for banking industry effective as of December 31, 2010, and the detailed standards and accounting standards for foreign exchange account determined by the Governor until the Korea International Accounting Standards are adopted. Subparagraphs 1039 (financial products: recognition and measurement), 1107 (financial products: public announcement), 1027 (consolidated financial statements and separate financial statements) and 2012 (consolidation: special purpose companies) from among the Korean International Financial Reporting Standards shall be preferentially adopted, however, detailed standards therefor shall be determined by the Governor. <Amended on Aug. 8, 2012>

(2) The Eximbank, Nonghyup Bank and NFFC, and a foreign bank branch for which the date of settlement of accounts is not December 31 may choose to apply the provisions before amendment to subparagraph 6 of Article 28, Article 29 (1) and (2), and Appendixes 1 and 2 (limited to cases of foreign bank branches) until the Korean International Financial Reporting Standards are adopted notwithstanding the amended provisions: Provided, That the amount whichever is bigger from among the amount pursuant to the accumulation standards prescribed in subparagraphs of paragraph (1) of this Article and the estimated amount of loss (referring to the amount calculated by utilizing the internal ratings based approach which is for the calculation of ratio of equity capital to risk-weighted asset prescribed in Article 26, for which approval has been obtained from the Governor) shall be the amount pursuant to accumulation standards, such as allowance for credit loss, under Article 29 (1). <Amended on Aug. 8, 2012>

(3) The Eximbank, Nonghyup Bank and NFFC may apply the accounting standards for banking industry effective as of December 31, 2010, and the detailed standards and accounting standards for foreign exchange account determined by the Governor to the financial statements for the immediately previous fiscal year which are recorded and compared in the financial statements for the first fiscal year that begins after January 1, 2011. <Amended on Aug. 8, 2012>

Article 5 (Relationship with other Provisions)

Where the former provisions have been cited by other Regulations as at the time this

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Regulation enters into force, the relevant provisions of this Regulation shall be deemed to have been cited in place of the former provisions if provisions corresponding thereto exist in this Regulation.

Article 6 (Repeal, etc. of other Regulations)

(1) Following the enforcement of this Regulation, the former Guidelines for Authorization of Banking Industry and the former Guidelines for the Scope of Incidental Business from among Banking Business are hereby repealed.

(2) A bank may perform the incidental business that has been converted into concurrent business without making a report, which is being performed according to the former Guidelines for the Scope of Incidental Business from among Banking Business as at the time this Regulation enters into force.





ADDENDA <Aug. 8, 2012>



Article 2 (Applicability to Prohibition against Requesting Unreasonable Security or Guarantee)

The amended provisions of Article 88-2 (1) 1 and 2 shall also apply to cases where security is maintained or changed when a contract for the renewal of credit transaction, such as extension of maturity date, renewal or refinancing, is concluded.

Article 3 (Applicability to Sales Agency Services for Mutual Aid for Small Enterprises and Small Enterprisers)

Banks which have performed business affairs provided for in Article 25-2 (2) 3 before this amended Regulation enters into force shall be deemed to have reported pursuant to Article 28 (2) 2 on condition that they are liable to explain significant matters of the relevant mutual aid, such as the fact that it is not subject to the protection of the account holder, at the time the mutual aid is sold.


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This Regulation shall enter into force on January 1, 2013: Provided, That the amended provisions of Article 89 shall enter into force on March 1, 2013.



(1) This Regulation shall enter into force on December 1, 2013: Provided, That the amended provisons of Articles 10, 14-5, 16-3, 34 through 36, 42, 45, 50, 51 and 97 and Appendices 2-4 and 2-8 shall enter into force on January 1, 2015.

(2) Notwithstanding paragraph (1), the amended provisions of Article 29-3 shall enter into force on the date of their public announcement.

(3) When applying the current provisions pursuant to the proviso to paragraph (1), "ratio of equity capital to risk weighted assets" shall be deemed "total capital ratio".

Article 2 (Special Exceptions to National Federation of Fisheries Cooperatives and Branches of Korea Exchange Bank)

(1) This Regulation (excluding Article 29-3; hereinafter the same shall apply in this paragraph) shall apply to the National Federation of Fisheries Cooperatives on December 1, 2016: Provided, That where the Minister of Oceans and Fisheries makes a request, the Financial Services Commission may apply this Regulation to the National Federation of Fisheries Cooperatives early.

(2) Notwithstanding this Regulation, the former Regulation except Article 29-3 shall apply to branches of the Korea Exchange Bank.



This Regulation shall enter into force on the date of its public announcement.

Article 2 (Applicability to Korean International Financial Reporting Standards and Special Exceptions to National Federation of Fisheries Cooperatives)

(1) Notwithstanding Article 32 (1) and (2), the Public Announcement No. 2009-65 of the Financial Services Commission and Article 3 (2) 2 of the Addenda to Regulation on Supervision of Banking Business, the National Federation of Fisheries Cooperatives may comply with the Korean International Financial Reporting Standards and standards prescribed by the Governor pursuant to Article 32 (2) (hereinafter in this Article referred to as the "Korean International Financial Reporting Standards, etc.") beginning with the first

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fiscal year after December 1, 2016: Provided, That where the Minister of Oceans and Fisheries makes a request before December 1, 2016, the Financial Services Commission may require the National Federation of Fisheries Cooperatives to comply with the Korean International Financial Reporting Standards, etc.

(2) Notwithstanding the proviso to Article 4 (1) of the Addenda of the Regulation on Supervision of Banking Business, the Public Announcement No. 2010-39 of the Financial Services Commission, the National Federation of Fisheries Cooperatives shall first apply the following statements of standards among the Korean International Financial Reporting Standards, and statements of standards replacing the following statements of standards until it applies the Korean International Financial Reporting Standards, etc., however, specific application standards shall be as prescribed by the Governor: 1. No. 1039 (financial instruments: recognition and measurement);2. No. 1107 (financial instruments: public announcement);3. No. 1110 (consolidated financial statements);4. No. 1112 (public announcement of stakes in other enterprises).

ADDENDA <Feb. 11, 2014>


This Regulation shall enter into force on February 14, 2014: Provided, That the amended provisions of Articles 10, 25 (2) 1, 25-2 (1), 29 (1) 1, 49 and 49-2 shall enter into force on the date of public announcement, and the amended provisions of Article 88 and Appendix 9 shall enter into force on March 1, 2014.

Article 2 (Applicability concerning Accumulation of Bad Debt Reserves for Redeemable Preference Assets)

Article 2 of Addenda of Regulation on Supervision of Banking Business, FSC Public Announcement No. 2009-34, shall not be applicable after the date this Regulation enters into force.

ADDENDA <Feb. 25, 2014>


This Regulation shall enter into force on March 1, 2014.

Article 2 (Period of Validity, etc.)

(1) The amended provisions of Article 29-4 (1) and (2) shall be valid until February 28, 2017.

(2) A person who violates Article 29-4 (1) and (2) during the period of validity under paragraph (1) shall be deemed to have violated this Regulation even after the period of validity expires.

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Classification Scope

Common equity capital

‐ Capital (including investments similar thereto) due to the issuance of common stock and capital surplus‐ Other capital surplus (excluding capital surplus due to the issuance of other

capital securities other than common stock)‐ Retained earnings (excluding bad debt reserves under Article 29)‐ Accumulated other comprehensive income

Other core capital‐ Capital and capital surplus due to the issuance of other basic capital‐ Capital securities, such as hybrid bonds, meeting standards prescribed by the Governor pursuant to Article 26 (2)

Supplementary Capital

‐ Capital and capital surplus due to the issuance of supplementary capital ‐ Allowance for bad debts, etc. accumulated for assets classified as "normal" and "precautionary" as a result of the classification of asset quality‐ Capital securities, such as subordinated bonds, meeting standards

prescribed by the Governor pursuant to Article 26 (2)

Deductibles

‐ Deducted from common equity capital● Amount equivalent to goodwill, other intangible assets, deferred income tax

assets, defined benefit pension assets, profits on sale in securitization transactions‐ Deducted from the relevant capital discount on stock issuance, evaluation

● Discount on capital stock, holding value of treasury stock and self-issued capital securities

● Capital securities mutually held in association with another financial institution in order to raise the ratio of owner's equity ‐ Items prescribed by the Governor, which are assets or capital items not available for making up losses of a bank

[Appendix 1] <Amended on Dec. 28, 2006; Feb. 2, 2009; Nov. 5, 2010; Jul. 3, 2013>

Scope of Common Equity Capital, Other Core Capital, Supplementary Capital and Deductibles

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Account Classification Sub‐classification

Bank Account

Items in B/S

(Loan Receivables)

Loans in won1), loans in foreign currency, foreign currency loans to banks2), domestic banker’s usance, offshore loans in foreign currency, loans with foreign loan fund, guarantee payments under payment guarantee, bills bought in won, bills bought in foreign currency3), factoring receivables, credit card accounts, debit card accounts, bond bought with repurchase agreements, call loans, privately placed bonds

(Securities) CPs (including guaranteed notes), securities loaned, publicly offered bonds4), subordinated beneficiary certificates5)

(Others) Temporary payment with credit nature, account receivables10), deposits

Annotations to B/S

Confirmed payment guarantees6), unconfirmed payment guarantees7), defects liabilities on asset‐backed securitization Won currency loan commitment, foreign currency loan commitment, offshore foreign currency loan commitment, endorsed notes, loans sold with repurchase agreements, ABCP purchase commitment

Trust Account 8)

Items in B/S(Loan Receivables)

Loans1), call loans, bonds with repurchase agreements, monetary claims, privately placed bonds

(Securities) Bills bought in won, credit card accounts, publicly offered bonds9), subordinated beneficiary certificates5)

(Others) Temporary payment with credit nature, depositsAnnotations to B/S Securities loaned, loans sold with repurchase agreements

Merchant Bank

Account

Items in B/S (Loan Receivables)

Discounted bills, discounted trade bills, factoring bills, CMA discounted bills, CMA discounted trade bills, CMA factoring bills, overdue bills, administrative bills, guarantee payments under payment guarantee

(Lease Receivables)Capital lease receivables (including advance payment for capital lease), operating lease assets (including advance payment for operating lease)

(Others) Temporary payment with credit nature

Annotations to B/SPayment guarantee for note issue, trade bills acceptance,sale of bills endorsed with security

[Appendix 2] <Amended on Sep. 23, 2002; Dec. 18, 2002; Jun. 30, 2004; Jul. 19, 2005; Nov. 30, 2005; Mar. 16, 2006; Nov. 16, 2006; Dec. 28, 2007; Jun. 24, 2009; Dec. 31, 2009; Jul. 27, 2010>

Scope of Credit Extension

1. (Scope of Credit Extension) The scope of credit extension provided for in Article 3 of this Regulation shall be the items in B/S(balance sheet) and others of banks prescribed in the table below:

Note: 1) CP discount shall be excluded.

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2) It shall apply only to credit extension to parent banks, etc. under Articles 37 (6) 3 and (7) of the Act and Article 21 (11) through (14) of the Decree.

3) D/A bills due and payable within six (6) months from the initial buying date shall be excluded from “bills bought in foreign currency” until the end of 2002: Provided, That it shall not apply to Article 79 (3) 1 of this Regulation.

4) It shall apply only to publicly offered bonds (including financial bonds), which are categorized as held‐to‐maturity securities and securities available for sale.

5) Class A beneficiary certificates among beneficiary certificates issued by a trust company under the Financial Investment Services and Capital Markets Act in the process of asset‐backed securitization shall be excluded, and in cases of beneficiary certificates in the form of non‐par value, its value shall be calculated by deducting the amount of Class A beneficiary certificates from the securitization asset value evaluated by an asset due diligence agency.

6) Tender guarantee shall be excluded.

7) Among payment guarantees for the advance payment to be deposited to the account designated by banks, the amount of advance payment refund guarantee within the unpaid advance payment in respect of which the repayment obligation of banks has not occurred shall be excluded.

8) It shall apply only to trust accounts whose principal or interest is contracted to be guaranteed.

9) It shall apply only to publicly offered bonds (including financial bonds), which are acquired for the purpose of investment.

10) Receivable spot exchange shall be excluded.

2. (Items to be Excluded in Calculating Credit Extension) Notwithstanding subparagraph 1 above, the following items shall be excluded from the items subject to calculation of the total amount limit for the same individual, corporation, or borrower and large amount of credit extension pursuant to Article 35 of the Act and from the calculation of credit extension necessary to select a highly‐indebted business group under Article 79 of this Regulation:

(a) Credit extensions for the central government and/or central bank of a country whose country risk weight is 0% under the Standards for Calculating the Ratio of Equity Capital to Risk-Weighted Assets set forth in Appendix 3 attached to the Detailed Enforcement Rules on Supervision of Banking Business (hereinafter, “country of risk weight 0%”), credit extensions guaranteed by the said institutions and credit extensions backed by securities issued or guaranteed by the said institutions;

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(b) Credit extensions in local currency for the central government and central bank of a country other than the countries of risk weight 0%: Provided, That it shall be limited to the scope of debt indicated in local currency;

(c) Credit extensions secured by the deposit money in its own bank;

(d) Credit extensions for any of the following domestic public institutions, credit extensions guaranteed by the said institutions, credit extensions backed by securities issued or guaranteed by the said institutions:

(ⅰ) Local governments under the Local Autonomy Act;

(ⅱ) Public enterprises and quasi‐government institutions under the Act on the Management of Public Agencies;

(ⅲ) Institutions qualified as local public enterprises under the Local Public Enterprises Act, for which coverage of deficit can be made by a local government, or institutions subject to approval of budgeting and account settlement and receiving financial or tax benefit;

(ⅳ) Institutions qualified for the institutional coverage of its deficit by the Government as a special public agency under a special Act, institutions for which investment (contribution) ratio by the Government is 50% or higher, or institutions for which investment (contribution) ratio by the Government is less than 50% and subject to approval of budgeting and account settlement and receiving financial or tax benefit from the Government;

(e) Credit extensions for a bank in a country of risk weight 0% and credit extensions guaranteed by the said bank;

(f) Credit extended to an investment trader or broker subject to regulation at the level equivalent to the level of regulation on banks, such as regulation on equity capital based on risks of an investment trading or brokerage business entity in a country of risk weight of 0% (referring to a person who engages in investment trading or brokerage business in a foreign country in accordance with the Acts and subordinate statutes of the foreign country; hereafter the same shall apply in this item) and credit extension guaranteed by such an investment trading or brokerage business entity; <Amended on Jun. 24, 2009>

(g) Credit extensions with remaining maturity of one year or less for a bank in a country which is not a country of risk weight 0%, and credit extensions with remaining maturity of one year or less guaranteed by the said bank;

(h) Credit extensions for international development banks (IBRD, IADB, AsDB, AfDB, EIB), credit extensions guaranteed by the said banks, and credit extensions backed by securities issued or guaranteed by the said bank;

(i) Credit extensions for a public sector in a country of risk weight 0%, credit extensions guaranteed by the same sector, and credit extensions

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backed by securities issued or guaranteed by the said sector;

(j) Other items in the accounts of cash in the course of credit collection;

(ⅰ) Purchase of domestic L/C bills;

(ⅱ) Purchase of documentary bills through issuance of L/C, etc.;

(k) Mortgage‐backed securities or mortgage‐backed bonds issued by a company which is a special purpose company for mortgage‐backed bonds in which the Government has made an investment, of which business and soundness are under the supervision and control of the FSC, or credit extension to such company.

3. (Method of Calculating Credit Extension) The amount of credit extension shall be the amount appropriated in the corresponding item of the B/S: Provided, That in cases of items in the margin of B/S, the amount of credit extension shall be obtained by multiplying the amount obtained by subtracting the amount appropriated in the margin of the B/S by the amount under subparagraph 2 by the credit conversion ratio prescribed in subparagraph 45 of the Standards for Calculating the Ratio of Equity Capital to Risk-Weighted Assets prescribed in Appendix 3 attached to the Detailed Enforcement Rules on Supervision of Banking Business. <Amended on Sep. 15, 2010; Nov. 5, 2010>

4. (Credit Extension to Securitization Specialty Companies) Credit extensions offered to a securitization specialty company established in order to securitize assets as prescribed by the Asset‐Backed Securitization Act shall be appropriated as follows: <Amended on Nov. 5, 2010>

(a) The Korean International Accounting Standards shall apply mutatis mutandis to the standard of judgment whether the sale and purchase of assets between the originator and the securitization specialty company are a sale transaction or a borrowing transaction, and the Asset‐Backed Securitization Act shall apply mutatis mutandis to the definition of terms relating to asset‐backed securitization;

(b) In cases of a sale transaction, it shall be deemed to have extended credit to the obligor concerned in proportion to the amount of outstanding claims for each obligor of the securitization assets. In cases of a borrowing transaction, it shall be deemed to have extended credit to the asset owner: Provided, That where future trade receivables are securitized (including securitization by way of revolving), it shall be treated in the same way as the case of a borrowing transaction.

5. (Credit Derivatives) Credit extensions with regard to credit derivatives shall be appropriated as follows:

(a) Protection buyers:

(ⅰ) Only when satisfying the recognition standards for credit risk transfer determined by the Governor, credit extensions shall be

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appropriated as follows depending on the type of transaction:

a. Contract‐type credit derivatives (credit default swap and total return swap): The contract amount agreed to receive upon occurrence of a credit event shall be subtracted from the credit extended to an obligor of assets under credit protection, and the amount so calculated is deemed the credit extended to the protection buyer. In such cases, the protection seller is limited to the Government, a central bank, a public institution, a bank, an investment trader or broker, or a merchant bank specified in subparagraph 2 above; <Amended on Jun. 24, 2009>

b. Note‐type credit derivatives (credit linked notes): Deducting the already received note‐sale proceeds from credit extension to the obligor of credit guaranteed assets: Provided, That where a special purpose vehicle is established during the course of transferring credit risk of credit guaranteed assets, this method of appropriation shall apply only to cases where the secured assets held by such special purpose vehicle fall under the assets prescribed in subparagraph 2 above;

(ⅱ) First‐to‐default credit derivatives: Deducting the contract amount of the credit derivatives concerned, among the credit guaranteed asset group, from the amount of credit extension to the obligor of the asset whose risk weight is the lowest under the Standards for Calculating the Ratio of Equity Capital to Risk-Weighted Assets set forth in Appendix 3 attached to the Detailed Enforcement Rules on Supervision of Banking Business, and appropriate such amount as credit extension to the protection buyer;

(ⅲ) Second‐to‐default credit derivatives: A financial institution which purchased second‐to‐default credit derivatives may transfer credit risk as follows only if it simultaneously owns first‐to‐default credit derivatives or first default has already occurred:

a. In cases of simultaneously holding first‐to‐default credit derivatives: Deducting the contract amount of the concerned credit derivatives, among the credit guaranteed asset group, from the amount of credit extension to the obligor of the asset whose risk weight is the second lowest under the Standards for Calculating the Ratio of Equity Capital to Risk-Weighted Assets set forth in Appendix 3 attached to the Detailed Enforcement Rules on Supervision of Banking Business, and appropriate such amount as credit extension to the protection buyer;

b. Where the first default has already occurred: Deducting the contract amount of the credit derivatives concerned, among the credit guaranteed asset group in which no credit event has occurred, from the amount of credit extension to the obligor of the asset whose risk weight is the lowest under

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the Standards for Calculating the Ratio of Equity Capital to Risk-Weighted Assets set forth in Appendix 3 attached to the Detailed Enforcement Rules on Supervision of Banking Business, and appropriate such amount as credit extension to the protection buyer;

(ⅳ) If the remaining maturity of credit derivatives is shorter than that of credit guaranteed assets, transfer of credit risk shall not be recognized;

(ⅴ) If the currencies shown on credit guaranteed assets and credit derivatives are different, transfer of credit risk of about 92% of the contract amount shall be recognized.

(b) Protection sellers:

(ⅰ) Credit extensions shall be recognized depending on transaction type as follows:

a. Contract‐type credit derivatives: The credit extension amount to be appropriated for the obligor of credit guarantee shall be the contract amount multiplied by the credit conversion ratio stipulated in subparagraph 45 of the Standards for Calculating the Ratio of Equity Capital to Risk-Weighted Assets set forth in Appendix 3 attached to the Detailed Enforcement Rules on Supervision of Banking Business;

b. Note‐type credit derivatives: The purchase amount of the note shall be calculated as credit extension for the obligor of credit guaranteed assets (credit derivatives sector) and for the protection buyer (note sector), respectively.

(ⅱ) If credit guaranteed assets are multiple, it shall be recognized

that credit extension is calculated for obligors of all credit guaranteed assets (in cases of the first‐to‐default credit derivatives) or all credit guaranteed assets except one asset whose risk weight is the lowest (in cases of the second‐to‐default credit derivatives).

6. (Set‐off of Deposit and Loan) The amount of loan and deposit under an offset contract in the bank concerned may be offset if it satisfies the requirements stipulated in subparagraph 85 (a) of the Standards for Calculating the Ratio of Equity Capital to Risk-Weighted Assets set forth in Appendix 3 attached to the Detailed Enforcement Rules on Supervision of Banking Business.

7. (Special Cases for the Export‐Import Bank of Korea (“Eximbank”)) As to the Eximbank, the following assets shall be excluded from the scope of credit extension:

(a) Credit extensions to the central government, central bank, or other institutions having at least 50% of government‐owned stocks of a

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country whose sovereign credit rating classified by OECD is 5th grade or higher, credit extensions guaranteed by those institutions, and credit extensions secured by securities issued or guaranteed by those institutions (only limited to the secured amount);

(b) Credit extensions to financial institutions rated by international credit rating agencies, such as Standard & Poor’s, Moody’s, and Fitch IBCA, to be investment grade, credit extensions guaranteed by those institutions and credit extensions secured by securities issued or guaranteed by those institutions (only limited to the secured amount);

(c) Credit extension amount equivalent to 80% of the amount of yangdo dambo (means security by way of transfer) acquired over export‐purpose raw materials or export goods;

(d) Credit extensions equivalent to the amount of yangdo dambo under

which the payments of export sales are deposited by an overseas importer to the account designated by Eximbank, and the Eximbank acquires yangdo dambo over such payments;

(e) Advance payment refund guarantee and performance guarantee, to the

extent of related loan amount, extended with respect to the export sales agreement under which Eximbank extends a loan;

(f) Advance payment received in accordance with the advance payment refund guarantee over the advance payment which is deposited into and managed under the account designated by Eximbank.

8. (Special Cases for the Korea Deposit Insurance Corporation) Where the Korea Deposit Insurance Corporation becomes a large shareholder in the course of financial restructuring, credit extensions for the Korea Deposit Insurance Corporation shall be excluded from the application of credit extension limitations on large shareholders pursuant to Article 35‐2 of the Act.

9. (Special Cases for Korea Development Bank) Credit extension granted to the Korea Finance Corporation by the Korea Development Bank during the period in which the Government controls the KDB Financial Group, Inc. as prescribed in Article 18-2 (3) of the Korea Development Bank Act shall be excluded from the subject of application of the limit of credit extension to large stockholders prescribed in Article 35-2 of the Act. <Newly Inserted on Nov. 5, 2010>

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[Appendix 2‐2] <Amended on Nov. 5, 2010; Feb. 11, 2014>

Examination Standards for Approval for Banking Business

(Relating to Article 5)

1. Matters concerning capital and methods of raising capital:

(a) The capital shall be not less than 100 billion won: Provided, That the capital of local banks may be not less than 25 billion won:

(b) The methods of raising funds necessary for the management of banking business shall be appropriate:

(ⅰ) Raising funds necessary for the management of banking business

and business plans shall be realizable; (ⅱ) Raising additional capital shall be possible;

2. Matters concerning plans on the organization of stockholders and large stockholders:

(a) The plan for organizing stockholders shall conform to Articles 15, 15-3 and 16-2 of the Act:

(ⅰ) Any person who has been the largest stockholder or major

stockholder of an insolvent financial institution determined as prescribed by the Act on the Structural Improvement of Financial Industry, the Act or finance-related Acts and subordinate statutes (referring to finance-related Acts and subordinate statutes under Article 13 (1) of the Decree) or a person specially related thereto (hereafter, "large stockholder" in this item), or the biggest stockholder or major stockholder (referring to a stockholder owning at least 10/100 of the total number of issued stocks with voting right) of a financial institution corresponding to an insolvent financial institution, which has been issued disposition, such as revocation of permission for business or of authorization for business, or a person specially related thereto shall not become a stockholder surpassing the stockholding limit of a bank. In such cases, this shall not apply to a large stockholder who is recognized as being not liable for such insolvency according to the judgment of a court, who is recognized by the FSC as being slightly liable for insolvency, or a person who has fulfilled economic liabilities under the Standards for Assuming Economic Liabilities by the Large Stockholders of Insolvent Financial Institution determined by the FSC or a person who is exempted therefrom;

(b) The following matters concerning large stockholders shall be satisfied: (ⅰ) Where a large stockholder falls under Article 2 (1) 10 (a) of the

Act: He/she shall satisfy the requirements in Appendix 1 of the Decree;

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(ⅱ) Where the same person including a large stockholder and a

stockholder of a financial institution (excluding local financial institutions) owns stocks in excess of 4/100 of the total number of issued stocks with voting right (excluding stocks whereby voting right cannot be exercised as prescribed in Article 16-2 (2) of the Act), in which case such same person is the largest stockholder or exercises actual influences on the important matters of management of such financial institution by a method, such as appointment or dismissal of executives, as prescribed by Presidential Decree: He/she shall satisfy the requirements in Appendix 2 of the Decree;

(ⅲ) Where the same person including a large stockholder and a

stockholder of a financial institution (excluding local financial institutions) owns stocks in excess of 4/100 of the total number of issued stocks with voting right (excluding stocks whereby voting right cannot be exercised as prescribed in Article 16-2 (2) of the Act), in which case such same person is a non-financial business operator who participates in the management of such financial institution by a method, such as appointment or dismissal of executives, as prescribed by Presidential Decree: He/she shall satisfy the requirements in Appendix 2 of the Decree;

3. Matters concerning business plans:

(a) The pro forma financial statements and revenue outlook shall be appropriate and feasible in view of business plans:

(ⅰ) A management strategy in comprehensive consideration of

objectives of management, state of competition, etc. has been prepared;

(ⅱ) The business plan has been conjectured on the basis of objective

data, and is appropriate in view of market condition; (ⅲ) The pro forma financial statement has been prepared in view of

the business plan, and consistency in the increase or decrease in the assumed business profits and losses and in the business expense is maintained, and a reasonable explanation is possible;

(b) The standards for management guidance under Article 34 (2) of the Act can be met:

(ⅰ) The standards for management guidance under Article 34 (2) of

the Act can be met:

(ⅱ) The financial situation can surpass the standards for timely corrective measures under the Act on the Structural Improvement of the Financial Industry;

(c) In order to manage risks and to protect bank customers, appropriate internal control system and business methods are prepared:

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(ⅰ) The relationship between the board of directors and management, organization and operational direction of the board of directors, authority and responsibility of audit committee, etc. shall be transparent and appropriate for the protection of bank customers or stockholders and for the maintenance of the soundness of finance and business;

(ⅱ) Appropriate supervision and internal control system have been

constructed for the observance of the law by executives and employees, risk management and prevention of violations by executives and employees;

(ⅲ) Compliance officer's independence in duties, participation in the

meetings of the board of directors, etc., and access right to data are guaranteed.

(ⅳ) Compliance officers, external directors, members of the audit

committee, etc. shall have knowledge and experience necessary for the performance of duties;

(ⅴ) The plan for organizing the board of directors shall conform to

the methods of organizing the board of directors prescribed in Articles 22 through 25 of the Act;

(ⅵ) The details and methods of business shall conform to Acts and

subordinate statutes and to the sound financial transaction order; (ⅶ) Corporate governance, such as external directors, organization of

the audit committee, shall not be in violation of Acts and subordinate statutes;

(ⅷ) The applicant or executives of such applicant are not likely to

violate Acts and subordinate statutes and the sound financial transaction order, such as direct involvement in a case of violation of Acts and subordinate statutes or the sound financial transaction order, etc. in the future;

4. Matters concerning promoters and executives: Promoters and executives shall meet the qualification standards prescribed in

Articles 18, 22 (7) and 23-2 of the Act and Articles 13, 15 and 17 of the Decree;

5. Matters concerning human resources, business facilities, computer systems and other material facilities:

(a) Matters concerning human resources: (ⅰ) Human resources necessary to perform the duties of filing an

application for authorization in view of a business plan, economic condition, etc. shall be secured;

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(ⅱ) The number of branches, number of personnel and scope of business affairs shall be appropriate in view of the scale of capital and plan of securing additional capital;

(ⅲ) The plan of securing specialized human resources relating to

specific fields, such as risk management, credit screening, and derivatives, shall be appropriate.

(b) Matters concerning business facilities: (ⅰ) The construction of risk management, internal control and credit

screening system is appropriate; (ⅱ) It shall be equipped with the business facilities and computer

systems conforming to the scope and scale of business affairs; (ⅲ) The articles of incorporation shall conform to the relevant laws

and shall not infringe on the rights and interests of bank customers; (ⅳ) Chinese walls shall be established, including a separate work

space provided to prevent the conflict of interests between departments;

(ⅴ) Sufficient work space and office equipment shall be provided in

comparison with the number of personnel of each department; (ⅵ) Legal obstacle shall not exist for internal organs, supervising

institutions, etc. in performing supervision or examination;

(c) It shall be equipped with computer systems and other material facilities:

(ⅰ) The stability and performance of computer system relating to

duties, such as main computer, DB server, storage system, terminals, exclusive lines, and communication facilities, have been sufficiently verified, and are established so that no obstacle to the performance of duties shall occur even though business is rapidly expanding henceforth;

(ⅱ) A security system, such as intrusion detection, intrusion

prevention system, and firewall, is constructed; (ⅲ) A system of confirming information users and a system to

control access to a computer room are established; (ⅳ) A backup system is constructed for all data, and backup data is

kept and managed in a separate place; (ⅴ) Verified security facilities that can safely protect computer

equipment, medium of communication and other material facilities are equipped;

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(ⅵ) A contingency plan in preparation for unexpected situations, such as strike, is prepared;

(ⅶ) Facilities to maintain the continuity of duties are secured where

power failure, fire, etc. occur; (ⅷ) A contingency plan that can be immediately implemented in time

of emergency is prepared; (ⅸ) Other material facilities necessary to stably and swiftly perform

the duties of filing applications for authorization are appropriately constructed;

6. Matters concerning a foreign financial company that has applied for the establishment of a financial institution or concerning the holding company of such foreign financial company:

(a) To obtain lawful approval where approval from the supervising authorities of its home country is necessary for the establishment of banks;

(b) It shall be systematically supervised by the supervising authorities of its home country;

(c) Financial status and management status are excellent and international credibility is recognized;

(d) Subsidiary companies and business offices in possession are systematically and reasonably managed;

(e) Information necessary for supervision concerning the management of banks and business activities can be sufficiently provided.

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[Appendix 2‐3] <Newly Inserted on Nov. 5, 2010; Feb. 11, 2014>

Examination Standards for Authorization for Merger, etc.

(Relating to Article 5-2)

1. Divestiture:

(a) Matters concerning the efficiency and maintenance of the credit order in finance:

(ⅰ) It shall not cause any obstacle to the efficiency of financial

industry and maintenance of the credit order; (ⅱ) The purposes of divestiture, such as efficient operation of

banking business, and facilitation of financial restructuring, shall be appropriate;

(ⅲ) Financial transactions shall not be shrunk or existing customers shall not suffer any disadvantage;

(ⅳ) No flaw shall exist in the performance of procedures pursuant to

the Commercial Act, the Financial Investment Services and Capital Markets Act and other related Acts and subordinate statutes;

(b) Matters concerning business plans: (ⅰ) The pro forma financial statements and revenue outlook for three

years after corporate divestiture shall be appropriate in view of business plans;

(ⅱ) Business strategy, such as main markets, primary customers, and

main contents of service, and scope of duties shall be appropriate;

(ⅲ) The plan for arrangement of duties, which cannot be performed after divestiture, shall be appropriate;

(c) Matters concerning ownership structure and organization operation: (ⅰ) The plan for the organization of stockholders after divestiture

shall conform to Articles 15, 15-3 and 16-2 of the Act; (ⅱ) The executives shall satisfy the qualification requirements

prescribed in Articles 18, 22 (7) and 23-2 of the Act and Articles 13, 15 and 17 of the Decree;

(ⅲ) The board of directors, audit committee, internal control standards, internal standards of corporate governance, etc. shall conform to Articles 22 through 25 of the Act;

(ⅳ) Changes in the ownership structure of a bank following corporate

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divestiture shall conform to Acts and subordinate statutes;

(ⅴ) Plans on the operation of the organization and human resources shall be appropriate;

(d) For the recent five years, where a person who has been the largest stockholder or major stockholder (referring to a stockholder owning at least 10/100 of the total number of issued stocks with voting right) of an insolvent financial institution determined as prescribed by the Act on the Structural Improvement of Financial Industry, this Act or finance-related Acts and subordinate statutes (referring to finance-related Acts and subordinate statutes under Article 13 (1) of the Decree) or a person specially related thereto (hereafter, "large stockholder" in this item) or the largest stockholder of a financial institution corresponding to an insolvent financial institution, which has been issued disposition, such as revocation of permission for business or revocation of authorization for business, is a bank or the limit excess stockholder of a bank, the FSC may choose not to grant authorization to such bank: Provided, That where such large stockholder is a person who is recognized as being not liable for insolvency according to the judgment of a court, who is recognized by the FSC as being slightly liable for insolvency, or who has fulfilled economic liabilities under the Standards for Assuming Economic Liabilities by the Large Stockholder of Insolvent Financial Institution determined by the FSC or is exempted therefrom, this shall not apply;

2. Merger (including merger after divestiture)

(a) Matters concerning the efficiency of financial industry and maintenance of the credit order:

(ⅰ) It shall not cause any obstacle to the efficiency of financial

industry and maintenance of the credit order; (ⅱ) It is not likely to shrink financial transactions or cause any

disadvantage to existing customers;

(b) Matters concerning restrictions on competition:

The results of examination of restrictions on competition in merger by the Fair Trade Commission shall be appropriate;

(c) Matters concerning the scope of duties and business plans: (ⅰ) The scope of duties to be performed after a merger shall not

violate the related Acts and subordinate statutes, etc. and the plan for arrangement of duties which cannot be performed shall be appropriate;

(ⅱ) The pro forma financial statements and revenue outlook for three

years after a merger shall be appropriate in view of business plans;

(ⅲ) Business strategy, such as main markets, primary customers, and

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main contents of service, and scope of duties shall be appropriate;

(d) Matters concerning organization and operation of human resources:

The organization and plan for the operation of human resources, such as that it has the organization, human resources system and capacity capable of performing duties after a merger, shall be appropriate;

(e) Matters concerning the observance of Acts and subordinate statutes:

(ⅰ) The size of capital shall be at least 100 billion won (25 billion won in cases of a local bank), the minimum capital requirements prescribed in Article 9 of the Act;

(ⅱ) The plan for organizing stockholders shall conform to Articles

15, 15-3 and 16-2 of the Act;

(ⅲ) The executives shall meet the qualifications prescribed in Articles 18, 22 (7) and 23-2 of the Act and Articles 13, 15 and 17 of the Decree;

(ⅳ) The board of directors, audit committee, internal control

standards, internal standards of corporate governance, etc. shall conform to Articles 22 through 25 of the Act;

(ⅴ) Changes in the ownership structure of a bank following a merger shall conform to Acts and subordinate statutes;

(ⅵ) No defect shall be found in performing procedures pursuant to

the Commercial Act, the Financial Investment Services and Capital Markets Act or other relevant Acts and subordinate statutes;

(f) For the recent five years, where a person who has been the largest stockholder or major stockholder (referring to a stockholder owning at least 10/100 of the total number of issued stocks with voting right) of an insolvent financial institution determined as prescribed by the Act on the Structural Improvement of Financial Industry, this Act or finance-related Acts and subordinate statutes (referring to finance-related Acts and subordinate statutes under Article 13 (1) of the Decree) or a person specially related thereto (hereafter, "large stockholder" in this item) or the largest stockholder of a financial institution corresponding to an insolvent financial institution, which has been issued disposition, such as revocation of permission for business or revocation of authorization for business, is a bank or the limit excess stockholder of a bank, the FSC may choose not to grant authorization to such bank: Provided, That where such large stockholder is a person who is recognized as being not liable for insolvency according to the judgment of a court, who is recognized by the FSC as being slightly liable for insolvency, or who has fulfilled economic liabilities under the Standards for Assuming Economic Liabilities by the Large Stockholder of Insolvent Financial Institution determined by the FSC or is exempted therefrom, this shall not apply;

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3. Dissolution of banks or cessation of banking business:

(a) It shall be inevitable in view of the management, financial condition, etc. of the relevant bank:

(b) It shall not cause any obstacle to the protection of customers, such as depositors, and to the maintenance of the credit order;

(c) No defect shall be found in performing procedures pursuant to the Commercial Act, the Financial Investment Services and Capital Markets Act or other relevant Acts and subordinate statutes;

(d) For the recent five years, where a person who has been the largest stockholder or major stockholder (referring to a stockholder owning at least 10/100 of the total number of issued stocks with voting right) of an insolvent financial institution determined as prescribed by the Act on the Structural Improvement of Financial Industry, this Act or finance-related Acts and subordinate statutes (referring to finance-related Acts and subordinate statutes under Article 13 (3) of the Decree) or a person specially related thereto (hereafter, "large stockholder" in this item) or the largest stockholder of a financial institution corresponding to an insolvent financial institution, which has been issued disposition, such as revocation of permission for business or revocation of authorization for business, is a bank or the limit excess stockholder of a bank, the FSC may choose not to grant authorization to such bank: Provided, That where such large stockholder is a person who is recognized as being not liable for insolvency according to the judgment of a court, who is recognized by the FSC as being slightly liable for insolvency, or who has fulfilled economic liabilities under the Standards for Assuming Economic Liabilities by the Large Stockholder of Insolvent Financial Institution determined by the FSC or is exempted therefrom, this shall not apply;

4. Business transfer or takeover:

(a) Where it is examined whether to grant authorization of the takeover of all the business or part of the duties prescribed in subparagraphs of Article 27 (2) of the Act, the standards for examination in 1. divestiture or merger shall apply mutatis mutandis;

(b) Where it is examined whether to grant authorization of the transfer of all the business or part of the duties prescribed in subparagraphs of Article 27 (2) of the Act, the standards for examination in 2. dissolution of banks or cessation of banking industry shall apply mutatis mutandis;

(c) In time of transfer of part of business:

(ⅰ) It shall meet examination standards for authorization for the dissolution of banks or cessation of banking industry;

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(ⅱ) The pro forma financial statements and revenue outlook for three years after business transfer shall be appropriate in view of business plans;

(ⅲ) Business strategy, such as main markets, primary customers, and main contents of service, and scope of duties shall be appropriate;

(ⅳ) The plan for arrangement of duties which cannot be performed

after business transfer shall be appropriate;

(d) For the recent five years, where a person who has been the largest stockholder or major stockholder (referring to a stockholder owning at least 10/100 of the total number of issued stocks with voting right) of an insolvent financial institution determined as prescribed by the Act on the Structural Improvement of Financial Industry, this Act or finance-related Acts and subordinate statutes (referring to finance-related Acts and subordinate statutes under Article 13 (1) of the Decree) or a person specially related thereto (hereafter, "large stockholder" in this item) or the largest stockholder of a financial institution corresponding to an insolvent financial institution, which has been issued disposition, such as revocation of permission for business or revocation of authorization for business, is a bank or the limit excess stockholder of a bank, the FSC may choose not to grant authorization to such bank: Provided, That, where such large stockholder is a person who is recognized as being not liable for insolvency according to the judgment of a court, who is recognized by the FSC as being slightly liable for insolvency, or who has fulfilled economic liabilities under the Standards for Assuming Economic Liabilities by the Large Stockholder of Insolvent Financial Institution determined by the FSC or is exempted therefrom, this shall not apply.

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[Appendix 2‐4] <Newly Inserted on Nov. 5, 2010; Jul. 3, 2013; Feb. 11, 2014>

Examination Standards for Authorization for Merger and Conversion under the Act on Structural Improvement of Financial Industry


1. Merger:

(a) The purpose of a merger shall be the rationalization of the financial industry, facilitation of the structural reorganization of the financial industry, etc.;

(b) It shall not cause any obstacle to the efficiency of the financial industry and maintenance of the credit order, such as that it is not likely to shrink financial transactions or cause any disadvantage to existing customers;

(c) No merger shall actually restrict competition between financial institutions:

The results of examination of restrictions on competition in a merger

by the Fair Trade Commission shall be appropriate;

(d) Matters concerning the scope of duties to be performed after a merger and concerning business plans:

1) The scope of duties to be performed after a merger shall not violate the related Acts and subordinate statutes, etc. and the plan for arrangement of duties which cannot be performed shall be appropriate;

2) The pro forma financial statements and revenue outlook for three

years after a merger shall be appropriate in view of business plans;

3) Business strategy, such as main markets, primary customers, and main contents of service, and scope of duties shall be appropriate;

(e) The organization and plan for the operation of human resources, such as that it has the organization, human resources system and capacity capable of performing duties after a merger, shall be appropriate;

(f) Matters concerning the observance of Acts and subordinate statutes:

(ⅰ) The size of capital shall be at least 100 billion won (25 billion won in cases of a local bank), the minimum capital requirements prescribed in Article 9 of the Act;

(ⅱ) The plan for organizing stockholders shall conform to Articles

15, 15-3 and 16-2 of the Act;

(ⅲ) The executives shall meet the qualifications prescribed in Articles

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18, 22 (7) and 23-2 of the Act and Articles 13, 15 and 17 of the Decree;

(ⅳ) The board of directors, audit committee, internal control

standards, internal standards of corporate governance, etc. shall conform to Articles 22 through 25 of the Act;

(ⅴ) Changes in the ownership structure of a bank following a merger shall conform to Acts and subordinate statutes;

(ⅵ) It shall not violate the Commercial Act, the Financial Investment

Services and Capital Markets Act or other relevant Acts and subordinate statutes and no defect shall be found in performing procedures prescribed thereby;

(g) Capital ratio, liabilities, etc. shall be at the appropriate level:

In case of a merger under Article 4 of the Act on the Structural Improvement of the Financial Industry, total capital ratio shall be at least 8 percent, core capital ratio shall be at least 6 percent and common equity capital ratio shall be at least 4.5 percent after the merger: Provided, That where the FSC deems it necessary for financial restructuring, this shall not apply; <Amended on Jul. 3, 2013>

(h) Major investors shall have sufficient investment capability and be in the sound financial situation:

Major investors shall satisfy requirements in Schedule 1;

(i) For the recent five years, where a person who has been the largest stockholder or major stockholder (referring to a stockholder owning at least 10/100 of the total number of issued stocks with voting right) of an insolvent financial institution determined as prescribed by the Act on the Structural Improvement of Financial Industry, this Act or finance-related Acts and subordinate statutes (referring to finance-related Acts and subordinate statutes under Article 13 (1) of the Decree) or a person specially related thereto (hereafter, "large stockholder" in this item) or the largest stockholder of a financial institution corresponding to an insolvent financial institution, which has been issued disposition, such as revocation of permission for business or revocation of authorization for business, is a bank or the limit excess stockholder of a bank, the FSC may choose not to grant authorization to such bank: Provided, That where such large stockholder is a person who is recognized as being not liable for insolvency according to the judgment of a court, who is recognized by the FSC as being slightly liable for insolvency, or who has fulfilled economic liabilities under the Standards for Assuming Economic Liabilities by the Large Stockholder of Insolvent Financial Institution determined by the FSC or is exempted therefrom, this shall not apply;

2. Conversion:

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(a) Where a financial institution, other than a bank, converts to a bank, Appendix 2-2 shall apply mutatis mutandis: Provided, That subparagraph 1 (g) and (h) of Appendix 2-4 shall apply mutatis mutandis to matters concerning financial soundness and major investors;

(b) Where a bank converts to a financial institution, other than a bank, subparagraph 3 of Appendix 2-3 shall apply mutatis mutandis.

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<Schedule 1>

Requirements for Major Investors

1. Where a major investor is a person who holds stocks pursuant to Articles 15 (3) and 16-2 (3) of the Banking Act:

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Classification Requirements1. Where the major investor is aninstitution (excludinginvestment companies,investment limitedliability companies,investment limitedpartnership companiesand investmentassociations prescribedby the FinancialInvestment Servicesand Capital MarketsAct; hereinafter referred

to as "financialcompany" in thisSchedule) that undergoes an inspection from the supervisory service asprescribed in Article 38of the Act on theEstablishment, etc. ofFinancial ServicesCommission

(a) Financial soundness standards applied to therelevant institution, which shall meet the following standards:

(ⅰ) In cases of financial institutions (including institutions established pursuant to Acts referred to in Article 13 (1)

37, 40 and 41 of the Decree), total capital ratio shall be at least 8/100, core capital ratio shall be at least 6/100 and common equity capital ratio shall be at least 4.5/100 as of the end of the last quarter; <Amended on Jul. 3, 2013>

(ⅱ) In cases of investment traders and investment brokers, net capital ratio for business as of the end of the most

recent month shall be at least 150/100;(ⅲ) In cases of insurance companies, the solvency margin

ratio as of the end of the most recent quarter shall be at least 100/100;

(ⅳ) In cases of institutions, other than those prescribed in sub-items (ⅰ) through (ⅲ), capital adequacy requirements applied to the

relevant institutions shall be met;

(b) In time of additional investment, the amount of estimated additional investment (including the amount of estimated subscription to already issued stocks; hereinafter the same shall apply) is within the equity capital of the relevant financial institution (investor), and the plan for raising the amount of estimated additional investment is appropriate and is not based on borrowing.

2. Where the major investor is aninvestment company,investment limitedliability company,investment limitedpartnership companyand investmentassociation prescribedby the FinancialInvestment Servicesand Capital MarketsAct

In time of additional investment, the amount of estimatedadditional investment is within the equity capital of the relevant financial institution (investor), and the plan for raising the amount of estimated additional investment is appropriate and is not based on borrowing.

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Classification Requirements3. Where the major investor is a domesticcorporation, other thana financial institution

(a) Debt ratio (referring to a rate obtained by dividing total debt on the balance sheet by total capital as of the end of the most recent business year; hereinafter the same shall apply) shall be 200/100 or less;

(b) Where such corporation belongs to a conglomerate, the debt ratio of such conglomerate shall be 200/100 or less;

(c) In time of additional investment, the amount of estimated additional investment is within the equity capital of the relevant investor, and the plan for raising the amount of estimated additional investment is appropriate and is not based on borrowing.

4. Where the major investor is a native Korean who is an individual

In time of additional investment, the plan for raising the amount of estimated additional investment is appropriateand is not based on borrowing.

5. Where the major investor is a foreigner

(a) Where such foreigner is a company engaged in banking business, investment trading business, investment brokerage business, insurance business orfinancial business recognized as equivalent thereto by the FSC (hereinafter referred to as "foreign financialcompany") or is a holding company of the relevant foreign financial company, total capital ratio shall be at least

8/100, core capital ratio shall be at least 6/100 and common equity capital ratio shall be at least 4.5/100 for the last three consecutive years, or the

financial condition of the relevant foreign financial company is at a level recognized as appropriate for the management of a financial institution in view of the capital equity ratio of the BIS, standards for evaluation of financial soundness of a foreign financial company engaged in the relevant type of business, credit rating of an international credit rating agency. In such cases, the holding company of a foreign financial company shall be based on the foreign financial company which is actually controlled by the relevant holding company;

<Amended on Jul. 3, 2013>

(b) In time of additional investment, the amount of estimated additional investment is within the equity capital of the relevant investor, and the plan for raising the amount of estimated additional investment is appropriate and is not based on borrowing.

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6. Where the major investor is a private

equity fund or a special p u r p o s e c o m p a n y prescribed

by the FinancialInvestment Servicesand Capital MarketsAct

(a) Where an executive partner of a private equity fund or a special purpose company falls under any of subparagraphs 1 through 4, he/she shall meet the relevant requirements;

(b) Where a foreigner is an executive partner of a private equity fund or a special purpose company (including where a foreigner is a limited partner of a private equity fund under the Financial Investment Services and Capital Markets Act and actually controls a private equity fund or a special purpose company, such as where he/she owns at least 30/100 of the shares of the private equity fund), he/she shall meet the requirements under subparagraph 5.

Note: 1. In judging whether a stockholder is the largest stockholder or a major stockholder, stocks with voting right owned by such stockholder and persons specially related thereto shall be added; 2. In calculating total capital, capital increment (limited to those that increase total capital) from the end of the most recent business year until the date of application for approval may be included in the calculation; 3. Where a conglomerate is subject to the preparation of combined financial statement as prescribed by the Act on External Audit of Stock Companies in calculating the overall debt ratio of non-financial companies belonging to a conglomerate, it refers to the debt ratio calculated pursuant to combined financial statement.

2. Where a major investor is a person who holds stocks as prescribed in Article 16-2 (2) of the Banking Act:

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Requirements(a) Standards for financial soundness applied to the relevant institution, which shall meet the following standards: (i) In cases of financial institutions (including institutions established pursuant to

Acts referred to in Article 13 (1) 37, 40 and 41 of the Decree), total capital ratio shall be at least 8/100, core capital ratio shall be at least 6/100 and common equity capital ratio shall be at least 4.5/100 as of the end of the last quarter; <Amended on Jul. 3, 2013>

(ii) In cases of investment traders or investment brokers, net capital ratio as of the end of the most recent month shall be at least 150/100; (iii) In cases of insurance companies, the solvency margin ratio as of the end of the most recent quarter shall be at least 100/100; (iv) In cases of institutions other than those in sub-items (i) through (iii), capital

adequacy requirements applicable thereto shall be met;(b) Debt ratio (referring to the rate obtained by dividing total debt on the balance sheet by total capital as of the end of most recent business year; hereinafter the same shall apply) shall be 200/100 or less;(c) Where the relevant corporation belongs to a conglomerate, etc., the debt ratio of such conglomerate, etc. shall be 200/100 or less;(d) In time of additional investment, the amount of estimated additional investment (including the amount of estimated subscription to already issued stocks; hereinafter the same shall apply) is within the equity capital of the relevant investor, and the plan for raising the amount of estimated additional investment is appropriate and is not based on borrowing.

Note: 1. In judging whether a stockholder is the largest stockholder or a major stockholder, stocks with voting right owned by such stockholder and persons specially related thereto shall be added; 2. In calculating total capital, capital increment (limited to those that increase total capital) from the end of the most recent business year until the date of application for approval may be included in the calculation; 3. Where a conglomerate is subject to the preparation of combined financial statement as prescribed by the Act on External Audit of Stock Companies in calculating the overall debt ratio of non-financial companies belonging to a conglomerate, it refers to the debt ratio calculated pursuant to combined financial statements.

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[Appendix 2‐5] <Newly Inserted on Nov. 5, 2010>

Examination Standards for Authorization for Establishment and Closure of Foreign Bank Branches, etc.


I. New establishment of foreign bank branches

1. New establishment of the first branch:

(a) Matters concerning the head office of a foreign bank:

(i) Legitimate approval for establishment from the supervising authorities of its home country has been obtained:

(ii) It has been granted authorization for banking business in its home country and is under systematic supervision by the supervising authorities;

(iii) Its financial and management condition is excellent and its reliability

is internationally recognized;

(iv) It has the operational capability necessary for the operation of Korean branches of a foreign bank, and systematically manages all the business offices at home and abroad;

(b) Matters concerning Korean branches of a foreign bank:

(i) It shall have the operating funds, organization and human resources necessary for the operation of Korean branches of a foreign bank;

(ii) It shall have business facilities and computer systems conforming to the scope and size of business;

(iii) It shall have a system of risk management, internal control and

necessary credit screening;

(iv) The business plan of the Korean branch of a foreign bank is recognized to be appropriate;

(v) It shall be able to sufficiently provide information necessary for the supervision of business activities of the Korean branch, head office and related companies of a foreign bank;

(c) Matters concerning the representative of a Korean branch of a foreign bank:

The representative of a Korean branch of a foreign bank shall have the management ability, such as sufficient knowledge and experience in management, integrity, etc., and no defect shall exist in the

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observance of laws;

2. New establishment of branches after the first branch:

(a) Matters concerning the head office of a foreign bank:

(i) Legitimate approval for establishment from the supervising authorities of its home country has been obtained:

(ii) Its financial and management condition is excellent and its reliability is internationally recognized;

(b) Matters concerning an additional Korean branch of a foreign bank:

(i) The condition of management and observance of related laws of the Korean branch of the relevant foreign bank, which has been already established in Korea, shall be excellent;

(ii) It shall have the operating funds, organization, business operation system and internal control system necessary for the operation of additional Korean branches of a foreign bank;

(iii) The business plan of the additional Korean branch of a foreign bank shall be recognized to be appropriate;

(c) Matters concerning the representative of an additional Korean branch of a foreign bank:

The representative of the additional Korean branch of a foreign bank shall have the management ability, such as sufficient knowledge and experience in management, integrity, etc., and no defect shall exist in the observance of laws.

II. Closure of foreign bank branches

(a) The plan on the disposal of assets and liabilities following cessation shall be appropriate and shall not cause any obstacle to the protection of

creditors, such as domestic depositors;(b) The plan for paying retirement allowance, etc. to the Korean employees shall be appropriate.

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[Appendix 2‐6] <Newly Inserted on Nov. 5, 2010; Feb. 11, 2014>

Application Documents for Preliminary Authorization and Authorization

Classification Preliminary Authorization AuthorizationOperation of Banking Business

1. Application for preliminary authorization in which all the promoters (directors) put name and seal or put signature;2. Articles of incorporation or draft articles of incorporation;3. Documents, such as minutes, etc. of a general meeting of promoters, inaugural general meeting of stockholders or board of directors, which verify that a decision to apply for establishment or authorization has been made;4. Document verifying that promoters (limited to cases of individuals) and executives conform to Article 18 of the Act;5. Financial statements and annexed notes for the most recent three business years (excluding corporations in the process of establishment, and referring to financial statements and annexed notes until the most recent business year from the date of establishment in cases of corporations for which three business years have not passed);6. Business plans (including pro forma financial statements) for three business years after start of business and statement of estimated receipts and disbursements;7. Documents by which present condition of human resources, business facilities, computer systems, other material facilities, etc. (including human resources, material facilities, etc. scheduled to be employed, purchased, etc.) may be verifiable;

1. Application for authorization;2. Articles of incorporation;3. Documents verifying that a decision to apply for establishment or authorization was made, such as minutes, etc. of a general meeting of promoters, inaugural general meeting of stockholders or board of directors;4. Documents in which the location and name of a head office, branches and other business offices are recorded;5. Documents verifying that promoters (limited to cases of individuals) and executives conform to Article 18 of the Act;6. Documents verifying that the board of directors, audit committee, internal control standards, internal standards of corporate governance, etc. conform to Articles 22 through 25 of the Act;7. Documents verifying that plans for organizing stockholders conform to Articles 15, 15-3

and 16-2 of the Act;8. List of stockholders;9. Documents, such as certificate of stock price in custody, certificate of bank balance, which verify that equity capital has been raised;

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8. Documents verifying that plans for organizing stockholders conform to Articles 15, 15-3 and 16-2 of the Act;9. Documents in which the (scheduled) location and name of a head office, branches and other business offices are recorded;10. Resumes of all the promoters (where the promoter is a corporation, its history, financial statements for the most recent three years and resume of a representative);11. Documents, such as commitment to pay capital, certificate of bank balance, e.g. deposit, etc., by which a plan to raise equity capital is verifiable;12. Timetables for promotion;13. Purport of changes in objectives;14. Plan to make the board of directors, audit committee, internal control standards, internal standards of corporate governance, etc. conform to Articles 22 through 25 of the Act;15. Certified copy of corporate register;16. Where the applicant is a foreign financial company (including a holding company): (a) Documents verifying that the person who has put a signature as a representative is a lawful representative; (b) Documents verifying that it has been authorized to operate financial business, such as banking business, investment trading business, investment brokerage business, insurance business, etc. in its home country; (c) List of the management

personnel and their career history;

10. Financial statements and annexed notes for the most recent three business years (excluding corporations in the process of establishment, and referring to financial statements and annexed notes until the most recent business year from the date of establishment in cases of corporations for which three business years have not passed);11. Business plans (including pro forma financial statements) for three business years after start of business and statement of estimated receipts and disbursements;12. Documents by which present condition of human resources, business facilities, computer systems, other material facilities, etc. are verifiable;13. Where conditions are imposed on the preliminary authorization under Article 11-2 of the Act (hereinafter, "preliminary authorization"),

documents verifying that such conditions have been fulfilled;

14. Other documents verifying compliance with matters of preliminary authorization;15. Where the applicant is a foreign financial company (including a holding company): (a) Documents verifying that the person who has put a signature as a representative is a lawful representative; (b) Note pledging that the applicant shall observe Acts and subordinate statutes of Korea, orders and instructions of the government authorities, FSC, Financial Supervisory Service, etc.

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(d) Documents verifying that the establishment of financial institutions within Korea does not violate the relevant laws of its home country and documents of approval from the supervisory authorities of its home country; (e) Business condition, such as balance sheets, income statements, etc. for the most recent three years, annual reports and audit reports of accounting firms; (f) All kinds of capital adequacy ratio and capital soundness indicators, such as BIS capital ratio for the most recent three years, and particulars thereof; (g) Present situation of handling international business of the applying financial company, present status of related companies in and out of Korea and present status of major financial transactions among the applying financial company and related companies; (h) Transactions of the applying financial company with Korea;

and agreements between financial institutions as it engages in business activities in Korea; (c) Articles of incorporation of the applying financial institution; (d) Documents verifying that it has been authorized to operate financial business, such as banking business, investment trading business, investment brokerage business, insurance business, etc. in its home country; (e) List of the management

personnel and their career history;

(f) Documents verifying that the establishment of financial institutions within Korea does not violate the relevant laws of its home country and documents of approval from the supervisory authorities of its home country; (g) Business condition, such as balance sheets, income statements, etc. for the most recent three years, annual reports and audit reports of accounting firms; (h) All kinds of capital adequacy ratio and capital soundness indicators, such as BIS capital ratio for the most recent three years, and particulars thereof; (i) Present situation of handling international business of the applying financial company, present status of related companies in and out of Korea and present status of major financial transactions among the applying financial company and related companies; (j) Transactions of the applying financial company with Korea;

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Classification Preliminary Authorization AuthorizationDivestitureunder the Banking Act

1. Application for preliminary authorization in which all the directors have put a name and a seal or have put a signature;2. Purpose of divestiture and reasons therefor;3.Contracts or appointments on divestiture;4. Minutes of the board of directors passing a resolution in favor of divestiture;5. Financial statements for the most recent three years;6. (Draft) modification of articles of incorporation;7. Documents in which the (scheduled) location and name of a head office, branches and other business offices are recorded;8. Plan for organizing stockholders and for corporate governance;9. Business plans (pro forma financial statements for three years after divestiture, plans for operation of human resources

and organization, scope of duties, business strategy, etc.);

10. Plan of protecting the rights and interests of interested parties;11. Timetables for promotion;

1. Application for authorization;2. Articles of incorporation;3. Minutes of the board of directors passing a resolution in favor of divestiture;4. Minutes of the general meeting of stockholders passing a resolution in favor of divestiture;5. Purpose of divestiture and reasons therefor;6. Contracts or appointments on divestiture;7. Financial statements for the most recent three years;8. Documents in which the location and name of a head office, branches and other business offices are recorded;9. Documents verifying that executives conform to Article 18 of the Act;10. Documents verifying that the board of directors, audit committee, internal control standards, internal standards of corporate governance, etc. conform to Articles 22 through 25 of the Act;11. Documents verifying that plans for organizing stockholders conform to Articles 15, 15-3 and 16-2 of the Act;12. List of stockholders;13. Business plans (pro forma financial statements for three years after divestiture, plans for operation of human resources


14. Documents verifying that procedures for protecting interested parties, such as creditors, are implemented;15. Other documents verifying that matters of preliminary authorization are implemented;

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Classification Preliminary Authorization AuthorizationMerger (mergerafter divestiture)under theBanking Act

1. Application for preliminary authorization in which all the directors have put a name and a seal or have put a signature;2. Purposes of a merger and reasons therefor;3.Contracts or appointments on a merger;4. Minutes of the board of directors passing a resolution in favor of a merger;5. Financial statements for the most recent three years;6. (Draft) modification of articles of incorporation [(draft) articles of incorporation in cases of consolidation];7. Documents in which the (scheduled) location and name of a head office, branches and other business offices are recorded;8. Plan for organizing stockholders and for corporate governance;9. Business plans (pro forma financial statements for three years after a merger, plans for operations of human resources


10. Plan of protecting the rights and interests of interested parties;11. Timetables for promotion;

1. Application for authorization;2. Articles of incorporation;3. Minutes of the board of directors passing a resolution in favor of a merger;4. Minutes of the general meeting of stockholders passing a resolution in favor of a merger;5. Purposes of merger and reasons therefor;6. Financial statements for the most recent three years;7. Documents in which the location and name of a head office, branches and other business offices are recorded;8. Documents verifying that executives conform to Article 18 of the Act;9. Documents verifying that the board of directors, audit committee, internal control standards, internal standards of corporate governance, etc. conform to Articles 22 through 25 of the Act;10. Documents verifying that plans for organizing stockholders conform to Articles 15, 15-3 and 16-2 of the Act;11. List of stockholders;12. Business plans (pro forma financial statements for three years after a merger, plans for operation of human resources


13. Documents verifying that procedures for protecting interested parties, such as creditors, are implemented;14. Other documents verifying that matters of preliminary authorization are implemented;

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Classification Preliminary Authorization AuthorizationMerger (mergerafter divestiture)under theAct on the Structural Improvement of the FinancialIndustry

1. Application for preliminary authorization in which all the directors have put a name and a seal or have put a signature;2. Purposes of a merger and reasons therefor;3.Contracts or appointments on a merger;4. Minutes of the board of directors passing a resolution

in favor of a merger;5. Financial statements for the most recent three years;6. (Draft) modification of articles of incorporation [(draft)

articles of incorporation in cases of consolidation];

7. Documents in which the (scheduled) location and name of a head office, branches and other business offices are recorded;8. Plan for organizing stockholders and for corporate governance;9. Business plans (pro forma financial statements for three years after a merger, plans for operation of human resources


10. Plan of protecting the rights and interests of interested parties;11. Estimated BIS capital ratio after a merger and data of calculation;12. Investment capability of

major investors or documents verifying financial condition thereof;13. Timetables for promotion;

1. Application for authorization;2. Articles of incorporation;3. Minutes of the board of directors passing a resolution in favor of a merger;4. Minutes of the general meeting of stockholders passing a resolution in favor of a merger;5. Purposes of a merger and reasons therefor;6. Financial statements for the most recent three years;7. Documents in which the location and name of a head office, branches and other business offices are recorded;8. Documents verifying that executives conform to Article 18 of the Act;9. Documents verifying that the board of directors, audit committee, internal control standards, internal standards of corporate governance, etc. conform to Articles 22 through 25 of the Act;10. Documents verifying that plans for organizing stockholders conform to Articles 15, 15-3 and 16-2 of the Act;11. List of stockholders;12. Business plans (pro forma financial statements for three years after a merger, plans for operation of human resources


13. Documents verifying that procedures for protecting interested parties, such as creditors, are implemented;14. Estimated BIS capital ratio

after a merger and data of calculation;15. Investment capability of major investors or documents verifying financial condition thereof;16. Other documents verifying that matters of preliminary authorization are implemented;

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Classification Preliminary Authorization AuthorizationConver-sionundertheActonthe Structural Improve-ment of the FinancialIndustry

C o n -ver-siontobank

1. Application for preliminary authorization in which all the

directors have put a name and a seal or have put a signature;

2. Articles of incorporation or draft articles of incorporation

3. Documents verifying that a resolution in favor of

application for conversion has been passed, such as minutes of the board of directors;

4. Documents verifying that executives conform to Article

18 of the Act;5. Financial statements and annexed notes for the most recent three business years (referring to financial statements and annexed notes

until the most recent business year from the date of establishment in cases of corporations for which three business years have not passed from the date of establishment);

6. Business plans (including pro forma financial statements) for three business years after start of business and statement of estimated receipts and disbursements;

7. Documents by which present condition of human resources, business facilities, computer system, other material facilities, etc. (including human resources, material facilities, etc. scheduled to be employed, purchased, etc.) is verifiable;

8. Documents verifying that plans for organizing stockholders conform to

Articles 15, 15-3 and 16-2 of the Act;

9. Documents in which the (scheduled) location and name

of a head office, branches and other business offices are recorded;

1. Application for authorization;2. Articles of incorporation;3. Documents verifying that a resolution in favor of application for conversion has

been passed, such as minutes of the board of directors;

4. Documents in which the location and name of a head

office, branches and other business offices are recorded;

5. Documents verifying that executives conform to Article

18 of the Act;6. Documents verifying that the board of directors, audit committee, internal control standards, internal standards of corporate governance, etc. conform to Articles 22 through 25 of the Act;7. Documents verifying that plans

for organizing stockholders conform to Articles 15, 15-3 and 16-2 of the Act;

8. List of stockholders;9. Documents, such as certificate

of stock price in custody, certificate of bank balance, which verify that equity capital has been raised;

10. Financial statements and annexed notes for the most recent three business years (referring to financial statements and annexed notes

until the most recent business year from the date of establishment in cases

of corporations for which three business years have not

passed from the date of establishment);11. Business plans (including pro forma financial statements) for three business

years after start of business and statement of estimated receipts and disbursements;

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Classification Preliminary Authorization AuthorizationConver-sionundertheActonthe Structur-al Improve-ment of the FinancialIndustry

C o n -ver-siontobank

10. Documents, such as commitment to pay capital, certificate of bank balance, e.g. deposit, by which a plan to raise equity capital is verifiable;11. Timetables for promotion;12. Plan to make the board of directors, audit committee, internal control standards, internal standards of corporate governance, etc. conform to Articles 22 through 25 of the Act;13. Certified copy of corporate register;

12. Documents by which present condition of human resources, business facilities, computer systems, other material facilities, etc. are verifiable;13. Where conditions are imposed on preliminary authorization, documents verifying that such conditions have been fulfilled;14. Other documents verifying compliance with matters of preliminary authorization;

C o n -ver-siontoentity otherthanbank

1. Application for preliminary authorization;2. Minutes of the board of directors;3. Trade name and type of business to be used and engaged in after conversion;4. Recent financial statements;5. Plan to protect depositors, details of measures taken against assets and liabilities and plan therefor;6. Timetables for promotion;

1. Application for authorization;2. Minutes of the board of directors and of the general meeting of stockholders (limited to cases requiring resolution of the general meeting of stockholders);3. Articles of incorporation after conversion;4. Trade name and type of business to be used and engaged in after conversion;5. Recent financial statements;6. Documents verifying that procedures for protecting depositors are implemented;7. Details of measures taken against assets and liabilities;8. Other documents verifying compliance with matters of preliminary authorization;

Dissolution of abank or closure of banking business

1. Application for preliminary authorization;2. Minutes of the board of directors;3. Where banking business is to be closed, trade name and type of business to be used and engaged in after closure of banking business;

1. Application for authorization;2. Minutes of the board of directors and of the general meeting of stockholders (limited to cases requiring resolution of the general meeting of stockholders);3. Where banking business is to be closed, articles of incorporation after closure of business;

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Classification Preliminary Authorization AuthorizationDissolution ofbank or closure of banking business

4. Recent financial statements;5. Plans to protect depositors, details of measures taken against assets and liabilities and plans therefor;6. Timetables for promotion;

4. Where banking business is to be closed, trade name and type of business to be used and engaged in after closure of banking business;5. Recent financial statements;6. In cases of dissolution, plans to seek liquidation;7. Document verifying the implementation of protection procedures for depositors;8. Details of measures taken against assets and liabilities;9. Other documents verifying the implementation of matters of preliminary authorization;

Takeover of business

1. Application for preliminary authorization;2. Purposes of takeover of business and reasons therefor;3. Contracts or appointments on takeover of business;4. Minutes of the board of directors passing a resolution in favor of takeover of business;5. Financial statements for the most recent three years;6. Present status of a head office and business offices;7. Business plans (pro forma financial statements for three years after takeover of business, plans for operation of human resources and

organization, scope of duties, business strategy,

etc.);8. Plans to protect rights and interests of interested parties;9. Timetables for promotion;

1. Application for authorization;2. Minutes of the board of directors passing a resolution in favor of takeover of business;3. Minutes of the general meeting of stockholders giving approval for takeover of business (limited to cases requiring resolution of the general meeting of stockholders);4. Purposes of takeover of business and reasons therefor;5. Financial statements for the most recent three years;6. Present status of a head office and business offices;7. Business plans (pro forma financial statements for three years after takeover of business, plans for operation of human resources and


etc.);8. Document verifying the implementation of protection procedures for interested parties, such as creditors;9. Other documents verifying the implementation of matters of preliminary authorization;

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Classification Preliminary Authorization AuthorizationTransfer of business 1. Application for preliminary

authorization;2. Purposes of transfer of business and reasons therefor;3. Contracts or appointments on transfer of business;4. Minutes of the board of directors passing a resolution in favor of transfer of business;5. Recent financial statements (financial statements for the most recent three years in cases of transfer of part of business);6. (Draft) modification of

articles of incorporation;7. Plans for corporate governance (limited to cases of transfer of part of business);8. Business plans (pro forma financial statements for three years after transfer of business, plans for operation of human resources and


etc.) (limited to cases of transfer of part of

business);9. Plans to protect rights and interests of interested parties, details of measures taken against assets and liabilities and plans therefor;10. Trade name and type of business to be used and engaged in after transfer of business where business is to be transferred in whole;11. Timetables for promotion;

1. Application for authorization;2. Articles of incorporation;3. Purposes of transfer of business and reasons therefor;4. Minutes of the board of directors passing a resolution in favor of transfer of business;5. Recent financial statements (financial statements for the most recent three years in cases of transfer of part of business);6. Documents verifying that executives conform to Article 18 of the Act (limited to cases of transfer of part of business);7. Documents verifying that the board of directors, audit committee, internal control standards, internal standards of corporate governance, etc. conform to Articles 22 through 25 of the Act (limited to cases of transfer of part of business);8. Business plans (pro forma financial statements for three years after transfer of business, plans for operation of human resources and


etc.) (limited to cases of transfer of part of

business);9. Details of measures taken against assets and liabilities10. Trade name and type of business to be used and engaged in after transfer of business where business is to be transferred in whole;11. Minutes of the general meeting of stockholders giving approval for transfer of business (limited to cases requiring resolution by the general meeting of stockholders);

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Classification Preliminary Authorization AuthorizationTransfer of business

12. Documents verifying that procedures for protecting interested parties, such as creditors, are implemented;13. In cases of dissolution after transfer of business, plans to seek liquidation;14. Other documents verifying the implementation of matters of preliminary authorization;

New establishment ofthe first branch

of a foreign

bank

1. Application for preliminary authorization;2. Documents verifying that the person who has put a signature as the representative of the applying financial institution is a lawful representative;3. Documents verifying that it has obtained authorization to operate banking business in its home country;4. List of the management personnel and their career history;5. Documents verifying that the establishment of branches within Korea does not violate the relevant laws of its home country and documents of approval from the supervisory authorities of its home

country;6. Situation of business for the most recent three years and annual reports;7. BIS capital ratio for the most recent three years, and particulars thereof;8. Plans to operate branches and business plans;9. Present situation of handling international business of the applying financial company, present status on management of existing overseas branches or management plan thereof;

1. Application for preliminary authorization;2. Documents verifying that the person who has put a signature as the representative of the applying financial institution is a lawful representative;3. Note pledging that the applicant shall observe Acts and subordinate statutes of Korea, orders and instructions of the government authorities, FSC, Financial Supervisory Service and agreements between financial institutions as it engages in business activities in Korea;4. Articles of incorporation of the applying financial institution;5. Name and authority of the person to be the representative of a branch to be established, lawful letter of attorney indicating such authority and resume;6. Documents verifying that it has obtained authorization to operate banking business in its home country;7. List of the management personnel and their career history;

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Classification Preliminary Authorization AuthorizationNew establishment ofthe first branch

of a foreign

bank

10. Transactions of the applying financial company with Korea;11. Timetables for promotion;

8. Documents verifying that the establishment of branches within Korea does not violate the relevant laws of its home country and documents of approval from the supervisory authorities of its home

country;9. Situation of business for the most recent three years and annual reports;10. BIS capital ratio for the most recent three years, and particulars thereof;11. Plans to operate branches and business plans;12. Present situation of handling international business of the applying financial company, present status on management of existing overseas branches or management plan thereof;13. Transactions of the applying financial company with Korea;

New establishment ofadditional branches of a

foreign bank

1. Application for preliminary authorization;2. Documents verifying that the person who has put a signature as the representative of the applying financial institution is a lawful representative;3. Documents verifying that the establishment of branches within Korea does not violate the relevant laws of its home country and documents of approval from the supervisory authorities of its home

country;4. Situation of business for the most recent three years and annual reports;5. BIS capital ratio for the most recent three years, and particulars thereof;6. Plans to operate branches and business plans;7. Timetables for promotion;

1. Application for authorization;2. Documents verifying that the person who has put a signature as the representative of the applying financial institution is a lawful representative;3. Name and authority of the person to be the representative of a branch to be established, lawful letter of attorney indicating such authority and resume;4. Documents verifying that the establishment of branches within Korea does not violate the relevant laws of its home country and documents of approval from the supervisory authorities of its home

country;5. Situation of business for the most recent three years and annual reports;

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Classification Preliminary Authorization AuthorizationNew establishment ofadditional branches of a

foreign bank

6. BIS capital ratio for the most recent three years, and particulars thereof;

Closure of foreign bank branches

1. Application for preliminary authorization;2. Documents verifying that the person who has put a signature as the representative of the applying financial institution is a lawful representative;3. Balance sheet of the relevant branch as of the end of the month immediately before the month in which an application for authorization was filed and as of the date an application for authorization was filed;4. Documents in which details of asset and liabilities are recorded;5. Schedule of closure of a branch and liquidation procedures;6. Plans of measures against employees, assets and liabilities of the relevant branch;7. Timetables for promotion.

1. Application for authorization;2. Documents verifying that the person who has put a signature as the representative of the applying financial institution is a lawful representative;3. Balance sheet of the relevant branch as of the end of the month immediately before the month in which an application for authorization was filed and as of the date an application for authorization was filed;4. Documents in which details of asset and liabilities are recorded;5. Documents in which measures against depositors and measures taken against assets and liabilities are recorded;6. Documents in which measures against employees of the relevant branch are recorded and documents by which details of such measures are verifiable.

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[Appendix 2‐7] <Newly Inserted on Nov. 5, 2010>

Flow Chart of (Preliminary) Authorization Procedures

PreliminaryAuthorizationStage

Procedures Guidance

↓Application for PreliminaryAuthorization

↓Public Announcement of Applications andCollection of Opinions ←

(Press Release Copies, Internet, etc.)Public Hearing (if necessary)

↓

Examination of PreliminaryAuthorization

← Actual Examination (if necessary)

← Evaluation Committee (if necessary)

↓PreliminaryAuthorization

⇓ ↓ ← Notification of Disapproval

AuthorizationStage

Application for Authorization

↓Examination and Confirmation of Authorization

← Actual Examination

↓ ← Notification of Disapproval

Authorization

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[Appendix 2‐8] <Newly Inserted on Nov. 5, 2010; Jul. 3, 2013; Feb. 11, 2014>

Requirements for Exceeding Stockholding Limit for Stockholders Exceeding Stockholding Limit


1. With respect to subparagraph 1 (a) of Appendix 1 of Article 5 of the Decree:

(a) In cases of a financial institution (including institutions established pursuant to Acts referred to in Article 13 (1) 37, 40 and 41 of the Decree), total capital ratio shall be at least 8/100, core capital ratio shall be at least 6/100 and common equity capital ratio shall be at least 4.5/100 as of the end of the last quarter; <Amended on Jul. 3, 2013>

(b) In cases of an investment trader or investment broker, the net capital ratio for business as of the end of the most recent month shall be at least 150/100;

(c) In cases of an insurance company, the solvency margin ratio as of the end of the most recent quarter shall be at least 100/100;

(d) In cases of an institution, other than those prescribed in items (a) through (c), it shall satisfy the capital adequacy standards applicable thereto;

2. With respect to subparagraph 1 (b) of Appendix 1 of Article 5 of the Decree:

He/she shall not be any of the following:

(a) A person who is registered with the centralized credit information collection agency under the Use and Protection of Credit Information Act as a customer who exchanges information disrupting financial order or a person who fails to repay debts within the agreed period;

(b) Enterprises for whom rehabilitation proceedings are underway;

(c) Deleted.

(d) Deleted.

(e) Enterprises showing signs of insolvency under the Corporate Restructuring Promotion Act;

3. With respect to subparagraph 1 (e) (i) of Appendix 1 of Article 5 of the Decree:

Where he/she has fulfilled economic liabilities under the Standards for Assuming Economic Liabilities by the Large Stockholder of Insolvent Financial Institution determined by the FSC, or has been exempted therefrom;

4. With respect to subparagraph 4 (a) and (b) of Appendix 1 of Article 5 of the Decree:

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Debt ratio shall not exceed 200/100.

5. With respect to subparagraph 6 (a) of Appendix 1 of Article 5 of the Decree:

Financial business recognized by the FSC as equivalent to banking business, investment trading business, investment brokerage business or insurance business.

6. With respect to subparagraph 6 (d) of Appendix 1 of Article 5 of the Decree:

The financial status of the relevant foreign financial company shall be at a level recognized to be appropriate for the operation of a financial institution in view of BIS capital ratio, standards for the evaluation of financial soundness of a foreign financial company engaged in the relevant type of business, credit rating assigned by an international credit rating agency, etc.

7. With respect to subparagraph 1 of Appendix 2 of Article 11 (2) of the Decree:

Standards under the classification in the items of subparagraph 1;

8. With respect to subparagraphs 2 and 3 of Appendix 2 of Article 11 (2) of the Decree:

Debt ratio shall not exceed 200/100.

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[Appendix 2‐9] <Newly Inserted on Jul. 3, 2013>

Minimum Capital Ratios(Relating to Article 26-1)

1. After December 1, 2013:

Common equity capital ratio Core capital ratio Total capital ratio3.5 percent 4.5 percent 8.0 percent

2. After January 1, 2014:


3. After January 1, 2015:


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Capital Ratios including Capital Conservation Buffers(Relating to Article 26-1)

Common equity capital ratio Core capital ratio Total capital ratio

Before 2015 Not applicableAfter January 1, 2016 5.125 percent 6.625 percent 8.625 percentAfter January 1, 2017 5.75 percent 7.25 percent 9.25 percentAfter January 1, 2018 6.375 percent 7.875 percent 9.875 percentAfter January 1, 2019 7.0 percent 8.5 percent 10.5 percent

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The Maximum Dividend, etc.(Relating to Article 26-4)

1. Before 2015: Not applicable

2. After January 1, 2016 (Unit: %)

C o m m o n equity capital ratio

or Core capital ratio

or total capital ratio

Less than 4.65625

Less than 6.15625

Less than 8.15625

Less than 4.8125

Less than 6.3125

Less than 8.3125

Less than 4.96875

Less than 6.46875

Less than 8.46875

Less than 5.125

Less than 6.625

Less than 8.625

At least 5.125

At least 6.624

At least 8.625

Maximum⁕ 0 20 40 60 100⁕ Relative importance compared with profits available for distribution as dividend

(excluding allowance for bad debts) under the Commercial Act

3. After January 1, 2017:(Unit: %)




Less than 4.8125

Less than 6.3125

Less than 8.3125

Less than 5.125

Less than 6.6625

Less than 8.625

Less than 5.4375

Less than 6.9375

Less than 8.9375

Less than 5.75

Less than 7.25

Less than 9.25

At least 5.75

At least 7.25

At least 9.25

Maximum 0 20 40 60 100


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Less than 4.96875

Less than 6.46875

Less than 8.46875

Less than 5.4375

Less than 6.9375

Less than 8.9375

Less than 5.90625

Less than 7.40625

Less than 9.40625

Less than 6.375

Less than 7.875

Less than 9.875

At least 6.375

At least 7.875

At least 9.875

Maximum 0 20 40 60 100





Less than 5.125

Less than 6.625

Less than 8.625

Less than 5.75

Less than 7.25

Less than 9.25

Less than 6.375

Less than 7.875

Less than 9.875

Less than 7

Less than 8.5

Less than 10.5

At least 7

At least 8.5

At least 10.5

Maximum 0 20 40 60 100

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[Appendix 3] <Amended on Nov. 30, 2006; Jun. 24, 2009; Nov. 5, 2010; Dec. 17, 2013>

Forward Looking Criteria

1. Definition of Asset Quality Classification by Stage:

(a) Normal:

Loans to a customer (normal customer) who is judged to cause no problem in collecting loans as his/her ability to repay debts is good in consideration of management details, financial status, future cash flow, etc.;

(b) Precautionary: Loans falling under any of the following subparagraphs:

(ⅰ) Loans to a customer (precautionary customer) in whom latent elements to undermine the ability to repay debts in the future are judged to exist in consideration of management details, financial status, future cash flow, etc., though immediate risk to the collection of loans has not occurred;

(ⅱ) Loans to a customer, which are overdue for more than one (1) month but less than three (3) months.

(c) Substandard: Loans falling under any of the following subparagraphs:

(ⅰ) Loans to a customer (substandard customer) in whom a considerable risk in the collection of loans has occurred as the elements likely to cause a decline in an ability to repay debts caused such decline, considering the management details, financial status, future cash flow, etc.;

(ⅱ) Amount collectible from among loans to a customer, which are overdue for more than three (3) months;

(ⅲ) Amount collectible from among loans to a customer in whom a serious risk in the collection of loans is judged to exist due to the occurrence of insolvency, liquidation proceedings or bankruptcy proceedings being under way, closure of business, etc.:

(ⅳ) Amount collectible from among loans to a “doubtful customer” and “presumed loss customer.”

(d) Doubtful: Loans falling under any of the following subparagraphs:

(ⅰ) The portion exceeding the amount collectible from among loans to a customer (doubtful customer) in whom a serious risk in the collection of loans is judged to have occurred as his/her ability to repay debts has deteriorated markedly considering management details, financial status, future cash flow, etc.;

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(ⅱ) The portion exceeding the amount collectible from among loans to a customer, which are overdue for more than three (3) months but less than twelve (12) months.

(e) Presumed Loss: Loans falling under any of the following subparagraphs:

(ⅰ) The portion exceeding the amount collectible from among loans to a customer (presumed loss customer), which are judged to inevitably be written off as loss as collection is impossible due to the serious deterioration of ability to repay debts considering management details, financial status, future cash flow, etc.;

(ⅱ) The portion exceeding the amount collectible from among loans to a customer, which are overdue for more than twelve (12) months;

(ⅲ) The portion exceeding the amount collectible from among loans to a customer in whom a serious risk in the collection of loans is judged to exist due to the occurrence of insolvency, liquidation proceedings or bankruptcy proceedings being under way, closure of business, etc.

2. Quality Classification of Corporate Loans

(Principles of Quality Classification)

(a) Banks shall classify the soundness of corporate loans in comprehensive consideration of an enterprise's ability to repay debts, period in arrears and whether it fails to pay a bill, etc.

(b) The soundness of corporate loans to an enterprise whose asset size or loan size is small may be classified on the basis of the period in arrears, whether it fails to pay a bill, etc. without evaluating its ability to repay debts.

(Establishment and Management of Credit Rating Models)

(c) Banks shall establish and manage a credit rating model (hereinafter, “credit rating model”) to evaluate the enterprises' ability to repay debts, and appropriately connect the credit rating model to quality classification, such as making the rating based on the credit rating model correspond to non-sufficient funds prescribed by the Governor in order to calculate the ratio of equity capital to risk weighted assets. <Amended on Dec. 17, 2013>

(d) Banks shall determine the scope of enterprises subject to the evaluation of an ability to repay debts, and the percentage of loans subject to the evaluation from among total loans, etc. in consideration of the composition of enterprises (by type of business or by size of

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enterprise, etc.), loan portfolios, etc.

(e) Banks shall regularly obtain, maintain and manage all the information and materials on the enterprises' management details, financial status, future cash flow, etc. to improve the accuracy of evaluation of the ability to repay debts.

(Adjustment of Classification by Loan)

(f) The quality of all kinds of loans for one corporation shall be classified as the same category in principle: Provided, That where a loan falls under each of the followings, its quality classification may be adjusted separately from other loans for the customer:

(ⅰ) The quality of loan with guarantee may be classified by evaluating the debt redemption capability of guarantor as well as the customer. In such cases, the guarantor’s ability to fulfill its obligation and any restrictions on collection shall be fully considered.

(ⅱ) Notwithstanding the classification of a customer, the quality of loans guaranteed by the Korean Government, local governments and government‐invested institutions may be classified as “normal.”

(ⅲ) Notwithstanding the classification of a customer, the quality of loans secured by deposit or installment deposit, loans secured by government and public bonds and monetary stabilization bonds whose principals and interests are to be repaid with certainty and commercial papers discounted which is expected to be under normal settlement may be classified as “normal.”

(ⅳ) The quality classification of foreign exchange bought may be adjusted separately from the total loans for the customer if deemed necessary in consideration of credit ratings of payers or guarantors.

(Others)

(g) In cases of loans to a non‐resident enterprise, soundness shall be classified in consideration of the country risk where the relevant company is located in addition to such enterprise's ability to repay debts. In cases of loans to foreign governments or international financial organizations or loans guaranteed by foreign governments or international financial organizations, soundness shall be classified in consideration of the credit rating of the relevant governments or organizations.

(h) The portion exceeding an estimated recoverable amount out of total loans to a customer enterprise for whom a decision to commence rehabilitation proceedings has been made by court after its default on payments is finally declared may be classified as "recovery-doubtful" until the rescheduling of such loans is concluded.

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3. Classification of Quality of Rescheduled Loans

(Definition of Rescheduled Loans)

(a) “Rescheduled loan” means a loan, which is a corporate loan, for which the procedure for loan rescheduling is being performed according to the following methods in order to ease a debtor's debt burden by mutual consent between a creditor and a debtor, as decided by a court, etc. where the debtor's ability to repay the debt is greatly deteriorated: Provided, that where a decrease in the value of the debt is insignificant, it shall not be deemed a rescheduled loan: <Amended on Dec. 17, 2013>

(ⅰ) Where the principal or interest of a loan is reduced or exempted, or terms and conditions on interest rate are changed;

(ⅱ) Where the due date of a loan is extended at a lower interest rate compared with a new loan which a similar credit risk or a new loan is extended;

(ⅲ) Where a debtor transfers receivables, real estate or other assets of a third party to a creditor or issues equity securities (debt-for-equity swaps) in order to repay all or part of his/her debt.

(Principles of Classification of Quality)

(b) Where a borrowing enterprise applies for loan rescheduling or the joint administration of creditor banks or the procedure corresponding thereto begins, a bank shall evaluate the borrowing enterprise's ability to repay a debt in consideration of its financial difficulty and expected losses, etc. incurred by the bank following its loan rescheduling, and classify the quality of the borrowing enterprise based on such evaluation; <Amended on Dec. 17, 2013>

(c) Where the conditions of loan rescheduling on a borrowing enterprise is officially determined, a bank shall calculate the current value by discounting future cash flows by the effective interest rate (where the change of the interest rate not falling under loan rescheduling has been agreed before the point in time of loan rescheduling, referring to the changed interest rate) at the time of extending a loan and classify the quality by applying the same standards for a corporate loan: Provided, That the borrowing enterprise's ability to repay a debt shall be evaluated based on the management details, financial position, future cash flows, etc. of the relevant borrowing enterprise; <Amended on Dec. 17, 2013>

(d) Where a bank judges that a borrowing enterprise will fulfill the determined conditions of loan rescheduling in the normal way because

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it falls under any of the following, the bank may choose not to classify the borrowing enterprise as "substandard" by reflecting its judgment in the evaluation of the borrowing enterprise's ability to repay a debt: <Amended on Dec. 17, 2013>

(ⅰ) Where it is confirmed that the borrowing enterprise has discharged the existing debt or reschedule debt for at least six consecutive months (including a period before the conditions of loan rescheduling is determined after the procedures for loan rescheduling began);

(ⅱ) Where an incident that definitely improves the borrowing enterprise's ability to repay a debt, such as the sale of assets, the conclusion of a lease contract or capital increase (including debt-for-equity swaps).

4. Classification of Household Loan Quality

(a) In principal, the debt redemption capability and the period overdue of the borrower shall be comprehensively considered for classifying the quality, but the quality of household loan may be classified based on the period overdue in the light of its nature.

(b) The quality of credit card receivables may be classified separately from other loans and if defaulted for more than six (6) months, they shall be classified to be “presumed loss.”

(c) The quality of residential mortgage loan, if necessary, may be classified separately from other loans in consideration of the loan amount compared with expected collections and the possibility of prompt debt collection through exercising security right, etc.

(d) Other classification adjustments in the light of nature of each loan shall apply mutatis mutandis to the adjustment of corporate loan classification.

5. Classification of Securities Quality

(a) A bank shall classify the quality of securities based on the issuing company’s credit rating pursuant to the credit rating model. If the issuing company’s credit is not graded, the quality may be classified according to the latest credit ratings of securities by domestic and overseas credit rating agencies.

(b) The quality of securities with guarantee may be classified by evaluating the guarantor’s debt redemption capability as well as that of the issuing company. In such cases, the guarantor’s ability to fulfill its obligation and any restrictions on collection shall be fully considered.

(c) Notwithstanding the issuing company’s credit rating, the quality of securities guaranteed by the Korean Government, local governments

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and government‐invested institutions may be classified as “normal.”

(d) In cases of securities issued by a non‐resident company, the quality shall be classified in consideration of the country risk where the company is located. In cases of securities issued by a foreign government and international financial organization or securities guaranteed by them, the quality shall be classified in consideration of the credit rating of the relevant government or international financial organization.

6. Calculation of Amount Collectible

(a) A bank shall establish and manage the standards for calculating an appropriate amount collectible for the security in favor of the loan classified as the grade of “substandard” or lower.

(b) The amount collectible shall be calculated based on the fair value of the actual amount that is collectible when the security is disposed: Provided, That the incidental costs for the disposal of the security shall be deducted from the amount.

7. Loan Receivables Overdue and Period Overdue

(a) Loan receivables overdue shall refer to the loan receivables of which the principal and interest (including installment repayment) have not been repaid on the redemption date and include any of the following:

(ⅰ) Loan receivables due and payable by reasons, other than delayed repayment of interest or installment payments;

(ⅱ) Revolving loan receivables in excess of limit;

(ⅲ) Guarantee payment under payment guarantee.

(b) Period overdue shall be calculated from a date immediately following the redemption date of the principal and interest (including installment repayments) of loan receivables, and the period overdue of loan receivables as determined in item (a) (ⅰ) through (ⅲ) above shall be calculated from the date as set forth below:

(ⅰ) In cases of item (a) (ⅰ): Date of acceleration;

(ⅱ) In cases of item (a) (ⅱ): Date immediately following the excess of limit;

(ⅲ) In cases of item (a) (ⅲ): Date of the occurrence of guarantee payment under payment guarantee.

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[Appendix 3‐2] <Newly Inserted on Dec. 29, 2005; Nov. 5, 2010>

Standards for Credit Conversion Factor of Off-Balance-Sheet Items

Conversion Factor* Item Example

100%(1) Direct credit substitutions, such as general debt

guarantee (including standby letter of credit for loans and securities) and underwriting (including underwriting‐natured endorsement)

‐ Payment guarantees for bond issuance and security for loan, etc.‐ Sale of credit derivatives

50%

(2) Contingent liabilities relating to certain transactions (tender guarantee, contract performance guarantee, standby letter of credit relating to certain transaction, etc.)

(3) Note issuance facilities and revolving underwriting facilities

(4) Other agreement exceeding 1 year of maturity (including agreements relating to discounted bill and foreign exchange)

‐ Letter of guarantee, performance guarantee, tender guarantee, etc.

‐ Undrawn limit out of credit line of overdraft loan and revolving loan, etc.

20%

(5) Contingent liabilities relating to short‐term (not exceeding 1 year of maturity) automatic settlement natured trade (commercial letter of credit, etc.)

(6) Other agreement not exceeding 1 year of maturity (including agreements relating to discounted bill and foreign exchange)

‐ Payment guarantee relating to issuance of letter of credit, etc.

‐ Undrawn limit out of credit line of overdraft loan and revolving loan, etc.

0% (7) Agreements that banks may unconditionally cancel without prior notice

* Banks may apply a credit conversion factor from experience calculated in accordance with reasonable and objective standards if an external auditor under the Act on External Audit of Stock Companies recognizes that such credit conversion factor conforms to the Korean International Financial Reporting Standards.

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[Appendix 4] <Amended on Nov. 13, 2002; Oct. 7, 2004; Aug. 8, 2012; Dec. 26, 2012; Jul. 3, 2013>

Soundness Evaluation Items for the Korea Development Bank and Others

Category Quantitative Index Items for Non‐Quantitative Evaluation Weight of Evaluation

Capital Adequacy(1)

Ÿ Total capital ratioŸ Core capital ratioŸ Common equity capital ratioŸ Tangible common equity

capital ratio

Ÿ Adequacy of capital scale considering nature and scale of risk

Ÿ Adequacy of assessment of equity capital and risky assets

20%(0%)

Asset Quality Ÿ Loss‐risk weighted bad loan ratio(1)

Ÿ Substandard and below loan ratio

Ÿ Overdue loan ratioŸ Loan loss provision ratio

Ÿ Adequacy of management of credit risk Ÿ Recognition and appraisal of credit risk Ÿ Adequacy of credit policyŸ Adequacy of classification of asset qualityŸ Adequacy of accumulation of allowanceŸ Adequacy of credit management(7)

Ÿ Actual status of identification and management of bad loans

30%(50%)

Compliance with Laws and

Regulations

Ÿ Status of compliance with laws and regulations and implementation of policy

Ÿ System for compliance with laws and regulations and level of recognition thereof

Ÿ Fulfillment of the matters indicated as inadequate

10%(20%)

Risk Management

Ÿ Risk governance and management policyŸ Procedures for risk management and

controlŸ Measurement and assessment of riskŸ Internal regulation system and actual

status of operationŸ Actual status of management and

performance record of financial subsidiaries(1)

20(8)%(30%)

Profitability(1)(2) Ÿ ROA Ÿ Expense to total asset ratioŸ Cost-income ratio Ÿ Risk adjusted return on

capital

Ÿ Level, etc. of risk affecting scale and details of profits

Ÿ Adequacy of reasons for change in losses and profits structure

Ÿ Adequacy of management of profitsŸ Management rationalization and capability

for creating future earning

10% (0%)

Liquidity(1) Ÿ Won currency liquidity ratio(3)

Ÿ Foreign currency liquidity ratio(4)

Ÿ loan-to-deposit ratio(5)

Ÿ Ratio of procurement of mid- and long-term loans in foreign currency(6)

Ÿ Adequacy of liquidity risk managementŸ Adequacy of reasons for change in

liquidityŸ Reasonableness of fund raising and

operation structureŸ Adequacy of management of stress-test

of liquidity

10%(0%)

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Note: (1) It shall not apply to overseas branches.(2) It shall not apply to the Eximbank, and quantitative index shall not apply

to the KDB and IBK.(3) It shall not apply to the Eximbank.(4) It shall not apply to banks of which foreign currency assets are 5% or below

compared to the total assets of banking accounts. (5) It shall not apply to banks of which the amount of won currency loans is

less than 2 trillion won as of the last month of the immediately preceding quarter, the KDB, Eximbank, NFFC and IBK.

(6) It shall not apply to banks of which the balance of foreign currency loan is less than 50 million U.S. dollars.

(7) It shall include “adequacy of foreign exchange risk management of borrowing company”.

(8) 30% shall be applied to the Eximbank.(9) Percentage in bracket means the weight of evaluation applicable to overseas

branches.

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<Appendix 5> <Newly Inserted on Aug. 31, 2006; Nov. 5, 2010; Aug. 8, 2012; Jul. 3, 2013>

Evaluation Items in Management Evaluation by Category

(Relating to Article 33)

1. Evaluation items for head offices and overseas subsidiary corporations of banks

Category Quantitative Index Items for Non‐Quantitative Evaluation

Weight of Evaluation

Capital Adequacy Ÿ Total capital ratioŸ Core capital ratioŸ Common equity capital ratioŸ Tangible common equity

capital ratio

Ÿ Whether standards for management guidance are fulfilled

Ÿ Adequacy of capital scale considering nature and scale of risk

Ÿ Adequacy of composition of capital and possibility of capital increase in future

Ÿ Adequacy of policies of the management for maintenance of adequacy of capital

20%

Asset Quality Ÿ Loss‐risk weighted bad loan ratio


Ÿ Overdue loan ratio*Ÿ Ratio of allowances for loan

loss

* Seasonal adjustment overdue ratio

Ÿ Adequacy of management of credit risk

Ÿ Recognition, assessment and appraisal of credit risk

Ÿ Adequacy of credit policyŸ Adequacy of classification of asset

qualityŸ Adequacy of accumulation of

allowanceŸ Adequacy of credit management(5)

Ÿ Actual status of identification and management of bad loans

25%

Appropriateness of Business Management

Ÿ Stability of management governance structure

Ÿ Adequacy of establishment of management policies and functions for implementation thereof

Ÿ Adequacy of the operation of a performance compensation system

Ÿ Efficiency of management and actual status of the improvement of management

Ÿ Internal control system and operation status

Ÿ Compliance with laws and regulations, policies and fulfillment of the matters indicated as inadequate

Ÿ Actual status of fulfillment of social responsibilities

15%

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Profitability Ÿ ROA (KRW 10 trillion of asset or more)

(Less than KRW 10 trillion of asset)

Ÿ Expense to total asset ratio(KRW 10 trillion of asset or more)(Less than KRW 10 trillion of asset)

Ÿ Cost-income ratioŸ Risk adjusted return on

capital(1)

Ÿ Level of risk affecting scale and details of profits, etc.

Ÿ Adequacy of profits structureŸ Adequacy of expense structureŸ Management rationalization and

capability for creating future earning

10%

Liquidity Ÿ Won currency liquidity ratioŸ Foreign currency liquidity

ratio(2)

Ÿ Loan-to-deposit ratio(3)

Ÿ Ratio of procurement of mid- and long-term loans in foreign currency(4)

Ÿ Adequacy of liquidity risk managementŸ Adequacy of reasons for change in

liquidityŸ Reasonableness of fund raising and

operation structureŸ Adequacy of management of

stress-test of liquidity

15%

Risk Management Ÿ Adequacy of risk governance and management policy

Ÿ Procedures for risk management and actual status of risk control

Ÿ Adequacy of recognition, measurement and assessment of risk

15%

Note: (1), (3) and (4) shall not apply to overseas subsidiary corporations of banks.(2) It shall not apply to banks of which foreign currency assets are 5% or below

compared to total assets of banking accounts. (3) It shall not apply to banks of which the amount of won currency loans is

less than 2 trillion won as of the last month of the immediately preceding quarter.

(4) It shall not apply to banks of which the balance of foreign currency loans is less than 50 million U.S. dollars.

(5) It shall include “adequacy of foreign exchange risk management of a borrowing company”.

2. Evaluation items for branches of foreign banks and overseas branches of banks

Category Quantitative Index Items for Non‐Quantitative Evaluation Weight of Evaluation

Risk Management Ÿ Adequacy of a risk management system

Ÿ Risk management level and actual status of promotion of improvement

Ÿ Actual status of risk management by each sector

Ÿ Actual status of control on risk management by head offices, etc.

30%

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Business Management and Internal Control

Ÿ Adequacy of establishment and implementation of management policy

Ÿ Profits management and accounting policy

Ÿ Operation status of an internal control system

Ÿ Control on overseas branches by head offices

20%

Compliance with Laws and

Regulations

Ÿ Actual status of compliance with laws and regulations and implementation of policies

Ÿ Systems for compliance with laws and regulations and level of recognition thereof

Ÿ Accuracy and timely submission of reports

Ÿ Fulfillment of matters indicated as inadequate

20%

Asset Quality Ÿ Loss‐risk weighted bad loan ratio


Ÿ Overdue loan ratio*Ÿ Ratio of allowance for

loan loss

* Seasonal adjustment overdue ratio

Ÿ Adequacy of management of credit risk and country risk

Ÿ Adequacy of risky assets holding levelsŸ Adequacy of classification of asset

qualityŸ Adequacy of accumulation of allowanceŸ Adequacy of credit managementŸ Actual status of identification and

management of bad loans

30%

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[Appendix 6] <Newly Inserted on Jul. 26, 2007; Nov. 7, 2008; Nov. 5, 2010>

Standards for Risk Management of Housing Mortgage Loan

CHAPTER IGeneral Provisions

1. (Definition) The terms used in these Standards shall be defined as follows:

(a) “Housing mortgage loan” means a loan extended to a household (including an asset‐backed securitized loan) by a bank, which is secured by a house. Any of the followings loans shall be deemed a housing mortgage loan unless otherwise prescribed:

(ⅰ) Intermediate payment loans and balance payment loans in cases

of parceling‐out houses;

(ⅱ) Relocation expense loans for houses under rebuilding or redevelopment, intermediate payment loans and balance payment loans for additional allotted charges.

(b) “House” means a house prescribed in subparagraph 1 of Article 2 of the Housing Act.

(c) “New loan” means a newly‐extended loan, including increase of the existing loan amount, renewal of the loan agreement, refinancing, taking over of obligations, etc.: Provided, That in cases of extension of loan maturity, renewal of the loan agreement or refinancing in which only the conditions for interest rate or maturity are changed and the transfer of the existing intermediate payment loan to a balance payment loan without increasing the amount of loan, they shall not be deemed new loans.

(d) “Loan‐To‐Value ratio (LTV)” means the ratio of the maximum amount of a possible loan against the value of mortgage, which is considered at the time of extending a housing mortgage loan.

(e) “Debt‐To‐Income ratio (DTI)” means the ratio of the total annual amount of redemption of principle and interest of the loan against the borrower’s annual income.

(f) “Speculation zone” means an area designated by the Minister of Strategy and Finance pursuant to Article 104‐2 of the Income Tax Act.

(g) “Overheated speculation district” means an area designated by the Minister of land, Transport and Maritime Affairs or a Mayor/Do Governor pursuant to Article 41 of the Housing Act.

(h) “Seoul Metropolitan Area” means Seoul Metropolitan City, Incheon Metropolitan City and Gyeonggi-do.

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CHAPTER IILoan‐To‐Value Ratio

2. (Application of LTV)

(a) LTV at the time of extending new housing mortgage loans by banks shall be as follows:

Maturity Speculation Zone Overheated

Speculation DistrictOther Areas

House(1) Apartment House(1) Apartment House(1) ApartmentNot more than 3 years (2) 50% or

less40% or less (2)

50% or less

50% or less (2)

60% or less

60% or less (2)

More than 3 yrs but not more than 10 yrs

60% or less

40% or less

60% or less

60% or less

60% or less

60% or less

Moret h a n 10 yrs

Mortgage value: more than 600 Mil won

60% or less

40% or less

60% or less

60% or less

60% or less

60% or less

Mortgage value: less than 600 Mil won

60% or less

60% or less

60% or less

60% or less

60% or less

60% or less

Payment in installments (10 yrs or more) (3)

70% or less

70% or less

70% or less

70% or less

70% or less

70% or less

Note:(1) Referring to houses excluding apartments (including apartments for commercial

and residential purposes).(2) In cases of intermediate payment loans and relocation expense loans for an

apartment, the equivalent ratio shall be applied without taking the maturity into account.

(3) Referring to a loan with a fixed interest rate (and with the grace period of one year or less, DTI of 40% or less), having a plan to sell itself to the Korea Housing Finance Corporation within one year or a plan for self‐securitization.

(b) Despite the LTV prescribed in the above item (a), in cases of taking over the loan of the existing borrower without changing balance amount, maturity, method of redemption and without extending additional loans, the LTV which was applied for the existing borrower may be applied for such taking over, and in cases of transfer of the existing intermediate payment loan to a balance payment loan without increasing the amount of loan or change of the bank etc., the LTV at the time of extending the intermediate payment loan may be applied.

CHAPTER IIIDebt‐To‐Income Ratio (DTI)

3. (Applicable Objects and its Standards) Where a new housing mortgage loan falls under any of the followings, banks shall extend the loan within the borrower’s DTI of not exceeding 40%:

(a) Apartment mortgage loan in a speculation zone for a borrower whose

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spouse has taken out a housing mortgage loan more than once: Provided, That where the borrower inevitably takes over the loan obligations in order to inherit or to participate in auction procedures or others held to secure the creditor’s debt obligations, the application of DTI may be exempted.

(b) Apartment mortgage loan in a speculation zone for an unmarried borrower who is less than full 30 years of age: Provided, That where the borrower inevitably takes over the loan obligations in order to inherit or to participate in auction procedures or others held to secure the creditor’s debt obligations, the application of DTI may be exempted.

(c) Household loan in order to finance a borrower who newly purchases an apartment as a mortgage, whose market price is more than 600 million won, in a speculation zone or in an overheated speculation district within Seoul Metropolitan Area: Provided, That in cases of any of the followings, the application of DTI may be exempted:

(ⅰ) A loan against an apartment for which three months, as at the date of extending the loan, have passed from the date of registration of title transfer (referring to the date on which the application for title transfer is filed with the registry office): Provided, That where the purpose of the loan is deemed to avoid application of DTI, it shall be excluded;

(ⅱ) A loan against shares of the rebuilding or redevelopment for which three months have passed from the date of application for the change of an association member list, or from the date of registration of proportional ownership transfer;

(ⅲ) A loan against an apartment which falls under any of the followings and three months have not passed from the date of registration of title transfer:

a. Small amount of loan covering 100 million won or less

(aggregated amount of loans in all financial institutions);

b. Loan exceeding 100 million won which is deemed inevitably necessary to finance urgent business needs or other purposes and obtained approval by the Credit Committee (or, other decision‐making organization equivalent to the Credit Committee);

c. Where the borrower inevitably takes over loan obligations in order to inherit or to participate in auction procedures or others held to secure the creditor’s debt obligations;

(ⅳ) Loan for relocation expenses or additional allotted charges to be received as a result of the progress of rebuilding or redevelopment of houses after three months have passed since the acquisition of the houses.

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CHAPTER IVExecution, Limitations on Extension of Maturity, etc. of Housing Mortgage Loan

4. (Limitations on Execution of Apartment Mortgage Loan in Speculation Zone by Same Borrower) A bank shall not newly extend a loan for a borrower who has already secured a housing mortgage loan against an apartment in a speculation zone: Provided, That this shall not apply in any of the following cases:

(a) Regarding a borrower who has already secured a housing mortgage loan, if the balance of the existing loan against an apartment in a speculation zone is within LTV, in cases of extending an additional loan (inferior priority) against the said apartment within the scope of LTV;

(b) Where another loan is granted to a borrower, who already owes a housing mortgage loan, on condition that the residential house that the borrower already owns shall be disposed of (the transfer of title shall be completed) within two years after the new loan is granted (based on the registration date of transfer of ownership after the construction of a new apartment is completed, if the new loan is for intermediated payments or moving expenses) in connection with a contract for purchasing a new apartment and where a special agreement that the term of the mortgage loan for the new apartment shall be accelerated if the borrower is unable to prove that the disposition of the residential house that the borrower already owns and the repayment of the pre-existing loan have been completed on or before the prescribed deadline.

5. (Limitations on Maturity Extension of Apartment Mortgage Loan in Speculation Zone) Regarding a borrower who has already secured two or more apartment mortgage loans (referring to household loans), a bank shall retrieve the loans in the order that whichever loan’s maturity becomes due earlier than that of others without extending the maturity and thereby eventually reduce the number of apartment mortgage loans for the same borrower in speculation zones to one case: Provided, That this shall not apply in any of the following cases:

(a) Maturity may be extended within the period of one year if there is a special agreement that the number of apartment mortgage loans in speculation zones be reduced to one case within a year from the time of maturity, and the borrower loses the benefit of time from the case of loan whose grace period is over if the borrower fails to perform the special agreement;

(b) In cases of two loans, if the maturity of the existing apartment mortgage loan becomes due earlier than that of the loan for financing intermediate payment (including the loan for relocation expenses), the maturity may be extended if there is a special agreement that the number of loans be reduced to one case within a grace period (one year) from the time of maturity of the loan for financing intermediate

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payment; thereafter, even when the maturity of the loan for financing intermediate payment becomes due, the maturity may be extended with a special agreement that the number of loans be reduced to one case within a grace period (one year);

(c) Where the title transfer by sale is restricted for all the owned apartments, the grace period may be adjusted if there is a special agreement that the number of loans be reduced to a case within one year from the first time when the maturity restriction ends;

(d) A grace period of additional one year each may be granted in any of the followings:

(ⅰ) In cases of the loan secured by a house as mortgage to be inevitably used by the borrower’s parents, children, or spouse who is/are actually residing in the address (referring to the address on the copy of resident registration) different from that of the principal (borrower): Provided, That the total number of such loan shall be one case;

(ⅱ) Where the disposition of a house owned is impossible due to

the court’s provisional seizure or injunction for prohibition of disposition, destruction of the house by fire or natural disaster, or objection to the sale by a co‐inheritor or a co‐owner of right of share, etc.;

(e) In cases of loans under a special agreement with the condition of disposition pursuant to subparagraph 4 (b); and cases of loans secured by an existing house (i.e., the house to be disposed).

6. (Limitations on Acquisition of Mortgage and on Execution of Housing Mortgage Loan for Minor Borrower)

(a) No bank shall extend a new housing mortgage loan for a minor (excluding a minor who is married) as at the date of loan extension: Provided, That this shall neither apply to the loan within 40% of DTI for a minor who has no parents such as the minor who is the head of a household, etc., nor to the loan for a minor who inevitably takes over the loan obligations due to inheritance, etc.

(b) A bank may extend the maturity, only one time and for maximum one year, of the residential mortgage loan for a minor borrower (including where a third party provides a mortgage): Provided, That the bank may exceptionally extend maturity for a minor borrower who has no parents, such as a minor who is the head of a household, etc.

(c) Where a borrower was a minor as at the time of loan extension and thereafter became an adult when the maturity is due (including the time when the grace period of a year is over), a new loan may be extended after the existing loan is retrieved.

7. (Limitation on Corporate Loan based on Apartment in Speculation Zone) No

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bank shall grant a new corporate loan secured by mortgage on an apartment in a speculation zone for the purpose of acquiring a residential house, except where it is approved inevitable.

8. (Principles of Deliberation for Residential Mortgage Loan) A bank shall, at the time of extending a residential mortgage loan, thoroughly conduct the credit review, by comprehensively taking into account of the overall credit rating, etc. based on the borrower’s ability to repay, such as income etc., and on the evaluation of the borrower’s personal credit.

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[Appendix 7] <Newly Inserted on Dec. 31, 2009>

Liquidation Weight (Relating to Article 64 (3))

Type of Assets Weight (%)

Foreign currencies and deposits, foreign currency call loans, bills bought in foreign currency, and cash assets equivalent

thereto, as prescribed by the Governor 100

Loans in Forei

gn Currency

(including leases

)

Loans between banks, domestic banker's usance, and loans in foreign currency equivalent thereto,

as prescribed by the Governor 100

Funds for actual demand overseas, equipment loans, syndicated loans, and loans in foreign

currency equivalent thereto, as prescribed by the Governor

90

Working capital and loans in foreign currency equivalent thereto, as prescribed by the

Governor80

Foreign Currency

Securities

Government Bonds

A～AAA 100

BBB～A 90

Below BBB 60

Corporate Bonds

A～AAA 90

BBB～A 85

Below BBB 50

Securities(including beneficiary

certificates)

Publicly Traded 55

Not Publicly Traded 35

Futures 85

Others 100

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[Form 1] <Newly Inserted on Aug. 8, 2012>

Prepared by : _________ (Capacity) Telephone No. : _______________

Application for Approval for Investment in Non-Financial Subsidiary

Document No.:__________ Date:____________To: Chairperson

Financial Services Commission (Head of division in charge)cc: Governor

Financial Supervisory Service (Head of department in charge) President of (Bank name) (Seal)

Pursuant to Article 51 (1) of the Regulation on Supervision of Banking Business, we hereby apply for approval for equity Investment in (company name) .

1. Outline of the company to which investment will be made2. Kinds and number of stocks to invest3. Purpose of investment4. Method and amount of acquisition 5. Whether the relevant Acts and regulations, including the Banking Act, Commercial Act,

Securities and Exchange Act, are complied with6. Effect on the management of the bank7. Current status and future prospect of business of the company to which investment will be

made8. Plan for disposal of shares of investment9. Other significant matters

Attachments: 1. Three year financial statements of the company to which investment will be made2. Other reference data

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[Form 2] <Newly Inserted on Aug. 8, 2012>

Prepared by : _________ (Capacity) Telephone No. : _______________

Application for Approval for Owning Stocks of Other Company

Document No.:__________ Date:____________To: Chairperson

Financial Services Commission (Head of division in charge)cc: Governor

Financial Supervisory Service (Head of department in charge) Subject: Application for Owning Stocks of Other Company

Pursuant to Article 24 of the Act on the Structural Improvement of the Financial Industry and Article 54 of the Regulation on Supervision of Banking Business, we hereby apply for approval for owning stocks of (company name) .

1. Outline of the company to which investment will be made

2. Kinds and scale of stocks to acquire

3. Purpose (or necessity) of investment4. Method of acquisition 5. Effect on the management of the financial institution6. Current status and future prospect of business of the company to which investment will be

made8. Other significant matters

Attachments: 1. Three year financial statements of the company to which investment will be made

(If the company to which investment will be made is newly established, pro forma financial statements for next three years)

2. Other reference data

President of (Name of Bank) (Seal)

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[Appendix 9] <Newly Inserted on Feb. 11, 2014>

Standards for Imposition of Fines for Negligence

(Relating to Article 88 (9))

1. (Methods of Calculation of Fines for Negligence)

(a) Where a fine for negligence is imposed for violation of Article 24-4 (1) 1, 2, 5, 6 or 7 of the Decree, standard amount for each violation

shall be as listed hereunder:(ⅰ) Where a fine for negligence is imposed on a bank: An amount

under subparagraph 2 (r) of Appendix 4 of the Decree;

(ⅱ) Where a fine for negligence is imposed on an executive, etc. or an employee: An amount under subparagraph 2 (s) of Appendix 4 of the Decree;

(b) The estimated amount of a fine for negligence shall be calculated for each violation at a certain rate of standard amount in consideration of the motive and result of restraints and relevant product, but shall not exceed a converted amount (an amount obtained by dividing an amount a bank receives with regard to a credit transaction by 12) related to a case subject to imposition:

(ⅰ) Where Article 24-4 (1) 1, 5 and 6 of the Decree or Article 88

(7) 2 is violated: An amount that a bank receives from a borrower or a person related to the borrower from the time the bank sells a bank product to him/her;

(ⅱ) Where Article 24-4 (1) 2 of the Decree is violated: The total amount of a bank product of which cancellation or withdrawal is restricted;

(ⅱi) Where Article 88 (7) 2 is violated: Total amount of which use by a borrower is actually restricted;

(c) Where a violator has a reason for increase or decrease of punishment, the aforementioned estimated amount shall be increased or decreased to determine a fine for negligence.

2. (Calculation of Estimated Amount) The estimated amount of fine for negligence for violation of abovementioned provisions shall be calculated as listed in the following table in consideration of the motive and result of restraints and relevant products:

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Relevant products

MotiveResults

Products handled by banks that are not prescribed in Article 88 (6) 2

Products handled by banks that are prescribed in Article 88 (6) 2

Intention-al

By mistake

Intention-al

By mistake

Where converted amount related to a case subject to imposition is 10/100 or more of credit amount 100%

of standard amount

50% of standard amount



Where converted amount related to a case subject to imposition is 5/100 or more of credit amount but less than 10/100 thereof



Where converted amount related to a case subject to imposition is 2/100 or more of credit amount but less than 5/100 thereof




12.5% of standard amount

Where converted amount related to a case subject to imposition is less than 2/100 of credit amount





3. (Determination of Final Amount to Be Imposed) Where a violator falls under the following, the final amount of fine for negligence to be imposed shall be determined by increasing or decreasing up to 50% of the estimated amount: Provided, That even where it is increased, the upper limit of fine for negligence under Article 69 (1) and (2) of the Act shall not be exceeded:

(ⅰ) Where reasons for increase or decrease under Appendix 3 of

the Regulation on the Examination and Sanctions against Financial Institutions exist;

(ⅱ) Where Article 24-4 (1) 1, 2, 5, 6 or 7 of the Enforcement Decree is violated with regard to a credit transaction in which the borrower is a small enterprise (excluding an enterprise engaged in financial business, insurance and pension business, and service business related to finance and insurance on the Korean Standard Industrial Classification under the Statistics Act and a small enterprise affiliated with a highly-indebted business group) under Article 8 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, the fine for negligence may be increased within the scope of 50% of the estimated amount.

4. (Exemption from Fine for Negligence and other Matters) Appendix 3 of the Regulation on the Examination and Sanctions against Financial Institutions shall apply.