As filed with the Securities and Exchange Commission on July 3, 2019

Registration Statement No. 333-217916

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

POST-EFFECTIVE AMENDMENT NO. 8

TO

REGISTRATION STATEMENT

UNDER

SCHEDULE B

OF

THE SECURITIES ACT OF 1933

THE EXPORT-IMPORT BANK OF KOREA

(Name of Registrant)

THE REPUBLIC OF KOREA

(Co-Registrant and Guarantor)

Names and Addresses of Authorized Representatives in the United States:

Dong Hoon Lee or Young-rok Kim Duly Authorized Representatives of The Export-Import Bank of Korea 460 Park Avenue, 8^th Floor New York, NY 10022 Seong-wook Kim Duly Authorized Representative of The Republic of Korea 460 Park Avenue, 9^th Floor New York, NY 10022

Copies to:

Jinduk Han, Esq.

Cleary Gottlieb Steen & Hamilton LLP

19F, Ferrum Tower

19, Eulji-ro 5-gil, Jung-gu

Seoul 04539, Korea

The securities registered hereby will be offered on a delayed or continuous basis pursuant to the procedures set forth in Securities Act Release Nos. 33-6240 and 33-6424.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JULY 3, 2019

PROSPECTUS

$12,082,248,627

The Export-Import Bank of Korea

Debt Securities

Warrants to Purchase Debt Securities

The Republic of Korea

Guarantees

We will provide the specific terms of these securities in supplements to this prospectus. You should read this prospectus and any prospectus supplement carefully before you invest.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus is dated                 , 2019

EXPLANATORY NOTE

This registration statement relates to US$7,500,000,000 aggregate amount of (i) debt securities (with or without warrants) of The Export-Import Bank of Korea to be offered from time to time as separate issues on terms and in the manner to be specified in a prospectus supplement to be delivered in connection with each such offering and (ii) guarantees that may be issued by The Republic of Korea in respect of debt securities of The Export-Import Bank of Korea on terms and in the manner to be specified in a prospectus supplement to be delivered in connection with each such issuance. The prospectus constituting a part of this registration statement relates to (i) the debt securities (with or without warrants) registered hereunder, (ii) guarantees that may be issued by The Republic of Korea, registered hereunder and (iii) US$4,582,248,627 aggregate principal amount of debt securities (with or without warrants) registered under Registration Statement No.333-212164 (including an aggregate principal amount of US$640,000,000 of debt securities that may be sold by us from time to time in a continuous offering designated Medium-Term Notes, Series A, Due Not Less Than Nine Months From Date of Issue (the “MTNs”)). Of such securities, The Export-Import Bank of Korea has sold US$400,000,000 2.50% notes due 2020, US$600,000,000 floating rate notes due 2022, US$1,000,000,000 3.00% notes due 2022, US$800,000,000 floating rate notes due 2021, US$700,000,000 floating rate notes due 2023, US$500,000,000 3.50% notes due 2021, US$500,000,000 3.625% notes due 2023, US$500,000,000 floating rate notes due 2022 and US$500,000,000 2.375% notes due 2024, and US$6,582,248,627 aggregate amount of securities remain unsold.

This registration statement contains a form of prospectus supplement filed as Exhibit K to this registration statement to be used in connection with the sale by us of the MTNs in a continuous offering.

TABLE OF CONTENTS

	Page
Certain Defined Terms and Conventions		1
Use of Proceeds		2
The Export-Import Bank of Korea		3
Overview		3
Capitalization		4
Business		5
Selected Financial Statement Data		7
Operations		9
Description of Assets and Liabilities		15
Debt		24
Credit Policies, Credit Approval and Risk Management		27
Capital Adequacy		28
Overseas Operations		29
Property		29
Management and Employees		30
Tables and Supplementary Information		31
Financial Statements and the Auditors		41
The Republic of Korea		138
Land and History		138
Government and Politics		140
The Economy		143
Principal Sectors of the Economy		151
The Financial System		158
Monetary Policy		163
Balance of Payments and Foreign Trade		166
Government Finance		173
Debt		175
Tables and Supplementary Information		178
Description of the Securities		181
Description of Debt Securities		181
Description of Warrants		187
Terms Applicable to Debt Securities and Warrants		188
Description of Guarantees		189
Limitations on Issuance of Bearer Debt Securities and Bearer Warrants		190
Taxation		191
Korean Taxation		191
United States Tax Considerations		193
Plan of Distribution		202
Legal Matters		203
Authorized Representatives in the United States		203
Official Statements and Documents		203
Experts		203
Forward-Looking Statements		204
Further Information		206

CERTAIN DEFINED TERMS AND CONVENTIONS

All references to the “Bank”, “we”, “our” or “us” mean The Export-Import Bank of Korea. All references to “Korea” or the “Republic” contained in this prospectus mean The Republic of Korea. All references to the “Government” mean the government of Korea.

Unless otherwise indicated, all references to “won”, “Won” or “￦” contained in this prospectus are to the currency of Korea, references to “U.S. dollars”, “Dollars”, “USD”, “$” or “US$” are to the currency of the United States of America, references to “Canadian Dollar” or “CAD” are to the currency of Canada, references to “Euro”, “EUR” or “€” are to the currency of the European Union, references to “Japanese Yen”, “JPY” or “¥” are to the currency of Japan, references to “Chinese Renminbi” or “CNY” are to the currency of the People’s Republic of China, references to “Swiss Franc” or “CHF” are to the currency of Switzerland, references to “British Pound” or “GBP” are to the currency of the United Kingdom, references to “Deutsche Mark” are to the currency of the Federal Republic of Germany, references to “Hong Kong Dollar” or “HKD” are to the currency of Hong Kong, S.A.R., references to “Singapore dollar” or “SGD” are to the currency of Singapore, references to “Turkish Lira” or “TRY” are to the currency of Turkey, references to “Malaysia Ringgit” or “MYR” are to the currency of Malaysia, references to “Brazilian Real” or “BRL” are to the currency of Federative Republic of Brazil, references to “Mexican Peso” or “MXN” are to the currency of the United Mexican States, references to “New Zealand Dollar” or “NZD” are to the currency of New Zealand, references to “Taiwan Dollar” or “TWD” are to the currency of Taiwan, references to “Thai Baht” or “THB” are to the currency of Thailand, references to “Australian Dollar” or “AUD” are to the currency of Australia, references to “Indian Rupee” or “INR” are to the currency of India, references to “Indonesian Rupiah” or “IDR” are to the currency of Indonesia, references to “Saudi Riyal” or “SAR” are to the currency of Saudi Arabia, references to “Russian Ruble” or “RUB” are to the currency of the Russian Federation, references to “Swedish Krona” or “SEK” are to the currency of Sweden, references to “South African Rand” or “ZAR” are to the currency of South Africa, references to “Danish Krone” or “DKK” are to the currency of Denmark, references to “Norwegian Krone” or “NOK” are to the currency of Norway and references to “Peruvian Sol” or “PEN” are to the currency of Peru.

In this prospectus, where information has been prepared in thousands, millions or billions of units, amounts may have been rounded up or down. Accordingly, actual numbers may differ from those contained herein due to rounding. All discrepancies in any table between totals and the sums of the amounts listed are due to rounding.

Our separate financial statements and information included in this prospectus were prepared under International Financial Reporting Standards as adopted by Korea (“Korean IFRS” or “K-IFRS”). References in this prospectus to “separate” financial statements and information are to financial statements and information prepared on a non-consolidated basis. Unless specified otherwise, our financial and other information included in this prospectus is presented on a separate basis in accordance with Korean IFRS and does not include such information with respect to our subsidiaries.

K-IFRS 1109, Financial Instruments, which is aimed at improving and simplifying the accounting treatment of financial instruments, is effective for annual periods beginning on or after January 1, 2018 and replaces K-IFRS 1039, Financial Instruments: Recognition and Measurement. We have applied the new accounting standard, K-IFRS 1109, which requires all financial assets to be classified and measured on the basis of an entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets, in our separate financial statements as of and for the year ended December 31, 2018 included in this prospectus. As permitted by the transition rules of K-IFRS 1109, our comparative separate financial statements as of and for the year ended December 31, 2017 included in this prospectus have not been restated to retroactively apply K-IFRS 1109 and are not directly comparable to our separate financial statements as of and for the year ended December 31, 2018. For information regarding the impact of the application of K-IFRS 1109 on our separate financial statements, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 39.”

1

USE OF PROCEEDS

Unless otherwise specified in the applicable prospectus supplement, we will use the net proceeds from the sale of the securities for our general operations.

2

THE EXPORT-IMPORT BANK OF KOREA

Overview

We were established in 1976 as a special governmental financial institution pursuant to the Export-Import Bank of Korea Act, as amended (the “KEXIM Act”). Since our establishment, we have been promoting the export and competitiveness of Korean goods and services in international markets. To this end, we have introduced financing facilities and implemented lending policies that are responsive to the needs of Korean exporters.

Our primary purpose, as stated in the KEXIM Act, is to “promote the sound development of the national economy and economic cooperation with foreign countries by extending the financial aid required for export and import transactions, overseas investment and the development of natural resources abroad.” Over the years, we have developed various financing facilities and lending policies that are consistent with the Government’s overall economic policies. In the latter part of the 1980s, as a result of changing trade conditions and the increased internationalization of the Korean economy, overseas investment credits and import credits were promoted and began to constitute an important portion of our business. In recent years, we have focused on the development of new financing facilities, including structured financing for ships and project financing for the construction of industrial plants and the development of natural resources abroad.

As of December 31, 2018, we had ￦72,120 billion of outstanding loans, including ￦38,525 billion of outstanding export credits, ￦26,442 billion of outstanding overseas investment credits and ￦4,653 billion of outstanding import credits, as compared to ￦71,884 billion of outstanding loans, including ￦41,369 billion of outstanding export credits, ￦24,107 billion of outstanding overseas investment credits and ￦3,726 billion of outstanding import credits as of December 31, 2017.

Although our management has control of our day-to-day operations, our operations are subject to the close supervision of the Government. The Government’s determination each fiscal year regarding the amount of financial support to extend to us, in the form of contributions to capital or transfers of our income to reserves, plays an important role in determining our lending capacity. The Government has the power to appoint or dismiss our President, Deputy President, Senior Executive Directors and Auditor. Moreover, the Minister of Economy and Finance of the Republic has, on behalf of the Republic, signed the registration statement of which this Prospectus forms a part.

The Government supports our operations pursuant to Article 37 of the KEXIM Act. Article 37 of the KEXIM Act provides that “the annual net losses of the Export-Import Bank of Korea shall be offset each year by the reserve, and if the reserve be insufficient, the Government shall provide funds to cover the deficit.” As a result of the KEXIM Act, the Government is generally responsible for our operations and is legally obligated to replenish any deficit that arises if our reserves, consisting of our surplus and capital surplus items, are insufficient to cover any of our annual net losses. In light of the above, if we have insufficient funds to make any payment under any of our obligations, including the debt securities covered by this prospectus, the Government would take appropriate steps, such as by making a capital contribution, by allocating funds or by taking other action, to enable us to make such payment when due. The provisions of Article 37 do not, however, constitute a direct guarantee by the Government of our obligations, and the provisions of the KEXIM Act, including Article 37, may be amended at any time by action of the National Assembly.

In January 2014, the Government amended the KEXIM Act to:

• increase our authorized capital from ￦8,000 billion to ￦15,000 billion;

• expand our operation scope that enables us, among other things, to invest in (i) funds intended to support export and import transactions by small and medium-sized enterprises and (ii) special purpose companies that carry out value added overseas development projects in a flexible way; and

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• reduce restrictions on our financing and investment activities by providing additional flexibility to us to cope with changes in market conditions.

In March 2016, the Government amended the KEXIM Act, which will take effect at the end of June 2016, to strengthen its enforcement powers by allowing:

• the Minister of Economy and Finance to impose any necessary sanctions against the officers of the Bank; and

• the Financial Services Commission to request the Minister of Economy and Finance to apply sanctions against the employees of the Bank.

Capitalization

As of December 31, 2018, our authorized capital was ￦15,000 billion and capitalization was as follows:

	December 31, 2018(1)
	(billions of Won)
Long-Term Debt (2)(3)(4)(5)(6):
Borrowings in Korean Won	￦	—
Borrowings in Foreign Currencies		3,830
Export-Import Financing Debentures		47,021
Total Long-Term Debt	￦	50,851
Capital and Reserves:
Capital Stock(7)	￦	11,815
Additional Paid-in-Capital		—
Capital Adjustments		(129	)
Retained Earnings		1,117
Legal Reserve(8)		346
Voluntary Reserve(8)		—
Reserve for Bad Loans(9)		302
Unappropriated Retained Earnings		597
Adjustments on the initial application of K-IFRS 1109		(129	)
Other Components of Equity(10)		680
Total Capital and Reserve	￦	13,483
Total Capitalization(8)	￦	64,334

(1) Except as described in this prospectus, there has been no material adverse change in our capitalization since December 31, 2018.

(2) Consists of borrowings and debentures with maturities of more than a year remaining.

(3) We have translated borrowings in foreign currencies as of December 31, 2018 into Won at the rate of ￦1,118.10 to US$1.00, which was the market average exchange rate as announced by the Seoul Monetary Brokerage Services Ltd., on December 31, 2018.

(4) As of December 31, 2018, we had contingent liabilities totaling ￦40,011 billion, which consisted of ￦34,795 billion under outstanding guarantees and acceptances and ￦5,216 billion under contingent guarantees and acceptances issued on behalf of our clients. For further information relating to our contingent liabilities under outstanding guarantees as of December 31, 2018, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 36.”

(5) As of December 31, 2018, we had entered into 462 interest rate related derivative contracts with a notional amount of ￦40,969 billion and 619 currency related derivative contracts with a notional amount of ￦34,494 billion in accordance with our policy to hedge interest rate and currency risks. See “—Financial

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Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 20.”

(6) See “—Description of Assets and Liabilities—Sources of Funding” for an explanation of these sources of funds. All our borrowings, whether domestic or international, are unsecured and unguaranteed.

(7) As of December 31, 2018, our authorized ordinary share capital was ￦15,000 billion and issued fully-paid capital stock was ￦11,815 billion. See “—Business—Government Support and Supervision.”

(8) See “—Business—Government Support and Supervision” for a description of the manner in which annual net income is transferred to the legal reserve and may be transferred to the voluntary reserve.

(9) If the estimated allowance for credit loss determined by K-IFRS for the accounting purposes is lower than that for regulatory purposes as required by Supervisory Regulation of Banking Business, we reserve such difference as the regulatory reserve for bad loans. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 23.”

(10) See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 22.”

Business

Purpose and Authority

We were established in 1976 as a special governmental financial institution pursuant to the KEXIM Act. The KEXIM Act, the Enforcement Decree of the KEXIM Act (the “KEXIM Decree”) and our Articles of Incorporation (the “By-laws”) define and regulate our powers and authority. We are treated as a special juridical entity under Korean law and are not subject to certain of the laws regulating activities of commercial banks.

We were established, as stated in the KEXIM Act, to “promote the sound development of the national economy and economic cooperation with foreign countries by extending the financial aid required for export and import transactions, overseas investment and the development of natural resources abroad.” As an instrument in serving the Government’s public policy objectives, we do not seek to maximize our profits. We do, however, strive to maintain an adequate level of profitability to strengthen our equity base in order to support the growth in the volume of our business.

Our primary purpose has been the provision of loans and guarantees to facilitate Korean companies’ exports and overseas investments and projects. Most of our activities have been carried out pursuant to this authority.

We have the authority to undertake a range of financial activities. These fall into four principal categories:

• export credits;

• overseas investment credits;

• import credits; and

• guarantee facilities.

Export credits include loans to facilitate Korean exports of capital and non-capital goods and technical and non-technical services. Overseas investment credits consist of loans to finance Korean overseas investments and projects. Import credits include the extension of loans to finance Korean imports of essential materials and natural resources. Guarantee facilities are made available to support the obligations of Korean exporters and importers.

We also have the authority to administer, on behalf of the Government, the Government’s Economic Development Cooperation Fund and the Inter-Korea Cooperation Fund, formerly known as South and North Korea Co-operation Fund.

We may also undertake other business activities incidental to the foregoing, including currency and interest rate swap transactions. We have engaged in such swap transactions for hedging purposes only.

5

Government Support and Supervision

The Government’s determination each fiscal year, regarding the amount of financial support to extend to us, plays an important role in determining our lending capacity. Such support has included contributions to capital, loans and transfers of our income to reserves.

Our authorized capital was ￦30 billion when the Government enacted the KEXIM Act in 1969. The National Assembly amended the KEXIM Act and increased our authorized capital to ￦150 billion in 1974, ￦500 billion in 1977, ￦1,000 billion in 1986, ￦2,000 billion in January 1998, ￦4,000 billion in September 1998 and ￦8,000 billion in January 2009. In January 2014, the Government further increased our authorized capital to ￦15,000 billion.

As of December 31, 1996, the capital contribution from the Government was approximately ￦686 billion, all in cash. Since 1997, the Government has made capital contributions not only in cash but also in the form of shares of common stock of Government-affiliated entities. Recent examples include the Government’s contributions to our capital of (i) ￦130 billion, ￦40 billion, ￦75 billion, ￦15 billion, ￦10 billion, ￦935 billion, ￦10 billion and ￦65 billion in cash in January 2014, January 2015, August 2015, September 2015, July 2016, September 2016, October 2016 and November 2016, respectively, and (ii) ￦380 billion and ￦1,000 billion in the form of shares of Korea Land & Housing Corporation in July 2014 and December 2015, respectively, ￦500 billion in the form of shares of Korea Aerospace Industries Ltd. in June 2016, ￦125 billion in the form of shares of Yeosu Gwangyang Port Authority in May 2017, ￦125 billion in the form of shares of Incheon Port Authority in May 2017 and ￦1,167 billion in the form of shares of Korea Aerospace Industries Ltd. in June 2017, in order to enhance our capacity to finance projects, including large-scale overseas development projects. Taking into account these capital contributions, our total capital stock was ￦11,815 billion as of December 31, 2018.

Pursuant to the KEXIM Act, only the Government, The Korea Development Bank, The Bank of Korea, certain designated domestic banking institutions, exporters’ associations and international financial organizations may contribute to our capital stock. As of December 31, 2018, the Government directly owned 66% of our capital stock and indirectly owned, through The Bank of Korea and The Korea Development Bank, 10% and 24%, respectively, of our capital stock. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 1.”

In addition to contributions to our capital, the Government provides funding for our financing activities. The Government has made loans available to us for our lending activities. See “—Description of Assets and Liabilities—Sources of Funding.”

The Government also supports our operation pursuant to Articles 36 and 37 of the KEXIM Act. Article 36 of the KEXIM Act and the By-laws provide that we shall apply our net income earned during each fiscal year, after deduction of depreciation expense for such fiscal year, in the following manner and in order of priority:

• first, at least 10% of such net income is transferred to our legal reserve until the total amount of our legal reserve equals the total amount of our capital stock;

• second, if the Minister of Economy and Finance approves such distribution, the balance of any such net income, after such transfer to the legal reserve, is distributed to the institutions, other than the Government, that have contributed to our capital (up to a maximum 15% annual dividend rate); and

• third, the remaining balance of any such net income is distributed in whatever manner our Operations Committee determines and the Minister of Economy and Finance approves, such as additions to our voluntary reserve.

Article 37 of the KEXIM Act provides that “the annual net losses of the Export-Import Bank of Korea shall be offset each year by the reserve, and if the reserve be insufficient, the Government shall provide funds to cover

6

the deficit.” As a result of the KEXIM Act, the Government is generally responsible for our operations and is legally obligated to replenish any deficit that arises if our reserves are insufficient to cover any of our annual net losses. In light of this provision, if we have insufficient funds to make any payment under any of our obligations, the Government would take appropriate steps by making a capital contribution, by allocating funds or by taking other action to enable us to make such payment when due. The provisions of Article 37 do not, however, constitute a direct guarantee by the Government of our obligations, and the provisions of the KEXIM Act, including Article 37, may be amended at any time by action of the National Assembly.

The Government closely supervises our operations including in the following ways:

• the President of the Republic appoints our President upon the recommendation of the Minister of Economy and Finance;

• the Minister of Economy and Finance appoints our Deputy President and Senior Executive Directors upon the recommendation of our President;

• the Minister of Economy and Finance appoints our Auditor;

• one month prior to the beginning of each fiscal year, we must submit our proposed program of operations and budget for the fiscal year to the Minister of Economy and Finance for his approval and immediately after the approval of the Minister of Economy and Finance, we must report such program to the National Assembly;

• the Minister of Economy and Finance must approve our operating manual, which sets out guidelines for all principal operating matters, including the range of permitted financings;

• the Board of Audit and Inspection, a Government department, examines our settlement of accounts annually;

• each of the Minister of Economy and Finance and the Financial Services Commission has broad authority to require reports from us on any matter and to examine our books, records and other documents. On the basis of the reports and examinations, the Minister of Economy and Finance may issue any orders it deems necessary to enforce the KEXIM Act or delegate examinations to the Financial Services Commission;

• the Financial Services Commission may supervise our operations to ensure managerial soundness based upon the KEXIM Decree and the Supervisory Regulations of Banking Business legislated by the Financial Services Commission and may issue orders deemed necessary for such supervision;

• we must submit our annual report to the Ministry of Economy and Finance (formerly, the Ministry of Finance and Economy) within three months after the end of each fiscal year and to the National Assembly within nine months after the end of each fiscal year outlining our operations and analyzing our activities during the relevant fiscal year; and

• we may amend our By-laws and operating manual only with the approval of the Minister of Economy and Finance.

Selected Financial Statement Data

Except where expressly indicated otherwise in this prospectus, loans in Won and loans in foreign currencies are collectively referred to as the “Loans”; bills bought, foreign exchange bought, advances for customers, call loans and interbank loans in foreign currency are collectively referred to as the “Other Loans”; Loans and Other Loans are collectively referred to as the “Loan Credits”; confirmed guarantees and acceptances are collectively referred to as the “Guarantees”; and Loan Credits and Guarantees are collectively referred to as the “Credit Exposure.”

Our separate financial information as of and for the year ended December 31, 2018 has reflected the application of the new accounting standard, K-IFRS 1109. As permitted by the transition rules of K-IFRS 1109,

7

our comparative separate financial information as of and for the year ended December 31, 2017 has not been restated to retroactively apply K-IFRS 1109 and is not directly comparable to our separate financial information as of and for the year ended December 31, 2018. For information regarding the impact of the application of K-IFRS 1109, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 39”

You should read the following selected financial statement data together with our separate financial statements and notes included in this prospectus.

	Year Ended December 31,
	2016			2017		2018(1)
	(billions of Won)
Income Statement Data
Total Interest Income	￦	2,231		￦	2,684	￦	2,951
Total Interest Expense		1,417			1,604		1,968
Net Interest Income		815			1,080		983
Operating Income (Loss)		(1,958	)		229		742
Income (Loss) before Income Tax		(1,958	)		229		753
Income Tax Expense (Benefit)		(471	)		56		156
Net Income (Loss)		(1,487	)		173		597
	As of December 31,
	2016			2017		2018(1)
	(billions of Won)
Balance Sheet Data
Total Loan Credits(2)	￦	76,724		￦	71,884	￦	72,120
Total Borrowings(3)		71,880			66,699		70,836
Total Assets		89,775			83,946		89,799
Total Liabilities		78,555			71,433		76.317
Total Shareholders’ Equity		11,220			12,513		13,483

(1) Reflects the application of K-IFRS 1109. For information regarding the impact of the application of K-IFRS 1109, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 39”.

(2) Gross amount, including bills bought, foreign exchange bought, call loans, inter-bank loans in foreign currency, advance for customers and others and before deducting valuation adjustment of loans in foreign currencies, allowance for loan losses and deferred loan origination fees. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 10.”

(3) Includes debentures.

2018

We had net income of ￦597 billion in 2018 compared to net income of ￦173 billion in 2017. The principal factor for the increase in net income to ￦597 billion in 2018 from ￦173 billion in 2017 was a decrease in impairment loss on loans to ￦327 billion in 2018 from ￦1,724 billion in 2017, primarily due to an improvement in loan quality. That factor was partially offset by impairment loss on guarantees of ￦57 billion in 2018 compared to reversal of impairment loss on guarantees of ￦879 billion in 2017, primarily due to an increase in guarantees to shipbuilding companies in 2018 compared to a significant decrease in guarantees to shipbuilding companies in 2017.

As of December 31, 2018, our total assets increased by 7% to ￦89,799 billion from ￦83,946 billion as of December 31, 2017, primarily due to a 30% increase in financial investments to ￦8,845 billion as of

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December 31, 2018 from ￦6,782 billion as of December 31, 2017 and a 76% increase in cash and due from financial institutions to ￦3,683 billion as of December 31, 2018 from ￦2,092 billion as of December 31, 2017.

As of December 31, 2018, our total liabilities increased by 7% to ￦76,317 billion from ￦71,433 billion as of December 31, 2017, primarily due to a 9% increase in debentures to ￦65,943 billion as of December 31, 2018 from ￦60,685 billion as of December 31, 2017.

The increases in assets and liabilities were primarily due to increases in the volume of loans and debt, respectively. The depreciation of the Won against the U.S. dollar as of December 31, 2018 compared to December 31, 2017 magnified the effect of the increase in the volume of loans and debt, as a majority of our assets and liabilities consisted of foreign currency loans and debt (including significant percentages in U.S. dollars).

As of December 31, 2018, our total shareholders’ equity increased by 8% to ￦13,483 billion from ￦12,513 billion as of December 31, 2017, due to increases in other components of equity and retained earnings.

2017

We had net income of ￦173 billion in 2017 compared to net loss of ￦1,487 billion in 2016. The principal factors for the net income of ￦173 billion in 2017 compared to the net loss of ￦1,487 billion in 2016 included:

• reversal of impairment loss on guarantees of ￦879 billion in 2017 compared to impairment loss on guarantees of ￦1,165 billion in 2016, primarily due to a decrease in refund guarantees to shipbuilding companies, which resulted in an improvement in guarantee quality; and

• an increase in net interest income to ￦1,080 billion in 2017 from ￦815 billion in 2016, primarily due to an increase in interest income from loans which more than offset an increase in interest expense from debentures.

The above factors were partially offset by income tax expense of ￦56 billion in 2017 compared to income tax benefit of ￦471 billion in 2016, primarily due to income before income tax of ￦229 billion in 2017 compared to loss before income tax of ￦1,958 billion in 2016.

As of December 31, 2017, our total assets decreased by 6% to ￦83,946 billion from ￦89,775 billion as of December 31, 2016, primarily due to a 6% decrease in Loan Credits to ￦71,884 billion as of December 31, 2017 from ￦76,724 billion as of December 31, 2016.

As of December 31, 2017, our total liabilities decreased by 9% to ￦71,433 billion from ￦78,555 billion as of December 31, 2016, primarily due to a 38% decrease in borrowings to ￦6,013 billion as of December 31, 2017 from ￦9,761 billion as of December 31, 2016 and a 2% decrease in debentures to ￦60,685 billion as of December 31, 2017 from ￦62,119 billion as of December 31, 2016.

The decreases in assets and liabilities were primarily due to the appreciation of the Won against the U.S. dollar as of December 31, 2017 compared to December 31, 2016, as a majority of our assets and liabilities consisted of foreign currency loans and debt (including significant percentages in U.S. dollars). The decreases in the volume of loans and debt magnified the effect of the appreciation of the Won against the U.S. dollar.

As of December 31, 2017, our total shareholders’ equity increased by 12% to ￦12,513 billion from ￦11,220 billion as of December 31, 2016, primarily due to an increase in capital stock.

Operations

Loan Operations

Our primary objective since our establishment has been to promote the export and competitiveness of Korean goods and services in international markets. To this end, we have introduced various financing facilities

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and implemented lending policies that are responsive to the needs of Korean exporters and foreign importers. Over the years, we have also developed financing facilities and lending policies that are consistent with the Government’s overall economic policies. In the latter part of the 1980s, as a result of changing trade conditions and the increased internationalization of the Korean economy, overseas investment credits and import credits were promoted and began to constitute an important portion of our business. Our lending programs include (1) export credits to Korean exporters or foreign buyers of Korean goods and services, (2) overseas investment credits to Korean firms and (3) import credits to Korean importers.

Before approving a credit, we consider:

• economic benefits to the Republic;

• the industry’s rank in the order of priorities established by the Government’s export-import policy;

• credit risk associated with the loans to be extended; and

• the goal of diversifying our lending activities.

The KEXIM Act and the By-laws provide that we may extend credit only where repayment “is considered probable.” Accordingly, we carefully investigate the financial position of each prospective borrower and the technical and financial aspects of the project to be financed, and a loan is made only if we believe there is reasonable assurance of repayment. See “—Credit Policies, Credit Approval and Risk Management—Credit Approval.”

In 2018, we provided Loans of ￦48,745 billion, a decrease of 5% from the previous year, and our commitments of Loans amounted to ￦48,423 billion, a decrease of 4% from the previous year. The decreases in disbursements and commitments for Loans were primarily attributable to decreased demand from the shipbuilding and overseas construction industries.

The following table sets out the total amounts of our outstanding Loan Credits, categorized by type of credit:

	As of December 31,								As % of 2018 Total
	2016			2017			2018
	(billions of Won)
Export Credits
Industrial Plants	￦	17,105		￦	15,082		￦	15,416		21	%
Shipbuilding		14,328			14,855			10,036		14
Ferrous & nonferrous metal products		1,971			1,738			1,683		2
Petrochemical products		1,462			1,577			1,562		2
Automobiles		1,732			1,945			1,797		2
Electronic machineries		1,682			2,048			2,280		3
Others(1)		4,348			4,124			5,750		8
Sub-total		42,628			41,369			38,525		53
Overseas Investment Credits		27,527			24,107			26,442		37
Import Credits		3,741			3,726			4,653		6
Others(2)		3,306			3,981			2,496		3
Present Value Premium/Discount		(478	)		(1,297	)		4		0
Total Loan Credits	￦	76,724		￦	71,884		￦	72,120		100	%

(1) Includes general machinery, service sector, etc.

(2) Includes call loans, loans for Inter-bank loans in foreign currency, advances for customers, etc.

Source: Internal accounting records

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The following table sets out our new loan commitments, categorized by type of credit:

New Loan Credit Commitments by Type of Credit

	As of December 31,						As % of 2018 Total
	2016		2017		2018
	(billions of Won)
Export Credits
Industrial Plants	￦	3,227	￦	5,051	￦	4,378		9	%
Shipbuilding		7,703		7,352		4,615		10
Ferrous & nonferrous metal products		1,327		1,352		1,292		3
Petrochemical products		3,822		4,206		3,455		7
Automobiles		3,494		3,535		2,418		5
Electronic machineries		1,843		2,108		2,152		4
Others(1)		8,901		7,446		8,849		18
Sub-total		30,317		31,050		27,159		56
Overseas Investment Credits		13,369		12,361		13,666		28
Import Credits		6,221		6,905		7,598		16
Total	￦	49,907	￦	50,316	￦	48,423		100	%

(1) Includes general machinery, service sector, etc.

Source: Internal accounting records

Export Credits

We offer export credits to either domestic suppliers or foreign buyers to finance export transactions.

Export Credits to domestic suppliers include:

• export loans to Korean exporters that export capital goods such as ships, industrial plants and machinery;

• pre-shipment credit to Korean exporters or manufacturers producing export products;

• technical service credit to Korean companies that export technical services abroad, including overseas construction projects;

• short-term trade financing to Korean exporters that manufacture export goods under short-term export contracts;

• small business export credit to small and medium-sized enterprises that manufacture export goods or supply materials needed by their primary exporters;

• rediscount on trade bills to domestic commercial banks for exporters;

• forfaiting to Korean exporters by discounting trade bills under the usance line of credit from export transactions on a non-recourse basis; and

• export factoring to Korean exporters by discounting trade receivables that occurs from open account export transactions on credit on a non-recourse basis.

Export credits to foreign buyers include:

• direct loans to foreign buyers that purchase Korean goods and services;

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• project finance to foreign companies that intend to import industrial plants, facilities and technical services from Korea for large-scale projects, of which the cash flows from such projects are the main source for repayment;

• structured finance to foreign shipping companies that purchase ships from Korean shipyards, of which the repayment usually depends on the cash flows generated by the operation of ships; and

• interbank export loans to creditworthy banks in foreign countries to help foreign buyers obtain credit for the purchase of goods and services of Korean origin.

As of December 31, 2018, export credits in the amount of ￦38,525 billion represented 53% of our total outstanding Loan Credits. Our disbursements of export credits in 2018 amounted to ￦28,396 billion, a decrease of 14% from the previous year, primarily due to decreased shipbuilding activity. Our commitments of export credits in 2018 amounted to ￦27,159 billion, a decrease of 13% from the previous year

We offer export credits to Korean companies in order to provide them with the funds required for the manufacture or construction of capital and non-capital goods and readying of technical services designated in our operating manual for export. Capital goods eligible for export credit financings currently include ships, industrial plants, industrial machinery and overseas construction projects. With respect to eligible items supported by our export credits, ships have traditionally had the largest share of our export credit operations.

We offer export loans and technical service credits to domestic suppliers at fixed (no less than the Commercial Interest Reference Rate under the OECD Arrangement (as defined below)) or floating rates of interest with maturities of up to 12 years for ships and maturities of varying terms, from two to 18 years, for financings of other eligible items. We typically require a minimum down payment of 20% of the contract amount for ship export financings and a minimum down payment of 15% for financings of other eligible items. When the credit rating of a prospective borrower does not meet our internal rating criteria, these export credits are secured by promissory notes issued in connection with the relevant transaction, or letters of guarantees or letters of credit issued or confirmed by a creditworthy international bank or the importer’s government or central bank. Other terms and conditions under such export credit facilities must be in accordance with the Arrangement on Guidelines for Officially Supported Export Credits by the Organization for Economic Cooperation and Development (the “OECD Arrangement”). We offer direct loans to foreign buyers, project finance to project companies and structured finance for ships to foreign shipping companies under similar terms and conditions as export credit financings to domestic suppliers. We offer interbank export loans to overseas banks to facilitate imports by foreign importers of Korean manufactured goods. Interbank export loans are offered at fixed or floating rates of interest with maturities of up to ten years.

Overseas Investment Credits

We extend overseas investment credits to either Korean companies or foreign companies in which a Korean company has an equity share, to finance investments in eligible overseas businesses and projects. Such financing programs include:

• overseas investment credit to Korean companies that invest abroad in the form of capital subscription, acquisition of stocks and long-term credit;

• overseas project credit to Korean companies or their overseas subsidiaries engaging in businesses outside Korea;

• major resources development credit to Korean companies for development of natural resources and acquisition of mining rights abroad; and

• overseas business credit to foreign companies in which Korean companies have an equity stake, in the form of funds for purchasing equipment or working capital.

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As of December 31, 2018, overseas investment credits amounted to ￦26,442 billion, representing 37% of our total outstanding Loan Credits. Our commitments of overseas investment credits in 2018 amounted to ￦13,666 billion, an increase of 11% from the previous year. Our disbursements of overseas investment credits in 2018 amounted to ￦12,974 billion, an increase of 13% from the previous year. The increases in new commitments and disbursements for overseas investment credits were primarily due to increased demand in overseas investment and project credits.

Proposals for overseas investment credits to finance the acquisition of important materials or the development of natural resources for the Korean economy, as determined by the Government, are given priority, together with projects that promote the export of Korean goods and services. As a result, projects financed by our overseas investment credit program have been mainly in the fields of manufacturing or development of natural resources.

We offer overseas investment credits at either fixed or floating rates of interest with maturities up to 30 years. Such facilities may require security in the form of a bank guarantee, pledge or mortgage on the borrower’s local assets. Depending upon the size of the borrower, we will provide up to 100% of the financing required for the overseas investment project.

Import Credits

We offer import credits to Korean companies that directly import essential materials, natural resources and high-technology materials whose stable and timely supply is required for the national economy, or to Korean companies that import such items after developing them overseas. Import credits are extended for importation of eligible items, including nuclear fuels, aircraft, mineral ores, crude oil, lumber, wood pulp, grains, cotton, sugar, and equipment and machinery for research and development, and for use in advanced technological industries.

As of December 31, 2018, import credits in the amount of ￦4,653 billion represented 6% of our total outstanding Loan Credits. Disbursements and new commitments of import credits amounted to ￦7,376 billion and ￦7,598 billion, respectively, in 2018, an increase of 7% and 10%, respectively, from the previous year, primarily due to an increase in demand for financing for raw materials used for export and domestic consumption.

We offer import credits at either fixed or floating rates of interest with maturities up to ten years for equipment and machinery and shorter maturities of up to two years for other items, which may require security in the form of a bank guarantee, pledge or mortgage on the borrower’s local assets. We generally provide up to 80% of the import contract amount, but provide up to 90% of the import contract amount in the case of small and medium-sized enterprises and up to 100% for transactions with a letter of credit opened by a bank.

Guarantee Operations

We provide guarantees in favor of Korean commercial banks and foreign banks or foreign importers in respect of the obligations of Korean exporters in order to facilitate export and import financings. Such guarantee programs for Korean exporters and importers include (1) financial guarantees to co-financing banks that provide loans for transactions that satisfy our eligibility requirements and (2) project-related guarantees to foreign importers for the performance of Korean exporters on eligible projects in the form of bid bonds, advance payment bonds, performance bonds and retention bonds. Guarantee commitments as of December 31, 2018 decreased to ￦40,011 billion from ￦42,809 billion as of December 31, 2017. Guarantees we had confirmed as of December 31, 2018 decreased to ￦34,795 billion from ￦38,961 billion as of December 31, 2017.

We mainly issue project-related guarantees, which include:

• advance payment guarantees that are issued to overseas importers of Korean goods and services to support obligations to refund down payments made to Korean exporters in the event of a failure to deliver the goods to be exported; and

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• performance guarantees that are issued to foreign importers to support the performance by Korean exporters of their contractual obligations.

In 2018, we issued project-related confirmed guarantees in the amount of ￦6,172 billion, an increase of 2% from the previous year

We also issue letters of credit to foreign exporters to assist in the financing of projects approved in connection with import credit loans, and to Korean exporters to assist in the financing of projects approved in connection with export credit loans.

For further information regarding our guarantee and letter of credit operations, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 36.”

Government Account Operations

Economic Development Cooperation Fund

In 1987, the Government established the Economic Development Cooperation Fund (the “EDCF”) to provide loans, at concessional interest rates, to governments or agencies of developing countries for projects that contribute to industrial development or economic stabilization of such countries. We administer the EDCF on behalf of the Government and are responsible for project appraisal, documentation and administrative work relating to the EDCF Loans. The EDCF business accounts are maintained separately from our own account on behalf of the Government, and we derive no separate income or expenditures from our operation of the EDCF business. Government contributions constitute the primary funding source of the EDCF. Loan disbursements by the EDCF in 2018 amounted to ￦858 billion for 106 projects in 32 countries, an increase of 15% from the previous year. As of December 31, 2018, the total outstanding loans extended by the EDCF was ￦7,055 billion, an increase of 12% from the previous year.

Inter-Korea Cooperation Fund

In 1991, the Government established the Inter-Korea Cooperation Fund (the “IKCF”) to promote mutual exchanges and cooperation between the Republic and North Korea by engaging in funding and financing activities to support family reunions, cultural events, academic seminars, trade and economic cooperation between the two countries. We administer the IKCF under the initiative and policy coordination of the Ministry of Unification. The IKCF accounts are maintained separately from our own account on behalf of the Government. Government contributions are the major funding source of the IKCF. The IKCF disbursements during 2018 amounted to ￦212 billion for 679 projects, and cumulative total disbursements as of December 31, 2018 were ￦6,957 billion, an increase of 3% from ￦6,745 billion as of December 31, 2017.

Other Operations

We engage in various other activities related to our financing activities.

Activities in which we currently engage include:

• country information services performed by the Overseas Economic Research Institute, which conducts country studies and country risk evaluation to assist in the efficient utilization of our financial resources;

• export credit advisory services, which are aimed at bringing about a larger share of overseas bidding by giving Korean exporters a wide range of knowledge on the country, industry, market and financial situation of the importing country in the early stage of the tendering process or contract negotiations;

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• consulting services by in-house professionals including lawyers, accountants and regional experts who consult on international transactions; and

• management of Korea’s foreign direct investment database.

Description of Assets and Liabilities

Total Credit Exposure

We extend credits to support export and import transactions, overseas investment projects and other relevant products in various forms including loans and guarantees.

The following table sets out our Credit Exposure as of December 31, 2016, 2017 and 2018, categorized by type of exposure extended:

		As of December 31,
		2016					2017					2018
		(billions of Won, except for percentages)
A	Loans in Won	￦	16,178		13	%	￦	18,956		18	%	￦	16,837		16	%
B	Loans in Foreign Currencies		55,523		44			47,873		45			51,861		49
C	Loans (A+B)		71,701		56			66,829		62			68,698		65
D	Other Loans		5,023		4			5,056		5			3,422		3
E	Loan Credits (C+D)		76,724		60			71,884		67			72,120		68
F	Allowances for Loan Losses		(2,926	)	(2	)		(3,287	)	(3	)		(1,554	)	(1	)
G	Loan Credits including present value discounts (E-F)		73,798		58			68,597		64			70,566		67
H	Guarantees		53,615		42			38,961		36			34,795		33
I	Credit Exposure (G+H)		127,413		100			107,558		100			105,361		100

Loan Credits by Geographic Area

The following table sets out the total amount of our outstanding Loan Credits as of December 31, 2016, 2017 and 2018, categorized by geographic area ⁽¹⁾:

	As of December 31,(1)						As % of 2018 Total
	2016		2017		2018
	(billions of Won)
Asia(2)	￦	56,012	￦	55,044	￦	56,209		78	%
Europe		5,463		3,509		5,630		8
America		11,190		9,229		7,757		11
Africa		4,059		4,102		2,524		3
Total	￦	76,724	￦	71,884	￦	72,120		100	%

(1) For purposes of this table, export credits have been allocated to the geographic areas in which the foreign buyers of Korean exports are located; overseas investment credits have been allocated to the geographic areas in which the overseas investments being financed are located; and import credits have been allocated to the geographic areas in which the sellers of the imported goods are located.

(2) Includes Australia.

Source: Internal accounting records

We engage in business related to Iran, including transactions involving as counterparties Iranian banks that may be indirectly owned or controlled by the Iranian government. The U.S. State Department has designated Iran as a state sponsor of terrorism, and U.S. law generally prohibits U.S. persons from doing business in Iran. We are

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a Korean bank and our activities with respect to Iran have not involved any U.S. person in either a managerial or operational role and have been subject to policies and procedures designed to ensure compliance with applicable Korean laws and regulations. We believe that our activities related to Iran are not subject to the mandatory sanctions administered or enforced by the United States Government (including, without limitation, Section 104 of the U.S. Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”) and the Iran Financial Sanctions Regulations issued by the U.S. Secretary of the Treasury thereunder (the “IFSR”)).

Our business related to Iran consists solely of extensions of credit and financing provided in connection with exports of Korean goods and services to Iran and our disbursements of Iran-related credits are made directly to Korean suppliers or exporters. Such activities have involved export-related credits to finance the export contracts of Korean exporters supplying goods and services to Iranian companies, extensions of credit through non-recourse discounting of export trade bills, and purchases of promissory notes securing export transactions. Our Loans to Iran represented 0.3%, 0.5% and 0.0% of our total assets as of December 31, 2016, 2017 and 2018, respectively, and also represented 0.3%, 0.7% and 0.0% of our Loan Credits as of those respective dates. Our total operating revenues from transactions with Iran in 2016, 2017 and 2018 represented 0.3%, 0.3% and 0.1% of our total operating revenues, respectively.

We are aware, through press reports and other means, of initiatives by governmental entities in the U.S. and by U.S. institutions such as universities and pension funds, to adopt laws, regulations or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with Iran, including, without limitation, CISADA and IFSR. It is possible that such initiatives may result in our being unable to gain or retain entities subject to such prohibitions as customers or as investors in our debt securities. In addition, our reputation may suffer due to our association with Iran. Such a result could have significant adverse effects on our business or the price of our debt securities.

Individual Exposure

The KEXIM Decree imposes limits on our aggregate credits extended to a single person or business group. As of the date hereof, we are in compliance with such requirements.

As of December 31, 2018, our largest Credit Exposure was to Daewoo Shipbuilding & Marine Engineering, or DSME, in the amount of ￦4,157 billion. As of December 31, 2018, our second largest and third largest Credit Exposures, respectively, were to Samsung Heavy Industries Co., Ltd. in the amount of ￦2,840 billion and to Hyundai Heavy Industries Co., Ltd. in the amount of ￦2,077 billion.

The following table sets out our five largest Credit Exposures as of December 31, 2018⁽¹⁾:

Rank	Name of Borrower	Loan Credits	Guarantees	Total
		(billions of Won)
1	Daewoo Shipbuilding & Marine Engineering Co., Ltd.	￦ 636	￦ 3,521	￦ 4,157
2	Samsung Heavy Industries Co., Ltd.	1,247	1,593	2,840
3	Hyundai Heavy Industries Co., Ltd.	706	1,371	2,077
4	Doosan Heavy Industries Co., Ltd.	853	1,187	2,040
5	Hanwha Engineering & Construction Co., Ltd	—	1,813	1,813

(1) Excludes loans and guarantees extended to affiliates.

Source: Internal accounting records.

In recent years, DSME, one of the largest shipbuilding and offshore construction companies in Korea, suffered from financial difficulties primarily due to significant losses incurred in connection with the construction of offshore plants resulting from a prolonged slowdown in the global shipbuilding industry. In October 2015, we announced that we, along with The Korea Development Bank, plan to provide financial support to DSME, including provision of liquidity support of up to ￦4.2 trillion. In December 2016, in a bid to

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improve DSME’s capital structure, we exchanged a term loan in the amount of ￦1 trillion provided by us to DSME for perpetual bonds newly issued by DSME, while KDB engaged in debt-for-equity swaps amounting to ￦1.8 trillion. In March 2017, we and The Korea Development Bank announced a second joint plan to provide an additional ￦2.9 trillion in financial support to DSME, which was approved by the other creditors in April 2017. Based on such plan, we exchanged a term loan in the amount of ￦1.28 trillion provided by us to DSME for perpetual bonds issued by DSME and The Korea Development Bank provided additional debt-to-equity swaps of ￦0.3 trillion in June 2017. Other creditors also provided debt-to-equity swaps for up to 80% of their debt with DSME and rescheduled the maturities of the remainder. In March 2019, KDB and Hyundai Heavy Industries Co., Ltd. (“HHI”) entered into a conditional agreement under which HHI will purchase a controlling stake in DSME from KDB. Under the agreement, HHI will create a holding company to control its shipbuilding business into which KDB will transfer all of its shares of common stock in DSME in return for an equity stake in the holding company. The completion of this transaction is subject to various conditions, including due diligence and approval from the anti-trust authorities of the European Union and applicable countries. We expect that our exposure to DSME will not change as a result of such transaction between KDB and HHI.

In addition, we have Credit Exposures to a number of financially troubled Korean companies including STX Offshore & Shipbuilding and Sungdong Shipbuilding & Marine Engineering Co., Ltd. STX Offshore & Shipbuilding, which had filed for court receivership in June 2016 and executed debt-for-equity swaps with their creditors (including us), exited court receivership in July 2017. Sungdong Shipbuilding & Marine Engineering, which had been in voluntary out-of-court debt restructuring since 2010, filed for court receivership in March 2018. As of December 31, 2018, our Credit Exposure to STX Offshore & Shipbuilding and Sungdong Shipbuilding & Marine Engineering amounted to ￦64 billion and ￦637 billion, respectively.

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Asset Quality

The Supervisory Regulation of Banking Business (“Supervisory Regulation”) legislated by the Financial Services Commission requires banks, including us, to analyze and classify their credits into one of five categories as normal, precautionary, substandard, doubtful or estimated loss by taking into account borrowers’ repayment capacity as well as a number of other factors including the financial position, profitability, transaction history of the relevant borrower and the value of any collateral or guarantee taken as security for the extension of credit. Categorizations are applied to all loans except call loans and interbank loans, which are classified as normal. Credit categorizations are as follows:

Normal	Credits extended to customers which, in consideration of their business and operations, financial conditions and future cash flows, do not raise concerns regarding their ability to repay the credits.
Precautionary	Credits extended to customers (1) which, in consideration of their business and operations, financial conditions and future cash flows, are judged to have potential risks with respect to their ability to repay the credits in the future, although there have not occurred any immediate risks of default in repayment; or (2) which are in arrears for one month or more but less than three months.
Substandard	(1) Credits extended to customers, which in consideration of their business and operations, financial conditions and future cash flows, are judged to have incurred considerable risks for default in repayment as the customers’ ability to repay has deteriorated; or (2) that portion which is expected to be collected of total credits (a) extended to customers which have been in arrears for three months or more, (b) extended to customers which are judged to have incurred serious risks due to the occurrence of final refusal to pay their promissory notes, liquidation or bankruptcy proceedings, or closure of their businesses or (c) of “Doubtful Customers” or “Estimated-loss Customers” (each as defined below).
Doubtful	That portion of credits in excess of the amount expected to be collected of total credits extended to (1) customers (“Doubtful Customers”) which, in consideration of their business and operations, financial conditions and future cash flows, are judged to have incurred serious risks of default in repayment due to noticeable deterioration in their ability to repay; or (2) customers which have been in arrears for three months or more but less than twelve months.
Estimated Loss	That portion of credits in excess of the amount expected to be collected of total credits extended to (1) customers (“Estimated-loss Customers”), which, in consideration of their business and operations, financial conditions and future cash flows, are judged to have to be accounted as a loss as the inability to repay became certain due to serious deterioration in their ability to repay; (2) customers which have been in arrears for twelve months or more; or (3) customers which are judged to have incurred serious risks of default in repayment due to the occurrence of final refusal to pay their promissory notes, liquidation or bankruptcy proceedings, or closure of their businesses.

Under K-IFRS, we establish provisions for credit losses with respect to loans using either a case-by-case or collective approach. We assess individually significant loans on a case-by-case basis and other loans on a collective basis. In addition, if we determine that no objective evidence of impairment exists for a loan, it includes such loan in a group of loans with similar credit risk characteristics and assesses them collectively for impairment regardless of whether such loan is significant. If there is objective evidence that an impairment loss has been incurred for individually significant loans, the amount of the loss is measured as the difference between

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the financial asset’s carrying amount and the present value of the estimated future cash flows discounted at such asset’s original effective interest rate. Future cash flows are estimated through a case-by-case analysis of individually assessed assets, which takes into account the benefit of any guarantee or other collateral held. The value and timing of future cash flow receipts are based on available estimates in conjunction with facts available at the time of review and reassessed on a periodic basis as new information becomes available. For collectively assessed loans, we base the level of provisions for credit losses on a portfolio basis in light of the homogenous nature of the assets included in each portfolio. The provisions are determined based on a quantitative review of the relevant portfolio, taking into account such factors as the level of arrears, the value of any security, and historical and projected cash recovery trends over the recovery period. For more detailed information regarding our loan loss provisioning policy, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 3(6).”

Asset Classifications

The following table provides information on our loan loss reserves:

	As of December 31, 2016				As of December 31, 2017				As of December 31, 2018
	Loan Amount(1)		Loan Loss Reserve(2)		Loan Amount(1)		Loan Loss Reserve(2)		Loan Amount(1)		Loan Loss Reserve(2)
	(billions of Won)
Normal	￦	132,096	￦	391	￦	114,923	￦	290	￦	117,870	￦	844
Precautionary		15,312		1,421		12,387		880		7,622		900
Sub-standard		2,743		763		605		167		529		48
Doubtful		1,838		1,117		2,395		1,732		845		523
Estimated Loss		1,621		1,092		1,436		1,291		383		321
Total	￦	153,610	￦	4,785	￦	131,748	￦	4,359	￦	127,248	￦	2,636

(1) These figures include loans (excluding interbank loans and call loans), domestic usance bills, bills bought, notes bought, advances for customers, confirmed acceptances and guarantees.

(2) Consists of (i) allowance for loan losses; (ii) provisions for confirmed and unconfirmed acceptances and guarantees; and (iii) certain financial guarantee contract liabilities in the amount of ￦215 billion as of December 31, 2016, ￦396 billion as of December 31, 2017 and ￦330 billion as of December 31, 2018.

Reserves for Credit Losses

Non-performing assets (“NPA”) are defined as assets that are classified as substandard or below.

The following table sets out our 10 largest non-performing assets as of December 31, 2018:

Borrower	Loans		Guarantees		Total
	(billions of Won)
Daesun Shipbuilding & Engineering Co., Ltd.	￦	486	￦	121	￦	607
Sungdong Shipbuilding & Marine Engineering Co., Ltd.		240		—		240
Dongbu Steel Co., Ltd.		46		56		102
DB Metal Co., Ltd.		99		—		99
Hanjin Heavy Industries & Construction Co., Ltd..		—		81		81
RECAUDO BOGOTA S.A.S.56		56		22		78
STX Offshore & Shipbuilding Co., Ltd..		57		8		65
Sedae Enertech Co., Ltd.		20		—		20
Daechang HRSG Corporation		12		6		18
Saehwa IMC Co., Ltd		14		—		14
Total	￦	1,030	￦	295	￦	1,325

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In the early 1990’s, at the direction of the Government, we extended a commodity loan in the aggregate amount of US$466 million to Vnesheconombank, the Bank for Foreign Economic Affairs of the former Soviet Union, which was guaranteed by the government of the former Soviet Union, as part of the Government’s policy to enhance economic cooperation between the two countries. Since the dissolution of the Soviet Union, the Government had been negotiating repayment terms with the government of the Russian Federation, which agreed to assume the guarantee of the former Soviet Union in respect of the obligations of Vnesheconombank under such loan. In 1995, the two governments came to an agreement on a repayment schedule in respect of approximately half of the loan. Since the agreement was made, US$229 million of the principal was repaid.

In June 2003, the two governments reached an agreement as to the rescheduling of the remaining portion of the loan and the change of the borrower from Vnesheconombank to the government of the Russian Federation. As a result, in September 2003, we upgraded the classification of the outstanding ￦258 billion (including accrued and unpaid interest) of our exposure to the government of the Russian Federation from estimated loss to doubtful in terms of asset quality and established a 70% provisioning level for that credit exposure. In June 2004, we further upgraded the classification of our exposure to the government of the Russian Federation from doubtful to precautionary in terms of asset quality, following the continued repayment of the loan by the government of the Russian Federation in accordance with the agreed payment schedule. As of December 31, 2018, our exposure to the government of the Russian Federation amounted to ￦83 billion and we established a 0.2% provisioning level for that credit exposure.

We cannot provide any assurance that our current level of exposure to non-performing assets will continue in the future or that any of its borrowers (including its largest borrowers as described above) is not currently facing, or in the future will not face, material financial difficulties.

As of December 31, 2018, the amount of our non-performing assets was ￦1,562 billion, a decrease of 60% from ￦3,934 billion as of December 31, 2017. As of December 31, 2018, our non-performing asset ratio was 1.5%, compared to 3.6% as of December 31, 2017

The following table sets forth our reserves for possible credit losses as of December 31, 2016, 2017 and 2018:

	As of December 31,
	2016			2017			2018
	(billions of Won, except for percentages)
Loan Loss Reserve (A)(1)	￦	4,785		￦	4,359		￦	2,636
NPA (B)(2)		6,202			4,437			1,757
Total Shareholders’ Equity (C)		11,220			12,513			13,483
Reserve to NPA (A/B)		77	%		98	%		150	%
Equity at Risk (B-A)/C		13	%		0	%		—

(1) Consists of allowance for loan losses and provisions for confirmed acceptances and guarantees, excluding the regulatory reserve for loans and guarantees.

(2) Non-performing assets, which are defined as assets that are classified as substandard or below.

Source: Internal accounting records

The following table sets forth our actual loan loss reserve ratios as of December 31, 2016, 2017 and 2018:

Classification of Loans	Actual Reserve Coverage (as of December 31, 2016)			Actual Reserve Coverage (as of December 31, 2017)			Actual Reserve Coverage (as of December 31, 2018)
Normal		0.4	%		0.3	%		0.9	%
Precautionary		17.7	%		12.2	%		21.4	%
Substandard		31.2	%		28.0	%		9.6	%
Doubtful		69.1	%		80.0	%		76.6	%
Estimated Loss		75.0	%		97.8	%		91.4	%

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Investments

Under the KEXIM Decree, we are not allowed to hold stocks or securities of more than three years’ maturity in excess of 60% of our equity capital. However, investment in the following securities is not subject to this restriction:

• Government bonds;

• BOK currency stabilization bonds;

• securities acquired via contributions by the Government; and

• securities acquired through investment approved by the Minister of Economy and Finance, for research related to our operations, for our financing or pursuant to Korean statutes.

As of December 31, 2018, our total investment in securities amounted to ￦11,356 billion, representing 13% of our total assets. Our securities portfolio consists primarily of financial assets at fair value through other comprehensive income (“FVOCI”). Financial assets at FVOCI mainly consist of marketable securities (including equity securities in Industrial Bank of Korea which was recapitalized by the Government through us) and non-marketable securities (including equity securities in Korea Expressway Corporation and Korea Land & Housing Corporation). In 2014, we sold 976,625 shares of common stock, which represented all of our holding of common stock in Kumho Tire, for ￦11 billion. In 2015, we sold 3,459,279 shares of common stock, which represented all of our holding of common stock in SAMT Co., Ltd., for ￦4 billion. In 2016, we sold 639,505 shares of common stock, which represented 5% of our holdings of common stock in Taihan Electric Wire Co., Ltd., for ￦2 billion. In 2017, we sold 2,199,936 shares of common stock of STX Heavy Industries, which represented all of our holdings of common stock in the company, for ￦19 billion

The following table sets out the composition of our securities as of December 31, 2016, 2017 and 2018:

	As of December 31, 2016					As of December 31, 2017					As of December 31, 2018(1)
Type of Investment Securities	Amount		%			Amount		%			Amount			%
	(billions of Won, except for percentages)
Available-for-sale Securities	￦	7,027		89	%	￦	6,693		71	%	￦	8,629	(2)		76	%
Held-to-maturity Securities		111		1			89		1			216	(3)		2
Investments in Associates and Subsidiaries		766		10			2,599		28			2,511			22
Total	￦	7,904		100	%	￦	9,381		100	%	￦	11,356			100	%

(1) Reflects the application of K-IFRS 1109. For information regarding the impact of the application of K-IFRS 1109, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 39”.

(2) Is classified as financial assets at FVOCI under K-IFRS 1109, effective for annual periods beginning on January 1, 2018.

(3) Is classified as financial assets at amortized cost under K-IFRS 1109, effective for annual periods beginning on January 1, 2018.

For further information relating to the classification guidelines and methods of valuation for unrealized gains and losses on our securities, see “—Financial Statements and the Auditors—Notes to separate financial statements and of and for the years ended December 31, 2018 and 2017—Note 3 and Note 5.”

Guarantees and Acceptances and Contingent Liabilities

We have credit risk factors that are not reflected on the balance sheet, which include risks associated with guarantees and acceptances. Guarantees and acceptances do not appear on the balance sheet, but rather are

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recorded as an off-balance sheet item in the notes to the financial statements. Guarantees and acceptances include financial guarantees, project related guarantees, such as bid bond, advance payment bond, performance bond or retention bond, and acceptances and advances relating to trade financings such as letters of credit or import freight. Contingent liabilities, for which the guaranteed amounts were not finalized, appear as unconfirmed guarantees and acceptance items in the notes to the financial statements as off-balance sheet items.

As of December 31, 2018, we had issued a total amount of ￦34,795 billion in confirmed guarantees and acceptances, of which ￦30,775 billion, representing 88% of the total amount, was classified as normal, ￦3,687 billion, representing 11% of the total amount, was classified as precautionary, and ￦332 billion, representing 1% of the total amount, was classified as substandard or below

Derivatives

The objective in our strategy and policies on derivatives is to actively manage and minimize our foreign exchange and interest rate risks. It is our policy to hedge all currency and interest rate risks wherever possible (taking into consideration the cost of hedging). We use various hedging instruments, including foreign exchange forwards and options, interest rate swaps, and cross currency swaps.

Under our internal trading rules that have been submitted to the Financial Supervisory Service, our policy is to engage in derivative transactions mainly for hedging our own position. As part of our total exposure management system, we monitor our exposure to derivatives and may make real-time inquiries, which enables our Risk Management Department to check our exposure on a regular basis. Under the guidelines set by the Financial Supervisory Service, we are required to submit reports on our derivatives exposure to the Financial Supervisory Service on a quarterly basis. As a measure to reduce the risk of intentional manipulation or error, we have separated responsibility for different functions such as initiation, authorization, approval, recording, monitoring and reporting to the Financial Supervisory Service. The Risk Management Department conducts regular reviews of derivative transactions to monitor any breach of compliance with the relevant regulatory requirements.

As of December 31, 2018, our outstanding loans made at floating rates of interest totaled approximately ￦51,677 billion, whereas our outstanding borrowings made at floating rates of interest totaled approximately ￦51,399 billion, including those raised in Australian Dollar, Euro, British Pound, and Brazil Real and swapped into U.S. dollar floating rate borrowings. As a result, we are exposed to possible interest rate risks to the extent that the amount of our borrowings made at floating rates of interest exceeds the amount of our loans made at floating rates of interest. Foreign exchange risk arises because a majority of our assets and liabilities are denominated in non-Won currencies. In order to match our currency and interest rate structure, we generally enter into swap transactions.

The following table shows the unsettled notional amounts and estimated fair values of derivatives we held as of the dates indicated.

	As of December 31,
	2016						2017						2018
	Unsettled Notional Amount		Fair Value of Assets		Fair Value of Liabilities		Unsettled Notional Amount		Fair Value of Assets		Fair Value of Liabilities		Unsettled Notional Amount		Fair Value of Assets		Fair Value of Liabilities
	(billions of Won)
Currency forwards	￦	5,581	￦	145	￦	157	￦	6,451	￦	113	￦	152	￦	5,349	￦	49	￦	56
Currency swaps		23,132		273		2,501		24,519		547		1,136		29,145		392		1,597
Interest rate swaps		34,407		395		530		38,781		419		681		40,969		471		881
Total	￦	63,120	￦	813	￦	3,188	￦	69,751	￦	1,079	￦	1,969	￦	75,463	￦	912	￦	2,534

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As of December 31, 2018, we had entered into 619 currency related derivative contracts with a notional amount of ￦34,494 billion and had entered into 462 interest rate related derivative contracts with a notional amount of ￦40,969 billion. In connection with our currency forwards and currency swaps, we had net valuation loss of ￦1,211 billion in 2018 and ￦628 billion in 2017, primarily due to the appreciation of the U.S. dollar against other currencies, which resulted in an increase in the value of our obligations denominated in the U.S. dollar. In connection with our interest rate swaps, we recorded net valuation loss of ￦411 billion in 2018 and ￦262 billion in 2017, primarily due to an increase in benchmark interest swap rates, such as the U.S. dollar interest swap rate in 2018, which resulted in a decrease in the value of our floating-for-fixed interest rate swaps. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 20.”

Sources of Funding

We obtain funds primarily through borrowings from the issuance of bonds in both domestic and international capital markets, borrowings from domestic and foreign financial institutions, capital contributions and internally generated funds. Internally generated funds result from various activities we carried on and include principal and interest payments on our loans, fees from guarantee operations and other services, and income from marketable securities we hold.

We raised a net total of ￦54,005 billion (new borrowings plus loan repayments by our clients less repayment of our existing debt) during 2018, a 1% increase compared with the previous year’s ￦53,486 billion. The total loan repayments, including prepayments by our clients, during 2018 amounted to ￦50,616 billion, an increase of 7% from ￦47,448 billion during 2017.

Since our establishment, the Government has, from time to time, provided us with loans to support our lending to Korean exporters and provide liquidity to us. As of December 31, 2018, we had no outstanding borrowings from the Government. We also issued Won-denominated domestic bonds in the aggregate amounts of ￦12,270 billion, ￦13,670 billion and ￦12,865 billion during 2016, 2017 and 2018, respectively.

We have diversified our funding sources by borrowing from various overseas sources and issuing long-term floating-rate notes and fixed-rate debentures in the international capital markets. These issues were in foreign currencies, including the U.S. dollar, Thai Baht, Malaysia Ringgit, Japanese Yen, Australian Dollar, Euro, Hong Kong Dollar, Singapore Dollar, Swiss Franc, Brazilian Real, Turkish Lira, Mexican Peso, Peruvian Sol, Indian Rupee, Indonesian Rupiah, Chinese Yuan, New Zealand Dollar, Saudi Riyal, Taiwan Dollar, Philippine Peso, Russian Ruble, South African Rand, Deutsche Mark, Danish Krone, Swedish Krona, Czech Koruna, Norwegian Krone, British Pound and Canadian Dollar and have original maturities ranging from one to thirty years.

During 2018, we issued Eurobonds in the aggregate principal amount of US$5,395 million in various types of currencies under our existing medium term notes program, an 11% increase from US$4,857 million in 2017. These bond issues consisted of offerings of US$1,291 million, HKD 1,300 million, BRL 2,606 million, EUR 850 million, CNY 4,920 million, INR 21,100 million, AUD 91.8 million, IDR 5,683,000 million, CHF 800 million and MXN 150 million. In addition, we issued global bonds during 2018 in the aggregate amount of US$2,500 million under our U.S. shelf registration statement (the “U.S. Shelf Program”) compared with US$3,500 million in 2017. As of December 31, 2018, the outstanding amounts of our notes and debentures were US$34,888 million, JPY 143,820 million, HKD 6,011 million, BRL 3,534 million, EUR 3,537 million, THB 10,300 million, CHF 1,200 million, AUD 3,726 million, INR 32,042 million, CNY 10,693 million, IDR 9,328,400 million, PEN 266 million, NZD 1,097 million, ZAR 654 million, NOK 2,250 million, GBP 60 million, CAD 690 million, SEK 250 million, MXN 150 million and SGD 200 million

We also borrow from foreign financial institutions in the form of loans that are principally made by syndicates of commercial banks at floating or fixed interest rates and in foreign currencies, with original

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maturities ranging from two to five years. As of December 31, 2018, the outstanding amount of such borrowings from foreign financial institutions was US$1,500 million.

Our capital stock has increased from time to time since our establishment. From January 1998 to December 2018, the Government contributed ￦10,435 billion to our capital. As of December 31, 2018, our total capital stock amounted to ￦11,815 billion, and the Government, The Bank of Korea and The Korea Development Bank owned 66%, 10% and 24%, respectively, of our capital stock.

In connection with our fund raising activities, we have from time to time sold third parties promissory notes, including related guarantees, acquired as collateral in connection with export credit financings.

The KEXIM Act provides that the aggregate outstanding principal amount of all of our borrowings, including the total outstanding export-import financing debentures we issued in accordance with the KEXIM Decree, may not exceed an amount equal to thirty times the sum of our capital stock plus our reserves. As of December 31, 2018, the aggregate outstanding principal amount of our borrowings (including export-import financing debentures), which was ￦70,945 billion, was equal to 19% of the authorized amount of ￦370,020 billion.

We are not permitted to accept demand or time deposits.

Each year we must submit to the Government for its approval an operating plan which includes our target levels for different types of funding. The following table is the part of the operating plan dealing with fund-raising for 2019:

Sources of Fund	(billions of Won)
Capital Contribution		—
Borrowings		24,000
Net Collection of Loans		25,000
Collection of Loans		45,676
Repayment of Debts		(20,676	)
Others		—
Total	￦	49,000

Debt

Debt Repayment Schedule

The following table sets out the principal repayment schedule for our outstanding debt (consisting of borrowings and debentures) as of December 31, 2018:

Debt Principal Repayment Schedule

	Maturing on or before December 31,
Currency(1)	2019		2020		2021		2022		Thereafter
	(billions of Won)
Won	￦	10,570	￦	890	￦	595	￦	210	￦	2,400
Foreign(2)		10,024		10,165		9,944		7,103		19,543
Total Won Equivalent	￦	20,594	￦	11,055	￦	10,539	￦	7,313	￦	21,943

(1) Borrowings and debentures in foreign currency have been translated into Won at the market average exchange rates on December 31, 2018, as announced by the Seoul Money Brokerage Services Ltd.

(2) This figure includes debentures, bank loans, commercial papers and repurchase agreements.

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Normally we determine the level of our foreign currency reserves based upon an estimate, at any given time, of aggregate loan disbursements to be made over the next two to three months. Our average foreign currency reserves in 2017 and 2018 were approximately US$3,671 million and US$3,246 million, respectively.

Although we currently believe that such reserves, together with additional borrowings available under our uncommitted short-term backup credit facilities and commercial paper programs, will be sufficient to repay our outstanding debt as it becomes due, there can be no assurance that we will continue to be able to borrow under such credit facilities, or that the devaluation of the Won will not adversely affect our ability to access funds sufficient to repay our foreign currency denominated indebtedness in the future. In addition to maintaining sufficient foreign currency reserves, we monitor the maturity profile of our foreign currency assets and liabilities to ensure that there are sufficient maturing assets to meet our liabilities as they become due.

As of December 31, 2018, our foreign currency assets maturing within three months, six months and one year exceeded our foreign currency liabilities coming due within such periods by US$4,374 million, US$5,778 million and US$6,049 million, respectively. As of December 31, 2018, our total foreign currency assets exceeded our total foreign currency liabilities by US$303 million

Internal and External Debt of the Bank

The following table summarizes, as of December 31 of the years indicated, the outstanding internal debt of the Bank:

Internal Debt of the Bank

	(billions of Won)
2014		8,670
2015		9,700
2016		12,080
2017		14,120
2018		14,665

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The following table sets out, by currency and the equivalent amount in U.S. Dollars, the outstanding external debt of the Bank as of December 31, 2018:

External Debt of the Bank

	Amount in Original Currency		Equivalent Amount in U.S. Dollars(1)
	(billions)
US$	US$	34.9	US$	34.9
Euro (EUR)	EUR	3.5		4.0
Japanese yen (JPY)	JPY	143.8		01.3
Brazilian real (BRL)	BRL	3.5		0.9
Australian Dollars (AUD)	AUD	3.7		2.6
British Pound (GBP)	GBP	0.1		0.1
Thai Baht (THB)	THB	10.3		0.3
Hong Kong dollar (HKD)	HKD	6.0		0.8
Swiss franc (CHF)	CHF	1.2		1.2
Swedish Krona (SEK)	SEK	0.3		0.0
Indonesian rupiah (IDR)	IDR	9,328.4		0.6
Chinese Yuan (CNY)	CNY	10.7		1.6
Norwegian Krone (NOK)	NOK	2.3		0.3
Mexican Peso (MXN)	MXN	0.2		0.0
New Zealand Dollar (NZD)	NZD	1.1		0.7
Indian Rupee (INR)	INR	32.0		0.5
South African Rand (ZAR)	ZAR	0.7		0.0
Peru Nuevo sol (PEN)	PEN	0.3		0.1
Canadian Dollar (CAD)	CAD	0.7		0.5
Singapore Dollar (SGD)	SGD	0.2		0.1
			US$	50.6

(1) Amounts expressed in currencies other than U.S. dollar are converted to U.S. dollar at the exchange rate announced by the Seoul Money Brokerage Services, Ltd. in effect on December 31, 2018 or the prevailing market rate on December 31, 2018.

The following table summarizes, as of December 31 of the years indicated, the outstanding external debt of the Bank:

External Debt of the Bank

	(billions of Won)
2014		48,411
2015		54,631
2016		59,847
2017		52,710
2018		56,594

For further information on the outstanding indebtedness of the Bank, see “—Tables and Supplementary Information.”

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Debt Record

We have never defaulted in the payment of principal of, or interest on, any of our obligations.

Credit Policies, Credit Approval and Risk Management

Credit Policies

The Credit Policy Department functions as our centralized policy-making and planning division with respect to our lending activities. The Credit Policy Department formulates and revises our internal regulations on loan programs, sets basic lending guidelines on a country basis and gathers data from our various operating groups and produces various internal and external reports.

Credit Approval

We have multiple levels of loan approval authority, depending on the loan amount and other factors such as the nature of the credit, the conditions of the transaction, and whether the loan is secured. Our Board of Directors can approve loans of any amount. The Chief Executive Credit Committee, Credit Committee, Loan Officer Committee, Director Generals and Directors each have authority to approve loans up to a specified amount. The amount differs depending on the type of loan and certain other factors, for example, whether a loan is collateralized or guaranteed.

At each level of authority, loan applications are reviewed on the basis of the feasibility of the project from a technical, financial and economic point of view in addition to evaluating the probability of recovery. In conducting such a review, the following factors are considered:

• eligibility of the transaction under our financing criteria;

• country risk of the country of the borrower and the country in which the related project is located;

• credit risk of the borrower;

• a supplier’s ability to perform under the related supply contract;

• legal disputes over the related project and supply contract; and

• availability of collateral.

When the credit rating of a prospective borrower does not meet our internal rating criteria, our policy is to ensure that the loans are either guaranteed or made on a partially or fully secured basis. As of December 31, 2018, approximately 13% of our total outstanding loans were guaranteed or made on a partially or fully secured basis.

Risk Management

Our overall risk management policy is set by the Risk Management Committee, which meets on a quarterly basis and from time to time to establish tolerance limits for various exposures, whereas the overall risk management is overseen by the Risk Management Department, which is responsible for monitoring risk exposure.

The Risk Management Department reports our loan portfolio to the Financial Supervisory Service on a quarterly basis. The Risk Management Department also monitors our operating groups’ compliance with internal guidelines and procedures. To manage liquidity risk, we review the strategy for the sources and uses of funds, with each division submitting projected sources and uses to the Treasury Group. The Risk Management Department and the Treasury Group continually monitor our overall liquidity and the Treasury Group prepares both weekly and monthly cash flow forecasts. Our policy is to maintain a liquidity level, which can cover loan disbursements for a period of two to three months going forward. We protect ourselves from potential liquidity squeezes by maintaining sufficient amount of liquid assets with additional back-up of short-term credit lines.

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Our core lending activities expose us to market risk, mostly in the form of interest rate and foreign currency risks. The Risk Management Department reports interest rate and foreign exchange gap positions to the Risk Management Committee on a quarterly basis. We also monitor changes in, and matches of, foreign currency assets and liabilities in order to reduce exposure to currency fluctuations.

One of the key components of our risk management policy, which also affects our fund-raising efforts, is to monitor matches of asset maturities and liability maturities. The average maturity as of December 31, 2018 for our Won- and foreign currency-denominated loans was 16 months and 42 months, respectively, and for Won- and foreign currency-denominated liabilities was 25 months and 49 months, respectively.

We follow an overall risk management process where we:

• determine the risk management objectives;

• identify key exposures;

• measure key risks; and

• monitor risk management results.

Our risk management system is a continuous system that is frequently evaluated and updated on an ongoing basis.

Capital Adequacy

Under the Financial Supervisory Service’s guidelines on risk-adjusted capital which were introduced in consideration of the standards set by the Bank for International Settlements, all banks in Korea, including us, are required to maintain a capital adequacy ratio (Tier I and Tier II) of at least 8% on a consolidated basis. To the extent that we fail to maintain this ratio, the Korean regulatory authorities may require corrective measures ranging from management improvement recommendations to emergency measures such as disposal of assets.

The current capital adequacy requirements of the Financial Services Commission are derived from a new set of bank capital measures, referred to as Basel III, which the Basel Committee on Banking Supervision initially introduced in 2009 and began phasing in starting from 2013. Commencing in July 2013, the Financial Services Commission promulgated a series of amended regulations implementing Basel III, pursuant to which Korean banks, including us, were required to maintain a minimum ratio of Tier I common equity capital (which principally includes equity capital, capital surplus and retained earnings less reserve for credit losses) to risk-weighted assets of 3.5% and Tier I capital to risk-weighted assets of 4.5% from December 1, 2013, which minimum ratios were increased to 4.0% and 5.5%, respectively, from January 1, 2014 and increased further to 4.5% and 6.0%, respectively, from January 1, 2015. Such requirements are in addition to the pre-existing requirement for a minimum ratio of Tier I and Tier II capital (less any capital deductions) to risk-weighted assets of 8.0%, which remains unchanged. The amended regulations also require an additional capital conservation buffer of 0.625% on January 1, 2016, with such buffer to increase to 1.25% on January 1, 2017, to 1.875% on January 1, 2018 and to 2.5% on January 1, 2019, as well as a potential counter-cyclical capital buffer of up to 2.5% starting in 2016, which will be determined on a quarterly basis by the Financial Services Commission. Presently, the Financial Services Commission has set the counter-cyclical capital buffer at 0%. As of December 31, 2018, our capital adequacy ratio, on a consolidated basis, was 13.8%, an increase from 12.9% as of December 31, 2017, which was primarily due to increases in retained earnings and accumulated other comprehensive income and a decrease in total risk-weighted assets.

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The following table sets forth our capital base and capital adequacy ratios (on a consolidated basis) reported as of December 31, 2016, 2017 and 2018:

	As of December 31,
	2016			2017			2018
	(billions of Won, except for percentages)
Tier I	￦	11,239		￦	12,447		￦	13,203
Capital stock (including capital surplus and capital adjustments)		10,405			11,686			11,686
Retained Earnings(1)		606			623			828
Accumulated other comprehensive income		286			185			724
Others		3			2			3
Deductions from Tier I Capital		(61	)		(49	)		(38	)
Capital Adjustments		—			—			—
Deferred Tax Asset		—			—			—
Others		(61	)		(49	)		(38	)
Tier II (General Loan Loss Reserves)		1,975			1,678			1,742
Total Capital		13,214			14,126			14,945
Risk Adjusted Assets		122,663			109,501			108,447
Capital Adequacy Ratios
Tier I common equity		9.2	%		11.4	%		12.2	%
Tier I		9.2	%		11.4	%		12.2	%
Tier I and Tier II		10.8	%		12.9	%		13.8	%

(1) Net amount after deducting regulatory reserve for bad loans.

Source: Internal accounting records

Overseas Operations

We maintain an international presence through 24 overseas representative offices, which are located in New York City, Tokyo, Beijing, São Paolo, Paris, Washington D.C., Shanghai, New Delhi, Dubai, Moscow, Mexico City, Tashkent, Hanoi, Manila, Jakarta, Yangon, Bogota, Istanbul, Dar es Salaam, Maputo, Accra, Phnom Penh, Addis Ababa and Colombo.

We also have three wholly-owned subsidiaries: KEXIM Bank (UK) Ltd. in London, KEXIM (Asia) Ltd. in Hong Kong and KEXIM Vietnam Leasing Co., Ltd. in Ho Chi Minh City. These subsidiaries are engaged in the merchant banking and lease financing businesses, and assist us in raising overseas financing. We also own 85% of P.T. Koexim Mandiri Finance, a subsidiary in Jakarta, which is primarily engaged in the business of lease financing.

The table below sets forth brief details of our subsidiaries as of December 31, 2018:

	Principal Place of Business	Type of Business	Book Value		Bank’s Holding
			(billions of Won)		(%)
Kexim Bank (UK) Ltd.	United Kingdom	Commercial Banking	￦	48		100	%
KEXIM (Asia) Ltd.	Hong Kong	Commercial Banking		49		100
P.T. Koexim Mandiri Finance	Indonesia	Leasing and Factoring		25		85
Kexim Vietnam Leasing Co., Ltd.	Vietnam	Leasing and Lending		10		100

Property

Our head office is located at 38 Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, Korea, a 45,715 square meter building on a site of 9,110 square meters and owned by us. In addition to the head office, we own a staff

29

training center located near Seoul on a site of 47,881 square meters and a marine finance center, a 4,423 square meter building, located in Busan on a site of 556 square meters. We also maintain 13 branches in Busan, Gwangju, Daegu, Changwon, Daejeon, Suwon, Incheon, Ulsan, Cheongju, Jeonju, Gumi, Yeosu and Wonju. Our domestic branch offices and overseas representative offices are located in facilities held under long-term leases.

Management and Employees

Management

Our governance and management is the responsibility of our Board of Directors, which has authority to decide important matters relating to our business. The Board of Directors is chaired by our President and is comprised of six members: the President, the Deputy President, two Senior Executive Directors and two Non-standing Senior Executive Directors. The Auditor may attend and state his/her opinion at the meetings of the Board of Directors. The President of Korea appoints our President upon the recommendation of the Minister of Economy and Finance. The Minister of Economy and Finance appoints the Deputy President and all Senior Executive Directors upon the recommendation of our President. The Minister of Economy and Finance appoints the Auditor. All Board members and the Auditor serve for three years and are eligible for re-appointment for successive terms of office.

The members of the Board of Directors are currently as follows:

Name	Age		Board Member Since		Position
Sung-soo Eun		57		September 11, 2017		Chairman and President
Seung-joong Kang		59		January 18, 2018		Deputy President
Deog-yong Shin		58		January 18, 2018		Senior Executive Director
Sung-bae Kim		64		December 30, 2016		External Director
Gong-pil Choi		61		December 30, 2016		External Director
Meong-heon Na		63		June 1, 2018		External Director

Our basic policy guidelines for activities are established by the Operations Committee. According to the By-laws, the Operations Committee is composed of officials nominated as follows:

• President of KEXIM;

• official of the Ministry of Economy and Finance, nominated by the Minister of Economy and Finance;

• official of the Ministry of Foreign Affairs, nominated by the Minister of Foreign Affairs;

• official of the Ministry of Trade, Industry & Energy, nominated by the Minister of Trade, Industry & Energy;

• official of the Ministry of Land, Infrastructure and Transport, nominated by the Minister of Land, Infrastructure and Transport;

• official of the Ministry of Oceans and Fisheries, nominated by the Minister of Oceans and Fisheries;

• official of the Financial Services Commission, nominated by the Chairman of the Financial Services Commission;

• executive director of The Bank of Korea, nominated by the Governor of The Bank of Korea;

• executive director of the Korea Federation of Banks, nominated by the Chairman of the Korea Federation of Banks;

• representative of an exporters’ association (Korea International Trade Association), nominated by the Minister of Economy and Finance after consultation with the Minister of Trade, Industry & Energy;

30

• officer of the Korea Trade Insurance Corporation established under the Trade Insurance Act, nominated by the Chairman and President of the Korea Trade Insurance Corporation; and

• up to two persons who have extensive knowledge and experience in international economic cooperation work, recommended by our President and appointed by the Minister of Economy and Finance.

The members of the Operations Committee are currently as follows:

Name	Age		Member Since	Position
Sung-soo Eun		57	September 11, 2017	Chairman and President of KEXIM
Hoe Jeong Kim		52	January 11, 2019	Deputy Minister for International Economic Affairs, Ministry of Economy and Finance
Kang-hyeon Yun		55	September 22, 2017	Deputy Minister for Economic Affairs, Ministry of Foreign Affairs
Tae Sung Park		55	January 28, 2019	Deputy Minister for International Trade and Investment, Ministry of Trade, Industry & Energy
Seong Hai Lee		52	January 31, 2019	Assistant Minister for Construction Policy Bureau, Ministry of Land, Infrastructure and Transport
Ki-doo Eom		52	January 25, 2017	Director of Shipping & Logistics Bureau, Ministry of Oceans and Fisheries
Byeong Doo Sohn		54	September 12, 2017	Secretary General, Financial Services Commission
Ho Soon Shin		56	September 26, 2017	Deputy Governor, The Bank of Korea
Jae Moon Hong		58	March 7, 2018	Senior Executive Director, Korea Federation of Banks
Jin Hyun Han		59	February 27, 2018	Executive Vice Chairman, Korea International Trade Association

Employees

As of December 31, 2018, we had 1,195 employees, among whom 779 employees were members of our labor union. We have never experienced a work stoppage of a serious nature. Every two years, the management and union negotiate and enter into a collective bargaining agreement. The most recent collective bargaining agreement was entered into in September 2018.

Tables and Supplementary Information

A. External Debt of the Bank

(1) External Bonds of the Bank

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2018
USD		50,000,000		7.8	April 27, 2009	April 29, 2019		50,000,000
USD		1,250,000,000		5.125	June 29, 2010	June 29, 2020		1,250,000,000
USD		1,000,000,000		4	October 20, 2010	January 29, 2021		1,000,000,000
USD		1,000,000,000		4.375	September 15, 2011	September 15, 2021		1,000,000,000
USD		1,000,000,000		5	January 11, 2012	April 11, 2022		1,000,000,000
USD		100,000,000		6.78	January 27, 2012	January 27, 2027		100,000,000
USD		50,000,000		4.369	August 27, 2013	February 27, 2025		50,000,000
USD		25,000,000		3.81	October 30, 2013	October 30, 2023		25,000,000

31

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2018
USD		45,000,000		3.81	October 30, 2013	October 30, 2023		45,000,000
USD		49,000,000		3.81	October 30, 2013	October 30, 2023		49,000,000
USD		20,000,000		3.9	October 30, 2013	October 30, 2023		20,000,000
USD		50,000,000		3.66	November 06, 2013	November 06, 2023		50,000,000
USD		50,000,000		3.87	November 06, 2013	November 06, 2025		50,000,000
USD		20,000,000		3.67	November 06, 2013	November 06, 2023		20,000,000
USD		40,000,000		4	November 07, 2013	November 07, 2025		40,000,000
USD		40,000,000		3.73	November 07, 2013	November 07, 2023		40,000,000
USD		50,000,000		3.91	November 07, 2013	November 07, 2025		50,000,000
USD		20,000,000		3.71	November 07, 2013	November 07, 2023		20,000,000
USD		20,000,000		4.03	November 08, 2013	November 08, 2025		20,000,000
USD		30,000,000		4.03	November 08, 2013	November 08, 2025		30,000,000
USD		50,000,000		4.03	November 08, 2013	November 08, 2025		50,000,000
USD		50,000,000		3.76	November 08, 2013	November 08, 2023		50,000,000
USD		30,000,000		4.03	November 12, 2013	November 12, 2025		30,000,000
USD		35,000,000		3.786	November 12, 2013	November 12, 2023		35,000,000
USD		750,000,000		4	January 14, 2014	January 14, 2024		750,000,000
USD		220,000,000		3.95	January 27, 2014	January 27, 2024		220,000,000
USD		50,000,000		4.14	January 28, 2014	January 28, 2026		50,000,000
USD		50,000,000		4.14	February 03, 2014	February 03, 2026		50,000,000
USD		50,000,000		4.14	February 03, 2014	February 03, 2026		50,000,000
USD		50,000,000		4.07	February 04, 2014	February 04, 2026		50,000,000
USD		50,000,000		4.06	February 04, 2014	February 04, 2026		50,000,000
USD		20,000,000		4.02	February 05, 2014	February 05, 2026		20,000,000
USD		30,000,000		4	February 13, 2014	February 13, 2026		30,000,000
USD		30,000,000		4	February 18, 2014	February 18, 2026		30,000,000
USD		40,000,000		4.04	February 19, 2014	February 19, 2026		40,000,000
USD		36,800,000		2.05	May 22, 2014	May 22, 2019		36,800,000
USD		30,000,000		3.3	July 07, 2014	July 07, 2024		30,000,000
USD		500,000,000		2.375	August 12, 2014	August 12, 2019		500,000,000
USD		500,000,000		3.25	August 12, 2014	August 12, 2026		500,000,000
USD		17,800,000		1.8	September 26, 2014	September 26, 2019		17,800,000
USD		50,000,000		3.409	October 24, 2014	October 24, 2029		50,000,000
USD		50,000,000		3.409	October 24, 2014	October 24, 2029		50,000,000
USD		50,000,000		3.402	October 29, 2014	October 29, 2029		50,000,000
USD		50,000,000		3.23	October 30, 2014	October 30, 2026		50,000,000
USD		30,000,000		3.463	October 31, 2014	October 31, 2029		30,000,000
USD		50,000,000		3.5	November 06, 2014	November 06, 2029		50,000,000
USD		50,000,000		3.5	November 19, 2014	November 19, 2029		50,000,000
USD		50,000,000		3.53	November 20, 2014	November 20, 2029		50,000,000
USD		50,000,000		3.5	November 25, 2014	November 26, 2029		50,000,000
USD		50,000,000		3.35	November 28, 2014	November 28, 2026		50,000,000
USD		1,250,000,000		2.875	January 21, 2015	January 21, 2025		1,250,000,000
USD		1,000,000,000		2.25	January 21, 2015	January 21, 2020		1,000,000,000
USD		50,000,000		2.62	February 27, 2015	February 27, 2023		50,000,000
USD		50,000,000		3.02	March 04, 2015	March 04, 2030		50,000,000
USD		50,000,000		3.02	March 04, 2015	March 04, 2030		50,000,000
USD		30,000,000		3.044	March 06, 2015	March 06, 2030		30,000,000
USD		30,000,000		3.044	March 06, 2015	March 06, 2030		30,000,000
USD		50,000,000		2.81	March 06, 2015	March 06, 2025		50,000,000
USD		40,000,000		3.087	March 10, 2015	March 10, 2030		40,000,000
USD		50,000,000		2.845	March 10, 2015	March 10, 2025		50,000,000
USD		50,000,000		2.8	March 17, 2015	March 17, 2025		50,000,000
USD		50,000,000		2.7	April 01, 2015	April 01, 2027		50,000,000
USD		50,000,000		2.4075	May 08, 2015	May 08, 2023		50,000,000
USD		50,000,000		2.41	May 11, 2015	May 11, 2023		50,000,000
USD		50,000,000		2.4125	May 12, 2015	May 12, 2023		50,000,000
USD		30,000,000		LIBOR 3M+0.50	May 13, 2015	May 13, 2020		30,000,000
USD		50,000,000		2.675	May 27, 2015	May 27, 2023		50,000,000

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Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2018
USD		50,000,000		2.552	May 27, 2015	May 27, 2023		50,000,000
USD		50,000,000		2.62	May 28, 2015	May 28, 2023		50,000,000
USD		400,000,000		3.25	June 30, 2015	August 12, 2026		400,000,000
USD		600,000,000		2.625	June 30, 2015	December 30, 2020		600,000,000
USD		50,000,000		3.45	August 04, 2015	August 04, 2030		50,000,000
USD		30,000,000		3.33	August 04, 2015	August 04, 2027		30,000,000
USD		50,000,000		3.047	September 01, 2015	September 01, 2025		50,000,000
USD		50,000,000		3.32	September 03, 2015	September 03, 2030		50,000,000
USD		1,000,000,000		3.25	November 10, 2015	November 10, 2025		1,000,000,000
USD		750,000,000		2.5	November 10, 2015	May 10, 2021		750,000,000
USD		50,000,000		LIBOR 3M+0.70	December 01, 2015	January 31, 2019*		50,000,000
USD		50,000,000		LIBOR 3M+0.70	December 01, 2015	January 31, 2019*		50,000,000
USD		25,000,000		LIBOR 3M+0.65	January 21, 2016	January 21, 2019*		25,000,000
USD		50,000,000		3.95	January 21, 2016	January 21, 2031		50,000,000
USD		50,000,000		3.95	January 21, 2016	January 21, 2031		50,000,000
USD		400,000,000		2.125	February 11, 2016	February 11, 2021		400,000,000
USD		50,000,000		3.94	February 11, 2016	February 11, 2031		50,000,000
USD		50,000,000		3.94	February 11, 2016	February 11, 2031		50,000,000
USD		50,000,000		3.83	February 16, 2016	February 16, 2031		50,000,000
USD		30,000,000		LIBOR 3M+0.70	February 18, 2016	February 18, 2019*		30,000,000
USD		50,000,000		2.6	February 25, 2016	February 25, 2026		50,000,000
USD		50,000,000		2.6	February 25, 2016	February 25, 2026		50,000,000
USD		350,000,000		LIBOR 3M+1.00	March 17, 2016	March 17, 2021		350,000,000
USD		50,000,000		3.72	March 21, 2016	March 21, 2031		50,000,000
USD		30,000,000		LIBOR 3M+0.70	March 31, 2016	March 31, 2019		30,000,000
USD		500,000,000		LIBOR 3M+0.70	May 26, 2016	May 26, 2019		500,000,000
USD		1,000,000,000		1.75	May 26, 2016	May 26, 2019		1,000,000,000
USD		1,000,000,000		2.625	May 26, 2016	May 26, 2026		1,000,000,000
USD		50,000,000		3.19	July 01, 2016	July 01, 2031		50,000,000
USD		50,000,000		2.38	July 01, 2016	July 01, 2026		50,000,000
USD		50,000,000		1.57	July 11, 2016	July 11, 2020		50,000,000
USD		50,000,000		3.05	July 13, 2016	July 13, 2031		50,000,000
USD		50,000,000		2.52	July 22, 2016	July 22, 2031		50,000,000
USD		50,000,000		2.085	July 22, 2016	July 22, 2026		50,000,000
USD		50,000,000		1.935	July 28, 2016	July 28, 2021		50,000,000
USD		50,000,000		3.09	August 02, 2016	August 02, 2031		50,000,000
USD		50,000,000		2.205	August 02, 2016	August 02, 2026		50,000,000
USD		50,000,000		2.29	August 03, 2016	August 03, 2026		50,000,000
USD		50,000,000		3.1	August 09, 2016	August 09, 2031		50,000,000
USD		30,000,000		2.27	August 16, 2016	August 16, 2026		30,000,000
USD		50,000,000		2.29	August 17, 2016	August 17, 2026		50,000,000
USD		45,000,000		3.25	August 19, 2016	August 19, 2031		45,000,000
USD		50,000,000		1.45	August 30, 2016	August 30, 2019		50,000,000
USD		50,000,000		2.01	August 30, 2016	August 30, 2024		50,000,000
USD		50,000,000		3.08	September 30, 2016	September 30, 2031		50,000,000
USD		700,000,000		2.375	October 21, 2016	April 21, 2027		700,000,000
USD		300,000,000		1.875	October 21, 2016	October 21, 2021		300,000,000
USD		750,000,000		1.5	October 21, 2016	October 21, 2019		750,000,000
USD		750,000,000		LIBOR 3M+0.46	October 21, 2016	October 21, 2019		750,000,000
USD		50,000,000		2.74	November 17, 2016	November 17, 2028		50,000,000
USD		50,000,000		3.23	December 12, 2016	December 12, 2028		50,000,000
USD		50,000,000		3.2	December 14, 2016	December 14, 2028		50,000,000
USD		30,000,000		3.42	January 06, 2017	January 06, 2029		30,000,000
USD		30,000,000		3.42	January 06, 2017	January 06, 2029		30,000,000
USD		50,000,000		3.47	January 12, 2017	January 12, 2032		50,000,000
USD		30,000,000		3.4	January 18, 2017	January 18, 2032		30,000,000
USD		50,000,000		3.38	January 18, 2017	January 18, 2032		50,000,000
USD		50,000,000		3.33	January 19, 2017	January 19, 2032		50,000,000

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Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2018
USD		500,000,000		LIBOR 3M+0.875	January 25, 2017	January 25, 2022		500,000,000
USD		500,000,000		2.75	January 25, 2017	January 25, 2022		500,000,000
USD		500,000,000		2.125	January 25, 2017	January 25, 2020		500,000,000
USD		50,000,000		3.475	February 17, 2017	February 17, 2032		50,000,000
USD		50,000,000		3.475	February 17, 2017	February 17, 2032		50,000,000
USD		50,000,000		LIBOR 3M+0.72	March 23, 2017	March 23, 2022		50,000,000
USD		50,000,000		3.54	April 24, 2017	April 26, 2032		50,000,000
USD		50,000,000		3.25	April 24, 2017	April 24, 2029		50,000,000
USD		50,000,000		LIBOR 3M+0.40	June 01, 2017	June 01, 2020		50,000,000
USD		100,000,000		LIBOR 3M+0.68	June 01, 2017	June 01, 2021		100,000,000
USD		180,000,000		LIBOR 3M+0.55	June 19, 2017	January 19, 2021		180,000,000
USD		120,000,000		LIBOR 3M+0.33	June 19, 2017	January 19, 2019*		120,000,000
USD		400,000,000		LIBOR 3M+0.80	July 05, 2017	July 05, 2022		400,000,000
USD		50,000,000		LIBOR 3M+0.32	July 06, 2017	January 06, 2019*		50,000,000
USD		50,000,000		3.58	August 17, 2017	August 17, 2037		50,000,000
USD		50,000,000		3.56	August 18, 2017	August 18, 2037		50,000,000
USD		200,000,000		LIBOR 3M+4.10	October 11, 2017	October 11, 2047		200,000,000
USD		50,000,000		3.65	October 25, 2017	October 25, 2047		50,000,000
USD		50,000,000		3.65	October 25, 2017	October 25, 2047		50,000,000
USD		600,000,000		LIBOR 3M+0.925	November 01, 2017	November 01, 2022		600,000,000
USD		1,000,000,000		3	November 01, 2017	November 01, 2022		1,000,000,000
USD		400,000,000		2.5	November 01, 2017	November 01, 2020		400,000,000
USD		50,000,000		3.55	November 08, 2017	November 08, 2037		50,000,000
USD		50,000,000		3.55	November 08, 2017	November 08, 2037		50,000,000
USD		50,000,000		3.65	November 17, 2017	November 17, 2047		50,000,000
USD		50,000,000		3.65	November 17, 2017	November 17, 2047		50,000,000
USD		20,000,000		3.72	November 17, 2017	November 17, 2047		20,000,000
USD		50,000,000		3.72	November 17, 2017	November 17, 2047		50,000,000
USD		50,000,000		3.65	November 27, 2017	November 27, 2047		50,000,000
USD		50,000,000		3.7	December 06, 2017	December 06, 2047		50,000,000
USD		50,000,000		3.92	February 05, 2018	February 05, 2048		50,000,000
USD		50,000,000		LIBOR 3M+0.30	February 08, 2018	February 08, 2019*		50,000,000
USD		30,000,000		2.94	February 23, 2018	February 23, 2021		30,000,000
USD		50,000,000		LIBOR 3M+0.36	March 02, 2018	March 02, 2020		50,000,000
USD		50,000,000		LIBOR 3M+0.36	March 02, 2018	March 02, 2020		50,000,000
USD		30,000,000		LIBOR 3M+0.60	March 20, 2018	March 20, 2023		30,000,000
USD		400,000,000		LIBOR 3M+0.74	March 22, 2018	March 22, 2023		400,000,000
USD		200,000,000		LIBOR 3M+0.40	March 22, 2018	September 22, 2020		200,000,000
USD		700,000,000		LIBOR 3M+0.775	June 01, 2018	June 01, 2023		700,000,000
USD		800,000,000		LIBOR 3M+0.575	June 01, 2018	June 01, 2021		800,000,000
USD		150,000,000		LIBOR 3M+0.43	July 13, 2018	July 13, 2020		150,000,000
USD		1,400,000		2.8	July 13, 2018	July 21, 2022		1,400,000
USD		30,200,000		3.09	November 05, 2018	November 08, 2023		30,200,000
USD		500,000,000		3.625	November 27, 2018	November 27, 2023		500,000,000
USD		500,000,000		3.5	November 27, 2018	November 27, 2021		500,000,000
USD		250,000,000		LIBOR 3M+0.26	December 04, 2018	December 04, 2020		250,000,000
				Subtotal in Original Currency			USD	30,700,200,000
				Subtotal in Equivalent Amount of Won(1)			￦	34,325,893,620,000
JPY		5,000,000,000		2.5	December 29, 2009	December 27, 2019		5,000,000,000
JPY		3,600,000,000		0.5	September 15, 2011	September 15, 2021		3,600,000,000
JPY		4,220,000,000		0.63	August 29, 2013	September 14, 2020		4,220,000,000
JPY		11,000,000,000		0.64	March 14, 2014	March 14, 2019*		11,000,000,000
JPY		50,000,000,000		0.27	June 28, 2018	June 28, 2021		50,000,000,000
JPY		70,000,000,000		0.16	June 28, 2018	December 27, 2019		70,000,000,000
				Subtotal in Original Currency			JPY	143,820,000,000
				Subtotal in Equivalent Amount of Won(2)			￦	1,457,155,476,000

34

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2018
HKD		252,000,000		4.05	June 24, 2010	June 24, 2020		252,000,000
HKD		120,000,000		3.45	September 23, 2011	September 23, 2021		120,000,000
HKD		60,000,000		3.92	November 08, 2011	November 08, 2021		60,000,000
HKD		250,000,000		3.92	November 08, 2011	November 08, 2021		250,000,000
HKD		380,000,000		2.525	February 13, 2014	February 13, 2019*		380,000,000
HKD		370,000,000		2.525	February 13, 2014	February 13, 2019*		370,000,000
HKD		200,000,000		2.42	September 30, 2014	September 30, 2019		200,000,000
HKD		300,000,000		1.9	February 02, 2015	February 03, 2020		300,000,000
HKD		160,000,000		1.98	February 02, 2015	February 03, 2020		160,000,000
HKD		300,000,000		2.28	April 13, 2015	April 13, 2022		300,000,000
HKD		380,000,000		2.2	February 16, 2016	February 15, 2019*		380,000,000
HKD		345,000,000		1.93	June 24, 2016	June 24, 2021		345,000,000
HKD		300,000,000		1.44	July 15, 2016	July 12, 2019		300,000,000
HKD		300,000,000		1.5	August 02, 2016	August 02, 2019		300,000,000
HKD		233,000,000		2.1	November 03, 2016	November 03, 2023		233,000,000
HKD		266,000,000		2.52	March 03, 2017	March 03, 2021		266,000,000
HKD		252,000,000		2.405	October 26, 2017	October 26, 2022		252,000,000
HKD		243,000,000		2.69	December 14, 2017	December 14, 2022		243,000,000
HKD		270,000,000		2.43	January 11, 2018	January 11, 2021		270,000,000
HKD		235,000,000		2.87	February 27, 2018	February 27, 2023		235,000,000
HKD		240,000,000		2.55	March 16, 2018	March 16, 2020		240,000,000
HKD		230,000,000		2.8	April 03, 2018	April 03, 2021		230,000,000
HKD		325,000,000		3.13	April 26, 2018	April 26, 2023		325,000,000
				Subtotal in Original Currency			HKD	6,011,000,000
				Subtotal in Equivalent Amount of Won(3)			￦	858,190,470,000
MXN		150,000,000		7.78	November 5, 2018	November 8, 2021		150,000,000
				Subtotal in Original Currency			MXN	150,000,000
				Subtotal in Equivalent Amount of Won(4)			￦	8,535,000,000
BRL		606,120,000		8.52	September 26, 2016	September 26, 2019		606,120,000
BRL		160,500,000		7.02	September 01, 2017	September 03, 2019		160,500,000
BRL		160,500,000		7.02	September 01, 2017	September 03, 2019		160,500,000
BRL		131,400,000		8	July 13, 2018	August 03, 2022		131,400,000
BRL		600,000,000		BRL CDI 3M+0.00	September 05, 2018	September 04, 2020		600,000,000
BRL		500,000,000		BRL CDI 3M+0.00	September 11, 2018	August 21, 2020		500,000,000
BRL		186,955,000		7.95	October 12, 2018	October 13, 2020		186,955,000
BRL		185,040,000		7.16	October 22, 2018	October 22, 2020		185,040,000
BRL		500,000,000		BRL CDI 3M+0.00	October 26, 2018	October 16, 2020		500,000,000
BRL		128,005,000		7.02	November 05, 2018	November 05, 2020		128,005,000
BRL		187,000,000		BRL CDI 3M+0.00	November 16, 2018	July 28, 2020		187,000,000
BRL		188,000,000		BRL CDI 3M+0.00	November 16, 2018	July 28, 2020		188,000,000
				Subtotal in Original Currency			BRL	3,533,520,000
				Subtotal in Equivalent Amount of Won(5)			￦	1,017,901,106,400
EUR		117,000,000		3.875	July 12, 2012	July 12, 2032		117,000,000
EUR		30,000,000		3.6	July 19, 2012	July 19, 2027		30,000,000
EUR		750,000,000		2	April 30, 2013	April 30, 2020		750,000,000
EUR		250,000,000		2	May 15, 2013	April 30, 2020		250,000,000
EUR		20,000,000		EURIBOR 3M+0.745	February 05, 2014	March 27, 2019*		20,000,000
EUR		750,000,000		0.375	March 15, 2016	March 15, 2019*		750,000,000
EUR		750,000,000		0.5	May 30, 2017	May 30, 2022		750,000,000
EUR		750,000,000		0.625	July 11, 2018	July 11, 2023		750,000,000
EUR		25,000,000		1.64	August 06, 2018	August 06, 2030		25,000,000
EUR		25,000,000		1.64	August 06, 2018	August 06, 2030		25,000,000
EUR		30,000,000		1.53	August 13, 2018	August 13, 2028		30,000,000

35

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2018
EUR		20,000,000		1.54	August 23, 2018	August 23, 2028		20,000,000
				Subtotal in Original Currency			EUR	3,517,000,000
				Subtotal in Equivalent Amount of Won(6)			￦	4,498,805,720,000
THB		3,000,000,000		3.95	June 28, 2010	June 28, 2020		3,000,000,000
THB		1,000,000,000		4.4	November 25, 2011	November 25, 2021		1,000,000,000
THB		1,500,000,000		3.9	August 27, 2012	August 27, 2022		1,500,000,000
THB		2,800,000,000		4.34	March 11, 2013	March 11, 2023		2,800,000,000
THB		500,000,000		4.78	July 31, 2013	July 31, 2025		500,000,000
THB		1,500,000,000		4.78	July 31, 2013	July 31, 2025		1,500,000,000
				Subtotal in Original Currency			THB	10,300,000,000
				Subtotal in Equivalent Amount of Won(7)			￦	353,805,000,000
CHF		45,000,000		2.1	September 05, 2013	December 30, 2023		45,000,000
CHF		5,000,000		2.1	September 06, 2013	December 30, 2023		5,000,000
CHF		100,000,000		1.125	March 03, 2014	September 03, 2019		100,000,000
CHF		250,000,000		0.17	July 18, 2017	July 18, 2025		250,000,000
CHF		150,000,000		0.253	March 06, 2018	March 06, 2023		150,000,000
CHF		350,000,000		0.253	March 06, 2018	March 06, 2023		350,000,000
CHF		300,000,000		0.3825	July 11, 2018	July 11, 2024		300,000,000
				Subtotal in Original Currency			CHF	1,200,000,000
				Subtotal in Equivalent Amount of Won(8)			￦	1,363,464,000,000
AUD		45,000,000		7.35	August 10, 2011	August 10, 2021		45,000,000
AUD		20,000,000		6.8	April 11, 2012	April 11, 2022		20,000,000
AUD		100,000,000		4.75	April 24, 2013	April 24, 2019		100,000,000
AUD		22,000,000		5.975	August 08, 2013	August 08, 2023		22,000,000
AUD		100,000,000		5.375	September 12, 2013	September 12, 2019		100,000,000
AUD		50,000,000		5.125	February 25, 2014	February 25, 2020		50,000,000
AUD		100,000,000		5.125	February 25, 2014	February 25, 2020		100,000,000
AUD		200,000,000		BBSW 3M+1.08	April 17, 2014	April 17, 2019		200,000,000
AUD		300,000,000		4.5	April 17, 2014	April 17, 2019		300,000,000
AUD		100,000,000		4.75	June 03, 2014	June 03, 2021		100,000,000
AUD		76,600,000		3.5	September 26, 2014	September 26, 2019		76,600,000
AUD		250,000,000		BBSW 3M+1.15	November 21, 2014	May 21, 2020		250,000,000
AUD		250,000,000		4.25	November 21, 2014	May 21, 2020		250,000,000
AUD		21,000,000		5.15	November 24, 2014	November 24, 2029		21,000,000
AUD		350,000,000		BBSW 3M+1.20	August 19, 2015	February 19, 2021		350,000,000
AUD		300,000,000		3.7	August 19, 2015	February 19, 2021		300,000,000
AUD		200,000,000		4	December 07, 2016	June 07, 2027		200,000,000
AUD		50,000,000		4	December 15, 2016	June 07, 2027		50,000,000
AUD		100,000,000		4	February 14, 2017	June 07, 2027		100,000,000
AUD		250,000,000		BBSW 3M+1.17	February 14, 2017	February 14, 2022		250,000,000
AUD		150,000,000		3.5	February 14, 2017	February 14, 2022		150,000,000
AUD		60,000,000		3.98	October 10, 2017	October 10, 2027		60,000,000
AUD		40,000,000		3.4	December 08, 2017	December 08, 2024		40,000,000
AUD		500,000,000		BBSW 3M+0.95	October 30, 2018	October 30, 2023		500,000,000
AUD		91,800,000		2.6	November 05, 2018	November 08, 2023		91,800,000
				Subtotal in Original Currency			AUD	3,726,400,000
				Subtotal in Equivalent Amount of Won(9)			￦	2,935,695,184,000
INR		4,641,700,000		5.46	September 26, 2016	September 26, 2019		4,641,700,000
INR		3,200,000,000		6.2	August 07, 2017	August 07, 2021		3,200,000,000
INR		3,100,000,000		6.2	August 25, 2017	August 07, 2021		3,100,000,000
INR		3,175,000,000		6.9	February 07, 2018	February 07, 2023		3,175,000,000

36

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2018
INR		1,900,000,000		6.75	February 09, 2018	August 09, 2022		1,900,000,000
INR		3,200,000,000		6.75	February 09, 2018	August 09, 2022		3,200,000,000
INR		3,175,000,000		6.9	February 12, 2018	February 07, 2023		3,175,000,000
INR		3,200,000,000		6.9	March 09, 2018	February 07, 2023		3,200,000,000
INR		3,200,000,000		6.75	April 03, 2018	August 09, 2022		3,200,000,000
INR		3,250,000,000		7.15	April 18, 2018	April 18, 2025		3,250,000,000
				Subtotal in Original Currency			INR	32,041,700,000
				Subtotal in Equivalent Amount of Won(10)			￦	512,026,366,000
CNY		120,000,000		4.55	August 23, 2013	August 23, 2023		120,000,000
CNY		300,000,000		4.5	November 06, 2013	November 06, 2023		300,000,000
CNY		500,000,000		4.5	January 27, 2014	January 27, 2024		500,000,000
CNY		500,000,000		3.625	January 27, 2014	January 27, 2019*		500,000,000
CNY		700,000,000		3.7	November 28, 2014	November 28, 2019		700,000,000
CNY		300,000,000		4.46	February 25, 2015	February 25, 2020		300,000,000
CNY		500,000,000		4.2	February 26, 2015	February 26, 2022		500,000,000
CNY		300,000,000		4.05	February 26, 2015	February 26, 2020		300,000,000
CNY		275,000,000		4.785	March 18, 2015	March 18, 2019*		275,000,000
CNY		300,000,000		4.79	March 27, 2015	March 27, 2019*		300,000,000
CNY		215,000,000		5.2	February 16, 2016	February 16, 2019*		215,000,000
CNY		200,000,000		5.1	March 02, 2016	March 02, 2019*		200,000,000
CNY		200,000,000		4.85	March 09, 2016	March 09, 2019*		200,000,000
CNY		200,000,000		4.95	March 17, 2016	March 17, 2019*		200,000,000
CNY		200,000,000		4.4	March 30, 2016	March 30, 2019*		200,000,000
CNY		220,000,000		4.5	April 01, 2016	April 01, 2019*		220,000,000
CNY		333,000,000		3.84	July 28, 2016	July 28, 2019		333,000,000
CNY		210,000,000		4.45	December 09, 2016	December 09, 2019		210,000,000
CNY		200,000,000		5.535	March 17, 2017	March 17, 2022		200,000,000
CNY		300,000,000		4.69	January 24, 2018	January 25, 2021		300,000,000
CNY		270,000,000		4.66	January 31, 2018	February 28, 2021		270,000,000
CNY		1,500,000,000		4.68	March 16, 2018	March 16, 2021		1,500,000,000
CNY		250,000,000		4.4	April 03, 2018	April 03, 2020		250,000,000
CNY		200,000,000		4.25	April 13, 2018	April 13, 2020		200,000,000
CNY		200,000,000		4.765	May 31, 2018	May 31, 2023		200,000,000
CNY		200,000,000		4.61	June 04, 2018	June 04, 2021		200,000,000
CNY		500,000,000		4.65	June 21, 2018	June 21, 2021		500,000,000
CNY		1,000,000,000		4.65	June 21, 2018	June 21, 2021		1,000,000,000
CNY		200,000,000		4.14	September 04, 2018	September 04, 2023		200,000,000
CNY		300,000,000		4.5	October 18, 2018	October 18, 2021		300,000,000
				Subtotal in Original Currency			CNY	10,693,000,000
				Subtotal in Equivalent Amount of Won(11)			￦	1,740,392,680,000
IDR		600,000,000,000		8	October 17, 2014	October 17, 2019		600,000,000,000
IDR		400,000,000,000		8	July 22, 2015	October 17, 2019		400,000,000,000
IDR		655,000,000,000		6.9	June 14, 2017	January 08, 2021		655,000,000,000
IDR		665,400,000,000		6.9	June 14, 2017	January 08, 2021		665,400,000,000
IDR		655,000,000,000		6.9	July 14, 2017	January 08, 2021		655,000,000,000
IDR		670,000,000,000		7.25	December 07, 2017	December 07, 2024		670,000,000,000
IDR		630,000,000,000		7.25	January 19, 2018	December 07, 2024		630,000,000,000
IDR		625,000,000,000		7.25	February 05, 2018	December 07, 2024		625,000,000,000
IDR		677,500,000,000		6.36	February 14, 2018	February 14, 2023		677,500,000,000
IDR		685,500,000,000		6.5	March 07, 2018	March 07, 2025		685,500,000,000
IDR		645,000,000,000		7.25	March 07, 2018	December 07, 2024		645,000,000,000
IDR		645,000,000,000		7.25	March 12, 2018	December 07, 2024		645,000,000,000
IDR		640,000,000,000		7.25	April 16, 2018	December 07, 2024		640,000,000,000
IDR		635,000,000,000		7.25	April 19, 2018	December 07, 2024		635,000,000,000

37

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2018
IDR		500,000,000,000		8.4	November 30, 2018	November 30, 2021		500,000,000,000
				Subtotal in Original Currency			IDR	9,328,400,000,000
				Subtotal in Equivalent Amount of Won(12)			￦	716,421,120,000
PEN		61,000,000		6.875	September 07, 2010	September 07, 2022		61,000,000
PEN		47,000,000		6.875	July 08, 2011	September 07, 2022		47,000,000
PEN		20,000,000		6.875	July 19, 2011	September 07, 2022		20,000,000
PEN		15,000,000		6.875	August 05, 2011	September 07, 2022		15,000,000
PEN		54,500,000		7.25	October 25, 2011	October 25, 2041		54,500,000
PEN		13,600,000		7.15	November 04, 2011	November 04, 2041		13,600,000
PEN		54,500,000		6.875	November 21, 2011	September 07, 2022		54,500,000
				Subtotal in Original Currency			PEN	265,600,000
				Subtotal in Equivalent Amount of Won(13)			￦	88,054,368,000
SGD		200,000,000		2.318	September 27, 2017	September 27, 2022		200,000,000
				Subtotal in Original Currency			SGD	200,000,000
				Subtotal in Equivalent Amount of Won(14)			￦	163,656,000,000
NZD		74,600,000		4.97	May 22, 2014	May 22, 2019		74,600,000
NZD		100,000,000		5.125	August 27, 2014	August 27, 2019		100,000,000
NZD		12,000,000		4.46	September 26, 2014	September 26, 2019		12,000,000
NZD		100,000,000		5.125	October 15, 2014	October 15, 2019		100,000,000
NZD		50,000,000		3.5	July 28, 2016	July 28, 2021		50,000,000
NZD		350,000,000		3.5	July 28, 2016	July 28, 2021		350,000,000
NZD		10,000,000		2.63	November 25, 2016	November 16, 2020		10,000,000
NZD		400,000,000		4	March 09, 2017	March 09, 2022		400,000,000
				Subtotal in Original Currency			NZD	1,096,600,000
				Subtotal in Equivalent Amount of Won(16)			￦	823,151,824,000
ZAR		653,600,000		8	November 25, 2016	November 16, 2020		653,600,000
				Subtotal in Original Currency			ZAR	653,600,000
				Subtotal in Equivalent Amount of Won(17)			￦	50,640,928,000
CAD		325,000,000		2.711	December 05, 2014	December 05, 2019		325,000,000
CAD		65,000,000		3.16	February 16, 2017	February 16, 2032		65,000,000
CAD		300,000,000		1.927	February 24, 2017	February 24, 2020		300,000,000
				Subtotal in Original Currency			CAD	690,000,000
				Subtotal in Equivalent Amount of Won(18)			￦	566,041,500,000
NOK		250,000,000		4.55	June 26, 2013	June 26, 2025		250,000,000
NOK		250,000,000		4.55	June 26, 2013	June 26, 2025		250,000,000
NOK		250,000,000		4.55	June 26, 2013	June 26, 2025		250,000,000
NOK		300,000,000		4.5075	September 09, 2013	September 11, 2023		300,000,000
NOK		300,000,000		4.5075	September 10, 2013	September 11, 2023		300,000,000
NOK		300,000,000		4.5075	September 11, 2013	September 11, 2023		300,000,000
NOK		300,000,000		4.5075	September 12, 2013	September 11, 2023		300,000,000
NOK		300,000,000		4.5075	September 13, 2013	September 11, 2023		300,000,000
				Subtotal in Original Currency			NOK	2,250,000,000
				Subtotal in Equivalent Amount of Won(19)			￦	289,147,500,000

38

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2018
GBP		30,000,000		GBP LIBOR 3M+0.32	August 05, 2016	August 05, 2019		30,000,000
GBP		30,000,000		GBP LIBOR 3M+0.28	August 16, 2016	August 16, 2019		30,000,000
				Subtotal in Original Currency			GBP	60,000,000
				Subtotal in Equivalent Amount of Won(21)			￦	85,219,200,000
SEK		250,000,000		1.28	December 11, 2017	December 11, 2024		250,000,000
				Subtotal in Original Currency			SEK	250,000,000
				Subtotal in Equivalent Amount of Won(22)			￦	31,145,000,000
		Total External Bonds of the Bank in Equivalent Amount of Won					￦	51,885,342,062,400

* Repaid on the respective maturity dates.

(1) U.S. dollar amounts are converted to Won amounts at the rate of US$1.00 to Won 1,118.10, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(2) Japanese Yen amounts are converted to Won amounts at the rate of JPY 100.00 to Won 1,013.18, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(3) Hong Kong Dollar amounts are converted to Won amounts at the rate of HKD 1.00 to Won 142.77, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(4) Malaysia Ringgit amounts are converted to Won amounts at the rate of MXN 1.00 to Won 56.90, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(5) Brazilian Real amounts are converted to Won amounts at the rate of BRL 1.00 to Won 288.08, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(6) Euro amounts are converted to Won amounts at the rate of EUR 1.00 to Won 1,279.16, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(7) Thai Baht amounts are converted to Won amounts at the rate of THB 1.00 to Won 34.35, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(8) Swiss Franc amounts are converted to Won amounts at the rate of CHF 1.00 to Won 1,136.22, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(9) Australian Dollar amounts are converted to Won amounts at the rate of AUD 1.00 to Won 787.81, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(10) Indian Rupee amounts are converted to Won amounts at the rate of INR 1.00 to Won 15.98, the prevailing market rate on December 31, 2018.

(11) Chinese Yuan amounts are converted to Won amounts at the rate of CNY 1.00 to Won 162.76, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(12) Indonesian Rupiah amounts are converted to Won amounts at the rate of IDR 100.00 to Won 7.68, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(13) Peruvian Sol amounts are converted to Won amounts at the rate of PEN 1.00 to Won 331.53, the prevailing market rate on December 31, 2018.

(14) Singapore Dollar amounts are converted to Won amounts at the rate of SGD 1.00 to Won 818.28, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(15) Turkish Lira amounts are converted to Won amounts at the rate of TRY 1.00 to Won 210.87, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(16) New Zealand Dollar amounts are converted to Won amounts at the rate of NZD 1.00 to Won 750.64, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(17) South African Rand amounts are converted to Won amounts at the rate of ZAR 1.00 to Won 77.48, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(18) Canadian Dollar amounts are converted to Won amounts at the rate of CAD 1.00 to Won 820.35, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(19) Norwegian Krone amounts are converted to Won amounts at the rate of NOK 1.00 to Won 128.51, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(21) British Pound amounts are converted to Won amounts at the rate of GBP 1.00 to Won 1,420.32, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(22) Swedish Krona amounts are converted to Won amounts at the rate of SEK 1.00 to Won 124.58, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

39

(2) External Borrowings of the Bank

Lender	Classifications		Range of Interest Rates		Range of Years of Issue		Range of Years of Maturity		Principal Amount Outstanding as of December 31, 2018(1)
			(%)						(millions of Won)
Bank of Tokyo-Mitsubishi UFJ, LTD		Borrowings from BTMU		LIBOR 3M + 0.6		2014		2019		335,430
Agricultural Bank of China, Seoul		Borrowings from ABC		LIBOR 3M+0.85		2016		2021		111,810
Bank of America, N.A.		Borrowings from BA-ML		LIBOR 3M+0.73		2016		2019		223,620
Syndicated Lenders		Borrowings from Syndicated Lenders		LIBOR 3M+0.57		2017		2020		279,525
Bank of America, N.A.		Borrowings from BA-ML		LIBOR 3M+0.7		2017		2021		167,715
Syndicated Lenders		Borrowings from Syndicated Lenders		LIBOR 3M+0.52		2018		2021		559,050
Long-term Borrowings from Foreign Financial Institution									￦	1,677,150
Compulsory Loan				LIBOR 3M + 0.5 ~ 0.78		2014		2024	￦	2,938,456
Foreign Currency CP				-0.4 ~ 2.52		2018		2019	￦	92,669
Total External Borrowings of the Bank									￦	4,708,275

(1) Converted to Won amounts at the relevant market average exchange rates in effect on December 31, 2018 as announced by Seoul Money Brokerage Services, Ltd.

B. Internal Debt of the Bank

Title	Range of Interest Rates		Range of Years of Issue		Range of Years of Original Maturity		Principal Amounts Outstanding as of December 31, 2018
	(%)						(millions of Won)
Bonds
Short-term Industrial Finance Bonds		1.72~2.08		2018		2019	￦	9,530,000
Long-term Industrial Finance Bonds		1.67~4.70		2014~2018		2019~2032		5,135,000
Total Bonds		1.67~4.70		2014~2018		2019~2032		14,665,000
Total Internal Debt							￦	14,665,000

40

Financial Statements and the Auditors

The Minister of Economy and Finance appoints our internal Auditor who is responsible for examining our financial operations and auditing our financial statements and accounting records. The present internal Auditor is Cho, Yong Soon, who was appointed for a three-year term on January 18, 2018.

We prepare our financial statements annually for submission to the Minister of Economy and Finance, accompanied by an opinion of the Auditor. Although we are not legally required to have financial statements audited by external auditors, an independent public accounting firm has audited our separate financial statements since 1983 and consolidated financial statements since 1998. As of the date of this prospectus, our independent auditor is KPMG Samjong Accounting Corp., located at 27th Floor, Gangnam Finance Center, 737 Yeoksam-dong, Gangnam-gu, Seoul, Korea which has audited our separate financial statements as of and for the years ended December 31, 2018 and 2017 included in this prospectus.

Our separate financial statements and information included in this prospectus were prepared under K-IFRS. For a summary of financial statement preparation and significant accounting policies, see “—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 2.” These principles and procedures differ in certain material respects from generally accepted accounting principles in the United States.

K-IFRS 1109, Financial Instruments, which is aimed at improving and simplifying the accounting treatment of financial instruments, is effective for annual periods beginning on or after January 1, 2018 and replaces K-IFRS 1039, Financial Instruments: Recognition and Measurement. We have applied the new accounting standard, K-IFRS 1109, which requires all financial assets to be classified and measured on the basis of an entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets, in our separate financial statements as of and for the year ended December 31, 2018 included in this prospectus. As permitted by the transition rules of K-IFRS 1109, our comparative separate financial statements as of and for the year ended December 31, 2017 included in this prospectus have not been restated to retroactively apply K-IFRS 1109 and are not directly comparable to our separate financial statements as of and for the year ended December 31, 2018. For information regarding the impact of the application of K-IFRS 1109 on our separate financial statements, see “—Notes to Separate Financial Statements as of and for the year ended December 31, 2018 and 2017—Notes 2 and 39.”

We recognize interest income on loans and debt securities using the effective interest method. See “—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 3(14).”

We classify a non-derivative financial asset as held for trading if either it is acquired for the purpose of selling it in the near term, or it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking. We classify debt securities with fixed or determinable payments and fixed maturities, and which we intend to hold to maturity, as held-to-maturity securities. We classify investments that are categorized as neither trading securities nor held-to-maturity securities as available-for-sale securities. We record our trading and available-for-sale securities at fair value. However, investments in available-for-sale securities that do not have readily determinable fair values are recognized at cost. We record held-to-maturity securities at amortized cost. We recognize impairment losses on securities in current operations when the recoverable amounts are less than the carrying amount of equity securities or amortized cost of debt securities.

We record debenture issuance costs as discounts on debentures and amortize them over the maturity period of the debentures using the effective interest method.

Our financial statements are separate financial statements prepared in accordance with the requirements of K-IFRS 1027 Separate Financial Statements, in which a parent, or an investor with joint control of, or significant influence over, an investee accounts for the investments based on the cost method or valuation methods in accordance with K-IFRS 1039 Financial Instruments.

41

Since we initially adopted K-IFRS in 2013, our premises and equipment on the statements of financial position as of January 1, 2013 have been measured at their fair value in accordance with IFRS 1 paragraph 30(b), and we have chosen to apply the cost model to the premises and equipment in accordance with IAS 16 paragraph 29.

K-IFRS No. 1116, “Leases”, which was enacted on May 22, 2017, is effective for annual periods beginning on or after January 1, 2019. For further information relating to K-IFRS No. 1116, “Leases”, see “—Notes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017—Note 3(19).”

42

Independent Auditors’ Report

The Board of Directors and Stockholder

The Export-Import Bank of Korea:

Opinion

We have audited the accompanying separate financial statements of the Export-Import Bank of Korea (the “Bank”), which comprise the separate statement of financial position as of December 31, 2018 and 2017, the separate statements of comprehensive income, changes in equity and cash flows for the year ended December 31, 2018 and 2017, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of the Bank as of December 31, 2018 and 2017, and its separate financial performance and its separate cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

Basis for Opinion

We conducted our audits in accordance with Korean Standards on Auditing (KSAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Separate Financial Statements section of our report. We are independent of the Bank in accordance with the ethical requirements that are relevant to our audit of the separate financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Matter

The procedures and practices utilized in the Republic of Korea to audit such financial statements may differ from those generally accepted any applied in other countries.

Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements

Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with K-IFRS, and for such internal control as management determines is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the separate financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Bank’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Separate Financial Statements

Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements.

43

As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control.

• Evaluate the appropriateness of accounting policies used in the preparation of the separate financial statements and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Bank to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

KPMG Samjong Accounting Corp.

Seoul, Korea

March 29, 2019

This report is effective as of March 29, 2019, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

44

THE EXPORT-IMPORT BANK OF KOREA

SEPARATE STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2018 AND 2017

	Korean won
	December 31, 2018(*1)			December 31, 2017
	(In millions)
ASSETS:
Cash and due from financial institutions (Notes 4, 5 and 7)	￦	3,682,863		￦	2,091,920
Financial assets at fair value through profit or loss (“FVTPL”) (K-IFRS 1039) (Notes 4, 5, 8 and 20)		—			1,616,973
Financial assets at fair value through profit or loss (“FVTPL”) (Notes 4, 5, 8 and 20)		2,298,223			—
Hedging derivative assets (Notes 4, 5 and 20)		75,743			228,121
Loans at amortized cost (Notes 4, 5, 10 and 37)		70,199,721			68,223,320
Financial investments (Notes 4, 5 and 9)		8,844,756			6,781,955
Investments in associates and subsidiaries (Note 11)		2,511,497			2,598,607
Tangible assets, net (Note 12)		266,102			268,465
Intangible assets, net (Note 13)		38,454			47,622
Deferred tax assets (Note 34)		902,252			1,126,199
Retirement benefit assets, net (Note 18)		—			12,227
Other assets (Notes 4, 5, 14 and 37)		979,628			950,531
	￦	89,799,239		￦	83,945,940
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Financial liabilities at FVTPL (Notes 4, 5 and 20)	￦	905,901		￦	911,778
Hedging derivative liabilities (Notes 4, 5 and 20)		1,628,303			1,058,196
Borrowings (Notes 4, 5 and 15)		4,893,478			6,013,457
Debentures (Notes 4, 5 and 16)		65,942,970			60,685,098
Provisions (Note 17)		751,882			675,118
Retirement benefit liabilities, net (Note 18)		6,350			—
Other liabilities (Notes 4, 5, 19 and 37)		2,187,742			2,088,950
		76,316,626			71,432,597
STOCKHOLDERS’ EQUITY:
Capital stock (Note 21)		11,814,963			11,814,963
Additional paid-in capital		—			—
Capital adjustments		(129,339	)		(129,339	)
Other components of equity (Notes 20 and 22)		680,329			119,739
Retained earnings (Note 23) (Regulatory reserve for loan losses as of December 31, 2018 and 2017: ￦302,248 million and ￦206,330 million)		1,116,660			707,980
		13,482,613			12,513,343
	￦	89,799,239		￦	83,945,940

(*1) The separate statement of financial position as of December 31, 2018 was prepared in accordance with K-IFRS No.1109. However, the comparative separate statement of financial position as of December 31, 2017 was not retrospectively restated.

See accompanying notes to separate financial statements.

45

THE EXPORT-IMPORT BANK OF KOREA

SEPARATE STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

	Korean won
	2018(*1)			2017
	(In millions)
OPERATING INCOME:
Net interest income (Notes 24 and 37):
Interest income	￦	2,951,416		￦	2,683,728
Interest expenses		(1,968,269	)		(1,603,753	)
		983,147			1,079,975
Net commission income (Notes 25 and 37):
Commission income		323,614			401,102
Commission expenses		(8,348	)		(9,373	)
		315,266			391,729
Dividend income (Note 26)		36,710			35,352
Loss (gain) on financial assets at FVTPL (K-IFRS 1039) (Note 27)		—			263,982
Loss (gain) on financial assets at FVTPL (Note 27)		(7,626	)		—
Loss (gain) on hedging derivative assets (Notes 20 and 28)		(755,066	)		1,208,274
Loss (gain) on financial investments (Note 29)		(5,043	)		16,143
Gain (loss) on foreign exchange transaction		599,891			(1,528,844	)
Other net operating income (loss) (Note 30)		204,813			54,270
Impairment loss on credit (Note 31)		(422,737	)		(1,080,828	)
General and administrative expenses (Note 32)		(207,827	)		(210,715	)
		741,528			229,338
NON-OPERATING INCOME (EXPENSES) (Note 33):
Net gain on investments in associates and subsidiaries		1,526			9,670
Net other non-operating income (expenses)		10,040			(10,156	)
		11,566			(486	)
INCOME BEFORE INCOME TAX		753,094			228,852
INCOME TAX EXPENSES (Note 34)		156,055			56,058
NET INCOME		597,039			172,794
(Adjusted income after reserve for bad loans for the years ended December 31, 2018 and 2017: ￦725,015 million and ￦595,796 million) (Note 23)
OTHER COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD (Note 22)
Items not reclassified subsequently to profit or loss:
Loss on disposal of financial assets at FVOCI		(9,606	)		—
Remeasurements of net defined benefit liability		(9,566	)		(3,207	)
Income tax effect		4,640			776
Items that are or may be reclassified subsequently to profit or loss:
Loss on valuation on available-for-sale (“AFS”) securities		—			(179,477	)
Gain on valuation of financial assets at FVOCI		1,062,901			—
Cash flow hedging gains or losses		(954	)		(467	)
Income tax effect		(256,991	)		22,097
		790,424			(160,278	)
TOTAL COMPREHENSIVE INCOME	￦	1,387,463		￦	12,516

(*1) The separate statement of comprehensive income for the year ended December 31, 2018 was prepared in accordance with K-IFRS No.1109. However, the comparative separate statement of comprehensive income for the year ended December 31, 2017 was not retrospectively restated.

See accompanying notes to separate financial statements

46

THE EXPORT-IMPORT BANK OF KOREA

SEPARATE STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

						Other components of equity
	Capital stock		Additional paid-in capital			Valuation on FVOCI financial instruments			Valuation of cash-flow hedge			Remeasurement, net of defined benefit assets			Gain or loss on disposal of FVOCI financial instruments			Retained earnings			Total
	(Korean won in millions)
January 1, 2017	￦	10,398,055	￦	6,723		￦	259,564		￦	854		￦	19,599		￦	—		￦	535,186		￦	11,219,981
Paid-in capital increase		1,416,908		(136,062	)		—			—			—			—			—			1,280,846
Total comprehensive Income																						12,516
Net income		—		—			—			—			—			—			172,794			172,794
Other comprehensive income:																						(160,278	)
Loss on valuation of AFS securities, net of tax		—		—			(157,579	)		—			—			—			—			(157,579	)
Loss on valuation of cash flow hedge, net of tax		—		—			—			(268	)		—			—			—			(268	)
Remeasurement elements of defined benefit plans, net of tax		—		—			—			—			(2,431	)		—			—			(2,431	)
December 31, 2017	￦	11,814,963	￦	(129,339	)	￦	101,985		￦	586		￦	17,168		￦	—		￦	707,980		￦	12,513,343
January 1, 2018	￦	11,814,963	￦	(129,339	)	￦	101,985		￦	586		￦	17,168		￦	—		￦	707,980		￦	12,513,343
Adjustments on initial application of K-IFRS No.1109 (Note 39)		—		—			(216,017	)		—			—			(13,817	)		(128,763	)		(358,597	)
January 1, 2018 (restated)		11,814,963		(129,339	)		(114,032	)		586			17,168			(13,817	)		579,216			12,154,746
Payment of dividends		—		—			—			—			—			—			(59,596	)		(59,596	)
Total comprehensive Income																						1,387,463
Net income																			597,039			597,039
Other comprehensive income:																						790,424
Gain on valuation of FVOCI financial instruments, net of tax		—		—			805,679			—			—			—			—			805,679
Loss on valuation of cash flow hedge, net of tax		—		—			—			(723	)		—			—			—			(723	)
Remeasurement elements of defined benefit plans, net of tax		—		—			—			—			(7,251	)		—			—			(7,251	)
Loss on disposal of FVOCI financial instruments, net of tax		—		—			—			—			—			(7,281	)		—			(7,281	)
December 31, 2018(*1)	￦	11,814,963	￦	(129,339	)	￦	691,647		￦	(137	)	￦	9,917		￦	(21,098	)	￦	1,116,660		￦	13,482,613

(*1) The separate statement of changes in stockholders’ equity for the year ended December 31, 2018 was prepared in accordance with K- IFRS No.1109. However, the comparative separate statement of changes in stockholders’ equity for the year ended December 31, 2017 was not retrospectively restated.

See accompanying notes to separate financial statements.

47

THE EXPORT-IMPORT BANK OF KOREA

SEPARATE STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

	Korean won
	2018(*1)			2017
	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	￦	597,039		￦	172,794
Adjustments to reconcile net income to net cash used in operating activities:
Income tax expense		156,055			56,058
Interest income		(2,951,416	)		(2,683,728	)
Interest expenses		1,968,269			1,603,753
Dividend income		(36,710	)		(35,352	)
Dividend received from subsidiaries and associates		(4,883	)		(9,905	)
Loss on financial assets at FVTPL		4,807			—
Loss on financial assets at FVOCI		5,364			—
Loss on financial assets held for trading		—			808
Loss on AFS financial assets		—			4,722
Transfer to derivatives’ credit risk provision		61,404			41,204
Loss on redemption of debentures		—			2,455
Loss on foreign exchange transactions		796,800			1,986,736
Impairment loss on credit		422,737			1,080,828
Impairment loss of investments in subsidiaries and associates		—			236
Loss on investments in subsidiaries and associates		3,356			—
Loss on fair value hedged items		200,634			184,212
Depreciation and amortization		20,058			18,159
Loss on disposals of tangible, intangible and other assets		5			24
Impairment loss on tangible, intangible and other assets		—			217
Loss on valuation of derivative assets		1,483,283			1,054,473
Retirement benefits		9,047			9,098
Provision for others		—			1,344
Gain on financial assets at FVTPL		(13,130	)		—
Gain on financial assets at FVOCI		(321	)		—
Gain on financial assets held for trading		—			(5,046	)
Gain on AFS financial assets		—			(20,865	)
Reversal of derivatives’ credit risk provision		(42,217	)		(9,525	)
Gain on foreign exchange transactions		(1,395,173	)		(492,192	)
Gain on fair value hedged items		(430,152	)		(277,508	)
Gain on valuation of derivative assets		(542,259	)		(1,802,086	)
Gain on disposals of tangible assets, intangible assets and other assets		(141	)		(60	)
Reversal of impairment loss on tangible, intangible and other assets		—			(50	)
Changes in operating assets and liabilities:
Due from financial institutions		(1,304,270	)		1,032,475
Financial assets and liabilities at FVTPL(K-IFRS 1039)		—			481,539
Financial assets and liabilities at FVTPL		(592,657	)		—
Hedging derivative net assets		(154,432	)		(733,261	)
Loans at amortized cost		(1,086,911	)		(1,854,328	)
Other assets		(8,019	)		(27,447	)
Provisions		(16,741	)		(910,287	)
Payment of retirement benefits		(35	)		(26,624	)
Other liabilities		(283,530	)		93,906
Other provisions		—			(1,724	)

(Continued)

48

THE EXPORT-IMPORT BANK OF KOREA

SEPARATE STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

	Korean won
	2018(*1)			2017
	(In millions)
Payment (Refund) of income tax	￦	(18,272	)	￦	(4,660	)
Interest received		2,703,902			2,304,960
Interest paid		(1,718,725	)		(1,395,738	)
Dividend received		41,593			45,257
Net cash used in operating activities		(2,125,641	)		(115,128	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposal of investment instruments		829,035			—
Disposal of AFS and HTM financial assets		—			912,204
Disposals of investment instruments in subsidiaries and associates		1,025			44
Disposals of tangible assets		42			101
Disposals of intangible assets		380			536
Acquisitions of investment instruments		(902,061	)		—
Acquisitions of AFS and HTM financial assets		—			(973,564	)
Acquisitions of investment instruments in subsidiaries and associates		(48,365	)		(365,283	)
Acquisitions of tangible assets		(5,897	)		(4,314	)
Acquisitions of intangible assets		(2,916	)		(14,965	)
Net cash used in investing activities		(128,757	)		(445,241	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in call money		68			316
Proceeds from borrowings		4,568,261			4,915,469
Proceeds from debentures		23,295,958			24,094,658
Repayment of borrowings		(5,990,207	)		(7,655,267	)
Repayment of debentures		(19,146,697	)		(20,809,262	)
Expense related to issuance of capital		—			(6,810	)
Payment of dividends		(59,596	)		—
Decrease in deposits		(2	)		—
Net cash provided by financing activities		2,667,785			539,104
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		413,387			(21,265	)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD		815,994			1,354,694
EFFECTS OF FOREIGN EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS IN FOREIGN CURRENCIES		(209,314	)		(517,435	)
CASH AND CASH EQUIVALENTS, END OF THE PERIOD (Note 7, 35)	￦	1,020,067		￦	815,994

(*1) The separate statement of cash flows for year ended December 31, 2018 was prepared in accordance with K-IFRS No.1109. However, the comparative separate statement of cash flows for the year ended December 31, 2017 was not retrospectively restated.

See accompanying notes to separate financial statements.

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THE EXPORT-IMPORT BANK OF KOREA

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

1. GENERAL:

(1) Summary of The Export-Import Bank of Korea

The Export-Import Bank of Korea (the “Bank” or the “Company”) was established in 1976 as a special financial institution under The Export-Import Bank of Korea Act (the “EXIM Bank Act”) to grant financial facilities for overseas trade (i.e., export and import), investments and resources development activities. As of December 31, 2018, the Bank operates ten domestic branches, three domestic offices, four overseas subsidiaries and twenty-four overseas offices.

The Bank’s authorized capital is ￦15,000,000 million, and through numerous capital increases since the establishment, its paid-in capital is ￦11,814,963 million as of December 31, 2018. The Government of the Republic of Korea (the “Government”), the Bank of Korea (“BOK”), and the Korea Development Bank hold 66.27%, 9.86%, and 23.87%, respectively, of the ownership of the Bank as of December 31, 2018.

The Bank, as a trustee of the Government, has managed the Economic Development Cooperation Fund (“EDCF”) since June 1987 and the Inter-Korean Cooperation Fund (“IKCF”) since March 1991. These funds are accounted for separately and are not included in the Bank’s separate financial statements. The Bank receives fees from the Government for the trustee services.

(2) Summary of subsidiaries and associates

1) Subsidiaries of the Bank as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

Subsidiaries	Location	Capital stock		Main business		Number of shares owned		Percentage of ownership (%)		Financial statements as of
KEXIM Bank UK Limited	United Kingdom		GBP 20 mil.		Finance		20,000,000		100.00		Dec. 31, 2018
KEXIM Vietnam Leasing Co.(*1)	Vietnam		USD 13 mil.		Finance		—		100.00		Dec. 31, 2018
PT.KOEXIM Mandiri Finance	Indonesia		IDR 52,000 mil.		Finance		442		85.00		Dec. 31, 2018
KEXIM Asia Limited	Hong Kong		USD 30 mil.		Finance		30,000,000		100.00		Dec. 31, 2018

(*1) This entity does not issue share certificates.

(December 31, 2017)

Subsidiaries	Location	Capital stock		Main business		Number of shares owned		Percentage of ownership (%)		Financial statements as of
KEXIM Bank UK Limited	United Kingdom		GBP 20 mil.		Finance		20,000,000		100.00		Dec. 31, 2017
KEXIM Vietnam Leasing Co.(*1)	Vietnam		USD 13 mil.		Finance		—		100.00		Dec. 31, 2017
PT.KOEXIM Mandiri Finance	Indonesia		IDR 52,000 mil.		Finance		442		85.00		Dec. 31, 2017
KEXIM Asia Limited	Hong Kong		USD 30 mil.		Finance		30,000,000		100.00		Dec. 31, 2017

(*1) This entity does not issue share certificates.

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2) Associates of the Bank as of December 31, 2018 and 2017, are as follows:

(December 31, 2018)

Associates	Location	Capital stock		Main business	Number of shares owned		Percentage of ownership (%)		Financial statements as of
Korea Asset Management Corporation	Korea	KRW	860,000 mil.	Financial service		44,482,396		25.86		Dec. 31, 2018
Credit Guarantee and Investment Fund	Philippines	USD	859 mil.	Financial service		100,000,000		11.64		Sep. 30, 2018
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.	Korea	KRW	1,391,693 mil.	Shipbuilding		113,075,200		81.25		Dec. 31, 2018
DAESUN Shipbuilding & Engineering Co., Ltd.	Korea	KRW	6,262 mil.	Shipbuilding		1,040,000		83.03		Dec. 31, 2018
KTB Newlake Global Healthcare PEF	Korea	KRW	35,180 mil.	Financial service		879,500,000		25.00		Dec. 31, 2018
KBS-KDB Private Equity Fund	Korea	KRW	29,713 mil.	Financial service		6,031,875,000		20.30		Dec. 31, 2018
Korea Shipping and Maritime Transportation	Korea	KRW	25,000 mil.	Financial service		2,000,000		40.00		Dec. 31, 2018
Korea Aerospace Industries. Ltd.	Korea	KRW	487,376 mil.	Manufacturing		25,745,964		26.41		Dec. 31, 2018

(December 31, 2017)

Associates	Location	Capital stock		Main business	Number of shares owned		Percentage of ownership (%)		Financial statements as of
Korea Asset Management Corporation	Korea	KRW	860,000 mil.	Financial service		44,482,396		25.86		Dec. 31, 2017
Credit Guarantee and Investment Fund	Philippines	USD	700 mil.	Financial service		100,000,000		14.29		Sep. 30, 2017
Korea Marine Guarantee Incorporated Company	Korea	KRW	322,357 mil.	Financial service		26,999,999		41.88		Dec. 31, 2017
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.	Korea	KRW	1,319,693 mil.	Shipbuilding		113,075,200		81.25		Sep. 30, 2017
DAESUN Shipbuilding & Engineering Co., Ltd.	Korea	KRW	7,730 mil.	Shipbuilding		1,040,000		67.30		Sep. 30, 2017
KTB Newlake Global Healthcare PEF	Korea	KRW	10,280 mil.	Financial service		257,000,000		25.00		Dec. 31, 2017
KBS-KDB Private Equity Fund	Korea	KRW	11,361 mil.	Financial service		2,366,875,000		20.83		Dec. 31, 2017
Korea Shipping and Maritime Transportation	Korea	KRW	22,625 mil.	Financial service		1,810,000		40.00		Dec. 31, 2017
Korea Aerospace Industries. Ltd.	Korea	KRW	487,376 mil.	Manufacturing		25,745,964		26.41		Dec. 31, 2017

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2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:

(1) Basis of Financial Statement Presentation

The Bank’s separate financial statements are prepared under K-IFRS.

(2) Basis of measurement

The separate financial statements have been prepared on the historical cost basis, except for the following material items in the statement of financial position:

• Derivative financial instruments measured at fair value

• Financial assets measured at fair value through profit or loss

• Financial instruments measured at fair value through profit or loss (K-IFRS 1039)

• Financial instruments measured at fair value through other comprehensive income

• Financial liabilities designated as hedged items in a fair value hedge accounting of which changes in fair value attributable to the hedged risk are recognized in profit or loss

• Liabilities for defined benefit plans, which are recognized as net of the total present value of defined benefit obligations less the fair value of plan assets

(3) Functional and presentation currency

These separate financial statements are presented in Korean won, which is the currency of the primary economic environment in which the Bank operates.

(4) Significant Estimates and Judgments

The preparation of separate financial statements requires the application of accounting policies and certain critical accounting estimates and assumptions may have a significant impact on assets (liabilities) and income (expenses). The management’s estimate may differ from the actual outcome if the management’s estimate and assumption based on its best judgment at the reporting date are different from an actual environment.

Estimates and assumptions are continually evaluated and the change in an accounting estimate is recognized prospectively by including it in profit or loss in the period of the change, if the change affects that period only, or the period of the change and future periods, if the change affects both.

Uncertainty in estimates and assumptions with significant risk that will result in material adjustment are as follows:

1) Fair value of financial instruments

The fair value of financial instruments where no active market exists or where quoted prices are not otherwise available are determined by using valuation techniques. Financial instruments that are not actively traded in the market and with less transparent market price, will have less objective fair value and will require judgment in liquidity, concentration, uncertainty in market factors and assumption in price determination and other risks.

As described in the significant accounting policies ‘Recognition and Measurement of Financial Instruments’ diverse valuation techniques are used to determine the fair value of financial instruments, from general market accepted valuation model to internally developed valuation model that incorporates various types of assumptions and variables.

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2) Provision of credit losses (allowances for loan losses, provisions for acceptances and guarantees, financial guarantee contracts and unused loan commitments)

The Bank recognizes credit loss allowance for expected credit losses on debt instruments, loans and receivables that are measured at amortized cost, loan commitments and financial guarantee contracts in accordance with K-IFRS No. 1109 ‘Financial Instruments.’ The allowance is determined by techniques, assumptions and input variables used by the Bank to measure expected future cash flows of individual financial instruments and to measure expected credit losses in a collective manner.

3) Defined benefit obligation

The present value of defined benefit obligations is measured by the independent actuaries using projected unit credit method. It is determined by actuarial assumptions and variables such as future increases in salaries, rate of retirement, discount rate and others.

4) Income taxes

The Bank has recognized current and deferred taxes that reflect tax consequences based on the best estimates in which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. However, actual income taxes in the future may not be identical to the recognized deferred tax assets and liabilities, and this difference can affect current and deferred tax at the period when the final tax effect is determined.

5) Hedging relationship

The Group expects a high hedge effectiveness throughout the hedging period in designating the hedging relationship and it is probable that the hedged transaction will be highly probable in the cash flow hedge.

(5) Changes in Accounting Policies

The Bank has adopted the same accounting policies for the year ended December 31, 2018, except for the application of the first amendment standard, effective from January 1, 2018, as explained below.

1) K-IFRS No. 1115, ‘Revenue from Contracts with Customers’

Effective January 1, 2018 the Bank has applied K-IFRS No. 1115, ‘Revenue from Contracts with Customers’, which replaces existing revenue recognition guidance, including K-IFRS No. 1018, ‘Revenue’, K-IFRS No. 1011, ‘Construction Contracts’, K-IFRS No. 2031, ‘Revenue-Barter Transactions Involving Advertising Services’, K-IFRS No. 2113, ‘Customer Loyalty Programmes’, K-IFRS No. 2115, ‘Agreement for the Construction of Real Estate’, and K-IFRS No. 2118, ‘Transfers of Assets from Customers.’

K-IFRS No. 1018 and other standards outlined revenue recognition for different types of transactions such as sales of goods and services, interest income, loyalty programs, dividend income and construction contracts; however, according to K-IFRS No.1115, all types of contracts recognize revenue through five-step revenue recognition model (① ‘Identifying the contract’ ® ② ‘Identifying performance obligations’ ® ③ ‘Determining the transaction price’ ® ④ ‘Allocating the transaction price to performance obligations’ ® ⑤ ‘Recognizing the revenue by satisfying performance obligations’).

The effect of applying K-IFRS 1115 on the financial statements is not significant.

2) K-IFRS No.1109, ‘Financial Instruments’

The Bank has applied K-IFRS No. 1109 ‘Financial Instruments’, which was published on September 25, 2015, from the year starting on January 1, 2018. K-IFRS No. 1109 replaced K-IFRS No. 1039, ‘Financial Instruments: Recognition and Measurement.’

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The main characteristics of K-IFRS No. 1109 are: classification and measurement of financial instruments based on characteristics of contractual cash flows and business model, impairment model based on expected credit losses, the expansion of the types of qualifying hedging instruments and hedged items, and changes in hedge effectiveness tests, etc.

In principle, K-IFRS No. 1109 should be applied retrospectively. However, there are exemptions for restating the comparative information with respect to classification, measurement of financial instruments, and impairment. In addition, for hedge accounting, the new standard will be applied prospectively except for certain cases such as accounting for the time value of options.

As permitted by the transition requirements of K-IFRS 1109, comparative periods have not been restated.

The effects of the first application of K-IFRS No.1109 on equity items, the reconciliation of the carrying amount of financial assets and financial liabilities, and the adjustment of loss provisions under K-IFRS No.1039 are included in note 39.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(1) General

The significant accounting policies applied in the preparation of these separate financial statements after transition to K-IFRS are set out below.

(2) Foreign Currency

1) Foreign currency transactions

In preparing the separate financial statements of the Bank, transactions in currencies other than the Bank’s functional currency (foreign currencies) are recorded by applying the rates of exchange at the dates of the transactions.

At the end of each reporting period foreign currency monetary items are translated using the closing rate which is the spot exchange rate at the end of the reporting period. Non-monetary items that are measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined and non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise. When gains or losses on a non-monetary item are recognized in other comprehensive income, any exchange component of those gains or losses are recognized in other comprehensive income. Conversely, when gains or losses on a non-monetary item are recognized in profit or loss, any exchange component of those gains or losses are recognized in profit or loss.

2) Foreign operations

The results and financial position of all foreign operations, whose functional currency differs from the Bank’s presentation currency, are translated into the Bank’s presentation currency using the following procedures;

Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position. Income and expenses for statement of comprehensive income presented are translated at average exchange rates for the period.

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Any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation. Thus they are expressed in the functional currency of the foreign operation and are translated into the presentation currency at the closing rate.

On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, are reclassified from equity to profit or loss (as a reclassification adjustment) when the gains or losses on disposal are recognized. On the partial disposal of a subsidiary that includes a foreign operation, the Bank reattributes the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income to the non-controlling interests in that foreign operation. In any other partial disposal of a foreign operation, the Bank reclassifies to profit or loss only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income.

(3) Cash and cash equivalents

Cash and cash equivalents include cash on hand, foreign currency, and highly liquid short term investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in value.

(4) Non-derivative Financial Assets

Financial assets are recognized when the Bank becomes a party to the contractual provisions of the instrument. In addition, a regular way purchase or sale (a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the market concerned) is recognized on the trade date

A financial asset is measured initially at its fair value plus, for an item not at Fair Value Through Profit or Loss (“FVTPL”), transaction costs that are directly attributable to its acquisition of the financial asset. Transaction costs on the financial assets at FVTPL that are directly attributable to the acquisition are recognized in profit or loss as incurred.

1) Financial assets designated at FVTPL

Financial assets can be irrevocably designated as measured at FVTPL despite of classification standards stated below, if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise from measuring assets or liabilities or recognizing the gains or losses on them on different bases.

2) Equity instruments

For the equity instruments that are not held for trading, at initial recognition, the Bank may make an irrevocable election to present subsequent changes in fair value in other comprehensive income. Equity instruments that are not classified as financial assets at Fair Value through Other Comprehensive Income (“FVOCI”) are classified as financial assets at FVTPL.

The Bank subsequently measures all equity investments at fair value. Valuation gains or losses of the equity instruments that are classified as financial assets at FVOCI previously recognized as other comprehensive income is not reclassified as profit or loss on derecognition. The Bank recognizes dividends in profit or loss when the Bank’s right to receive payments of the dividend is established.

Valuation gains or losses due to changes in fair value of the financial assets at FVTPL are recognized as gains or losses on financial assets at FVTPL. Impairment loss (reversal) on equity instruments at FVOCI is not recognized separately.

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3) Debt instruments

Subsequent measurement of debt instruments depends on the Bank’s business model in which the asset is managed and the contractual cash flow characteristics of the asset. Debt instruments are classified as financial assets at amortized cost, at FVOCI, or at FVTPL. Debt instruments are reclassified only when the Bank’s business model changes.

☐ Financial assets at amortized cost

Assets that are held within a business model whose objective is to hold assets to collect contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Impairment losses, and gains or losses on derecognition of the financial assets at amortized cost are recognized in profit or loss. Interest income on the effective interest method is included in the ‘Interest income’ in the separate statement of comprehensive income.

☐ Financial assets at FVOCI

Assets that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Other than impairment losses, interest income amortized using effective interest method and foreign exchange differences, gains or losses of the financial assets at FVOCI are recognized as other comprehensive income in equity. On derecognition, gains or losses accumulated in other comprehensive income are reclassified to profit or loss. The interest income on the effective interest method is included in the ‘Interest income’ in the separate statement of comprehensive income. Foreign exchange differences and impairment losses are included in the ‘Net foreign currency transaction gain’ and ‘Impairment loss on financial assets’ in the separate statement of comprehensive income, respectively.

☐ Financial assets at FVTPL

Debt securities other than financial assets at amortized costs or FVOCI are classified at FVTPL. Unless hedge accounting is applied, gains or losses from financial assets at FVTPL are recognized as profit or loss and are included in ‘Net gain on financial assets at fair value through profit or loss’ in the separate statement of comprehensive income.

4) Embedded derivatives

Financial assets with embedded derivatives are classified regarding the entire hybrid contract, and the embedded derivatives are not separately recognized. The entire hybrid contract is considered when it is determined whether the contractual cash flows represent solely payments of principal and interest.

5) Derecognition of financial assets

The Bank derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Bank is recognized as a separate asset or liability.

If the Bank retains substantially all the risks and rewards of ownership of the transferred financial assets, the Bank continues to recognize the transferred financial assets and recognizes financial liabilities for the consideration received.

6) Offsetting

Financial assets and financial liabilities are offset and the net amount is presented in the separate statement of financial position only when the Bank currently has a legally enforceable right to set off the recognized amounts, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

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(5) Derivative Financial Instruments

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below

1) Hedge accounting

The Bank holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Bank designated derivatives as hedging instruments to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge).

On initial designation of the hedge, the Bank formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.

• Fair value hedg Fair value hedge

Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in profit or loss. The gain or loss from remeasuring the hedging instrument at fair value for a derivative hedging instrument and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the separate statement of comprehensive income.

The Bank discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria. Any adjustment arising from G/L on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.

• Cash flow hedge

When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

• Net investment hedge

The portion of the change in fair value of a financial instrument designated as a hedging instrument that meets the requirements for hedge accounting for a net investment in a foreign operation is recognized in other comprehensive income and the ineffective portion of the hedge is recognized in profit or loss Recognize. The portion recognized as other comprehensive income that is effective as a hedge is recognized in the statement of comprehensive income as a result of reclassification adjustments in accordance with K-IFRS No. 1021, “Effect of Changes in Foreign Exchange Rates” at the time of disposing of its overseas operations or disposing of a portion of its overseas operations To profit or loss.

57

2) Other derivative financial instruments

Changes in the fair value of other derivative financial instrument not designated as a hedging instrument are recognized immediately in profit or loss.

3) Unobservable valuation differences at initial recognition

Any difference between the fair value of over the counter derivatives at initial recognition and the amount that would be determined at that date using a valuation technique in a situation in which the valuation is dependent on unobservable parameters is not recognized in profit or loss but is recognized on a straight-line basis over the life of the instrument or immediately when the fair value becomes observable.

(6) Impairment: Financial assets and contract assets

The Bank measures expected credit loss and recognizes loss allowance at the end of the reporting period for financial assets measured at amortized cost and fair value through other comprehensive income with the exception of financial asset measured at fair value through profit or loss.

Expected credit losses are a probability-weighted estimate of credit losses (i.e. the present value of all cash shortfalls) over the expected life of the financial instrument. The Group measures expected credit losses by reflecting reasonable and supportable information that is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions.

The Bank uses the following three measurement techniques in accordance with Korean IFRS:

• General approach: for financial assets and off-balance-sheet unused credit line that are not applied below two approaches

• Credit-impaired approach: for purchased or originated credit-impaired financial assets

Different measurement approaches are applied depending on significant increase in credit risk. 12 month expected credit losses is recognized when credit risk has not significantly increased since initial recognition. A loss allowance at an amount equal to lifetime expected credit losses is recognized when credit risk has significantly increased since initial recognition. Lifetime is presumed to be a period to the contractual maturity date of a financial asset (the expected life of the financial asset).

One or more of the following items is deemed significant increase in credit risk. 30 days past due presumption is applicable for all consolidated subsidiaries, and other standards are selectively applied considering applicability of each subsidiary with its specific indicators. When the contractual cash flows of a financial asset are renegotiated or otherwise modified, the Group determines whether the credit risk has increased significantly since initial recognition using the following information.

• more than 30 days past due;

• decline in credit rating at period end by more than certain notches as compared to that at initial recognition;

• the soundness of the assets is under precautionary from the grade table by Korean Financial Supervisory service

The Bank generally deems one or more of the following items credit-impaired:

• no less than 90 days past due;

• legal proceedings related to collection;

• a borrower that has received a credit-warning from Korea Credit Information Services

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• corporate borrowers that are considered impaired (internally rating S, D, or F);

• a borrower with the external auditor’s opinion that is qualified or disclaimer;

• refinancing; and

• debt restructuring.

1) Forward-looking information

The Bank uses forward-looking information, when it measures expected credit losses.

The Bank assumes the risk component has a certain correlation with the business cycle, and calculates the expected credit loss by reflecting the forward-looking information with macroeconomic variables on the measurement inputs.

2) Measuring expected credit losses on financial assets at amortized cost

The amount of the loss on financial assets at amortized cost is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.

The Group estimates expected future cash flows for financial assets that are individually significant (individual assessment of impairment).

For financial assets that are not individually significant, the Group collectively estimates expected credit loss by grouping loans with homogeneous credit risk profile (collective assessment of impairment).

☐ Individual assessment of impairment

Individual assessment of impairment losses are calculated using management’s best estimate on present value of expected future cash flows. The Group uses all the available information including operating cash flow of the borrower and net realizable value of any collateral held.

☐ Collective assessment of impairment

Collective assessment of loss allowance involves historical loss experience along with incorporation of forward-looking information. Such process incorporates factors such as type of collateral, product and borrowers, credit rating, size of portfolio and recovery period and applies ‘probability of default’(PD) on a group of assets and ‘loss given default’(LGD) by type of recovery method. Also, the expected credit loss model involves certain assumption to determine input based on loss experience and forward-looking information. These models and assumptions are periodically reviewed to reduce gap between loss estimate and actual loss experience.

Lifetime expected credit loss as at the end of the reporting period is calculated by product based on the carrying amount net of expected repayment, PD for each period and LGD adjusted by change in carrying amount.

3) Measuring expected credit losses on financial assets at fair value through other comprehensive income

Measuring method of expected credit losses on financial assets at fair value through other comprehensive income is equal to the method of financial assets at amortized cost, except for loss allowances that are recognized as other comprehensive income. Amounts recognized in other comprehensive income for sale or repayment of financial assets at fair value through other comprehensive income are reclassified to profit or loss.

(7) Tangible assets

1) Recognition and measurement

All property and equipment that qualify for recognition as an asset are measured at their cost and subsequently carried at their cost less any accumulated depreciation and any accumulated impairment losses.

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The cost of property and equipment includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Subsequent expenditures are capitalized only when they prolong the useful life or enhance values of the assets but the costs of the day-to-day servicing of the assets such as repair and maintenance costs are recognized in profit or loss as incurred. If part of an item of an asset has a useful life different from that of the entire asset, it is recognized as a separate asset.

2) Depreciation

Land is not depreciated whereas other property and equipment are depreciated using the method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Bank. The depreciable amount of an asset is determined after deducting its residual value.

The depreciation method is straight-line and estimated useful lives of the assets are as follows.

Property and equipment	Estimated useful lives
Buildings and structures	10–60 years
Vehicles	4 years
Tools, furniture and fixtures	4–20 years

The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year-end and, if expectations differ from previous estimates or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate.

(8) Intangible assets

Intangible assets are measured initially at cost and subsequently carried at its cost less any accumulated amortization and any accumulated impairment losses.

Intangible assets are amortized using the straight-line method with no residual value over their estimated useful economic life since the assets are available for use.

Intangible assets	Estimated useful lives
Software	5 years
System development costs	5 years

The amortization period and the amortization method for intangible assets with a definite useful life are reviewed at least at each financial year-end. The useful life of an intangible asset that is not being amortized is reviewed each period to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset. If there is any change, it is accounted for as a change in an accounting estimate.

(9) Impairment of non-financial assets

The Bank assesses at the end of each reporting period whether there is any indication that a non-financial asset, except for deferred tax assets, assets arising from employee benefits and non-current assets (or group of assets to be sold) classified as held for sale, may be impaired. If any such indication exists, the Bank estimates the recoverable amount of the asset. However, irrespective of whether there is any indication of impairment, the Bank tests goodwill acquired in a business combination, an intangible asset with an indefinite useful life and an intangible asset not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount.

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The recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Bank determines the recoverable amount of the cash-generating unit to which the asset belongs (the asset’s cash-generating unit).

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and such impairment loss is recognized immediately in profit or loss.

(10) Financial liabilities at FVTPL

Financial liabilities at FVTPL include contingent consideration that may be paid by an acquirer as part of a business combination to which K-IFRS No.1103 applies, short-term financial liabilities and financial liabilities recognized as financial liabilities at FVTPL initially. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Otherwise, the transaction cost is recognized in current profit or loss.

(11) Provisions

A provision is recognized if the Bank has a present obligation (legal or constructive) as a result of the past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision, and where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation.

Provisions on confirmed and unconfirmed acceptances and guarantees, unfunded commitments of credit card and unused credit line of consumer and corporate loans are recognized using valuation model that applies the credit conversion factor, default rates, and loss given default. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provisions are reversed.

(12) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer (the Bank) to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the original or modified terms of a debt instrument.

Financial guarantee contracts are initially recognized at fair value and are amortized over the life of the contract. After initial recognition, financial guarantee contracts are measured at the greater of:

• The amount determined in accordance with K-IFRS No.1109, ‘Financial Instruments’ and

• The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance with K-IFRS No.1115, ‘Revenue from Contracts with Customers’

(13) Equity and Reserve

Equity and Reserve are any contract or agreement that evidences a residual interest in the assets of an entity after deducting all of its liabilities

(14) Interest income and expenses

Interest income and expenses are recognized using the effective interest method. Effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability (or groups of financial assets or financial liabilities) and of allocating the interest income or interest expenses over the relevant period.

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The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. In those rare cases when it is not possible to estimate reliably the cash flows or the expected life of a financial instrument (or group of financial instruments), the Bank uses the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments).

Interest on impaired financial assets is recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

(15) Fee and commission income

The Bank recognizes financial service fee in accordance with the accounting standard of the financial instrument related to the fees earned.

1) Fees that are an integral part of the effective interest of a financial instrument

Such fees are generally treated as adjustments of effective interest. Such fees may include compensation for activities such as evaluating the borrower’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, negotiating the terms of the instrument, preparing and processing documents and closing the transaction and origination fees received on issuing financial liabilities measured at amortized cost.

However, fees relating to the creation or acquisition of a financial asset at FVTPL are recognized as revenue immediately

2) Fees earned as services are provided

Such fees are recognized as revenue as the services are provided.

3) Fees that are earned on the execution of a significant act

Such fees are recognized as revenue when the significant act has been completed.

(16) Dividend income

Dividend income is recognized in profit or loss when the right to receive payment is established. Dividend income from financial assets at FVTPL and financial investment is recognized in profit or loss as part of dividend income in the separate statements of comprehensive income.

(17) Employee compensation and benefits

1) Defined contribution plans

When employees render service related to defined contribution plans, contributions related to employees services are recognized in current profit or loss without contributions included in cost of assets. Contributions which are supposed to be paid are recognized in accrued expenses after deducting any amount already paid. Also, if contributions already paid exceed contributions which would be paid at the end of period, the amount of excess is recognized in prepaid expenses.

2) Defined benefit plans

The Bank’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

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The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Bank, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Bank determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Bank recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

3) Short-term employee benefits

Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render the related service.

Short-term employee benefits are recognized in current profit and loss when employees render the related service. Short-term employee benefits are not discounted.

(18) Income taxes

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

Current income tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period. The difference between the taxable profit and accounting profit may arise when income or expenses are included in accounting profit in one period, but is included in taxable profit in a different period, and if there is revenue that is exempt from taxation, expenses that are not deductible in determining taxable profit (tax loss). Current income tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The Bank offsets current income tax assets and current income tax liabilities if, and only if, the Bank has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

2) Deferred tax

Deferred tax is recognized, using the asset-liability method, on temporary differences arising between the tax base amount of assets and liabilities and their carrying amount in the financial statements. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

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Deferred tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except for deferred tax liabilities which the timing of the reversal of the temporary difference is controlled by the Bank and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period. The Bank reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

The Bank offsets deferred tax assets and deferred tax liabilities when the Bank has a legally enforceable right to set off current tax assets against current tax liabilities; and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity; or different taxable entity which intend either to settle current tax liabilities and assets on a net basis or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(19) New standards and interpretations not yet adopted

The following new standards and amendments to existing standards have been published and are mandatory for the Bank to adopt for annual periods beginning on or after January 1, 2018, and the Bank has not early adopted them.

1) Amendments to K-IFRS No.1116—Leases

K-IFRS No. 1116, “Leases”, which was enacted on May 22, 2017, is effective for annual periods beginning on or after January 1, 2019, but may be applied early.

The Standard is based on current Korean IFRS 1017 “Leases”, K-IFRS 2104, “Determining whether an arrangement contains a lease”, K-IFRS No. 2015 “Operating lease: Incentive” It will replace Interpretation No. 2027, “Evaluating the substances of transactions involving the legal form of a lease”.

At the date of commitment, the Bank determines whether the contract is a lease or whether the contract includes a lease, and identifies whether the contract includes a lease or a lease in accordance with this standard. The lessee and lessor must account for each lease element of the lease as a lease, separate from the non-lease element in an agreement that includes a lease or lease.

The lessee is required to recognize an asset that represents the right to use the underlying asset and a liability that represents the obligation to pay the lease payments. However, in the case of short-term lease and small asset lease, the lessee is not required to separate the non-lease component from the lease component in accordance with the simplified method, and can apply the method of accounting for each lease component and related non-lease component as one lease component.

The accounting treatment of lessor is not significantly different from the accounting treatment of the current K-IFRS 1017.

① Accounting treatment as a lessee

• Application method of K-IFRS 1116 “Lease”

The lessee recognizes the cumulative effect of applying the retrospective application (full retroactive method) to each past reporting period presented in accordance with K-IFRS No. 1008, “Accounting Policies, Changes in Accounting Estimates and Errors” (Cumulative Effect Batch Reconciliation Action).

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The Bank plans to apply CAS Statement No. 1116 for the first time by applying cumulative effect and cumulative temporary adjustment measures as of January 1, 2019. Accordingly, the cumulative effect of applying K-IFRS No. 1116 is adjusted in the retained earnings (or, where appropriate, other components of equity) at the date of initial application and the comparative financial statements are not going to be restated.

• Financial effect of K-IFRS No. 1116 “Lease”

The Bank is on the process of estimating the impact applying K-IFRS 1116 to the financial statements, and it is not practically available to provide the reasonable estimation of its effect before the completion. In order to estimate, the Bank has gathered lease payments, and other information, and analyzing them.

② Accounting treatment as a lessor

• Application method and financial impact of K-IFRS 1116 “Lease”

As a lessor, the Bank has specifically assessed the effect of accounting for the identification of lease contracts, separation of lease components on the financial statements in accordance with K-IFRS No. 1116. There is no impact on finance lease payment receivables as of January 1, 2019.

2) Amendment of K-IFRS No.1109 “Financial instruments”

Financial assets that are redeemable with reimbursable financial assets are remeasured to be measured at amortized cost. When the financial liabilities measured at amortized cost are changed but not eliminated, the effect of the change should be recognized in profit or loss. These amendments will be effective from the fiscal year beginning on or after January 1, 2019 and are subject to early adoption.

3) Amendment of K-IFRS No.1019 “Employee benefits”

If the change in the defined benefit plan results in the revision, reduction or settlement of the plan, the assumptions used in remeasurement of the net defined benefit obligation (asset) to estimate the current service cost and net interest for the remaining period of the period after the adjustments in the plan. In addition, the decrease in excess of the amount of unrecognized actuarial gain or loss is reflected in profit or loss as a part of past service cost or settlement profit or loss. The amendments are applied prospectively to the amendment, reduction, and settlement of systems that have occurred since the fiscal year beginning on or after January 1, 2019.

4) Establishment of K-IFRS No.2123 “Uncertainty over income tax treatments”

The interpretation is applied to the recognition and measurement of deferred tax and deferred income tax if there is uncertainty about whether or not the tax treatment applied by the entity will be recognized by the taxing authority. Guidance on accounting units of uncertainty in taxation and circumstances requiring reevaluation Includes. The interpretation is effective from January 1, 2019, and it can choose between retroactively reclassifying comparative financial statements or reflect the effect of the change on the basis of the first year of adoption.

5) K-IFRS No.1012 “Income taxes”

If most of the necessary activities to enable us to use (or sell) our qualifying assets has been completed, it will include the funds borrowed for specific purposes in ordinary borrowings to acquire those assets. This amendment applies to borrowing costs incurred subsequent to the first year of the application of the amendment and may be applied early in the financial year beginning after January 1, 2019.

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4. RISK MANAGEMENT:

4-1. Summary

(1) Overview of Risk Management Policy

The financial risks that the Bank is exposed to are credit risk, market risk, liquidity risk, operational risk, interest risk, credit concentration risk, strategy/reputational risk, outsourcing risk, settlement risk and others. Credit risk, market risk, liquidity risk, and operational risk have been recognized as the Bank’s key risks.

The Bank’s risk management system focuses on increasing transparency, developing risk management environment and preemptive response to risks due to rapid changes in financial environment to support the Bank’s long-term strategy and business decision efficiently.

The note regarding financial risk management provides information about the risks that the Bank is exposed to, the objective, policies and process for managing the risk, the methods used to measure the risk and capital adequacy. Additional quantitative information is disclosed throughout the separate financial statements.

(2) Risk Management Group

1) Risk Management Committee

The Risk Management Committee establishes risk management strategies in accordance with the directives of the board of directors and determines the Bank’s target risk appetite, approves significant risk matters and reviews the level of risks that the Bank is exposed to and the appropriateness of the Bank’s risk management operations as an ultimate decision-making authority.

2) Risk Management Council

The Risk Management Council is a consultative group that reviews and makes decisions on matters delegated by the Risk Management Committee and discusses the detailed issues relating to the Bank’s risk management.

3) Risk Management Practices Committee

The Risk Management Practices Committee assists the Risk Management Committee and the Risk Management Council. It performs practical work process relating to risk management plan, including targeted Bank for International Settlements (“BIS”) ratio, risk management strategy, risk measurement, risk analysis, economic capital limit and others.

4-2. Credit risk

(1) Overview of Credit Risk

Credit risk is the risk of possible losses in an asset portfolio in the events of counterparty’s default, breach of contract and deterioration in the credit quality of the counterparty. For the risk management reporting purposes, the individual borrower’s default risk, country risk, specific risks and other credit risk exposure components are considered as a whole.

(2) Credit Risk Management

The Bank controls the credit concentration risk exposure by applying and managing total exposure limits to prevent the excessive risk concentration to specific industry and specific borrowers. The Bank maintains allowances for loan losses associated with credit risk on loans and receivables to manage its credit risk.

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(3) Maximum exposure to credit risk

The Bank’s maximum exposure of financial instruments to credit risk as of December 31, 2018 and 2017, is as follows (Korean won in millions):

	Dec. 31, 2018		Dec. 31, 2017
Cash and due from financial institutions	￦	3,682,863	￦	2,091,920
Financial assets at FVTPL (K-IFRS 1039)		—		891,360
Financial assets at FVTPL(*1)		904,273		—
Hedging derivative assets		75,743		228,121
Loans at amortized cost(*2)		71,741,225		71,486,133
Financial investments(*3)		1,059,067		1,000,995
Other financial assets		1,135,012		1,102,062
Acceptances and guarantee contracts		40,010,549		42,808,774
Commitments(*4)		17,619,116		19,737,788
	￦	136,227,848	￦	139,347,153

(*1) Financial assets at FVTPL exclude debt securities related to marketable securities and paid-in capital.

(*2) Loans at amortized cost exclude loans valuation adjustment related to fair value hedging, allowances for loan losses.

(*3) Allowances for loan losses for debt securities at amortized cost is excluded.

(*4) Commitments exclude commitments on purchase of beneficiary certificates which are included in other commitments in Note 36.

(4) Credit risk of loans

The Bank maintains allowances for loan losses associated with credit risk on loans to manage its credit risk. The Bank writes off on non-profitable loans, non-recoverable loans, loans classified as estimated loss by asset quality category, loans requested to be written off by Financial Supervisory Service (“FSS”) and others upon approval of Loan Management Committee.

Loans are categorized as follows (Korean won in millions):

(December 31, 2018)

	12 month expected credit losses		Lifetime expected credit losses		Credit-impaired financial assets		Total
Collective assessment:
Best	￦	18,155,827	￦	9,489	￦	5,596	￦	18,170,912
Outstanding		24,374,636		—		40,000		24,414,636
Good		25,155,018		1,458,851		49,921		26,663,790
Below normal		3,200		434,356		60,554		498,110
Subtotal		67,688,681		1,902,696		156,071		69,747,448
Individual assessment:
Best		—		—		513,941		513,941
Outstanding		—		—		—		—
Good		—		—		29,370		29,370
Below normal		—		720,631		1,108,766		1,829,397
Subtotal		—		720,631		1,652,077		2,372,708
		67,688,681		2,623,327		1,808,148		72,120,156
Net deferred origination fees and costs								(378,931	)
Total							￦	71,741,225

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(December 31, 2017)

	Individual assessment			Collective assessment			Total			Ratio (%)
Loans:
Normal
Not past due	￦	2,123,302		￦	66,023,655		￦	68,146,957			94.79
Past due		—			30			30			0.01
Impaired		3,610,399			126,860			3,737,259			5.20
Subtotal		5,733,701			66,150,545			71,884,246			100.00
Net deferred origination fees and costs:
Normal
Not past due		(37	)		(396,944	)		(396,981	)		99.72
Past due		—			—			—			—
Impaired		(1,138	)		6			(1,132	)		0.28
Subtotal		(1,175	)		(396,938	)		(398,113	)		100.00
Carrying amounts before deducting allowances:
Normal
Not past due		2,123,265			65,626,711			67,749,976			94.77
Past due		—			30			30			0.01
Impaired		3,609,261			126,866			3,736,127			5.22
Subtotal		5,732,526			65,753,607			71,486,133			100.00
Allowances:
Normal
Not past due		(368,644	)		(254,029	)		(622,673	)		18.94
Percentage (%)		17.36			0.39			0.92
Past due		—			(22	)		(22	)		0.01
Percentage (%)		—			73.33			73.33
Impaired		(2,601,057	)		(63,243	)		(2,664,300	)		81.05
Percentage (%)		72.07			49.85			71.31
Subtotal		(2,969,701	)		(317,294	)		(3,286,995	)		100.00
Percentage (%)		51.80			0.48			4.60
Carrying amounts:
Normal
Not past due		1,754,621			65,372,682			67,127,303			98.43
Past due		—			8			8			0.01
Impaired		1,008,204			63,623			1,071,827			1.56
Total	￦	2,762,825		￦	65,436,313		￦	68,199,138			100.00

The above carrying amounts exclude loan valuation adjustment related to fair value hedging amounting to ￦12,801 million and ￦24,182 million as of December 31, 2018 and 2017, respectively.

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1) Credit quality of loans that are neither past due nor impaired

Credit quality of loans that are neither past due nor impaired as of December 31, 2017, are as follows (Korean won in millions):

(December 31, 2017)

	Loans										Deferred loan origination fees and costs
Criteria	Loans in local currency		Loans in foreign currencies		Others		Total		Ratio (%)					Allowances			Carrying amount
Best	￦	2,802,177	￦	9,769,413	￦	2,121,958	￦	14,693,548		21.56	￦	(62,402	)	￦	(9,752	)	￦	14,621,394
Outstanding		4,451,381		29,153,655		1,696,223		35,301,259		51.80		(318,151	)		(72,261	)		34,910,847
Good		6,485,730		7,888,486		1,226,780		15,600,996		22.90		(13,665	)		(144,840	)		15,442,491
Below normal		1,763,682		787,472		—		2,551,154		3.74		(2,763	)		(395,820	)		2,152,571
	￦	15,502,970	￦	47,599,026	￦	5,044,961	￦	68,146,957		100.00	￦	(396,981	)	￦	(622,673	)	￦	67,127,303

2) Aging analysis of loans that are past due but not impaired

Aging analysis of loans that are past due but not impaired as of December 31, 2017, are as follows (Korean won in millions):

(December 31, 2017)

	Loans										Deferred loan origination fees and costs
	Loans in local currency		Loans in foreign currencies		Others		Total		Ratio (%)				Allowances			Carrying amount
Within one months	￦	30	￦	—	￦	—	￦	30		100.00	￦	—	￦	(22	)	￦	8
Within two months		—		—		—		—		—		—		—			—
Within three months		—		—		—		—		—		—		—			—
Over three months		—		—		—		—		—		—		—			—
	￦	30	￦	—	￦	—	￦	30		100.00	￦	—	￦	(22	)	￦	8

3) Loans assessed for impairment on individual basis

Loans assessed for impairment on individual basis by country and industry of the Bank’s counterparties, as of December 31, 2017, are as follows (Korean won in millions):

(December 31, 2017)

	Loans						Allowance									Allowance ratio (%)
	Domestic		Foreign		Total		Domestic			Foreign			Total			Domestic		Foreign		Total
Manufacturing	￦	3,449,650	￦	35,365	￦	3,485,015	￦	(2,484,785	)	￦	(35,365	)	￦	(2,520,150	)		72.03		100.00		72.31
Transportation		—		17,218		17,218		—			—			—			—		—		—
Construction		1,187		—		1,187		(1,187	)		—			(1,187	)		100.00		—		100.00
Public Sector & Others		—		105,841		105,841		—			(79,720	)		(79,720	)		—		75.32		75.32
	￦	3,450,837	￦	158,424	￦	3,609,261	￦	(2,485,972	)	￦	(115,085	)	￦	(2,601,057	)		72.04		72.64		72.07

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(5) Credit quality of securities (debt securities)

1) Securities (debt securities) exposed to credit risk as of December 31, 2018 are as follows (Korean won in millions):

(December 31, 2018)

	12 month expected credit losses		Lifetime expected credit losses		Credit- impaired financial assets		Total
Grade 1	￦	1,059,067	￦	—	￦	—	￦	1,059,067
Grade 2		—		—		—		—
Grade 3		—		—		—		—
Grade 4		—		—		—		—
Grade 5		—		—		—		—
Total	￦	1,059,067	￦	—	￦	—	￦	1,059,067

Securities (debt securities) exposed to credit risk as of December 31, 2017 are as follows (Korean won in millions):

(December 31, 2017)

Securities that are neither past due nor impaired ￦  1,039,660

1) Credit quality of securities (debt securities) that are neither past due nor impaired as December 31, 2017, are as follows (Korean won in millions):

(December 31, 2017)

	Credit quality(*1)										Total
	Grade 1		Grade 2		Grade 3		Grade 4		Grade 5
Financial assets at FVTPL	￦	38,665	￦	—	￦	—	￦	—	￦	—	￦	38,665
AFS financial assets		911,518		—		—		—		—		911,518
HTM financial assets		89,477		—		—		—		—		89,477
	￦	1,039,660	￦	—	￦	—	￦	—	￦	—	￦	1,039,660

(*1) Credit quality is classified based on internal credit quality grade as below:

	Credit rating
Grade 1	AAA ~ BBB
Grade 2	BBB- ~ BB
Grade 3	BB- ~ B
Grade 4	B- ~ C
Grade 5	D

(6) Concentration of credit risk

The amounts disclosed below exclude loan valuation adjustment related to fair value hedging amounting to ￦12,801 million and ￦24,182 million as of December 31, 2018 and 2017, respectively.

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1) Loans by country where the credit risk belongs to as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(Dec. 31, 2018)

	Loans in local currency		Loans in foreign currencies		Others		Total		Ratio (%)		Deferred loan origination fees			Allowances
Asia:
Korea	￦	16,809,808	￦	7,440,799	￦	912,802	￦	25,163,409		34.89	￦	(9,220	)	￦	(864,719	)
China		—		2,242,295		293,791		2,536,086		3.52		(3,243	)		(26,273	)
Saudi Arabia		—		3,673,671		38,316		3,711,987		5.15		(45,036	)		(7,300	)
India		—		2,746,143		47,920		2,794,063		3.87		(16,061	)		(3,218	)
Indonesia		17,000		3,222,120		9,893		3,249,013		4.51		(61,170	)		(12,972	)
Uzbekistan		—		671,116		73,789		744,905		1.03		(5,758	)		(20,125	)
Vietnam		—		4,054,789		32,980		4,087,769		5.67		(30,540	)		(21,282	)
Australia		—		2,075,514		6,777		2,082,291		2.89		(17,989	)		(2,652	)
Philippines		—		194,474		—		194,474		0.27		(150	)		(937	)
Qatar		—		776,784		253		777,037		1.08		(2,766	)		(3,834	)
Singapore		—		574,537		69,753		644,290		0.89		(2,410	)		(1,442	)
Oman		—		847,722		3,169		850,891		1.18		(10,259	)		(3,917	)
Hong Kong		—		733,779		420,672		1,154,451		1.60		(318	)		(10,895	)
The United Arab Emirates		—		3,574,767		8,527		3,583,294		4.97		(24,914	)		(1,274	)
Others		9,800		3,331,782		1,293,738		4,635,320		6.43		(61,722	)		(47,791	)
Subtotal		16,836,608		36,160,292		3,212,380		56,209,280		77.95		(291,556	)		(1,028,631	)
Europe:
Russia		—		331,567		—		331,567		0.46		(3	)		(994	)
United Kingdom		—		1,335,664		—		1,335,664		1.85		(7,272	)		(123,812	)
France		—		175,039		50,046		225,085		0.31		(1,661	)		(274	)
Netherlands		—		48,608		14,992		63,600		0.09		—			(779	)
Malta		—		1,186		—		1,186		0.01		—			—
Greece		—		846,343		—		846,343		1.17		(4,485	)		(686	)
Turkey		—		851,069		330		851,399		1.18		(15,254	)		(27,158	)
Germany		—		274,923		6,819		281,742		0.39		(387	)		(883	)
Ukraine		—		82,862		—		82,862		0.11		(1,290	)		—
Cyprus		—		—		—		—		—		—			—
Hungary		—		16,948		934		17,882		0.02		(7	)		(372	)
Others		—		1,496,521		95,770		1,592,291		2.20		(10,422	)		(6,206	)
Subtotal		—		5,460,730		168,891		5,629,621		7.79		(40,781	)		(161,164	)
America:
Panama		—		786,755		—		786,755		1.09		(2,286	)		(3,441	)
United States		—		2,680,095		23,938		2,704,033		3.75		(6,185	)		(30,348	)
The British Virgin Islands		—		25,509		—		25,509		0.04		(172	)		(19	)
Mexico		—		755,131		—		755,131		1.05		(5,292	)		(2,140	)
Bermuda		—		242,300		—		242,300		0.34		(1,358	)		(225	)
Brazil		—		1,927,500		—		1,927,500		2.67		(4,973	)		(7,514	)
Others		—		1,307,331		8,779		1,316,110		1.82		(5,267	)		(57,208	)
Subtotal		—		7,724,621		32,717		7,757,338		10.76		(25,533	)		(100,895	)
Africa:
Marshall Islands		—		757,849		—		757,849		1.05		(4,496	)		(2,216	)
Liberia		—		11,461		—		11,461		0.02		(139	)		(15	)
Madagascar		—		387,885		—		387,885		0.54		(1,550	)		(128,883	)
Others		—		1,358,414		8,308		1,366,722		1.90		(14,876	)		(132,500	)
Subtotal		—		2,515,609		8,308		2,523,917		3.50		(21,061	)		(263,614	)
Total	￦	16,836,608	￦	51,861,252	￦	3,422,296	￦	72,120,156		100.00	￦	(378,931	)	￦	(1,554,304	)

71

(December 31, 2017)

	Loans in local currency		Loans in foreign currencies		Others		Total		Ratio (%)		Deferred loan origination fees			Allowances
Asia:
Korea	￦	18,939,007	￦	5,315,232	￦	604,003	￦	24,858,242		34.58	￦	(6,410	)	￦	(2,995,149	)
China		—		1,833,920		311,601		2,145,521		2.98		(366	)		(37,646	)
Saudi Arabia		—		3,795,685		24,637		3,820,322		5.31		(52,670	)		(8,303	)
India		—		2,743,764		26,628		2,770,392		3.85		(22,580	)		(4,003	)
Indonesia		17,000		3,234,658		8,326		3,259,984		4.54		(70,546	)		(10,627	)
Uzbekistan		—		669,111		155,895		825,006		1.15		(6,263	)		(4,770	)
Vietnam		—		3,250,478		16,027		3,266,505		4.54		(22,466	)		(20,972	)
Australia		—		2,170,414		836		2,171,250		3.02		(19,996	)		(4,234	)
Philippines		—		245,572		—		245,572		0.34		(50	)		(10,126	)
Qatar		—		678,507		—		678,507		0.94		(2,832	)		(2,302	)
Singapore		—		163,068		75,507		238,575		0.33		(851	)		(318	)
Oman		—		975,651		10,707		986,358		1.37		(11,643	)		(3,121	)
Hong Kong		—		999,457		387,148		1,386,605		1.93		(2,383	)		(2,491	)
The United Arab Emirates		—		2,921,077		4,863		2,925,940		4.08		(27,197	)		(6,928	)
Others		—		2,296,222		3,168,744		5,464,966		7.61		(53,012	)		(16,618	)
Subtotal		18,956,007		31,292,816		4,794,922		55,043,745		76.57		(299,265	)		(3,127,608	)
Europe:
Russia		—		362,699		—		362,699		0.50		(15	)		(1,208	)
United Kingdom		—		444,050		66,542		510,592		0.71		(1,469	)		(433	)
France		—		144,968		3,062		148,030		0.21		(2,188	)		(83	)
Netherlands		—		2,642		12,918		15,560		0.02		—			(44	)
Malta		—		125,602		—		125,602		0.17		(1,211	)		—
Greece		—		237,504		—		237,504		0.33		(1,327	)		(114	)
Turkey		—		659,824		2,802		662,626		0.92		(9,059	)		(1,999	)
Germany		—		281,095		402		281,497		0.39		(478	)		(709	)
Ukraine		—		119,102		—		119,102		0.17		(3,000	)		(91	)
Cyprus		—		232,689		—		232,689		0.32		(2,354	)		—
Hungary		—		145,347		—		145,347		0.20		(1,095	)		(5,433	)
Others		—		568,424		99,041		667,465		0.94		(3,692	)		(2,097	)
Subtotal		—		3,323,946		184,767		3,508,713		4.88		(25,888	)		(12,211	)
America:
Panama		—		1,215,278		—		1,215,278		1.69		(3,273	)		(6,440	)
United States		—		2,540,975		72,629		2,613,604		3.64		(7,733	)		(80,463	)
The British Virgin Islands		—		219,215		—		219,215		0.30		(2,363	)		(47	)
Mexico		—		834,136		—		834,136		1.16		(6,167	)		(2,194	)
Bermuda		—		819,398		—		819,398		1.14		(7,173	)		(16,533	)
Brazil		—		2,097,645		—		2,097,645		2.92		(5,589	)		(4,117	)
Others		—		1,426,809		3,299		1,430,108		1.99		(5,843	)		(23,511	)
Subtotal		—		9,153,456		75,928		9,229,384		12.84		(38,141	)		(133,305	)
Africa:
Marshall Islands		—		1,903,658		—		1,903,658		2.65		(11,349	)		(8,025	)
Liberia		—		444,802		—		444,802		0.62		(3,344	)		(666	)
Madagascar		—		371,684		—		371,684		0.52		(1,832	)		(1,200	)
Others		—		1,382,260		—		1,382,260		1.92		(18,294	)		(3,980	)
Subtotal		—		4,102,404		—		4,102,404		5.71		(34,819	)		(13,871	)
Total	￦	18,956,007	￦	47,872,622	￦	5,055,617	￦	71,884,246		100.00	￦	(398,113	)	￦	(3,286,995	)

72

2) Loans by industry as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

	Loans										Deferred loan origination fees			Allowances
	Loans in local currency		Loans in foreign currencies		Others		Total		Ratio (%)
Manufacturing	￦	11,044,184	￦	23,492,659	￦	212,289	￦	34,749,132		48.18	￦	(161,406	)	￦	(1,252,691	)
Transportation		501,180		6,694,646		—		7,195,826		9.98		(36,927	)		(64,916	)
Financial institutions		4,139,230		6,802,713		3,154,565		14,096,508		19.55		(4,827	)		(21,520	)
Wholesale and retail		562,053		1,214,089		46,664		1,822,806		2.53		(3,088	)		(20,891	)
Real estate		—		115,179		—		115,179		0.16		(1,771	)		(783	)
Construction		317,442		499,756		—		817,198		1.13		(8,461	)		(6,912	)
Public sector and others		272,519		13,042,210		8,778		13,323,507		18.47		(162,451	)		(186,591	)
Total	￦	16,836,608	￦	51,861,252	￦	3,422,296	￦	72,120,156		100.00	￦	(378,931	)	￦	(1,554,304	)

(December 31, 2017)

	Loans										Deferred loan origination fees			Allowances
	Loans in local currency		Loans in foreign currencies		Others		Total		Ratio (%)
Manufacturing	￦	14,316,259	￦	21,739,146	￦	264,633	￦	36,320,038		50.53	￦	(163,359	)	￦	(3,090,742	)
Transportation		273,905		6,663,808		—		6,937,713		9.65		(39,566	)		(27,784	)
Financial institutions		2,477,740		4,929,310		4,762,571		12,169,621		16.93		(5,451	)		(17,960	)
Wholesale and retail		691,117		1,212,952		25,590		1,929,659		2.68		(3,447	)		(8,444	)
Real estate		9,000		318,201		—		327,201		0.46		(1,917	)		(801	)
Construction		752,442		599,986		447		1,352,875		1.88		(588	)		(9,790	)
Public sector and others		435,545		12,409,218		2,376		12,847,139		17.87		(183,785	)		(131,474	)
Total	￦	18,956,008	￦	47,872,621	￦	5,055,617	￦	71,884,246		100.00	￦	(398,113	)	￦	(3,286,995	)

73

3) Concentration of credit risk of financial assets at FVTPL and securities (debt securities) by industry as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

	Amount		Ratio (%)
Financial Assets at FVTPL
Government and government sponsored institutions	￦	—		—
Banking and insurance		45,272		67.83
Others		21,469		32.17
Subtotal		66,741		100.00
Financial Assets at FVOCI
Government and government sponsored institutions		102,096		12.11
Banking and insurance		709,109		84.10
Others		32,013		3.79
Subtotal		843,218		100.00
Financial Assets at amortized cost
Government and government sponsored institutions		4,476		2.07
Banking and insurance		187,419		86.83
Others		23,954		11.10
Subtotal		215,849		100.00
Total	￦	1,125,808

(December 31, 2017)

	Amount		Ratio (%)
Financial Assets at FVTPL
Government and government sponsored institutions	￦	—		—
Banking and insurance		12,729		32.92
Others		25,936		67.08
Subtotal		38,665		100.00
AFS financial assets
Government and government sponsored institutions		165,117		18.11
Banking and insurance		370,859		40.69
Others		375,542		41.20
Subtotal		911,518		100.00
HTM financial assets
Government and government sponsored institutions		5,356		5.98
Banking and insurance		61,076		68.26
Others		23,045		25.76
Subtotal		89,477		100.00
Total	￦	1,039,660

74

4) Concentration of credit risk of financial assets at FVTPL and securities (debt securities) by country as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

	Dec. 31, 2018
	Amount		Ratio (%)
Financial assets at FVTPL
Korea	￦	16,960		25.41
Others		49,781		74.59
Subtotal		66,741		100.00
Financial Assets at FVOCI
Korea		224,580		26.63
Others		618,638		73.37
Subtotal		843,218		100.00
Financial Assets at amortized cost
Korea		84,613		39.20
Others		131,236		60.80
Subtotal		215,849		100.00
Total	￦	1,125,808

(December 31, 2017)

	Dec. 31, 2017
	Amount		Ratio (%)
Financial assets at FVTPL
United States	￦	24,895		64.39
Others		13,770		35.61
Subtotal		38,665		100.00
AFS financial assets
Korea		323,725		35.51
United States		427,449		46.89
Others		160,344		17.60
Subtotal		911,518		100.00
HTM financial assets
Korea		28,616		31.98
China		27,912		31.19
Others		32,949		36.83
Subtotal		89,477		100.00
Total	￦	1,039,660

75

5) Credit enhancement and its financial effect as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

	Loans(*1)		Acceptances and guarantees		Unused loan commitments		Total		Ratio (%)
Maximum exposure to credit risk	￦	71,741,224	￦	40,010,549	￦	17,619,116	￦	129,370,889		100.00
Credit enhancement:
Deposits and savings		91,577		40,833		7,003		139,413		0.11
Export guarantee insurance		—		717,364		7,223		724,587		0.56
Guarantee		4,666,963		1,935,334		1,565,600		8,167,897		6.31
Securities		145,978		378,069		12,400		536,447		0.41
Real estate		1,886,139		1,200,486		23,193		3,109,818		2.40
Ships		869,933		244,822		—		1,114,755		0.86
Others		1,297,273		—		12,099		1,309,372		1.02
Subtotal		8,957,863		4,516,908		1,627,518		15,102,289		11.67
Exposure to credit risk after deducting credit enhancement	￦	62,783,361	￦	35,493,641	￦	15,991,598	￦	114,268,600		88.33

(*1) Loans exclude loans valuation adjustment related to fair value hedging.

(December 31, 2017)

	Loans(*1)		Acceptances and guarantees		Unused loan commitments		Total		Ratio (%)
Maximum exposure to credit risk	￦	71,486,133	￦	42,808,774	￦	19,737,788	￦	134,032,695		100.00
Credit enhancement:
Deposits and savings		93,112		93,168		7,840		194,120		0.15
Export guarantee insurance		—		884,694		1,806		886,500		0.66
Guarantee		3,851,033		1,902,263		1,381,731		7,135,027		5.32
Securities		149,004		410,282		17,450		576,736		0.43
Real estate		1,720,631		1,146,484		432,126		3,299,241		2.46
Ships		859,813		205,874		9,643		1,075,330		0.80
Others		1,515,638		23,402		9,838		1,548,878		1.16
Subtotal		8,189,231		4,666,167		1,860,434		14,715,832		10.98
Exposure to credit risk after deducting credit enhancement	￦	63,296,902	￦	38,142,607	￦	17,877,354	￦	119,316,863		89.02

(*1) Loans exclude loans valuation adjustment related to fair value hedging.

4-3. Liquidity risk

(1) Overview of liquidity risk

Liquidity risk is the risk that the Bank is unable to meet its payment obligations arising from financial liabilities as they become due. The Bank discloses all financial asset, financial liabilities and off-balance-sheet items, such as loan commitments and analysis of the contractual maturity, which are related to liquidity risk, into seven categories. The cash flows disclosed in the maturity analysis are undiscounted contractual amounts, including principal and future interest, which resulted in disagreement with the discounted cash flows included in the separate statements of financial position. However, for derivatives, each discounted cash flow consisting of current fair value is presented.

76

(2) Principles of the liquidity risk management

1) Liquidity risk is managed with integration. The Bank measures, reports and controls liquidity risk by quantification with reasonable method.

2) Liquidity risk reflects financing plans and fund-using plans, and the Bank reports the liquidity risk with preciseness, timeliness and consistency.

3) The Bank establishes liquidity risk management strategy by analyzing liquidity maturity, liquidity gap structure and market environment.

(3) Liquidity risk management

Risk management department monitors changes by liquidity risk sources and compliance of risk limits. It notifies related departments to prepare countermeasures in case the measured liquidity risk is close to risk limits. Also, it analyzes crisis situations and effects of the crisis situations and reports to the Risk Management Committee on a regular basis. Each related department monitors changes of liquidity risk sources and compliance of risk limits by itself and if exposure to new risk is expected, it discusses the matter with the head of risk management department.

(4) Measurement of liquidity risk

The Bank measures liquidity ratio, liquidity gap ratio and others for local currency and foreign currencies and simulates analysis reflecting market environment, product features and the Bank’s strategies.

77

(5) Analysis on remaining contractual maturity of financial liabilities and off-balance-sheet items

Remaining contractual maturity and amount of financial liabilities and off-balance-sheet items as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

	On demand		Within 1 month		1 to 3 months		3 to 6 Months		6 to 12 months		1 year to 5 years		Over 5 years		Total
Financial liabilities:
Financial liabilities at FVTPL	￦	905,901	￦	—	￦	—	￦	—	￦	—	￦	—	￦	—	￦	905,901
Hedging derivative liabilities		—		11,405		17,721		140,390		229,816		691,997		536,974		1,628,303
Borrowings		—		68,965		45,916		448,363		632,663		3,864,588		173,063		5,233,558
Debentures		—		1,051,114		3,281,750		5,681,679		10,742,556		35,635,971		17,715,427		74,108,497
Other financial liabilities		—		719,647		—		329		2,332		167,861		947,509		1,837,678
	￦	905,901	￦	1,851,131	￦	3,345,387	￦	6,270,761	￦	11,607,367	￦	40,360,417	￦	19,372,973	￦	83,713,937
Off-balance sheet items(*1):
Commitments	￦	17,619,116	￦	—	￦	—	￦	—	￦	—	￦	—	￦	—	￦	17,619,116
Financial guarantee contracts		14,500,508		—		—		—		—		—		—		14,500,508
	￦	32,119,624	￦	—	￦	—	￦	—	￦	—	￦	—	￦	—	￦	32,119,624

(*1) Guarantees and loan commitments and other credit facilities provided by the Bank have maturities. However, if the counterparty requests the payment immediately, the payment must be fulfilled.

(December 31, 2017)

	On demand		Within 1 month		1 to 3 months		3 to 6 Months		6 to 12 months		1 year to 5 years		Over 5 years		Total
Financial liabilities:
Financial liabilities at FVTPL	￦	911,778	￦	—	￦	—	￦	—	￦	—	￦	—	￦	—	￦	911,778
Hedging derivative liabilities		—		206		57,322		91,587		45,610		449,538		413,933		1,058,196
Borrowings		—		216,013		15,770		1,139,708		424,604		3,936,528		575,566		6,308,189
Debentures		—		912,759		3,000,853		5,332,189		9,803,980		31,884,629		17,443,603		68,378,013
Other financial liabilities		—		985,367		—		—		65,689		34,810		708,632		1,794,498
	￦	911,778	￦	2,114,345	￦	3,073,945	￦	6,563,484	￦	10,339,883	￦	36,305,505	￦	19,141,734	￦	78,450,674
Off-balance sheet items(*1):
Commitments	￦	19,737,788	￦	—	￦	—	￦	—	￦	—	￦	—	￦	—	￦	19,737,788
Financial guarantee contracts		14,493,065		—		—		—		—		—		—		14,493,065
	￦	34,230,853	￦	—	￦	—	￦	—	￦	—	￦	—	￦	—	￦	34,230,853

(*1) Guarantees and loan commitments and other credit facilities provided by the Bank have maturities. However, if the counterparty requests the payment immediately, the payment must be fulfilled.

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4-4. Market risk

(1) Overview of market risk

1) Definition of market risk

Market risk is the risk of possible losses that arise from the changes of market factors, such as interest rate, stock price, foreign exchange rate, commodity value and other market factors related to the fair value or future cash flows of the financial instruments. The Bank classifies exposures to market risk into either foreign exchange rate risk or interest rate risk. Foreign exchange risk means that possible losses on assets and liabilities denominated in foreign currencies due to changes of foreign exchange rate. Interest rate risk means that possible losses on assets and liabilities due to changes of interest rate.

2) Market risk management group

The Bank operates the Risk Management Committee and the Risk Management Council for managing risks and risk limits. The Risk Management Practices Committee assists the Risk Management Committee and the Risk Management Council for practical matters, such as managing adequate assets and liabilities by analyzing foreign exchange risk, interest rate risk, liquidity risk, money balance plan and effects by initiating new product. Market risk is managed by product and currency for minimizing segments exposed to changes of foreign exchange, interest rate and securities’ price. Foreign exchange risk is measured by definite method and probabilistic method and definite method is used for limits management. Interest rate value at risk (“VaR”) and interest rate earning at risk (“EaR”) are measured by BIS standards, definite method and probabilistic method and definite method is used for limits management. Meanwhile, the Bank performs financial crisis analysis supposing exceptional, but possible events for evaluating latent weakness. The analysis is used for important decision making, such as risk mitigation, emergency plan development and limit setup. The results of the analysis are reported to the board of directors and management on a quarterly basis.

(2) Foreign exchange risk

1) Management of foreign exchange risk

Foreign exchange risk management limit is set up and included in internal capital management limit. A risk management division head monitors changes of foreign exchange risk by source and compliance of risk limits regularly. A finance division head also monitors changes of foreign exchange risk by source and compliance of risk limits. The finance division head needs to cooperate with the risk management division head in case it is expected that the Bank will be exposed to a new risk. The risk management division head orders related divisions to prepare countermeasures in case it is apprehended that foreign exchange risk exceeds risk limit. If foreign exchange risk exceeds the risk limit, the risk management division head orders related divisions to prepare countermeasures and reports to Risk Management Committee after resolving the exceeded limit problem.

2) Measurement of foreign exchange risk

Foreign exchange risk is managed by foreign exchange VaR and foreign exchange position. Foreign exchange VaR is measured on a monthly basis and foreign exchange position is measured on a daily basis. It is measured separately by currency for assets and liabilities denominated in foreign currencies exceeding 5% of total assets and liabilities denominated in foreign currencies.

3) Measurement method

① VaR

The Bank uses a yearly VaR to measure market risk. The yearly VaR is a statistically estimated maximum amount of loss that could occur in one year under normal distribution of financial variables. The Bank calculates

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VaR using equal weighted-average method based on historical changes in market rates, prices and volatilities over the previous five years data and measures VaR at a 99% single tail confidence level. VaR is a commonly used market risk management technique. However, the method has some shortcomings.

VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a good indicator of future events, as there may be conditions and circumstances in the future that the model does not anticipate. As a result, the timing and magnitude of the actual losses can be different, depending on the assumptions made at the time of calculation. In addition, the time periods used for the model, generally one day or 10 days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient, or too long, the VaR results may understate or overstate the potential loss.

② Stress testing

The stress testing is carried out to analyze the abnormal market situation reflecting intrinsic volatility of foreign exchange that has significant influent on the value of portfolio. The Bank mainly uses historical scenario tool and also uses hypothetical scenario tool for the analysis of an abnormal market situation. Stress testing is performed at least once in every quarter.

③ Results of measurement

Results of foreign exchange VaR as of December 31, 2018 and 2017, are as follows (Korean won in millions):

Dec. 31, 2018

Dec. 31, 2017

Average

Minimum

Maximum

Ending

Average

Minimum

Maximum

Ending

Foreign exchange risk

￦

27,714

￦

4,635

￦

68,602

￦

26,897

￦

55,558

￦

6,117

￦

111,035

￦

37,718

(3) Interest rate risk

1) Management of interest rate risk

Interest rate risk management limit is set up and included in internal capital management limit. A risk management division head monitors changes of interest rate risk by source and compliance of risk limits regularly. A finance division head also monitors changes of interest rate risk by source and compliance of risk limits. The finance division head needs to cooperate with the risk management division head in case it is expected that the Bank will be exposed to a new risk. The risk management division head orders related divisions to prepare countermeasures in case it is apprehended that interest rate risk exceeds risk limit. If interest rate risk exceeds the risk limit, the risk management division head orders related divisions to prepare countermeasures and reports to Risk Management Committee after resolving the exceeded limit problem.

2) Measurement of interest rate risk

Interest rate risk is managed by measuring interest rate EaR and interest rate VaR and uses interest rate sensitivity gap and duration gap as supplementary index. Interest rate EaR and interest rate VaR are measured on a monthly basis, and interest rate sensitivity gap and duration gap are measured on a daily basis. The Bank simulates analysis reflecting market environment, product features and the Bank’s strategies.

3) Measurement method

① VaR

The Bank uses a yearly VaR to measure market risk. The yearly VaR is a statistically estimated maximum amount of loss that could occur in one year under normal distribution of financial variables. The Bank calculates

80

VaR using equal weighted-average method based on historical changes in market rates, prices and volatilities over the previous five years data and measures VaR at a 99% single tail confidence level. This means the actual amount of loss may exceed the VaR, on average, once out of 100 business days. VaR is a commonly used market risk management technique. However, the method has some limitations.

VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a good indicator of future events, as there may be conditions and circumstances in the future that the model does not anticipate. As a result, the timing and magnitude of the actual losses can be different depending on the assumptions made at the time of calculation. In addition, the time periods used for the model, generally one day or 10 days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient or too long, the VaR results may understate or overstate the potential loss.

② Stress testing

The stress testing is carried out to analyze the abnormal market situation reflecting intrinsic volatility of interest rate that has significant influence on the value of portfolio. The Bank mainly uses historical scenario tool and also uses hypothetical scenario tool for the analysis of an abnormal market situation. Stress testing is performed at least once in every quarter.

③ Results of measurement

Results of interest rate VaR as of December 31, 2018 and 2017, are as follows (Korean won in millions):

Dec. 31, 2018

Dec. 31, 2017

Average

Minimum

Maximum

Ending

Average

Minimum

Maximum

Ending

Interest rate risk

￦

79,086

￦

37,129

￦

112,921

￦

37,129

￦

112,024

￦

58,413

￦

179,886

￦

96,423

4-5. Capital risk

The Bank follows the standard of capital adequacy established by the Financial Services Commission. The standard is based on Basel III, which was established by Basel Committee on Banking Supervision in BIS. In Korea, this standard has been followed since December 2013. According to the standard, domestic banks should maintain at least 8% or above of BIS capital ratio for risk-weighted asset, and quarterly report BIS capital ratio to the FSS.

According to Korean Banking Supervision rules for operations, the Bank’s capitals are mainly divided into two categories:

1) Tier 1 capital (basic capital): Basic capital is composed of capital stock-common and other basic capital. Capital stock-common includes common stock satisfied with qualifications, capital surplus, retained earnings, accumulated other comprehensive income, other reserves and non-controlling interests among the common stock of consolidated subsidiaries. Other basic capital includes securities and capital surplus satisfied with qualifications

2) Tier 2 capital (supplementary capital): Supplementary capital is composed of the securities and capital surplus satisfied with qualifications, non-controlling interests among the securities of consolidated subsidiaries and the amounts of less than below 1.25% of credit risk-weighted asset like allowance for credit losses in respect of credits classified as normal or precautionary.

The risk-weighted asset includes intrinsic risks in total assets, errors of internal operation processes and loss risk from external events. It indicates a size of assets reflecting the level of risks that the Bank bears. The Bank computes the risk-weighted asset by risks (credit risk, market risk and operational risk) and uses it for calculation of BIS capital ratio.

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5. FINANCIAL ASSETS AND FINANCIAL LIABILITIES:

5-1. Classification and fair value

(1) Carrying amounts and fair values of financial instruments as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

	Classification		Carrying amount		Fair value
Financial assets:
Cash and due from financial institutions		Non-recurring	￦	3,682,863	￦	3,682,864
Financial assets at FVTPL		Recurring		2,298,223		2,298,223
Hedging derivative assets		Recurring		75,743		75,743
Loans at amortized cost		Non-recurring		70,199,721		70,374,963
Financial assets at FVOCI		Recurring		8,628,968		8,628,968
Financial assets at amortized cost		Non-recurring		215,788		217,237
Other financial assets		Non-recurring		964,721		964,721
			￦	86,066,027	￦	86,242,719
Financial liabilities:
Financial liabilities at FVTPL		Recurring	￦	905,901	￦	905,901
Hedging derivative liabilities		Recurring		1,628,303		1,628,303
Borrowings		Non-recurring		4,893,478		4,833,791
Debentures		Non-recurring		65,942,970		66,493,992
Other financial liabilities		Non-recurring		1,837,678		1,837,678
			￦	75,208,330	￦	75,699,665

(December 31, 2017)

	Classification		Carrying amount		Fair value
Financial assets:
Cash and due from financial institutions		Non-recurring	￦	2,091,920	￦	2,092,008
Financial assets at FVTPL		Recurring		1,616,973		1,616,973
Hedging derivative assets		Recurring		228,121		228,121
Loans		Non-recurring		68,223,320		69,459,210
AFS financial assets		Recurring		6,692,478		6,692,478
HTM financial assets		Non-recurring		89,477		89,119
Other financial assets		Non-recurring		933,510		933,510
			￦	79,875,799	￦	81,111,419
Financial liabilities:
Financial liabilities at FVTPL		Recurring	￦	911,778	￦	911,778
Hedging derivative liabilities		Recurring		1,058,196		1,058,196
Borrowings		Non-recurring		6,013,457		5,985,700
Debentures		Non-recurring		60,685,098		61,193,068
Other financial liabilities		Non-recurring		1,794,498		1,794,498
			￦	70,463,027	￦	70,943,240

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For each class of financial assets and financial

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liabilities, the Bank discloses the fair value of that class of assets and liabilities in a way that permits them to be compared with their carrying amount at the end of each reporting period. The best evidence of fair value of financial instruments is quoted price in an active market.

Methods for measuring fair value of financial instruments are as follows:

Financial instruments	Method of measuring fair value
Loans and receivables	As demand deposits and transferable deposits do not have maturity and are readily convertible to cash, the carrying amounts of these deposits approximate their fair values. Fair values of the deposits with the maturity of more than one year are determined by discounted cash flow model (“DCF model”). DCF model is also used to determine the fair value of loans. Fair value is determined by discounting the cash flows expected from each contractual period by applying the discount rates for each period.
Investment securities	Trading financial assets and liabilities and AFS financial assets are measured at fair value using a quoted market price in an active market. If a quoted market price is not available, they are measured by using a price quoted by a third party, such as a pricing service or broker or using the DCF model.
Derivatives	For exchange traded derivative, quoted price in active market is used to determine fair value and for OTC derivative, fair value is determined primarily using the DCF model. The Bank uses internally developed valuation models that are widely used by market participants to determine fair value of plain OTC derivatives including option, interest rate swap and currency swap based on observable market parameters. However, some complex financial instruments are valued using the results of independent pricing services, where part or all of the inputs are not observable in the market.
Borrowings	Fair value is determined using DCF model discounting contractual future cash flows by appropriate discount rate.
Debentures	Fair value of debentures denominated in local currency is determined by using the valuation of independent third-party pricing services in accordance with the market prices that are quoted in active markets. Fair value of debentures denominated in foreign currencies is determined by DCF model.

Fair values of financial assets and financial liabilities classified as fair value Level 3 of the fair value hierarchy are determined by using the valuation of independent third-party pricing services. Meanwhile, carrying amounts of other financial assets and financial liabilities are regarded as an approximation of fair values.

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(2) Fair value hierarchy

Fair value hierarchy of financial assets and liabilities, which are not measured at fair value as of December 31, 2018 and 2017, is as follows (Korean won in millions):

(Dec. 31, 2018)

	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from financial Institutions(*)	￦	950,067	￦	—	￦	2,732,797	￦	3,682,864
Loans at amortized cost		—		—		70,374,963		70,374,963
Financial assets at amortized cost		—		217,237		—		217,237
Other financial assets		—		—		964,721		964,721
Total	￦	950,067	￦	217,237	￦	74,072,481	￦	75,239,785
Financial liabilities:
Borrowings	￦	—	￦	4,833,791	￦	—	￦	4,833,791
Debentures		—		66,493,992		—		66,493,992
Other financial liabilities		—		—		1,837,678		1,837,678
Total	￦	—	￦	71,327,783	￦	1,837,678	￦	73,165,461

(December 31, 2017)

	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from financial institutions(*)	￦	647,521	￦	—	￦	1,444,487	￦	2,092,008
Loans		—		—		69,459,210		69,459,210
HTM financial assets		—		89,119		—		89,119
Other financial assets		—		—		933,510		933,510
	￦	647,521	￦	89,119	￦	71,837,207	￦	72,573,847
Financial liabilities:
Borrowings	￦	—	￦	5,985,700	￦	—	￦	5,985,700
Debentures		—		61,193,068		—		61,193,068
Other financial liabilities		—		—		1,794,498		1,794,498
	￦	—	￦	67,178,768	￦	1,794,498	￦	68,973,266

(*) Cash and due from financial institutions as Level 3 are consist of deposits for over-the-counter derivatives to Central Counterparty, and other financial institutions.

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Fair value hierarchy of financial assets and liabilities measured at fair value as of December 31, 2018, and December 31 2017, is as follows (Korean won in millions):

(December 31, 2018)

	Level 1		Level 2		Level 3		Total
Financial assets:
Financial assets at FVTPL	￦	—	￦	2,032,246	￦	265,977	￦	2,298,223
Hedging derivative assets		—		75,743		—		75,743
Financial assets at FVOCI		283,102		743,304		7,602,562		8,628,968
	￦	283,102	￦	2,851,293	￦	7,868,539	￦	11,002,934
Financial liabilities:
Financial liabilities at FVTPL	￦	—	￦	905,901	￦	—	￦	905,901
Hedging derivative liabilities		—		1,628,303		—		1,628,303
	￦	—	￦	2,534,204	￦	—	￦	2,534,204

(December 31, 2017)

	Level 1		Level 2		Level 3		Total
Financial assets:
Financial assets at FVTPL	￦	725,613	￦	891,360	￦	—	￦	1,616,973
Hedging derivative assets		—		228,121		—		228,121
AFS financial assets		319,416		812,471		3,906,416		5,038,303
	￦	1,045,029	￦	1,931,952	￦	3,906,416	￦	6,883,397
Financial liabilities:
Financial liabilities at FVTPL	￦	—	￦	911,778	￦	—	￦	911,778
Hedging derivative liabilities		—		1,058,196		—		1,058,196
	￦	—	￦	1,969,974	￦	—	￦	1,969,974

The Bank classifies financial instruments as three level of fair value hierarchy as below:

Level 1: Financial instruments measured at quoted prices from active markets are classified as fair value Level 1. This level includes listed equity securities, derivatives, and government bonds traded in an active exchange market.

Level 2: Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as Level 2. This level includes the majority of debt and general OTC derivatives such as swap, futures and options

Level 3: Financial instruments measured using valuation techniques where one or more significant inputs are not based on observable market data are classified as Level 3. This level includes unlisted equity securities, structured bonds and OTC derivatives.

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The valuation techniques and input variables of Level 2 financial instruments subsequently not measured at fair value as of December 31, 2018 and December 31, 2017 are as follows (Korean won in millions):

(December 31, 2018)

	Fair value		Valuation techniques		Input variables
Financial assets
Financial assets at amortized cost
Debt securities	￦	217,237		DCF Model		Discount rate
Financial liabilities
Borrowings		4,833,791		DCF Model		Discount rate
Debentures		66,493,992		DCF Model		Discount rate

(December 31, 2017)

	Fair value		Valuation techniques		Input variables
Financial assets
HTM financial assets
Debt securities	￦	89,119		DCF Model		Discount rate
Financial liabilities
Borrowings		5,985,700		DCF Model		Discount rate
Debentures		61,193,068		DCF Model		Discount rate

The valuation techniques and input variables of Level 3 financial instruments subsequently not measured at fair value as of December 31, 2018 and December 31, 2017 are as follows (Korean won in millions):

(December 31, 2018)

	Fair value		Valuation techniques		Input variables
Financial assets
Loans at amortized cost	￦	70,374,963		DCF Model		Discount rate
Other financial assets		964,721		DCF Model		Discount rate
Financial liabilities
Other financial liabilities		1,837,678		DCF Model		Discount rate

(December 31, 2017)

	Fair value		Valuation techniques		Input variables
Financial assets
Loans	￦	69,459,210		DCF Model		Discount rate
Other financial assets		933,510		DCF Model		Discount rate
Financial liabilities
Other financial liabilities		1,794,498		DCF Model		Discount rate

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The valuation techniques and input variables of Level 2 financial instruments, measured at fair value after initial recognition, as of December 31, 2018 and December 31, 2017 are as follows (Korean won in millions):

(December 31, 2018)

	Fair value		Valuation techniques		Input variables
Financial assets
Financial assets at FVTPL:
Debt securities	￦	1,194,714		DCF Model		Discount rate
Derivative assets for trading		837,532		DCF Model		Discount rate
Hedging derivative assets		75,743		DCF Model		Discount rate
Financial assets at FVOCI:
Debt securities		743,304		DCF Model		Discount rate
Financial liabilities
Financial liabilities at FVTPL:
Derivative liabilities for trading		905,901		DCF Model		Discount rate
Hedging derivative liabilities		1,628,303		DCF Model		Discount rate

(December 31, 2017)

	Fair value		Valuation techniques		Input variables
Financial assets
Financial assets at FVTPL
Debt securities	￦	38,665		DCF Model		Discount rate
Derivative assets for trading		852,695		DCF Model		Discount rate
Hedging derivative assets		228,121		DCF Model		Discount rate
AFS financial assets
Debt securities		812,471		DCF Model		Discount rate
Financial liabilities
Financial liabilities at FVTPL
Derivative liabilities for trading		911,778		DCF Model		Discount rate
Hedging derivative liabilities		1,058,196		DCF Model		Discount rate

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Below table accounts for quantitative information of fair value using input factor, which is significant but unobservable, and relation between unobservable input factor and estimate of fair value.

(December 31, 2018)

	Fair value (Korean won in million)		Valuation techniques	Significant unobservable input factors		Range	Relationship between unobservable input factors and fair value estimates
Financial assets at FVTPL:
Unlisted stock	￦	17,223	DCF Model NAV Methods CCA Methods		Discount rate	7.85%	If discount rate is decreased (increased)/if growth rate is increased (decreased), fair value is increased (decreased).
Marketable securities		159,765
Paid-in capital		72,029			Growth rate	—
Loans		16,960
Financial assets at FVOCI:
Unlisted stock	￦	7,585,686	DCF Model NAV Methods CCA Methods		Discount rate	3.87 ~ 16.21%	If discount rate is decreased (increased)/if growth rate is increased (decreased), fair value is increased (decreased).
Paid-in capital		16,876			Growth rate	—

(December 31, 2017)

	Fair value (Korean won in millions)		Valuation techniques	Significant unobservable input factors	Range	Relationship between unobservable input factors and fair value estimates
AFS financial assets:
Unlisted stock	￦	3,906,416	DCF Model CCA Methods NAV Methods FTE Methods	Discount rate	5.49% ~ 19.31%	If discount rate is decreased (increased)/if growth rate is increased (decrease), fair value is increased (decreased).
				Growth rate	—

1) Changes in Level 3 financial assets that are measured at fair value for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(2018)

	Beginning balance(*1)		Profit (loss)			Other comprehensive income		Purchases/ issues		Sales/ settlements			Transfers into Level 3 / Transfers out of Level 3		Ending balance
Financial assets
Securities at FVTPL	￦	134,325	￦	3,750		￦	—	￦	114,491	￦	(3,549	)	￦	—	￦	249,017
Loans at FVTPL		13,577		(117	)		—		3,500		—			—		16,960
Financial assets at FVOCI		6,292,539		—			1,115,904		194,134		(15	)		—		7,602,562
Total	￦	6,440,441	￦	3,633		￦	1,115,904	￦	312,125	￦	(3,564	)	￦	—	￦	7,868,539

(*1) The beginning balance was restated in accordance with K-IFRS No. 1109.

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(2017)

Beginning balance

Profit (Loss)

Other comprehensive income

Purchases/ issues

Sales/ settlements

Transfers into Level 3 / Transfers out of Level 3

Ending balance

Financial assets

AFS financial assets

￦

3,931,733

￦

(80

)

￦

(87,259

)

￦

64,366

￦

(2,344

)

￦

—

￦

3,906,416

2) In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss for the period and total gains or losses for financial instruments held at the end of the reporting period in the separate statement of comprehensive income for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	Net income (loss) from financial investments
	2018		2017
Total gains (losses) on financial instruments held at the end of the reporting period	￦	3,633	￦	(80	)
Total gains (losses) included in profit or loss for the period		3,633		(80	)

3) The sensitivity of fair value analysis for the Level 3 financial instruments

The Bank performed the sensitivity analysis for the Level 3 financial instruments for which fair value would be measured differently upon reasonably possible alternative assumptions. The Bank classified the effect from changes upon the alternative assumptions into favorable effect and unfavorable effect and presented the most favorable effect or the most unfavorable effect in the table hereunder. Stocks are the financial instruments subject to sensitivity analysis, which are classified as Level 3 and of which changes in fair value are recognized as other comprehensive income. Meanwhile, equity instruments, which are recognized as cost among the financial instruments and are classified as Level 3 are excluded from the sensitivity analysis.

Sensitivity analysis details per market risk variable of each Level 3 financial instrument held and measured at fair value as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

	Net income (loss)					Other comprehensive income (loss)
	Favorable		Unfavorable			Favorable		Unfavorable
Financial assets:
Financial assets at FVTPL(*1)	￦	1,356	￦	(507	)	￦	—	￦	—
Financial assets at FVOCI(*1)		—		—			5,923,204		(1,222,886	)

(December 31, 2017)

	Net income (loss)				Other comprehensive income (loss)
	Favorable		Unfavorable		Favorable		Unfavorable
Financial assets:
AFS Financial assets(*1)	￦	—	￦	—	￦	3,175,806	￦	(936,590	)

(*1) Changes in fair value of stocks are computed along with the increases or decreases in either growth rate from nil to 1% and discount rate, which are unobservable inputs.

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5-2. Carrying amounts of financial instruments

Carrying amounts of financial instruments as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

	Financial assets at FVTPL		Financial assets at FVOCI		Financial assets at amortized cost		Hedging derivative assets		Total
Financial assets:
Cash and due from financial institutions	￦	—	￦	3,682,863	￦	—	￦	—	￦	3,682,863
Financial assets at FVTPL		2,298,223		—		—		—		2,298,223
Hedging derivative assets		—		—		—		75,743		75,743
Loans at amortized cost		—		70,199,721		—		—		70,199,721
Financial investments		—		215,788		8,628,968		—		8,844,756
Other financial assets		—		964,721		—		—		964,721
Total	￦	2,298,223	￦	75,063,093	￦	8,628,968	￦	75,743	￦	86,066,027

	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Hedging derivative liabilities		Total
Financial liabilities:
Financial liabilities at FVTPL	￦	905,901	￦	—	￦	—	￦	905,901
Hedging derivative liabilities		—		—		1,628,303		1,628,303
Borrowings		—		4,893,478		—		4,893,478
Debentures		—		65,942,970		—		65,942,970
Other financial liabilities		—		1,837,678		—		1,837,678
Total	￦	905,901	￦	72,674,126	￦	1,628,303	￦	75,208,330

(December 31, 2017)

	Financial assets at FVTPL		Loans		AFS financial assets		HTM financial assets		Hedging derivative assets		Total
Financial assets:
Cash and due from financial institutions	￦	—	￦	2,091,920	￦	—	￦	—	￦	—	￦	2,091,920
Financial assets at FVTPL		1,616,973		—		—		—		—		1,616,973
Hedging derivative assets		—		—		—		—		228,121		228,121
Loans		—		68,223,320		—		—		—		68,223,320
Financial investments		—		—		6,692,478		89,477		—		6,781,955
Other financial assets		—		933,510		—		—		—		933,510
Total	￦	1,616,973	￦	71,248,750	￦	6,692,478	￦	89,477	￦	228,121	￦	79,875,799

90

	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Hedging derivative liabilities		Total
Financial liabilities:
Financial liabilities at FVTPL	￦	911,778	￦	—	￦	—	￦	911,778
Hedging derivative liabilities		—		—		1,058,196		1,058,196
Borrowings		—		6,013,457		—		6,013,457
Debentures		—		60,685,098		—		60,685,098
Other financial liabilities		—		1,794,498		—		1,794,498
Total	￦	911,778	￦	68,493,053	￦	1,058,196	￦	70,463,027

5-3. Offset of financial instruments

The Bank has conditional rights of setoff that are enforceable and exercisable only in the events mentioned in agreements regardless of meeting some or all of the offsetting criteria in K-IFRS 1032 for financial instruments. Cash collaterals do not meet the offsetting criteria in K-IFRS 1032, but they can be set off with net amount of financial instruments.

The effects of netting agreements as of December 31, 2018 and 2017, are as follow (Korean won in millions):

(December 31, 2018)

	Gross amounts of recognized financial assets (liabilities)		Gross amounts of recognized financial liabilities (assets) to be setoff		Net amounts of financial assets (liabilities) presented in the separate statement of financial position		Amount that is not offset in the financial statements						Net amount
							Financial instruments			Cash collateral
Financial assets:
Derivatives	￦	913,275	￦	—	￦	913,275	￦	(292,132	)	￦	(3,488	)	￦	617,655
Financial liabilities:
Derivatives		2,534,204		—		2,534,204		(292,132	)		(1,380,905	)		861,167

(December 31, 2017)

	Gross amounts of recognized financial assets (liabilities)		Gross amounts of recognized financial liabilities (assets) to be setoff		Net amounts of financial assets (liabilities) presented in the separate statement of financial position		Amount that is not offset in the financial statements						Net amount
							Financial instruments			Cash collateral
Financial assets:
Derivatives	￦	1,080,816	￦	—	￦	1,080,816	￦	(535,438	)	￦	(38,009	)	￦	507,369
Financial liabilities:
Derivatives		1,969,974		—		1,969,974		(535,438	)		(667,220	)		767,316

5-4. Transfer of financial assets

The Bank has securities sold under repurchase agreements (“RP”), and it refers to the financial assets that have been transferred, but presented in the separate financial statements since the assets do not meet the conditions of derecognition. In case of securities sold under the RP, securities are disposed, but the Bank agrees to repurchase at the fixed amount, so that the Bank retains substantially all the risks and rewards of ownership of the securities. There are no carrying amounts of transferred assets and relevant liabilities as of December 31, 2018 and December 31, 2017.

91

6. OPERATING SEGMENT:

Though the Bank conducts business activities related to financial services, in accordance with relevant laws, such as the Export-Import Bank of Korea Act, it does not report separate segment information, as management considers the Bank to be operating under one core business. The Bank determines geographic information of its revenue and non-current assets based on originating location. As the Bank’s originating location for all transactions is in Korea, the geographical information for revenue and non-current assets is omitted.

7. CASH AND DUE FROM FINANCIAL INSTITUTIONS:

(1) Cash and cash equivalents as of December 31, 2018 and December 31, 2017 are as follows (Korean won in millions):

Detail	Dec. 31, 2018			Dec. 31, 2017
Due from financial institutions in local currency	￦	604,286		￦	439,119
Due from financial institutions in foreign currencies		3,078,577			1,652,801
Subtotal		3,682,863			2,091,920
Restricted due from financial institutions		(2,132,796	)		(985,926	)
Due from financial institutions with original maturities of more than three months at acquisition date		(530,000	)		(290,000	)
Subtotal		(2,682,796	)		(1,275,926	)
Total(*1)	￦	1,020,067		￦	815,994

(*1) Equal to the cash and due from financial institutions as presented on the separate statements of cash flows.

(2) Details of due from financial institutions as of December 31, 2018 and 2017 are as follows (Korean won in millions):

Detail	December 31, 2018				December 31, 2017
	Amount		Interest (%)		Amount		Interest (%)
Due from financial institutions in local currency:
Demand deposits	￦	2,026		—	￦	1,439		—
Time deposits		600,000		1.83 ~ 2.27		430,000		1,60 ~ 2.15
Others		600		1.10		4,900		1.10
Margin for derivatives		1,660		—		2,780		—
Subtotal		604,286				439,119
Due from financial institutions in foreign currencies:
Demand deposits		43,379		—		44,057		—
Time deposits		—		—		28,473		—
On demand		865,382		—		572,133		—
Offshore demand deposits		38,680		—		24,993		—
Others		1,836,348		0.00 ~ 0.45		784,438		0.00 ~ 0.45
Margin for derivatives		294,788		—		198,707		—
Subtotal		3,078,577				1,652,801
Total	￦	3,682,863			￦	2,091,920

92

(3) Restricted due from financial institutions as of December 31, 2018 and December 31, 2017 are as follows (Korean won in millions):

Detail	Financial Institution	Dec. 31, 2018		Dec. 31, 2017		Reason for restriction
Others	DEUTSCHE BANK TRUST COMPANY AMERICAS and others	￦	2,132,796	￦	985,926	Credit support annex for derivative transactions

8. FINANCIAL ASSETS AT FVTPL:

Details of financial assets at FVTPL as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

	Amount
Debt securities in local currency
Paid-in capital	￦	67,614
Beneficiary certificates		1,212,517
Subtotal		1,280,131
Debt securities in foreign currency
Debt securities		49,781
Paid-in capital		4,415
Beneficiary certificates		92,181
Equity securities in foreign currency stocks		17,223
Subtotal		163,600
Loans at FVPL
Privately placed corporate bonds		16,960
Derivative assets
Stocks		583
Interest product		445,329
Currency product		391,596
Others		24
Subtotal		837,532
Total	￦	2,298,223

(December 31, 2017)

	Amount
Equity securities
Beneficiary certificates	￦	725,613
Debt securities
Debt securities in foreign currency		38,665
Derivative assets
Stocks		1,444
Interest product		329,246
Currency product		521,982
Others		23
		852,695
Total	￦	1,616,973

93

9. FINANCIAL INVESTMENTS:

Details of financial investments as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

	Amount
Financial assets at FVOCI
Debt securities in local currency
National bond	￦	99,914
Derivative linked securities		50,000
Equity securities
Stocks		7,768,874
Paid-in capital		16,876
Subtotal		7,935,664
Debt securities in foreign currencies
Corporate bonds and etc.(*1)		693,304
Financial assets at amortized cost
Debt securities in foreign currencies
Corporate bonds and etc.(*1)		215,788
Total	￦	8,844,756

(December 31, 2017)

	Amount
AFS securities in local currency
Equity securities
Marketable securities	￦	220,370
Non-marketable securities		5,410,644
Equity investments in unincorporated entities		62,117
Others		65,642
Debt securities
Debt securities		149,085
Subtotal		5,907,858
AFS securities in foreign currencies
Equity securities
Stocks		17,764
Paid-in capital		4,423
Debt securities
Debt securities(*1)		762,433
Subtotal		784,620
HTM securities in foreign currencies
Debt securities
Debt securities(*1)		89,477
Total	￦	6,781,955

(*1) Includes securities, which are pledged as collateral amounting to ￦60,229 million and ￦31,220 million as of December 31, 2018 and 2017, respectively.

94

10. LOANS AT AMORTIZED COST:

Loans as presented below exclude loan valuation adjustment related to fair value hedging amounting to ￦12,801 million and ￦24,182 million as of December 31, 2018 and 2017, respectively.

(1) Details of loans as of December 31, 2018 and December 31, 2017 are as follows (Korean won in millions):

	Detail	Dec. 31, 2018			Dec. 31, 2017
Loans in local currency	Loans for export	￦	11,509,858		￦	12,027,416
	Loans for foreign investments		1,290,776			797,992
	Loans for import		2,550,627			1,959,237
	Troubled Debt Restructuring		951,800			2,161,537
	Others		533,547			2,009,825
	Subtotal		16,836,608			18,956,007
Loans in foreign currencies	Loans for export		26,938,880			25,985,848
	Loans for foreign investments		21,167,724			19,518,443
	Loans for rediscounted trading notes		1,017,471			—
	Loans for import		1,921,810			1,594,141
	Overseas funding loans		585,160			546,938
	Domestic usance bills		180,301			172,830
	Others		49,906			54,422
	Subtotal		51,861,252			47,872,622
Others	Foreign-currency bills bought		876,098			1,063,717
	Advance payments on acceptances and guarantees		30,473			10,656
	Call loans		2,515,725			2,056,086
	Interbank loans in foreign currencies		—			1,925,158
	Subtotal		3,422,296			5,055,617
	Total		72,120,156			71,884,246
	Net deferred origination fees and costs		(378,931	)		(398,113	)
	Allowance for loan losses		(1,554,304	)		(3,286,995	)
	Total	￦	70,186,920		￦	68,199,138

95

(2) Loans classified by type of customers as of December 31, 2018 and 2017 are as follows (Korean won in millions):

(December 31, 2018)

	Detail	Loans in local currency			Loans in foreign currencies			Others			Total			Ratio (%)
Customer	Large enterprise	￦	6,838,493		￦	30,626,080		￦	102,321		￦	37,566,894			60.73
	Small and medium sized enterprise		6,298,185			5,637,751			165,411			12,101,347			19.56
	Public sector and others		1,969,233			10,218,766			—			12,187,999			19.71
	Subtotal		15,105,911			46,482,597			267,732			61,856,240			100.00
	Net deferred origination fees and costs		(5,637	)		(371,438	)		—			(377,075	)
	Allowance for loan losses		(706,023	)		(797,970	)		(31,573	)		(1,535,566	)
	Subtotal		14,394,251			45,313,189			236,159			59,943,599
Financial institution	Bank		1,730,697			2,941,252			3,024,925			7,696,874			74.99
	Others		—			2,437,402			129,640			2,567,042			25.01
	Subtotal		1,730,697			5,378,654			3,154,565			10,263,916			100.00
	Net deferred origination fees and costs		—			(1,856	)		—			(1,856	)
	Allowance for loan losses		(948	)		(14,682	)		(3,109	)		(18,739	)
	Subtotal		1,729,749			5,362,116			3,151,456			10,243,321
	Total	￦	16,124,000		￦	50,675,305		￦	3,387,615		￦	70,186,920

(December 31, 2017)

	Detail	Loans in local currency			Loans in foreign currencies			Others			Total			Ratio (%)
Customer	Large enterprise	￦	8,000,990		￦	29,003,791		￦	160,194		￦	37,164,975			60.29
	Small and medium sized enterprise		8,511,777			6,207,018			132,851			14,851,646			24.09
	Public sector and others		1,083,874			8,545,395			—			9,629,269			15.62
	Subtotal		17,596,641			43,756,204			293,045			61,645,890			100.00
	Net deferred origination fees and costs		(3,886	)		(392,432	)		—			(396,318	)
	Allowance for loan losses		(2,891,976	)		(368,530	)		(9,700	)		(3,270,206	)
	Subtotal		14,700,779			42,995,242			283,345			57,979,366
Financial institution	Bank		1,359,366			2,368,339			4,494,987			8,222,692			80.31
	Others		—			1,748,079			267,585			2,015,664			19.69
	Subtotal		1,359,366			4,116,418			4,762,572			10,238,356			100.00
	Net deferred origination fees and costs		—			(1,795	)		—			(1,795	)
	Allowance for loan losses		(800	)		(8,450	)		(7,539	)		(16,789	)
	Subtotal		1,358,566			4,106,173			4,755,033			10,219,772
	Total	￦	16,059,345		￦	47,101,415		￦	5,038,378		￦	68,199,138

96

(3) Changes in allowance for loan losses for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(2018)

	12 month expected credit losses			Lifetime expected credit losses			Credit- impaired financial assets			Total
Beginning balance(*1)	￦	240,653		￦	415,963		￦	2,661,044		￦	3,317,660
- Transfer to 12 month expected credit losses		6,436			(6,384	)		(52	)		—
- Transfer to lifetime expected credit losses		(4,482	)		4,494			(12	)		—
- Transfer to credit-impaired financial assets		(994	)		(28,527	)		29,521			—
Written-off		(1,091	)		—			(2,018,447	)		(2,019,538	)
Collection of written-off loans		8,742			—			2,056			10,798
Loan-for-equity swap		—			—			(31,364	)		(31,364	)
Others		(38,592	)		—			—			(38,592	)
Unwinding effect		—			(299	)		(34,048	)		(34,347	)
Foreign exchange translation		3,418			13,987			4,896			22,301
Additional provisions, net of reversals		43,067			159,506			124,813			327,386
Ending balance	￦	257,157		￦	558,740		￦	738,407		￦	1,554,304

(*1) The beginning balance was restated in accordance with K-IFRS No. 1109.

(2017)

	Individual assessment			Collective assessment			Total
Beginning balance	￦	2,228,715		￦	697,020		￦	2,925,735
Written-off		(205,540	)		(79,080	)		(284,620	)
Collection of written-off loans		445			18,094			18,539
Loan-for-equity swap		(48,404	)		(4,093	)		(52,497	)
Others		—			(938,437	)		(938,437	)
Unwinding effect		(74,103	)		(5,745	)		(79,848	)
Foreign exchange translation		(10,137	)		(15,932	)		(26,069	)
Additional provisions, net of reversals		706,250			1,017,942			1,724,192
Transfer in (out)		372,475			(372,475	)		—
Ending balance	￦	2,969,701		￦	317,294		￦	3,286,995

97

11. INVESTMENTS IN ASSOCIATES AND SUBSIDIARIES:

(1) Details of investments in associates and subsidiaries as of December 31, 2018 and December 31, 2017 are as follows (Korean won in millions):

(December 31, 2018)

Company

Detail

Location

Business

Year-end

Ownership (%)

Net asset(*1)

Carrying amount

KEXIM Bank UK Limited

Subsidiary

United Kingdom

Financial service

December

100.00

￦

45,874

￦

48,460

KEXIM Vietnam Leasing Co.

Subsidiary

Vietnam

Financial service

December

100.00

17,316

10,275

PT.KOEXIM Mandiri Finance

Subsidiary

Indonesia

Financial service

December

85.00

26,754

25,270

KEXIM Asia Limited

Subsidiary

Hong Kong

Financial service

December

100.00

64,034

49,139

Korea Asset Management Corporation

Associate

Korea

Financial service

December

25.86

483,324

380,520

Credit Guarantee and Investment Fund(*2,4)

Associate

Philippines

Financial service

December

11.64

116,502

115,486

SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.(*5)

Associate

Korea

Shipbuilding

December

81.25

(1,216,974

)

—

DAESUN Shipbuilding & Engineering Co., Ltd.(*6)

Associate

Korea

Shipbuilding

December

83.03

(270,822

)

—

KTB Newlake Global Healthcare PEF

Associate

Korea

Financial service

December

25.00

8,017

8,795

KBS-KDB Private Equity Fund

Associate

Korea

Financial service

December

20.30

5,892

6,032

Korea Shipping and Maritime Transportation

Associate

Korea

Financial service

December

40.00

421,440

400,000

Korea Aerospace Industries. Ltd.

Associate

Korea

Manufacturing

December

26.41

273,978

1,467,520

Total

￦

2,511,497

98

(December 31, 2017)

Company

Detail

Location

Business

Year-end

Ownership (%)

Net asset(*1)

Carrying amount

KEXIM Bank UK Limited

Subsidiary

United Kingdom

Financial service

December

100.00

￦

45,079

￦

48,460

KEXIM Vietnam Leasing Co.

Subsidiary

Vietnam

Financial service

December

100.00

15,568

10,275

PT.KOEXIM Mandiri Finance

Subsidiary

Indonesia

Financial service

December

85.00

27,359

25,270

KEXIM Asia Limited

Subsidiary

Hong Kong

Financial service

December

100.00

60,176

49,139

Korea Asset Management Corporation

Associate

Korea

Financial service

December

25.86

450,571

380,520

Credit Guarantee and Investment Fund(*2,4)

Associate

Philippines

Financial service

December

14.29

113,046

115,486

Korea Marine Guarantee Inc.

Associate

Korea

Financial service

December

41.88

130,788

135,000

SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.(*3,4)

Associate

Korea

Shipbuilding

December

81.25

(972,550

)

—

DAESUN Shipbuilding & Engineering Co., Ltd.(*4,6)

Associate

Korea

Shipbuilding

December

67.30

(264,588

)

—

KTB Newlake Global Healthcare PEF

Associate

Korea

Financial service

December

25.00

2,010

2,570

KBS-KDB Private Equity Fund

Associate

Korea

Financial service

December

20.83

2,096

2,367

Korea Shipping and Maritime Transportation

Associate

Korea

Financial service

December

40.00

304,812

362,000

Korea Aerospace Industries. Ltd.

Associate

Korea

Manufacturing

December

26.41

301,181

1,467,520

Total

￦

2,598,607

(*1) In cases of associates, the amounts represent net asset after taking into account percentage of ownership.

(*2) As of December 31, 2018 and December 31, 2017, this entity is classified into an associate because the Bank has significant influence in the way of representation on the board of directors or equivalent governing body of the investee.

(*3) As of December 31, 2017, this entity was under the creditor-led work out programs. The Bank would need to have at least 75% of the total creditor’s loans to have substantive control based on the creditor’s agreement. As the Bank had only 69.01% of the total creditor’s loans, this was classified into associates.

(*4) The most recent financial statements were used (due to the unavailability of the ones as of December 31, 2018) in which the significant transactions or events, which occurred between the end of preceding reporting period of an associate and that of the Bank, had been reflected.

(*5) Since the corporate restructuring process has been initiated during the current year and major decisions have been made by the courts, the Bank classified the entity as an associate not considering to have substantial control over the entity.

(*6) This entity was under the creditor-led work out programs. The Bank should have at least 75% of the total creditor’s loans to have a substantive control based on the creditor’s agreement. As the Bank had only 70.60% of the total creditor’s loans, this was classified into associates.

99

(2) Changes in investments in associates and subsidiaries for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(2018)

Company	Detail		Beginning balance		Acquisition		Disposals			Impairment loss		Ending balance
KEXIM Bank UK Limited		Subsidiary	￦	48,460	￦	—	￦	—		￦	—	￦	48,460
KEXIM Vietnam Leasing Co.		Subsidiary		10,275		—		—			—		10,275
PT.KOEXIM Mandiri Finance		Subsidiary		25,270		—		—			—		25,270
KEXIM Asia Limited		Subsidiary		49,139		—		—			—		49,139
Korea Asset Management Corporation		Associate		380,520		—		—			—		380,520
Credit Guarantee and Investment Fund		Associate		115,486		—		—			—		115,486
Korea Marine Guarantee Inc.		Associate		135,000		—		(135,000	)		—		—
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		Associate		—		—		—			—		—
DAESUN Shipbuilding & Engineering Co., Ltd.		Associate		—		—		—			—		—
KTB Newlake Global Healthcare PEF		Associate		2,570		6,225		—			—		8,795
KBS-KDB Private Equity Fund		Associate		2,367		4,140		(475	)		—		6,032
Korea Shipping and Maritime Transportation		Associate		362,000		38,000		—			—		400,000
Korea Aerospace Industries. Ltd.		Associate		1,467,520		—		—			—		1,467,520
Total			￦	2,598,607	￦	48,365	￦	(135,475	)	￦	—	￦	2,511,497

100

(2017)

Company	Detail		Beginning balance		Acquisition		Disposals			Impairment loss			Ending balance
KEXIM Bank UK Limited		Subsidiary	￦	48,460	￦	—	￦	—		￦	—		￦	48,460
KEXIM Vietnam Leasing Co.		Subsidiary		10,275		—		—			—			10,275
PT.KOEXIM Mandiri Finance		Subsidiary		25,270		—		—			—			25,270
KEXIM Asia Limited		Subsidiary		49,139		—		—			—			49,139
Korea Asset Management Corporation		Associate		380,520		—		—			—			380,520
Credit Guarantee and Investment Fund		Associate		115,486		—		—			—			115,486
Korea Marine Guarantee Inc.		Associate		135,000		—		—			—			135,000
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		Associate		—		236		—			(236	)		—
DAESUN Shipbuilding & Engineering Co., Ltd.		Associate		—		—		—			—			—
EQP Global Energy Infrastructure PEF		Associate		280		—		(280	)		—			—
KTB Newlake Global Healthcare PEF		Associate		1,153		1,417		—			—			2,570
KBS-KDB Private Equity Fund		Associate		501		1,866		—			—			2,367
Korea Shipping and Maritime Transportation		Associate		—		362,000		—			—			362,000
Korea Aerospace Industries. Ltd.		Associate		—		1,467,520		—			—			1,467,520
Total			￦	766,084	￦	1,833,039	￦	(280	)	￦	(236	)	￦	2,598,607

(3) Summarized financial information of associates and subsidiaries as of and for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(December 31, 2018)

Company	Assets		Liabilities		Operating income (loss)			Net income (loss)			Comprehensive net income (loss)
KEXIM Bank UK Limited	￦	420,787	￦	374,913	￦	2,165		￦	2,283		￦	794
KEXIM Vietnam Leasing Co.		164,600		147,284		1,285			1,053			1,749
PT.KOEXIM Mandiri Finance		179,376		152,623		1,424			682			(87	)
KEXIM Asia Limited		464,899		400,865		2,991			3,377			4,163
Korea Asset Management Corporation		4,059,409		2,190,405		85,974			72,143			(24,757	)
Credit Guarantee and Investment Fund		1,042,772		41,893		17,007			16,275			(18,694	)
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		939,911		2,703,386		(33,332	)		(111,591	)		(63	)
DAESUN Shipbuilding & Engineering Co., Ltd.		408,591		792,192		4,164			(2,568	)		14,001
KTB Newlake Global Healthcare PEF		32,380		311		(870	)		(870	)		(870	)
KBS-KDB Private Equity Fund		29,249		227		608			608			608
Korea Shipping and Maritime Transportation		1,062,659		9,060		8,036			199,781			(3,347	)
Korea Aerospace Industries. Ltd.		3,932,938		2,887,097		144,468			50,262			42,379

101

(December 31, 2017)

Company	Assets		Liabilities		Operating income (loss)			Net income (loss)			Comprehensive net income (loss)
KEXIM Bank UK Limited	￦	453,479	￦	408,400	￦	3,470		￦	2,831		￦	(1,129	)
KEXIM Vietnam Leasing Co.		144,783		129,216		1,786			1,599			(2,166	)
PT.KOEXIM Mandiri Finance		176,436		149,077		2,769			2,397			(5,003	)
KEXIM Asia Limited		423,166		362,989		3,452			3,094			(13,969	)
Korea Asset Management Corporation		3,567,608		1,825,259		60,350			45,137			33,104
Credit Guarantee and Investment Fund		837,193		46,106		12,234			12,310			15,269
Korea Marine Guarantee Inc.		331,270		18,978		(849	)		(1,863	)		(1,785	)
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		1,294,318		2,703,607		43,967			7,976			15,412
DAESUN Shipbuilding & Engineering Co., Ltd.		420,575		795,346		(10,398	)		(143	)		(143	)
KTB Newlake Global Healthcare PEF		8,279		239		(671	)		(671	)		(671	)
KBS-KDB Private Equity Fund		10,516		454		(915	)		(915	)		(915	)
Korea Shipping and Maritime Transportation		764,796		2,767		27,646			(153,589	)		(142,856	)
Korea Aerospace Industries. Ltd.		3,166,223		2,025,818		(208,873	)		(235,186	)		(239,776	)

12. TANGIBLE ASSETS:

(1) Details of tangible assets for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(December 31, 2018)

Detail	Acquisition cost		Accumulated depreciation			Government grants			Book value
Lands	￦	190,807	￦	—		￦	—		￦	190,807
Buildings		100,778		(36,237	)		(17	)		64,524
Vehicles		4,011		(3,411	)		—			600
Furniture and fixture		37,026		(26,855	)		—			10,171
Total	￦	332,622	￦	(66,503	)	￦	(17	)	￦	266,102

(December 31, 2017)

Detail	Acquisition cost		Accumulated depreciation			Government grants			Book value
Lands	￦	190,807	￦	—		￦	—		￦	190,807
Buildings		97,539		(33,834	)		(17	)		63,687
Vehicles		3,961		(3,088	)		—			874
Furniture and fixture		35,014		(21,917	)		—			13,097
Total	￦	327,321	￦	(58,839	)	￦	(17	)	￦	268,465

102

(2) Changes in tangible assets for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(2018)

Detail	Beginning balance		Acquisitions		Disposals			Depreciation			Ending balance
Lands	￦	190,807	￦	—	￦	—		￦	—		￦	190,807
Buildings		63,687		3,239		—			(2,402	)		64,524
Vehicles		874		200		—			(474	)		600
Furniture and fixture		13,097		2,458		(6	)		(5,378	)		10,171
Total	￦	268,465	￦	5,897	￦	(6	)	￦	(8,254	)	￦	266,102

(2017)

Detail	Beginning balance		Acquisitions		Disposals			Depreciation			Ending balance
Lands	￦	190,807	￦	—	￦	—		￦	—		￦	190,807
Buildings		66,383		—		—			(2,696	)		63,687
Vehicles		1,278		230		(41	)		(593	)		874
Furniture and fixture		14,669		4,084		(5	)		(5,651	)		13,097
Total	￦	273,137	￦	4,314	￦	(46	)	￦	(8,940	)	￦	268,465

13. INTANGIBLE ASSETS:

(1) Details of intangible assets for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(December 31, 2018)

Detail	Acquisition cost		Accumulated Depreciation			Accumulated Impairment Losses			Book value
Computer software	￦	23,795	￦	(12,792	)	￦	—		￦	11,003
System development fees		47,821		(23,836	)		—			23,985
Memberships		3,683		—			(217	)		3,466
Total	￦	75,299	￦	(36,628	)	￦	(217	)	￦	38,454

(December 31, 2017)

Detail	Acquisition cost		Accumulated Depreciation			Accumulated Impairment Losses			Book value
Computer software	￦	22,206	￦	(9,169	)	￦	—		￦	13,037
System development fees		46,405		(15,566	)		—			30,839
Memberships		4,501		—			(755	)		3,746
Total	￦	73,112	￦	(24,735	)	￦	(755	)	￦	47,622

103

(2) Changes in intangible assets for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(2018)

Detail	Beginning balance		Acquisitions		Disposals			Amortization			Impairment		Ending balance
Computer software	￦	13,037	￦	1,500	￦	—		￦	(3,534	)	￦	—	￦	11,003
System development fees		30,839		1,416		—			(8,270	)		—		23,985
Memberships		3,746		—		(280	)		—			—		3,466
Total	￦	47,622	￦	2,916	￦	(280	)	￦	(11,804	)	￦	—	￦	38,454

(2017)

Detail	Beginning balance		Acquisitions		Disposals			Amortization			Impairment			Ending balance
Computer software	￦	12,400	￦	3,939	￦	—		￦	(3,302	)	￦	—		￦	13,037
System development fees		26,066		10,690		—			(5,917	)		—			30,839
Memberships		4,133		336		(506	)		—			(217	)		3,746
Total	￦	42,599	￦	14,965	￦	(506	)	￦	(9,219	)	￦	(217	)	￦	47,622

14. OTHER ASSETS:

(1) Details of other assets as of December 31, 2018 and 2017, are as follows (Korean won in millions):

	Dec. 31, 2018			Dec. 31, 2017
Other financial assets:
Guarantee deposits	￦	37,638		￦	38,153
Accounts receivable		203,866			238,046
Accrued income		893,465			825,800
Receivable spot exchange		43			63
Allowances for loan losses on other assets		(170,291	)		(168,552	)
Subtotal		964,721			933,510
Other assets:
Advance payments		—			1
Prepaid expenses		1,693			2,048
Current income tax asset		852			4,703
Sundry assets		12,362			10,269
Subtotal		14,907			17,021
Total	￦	979,628		￦	950,531

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(2) Changes in allowances for loan losses on other assets for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018			2017
Beginning balance(*1)	￦	168,156		￦	50,938
Collection of written-off loans		42			15
Foreign exchange translation		—			(8	)
Additional provisions		2,136			117,622
Others		(43	)		(15	)
Ending balance	￦	170,291		￦	168,552

(*1) The beginning balance was restated in accordance with K-IFRS No. 1109.

15. BORROWINGS:

(1) Details of borrowings as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

Detail	Lender	Interest rate (%)	Amount
Borrowings in foreign currencies:
Borrowings from the Government	MINISTRY OF ECONOMY AND FINANCE	LIBOR 3M+0.55 ~ LIBOR 3M+0.78	￦	2,938,456
Long term borrowings from foreign financial institutions	CREDIT AGRICOLE CIB and others	LIBOR 3M+0.52 ~ LIBOR 3M+0.85		1,677,150
Discount on borrowings				(1,159	)
Offshore commercial papers denominated in foreign currency	SOCIETE GENERALE, HONG KONG BR. and others	(-)0.37 ~ 2.32		92,669
Others (Foreign banks)	DBS BANK LTD, and others	0.00 ~ 0.03		180,302
Others (CSA)	ING BANK N.V. AMSTERDAM and others	—		6,060
Total			￦	4,893,478

(December 31, 2017)

Detail	Lender	Interest rate (%)	Amount
Borrowings in foreign currencies:
Borrowings from the Government	MINISTRY OF ECONOMY AND FINANCE	LIBOR 3M+0.50 ~ LIBOR 3M+0.78	￦	2,976,435
Long term borrowings from foreign financial institutions	BANK OF AMERICA N.A and others	LIBOR 3M+0.40 ~ LIBOR 3M+0.85		2,678,500
Discount on borrowings				(2,224	)
Commercial papers	BRED BANQUE POPULAIRE	(-)0.40		42,727
Offshore commercial papers denominated in foreign currency	BARCLAYS BANK PLC LONDON and others	(-)0.39 ~ 1.69		72,999
Others (Foreign banks)	DBS BANK LTD, SINGAPORE BRANCH and others	0.00 ~ 0.06		172,830
Others (CSA)	CITIBANK N.A., HONG KONG and others	—		72,190
Total			￦	6,013,457

105

(2) Details of the borrowings from other financial institutions as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

Type	Call-money		Borrowings in foreign currencies		Total
Commercial banks	￦	—	￦	1,955,022	￦	1,955,022

(December 31, 2017)

Type	Call-money		Borrowings in foreign currencies		Total
Commercial banks	￦	—	￦	3,037,022	￦	3,037,022

The above borrowings excluded the present value discounting effect.

16. DEBENTURES:

Details of debentures as of December 31, 2018 and 2017, are as follows (Korean won in millions):

Detail	Dec. 31, 2018					Dec. 31, 2017
	Interest rate (%)		Amount			Interest rate (%)		Amount
Local currency:
Floating rate		1.98 ~ 2.01	￦	480,000			1.67 ~ 1.83	￦	1,100,000
Fixed rate		1.67 ~ 4.70		14,185,000			1.35 ~ 4.70		13,020,000
Subtotal				14,665,000					14,120,000
Fair value hedging adjusting				(51,844	)				(80,211	)
Discount on debentures:				(81,024	)				(78,861	)
Subtotal				14,532,132					13,960,928
Foreign currencies:
Floating rate		LIBOR+0.26 ~ LIBOR+1.00		9,442,431			LIBOR+0.30 ~ LIBOR +1.00		7,685,330
Fixed rate		0.16 ~ 8.52		42,442,911			0.17 ~ 9.32		39,253,997
Subtotal				51,885,342					46,939,327
Fair value hedging adjusting				(360,624	)				(98,744	)
Discount on debentures				(113,880	)				(116,413	)
Subtotal				51,410,838					46,724,170
Total			￦	65,942,970				￦	60,685,098

17. PROVISIONS:

(1) Details of provisions as of December 31, 2018 and 2017, are as follows (Korean won in millions):

	Dec. 31, 2018		Dec. 31, 2017
Provisions for acceptances and guarantees	￦	602,435	￦	509,038
Provisions for unused loan commitments		149,447		166,080
Total	￦	751,882	￦	675,118

106

(2) Changes in provisions for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(2018)

	Acceptances and guarantees
	12 month expected credit losses			Lifetime expected credit losses			Credit-impaired financial assets			Total
Beginning balance(*1)	￦	45,086		￦	440,860		￦	52,335		￦	538,281
- Transfer to 12 month expected credit losses		12,226			(12,226	)		—			—
- Transfer to lifetime expected credit losses		(6	)		6			—			—
- Transfer to credit-impaired financial assets		(48	)		(424	)		472			—
Foreign exchange translation		1,355			6,104			(172	)		7,287
Additional provisions (reversal of provision)		(12,126	)		70,343			(1,350	)		56,867
Ending balance	￦	46,487		￦	504,663		￦	51,285		￦	602,435

	Unused loan commitments
	12 month expected credit losses		Lifetime expected credit losses			Credit-impaired financial assets			Total
Beginning balance(*1)	￦	16,961	￦	89,674		￦	84,441		￦	191,076
- Transfer to 12 month expected credit losses		92		(90	)		(2	)		—
- Transfer to lifetime expected credit losses		—		165			(165	)		—
- Transfer to credit-impaired financial assets		—		—			—			—
Foreign exchange translation		112		258			4			374
Additional provisions (Reversal of provision)		9,924		29,887			(81,814	)		(42,003	)
Ending balance	￦	27,089	￦	119,894		￦	2,464		￦	149,447

(*1) The beginning balance was restated in accordance with K-IFRS No. 1109.

(2017)

Detail	Acceptances and guarantees									Unused loan commitments			Provision for others			Total
	Individual assessment			Collective assessment			Subtotal
Beginning balance	￦	403,504		￦	1,004,406		￦	1,407,910		￦	228,839		￦	15,198		￦	1,651,947
Foreign exchange translation		(5,572	)		(14,047	)		(19,619	)		(104	)		—			(19,723	)
Additional provisions (Reversal of provision)		(314,764	)		(564,489	)		(879,253	)		(62,655	)		1,344			(940,564	)
Transfers in (out)		370,270			(370,270	)		—			—			(14,818	)		(14,818	)
Payment		—			—			—			—			(1,724	)		(1,724	)
Ending balance	￦	453,438		￦	55,600		￦	509,038		￦	166,080		￦	—		￦	675,118

18. RETIREMENT BENEFIT PLAN:

The Bank operates both defined benefit plan and defined contribution plan.

(1) Defined benefit plan

The Bank operates defined benefit plans, which have the following characteristics:

• The entity has the obligation to pay the agreed benefits to all its current and past employees.

107

• The entity is liable for actuarial risk (excess of actual payment against expected amount) and investment risk.

The present value of the defined benefit obligation recognized in the separate statements of financial position is calculated annually by independent actuaries in accordance with actuarial valuation method. The present value of the defined benefit obligation is calculated using the projected unit credit method (“PUC”). The data used in the PUC, such as interest rates, future salary increase rate, mortality rate, consumer price index and expected return on plan asset, are based on observable market data and historical data, which are annually updated.

Actuarial assumptions may differ from actual results due to change in the market, economic trend and mortality trend, which may affect defined benefit obligation liabilities and future payments. Actuarial gains and losses arising from changes in actuarial assumptions are recognized in the period incurred through other comprehensive income or loss.

(2) Details of defined benefit obligation as of December 31, 2018 and 2017, are as follows (Korean won in millions):

	Dec. 31, 2018			Dec. 31, 2017
Present value of defined benefit obligations	￦	97,160		￦	79,956
Fair value of plan assets		(90,810	)		(92,183	)
Defined benefit liabilities(assets), net	￦	6,350		￦	(12,227	)

(3) Changes in net defined benefit obligations for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(2018)

	Present value of the defined benefit obligation			Plan assets			Net defined benefit obligation
Beginning balance	￦	79,956		￦	(92,183	)	￦	(12,227	)
Contributions from the employer		—						—
Current service cost		9,314			—			9,314
Interest expense (income)		3,103			(3,586	)		(483	)
Return on plan assets, excluding the interest expense (income)		—			1,768			1,768
Actuarial gains and losses arising from changes in financial assumptions		3,303			—			3,303
Actuarial gains and losses arising from experience adjustments		4,494			—			4,494
Management fee on plan assets		—			215			215
Benefits paid		(3,010	)		2,976			(34	)
Ending balance	￦	97,160		￦	(90,810	)	￦	6,350

108

(2017)

	Present value of the defined benefit obligation			Plan assets			Net defined benefit obligation
Beginning balance	￦	72,105		￦	(70,013	)	￦	2,092
Contributions from the employer		—			(27,100	)		(27,100	)
Current service cost		8,912			—			8,912
Interest expense (income)		2,612			(2,548	)		64
Return on plan assets, excluding the interest expense (income)		—			1,258			1,258
Actuarial gains and losses arising from changes in financial assumptions		(3,081	)		—			(3,081	)
Actuarial gains and losses arising from experience adjustments		5,029			—			5,029
Management fee on plan assets		—			122			122
Benefits paid		(5,621	)		6,098			477
Ending balance	￦	79,956		￦	(92,183	)	￦	(12,227	)

(4) Details of plan assets as of December 31, 2018 and 2017, are as follows (Korean won in millions):

	Dec. 31, 2018		Dec. 31, 2017
Cash and cash equivalent	￦	35,943	￦	3
Debt securities		5,551		15,073
Others		49,316		77,107
Total	￦	90,810	￦	92,183

(5) Actuarial assumptions used in retirement benefit obligation assessment as of December 31, 2018 and 2017 are as follows:

	Dec. 31, 2018			Dec. 31, 2017
Discount rate		3.38	%		3.89	%
Expected wage growth rate		2.03	%		2.43	%

(6) Assuming that all the other assumptions remain unchanged, the effect of changes in the significant actuarial assumptions which were made within the reasonable limit on retirement benefit obligations as of December 31, 2018 and 2017 are as follows (Korean won in millions):

(December 31, 2018)

Detail	1%p Increase			1%p Decrease
Change of discount rate	￦	(10,651	)	￦	12,674
Change of future salary increase rate		12,725			(10,887	)

(December 31, 2017)

Detail	1%p Increase			1%p Decrease
Change of discount rate	￦	(9,081	)	￦	10,819
Change of future salary increase rate		10,883			(9,290	)

109

The above sensitivity analysis does not present any actual changes in the retirement benefit obligations as there is no change in actuarial assumptions which is independently made due to the correlation among the assumptions. In addition, the actuarial present value of promised retirement benefits in the sensitivity analysis is determined using the projected unit credit method, which is used in the calculation of the retirement benefit obligations in the separate financial statements.

(7) Retirement benefit cost incurred from the defined contribution plan for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018		2017
Retirement benefits	￦	797	￦	677

19. OTHER LIABILITIES:

Details of other liabilities as of December 31, 2018 and 2017, are as follows (Korean won in millions):

	Dec. 31, 2018		Dec. 31, 2017
Other financial liabilities:
Financial guarantee contract liabilities	￦	1,119,984	￦	1,123,773
Foreign exchanges payable		157		213
Accounts payable		14,130		57,022
Accrued expenses		703,247		613,328
Guarantee deposit received		161		162
Subtotal		1,837,679		1,794,498
Other liabilities:
Allowance for credit loss in derivatives		89,097		69,910
Unearned income		210,728		220,441
Current tax payable		42,917		—
Sundry liabilities		7,321		4,101
Subtotal		350,063		294,452
Total	￦	2,187,742	￦	2,088,950

20. DERIVATIVES:

The Bank operates derivatives both for trading and hedging purposes. Derivatives held for trading purpose are included in financial assets and liabilities at FVTPL.

(1) Fair value hedge

Fair value hedge is a hedge of the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss. When applying fair value hedge, the gain or loss on the hedged item attributable to the hedged risk shall adjust the carrying amount of the hedged item and be recognized in profit or loss.

The Bank shall discontinue prospectively the fair value hedge if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Bank revokes the designation. Any adjustment arising from the gain or loss on the hedged item attributable to the hedged risk to the carrying amount of a hedged financial instrument for which the effective interest method is used shall be amortized to profit or loss.

110

The Bank uses interest rate swaps for hedging changes of fair values in hedged items arising from changes in interest rates. The Bank also uses currency swaps for hedging changes of fair values in hedged items arising from changes in foreign exchange rates

(2) Cash flow hedge

Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction and could affect profit or loss. When applying cash flow hedge, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge shall be recognized in other comprehensive income; and the ineffective portion of the gain or loss on the hedging instrument are recognized in profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the same period or periods during which the hedged forecast cash flows affect profit or loss.

The Bank shall discontinue prospectively the cash flow hedge if hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Bank revokes the designation. The forecasted transaction is no longer expected to occur, any related cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income from the period when the hedge was effective are reclassified from equity to profit or loss as a reclassification adjustment.

The Bank uses interest rate swaps for hedging changes of cash flows in hedged items arising from changes in interest rates. The Bank also uses currency swaps for hedging changes of cash flows in hedged items arising from changes in foreign exchange.

(3) Details of derivative assets and liabilities as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

			Derivative assets
Detail	Notional		Fair value hedge		Cash flow hedge		Trading		Total
Interest:
Interest rate swaps	￦	40,968,896	￦	25,760	￦	—	￦	445,329	￦	471,089
Currency:
Currency forwards		5,349,279		—		—		49,230		49,230
Currency swaps		29,145,216		49,983		—		342,366		392,349
Subtotal		34,494,495		49,983		—		391,596		441,579
Stock:
Stock options		46,952		—		—		583		583
Others:
Other derivatives		—		—		—		24		24
Total	￦	75,510,343	￦	75,743	￦	—	￦	837,532	￦	913,275

111

			Derivative liabilities
Detail	Notional		Fair value hedge		Cash flow hedge		Trading		Total
Interest:
Interest rate swaps	￦	40,968,896	￦	504,584	￦	—	￦	376,328	￦	880,912
Currency:
Currency forwards		5,349,279		—		—		56,123		56,123
Currency swaps		29,145,216		1,123,719		—		473,222		1,596,941
Subtotal		34,494,495		1,123,719		—		529,345		1,653,064
Stock:
Stock options		46,952		—		—		210		210
Others:
Other derivatives		—		—		—		18		18
Total	￦	75,510,343	￦	1,628,303	￦	—	￦	905,901	￦	2,534,204

(December 31, 2017)

			Derivative assets
Detail	Notional		Fair value hedge		Cash flow hedge		Trading		Total
Interest:
Interest rate swaps	￦	38,780,733	￦	89,305	￦	—	￦	329,246	￦	418,551
Currency:
Currency forwards		6,451,057		—		—		113,466		113,466
Currency swaps		24,518,828		138,816		—		408,516		547,332
Subtotal		30,969,885		138,816		—		521,982		660,798
Stock:
Stock options		2,298,275		—		—		1,444		1,444
Other:
Other derivative		—		—		—		23		23
Total	￦	72,048,893	￦	228,121	￦	—	￦	852,695	￦	1,080,816

			Derivative liabilities
Detail	Notional		Fair value hedge		Cash flow hedge		Trading		Total
Interest:
Interest rate swaps	￦	38,780,733	￦	369,290	￦	—	￦	311,850	￦	681,140
Currency:
Currency forwards		6,451,057		—		—		152,478		152,478
Currency swaps		24,518,828		688,906		—		447,433		1,136,339
Subtotal		30,969,885		688,906		—		599,911		1,288,817
Stock:
Stock options		2,298,275		—		—		—		—
Other:
Other derivative		—		—		—		17		17
Total	￦	72,048,893	￦	1,058,196	￦	—	￦	911,778	￦	1,969,974

112

(4) Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018			2017
Fair value hedge—hedged items	￦	229,518		￦	93,296
Fair value hedge—hedging instruments		(755,066	)		1,208,424

(5) Applying cash follow hedge, the Bank recognized ￦(954) million and ￦(467) million as other comprehensive income (loss) (before tax effect) for the years ended December 31, 2018 and 2017 and there is no ineffectiveness recognized for the years ended December 31, 2018 and 2017.

(6) Hedge accounting

1) Purpose and strategy of hedge accounting

The Bank transacts with derivative financial instruments to hedge its interest rate risk and currency risk arising from the assets and liabilities of the Bank. The Bank applies the fair value hedge accounting for the changes in the market interest rates of the financial debentures in Korean won and foreign currency and the loans in foreign currency; and cash flow hedge accounting for interest rate swaps to hedge cash flow risk due to interest rates of the debentures in Korean won.

2) Nominal values and average hedge ratio for derivatives as of December 31, 2018 are as follows (Korean won in millions):

	Within 1 year			1 to 2 years			2 to 3 years			3 to 4 years			4 to 5 years			Over 5 years			Total
Fair value hedges
Nominal values of hedged items		￦5,796,262			￦4,385,764			￦6,015,128			￦4,309,897			￦3,268,636			￦10,362,632			￦34,138,319
Nominal values of hedging derivatives		5,784,202			4,053,183			5,781,111			3,495,015			3,269,305			9,538,497			31,921,313
Average hedge ratio		99.79	%		92.42	%		96.11	%		81.09	%		100.02	%		92.05	%		93.51	%
Cash flow hedges
Nominal values of hedged items		480,000			—			—			—			—			—			480,000
Nominal values of hedging derivatives		480,000			—			—			—			—			—			480,000
Average hedge ratio		100.00	%		—			—			—			—			—			100.00	%

113

3) Effect of hedge accounting on financial statement, statement of comprehensive income, statement of changes in equity

① Effect of derivatives on statement financial position, statement of comprehensive income, statement of changes in equity

	(Korean won in millions)
	Nominal amount		BV of asset		BV of liabilities		Changes if fair value in the period
Fair value hedges
Interest swap	￦	19,460,944	￦	25,760	￦	504,584	￦	(198,853	)
Currency swap		12,460,369		49,983		1,123,719		(523,646	)
Subtotal		31,921,313		75,743		1,628,303		(722,499	)
Cash flow hedges		480,000		—		—		(954	)
Total	￦	32,401,313	￦	75,743	￦	1,628,303	￦	(723,453	)

② Effect of hedging items on statement financial position, statement of comprehensive income, statement of changes in equity

	(Korean won in millions)
	Nominal amount		BV of asset		BV of liabilities		Changes of fair value in the period
Fair value hedges
Loans in foreign currencies	￦	108,470	￦	—	￦	3,183	￦	(3,370	)
Debentures in local currency		1,000,000		—		60,723		(28,368	)
Debentures in foreign currencies		33,029,849		75,743		1,564,397		187,629
Subtotal		34,138,319		75,743		1,628,303		155,891
Cash flow hedges		480,000		—		—		—
Total	￦	34,618,319	￦	75,743	￦	1,628,303	￦	155,891

4) Gains (losses) on hedged items and hedging instruments attributable to the hedged ineffectiveness for the year ended December 31, 2018 were as follows (Korean won in millions):

	Gains on hedged items		Gains on hedging instruments			Hedge ineffectiveness recognized in profit or loss
Fair value hedges	￦	221,226	￦	(250,605	)	￦	(29,379	)
Cash flow hedges		954		(954	)		—
Total	￦	222,180	￦	(251,559	)	￦	(29,379	)

21. CAPITAL STOCK:

As of December 31, 2018, the authorized capital and paid-in capital of the Bank are ￦15,000,000 million and ￦11,814,963 million, respectively. The Bank does not issue share certificates.

Changes in capital stock for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018		2017
Beginning balance	￦	11,814,963	￦	10,398,055
Paid-in capital increase and investment in kind		—		1,416,908
Ending balance	￦	11,814,963	￦	11,814,963

114

22. OTHER COMPONENTS OF EQUITY:

(1) Details of other components of equity as of December 31, 2018 and 2017, are as follows (Korean won in millions):

	Dec. 31, 2018			Dec. 31, 2017
Gain on valuation of AFS securities	￦	—		￦	101,985
Loss on valuation of financial assets at FVOCI		691,648			—
Gain on disposal of financial assets at FVOCI		(21,098	)		—
Gain on valuation of cash flow hedge		(137	)		586
Remeasurement of net defined benefit obligation		9,916			17,168
Total	￦	680,329		￦	119,739

(2) Changes in other components for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(2018)

	Beginning Balance(*1)			Increase (decrease)			Tax effect			Ending balance
Gain (loss) on valuation of financial assets at FVOCI	￦	(114,032	)	￦	1,062,901		￦	(257,221	)	￦	691,648
Loss on disposal of financial assets at FVOCI		(13,817	)		(9,606	)		2,325			(21,098	)
Gain (loss) on valuation of cash flow hedge		586			(954	)		231			(137	)
Remeasurement of net defined benefit liability		17,168			(9,566	)		2,314			9,916
Total	￦	(110,095	)	￦	1,042,775		￦	(252,351	)	￦	680,329

(*1) The beginning balance was restated in accordance with K-IFRS No. 1109.

(2017)

	Beginning balance		Increase (decrease)			Tax effect		Ending balance
Gain on valuation of AFS securities	￦	259,564	￦	(179,477	)	￦	21,898	￦	101,985
Gain (loss) on valuation of cash flow hedge		854		(467	)		199		586
Remeasurement of net defined benefit liability		19,599		(3,207	)		776		17,168
Total	￦	280,017	￦	(183,151	)	￦	22,873	￦	119,739

23. RETAINED EARNINGS:

(1) Details of retained earnings as of as of December 31, 2018 and 2017, are as follows (Korean won in millions):

	Dec. 31, 2018			Dec. 31, 2017
Legal reserve(*1)	￦	346,136		￦	328,856
Reserve for bad loan		302,248			206,330
Adjustments on initial application of K-IFRS No.1109		(128,763	)		—
Unappropriated retained earnings		597,039			172,794
Total	￦	1,116,660		￦	707,980

(*1) Pursuant to the EXIM Bank Act, the Bank appropriates 10% of separate net income for each accounting period as legal reserve, until the accumulated reserve equals to its paid-in capital.

115

(2) Changes in retained earnings for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018			2017
Beginning balance(*1)	￦	579,217		￦	535,186
Net income for the period		597,039			172,794
Dividends		(59,596	)		—
Ending balance	￦	1,116,660		￦	707,980

(*1) The beginning balance was restated in accordance with K-IFRS No. 1109.

(3) Details of dividends for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018		2017
The Government	￦	39,493	￦	—
BOK		5,876		—
Korea Development Bank		14,227		—
Total	￦	59,596	￦	—

(4) Statements of appropriations of retained earnings for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018 (Expected date of appropriation: Mar. 29, 2019)				2017 (Date of appropriation: Mar. 30, 2018)
I. Retained earnings before appropriations:			￦	597,039			￦	172,794
1. Unappropriated retained earnings carried over from prior years	￦	—			￦	—
2. Net income		597,039				172,794
II. Other reserve transferred				195,598				—
III. Appropriations:				792,637				172,794
1. Legal reserve		59,704				17,280
2. Dividend		62,656				59,596
3. Other reserve		670,277				—
4. Reserve for bad loans		—				95,918
IV. Unappropriated retained earnings at the end of the period			￦	—			￦	—

(5) Reserve for bad loans

Reserve for bad loans is calculated and disclosed according to Article 29 (1) and (2), Regulation on Supervision of Banking Business. In accordance with Regulation on Supervision of Banking Business, etc., if the estimated allowance for credit loss determined by K-IFRS for the accounting purpose is lower than those for the regulatory purpose required by Regulation on Supervision of Banking Business, the Bank should reserve such difference as the regulatory reserve for bad loans. Due to the fact that regulatory reserve for bad loans is a voluntary reserve, the amounts that exceed the existing reserve for bad loans over the compulsory reserve for bad loans at the period-end date are reversed in profit. In case of accumulated deficit, the Bank should recommence setting aside reserve for bad loans at the time when accumulated deficit is reduced to zero.

116

1) Reserve for bad loans

Details of reserve for bad loans as of December 31, 2018 and 2017, are as follows (Korean won in millions):

	Dec. 31, 2018			Dec. 31, 2017
Accumulated reserve for bad loans	￦	302,248		￦	206,330
Expected reserve for(reversal of) bad loans		(195,598	)		95,918
Reserve for bad loans	￦	106,650		￦	302,248

2) Regulatory reserve for bad loans and net income after adjusting reserve for bad loans.

Details of regulatory reserve for bad loans and net income after adjusting the reserve for years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018		2017
Net income for the period	￦	597,039	￦	172,794
Regulatory reserve for bad loans		127,976		423,002
Net profit after adjusting the reserve for loan losses(*1)	￦	725,015	￦	595,796

(*1) Adjusted profit considering reserves for bad debt as above is calculated by assuming that the provision in reserves for bad debt before income tax is reflected in net income.

24. NET INTEREST INCOME:

Net interest income is the amount after deduction of interest expenses from interest income, and the details are as follows:

(1) Details of interest income for the years ended December 31, 2018 and 2017, are as follows (Korean won in millions):

	2018		2017
Interest of due from financial institutions:
Due from financial institutions in local currency	￦	12,159	￦	3,318
Due from financial institutions in foreign currencies		51,488		15,195
Subtotal		63,647		18,513
Interest of financial assets at FVTPL:
Interest of trading securities		—		1,554
Interest of trading securities at FVTPL		1,393		—
Interest of loans at FVTPL		186		—
Subtotal		1,579		1,554
Interest of investments:
Interest of AFS securities		—		17,760
Interest of securities at FVOCI		27,074		—
Interest of HTM securities		—		2,045
Interest of securities at amortized cost		2,557		—
Subtotal		29,631		19,805

117

	2018		2017
Interest of loans:
Interest of loans in local currency		617,409		713,638
Interest of loans in foreign currencies		2,165,524		1,856,733
Interest of advance for customers		23,440		25,373
Interest of bills bought		304		151
Interest of call loans		41,234		30,817
Interest of interbank loans		7,420		12,511
Subtotal		2,855,331		2,639,223
Other interest income		1,228		4,633
Total	￦	2,951,416	￦	2,683,728

(2) Details of interest expenses for the years ended December 31, 2018 and 2017, are as follows (Korean won in millions):

	2018		2017
Interest of borrowings:
Borrowings in local currencies	￦	—	￦	2
Borrowings in foreign currencies		155,254		142,225
Interest of call money		1,468		4,462
Interest of debentures:
Interest of debentures in local currency		270,436		205,939
Interest of debentures in foreign currencies		1,532,844		1,233,202
Subtotal		1,803,280		1,439,141
Other interest expenses		8,267		17,923
Total	￦	1,968,269	￦	1,603,753

25. NET COMMISSION INCOME:

Net commission income is the amount after deduction of commission expenses from commission income, and the details are as follows.

(1) Details of commission income for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018		2017
Commission income in local currency:
Commission income on management of EDCF	￦	16,176	￦	15,383
Commission income on management of IKCF		2,270		2,279
Other commission income in local currency		6		—
Subtotal		18,452		17,662
Commission income in foreign currencies:
Commission income on letter of credit		1,821		2,239
Commission income on confirmation on export letter of credit		275		713
Commission income on loan commitments		34,853		38,027
Arrangement fee		4,641		7,223
Advisory fee		1,815		2,002
Cancellation fee		—		22
Prepayment fee		5,831		5,299

118

	2018		2017
Sundry commission income on foreign exchange		115		139
Structuring fee		1,233		9,914
Brokerage fee for foreign currencies exchange funds		1,827		2,681
Other commission income in foreign currencies		1,339		2,477
Subtotal		53,750		70,736
Others:
Other commission income		11,136		5,984
Guarantee fees in local currency:
Guarantee fees in local currency		—		21,795
Guarantee fees in foreign currencies:
Guarantee fees in foreign currencies		166,882		224,281
Premium for guarantee		73,394		60,644
Subtotal		240,276		284,925
Total	￦	323,614	￦	401,102

(2) Details of commission expenses for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018		2017
Commission expenses in local currency:
Commission expenses on domestic transaction	￦	387	￦	447
Commission expenses in foreign currencies:
Service fees paid to credit-rating agency		2,394		3,458
Sundry commission expenses on foreign exchange		2,144		1,267
Sundry commissions expenses on offshore transaction		—		1
Subtotal		4,538		4,726
Others:
Other commissions expenses		3,423		4,200
Total	￦	8,348	￦	9,373

26. DIVIDEND INCOME:

Details of dividend income for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018		2017
Financial assets at FVTPL	￦	2,938	￦	—
AFS securities		—		35,352
Financial assets at FVOCI		33,772		—
Total	￦	36,710	￦	35,352

119

27. GAIN (LOSS) ON FINANCIAL ASSETS AT FVTPL:

Details of gain (loss) on financial assets at FVTPL for the years ended December 31, 2018 and 2017, are as follows (Korean won in millions):

	2018
Securities at FVTPL:
Gain on valuation	￦	13,130
Loss on valuation		(4,807	)
Gain on disposal		12,290
Loss on disposal		(805	)
Others		2,990
Subtotal		22,798
Trading derivatives:
Gain on valuation		468,312
Loss on valuation		(533,372	)
Gain on transaction		695,385
Loss on transaction		(660,749	)
Subtotal		(30,424	)
Total	￦	(7,626	)

	2017
Trading securities:
Gain on valuation	￦	5,046
Loss on valuation		(808	)
Gain on disposal		13,742
Loss on disposal		(322	)
Subtotal		17,658
Trading derivatives:
Gain on valuation		988,657
Loss on valuation		(845,063	)
Gain on transaction		635,756
Loss on transaction		(533,026	)
Subtotal		246,324
Total	￦	263,982

28. GAIN (LOSS) ON HEDGING DERIVATIVES:

Details of gain (loss) on hedging derivatives for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018			2017
Gain on hedging derivatives	￦	278,348		￦	1,456,521
Loss on hedging derivatives		(1,033,413	)		(248,247	)
Total		￦ (755,065)			￦1,208,274

120

29. GAIN (LOSS) ON FINANCIAL INVESTMENTS:

Details of gain (loss) on financial investments for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018
Financial assets at FVOCI:
Gain on disposals	￦	321
Loss on disposals		(5,364	)
Total	￦	(5,043	)

	2017
AFS securities:
Gain on disposals	￦	20,865
Loss on disposals		(1,128	)
Impairment loss		(3,594	)
Total	￦	16,143

30. OTHER OPERATING INCOME (EXPENSES):

Details of other operating income (expenses) for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018		2017
Other operating income:
Gains on sale of loans	￦	—	￦	1,655
Gain on fair value hedged items		430,152		277,508
Others		485		1,064
Subtotal		430,637		280,227
Other operating expenses:
Loss on fair value hedged items		200,634		184,212
Contribution to miscellaneous funds		4,861		5,177
Loss on redemption		—		2,455
Transfer of other provisions		162		1,344
Others		20,167		32,769
Subtotal		225,824		225,957
Total	￦	204,813	￦	54,270

121

31. IMPAIRMENT LOSS (REVERSAL) ON CREDIT:

Details of impairment loss (reversal) on credit for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018			2017
Loans at amortized cost	￦	327,386		￦	1,724,192
Other financial assets		2,136			117,622
Guarantees		56,867			(879,253	)
Unused loan commitments		(42,003	)		(62,655	)
Financial guarantee contract		80,069			180,922
Financial assets at FVOCI		(1,739	)		—
Financial assets at amortized cost		21			—
Total	￦	422,737		￦	1,080,828

32. GENERAL AND ADMINISTRATIVE EXPENSES:

Details of general and administrative expenses for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	Detail	2018		2017
General and administrative	Short-term salaries	￦	103,839	￦	99,072
Other expenses in financing department	Office expenses		58,256		56,026
	Subtotal		162,095		155,098
Office expenses of EDCF			1,737		1,731
General and administrative—Others	Postemployment benefit (defined contributions)		797		677
	Postemployment benefit (defined benefits)		9,047		9,098
	Depreciation of tangible assets		8,254		8,940
	Amortization of intangible assets		11,804		9,219
	Taxes and dues		12,093		25,952
	Donations and contributions		2,000		—
	Subtotal		43,995		53,886
	Total	￦	207,827	￦	210,715

122

33. NON-OPERATING INCOME (EXPENSES):

Details of non-operating income (expenses) for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	Detail	2018			2017
Gain(loss) on investments in associates and subsidiaries	Dividend income	￦	4,883		￦	9,905
	Impairment loss		—			(235	)
	Loss on disposal		(3,357	)		—
	Subtotal		1,526			9,670
Others income	Gain on disposals of tangible assets		41			60
	Reversal of impairment loss on intangible assets		—			50
	Gain on disposals of intangible assets		100			—
	Rental income		166			156
	Damages paid for breach of contracts		2			5
	Interest on other loans		123			85
	Revenue on research project		19,090			2,912
	Other miscellaneous income		7,015			1,790
	Subtotal		26,537			5,058
Others expenses	Loss on disposal of tangible assets		5			5
	Loss on disposal of intangible assets		—			20
	Impairment loss on intangible assets		—			217
	Donations and contributions		4,748			3,117
	Court cost		5,505			3,571
	Expenses on research project		6,171			7,202
	Other miscellaneous expenses		68			1,082
	Subtotal		16,497			15,214
	Total	￦	10,040		￦	(10,156	)

34. INCOME TAX EXPENSE (BENEFIT):

(1) Details of income tax expenses (benefit) for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018			2017
Current income tax payable	￦	66,212		￦	8
Changes in deferred income taxes due to temporary differences		338,433			33,177
Changes in deferred income taxes directly recognized in equity		(248,590	)		22,873
Income tax expense	￦	156,055		￦	56,058

123

(2) Changes in temporary differences and deferred income tax assets (liabilities) for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

(2018)

Detail	Temporary differences									Deferred tax assets (liabilities)— ending balance
	Beginning balance(*1)			Increase (Decrease)			Ending balance
Depreciation	￦	82		￦	36		￦	118		￦	29
Fair value hedging income (loss)		(203,138	)		(222,130	)		(425,268	)		(102,915	)
Financial guarantee contract liability		943,516			4,309			947,825			229,374
Loans		(377,724	)		237,123			(140,601	)		(34,025	)
Allowance for loan losses		671,854			(654,823	)		17,031			4,121
Unused commitment provisions		166,080			(16,633	)		149,447			36,166
Net deferred origination fees and costs		398,113			(19,182	)		378,931			91,701
Long-term income in advance		(5,907	)		1,518			(4,389	)		(1,062	)
Provisions for acceptances and guarantees		509,037			93,398			602,435			145,789
Loan-for-equity swap		1,719,839			308,339			2,028,178			490,819
Loss on valuation of derivatives		(932,587	)		(391,213	)		(1,323,800	)		(320,360	)
Gain on valuation of derivatives		881,283			719,663			1,600,946			387,429
Defined benefit liability		(16,040	)		18,782			2,742			664
Accrued interest and interest receivables related to swap transaction		(219,183	)		(65,621	)		(284,804	)		(68,922	)
Tangible assets		(175,158	)		(167	)		(175,325	)		(42,429	)
Others		412,903			984,641			1,397,544			338,205
Loss carried forward		1,341,870			(1,341,870	)		—			—
Subtotal		5,114,840			(343,830	)		4,771,010			1,154,584
Deferred income tax assets (liabilities) directly adjusted in equity											(252,332	)
Total										￦	902,252

(*1) The beginning balance was restated in accordance with K-IFRS No. 1109.

124

(2017)

Detail	Temporary differences									Deferred tax assets (liabilities)— ending balance
	Beginning balance			Increase (Decrease)			Ending balance
Depreciation	￦	82		￦	—		￦	82		￦	20
Fair value hedging income (loss)		(123,217	)		(79,921	)		(203,138	)		(49,159	)
Financial guarantee contract liability		805,555			137,961			943,516			228,331
Loans		(196,157	)		(181,567	)		(377,724	)		(91,409	)
Allowance for loan losses		208,405			463,449			671,854			162,589
Unused commitment provisions		228,839			(62,759	)		166,080			40,191
Net deferred origination fees and costs		426,935			(28,822	)		398,113			96,343
Long-term income in advance		(6,216	)		309			(5,907	)		(1,430	)
Provisions for acceptances and guarantees		1,407,910			(898,873	)		509,037			123,187
Loan-for-equity swap		1,723,573			(3,734	)		1,719,839			416,201
Loss on valuation of derivatives		(2,286,929	)		1,354,342			(932,587	)		(225,686	)
Gain on valuation of derivatives		2,375,073			(1,493,790	)		881,283			213,271
Defined benefit liability		(1,061	)		(14,979	)		(16,040	)		(3,882	)
Accrued interest and interest receivables related to swap transaction		(293,700	)		74,517			(219,183	)		(53,042	)
Tangible assets		(176,588	)		1,430			(175,158	)		(42,388	)
Others		215,931			11,215			227,146			54,968
Loss carried forward		851,792			490,078			1,341,870			324,733
Subtotal		5,160,227			(231,144	)		4,929,083			1,192,838
Deferred income tax assets (liabilities) directly adjusted in equity											(66,639	)
Total										￦	1,126,199

(3) Details of the reconciliation between net income before income tax and income tax expense (benefit) for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

	2018			2017
Net income (loss) before income tax	￦	753,094		￦	228,852
Income tax (benefit) calculated at statutory tax rate (11% up to ￦200 million, 22% over ￦200 million to ￦20 billion, 24.2% over ￦20 billion to ￦300 billion, and 27.5% over ￦300billion)		196,739			54,920
Adjustments:
Effect on non-taxable income		(9,466	)		(1,215	)
Effect on non-deductible expense		3,830			362
Effect on tax deduction		(12,265	)		—
Unrecognized temporary differences		—			57
Others		(22,783	)		6,302
Subtotal		(40,685	)		5,506
Adjustment recognized in the period for current tax of prior periods		—			(4,368	)
Income tax expense	￦	156,055		￦	56,058
Effective tax rate from operations		20.72	%		24.50	%

125

(4) Details of deferred tax relating to items that are recognized directly in equity as of December 31, 2018 and 2017 are as follows (Korean won in millions):

Detail	Dec. 31, 2018			Dec. 31, 2017
Loss on valuation of AFS securities	￦	—		￦	(60,971	)
Loss on valuation of financial investments		(249,210	)		—
Loss on valuation of cash flow hedge		44			(187	)
Remeasurement of net defined benefit liability		(3,166	)		(5,481	)
Total	￦	(252,332	)	￦	(66,639	)

(5) Unrecognized deferred tax assets and liabilities

The Bank does not recognize deferred tax liabilities for taxable temporary difference of ￦48,818 million related to investments in associates and subsidiaries as of December 31, 2018 because the Bank is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The Bank also does not recognize deferred tax assets for deductible temporary differences of ￦4,469 million related to impairment loss of AFS securities as of December 31, 2018 because the realizable period has already passed.

35. STATEMENTS OF CASH FLOWS:

(1) Details of non-cash flow transactions for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

Detail	2018		2017
Written-off	￦	2,019,538	￦	342,836
Transfer to financial investments from the investements in associates		131,094		—
Investment in kind		—		1,416,908
Gain (Loss) on valuation of AFS securities		—		(179,477	)
Remeasurement of net defined benefit liability		9,566		3,207

(2) Changes in liabilities arising from financing activities for the year ended December 31, 2018 and 2017 are as follows (Korean won in millions):

<2018>

Detail	Borrowings			Debentures			Total
Beginning balance	￦	6,013,457		￦	60,685,098		￦	66,698,555
Change in cash flows		(1,421,877	)		4,149,261			2,727,384
Amortization		1,697			181,849			183,546
Foreign exchange transaction		300,201			1,159,493			1,459,694
Change in fair value hedged items		—			(232,731	)		(232,731	)
Ending balance	￦	4,893,478		￦	65,942,970		￦	70,836,448

126

<2017>

Detail	Borrowings			Debentures			Total
Beginning balance	￦	9,761,389		￦	62,119,016		￦	71,880,405
Change in cash flows		(2,739,482	)		3,285,396			545,914
Amortization		3,137			161,295			164,432
Foreign exchange transaction		(1,011,587	)		(4,781,714	)		(5,793,301	)
Change in fair value hedged items		—			(98,895	)		(98,895	)
Ending balance	￦	6,013,457		￦	60,685,098		￦	66,698,555

36. CONTINGENT LIABILITIES AND COMMITMENTS:

(1) Details of contingent liabilities and commitments as of December 31, 2018 and 2017 are as follows (Korean won in millions):

Detail		Dec. 31, 2018		Dec. 31, 2017
Guarantees	Confirmed	￦	34,794,577	￦	38,960,799
	Unconfirmed		5,215,972		3,847,975
	Subtotal		40,010,549		42,808,774
Loan commitments	Local currency, foreign currency loan commitments		16,884,935		17,996,772
	Others		944,320		1,825,727
	Subtotal		17,829,254		19,822,499
	Total	￦	57,839,803	￦	62,631,273

(2) Details of guarantees that have been provided for others as of December 31, 2018 and 2017 are as follows (Korean won in millions):

Detail		Dec. 31, 2018		Dec. 31, 2017
Confirmed guarantees	Local currency:
	Performance of contracts	￦	59,467	￦	50,709
	Repayment of advances		283,203		227,091
	Others		290,108		602,187
	Subtotal		632,778		879,987
	Foreign currency:
	Performance of contracts		9,232,888		10,096,151
	Repayment of advances		7,990,136		11,091,318
	Acceptances of imported goods		3,864		3,277
	Acceptances of import letter of credit outstanding		68,786		89,480
	Foreign liabilities		11,912,436		10,964,999
	Others		4,953,689		5,835,587
	Subtotal		34,161,799		38,080,812

127

Detail		Dec. 31, 2018		Dec. 31, 2017
Unconfirmed guarantees	Foreign liabilities		1,424,174		1,569,782
	Repayment of advances		3,661,665		2,243,202
	Performance of contracts		130,099		33,793
	Underwriting of import credit		—		1,163
	Others		34		35
	Subtotal		5,215,972		3,847,975
	Total	￦	40,010,549	￦	42,808,774

(3) Details of guarantees classified by country as of December 31, 2018 and 2017 are as follows (Korean won in millions):

(December 31, 2018)

		Confirmed guarantees				Unconfirmed guarantees				Total
Detail		Amount		Ratio (%)		Amount		Ratio (%)		Amount		Ratio (%)
Asia	Korea	￦	21,218,012		60.98	￦	3,791,583		72.69	￦	25,009,595		62.51
	China		257,780		0.74		—		—		257,780		0.64
	Saudi Arabia		1,840,720		5.29		—		—		1,840,720		4.60
	India		445,637		1.28		45,644		0.88		491,281		1.23
	Indonesia		969,133		2.78		123,191		2.36		1,092,324		2.73
	Uzbekistan		272,000		0.79		—		—		272,000		0.68
	Vietnam		1,227,908		3.53		281,117		5.39		1,509,025		3.77
	Australia		645,927		1.86		52,874		1.01		698,801		1.75
	Philippines		12,073		0.03		70		0.01		12,143		0.03
	Qatar		280,822		0.81		—		—		280,822		0.70
	Oman		376,700		1.08		26,687		0.51		403,387		1.01
	Others		1,459,282		4.19		431,327		8.27		1,890,609		4.73
	Subtotal		29,005,994		83.36		4,752,493		91.12		33,758,487		84.38
Europe	United Kingdom		753,530		2.17		—		—		753,530		1.88
	Belgium		86,348		0.25		—		—		86,348		0.22
	France		415,262		1.19		—		—		415,262		1.04
	Others		774,439		2.22		312,612		5.99		1,087,051		2.71
	Subtotal		2,029,579		5.83		312,612		5.99		2,342,191		5.85
America	United States		2,254,907		6.48		12,299		0.24		2,267,206		5.67
	Brazil		406,027		1.17		—		—		406,027		1.01
	Mexico		246,816		0.71		2,027		0.04		248,843		0.62
	Bermuda		213,076		0.61		—		—		213,076		0.53
	Others		189,915		0.55		124,386		2.38		314,301		0.79
	Subtotal		3,310,741		9.52		138,712		2.66		3,449,453		8.62
Africa	Madagascar		166,237		0.48		—		—		166,237		0.42
	Others		282,026		0.81		12,155		0.23		294,181		0.73
	Subtotal		448,263		1.29		12,155		0.23		460,418		1.15
	Total	￦	34,794,577		100.00	￦	5,215,912		100.00	￦	40,010,549		100.00

128

(December 31, 2017)

		Confirmed guarantees				Unconfirmed guarantees				Total
Detail		Amount		Ratio (%)		Amount		Ratio (%)		Amount		Ratio (%)
Asia	Korea	￦	26,140,921		67.10	￦	2,197,447		57.11	￦	28,338,368		66.20
	Saudi Arabia		1,914,178		4.91		—		—		1,914,178		4.47
	India		441,562		1.13		78,704		2.05		520,266		1.22
	Indonesia		970,827		2.49		122,053		3.17		1,092,880		2.55
	Uzbekistan		280,884		0.72		1,163		0.03		282,047		0.66
	Vietnam		960,748		2.47		301,267		7.83		1,262,015		2.95
	Australia		697,324		1.79		50,666		1.32		747,990		1.75
	Philippines		126,536		0.32		8,614		0.22		135,150		0.32
	Qatar		290,789		0.75		—		—		290,789		0.68
	Oman		326,291		0.84		75,970		1.97		402,261		0.94
	Others		983,640		2.52		117,139		3.04		1,100,779		2.56
	Subtotal		33,133,700		85.04		2,953,023		76.74		36,086,723		84.30
Europe	United Kingdom		329,506		0.85		—		—		329,506		0.77
	France		394,781		1.01		52,095		1.35		446,876		1.04
	Others		449,278		1.15		184,849		4.80		634,127		1.48
	Subtotal		1,173,565		3.01		236,944		6.15		1,410,509		3.29
America	United States		2,348,208		6.03		194,670		5.06		2,542,878		5.94
	Brazil		471,757		1.21		—		—		471,757		1.10
	Mexico		265,381		0.68		1,942		0.05		267,323		0.62
	Bermuda		191,686		0.49		—		—		191,686		0.45
	Others		281,531		0.72		33,958		0.88		315,489		0.74
	Subtotal		3,558,563		9.13		230,570		5.99		3,789,133		8.85
Africa	Madagascar		159,293		0.41		—		—		159,293		0.37
	Marshall Islands		568,553		1.46		—		—		568,553		1.33
	Others		367,125		0.95		427,438		11.12		794,563		1.86
	Subtotal		1,094,971		2.82		427,438		11.12		1,522,409		3.56
	Total	￦	38,960,799		100.00	￦	3,847,975		100.00	￦	42,808,774		100.00

(4) Details of guarantees classified by industry as of December 31, 2018 and 2017, are as follows (Korean won in millions):

(December 31, 2018)

	Confirmed guarantees				Unconfirmed guarantees				Total
Detail	Amount		Ratio (%)		Amount		Ratio (%)		Amount		Ratio (%)
Manufacturing	￦	16,163,602		46.45	￦	4,542,436		87.09	￦	20,706,038		51.75
Transportation		1,665,252		4.79		2,498		0.05		1,667,750		4.17
Finance		2,290,564		6.58		146		0.01		2,290,710		5.73
Wholesale and retail		798,662		2.30		53,725		1.03		852,387		2.13
Property related business		379,908		1.09		48,220		0.92		428,128		1.07
Construction		7,898,229		22.70		265,256		5.09		8,163,485		20.40
Public and others		5,598,360		16.09		303,691		5.81		5,902,051		14.75
Total	￦	34,794,577		100.00	￦	5,215,972		100.00	￦	40,010,549		100.00

129

(December 31, 2017)

	Confirmed guarantees				Unconfirmed guarantees				Total
Detail	Amount		Ratio (%)		Amount		Ratio (%)		Amount		Ratio (%)
Manufacturing	￦	18,577,567		47.68	￦	3,087,986		80.25	￦	21,665,553		50.61
Transportation		1,850,655		4.75		56,203		1.46		1,906,858		4.45
Finance		2,051,157		5.26		1,163		0.03		2,052,320		4.79
Wholesale and retail		863,844		2.22		217,253		5.65		1,081,097		2.53
Property related business		353,741		0.91		59,345		1.54		413,086		0.96
Construction		9,251,902		23.75		22,135		0.58		9,274,037		21.67
Public and others		6,011,933		15.43		403,890		10.49		6,415,823		14.99
Total	￦	38,960,799		100.00	￦	3,847,975		100.00	￦	42,808,774		100.00

(5) Global Medium-Term Note Program and CP programs

The Bank has been establishing the following programs regarding the issue of foreign currencies bonds and CPs:

1) Established on August 1, 1991, initially, and annually renewed, U.S. Shelf Registration to issue foreign bonds under the Securities and Exchange Commission rule of the United States of America with an issuance limit of USD 50 billion.

2) Established on May 14, 1997, and May 16, 1997, initially, and annually renewed, CP program to issue CPs with issuance limits of USD 6 billion and USD 2 billion, respectively.

3) Established on November 6, 1997, initially, and annually renewed, Global Medium-Term Note Program to issue mid-to-long-term foreign currencies bonds with an issuance limit of USD 25 billion.

4) Established on February 2, 2012, initially, and annually renewed, MYR MTN program to issue Malaysian Ringgit-denoted bonds with issuance limits of MYR 1 billion.

5) Established in 1995, initially, and renewed every two years, Yen Shelf Registration to issue Samurai bond with an issuance limit of JPY 500 billion.

6) Established on May 31, 2010, Australian Domestic Debt Issuance Program to issue Kangaroo bond with limit of AUD 4 billion.

7) Established on January 17, 2011, and renewed every two years, Uridashi Shelf Registration to issue Uridashi bond with an issuance limit of JPY 500 billion.

(6) Litigations

As of December 31, 2018, 10 lawsuits (aggregated claim amount: ￦163,701 million) were filed as a plaintiff and 8 pending litigations as a defendant were filed (aggregated claim amount: ￦127,108 million). The Bank’s management expects that there is no significant impact on the financial statements due to these lawsuits but it is possible to make additional loss to the Bank due to the results of future litigation.

(7) Written-off loans

The Bank manages written-off loans that have claims on debtors due to the statute of limitations, uncollected after write-off, etc. The written-off loans as of December 31, 2018 and 2017, are ￦3,413,713 million and ￦1,385,885 million, respectively.

130

37. TRANSACTIONS AND BALANCES WITH RELATED PARTIES:

Related parties consist of entities related to the Bank, postemployment benefits, a key management personnel and a close member of that person’s family, an entity controlled or jointly controlled and an entity influenced significantly.

(1) Details of related parties as of December 31, 2018, are as follows:

Detail	Relationship		Ownership- percentage (%)
Parent:
Korean government		Parent		66.27
Subsidiaries and Associates:
KEXIM Bank UK Limited		Subsidiary		100.00
PT.KOEXIM Mandiri Finance		Subsidiary		85.00
KEXIM Vietnam Leasing Co.		Subsidiary		100.00
KEXIM Asia Limited		Subsidiary		100.00
Korea Asset Management Corporation		Associate		25.86
Credit Guarantee and Investment Fund		Associate		11.64
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		Associate		81.25
DAESUN Shipbuilding & Engineering Co., Ltd.		Associate		83.03
KTB Newlake Global Healthcare PEF		Associate		25.00
KBS-KDB Private Equity Fund		Associate		20.30
Korea Shipping and Maritime Transportation		Associate		40.00
Korea Aerospace Industries. Ltd.		Associate		26.41

(2) Significant balances of receivables, payables and guarantees with the related parties

1) Significant balances of receivables and payables with the related parties as of December 31, 2018 and 2017 are as follows (Korean won in millions):

(December 31, 2018)

Detail	Receivables		Allowance /Provisions		Payables
Subsidiaries:
KEXIM Bank UK Limited	￦	149,849	￦	—	￦	122
PT.KOEXIM Mandiri Finance		151,717		262		—
KEXIM Vietnam Leasing Co.		125,074		302		—
KEXIM Asia Limited		143,624		69		—
Subtotal		570,264		633		122
Associates:
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		610,291		182,037		—
DAESUN Shipbuilding & Engineering Co., Ltd.		487,111		424,705		139
Korea Shipping and Maritime Transportation		42,783		—		—
Subtotal		1,140,185		606,742		139
Total	￦	1,710,449	￦	607,375	￦	261

131

(December 31, 2017)

Detail	Receivables		Allowance /Provisions		Payables
Subsidiaries:
KEXIM Bank UK Limited	￦	136,805	￦	—	￦	93
PT.KOEXIM Mandiri Finance		145,109		227		—
KEXIM Vietnam Leasing Co.		122,994		195		—
KEXIM Asia Limited		121,267		58		59
Subtotal		526,175		480		152
Associates:
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		1,931,974		1,590,951		—
DAESUN Shipbuilding & Engineering Co., Ltd.		459,156		284,443		41,743
Subtotal		2,391,130		1,875,394		41,743
Total	￦	2,917,305	￦	1,875,874	￦	41,895

2) Guarantees provided to the related parties as of December 31, 2018 and 2017 are as follows (Korean won in millions):

(December 31, 2018)

Detail	Confirmed guarantees		Unconfirmed guarantees		Loans commitments		Other commitments
Subsidiaries:
KEXIM Bank UK Limited	￦	—	￦	—	￦	199,855	￦	12,299
PT.KOEXIM Mandiri Finance		—		—		16,772		—
KEXIM Vietnam Leasing Co.		—		146		126,200		—
KEXIM Asia Limited		—		—		105,110		—
Subtotal		—		146		447,937		12,299
Associates:
DAESUN Shipbuilding & Engineering Co., Ltd.		120,789		124,044		—		—
Subtotal		120,789		124,044		—		—
Total	￦	120,789	￦	124,190	￦	447,937	￦	12,299

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(December 31, 2017)

Detail	Confirmed guarantees		Unconfirmed guarantees		Loans commitments		Other commitments
Subsidiaries:
KEXIM Bank UK Limited	￦	—	￦	—	￦	202,495	￦	15,000
PT.KOEXIM Mandiri Finance		—		—		16,071		—
KEXIM Vietnam Leasing Co.		—		—		16,071		—
KEXIM Asia Limited		—		—		88,766		20,892
Subtotal		—		—		323,403		35,892
Associates:
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		25,997		98,061		210,000		—
DAESUN Shipbuilding & Engineering Co., Ltd.		92,812		77,425		—		—
Subtotal		118,809		175,486		210,000		—
Total	￦	118,809	￦	175,486	￦	533,403	￦	35,892

(3) Profit and loss transactions with related parties

Profit and loss transactions with related parties for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

Detail	Related party	2018						2017
		Revenue		Bad debt expenses		Expenses		Revenue		Bad debt expenses			Expenses
Subsidiaries	KEXIM Bank UK Limited	￦	3,634	￦	—	￦	371	￦	2,149	￦	—		￦	535
	PT.KOEXIM Mandiri Finance		3,889		23		—		2,293		(4	)		—
	KEXIM Vietnam Leasing Co.		3,326		97		—		2,191		(22	)		1
	KEXIM Asia Limited		3,396		11		13		2,385		58			116
Associate	SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		29,241		24,565		6		82,413		887,790			—
	DAESUN Shipbuilding & Engineering Co., Ltd		34,759		143,754		—		49,297		49,047			59
	Korea Shipping and Maritime Transportation		619		—		—		—		—			—
	Total	￦	78,864	￦	168,450	￦	390	￦	140,728	￦	936,869		￦	711

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(4) Money dealing with related parties

Money dealing with related parties for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

Detail	2018				2017
	Financing transaction				Financing transaction
	Loan		Collection		Loan		Collection
Subsidiaries:
KEXIM Bank UK Limited	￦	236,787	￦	228,162	￦	240,458	￦	231,744
PT.KOEXIM Mandiri Finance		304,758		305,054		297,385		275,019
KEXIM Vietnam Leasing Co.		244,567		247,818		209,031		214,802
KEXIM Asia Limited		309,166		297,815		320,952		315,549
Associates:
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		24,345		25,048		34,000		216,503
DAESUN Shipbuilding & Engineering Co., Ltd.		—		—		99,450		—
Total	￦	1,119,623	￦	1,103,897	￦	1,201,276	￦	1,253,617

(5) Details of compensation for key executives for the years ended December 31, 2018 and 2017 are as follows (Korean won in millions):

Detail	2018		2017
Salaries	￦	2,944	￦	2,418
Severance and retirement benefits		201		162
Total	￦	3,145	￦	2,580

38. APPROVAL OF FINANCIAL STATEMENTS:

The financial statements of the Bank were approved by board of directors on March 26, 2019, and were finally approved by the Operations Committee on March 29, 2019.

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39. THE ADOPTION OF K-IFRS No. 1109 ‘Financial Instruments’:

The Bank has adopted K-IFRS No. 1109 ‘Financial Instruments’ which was published on September 25, 2015 from the year beginning on January 1, 2018. The effect of the adoption of this new standard to the Bank’s financial statements is as follows:

(1) Classification and measurement of financial assets

The impacts on the classification and measurements of the non-derivative financial instruments as of January 1, 2018 by application of this new standard were as follows (Korean won in millions):

	Classification under K-IFRS No.1039	Classification under K-IFRS No.1109	Amounts under K-IFRS No.1039(*1)		Amounts under K-IFRS No.1109(*1)
Due from banks:	Loans and receivables	Amortized cost	￦	2,091,920	￦	2,091,920
Loans:	Loans and receivables	FVPL		18,216		13,577
	Loans and receivables	FVOCI		1,095,968		866,318
	Loans and receivables	Amortized cost		70,371,948		70,371,948
Other financial assets	Loans and receivables	Amortized cost		1,102,062		1,090,380
Trading assets (debt securities)	FVTPL	FVPL		38,665		38,665
Trading assets (equity securities)	FVTPL	FVPL		725,613		725,613
AFS financial assets (debt securities)	AFS financial assets	FVOCI		911,518		911,518
AFS financial assets (equity securities)	AFS financial assets	FVPL		134,324		134,324
	AFS financial assets	FVOCI		5,646,636		5,646,636
HTM financial assets (debt securities)	HTM financial assets	Amortized cost		89,477		89,477
Total of the non-derivative financial instruments			￦	82,226,347	￦	81,980,376

(*1) These are amounts before deduction of allowance for loan loss, and exclude loan valuation adjustment related to fair value hedging amounting to ￦24,182 million.

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(2) Loss allowances impact

The impacts on loss allowances as of January 1, 2018 by application of this new standard were as follows (Korean won in millions):

Detail	Stages	Loans		Loss allowance under K-IFRS No.1039		Loss allowance under K-IFRS No.1109
Loans and receivables	Stage 1	￦	64,646,271	￦	209,161	￦	241,555
	Stage 2		3,185,189		96,182		417,303
	Stage 3		4,099,725		2,840,651		2,826,958
	Reclassification		2,315,657		309,554		—
	Subtotal		74,246,842		3,455,548		3,485,816
Acceptances and guarantee contracts/ Commitments	Stage 1		48,995,311		744,674		758,590
	Stage 2		12,335,103		541,790		722,789
	Stage 3		1,216,148		512,427		512,870
	Subtotal		62,546,562		1,798,891		1,994,249
Debt securities	Stage 1		1,000,995		—		1,815
Total		￦	137,794,399	￦	5,254,439	￦	5,481,880

(3) Changes in equity

Changes in retained earnings as of January 1, 2018 due to the initial application date of K-IFRS No.1109 were as follows (Korean won in millions):

	Amounts
Retained earnings at January 1, 2018 before changes	￦	707,980
Adjustments of retained earnings due to the application of K-IFRS No.1109:
Reclassification from financial assets at amortized cost to financial assets at FVOCI		120,064
Reclassification from available-for-sale financial assets to financial assets at FVOCI		(61,926	)
Increase in loss allowance for financial assets at amortized cost		(30,705	)
Increase in provisions for acceptances and guarantees		(29,244	)
Increase in provisions for unused loan commitments		(166,116	)
Increase in loss allowance for debt instruments at FVOCI		(2,342	)
Others(*1)		397
Subtotal		(169,872	)
Tax effect		41,109
Retained earnings at January 1, 2018 after changes		579,217

(*1) Others represent translation difference of foreign currencies, and others.

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Changes in other components of equity of January 1, 2018 due to the initial application date of K-IFRS No.1109 were as follows (Korean won in millions):

	Amounts
Other components of equity at January 1, 2018 before changes	￦	119,739
Adjustments of other components of equity due to the application of K-IFRS No.1109:
Reclassification from financial assets at amortized cost to financial assets at FVOCI		(305,553	)
Reclassification from available-for-sale financial assets to financial assets at FVOCI		2,342
Subtotal		(303,211	)
Tax effect		73,377
Other components of equity at January 1, 2018 after changes		(110,095	)

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THE REPUBLIC OF KOREA

Land and History

Territory and Population

Located generally south of the 38th parallel on the Korean peninsula, The Republic of Korea covers about 38,000 square miles, approximately one-fourth of which is arable. The Republic has a population of approximately 51 million people. The country’s largest city and capital, Seoul, has a population of about 10 million people.

Map of the Republic of Korea

Political History

Dr. Rhee Seungman, who was elected President in each of 1948, 1952, 1956 and 1960, dominated the years after the Republic’s founding in 1948. Shortly after President Rhee’s resignation in 1960 in response to student-led demonstrations, a group of military leaders headed by Park Chung Hee assumed power by coup. The military leaders established a civilian government, and the country elected Mr. Park as President in October 1963. President Park served as President until his assassination in 1979 following a period of increasing strife between the Government and its critics. The Government declared martial law and formed an interim government under Prime Minister Choi Kyu Hah, who became the next President. After clashes between the

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Government and its critics, President Choi resigned, and General Chun Doo Hwan, who took control of the Korean army, became President in 1980.

In late 1980, the country approved, by national referendum, a new Constitution, providing for indirect election of the President by an electoral college and for certain democratic reforms, and shortly thereafter, in early 1981, re-elected President Chun.

Responding to public demonstrations in 1987, the legislature revised the Constitution to provide for direct election of the President. In December 1987, Roh Tae Woo won the Presidency by a narrow plurality, after opposition parties led by Kim Young Sam and Kim Dae Jung failed to unite behind a single candidate. In February 1990, two opposition political parties, including the one led by Kim Young Sam, merged into President Roh’s ruling Democratic Liberal Party.

In December 1992, the country elected Kim Young Sam as President. The election of a civilian and former opposition party leader considerably lessened the controversy concerning the legitimacy of the political regime. President Kim’s administration reformed the political sector and deregulated and internationalized the Korean economy.

In December 1997, the country elected Kim Dae Jung as President. President Kim’s party, the Millennium Democratic Party (formerly known as the National Congress for New Politics), formed a coalition with the United Liberal Democrats led by Kim Jong Pil, with Kim Jong Pil becoming the first prime minister in President Kim’s administration. The coalition, which temporarily ended before the election held in April 2000, continued with the appointment of Lee Han Dong of the United Liberal Democrats as the Prime Minister in June 2000. The coalition again ended in September 2001.

In December 2002, the country elected Roh Moo Hyun as President. President Roh and his supporters left the Millennium Democratic Party in 2003 and formed a new party, the Uri Party, in November 2003. On August 15, 2007, 85 members of the National Assembly, previously belonging to the Uri Party, or the Democratic Party, formed the United New Democratic Party (the “UNDP”). The Uri Party merged into the UNDP on August 20, 2007. In February 2008, the UNDP merged back into the Democratic Party. In December 2011, the Democratic Party merged with the Citizens Unity Party to form the Democratic United Party, which changed its name to the Democratic Party in May 2013.

In December 2007, the country elected Lee Myung-Bak as President. He commenced his term on February 25, 2008. On April 9, 2018, the Korean prosecutor’s office indicted former President Lee on 16 counts of corruption, including bribery, abuse of power, embezzlement and other irregularities.

In December 2012, the country elected Park Geun-hye as President. She commenced her term on February 25, 2013. On December 9, 2016, the National Assembly voted in favor of impeaching President Park for a number of alleged constitutional and criminal violations, including violation of the Constitution and abuse of power by allowing her confidant to exert influence on state affairs and allowing senior presidential aides to aid in her extortion from companies. President Park was suspended from power immediately, with the prime minister simultaneously taking over the role of acting President. On March 10, 2017, the Constitutional Court unanimously upheld the parliamentary vote to impeach President Park, triggering her immediate dismissal. On April 17, 2017, the Korean prosecutor’s office indicted former President Park on charges of bribery, abuse of power and coercion, among others. On August 24, 2018, the Seoul High Court found former President Park guilty on many of the charges, including bribery, abuse of power and coercion, and sentenced her to 25 years in prison and assessed a fine of Won 20 billion.

A special election to elect a new President was held on May 9, 2017 and the country elected Moon Jae-in as President. He commenced his term on May 10, 2017. The Moon administration’s key policy priorities include:

• investigating corruption involving high-ranking government officials, anti-corruption and reform of chaebol (Korean conglomerates);

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• denuclearization of and establishing peace on the Korean Peninsula and enhancing Korea’s core military strength in response to North Korea’s nuclear capabilities;

• reducing fine dust emissions, closing old nuclear power plants and reexamining the construction of new nuclear power plants;

• creating new jobs, resolving youth unemployment and enacting laws prohibiting discrimination against non-regular workers;

• creating jobs for senior citizens, increasing basic pension and providing government subsidies for Alzheimer’s disease treatment; and

• protecting small business owners and restricting establishment of large-scale stores and multi-complex shopping malls.

Government and Politics

Government and Administrative Structure

Governmental authority in the Republic is centralized and concentrated in a strong Presidency. The President is elected by popular vote and can only serve one term of five years. The President chairs the State Council, which consists of the prime minister, the deputy prime ministers, the respective heads of Government ministries and the ministers of state. The President can select the members of the State Council and appoint or remove all other Government officials, except for elected local officials.

The President can veto new legislation and take emergency measures in cases of natural disaster, serious fiscal or economic crisis, state of war or other similar circumstances. The President must promptly seek the concurrence of the National Assembly for any emergency measures taken and failing to do so automatically invalidates the emergency measures. In the case of martial law, the President may declare martial law without the consent of the National Assembly; provided, however, that the National Assembly may request the President to rescind such martial law.

The National Assembly exercises the country’s legislative power. The Constitution and the Election for Public Offices Act provide for the direct election of about 84% of the members of the National Assembly and the distribution of the remaining seats proportionately among parties winning more than 5 seats in the direct election or receiving over 3% of the popular vote. National Assembly members serve four-year terms. The National Assembly enacts laws, ratifies treaties and approves the national budget. The executive branch drafts most legislation and submits it to the National Assembly for approval.

The country’s judicial branch comprises the Supreme Court, the Constitutional Court and lower courts of various levels. The President appoints the Chief Justice of the Supreme Court and appoints the other Justices of the Supreme Court upon the recommendation of the Chief Justice. All appointments to the Supreme Court require the consent of the National Assembly. The Chief Justice, with the consent of the conference of Supreme Court Justices, appoints all the other judges in Korea. Supreme Court Justices serve for six years and all other judges serve for ten years. Other than the Chief Justice, justices and judges may be reappointed to successive terms.

The President formally appoints all nine judges of the Constitutional Court, but three judges must be designated by the National Assembly and three by the Chief Justice of the Supreme Court. Constitutional Court judges serve for six years and may be reappointed to successive terms.

Administratively, the Republic comprises eight provinces, one special autonomous province (Jeju), one special city (Seoul), six metropolitan cities (Busan, Daegu, Incheon, Gwangju, Daejon and Ulsan) and one special autonomous city (Sejong). From 1961 to 1995, the national government controlled the provinces and the President appointed provincial officials. Local autonomy, including the election of provincial officials, was reintroduced in June 1995.

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Political Parties

The 20th legislative general election was held on April 13, 2016 and the term of the National Assembly members elected in the 20th legislative general election commenced on May 30, 2016. Currently, there are four major political parties: The Minjoo Party of Korea, or MPK, the Liberty Korea Party, or LKP, the Bareun Future Party, or BFP, and the Party for Democracy and Peace, or PDP.

As of June 30, 2019, the parties control the following number of seats in the National Assembly:

	MPK		LKP		BFP		PDP		Others		Total
Number of seats		128		111		28		14		17		298

Relations with North Korea

Relations between the Republic and North Korea have been tense over most of the Republic’s history. The Korean War began with the invasion of the Republic by communist forces from the north in 1950, which was repelled by the Republic and the United Nations forces led by the United States. Following a military stalemate, an armistice was reached establishing a demilitarized zone monitored by the United Nations in the vicinity of the 38th parallel in 1953.

North Korea maintains a military force estimated at more than a million regular troops, mostly concentrated near the northern side of the demilitarized zone, and 7 million reserves. The Republic’s military forces, composed of approximately 630,000 regular troops and 3 million reserves, maintain a state of military preparedness along the southern side of the demilitarized zone. In addition, the United States has maintained its military presence in the Republic since the signing of the armistice and currently has approximately 28,500 troops stationed in the Republic. The Republic and the United States share a joint command structure over their military forces in Korea. In October 2014, the United States and the Republic agreed to implement a conditions-based approach to the dissolution of their joint command structure at an appropriate future date, which would allow the Republic to assume the command of its own armed forces in the event of war on the Korean peninsula.

The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In particular, since the death of Kim Jong-il in December 2011, there has been increased uncertainty with respect to the future of North Korea’s political leadership and concern regarding its implications for political and economic stability in the region. Kim Jong-il’s third son, Kim Jong-eun, has assumed power as his father’s designated successor.

In addition, there have been heightened security concerns in recent years stemming from North Korea’s nuclear weapons and ballistic missile programs as well as its hostile military and other actions against Korea. Some of the significant incidents in recent years include the following:

• From time to time, North Korea has conducted ballistic missile tests. In February 2016, North Korea launched a long-range rocket in violation of its agreement with the United States as well as United Nations sanctions barring it from conducting launches that use ballistic missile technology. Despite international condemnation, North Korea released a statement that it intends to continue its rocket launch program and it conducted a series of ballistic missile tests in 2016 and 2017. In response, the United Nations Security Council issued unanimous statements condemning North Korea and agreeing to continue to closely monitor the situation and to take further significant measures, and in December 2017, unanimously passed a resolution extending existing sanctions that were imposed on North Korea.

• North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty in January 2003 and conducted three rounds of nuclear tests between October 2006 and February 2013. In January 2016, North Korea conducted a fourth nuclear test, claiming that the test involved its first hydrogen bomb. In

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September 2016, North Korea conducted a fifth nuclear test, claiming to have successfully detonated a nuclear warhead that could be mounted on ballistic missiles. In September 2017, North Korea announced that it successfully conducted its sixth nuclear test by detonating a hydrogen bomb designed to be mounted on an intercontinental ballistic missile, which resulted in increased tensions in the region and elicited strong objections worldwide. In response to such tests (as well as North Korea’s long-range ballistic missile program), the United Nations Security Council unanimously passed several rounds of resolutions condemning North Korea’s actions and significantly expanding the scope of the sanctions applicable to North Korea, while the United States and the European Union also imposed additional sanctions on North Korea.

• In August 2015, two Korean soldiers were injured in a landmine explosion near the Korean demilitarized zone. Claiming the landmines were set by North Koreans, the Korean army re-initiated its propaganda program toward North Korea utilizing loudspeakers near the demilitarized zone. In retaliation, the North Korean army fired artillery rounds on the loudspeakers, resulting in the highest level of military readiness for both Koreas.

• In March 2010, a Korean naval vessel was destroyed by an underwater explosion, killing many of the crewmen on board. The Government formally accused North Korea of causing the sinking, while North Korea denied responsibility. Moreover, in November 2010, North Korea fired more than one hundred artillery shells that hit Korea’s Yeonpyeong Island near the Northern Limit Line, which acts as the de facto maritime boundary between Korea and North Korea on the west coast of the Korean peninsula, causing casualties and significant property damage. The Government condemned North Korea for the attack and vowed stern retaliation should there be further provocation.

North Korea’s economy also faces severe challenges, which may further aggravate social and political pressures within North Korea. Although bilateral summit meetings were held between Korea and North Korea in April and May 2018 and between the United States and North Korea in June 2018 and February 2019, there can be no assurance that the level of tension on the Korean peninsula will not escalate in the future or that such escalation will not have a material adverse impact on the Republic’s economy and us. Any further increase in tension, which may occur, for example, if North Korea experiences a leadership crisis, high-level contacts between the Republic and North Korea break down or further military hostilities occur, could have a material adverse effect on the Republic’s economy and us. Over the longer term, reunification of the two Koreas could occur. Reunification may entail a significant economic commitment by the Republic.

Foreign Relations and International Organizations

The Republic maintains diplomatic relations with most nations of the world, most importantly with the United States with which it entered into a mutual defense treaty and several economic agreements. The Republic also has important relationships with Japan and China, its largest trading partners together with the United States.

The Republic belongs to a number of supranational organizations, including:

• United Nations;

• the International Monetary Fund, or the IMF;

• the World Bank;

• the Asian Development Bank, or ADB;

• the Multilateral Investment Guarantee Agency;

• the International Finance Corporation;

• the International Development Association;

• the African Development Bank;

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• the European Bank for Reconstruction and Development;

• the Bank for International Settlements;

• the World Trade Organization, or WTO;

• the Inter-American Development Bank, or IDB; and

• the Organization for Economic Cooperation and Development, or OECD.

The Economy

The following table sets forth information regarding certain of the Republic’s key economic indicators for the periods indicated.

	As of or for the year ended December 31,
	2014			2015			2016			2017			2018(6)
	(billions of dollars and trillions of Won, except percentages)
GDP Growth (at current prices)		4.0	%		5.3	%		5.0	%		5.4	%(6)		3.0	%(6)
GDP Growth (at chained 2010 year prices)		3.3	%		2.8	%		2.9	%		3.1	%(6)		2.7	%(6)
Inflation		1.3	%		0.7	%		1.0	%		1.9	%		1.5	%
Unemployment(1)		3.5	%		3.6	%		3.7	%		3.7	%		3.8	%
Trade Surplus(2)	$	47.2		$	90.3		$	89.2		$	95.2		$	69.7
Foreign Currency Reserves	$	363.6		$	368.0		$	371.1		$	389.3		$	403.7
External Liabilities(3)	$	424.3		$	396.1		$	382.2		$	412.0		$	440.6	(6)
Fiscal Balance	￦	8.5		￦	(0.2	)	￦	16.9		￦	24.0	(6)	￦	31.2	(6)
Direct Internal Debt of the Government(4) (as % of GDP(5))		34.6	%		37.3	%		38.5	%		39.8	%(6)		40.3	%(6)
Direct External Debt of the Government(4) (as % of GDP(5))		0.5	%		0.5	%		0.4	%		0.5	%(6)		0.5	%(6)

(1) Average for year.

(2) Derived from customs clearance statistics on a C.I.F. basis, meaning that the price of goods include insurance and freight cost.

(3) Calculated under the criteria based on the sixth edition of Balance of Payment Manual, or BPM6, published by the International Monetary Fund in December 2010.

(4) Does not include guarantees by the Government. See “—Debt—External and Internal Debt of the Government—Guarantees by the Government” for information on outstanding guarantees by the Government.

(5) At chained 2010 year prices.

(6) Preliminary.

Source: The Bank of Korea

Worldwide Economic and Financial Difficulties

In recent years, the global financial markets have experienced significant volatility as a result of, among other things:

• the financial difficulties affecting many governments worldwide, in particular in southern Europe and Latin America;

• the slowdown of economic growth in China and other major emerging market economies;

• interest rate fluctuations as well as the possibility of increases in policy rates by the U.S. Federal Reserve and other central banks;

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• political and social instability in various countries in the Middle East and Northern Africa, including Iraq, Syria and Yemen, as well as in the Ukraine and Russia; and

• fluctuations in oil and commodity prices.

In light of the high level of interdependence of the global economy, any of the foregoing developments could have a material adverse effect on the Korean economy and financial markets.

As a result of adverse global financial and economic conditions, there has been significant volatility in the Korea Composite Stock Index in recent years. See “—The Financial System—Securities Markets”. There is no guarantee that the stock prices of Korean companies will not decline again in the future. Future declines in the index and large amounts of sales of Korean securities by foreign investors and subsequent repatriation of the proceeds of such sales may continue to adversely affect the value of the Won, the foreign currency reserves held by financial institutions in Korea, and the ability of Korean companies and banks to raise capital. In addition, the value of the Won relative to major foreign currencies in general and the U.S. dollar in particular has fluctuated widely in recent years. A depreciation of the Won generally increases the cost of imported goods and services and the required amount of the Won revenue for Korean companies to service foreign currency-denominated debt.

In the event that difficult conditions in the global credit markets continue or the global economy deteriorates in the future, the Korean economy could be adversely affected and Korean banks may be forced to fund their operations at a higher cost or may be unable to raise as much funding as they need to support their lending and other activities.

In addition to the global developments, domestic developments that could lead to or contribute to a material adverse effect on the Korean economy include, among other things, the following:

• steadily rising household debt consisting of housing loans and merchandise credit, which increased to approximately ￦1,534.6 trillion as of December 31, 2018 from ￦843.2 trillion as of December 31, 2010, primarily due to increases in mortgage loans and purchases with credit cards;

• a slowdown in consumer spending and depressed consumer sentiment, due in part to national tragedies including the sinking of the Sewol passenger ferry in April 2014, which led to the death of hundreds of passengers, and the outbreak of infectious diseases, such as the outbreak of the Middle East Respiratory Syndrome (“MERS”) in May 2015, which resulted in the death of over 30 people and the quarantine of thousands;

• a substantial increase in the Korean government’s expenditures for pension and social welfare programs, due in part to an aging population (defined as the population of people aged 65 years or older) that accounts for 14.3% of the Republic’s total population as of December 31, 2018, an increase from 7.2% as of December 31, 2000, and is expected to surpass 15.6% in 2020 and 21.1% in 2026, which could lead to a Korean government budget deficit;

• increasing delinquencies and credit defaults by consumer and small- and medium-sized enterprise borrowers;

• decreases in the market prices of Korean real estate;

• the occurrence of severe health epidemics, including epidemics that affect the livestock industry; and

• deterioration resulting from territorial or trade disputes or disagreements in foreign policy (such as the ongoing controversy between Korea and China regarding the decision to allow the United States to deploy the Terminal High Altitude Area Defense system in Korea).

Gross Domestic Product

GDP measures the market value of all final goods and services produced within a country for a given period and reveals whether a country’s productive output rises or falls over time. Economists present GDP in both

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current market prices and “real” or “inflation-adjusted” terms. In March 2009, the Republic adopted a method known as the “chain-linked” measure of GDP, replacing the previous fixed-base, or “constant” measure of GDP, to show the real growth of the aggregate economic activity, as recommended by the System of National Accounts 1993. GDP at current market prices values a country’s output using the actual prices of each year, whereas the “chain-linked” measure of GDP is compiled by using “chained indices” linking volume growth between consecutive time periods. In March 2014, the Republic published a revised GDP calculation method by implementing the System of National Accounts 2008 and updating the reference year from 2005 to 2010 to align Korean national accounts statistics with the recommendations of the new international standards for compiling national economic accounts and to maintain comparability with other nations’ accounts. The main components of these revisions include, among other things, (i) recognizing expenditures for research and development and creative activity for the products of entertainment, literary and artistic originals as fixed investment, (ii) incorporating a wide array of new and revised source data such as the economic census, the population and housing census and 2010 benchmark input-output tables, which provide thorough and detailed information on the structure of the Korean economy, (iii) developing supply-use tables, which provide a statistical tool for ensuring consistency among the production, expenditure and income approaches to measuring GDP and (iv) recording merchandise trade transactions based on ownership changes rather than movements of goods across the national border.

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The following table sets out the composition of the Republic’s GDP at current market and chained 2010 year prices and the annual average increase in the Republic’s GDP.

Gross Domestic Product

	2014			2015			2016			2017(1)			2018(1)			As % of GDP 2018(1)
	(billions of Won)
Gross Domestic Product at Current Market Prices:
Private		748,200.8			771,239.2			798,728.9			832,234.7			867,042.9			48.6
Government		224,724.2			234,766.4			249,166.9			265,347.0			286,730.4			16.1
Gross Capital Formation		435,078.1			452,315.1			480,261.6			537,732.6			537,935.9			30.2
Exports of Goods and Services		747,134.3			709,122.0			694,216.1			745,645.6			784,379.3			44.0
Less Imports of Goods and Services		(669,058.0	)		(600,239.3	)		(581,662.3	)		(652,156.8	)		(694,973.9	)		(39.0	)
Statistical Discrepancy		—			(3,079.4	)		1,074.9			1,595.5			1,154.4			0.1
Expenditures on Gross Domestic Product		1,486,079.3			1,564,123.9			1,641,786.0			1,730,398.5			1,782,268.9			100.0
Net Factor Income from the Rest of the World		4,684.5			4,259.2			4,422.8			62.9			(1,177.9	)		(0.1	)
Gross National Income(2)		1,490,763.9			1,568,383.1			1,646,208.9			1,730,461.4			1,781,091.0			99.9
Gross Domestic Product at Chained 2010 Year Prices:
Private		692,236.0			707,492.7			725,362.3			744,284.4			765,417.4			47.9
Government		205,869.2			212,021.6			221,514.2			229,100.7			241,919.4			15.1
Gross Capital Formation		430,685.5			462,114.3			488,039.9			537,370.0			527,195.5			33.0
Exports of Goods and Services		804,797.1			803,746.1			824,330.0			840,019.9			875,264.8			54.8
Less Imports of Goods and Services		(706,938.4	)		(721,740.4	)		(755,861.0	)		(808,985.5	)		(822,891.8	)		(51.5	)
Statistical Discrepancy		1,019.1			2,481.2			3,261.9			3,366.9			1,444.6			0.1
Expenditures on Gross Domestic Product(3)		1,426,972.4			1,466,788.3			1,509,755.0			1,555,995.3			1,597,514.1			100.0
Net Factor Income from the Rest of the World in the Terms of Trade		4,706.4			4,249.8			4,293.6			261.0			(1,049.0	)		(0.1	)
Trading Gains and Losses from Changes in the Terms of Trade		(14,000.4	)		38,787.9			59,905.0			65,729.0			42,198.1			2.6
Gross National Income(4)		1,417,814.2			1,510,005.6			1,574,137.3			1,622,212.6			1,638,879.4			102.6
Percentage Increase (Decrease) of GDP over Previous Year:
At Current Prices		4.0			5.3			5.0			5.4			3.0
At Chained 2010 Year Prices		3.3			2.8			2.9			3.1			2.7

(1) Preliminary.

(2) GDP plus net factor income from the rest of the world is equal to the Republic’s gross national income.

(3) Under the “chain-linked” measure of GDP, the components of GDP will not necessarily add up to the total GDP.

(4) Under the “chain-linked” measure of Gross National Income, the components of Gross National Income will not necessarily add up to the total Gross National Income.

Source: The Bank of Korea.

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The following table sets out the Republic’s GDP by economic sector at current market prices:

Gross Domestic Product by Economic Sector

(at current market prices)

	2014		2015		2016		2017(1)		2018(1)			As % of GDP 2018(1)
	(billions of Won)
Industrial Sectors:		547,231.2		578,352.0		608,403.1		654,616.6		661,339.9			37.1
Agriculture, Forestry and Fisheries		31,560.3		32,612.2		31,647.0		33,935.4		35,348.0			2.0
Mining and Manufacturing		411,030.4		426,228.8		442,502.4		479,927.3		488,053.3			27.4
Mining and Quarrying		2,520.2		2,577.1		2,802.1		2,815.2		2,772.1			0.2
Manufacturing		408,510.2		423,651.7		439,700.3		477,112.1		485,281.2			27.2
Electricity, Gas and Water Supply		37,373.8		44,988.9		49,879.4		47,531.0		43,780.6			2.5
Construction		67,266.7		74,522.1		84,374.3		93,222.9		94,158.0			5.3
Services:		807,624.1		845,294.8		882,458.9		914,424.9		954,651.7			53.6
Wholesale and Retail Trade, Restaurants and Hotels		152,205.2		156,363.1		164,350.4		168,423.0		173,940.3			9.8
Transportation and Storage		50,306.8		56,154.6		59,230.7		56,987.2		54,721.1			3.1
Finance and Insurance		75,859.8		78,699.7		81,075.7		85,784.4		94,582.7			5.3
Real Estate and Leasing		109,549.0		114,618.7		118,359.9		122,262.5		125,357.3			7.0
Information and Communication		52,510.8		54,257.2		56,710.7		57,581.0		58,265.4			3.3
Business Activities		100,936.7		106,944.2		110,894.2		115,417.2		120,751.9			6.8
Public Administration and Defense		98,333.5		102,848.3		107,601.0		114,832.9		121,821.4			6.8
Education		74,007.8		76,237.2		77,664.4		79,432.7		82,936.4			4.7
Health and Social Work		57,129.7		61,980.4		68,100.9		74,356.4		81,116.2			4.6
Cultural and Other Services		36,784.7		37,191.4		38,471.0		39,347.6		41,159.0			2.3
Taxes Less Subsidies on Products		131,224.0		140,477.2		150,924.2		161,356.9		166,277.4			9.3
Gross Domestic Product at Current Market Prices		1,486,079.3		1,564,123.9		1,641,786.0		1,730,398.5		1,782,268.9			100.0
Net Factor Income from the Rest of the World		4,684.5		4,259.2		4,422.8		62.9		(1,177.9	)		(0.1	)
Gross National Income at Current Market Price		1,490,763.9		1,568,383.1		1,646,208.9		1,730,461.4		1,781,091.0			99.9

(1) Preliminary.

Source: The Bank of Korea.

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The following table sets out the Republic’s GDP per capita:

Gross Domestic Product per capita

(at current market prices)

	2014		2015		2016		2017(1)		2018(1)
GDP per capita (thousands of Won)		29,284		30,660		32,038		33,635		34,517
GDP per capita (U.S. dollar)		27,805		27,097		27,607		29,744		31,370
Average Exchange Rate (in Won per U.S. dollar)		1,053.2		1,131.5		1,160.5		1,130.8		1,100.3

(1) Preliminary.

Source: The Bank of Korea.

The following table sets out the Republic’s Gross National Income, or GNI, per capita:

Gross National Income per capita

(at current market prices)

	2014		2015		2016		2017(1)		2018(1)
GNI per capita (thousands of Won)		29,377		30,744		32,124		33,636		34,494
GNI per capita (U.S. dollar)		27,892		27,171		27,681		29,745		31,349
Average Exchange Rate (in Won per U.S. dollar)		1,053.2		1,131.5		1,160.5		1,130.8		1,100.3

(1) Preliminary.

Source: The Bank of Korea.

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The following table sets out the Republic’s GDP by economic sector at chained 2010 year prices:

Gross Domestic Product by Economic Sector

(at chained 2010 year prices)

	2014		2015		2016		2017(1)		2018(1)		As % of GDP 2018(1)
	(billions of Won)
Industrial Sectors:		527,016.1		538,722.4		554,601.8		578,753.1		592,775.4		37.1
Agriculture, Forestry and Fisheries		29,378.2		29,251.4		28,441.6		28,530.8		28,946.2		1.8
Mining and Manufacturing		413,839.1		421,057.7		430,968.9		449,483.8		465,349.0		29.1
Mining and Quarrying		2,344.40		2,314.5		2,357.1		2,221.1		2,081.8		0.1
Manufacturing		411,494.7		418,743.2		428,611.8		447,262.7		463,267.2		29.0
Electricity, Gas and Water Supply		27,327.9		28,722.1		29,495.0		30,399.3		31,076.0		1.9
Construction		56,470.9		59,691.2		65,696.3		70,339.2		67,404.2		4.2
Services:		764,283.7		786,394.3		806,312.4		823,800.7		847,416.9		53.0
Wholesale and Retail Trade, Restaurants and Hotels		149,150.5		152,013.0		156,323.0		157,472.7		159,604.0		10.0
Transportation and Storage		48,646.9		49,486.3		50,616.8		51,765.3		52,761.1		3.3
Finance and Insurance		83,020.5		88,568.7		90,844.7		94,249.9		98,811.1		6.2
Real Estate and Leasing		97,112.9		98,773.8		99,559.1		100,496.5		102,651.8		6.4
Information and Communication		55,164.8		56,532.2		58,282.1		59,743.4		61,362.3		3.8
Business Activities		91,424.0		95,713.9		97,986.2		99,948.1		101,890.5		6.4
Public Administration and Defense		87,052.8		88,495.2		90,625.4		93,008.8		96,277.5		6.0
Education		64,865.2		65,158.4		65,234.3		65,574.5		66,970.3		4.2
Health and Social Work		54,740.1		58,653.1		63,157.9		67,738.3		72,806.4		4.6
Cultural and Other Services		33,106.0		32,999.7		33,682.9		33,803.2		34,281.9		2.1
Taxes Less Subsidies on Products		136,454.6		142,688.3		149,817.1		154,793.8		160,329.5		10.0
Gross Domestic Product at Chained 2010 Year Prices(2)		1,426,972.4		1,466,788.3		1,509,755.0		1,555,995.3		1,597,514.1		100.0

(1) Preliminary.

(2) Under the “chain-linked” measure of GDP, the components of GDP will not necessarily add up to the total GDP.

Source: The Bank of Korea.

GDP growth in 2014 was 3.3% at chained 2010 year prices, as aggregate private and general government consumption expenditures increased by 2.0%, exports of goods and services increased by 2.0% and gross domestic fixed capital formation increased by 3.4%, which more than offset an increase in imports of goods and services by 1.5%, each compared with 2013.

GDP growth in 2015 was 2.8% at chained 2010 year prices, as aggregate private and general government consumption expenditures increased by 2.4% and gross domestic fixed capital formation increased by 5.1%, which more than offset a decrease in exports of goods and services by 0.1% and an increase in imports of goods and services by 2.1%, each compared with 2014.

GDP growth in 2016 was 2.9% at chained 2010 year prices, as aggregate private and general government consumption expenditures increased by 3.0%, gross domestic fixed capital formation increased by 5.6% and

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exports of goods and services increased by 2.6%, which more than offset an increase in imports of goods and services by 4.7%, each compared with 2015.

Based on preliminary data, GDP growth in 2017 was 3.1% at chained 2010 year prices, as aggregate private and general government consumption expenditures increased by 2.8%, gross domestic fixed capital formation increased by 8.6% and exports of goods and services increased by 1.9%, which more than offset an increase in imports of goods and services by 7.0%, each compared with 2016.

Based on preliminary data, GDP growth in 2018 was 2.7% at chained 2010 year prices, as aggregate private and general government consumption expenditures increased by 3.5% and exports of goods and services increased by 4.2%, which more than offset a decrease in gross domestic fixed capital formation by 2.2% and an increase in imports of goods and services by 1.7%, each compared with 2017.

Based on preliminary data, GDP growth in the first quarter of 2019 was 1.7% at chained 2010 year prices, as aggregate private and general government consumption expenditures increased by 2.8% and imports of goods and services decreased by 5.1%, which more than offset a decrease in gross domestic fixed capital formation by 8.6% and a decrease in exports of goods and services by 0.2%, each compared with the corresponding period of 2018.

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Principal Sectors of the Economy

Industrial Sectors

The following table sets out production indices for the principal industrial products of the Republic and their relative contribution to total industrial production:

Industrial Production

(2015 = 100)

	Index Weight(1)		2014		2015		2016		2017		2018(2)
All Industries		10,000.0		100.3		100.0		102.2		104.7		106.1
Mining and Manufacturing		9,611.6		100.2		100.0		102.3		104.6		105.8
Mining		33.9		98.5		100.0		103.4		100.2		89.4
Petroleum, Crude Petroleum and Natural Gas		8.7		120.4		100.0		96.8		86.5		73.4
Metal Ores		0.9		126.6		100.0		95.0		84.0		104.8
Non-metallic Minerals		24.3		93.6		100.0		105.2		103.8		93.1
Manufacturing		9,577.7		100.3		100.0		102.3		104.6		105.9
Food Products		434.4		98.2		100.0		102.9		103.2		104.1
Beverage Products		82.4		97.2		100.0		103.6		105.7		105.2
Tobacco Products		43.2		107.9		100.0		113.0		122.4		101.0
Textiles		160.6		106.6		100.0		98.1		95.1		88.7
Wearing Apparel, Clothing Accessories and Fur Articles		145.2		104.0		100.0		96.3		95.5		93.0
Tanning and Dressing of Leather, Luggage and Footwear		42.1		105.9		100.0		93.3		82.5		84.6
Wood and Products of Wood and Cork (Except Furniture)		31.7		96.4		100.0		101.5		106.2		95.9
Pulp, Paper and Paper Products		126.8		101.1		100.0		99.4		97.2		97.2
Printing and Reproduction of Recorded Media		50.2		102.7		100.0		100.9		101.3		101.5
Coke, hard-coal and lignite fuel briquettes and Refined Petroleum Products		471.0		94.3		100.0		106.9		113.0		113.7
Chemicals and Chemical Products		847.5		97.8		100.0		105.7		109.4		111.9
Pharmaceuticals, Medicinal Chemicals and Botanical Products		144.1		98.1		100.0		109.9		118.6		128.1
Rubber and Plastic Products		421.1		100.1		100.0		100.5		99.9		94.9
Non-metallic Minerals		271.7		93.8		100.0		109.2		111.4		107.0
Basic Metals		827.6		101.7		100.0		101.7		102.6		99.4
Fabricated Metal Products		557.8		104.6		100.0		102.4		96.7		89.0
Electronic Components, Computer, Radio, Television and Communication Equipment and Apparatuses		1,794.3		98.7		100.0		105.1		112.6		125.3
Medical, Precision and Optical Instruments, Watches and Clocks		148.1		104.2		100.0		99.9		119.0		136.8
Electrical Equipment		479.5		103.4		100.0		102.8		105.5		105.2
Other Machinery and Equipment		803.6		103.2		100.0		101.4		115.1		111.8
Motor Vehicles, Trailers and Semitrailers		1,076.4		98.7		100.0		97.6		95.0		93.7
Other Transport Equipment		506.5		109.9		100.0		88.8		68.2		63.3
Furniture		69.5		94.7		100.0		107.0		110.3		102.3
Other Products		42.4		103.8		100.0		104.5		108.2		103.1
Electricity, Gas		388.4		100.7		100.0		100.8		106.3		110.2
Total Index		10,000.0		100.3		100.0		102.2		104.7		106.1

(1) Index weights were established on the basis of an industrial census in 2015 and reflect the average annual value added by production in each of the classifications shown, expressed as a percentage of total value added in the mining, manufacturing and electricity and gas industries in that year.

(2) Preliminary.

Source: The Bank of Korea; Korea National Statistical Office.

Industrial production increased by 0.2% in 2014, primarily due to increased exports. Industrial production decreased by 0.3% in 2015, primarily due to decreased exports. Industrial production increased by 2.2% in 2016,

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primarily due to increased domestic consumption. Industrial production increased by 2.4% in 2017, primarily due to increased domestic consumption and exports. Based on preliminary data, industrial production increased by 1.3% in 2018, primarily due to increased domestic consumption and exports.

Manufacturing

The manufacturing sector increased production by 0.3% in 2014, primarily due to increased demand for basic metals, machinery and equipment and motor vehicles, trailers and semitrailers. The manufacturing sector decreased production by 0.3% in 2015, primarily due to decreased demand for other transport equipment, fabricated metal products, other machinery and equipment, and basic metals. The manufacturing sector increased production by 2.3% in 2016 and by 2.2% in 2017, primarily due to increased demand for consumer electronics products, electronic components (including semiconductors), communication equipment and chemical products, which more than offset decreased demand for motor vehicles, trailers and semitrailers. Based on preliminary data, the manufacturing sector increased production by 1.2% in 2018, primarily due to increased demand for consumer electronics products and electronic components (including semiconductors).

Automobiles. In 2014, automobile production increased by 0.1% and domestic sales volume recorded an increase of 4.6%, compared with 2013, primarily due to increased domestic demand for recreational vehicles, and export sales volume recorded a decrease of 0.8%, compared with 2013, primarily due to decreased demand for automobiles in Eastern Europe and South America. In 2015, automobile production increased by 0.7% and domestic sales volume recorded an increase of 7.7%, compared with 2014, primarily due to continued increase in domestic demand for recreational vehicles, and export sales volume recorded a decrease of 2.9%, compared with 2014, primarily due to decreased demand for automobiles in China, Russia, Eastern Europe and South America. In 2016, automobile production decreased by 7.2% and export sales volume recorded a decrease of 11.8%, compared with 2015, primarily due to the slowdown of the global economy, and domestic sales volume recorded an increase of 1.0%, compared with 2015, primarily due to the reduction of individual consumption tax on cars. Based on preliminary data, in 2017, automobile production decreased by 2.7%, domestic sales volume recorded a decrease of 2.5% and exports sales volume recorded a decrease of 3.5%, compared with 2016, primarily due to decreased domestic production of automobiles resulting mainly from partial strikes by unionized workers of automobile manufacturers, increased overseas production and decreased exports to the US and China. Based on preliminary data, in 2018, automobile production decreased by 2.1%, domestic sales volume recorded a decrease of 0.5% and exports sales volume recorded a decrease of 3.2%, compared with 2017, primarily due to decreased domestic production of automobiles resulting mainly from partial strikes by unionized workers of automobile manufacturers and the restructuring of GM Korea’s production units and decreased exports to countries in South America and Middle East.

Electronics. In 2014, electronics production amounted to ￦329,389 billion, an increase of 1.2% from the previous year, and exports amounted to US$176.2 billion, an increase of 2.0% from the previous year, primarily due to increases in demand for mobile phones and semiconductors. In 2014, export sales of semiconductor memory chips constituted approximately 10.9% of the Republic’s total exports. In 2015, electronics production amounted to ￦316,600 billion, a decrease of 3.9% from the previous year, and exports amounted to US$172.9 billion, a decrease of 0.6% from the previous year, primarily due to adverse global economic conditions and the expansion of overseas production. In 2015, export sales of semiconductor memory chips constituted approximately 11.9% of the Republic’s total exports. In 2016, electronics production amounted to ￦309,016 billion, a decrease of 2.4% from the previous year, and exports amounted to US$162.5 billion, a decrease of 6.0% from the previous year, primarily due to continued adverse global economic conditions and the expansion of overseas production. In 2016, export sales of semiconductor memory chips constituted approximately 12.6% of the Republic’s total exports. In 2017, electronics production amounted to ￦341,274 billion, an increase of 10.4% from the previous year, and exports amounted to US$197.6 billion, an increase of 21.6% from the previous year, primarily due to increases in demand for semiconductors, organic light-emitting diode, or OLED, display panels and computers. In 2017, export sales of semiconductor memory chips constituted approximately 17.4% of the Republic’s total exports. Based on preliminary data, in the first

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eleven months of 2018, electronics production amounted to ￦310,698 billion, an increase of 0.2% from the corresponding period of 2017, and in 2018, exports amounted to US$220.3 billion, an increase of 11.5% from the previous year, primarily due to increases in demand for semiconductors and lithium-ion batteries. In 2018, export sales of semiconductor memory chips constituted approximately 21.2% of the Republic’s total exports.

Iron and Steel. In 2014, crude steel production totaled 71.5 million tons, an increase of 8.3% from 2013, and domestic sales volume and export sales volume of iron and steel products increased by 7.3% and 10.5%, respectively, primarily due to the recovery of domestic and global demand for crude steel products. In 2015, crude steel production totaled 69.7 million tons, a decrease of 2.6% from 2014, and domestic sales volume of iron and steel products increased by 0.6% but export sales volume of iron and steel products decreased by 2.2%, primarily due to excess supply from China and adverse conditions in the global shipbuilding and construction industries. In 2016, crude steel production totaled 68.6 million tons, a decrease of 1.6% from 2015, and export sales volume of iron and steel products decreased by 1.8%, primarily due to intensified export competition and adverse conditions in the global shipbuilding and construction industries, but domestic sales volume of iron and steel products increased by 2.2%, primarily due to the recovery of the domestic construction industry. In 2017, crude steel production totaled 71.1 million tons, an increase of 3.7% from 2016, and export sales volume of iron and steel products increased by 2.3%, primarily due to an increase in global demand for crude steel products but domestic sales volume of iron and steel products decreased by 1.2%, primarily due to adverse conditions in the domestic shipbuilding and automobile industries. Based on preliminary data, in 2018, crude steel production totaled 72.5 million tons, an increase of 1.9% from 2017, primarily due to the recovery of the domestic shipbuilding industry but export sales volume of iron and steel products decreased by 3.9%, primarily due to restrictions on imports of steel products imposed by the United States, Canada and the European Union.

Shipbuilding. In 2014, the Republic’s shipbuilding orders amounted to approximately 13 million compensated gross tons, a decrease of 31.6% compared to 2013, primarily due to a downturn in the domestic and global shipbuilding industry. In 2015, the Republic’s shipbuilding orders amounted to approximately 11 million compensated gross tons, a decrease of 15.4% compared to 2014, primarily due to the continued downturn in the domestic and global shipbuilding industry. In 2016, the Republic’s shipbuilding orders amounted to approximately 2 million compensated gross tons, a decrease of 81.8% compared to 2015, primarily due to the continued adverse conditions in the domestic and global shipbuilding industry. In 2017, the Republic’s shipbuilding orders amounted to approximately 8 million compensated gross tons, an increase of 300% compared to 2016, primarily due to increased demand for LNG carriers, bulk carriers and container carriers. Based on preliminary data, in 2018, the Republic’s shipbuilding orders amounted to approximately 13 million compensated gross tons, an increase of 62.5% compared to 2017, primarily due to increased demand for LNG carriers, oil tankers and container carriers.

Agriculture, Forestry and Fisheries

The Government’s agricultural policy has traditionally focused on:

• grain production;

• development of irrigation systems;

• land consolidation and reclamation;

• seed improvement;

• mechanization measures to combat drought and flood damage; and

• increasing agricultural incomes.

Recently, however, the Government has increased emphasis on cultivating profitable crops and strengthening international competitiveness as a result of the continued opening of the domestic agricultural market.

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In 2013, rice production increased 5.0% from 2012 to 4.2 million tons. In 2014, rice production remained at 4.2 million tons. In 2015, rice production increased 2.4% from 2014 to 4.3 million tons. In 2016, rice production decreased 2.3% from 2015 to 4.2 million tons. In 2017, rice production decreased 5.3% from 2016 to 4.0 million tons. Due to limited crop yields resulting from geographical and physical constraints, the Republic depends on imports for certain basic foodstuffs.

The Government is seeking to develop the fishing industry by encouraging the building of large fishing vessels and modernizing fishing equipment, marketing techniques and distribution outlets.

In 2014, the agriculture, forestry and fisheries industry increased by 3.6% compared to 2013, primarily due to increases in the price of certain livestock items, which led to increases in production and the establishment of new agriculture and fishery companies. In 2015, the agriculture, forestry and fisheries industry decreased by 0.4% compared to 2014, primarily due to unfavorable weather conditions. In 2016, the agriculture, forestry and fisheries industry decreased by 2.8% compared to 2015, primarily due to unfavorable weather conditions and a decrease in fishing catch. Based on preliminary data, in 2017, the agriculture, forestry and fisheries industry increased by 0.3% compared to 2016, primarily due to an increase in aquafarming production. Based on preliminary data, in 2018, the agriculture, forestry and fisheries industry increased by 1.5% compared to 2017, primarily due to an increase in livestock production.

Construction

In 2014, the construction industry increased by 0.8% compared to 2013, primarily due to an increase in the construction of private residential buildings. In 2015, the construction industry increased by 5.7% compared to 2014, primarily due to an increase in the construction of private residential and commercial buildings. In 2016, the construction industry increased by 10.1% compared to 2015, primarily due to an increase in the construction of private residential and commercial buildings. Based on preliminary data, in 2017, the construction industry increased by 7.1% compared to 2016, primarily due to an increase in the construction of residential and commercial buildings. Based on preliminary data, in 2018, the construction industry decreased by 4.2% compared to 2017, primarily due to a decrease in the construction of residential and commercial buildings.

Electricity and Gas

The following table sets out the Republic’s dependence on imports for energy consumption:

Dependence on Imports for Energy Consumption

	Total Primary Energy Supply		Imports		Imports Dependence Ratio
	(millions of tons of oil equivalents(1), except ratios)
2014		282.5		268.9		95.2
2015		286.9		272.0		94.8
2016		293.8		277.9		94.6
2017		302.1		284.0		94.0
2018(2)		307.3		287.3		93.5

(1) Conversion to tons of oil equivalents was calculated based on energy conversion factors under the Energy Act Enforcement Decree as amended in July 2017.

(2) Preliminary.

Source: Korea Energy Economics Institute; Korea National Statistical Office.

Korea has almost no domestic oil or gas production and depends on imported oil and gas to meet its energy requirements. Accordingly, the international prices of oil and gas significantly affect the Korean economy. Any significant long-term increase in the prices of oil and gas will increase inflationary pressures in Korea and adversely affect the Republic’s balance of trade.

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To reduce its dependence on oil and gas imports, the Government has encouraged energy conservation and energy source diversification emphasizing nuclear energy. The following table sets out the principal primary sources of energy supplied in the Republic, expressed in oil equivalents and as a percentage of total energy consumption.

Primary Energy Supply by Source

	Coal				Petroleum				Nuclear				Others(1)				Total
	Quantity		%		Quantity		%		Quantity		%		Quantity		%		Quantity		%
	(millions of tons of oil equivalents(2), except percentages)
2014		84,399		29.9		104,702		37.1		33,002		11.7		60,379		21.4		282,481		100.0
2015		85,401		29.8		109,094		38.0		34,765		12.1		57,675		20.1		286,936		100.0
2016		81,499		27.7		117,605		40.0		34,181		11.6		60,493		20.6		293,778		100.0
2017		86,177		28.5		119,400		39.5		31,615		10.5		64,873		21.5		302,065		100.0
2018(3)		88,210		28.7		118,143		38.4		28,437		9.3		72,501		23.6		307,291		100.0

(1) Includes natural gas, hydroelectric power and renewable energy.

(2) Conversion to tons of oil equivalents was calculated based on energy conversion factors under the Energy Act Enforcement Decree as amended in July 2017.

(3) Preliminary.

Source: Korea Energy Economics Institute; The Bank of Korea.

The Republic’s first nuclear power plant went into full operation in 1978 with a rated generating capacity of 587 megawatts. As of December 31, 2018, the Republic had 24 nuclear plants with a total estimated nuclear power installed generating capacity of 21,850 megawatts and six nuclear plants under construction. In December 2017, the Government released the “Eighth Basic Plan relating to the Long-Term Supply and Demand of Electricity” which serves as the guideline for stable medium- and long-term supply of electric power. The objectives of the Eighth Basic Plan include, among other things, (i) increasing efforts to address environmental and safety concerns, including reducing greenhouse gas emission and yellow dust, (ii) decreasing the portion of electricity supplied using nuclear and coal energy sources including through suspension of construction of new nuclear power plants, permanent closing of old coal-fired generation units and converting coal-fired generation units into LNG-fired generation units, (iii) increasing the portion of electricity supplied from renewable energy, in particular solar and wind power, and (iv) promoting the replacement of coal with LNG as an energy source by reducing the gap in expenses incurred in using the respective fuel types, for example, by adjusting the consumption tax rates applicable to the respective fuel types. The Government plans to expand infrastructure to supply natural gas to households, pursue a long-term strategy of overseas energy development projects to ensure supply stability, increase clean and renewable energy and provide support for research and development pertaining to green technologies. Since the release of the Eighth Basic Plan, the Government has reiterated its policy to slowly phase out power generation from nuclear and coal energy sources and increase the use of renewable energy sources. The Government plans to establish more detailed guidelines and set specific targets for reducing reliance on nuclear and coal power generation for the next 15 years. To that end, the Government commenced preparation of the Ninth Basic Plan in March 2019 and aims to issue the finalized plan by the end of 2019.

Services Sector

In 2014, the service industry increased by 3.3% compared to 2013 as the health and social work sector increased by 6.8%, the finance and insurance sector increased by 5.6% and the business activities sector increased by 4.8%, each compared with 2013. In 2015, the service industry increased by 2.8% compared to 2014 as the finance and insurance sector increased by 6.7%, the business activities sector increased by 4.7% and the health and social work sector increased by 7.1%, each compared with 2014. In 2016, the service industry increased by 2.5% compared to 2015 as the health and social work sector increased by 7.7%, the wholesale and

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retail trade, restaurants and hotels sector increased by 2.8% and the finance and insurance sector increased by 2.6%, each compared with 2015. Based on preliminary data, in 2017, the service industry increased by 2.1% compared to 2016 as the health and social work sector increased by 7.3%, the finance and insurance sector increased by 3.7% and the public administration and defense sector increased by 2.6%, each compared with 2016. Based on preliminary data, in 2018, the service industry increased by 2.8% compared to 2017 as the health and social work sector increased by 7.5%, the finance and insurance sector increased by 4.8% and the public administration and defense sector increased by 3.5%, each compared with 2017.

Prices, Wages and Employment

The following table shows selected price and wage indices and unemployment rates:

	Producer Price Index(1)		Increase (Decrease) Over Previous Year			Consumer Price Index(1)		Increase (Decrease) Over Previous Year		Wage Index(1)(2)			Increase (Decrease) Over Previous Year			Unemployment Rate(1)(3)
	(2010=100)		(%)			(2015=100)		(%)		(2015=100)			(%)			(%)
2014		105.2		(0.5	)		99.3		1.3		97.1			4.1			3.5
2015		101.0		(4.0	)		100.0		0.7		100.0			2.9			3.6
2016		99.1		(1.8	)		101.0		1.0		104.2			4.2			3.7
2017		102.5		3.5			102.9		1.9		106.4			2.1			3.7
2018		104.6		2.0			104.5		1.5		N/A	(4)		N/A	(4)		3.8

(1) Average for year.

(2) Nominal wage index of average earnings in manufacturing industry.

(3) Expressed as a percentage of the economically active population.

(4) Not available.

Source: The Bank of Korea; Korea National Statistical Office.

In 2014, the inflation rate remained at 1.3%, primarily due to increases in the prices of electricity, gas, water supply, food products and education, which were offset by lower oil prices. In 2015, the inflation rate decreased to 0.7%, primarily due to lower oil prices. In 2016, the inflation rate increased to 1.0%, primarily due to increases in agricultural and livestock product prices and private service fees, which more than offset a decrease in oil prices. In 2017, the inflation rate increased to 1.9%, primarily due to increases in the prices of agricultural and livestock products and oil. In 2018, the inflation rate decreased to 1.5%, primarily due to a slowdown in the growth rate of agricultural goods and oil prices. In the first quarter of 2019, the inflation rate was 0.5%.

In 2014, the unemployment rate increased to 3.5% from 3.1% in 2013, primarily due to the sluggishness of the domestic economy. In 2015, the unemployment rate increased to 3.6%, primarily due to the continued sluggishness of the domestic economy. In 2016, the unemployment rate increased to 3.7%, primarily due to the continued sluggishness of the domestic economy. In 2017, the unemployment rate remained unchanged at 3.7%. In 2018, the unemployment rate increased to 3.8%, primarily due to the continued sluggishness of the domestic economy. In the first quarter of 2019, the unemployment rate was 4.5%.

From 1992 to 2009, the economically active population of the Republic increased by approximately 24.8% to 24.3 million, while the number of employees increased by approximately 23.7% to 23.5 million. The economically active population over 15 years old as a percentage of the total over-15 population has remained between 61% and 64% over the past decade. Literacy among workers under 50 is almost universal. As of December 31, 2018, the economically active population of the Republic was 27.9 million and the number of employees was 26.8 million.

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The following table shows selected employment information by industry and by gender:

	2014		2015		2016		2017		2018
	(all figures in percentages, except as indicated)
Labor force (in thousands of persons)		25,897		26,178		26,409		26,725		26,822
Employment by Industry:
Agriculture, Forestry and Fishing		5.6		5.1		4.9		4.8		5.0
Mining and Manufacturing		17.3		17.6		17.2		17.2		16.9
S.O.C & Services		77.1		77.2		77.9		78.0		78.1
Electricity, Transport, Communication and Finance		11.8		11.8		11.8		11.4		11.8
Business, Private & Public Service and Other Services		35.3		35.4		36.3		36.4		36.5
Construction		7.1		7.0		7.0		7.4		7.6
Wholesale & Retail Trade, Hotels and Restaurants		23.0		23.0		22.9		22.8		22.2
Total Employed		100.0		100.0		100.0		100.0		100.0
Employment by Gender:
Male		58.0		57.7		57.6		57.5		57.3
Female		42.0		42.3		42.4		42.5		42.7
Total Employed		100.0		100.0		100.0		100.0		100.0

Source: The Bank of Korea

Pursuant to certain amendments to the Labor Standards Act that became effective on July 1, 2018, the maximum working hours of employees has been and is being reduced from 68 hours per week to 52 hours per week, and the number of special industries that are exempt from restrictions on maximum working hours will be significantly reduced. This new maximum working hours restriction under the amended Labor Standards Act is in effect for workplaces with 300 or more workers from July 1, 2018, and it will be extended to workplaces with not fewer than 50 but fewer than 300 workers from January 1, 2020 and further extended to workplaces with not fewer than 5 but fewer than 50 workers from July 1, 2021.

Approximately 10.7% of the Republic’s workers were unionized as of December 31, 2017. Labor unrest in connection with demands by unionized workers for better wages and working conditions and greater job security occur from time to time in the Republic. Some of the significant incidents in recent years include the following:

• In November 2014, unionized workers at Hyundai Heavy Industries went on a series of partial strikes demanding higher wages.

• In April 2015, tens of thousands of members of the Korean Confederation of Trade Unions, which includes teacher and civil servant union groups, went on general strike demanding that the Government scrap its plans to reform the labor market and pension program for public workers.

• In September 2016, unionized subway and railroad workers launched a joint nationwide strike, the first in 22 years, demanding that the Government scrap its proposed merit pay system for subway and railroad workers.

• In October 2016, unionized workers at Hyundai Motor went on full strike, the first in 12 years, demanding higher wages, while unionized workers at Kia Motors Corporation (“Kia Motors”) went on partial strike protesting the wage gap between workers at Kia Motors and workers at Hyundai Motor.

• In September 2017, several thousand unionized workers at KBS and MBC, Korea’s two largest television and radio broadcasters, went on strike, which lasted several months, to protest against alleged management interference in news coverage and unfair labor practices.

• In 2017, unionized workers at Hyundai Motor went on a series of partial strikes demanding higher wages and bonuses.

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• In July 2018, unionized workers at Hyundai Heavy Industries went on full strike demanding higher wages.

Actions such as these by labor unions may hinder implementation of the labor reform measures and disrupt the Government’s plans to create a more flexible labor market. Although much effort is being expended to resolve labor disputes in a peaceful manner, there can be no assurance that further labor unrest will not occur in the future. Continued labor unrest in key industries of the Republic may have an adverse effect on the economy.

In 1997, the Korean Confederation of Trade Unions organized a political alliance, which led to the formation of the Democratic Labor Party in January 2000. The Democratic Labor Party merged with The New People’s Participation Party and changed its name to The Unified Progressive Party (“UPP”) in December 2011. In October 2012, the UPP split and seven UPP members of the National Assembly and their supporters formed a new party, the Progressive Justice Party, which changed its name to the Justice Party in July 2013. In December 2014, the Constitutional Court ordered the dissolution of the UPP and the removal of the party’s five lawmakers from the National Assembly for violating the Republic’s Constitution after certain of its members were convicted of trying to instigate an armed rebellion and supporting North Korea. In the legislative general election held on April 13, 2016, the Justice Party won six seats in the National Assembly, and the members-elect began their four-year terms on May 30, 2016. As of December 31, 2018, the Justice Party holds five seats in the National Assembly.

The Financial System

Structure of the Financial Sector

The Republic’s financial sector includes the following categories of financial institutions:

• The Bank of Korea;

• banking institutions;

• non-bank financial institutions; and

• other financial entities, including:

• financial investment companies;

• credit guarantee institutions;

• venture capital companies; and

• miscellaneous others.

To increase transparency in financial transactions and enhance the integrity and efficiency of the financial markets, Korean law requires that financial institutions confirm that their clients use their real names when transacting business. To ease the liquidity crisis, the Government altered the real-name financial transactions system during 1998, to allow the sale or deposit of foreign currencies through domestic financial institutions and the purchase of certain bonds, including Government bonds, without identification. The Government also strengthened confidentiality protection for private financial transactions.

In July 2007, the Korean National Assembly passed the Financial Investment Services and Capital Markets Act or the FSCMA, under which various industry-based capital markets regulatory systems were consolidated into a single regulatory system. The FSCMA, which became effective in February 2009, expands the scope of permitted investment-related financial products and activities through expansive definitions of financial instruments and function-based regulations that allow financial investment companies to offer a wider range of financial services, as well as strengthening investor protection and disclosure requirements.

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Prior to the effective date of the FSCMA, separate laws regulated various types of financial institutions depending on the type of the financial institution (for example, securities companies, futures companies, trust business companies and asset management companies) and subjected financial institutions to different licensing and ongoing regulatory requirements (for example, under the Securities and Exchange Act, the Futures Business Act and the Indirect Investment Asset Management Business Act). By applying one uniform set of rules to financial businesses having the same economic function, the FSCMA attempts to improve and address issues caused by the previous regulatory system under which the same economic function relating to capital markets-related business were governed by multiple regulations. To this end, the FSCMA categorizes capital markets-related businesses into six different functions as follows:

• investment dealing (trading and underwriting of financial investment products);

• investment brokerage (brokerage of financial investment products);

• collective investment (establishment of collective investment schemes and the management thereof);

• investment advice;

• discretionary investment management; and

• trusts (together with the five businesses set forth above, “Financial Investment Businesses”).

Accordingly, all financial businesses relating to financial investment products are reclassified as one or more of the Financial Investment Businesses described above, and financial institutions are subject to the regulations applicable to their relevant Financial Investment Businesses, irrespective of what type of financial institution it is. For example, under the FSCMA, derivative businesses conducted by securities companies and future companies are subject to the same regulations, at least in principle.

The banking business and the insurance business are not subject to the FSCMA and will continue to be regulated under separate laws; provided, however, that they are subject to the FSCMA if their activities involve any Financial Investment Businesses requiring a license based on the FSCMA.

Banking Industry

The banking industry comprises commercial banks and specialized banks. Commercial banks serve the general public and corporate sectors. They include nationwide banks, regional banks and branches of foreign banks. Regional banks provide services similar to nationwide banks, but operate in a geographically restricted region. Branches of foreign banks have operated in the Republic since 1967 but provide a relatively small proportion of the country’s banking services. As of December 31, 2018, there were six nationwide banks, six regional banks, two internet banks and 38 foreign banks with branches operating in the Republic.

Specialized banks meet the needs of specific sectors of the economy in accordance with Government policy; they are organized under, or chartered by, special laws. Specialized banks include (i) The Korea Development Bank, (ii) The Export-Import Bank of Korea, (iii) The Industrial Bank of Korea, (iv) SuHyup Bank and (v) NongHyup Bank. The Government has made capital contributions to three of these specialized banks as follows:

• The Korea Development Bank: the Government owns directly all of its paid-in capital and has made capital contributions since its establishment in 1954. Recent examples include the Government’s contributions to its capital of ￦2,055 billion in 2015, ￦308 billion in 2016, ￦395 billion in 2017 and ￦170 billion in 2018. Taking into account these capital contributions, its total paid-in capital was ￦18,108 billion as of December 31, 2018.

• The Export-Import Bank of Korea: the Government owns, directly and indirectly, all of its paid-in capital and has made capital contributions since its establishment in 1976. Recent examples include the Government’s contributions to its capital of ￦1,130 billion in 2015, ￦1,620 billion in 2016 and ￦1,417 billion in 2017. Taking into account these capital contributions, its total paid-in capital was ￦11,815 billion as of December 31, 2018.

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• The Industrial Bank of Korea: the Government owned, directly and indirectly, 55.2% of its common shares and all of its preferred shares as of December 31, 2017. The Government had owned all of the issued share capital of The Industrial Bank of Korea until 1994, but the Government’s minimum share ownership requirement was repealed in 1997, and the Government has since periodically adjusted its ownership percentage in the Industrial Bank of Korea through transactions involving the purchase and sale of its common shares. In 2014, the Industrial Bank of Korea issued an aggregate of 3,022,240 new common shares to the Government for ￦36 billion in cash and the Government sold 49,009,880 common shares of the Industrial Bank of Korea for ￦675 billion in cash. In addition, in April 2014, the Industrial Bank of Korea disposed of 26,200,882 of its common shares held as treasury shares through an international offering for ￦294 billion. In 2015, the Industrial Bank of Korea issued an aggregate of 3,184,713 new common shares to the Government for ￦40 billion in cash. In March 2016, the Industrial Bank of Korea issued an aggregate of 3,576,857 new common shares to the Government for ￦40 billion in cash. Taking into account such transactions, the Government’s total paid-in capital was ￦1,674 billion as of December 31, 2018.

The economic difficulties in 1997 and 1998 caused an increase in Korean banks’ non-performing assets and a decline in capital adequacy ratios of Korean banks. From 1998 through 2002, the Financial Services Commission amended banking regulations several times to adopt more stringent criteria for non-performing assets that more closely followed international standards.

The following table sets out the total loans (including loans in Won and loans in foreign currencies) and non-performing assets of Korean banks as of the dates indicated.

	Total Loans		Non-Performing Assets(1)		Percentage of Total
	(trillions of won)				(percentage)
December 31, 2014		1,557.9		24.2		1.6
December 31, 2015		1,664.3		30.0		1.8
December 31, 2016		1,732.9		24.6		1.4
December 31, 2017		1,775.9		21.1		1.2
December 31, 2018(2)		1,872.6		18.2		1.0

(1) Assets classified as substandard or below.

(2) Preliminary.

Source: Financial Supervisory Service.

In 2014, these banks posted an aggregate net profit of ￦6.8 trillion, compared to an aggregate net profit of ￦4.5 trillion in 2013, primarily due to decreased loan loss provisions. In 2015, these banks posted an aggregate net profit of ￦4.4 trillion, compared to an aggregate net profit of ￦6.8 trillion in 2014, primarily due to increased loan loss provisions. In 2016, these banks posted an aggregate net profit of ￦3.0 trillion, compared to an aggregate net profit of ￦4.4 trillion in 2015, primarily due to increased loan loss provisions. In 2017, these banks posted an aggregate net profit of ￦11.2 trillion, compared to an aggregate net profit of ￦3.0 trillion in 2016, primarily due to decreased loan loss provisions and increased net interest income. Based on preliminary data, in 2018, these banks posted an aggregate net profit of ￦13.8 trillion, compared to an aggregate net profit of ￦11.2 trillion in 2017, primarily due to increased net interest income and decreased loan loss provisions, which more than offset a decrease in net non-interest income.

Non-Bank Financial Institutions

Non-bank financial institutions include:

• savings institutions, including trust accounts of banks, mutual savings banks, credit unions, mutual credit facilities, community credit cooperatives and postal savings;

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• life insurance institutions; and

• credit card companies.

As of September 30, 2018, 79 mutual savings banks, 26 life insurance institutions, which includes joint venture life insurance institutions and wholly-owned subsidiaries of foreign life insurance companies, and eight credit card companies operated in the Republic.

Money Markets

In the Republic, the money markets consist of the call market and markets for a wide range of other short-term financial instruments, including treasury bills, monetary stabilization bonds, negotiable certificates of deposits, repurchase agreements and commercial paper.

Securities Markets

On January 27, 2005, the Korea Exchange was established pursuant to the now repealed Korea Securities and Futures Exchange Act by consolidating the Korea Stock Exchange, the Korea Futures Exchange, the KOSDAQ Stock Market, Inc., or the KOSDAQ, and the KOSDAQ Committee of the Korea Securities Dealers Association, which had formerly managed the KOSDAQ. There are three major markets operated by the Korea Exchange: the KRX KOSPI Market, the KRX KOSDAQ Market, and the KRX Derivatives Market. The Korea Exchange has two trading floors located in Seoul, one for the KRX KOSPI Market and one for the KRX KOSDAQ Market, and one trading floor in Busan for the KRX Derivatives Market. The Korea Exchange is a joint stock company with limited liability, the shares of which are held by (i) financial investment companies that were formerly members of the Korea Futures Exchange or the Korea Stock Exchange and (ii) the stockholders of the KOSDAQ. Currently, the Korea Exchange is the only stock exchange in Korea and is operated by membership, having as its members Korean financial investment companies and some Korean branches of foreign financial investment companies.

The Korea Exchange publishes the Korea Composite Stock Price Index every ten seconds, which is an index of all equity securities listed on the Korea Exchange. The Korea Composite Stock Price Index is computed using the aggregate value method, whereby the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed companies as of the base date, January 4, 1980.

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The following table shows the value of the Korea Composite Stock Price Index as of the dates indicated:

December 31, 2014	1,915.6
January 30, 2015	1,949.3
February 27, 2015	1,985.8
March 31, 2015	2,041.0
April 30, 2015	2,127.2
May 29, 2015	2,114.8
June 30, 2015	2,074.2
July 31, 2015	2,030.2
August 29, 2015	1,941.5
September 30, 2015	1,962.8
October 30, 2015	2,029.5
November 30, 2015	1,992.0
December 30, 2015	1,960.3
January 29, 2016	1,912.1
February 29, 2016	1,916.7
March 31, 2016	1,995.8
April 29, 2016	1,994.2
May 31, 2016	1,983.4
June 30, 2016	1,970.4
July 29, 2016	2,016.2
August 31, 2016	2,034.7
September 30, 2016	2,043.6
October 31, 2016	2,008.2
November 30, 2016	1,983.5
December 29, 2016	2,026.5
January 31, 2017	2,067.6
February 28, 2017	2,091.6
March 31, 2017	2,160.2

April 28, 2017	2,205.4
May 31, 2017	2,347.4
June 30, 2017	2,391.8
July 31, 2017	2,402.7
August 31, 2017	2,363.2
September 29, 2017	2,394.5
October 31, 2017	2,523.4
November 30, 2017	2,476.4
December 28, 2017	2,467.5
January 31, 2018	2,566.5
February 28, 2018	2,427.4
March 30, 2018	2,445.9
April 30, 2018	2,515.4
May 31, 2018	2,423.0
June 29, 2018	2,326.1
July 31, 2018	2,326.1
August 31, 2018	2,295.3
September 28, 2018	2,322.9
October 31, 2018	2,343.1
November 30, 2018	2,029.7
December 31, 2018	2,096.9
January 31, 2019	2,041.0
February 28, 2019	2,204.9
March 29, 2019	2,140.7
April 30, 2019	2,203.6
May 31, 2019	2,041.7
June 28, 2019	2,130.6

As liquidity and credit concerns and volatility in the global financial markets increased significantly since September 2008, there was a significant overall decline in the stock prices of Korean companies during the fourth quarter of 2008 and first half of 2009 and the index has fluctuated since then. The index was 2,096.0 on July 3, 2019.

Supervision System

The Office of Bank Supervision, the Securities Supervisory Board, the Insurance Supervisory Board and all other financial sector regulatory bodies merged in January 1999 to form the Financial Services Commission. The Financial Services Commission acts as the executive body over the Financial Supervisory Service. The Financial Services Commission reports to, but operates independently of, the Prime Minister’s office.

The Ministry of Economy and Finance focuses on financial policy and foreign currency regulations. The Bank of Korea manages monetary policy focusing on price stabilization.

Deposit Insurance System

The Republic’s deposit insurance system insures amounts on deposit with banks, non-bank financial institutions, securities companies and life insurance companies.

Since January 2001, deposits at any single financial institution are insured only up to W50 million per person regardless of the amount deposited.

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The Government excluded certain deposits, such as repurchase agreements, from the insurance scheme, expanded the definition of unsound financial institutions to which the insurance scheme would apply and gradually increased the insurance premiums payable by insured financial institutions.

Monetary Policy

The Bank of Korea

The Bank of Korea was established in 1950 as Korea’s central bank and the country’s sole currency issuing bank. A seven-member Monetary Policy Committee, chaired by the Governor of The Bank of Korea, formulates and controls monetary and credit policies.

Inflation targeting is the basic system of operation for Korean monetary policy. The consumer price index is used as The Bank of Korea’s target indicator. To achieve its established inflation target, the Monetary Policy Committee of The Bank of Korea determines and announces the “Bank of Korea Base Rate,” the reference rate applied in transactions such as repurchase agreements between The Bank of Korea and its financial institution counterparts. The Bank of Korea uses open market operations as its primary instrument to keep the call rate in line with the Monetary Policy Committee’s target rate. In addition, The Bank of Korea is able to establish policies regarding its lending to banks in Korea and their reserve requirements.

Interest Rates

On October 9, 2008, The Bank of Korea cut its policy rate to 5.0% from 5.25%, and continued to lower it further to 4.25% on October 27, 2008, 4.0% on November 7, 2008, 3.0% on December 11, 2008, 2.5% on January 9, 2009 and 2.0% on February 12, 2009, in order to address financial market instability and to help combat the slowdown of the domestic economy. On July 9, 2010, The Bank of Korea raised the policy rate to 2.25% from 2.0%, which was further raised to 2.5% on November 16, 2010, in response to signs of inflationary pressures and the continued growth of domestic economy. On January 13, 2011, The Bank of Korea raised the policy rate to 2.75%, which was further increased to 3.0% on March 10, 2011 and to 3.25% on June 10, 2011, in response to inflationary pressures driven mainly by rises in the prices of petroleum products and farm products. The Bank of Korea lowered its policy rate to 3.0% from 3.25% on July 12, 2012, which was further lowered to 2.75% on October 11, 2012, 2.5% on May 9, 2013, 2.25% on August 14, 2014, 2.0% on October 15, 2014, 1.75% on March 12, 2015, 1.5% on June 11, 2015 and 1.25% on June 9, 2016, in order to address the sluggishness of the global and domestic economy. On November 30, 2017, The Bank of Korea raised its policy rate to 1.5% from 1.25%, which was further raised to 1.75% on November 30, 2018, in response to signs of inflationary pressures and the continued growth of the global and domestic economy.

With the deregulation of interest rates on banks’ demand deposits on February 2, 2004, The Bank of Korea completed the interest rate deregulation based upon the “Four-Stage Interest Rate Liberalization Plan” announced in 1991. The prohibition on the payment of interest on ordinary checking accounts was, however, maintained.

Money Supply

The following table shows the volume of the Republic’s money supply:

	December 31,
	2014			2015			2016			2017			2018
	(billions of Won)
Money Supply (M1)(1)		585,822.6			708,452.9			795,531.1			849,862.4			865,851.8
Quasi-money(2)		1,491,411.4			1,538,922.1			1,611,928.0			1,680,491.2			1,834,510.6
Money Supply (M2)(3)		2,077,234.0			2,247,375.0			2,407,459.1			2,530,353.6			2,700,362.4
Percentage Increase Over Previous Year		8.1	%		8.2	%		7.1	%		5.1	%		6.7	%

(1) Consists of currency in circulation and demand and instant access savings deposits at financial institutions.

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(2) Includes time and installment savings deposits, marketable instruments, yield-based dividend instruments and financial debentures, excluding financial instruments with a maturity of more than two years.

(3) Money Supply (M2) is the sum of Money Supply (M1) and quasi-money.

Source: The Bank of Korea.

Exchange Controls

Authorized foreign exchange banks, as registered with the Ministry of Economy and Finance, handle foreign exchange transactions. The ministry has designated other types of financial institutions to handle foreign exchange transactions on a limited basis.

Korean laws and regulations generally require a report to either the Ministry of Economy and Finance, The Bank of Korea or authorized foreign exchange banks, as applicable, for issuances of international bonds and other instruments, overseas investments and certain other transactions involving foreign exchange payments.

In 1994 and 1995, the Government relaxed regulations of foreign exchange position ceilings and foreign exchange transaction documentation and created free Won accounts which may be opened by non-residents at Korean foreign exchange banks. The Won funds deposited into the free Won accounts may be converted into foreign currencies and remitted outside Korea without any governmental approval. In December 1996, after joining the OECD, the Republic freed the repatriation of investment funds, dividends and profits, as well as loan repayments and interest payments. The Government continues to reduce exchange controls in response to changes in the world economy, including the new trade regime under the WTO, anticipating that such foreign exchange reform will improve the Republic’s competitiveness and encourage strategic alliances between domestic and foreign entities.

In September 1998, the National Assembly passed the Foreign Exchange Transactions Act, which became effective in April 1999 and has subsequently been amended numerous times. In principle, most currency and capital transactions, including, among others, the following transactions, have been liberalized:

• the investment in real property located overseas by Korean companies and financial institutions;

• the establishment of overseas branches and subsidiaries by Korean companies and financial institutions;

• the investment by non-residents in deposits and trust products having more than one year maturities; and

• the issuance of debentures by non-residents in the Korean market.

To minimize the adverse effects from further opening of the Korean capital markets, the Ministry of Economy and Finance is authorized to introduce a variable deposit requirement system to restrict the influx of short-term speculative funds.

The Government has also embarked on a second set of liberalization initiatives starting in January 2001, under which ceilings on international payments for Korean residents have been eliminated, including overseas travel expenses, overseas inheritance remittances and emigration expenses. Overseas deposits, trusts, acquisitions of foreign securities and other foreign capital transactions made by residents and the making of deposits in Korean currency by non-residents have also been liberalized. In line with the foregoing liberalization, measures will also be adopted to curb illegal foreign exchange transactions and to stabilize the foreign exchange market.

Effective as of January 1, 2006, the Government liberalized the regulations governing “capital transactions.” The regulations provide that no regulatory approvals are required for any capital transactions. The capital transactions previously subject to approval requirements are now subject only to reporting requirements.

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In January 2010, the Financial Supervisory Services released FX Derivative Transactions Risk Management Guideline to prevent over-hedging of foreign exchange risk by corporate investors. According to the guideline as amended in July 2010, if a corporate investor, other than a financial institution or a public enterprise, wishes to enter into a foreign exchange forward, option or swap agreement with a bank, the bank is required to verify whether the corporate investor’s assets, liabilities or contracts face foreign exchange risks that could be mitigated by a foreign exchange forward, option or swap agreement. In addition, the bank is required to ensure that the corporate investor’s risk hedge ratio, which is the ratio of the aggregate notional amount to the aggregate amount of risk, does not exceed 100%.

Foreign Exchange

The following table shows the exchange rate between the Won and the U.S. Dollar (in Won per U.S. Dollar) as announced by the Seoul Money Brokerage Services, Ltd. as of the dates indicated:

	Won/U.S. Dollar Exchange Rate
December 31, 2014		1,099.2
January 30, 2015		1,090.8
February 27, 2015		1,099.2
March 31, 2015		1,105.0
April 30, 2015		1,068.1
May 29, 2015		1,108.0
June 30, 2015		1,124.1
July 31, 2015		1,166.3
August 31, 2015		1,176.3
September 30, 2015		1,194.5
October 30, 2015		1,142.3
November 30, 2015		1,150.4
December 31, 2015		1,172.0
January 29, 2016		1,208.4
February 29, 2016		1,235.4
March 31, 2016		1,153.5
April 29, 2016		1,143.9
May 31, 2016		1,190.6
June 30, 2016		1,164.7
July 31, 2016		1,125.7
August 31, 2016		1,118.5
September 30, 2016		1,096.3
October 31, 2016		1,145.2
November 30, 2016		1,168.5
December 30, 2016		1,208.5
January 31, 2017		1,157.8
February 28, 2017		1,132.1
March 31, 2017		1,116.1

	Won/U.S. Dollar Exchange Rate
April 28, 2017		1,130.1
May 31, 2017		1,123.9
June 30, 2017		1,139.6
July 31, 2017		1,119.1
August 31, 2017		1,122.8
September 29, 2017		1,146.7
October 31, 2017		1,125.0
November 30, 2017		1,082.4
December 29, 2017		1,071.4
January 31, 2018		1,071.5
February 28, 2018		1,071.0
March 30, 2018		1,066.5
April 30, 2018		1,076.2
May 31, 2018		1,081.3
June 29, 2018		1,121.7
July 31, 2018		1,116.7
August 31, 2018		1,108.8
September 28, 2018		1,112.7
October 31, 2018		1,140.6
November 30, 2018		1,121.8
December 31, 2018		1,118.1
January 31, 2019		1,117.2
February 28, 2019		1,117.8
March 29, 2019		1,137.8
April 30, 2019		1,158.2
May 31, 2019		1,190.0
June 28, 2019		1,156.8

During the period from January 2, 2008 through April 16, 2009, the value of the Won relative to the U.S. dollar declined by approximately 29.9%, due primarily to adverse economic conditions resulting from liquidity and credit concerns and volatility in the global credit and financial markets and repatriations by foreign investors of their investments in the Korean stock market. The exchange rate between the Won and the U.S. Dollar has fluctuated since then. The market average exchange rate was ￦1,164.8 to US$1.00 on July 3, 2019.

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Balance of Payments and Foreign Trade

Balance of Payments

Balance of payments figures measure the relative flow of goods, services and capital into and out of the country as represented in the current balance and the capital balance. The current balance tracks a country’s trade in goods and services and transfer payments and measures whether a country is living within its income from trading and investments. The capital balance covers all transactions involving the transfer of capital into and out of the country, including loans and investments. The overall balance represents the sum of the current and capital balances. An overall balance surplus indicates a net inflow of foreign currencies, thereby increasing demand for and strengthening the local currency. An overall balance deficit indicates a net outflow of foreign currencies, thereby decreasing demand for and weakening the local currency. The financial account mirrors the overall balance. If the overall balance is positive, the surplus, which represents the nation’s savings, finances the overall deficit of the country’s trading partners. Accordingly, the financial account will indicate cash outflows equal to the overall surplus. If, however, the overall balance is negative, the nation has an international deficit which must be financed. Accordingly, the financial account will indicate cash inflows equal to the overall deficit.

The following table sets out certain information with respect to the Republic’s balance of payments:

Balance of Payments⁽¹⁾

Classification	2014			2015			2016			2017			2018(4)
	(millions of dollars)
Current Account		83,029.6			105,118.6			97,923.7			75,230.9			76,408.5
Goods		86,145.0			120,275.0			116,461.7			113,592.9			111,866.6
Exports(2)		613,396.5			543,082.5			511,926.1			580,310.2			625,437.4
Imports(2)		527,251.5			422,807.5			395,464.4			466,717.3			513,570.8
Services		(3,290.1	)		(14,625.8	)		(17,338.4	)		(36,734.1	)		(29,737.1	)
Income		5,159.4			4,454.6			4,567.1			5,336.9			2,777.7
Current Transfers		(4,984.7	)		(4,985.2	)		(5,766.7	)		(6,964.8	)		(8,498.7	)
Capital and Financial Account		86,340.5			102,724.3			99,765.1			84,398.5			70,678.2
Capital Account		(8.9	)		(60.2	)		(46.2	)		(26.8	)		188.9
Financial Account(3)		86,349.4			102,784.5			99,811.3			84,425.3			70,489.3
Net Errors and Omissions		3,328.7			(2,273.9	)		1,933.8			9.221.2			(6,108.1	)

(1) Figures are prepared based on the sixth edition of Balance of Payment Manual, or BPM6, published by International Monetary Fund in December 2010 and implemented by the Government in December 2013. In December 2018, The Bank of Korea revised the Republic’s balance of payments information to capture new economic activities and reflect the changes in raw data.

(2) These entries are derived from trade statistics and are valued on a free on board basis, meaning that the insurance and freight costs are not included.

(3) Includes borrowings from the IMF, syndicated bank loans and short-term borrowings.

(4) Preliminary.

Source: The Bank of Korea.

The current account surplus in 2017 decreased to US$75.2 billion from the current account surplus of US$97.9 billion in 2016, primarily due to an increase in deficit from the service account. Based on preliminary data, the Republic recorded a current account surplus of approximately US$76.4 billion in 2018. The current account surplus in 2018 increased from the current account surplus of US$75.2 billion in 2017, primarily due to a decrease in deficit from the service account which more than offset decreases in surpluses from the current transfers account and the goods account. Based on preliminary data, the Republic recorded a current account surplus of approximately US$11.3 billion in the first quarter of 2019. The current account surplus in the first quarter of 2019 decreased from the current account surplus of US$11.7 billion in the corresponding period of 2018, primarily due to a decrease in surplus from the goods account which more than offset a decrease in deficit from the service account.

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Foreign Direct Investment

Since 1960, the Government has adopted a broad range of related laws, administrative rules and regulations, providing a framework for the conduct and regulation of foreign investment activities. In September 1998, the Government promulgated the Foreign Investment Promotion Act, or the FIPA, which replaced previous foreign direct investment related laws, rules and regulations, to promote inbound foreign investments by providing incentives to, and facilitating investment activities in the Republic by, foreign nationals. The FIPA prescribes, among others, procedural requirements for inbound foreign investments, incentives for foreign investments such as tax reductions, and requirements relating to designation and development of foreign investment target regions. The Government believes that providing a stable and receptive environment for foreign direct investment will accelerate the inflow of foreign capital, technology and management techniques.

The following table sets forth information regarding annual foreign direct investment in the Republic for the periods indicated.

Foreign Direct Investment

	2014		2015		2016		2017		2018
	(billions of dollars)
Contracted and Reported Investment
Greenfield Investment(1)		11.0		14.1		15.0		15.7		20.0
Merger & Acquisition		8.0		6.8		6.3		7.2		6.9
Total		19.0		20.9		21.3		22.9		26.9
Actual Investment		12.2		16.6		10.8		13.6		17.0	(2)

(1) Includes building new factories and operational facilities.

(2) Preliminary.

Source: Ministry of Trade, Industry and Energy

In 2017, the contracted and reported amount of foreign direct investment in the Republic increased to US$22.9 billion from US$21.3 billion in 2016, primarily due to an increase in foreign investment in the manufacturing sector to US$7.2 billion in 2017 from US$5.0 billion in 2016, which more than offset a decrease in foreign investment in the electricity, gas and construction sector to US$0.3 billion in 2017 from US$0.7 billion in 2016.

In 2018, the contracted and reported amount of foreign direct investment in the Republic increased to US$26.9 billion from US$22.9 billion in 2017, primarily due to an increase in foreign investment in the manufacturing sector to US$10.0 billion in 2018 from US$7.2 billion in 2017.

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The following table sets forth information regarding the source of foreign direct investment by region and country for the periods indicated:

Foreign Direct Investment by Region and Country

	2014		2015		2016		2017		2018
	(billions of dollars)
North America
U.S.A.		3.6		5.5		3.9		4.7		5.9
Others		1.4		2.9		1.4		1.6		1.9
		5.0		8.4		5.3		6.3		7.8
Asia
Japan		2.5		1.7		1.2		1.8		1.3
Hong Kong		1.1		1.5		2.1		1.8		1.5
Singapore		1.7		2.5		2.3		1.8		1.5
China		1.2		2.0		2.0		0.8		2.7
Others		0.3		0.7		0.5		2.0		2.4
		6.8		8.4		8.1		8.2		9.4
European Union
Malta		0.4		0.7		4.1		1.1		2.6
Netherlands		2.4		0.5		1.5		1.7		1.4
England		0.4		0.3		0.4		2.2		1.2
Germany		0.2		0.5		0.3		0.7		0.5
France		0.2		0.1		0.2		0.3		0.7
Luxembourg		1.9		0.2		0.2		0.2		0.2
Others		1.2		0.4		0.8		1.1		2.4
		6.7		2.7		7.5		7.3		9.0
Others regions and countries		0.5		1.4		0.4		1.1		0.6
Total		19.0		20.9		21.3		22.9		26.9

Source: Ministry of Trade, Industry and Energy

Trade Balance

Trade balance figures measure the difference between a country’s exports and imports. If exports exceed imports the country has a trade balance surplus while if imports exceed exports the country has a deficit. A deficit, indicating that a country’s receipts from abroad fall short of its payments to foreigners, must be financed, rendering the country a debtor nation. A surplus, indicating that a country’s receipts exceed its payments to foreigners, allows the country to finance its trading partners’ net deficit to the extent of the surplus, rendering the country a creditor nation.

The following table summarizes the Republic’s trade balance for the periods indicated:

Trade Balance

	Exports(1)		As % of GDP(2)			Imports(3)		As % of GDP(2)			Balance of Trade		Exports as % of Imports
	(billions of dollars, except percentages)
2014		572.7		40.6	%		525.5		37.2	%		47.2		109.0
2015		526.8		38.1	%		436.5		31.6	%		90.3		120.7
2016		495.4		35.0	%		406.2		28.7	%		89.2		122.0
2017		573.7		37.5	%		478.5		31.3	%		95.2		119.9
2018(4)		604.9		37.3	%		535.2		33.0	%		69.7		113.0

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(1) These entries are derived from customs clearance statistics on a C.I.F. basis, meaning that the price of goods include insurance and freight cost.

(2) At current market prices.

(3) These entries are derived from customs clearance statistics on a C.I.F. basis, meaning that the price of goods include insurance and freight cost.

(4) Preliminary.

Source: The Bank of Korea; Korea Customs Service.

The Republic, due to its lack of natural resources, relies on extensive trading activity for growth. The country meets virtually all domestic requirements for petroleum, wood and rubber with imports, as well as much of its coal and iron needs. Exports consistently represent a high percentage of GDP and, accordingly, the international economic environment is of crucial importance to the Republic’s economy.

The following tables give information regarding the Republic’s exports and imports by major commodity groups:

Exports by Major Commodity Groups (C.I.F.)⁽¹⁾

	2014		As % of 2014 Total		2015		As % of 2015 Total		2016		As % of 2016 Total		2017		As % of 2017 Total		2018		As % of 2018 Total
	(billions of dollars, except percentages)
Foods & Consumer Goods		7.0		1.2		6.8		1.3		7.4		1.5		7.8		1.4		7.9		1.3
Raw Materials and Fuels		59.2		10.3		39.5		7.5		33.0		6.7		43.1		7.5		55.1		9.1
Petroleum & Derivatives		51.2		8.9		32.4		6.1		26.8		5.4		35.4		6.2		47.0		7.8
Others		8.0		1.4		7.1		1.3		6.2		1.3		7.7		1.3		8.1		1.3
Light Industrial Products		38.6		6.7		35.4		6.7		35.4		7.1		36.0		6.3		35.8		5.9
Heavy & Chemical Industrial Products		467.9		81.7		445.1		84.5		419.7		84.7		486.8		84.9		506.1		83.7
Electronic & Electronic Products		174.4		30.5		170.5		32.4		159.4		32.2		192.0		33.5		214.8		35.5
Chemicals & Chemical Products		65.6		11.5		55.9		10.6		55.3		11.2		65.7		11.5		74.0		12.2
Metal Goods		47.5		8.3		41.4		7.9		39.9		8.1		46.9		8.2		48.1		8.0
Machinery & Precision Equipment		57.9		10.1		57.3		10.9		55.2		11.1		63.3		11.0		69.4		11.5
Transport Equipment		116.5		20.3		112.8		21.4		101.0		20.4		108.8		19.0		87.4		14.4
Passenger Cars		44.8		7.8		41.7		7.9		37.5		7.6		38.8		6.8		38.2		6.3
Ship & Boat		38.7		6.8		38.8		7.4		33.5		6.8		41.4		7.2		20.7		3.4
Others		33.0		5.8		32.3		6.1		30.0		6.1		28.6		5.0		28.4		4.7
Others		6.0		1.0		7.2		1.4		8.9		1.8		10.1		1.8		12.5		2.1
Total		572.7		100.0		526.8		100.0		495.4		100.0		573.7		100.0		604.9		100.0

(1) These entries are derived from customs clearance statistics. C.I.F. means that the price of goods includes insurance and freight costs.

(2) Preliminary

Source: The Bank of Korea; Korea Customs Service.

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Imports by Major Commodity Groups (C.I.F.)⁽¹⁾

	2014		As % of 2014 Total		2015		As % of 2015 Total		2016		As % of 2016 Total		2017		As % of 2017 Total		2018		As % of 2018 Total
	(billions of dollars, except percentages)
Industrial Materials and Fuels		311.2		59.2		219.0		50.2		191.0		47.0		233.1		48.7		279.0		52.1
Crude Petroleum		94.9		18.1		55.1		12.6		44.3		10.9		59.6		12.5		80.4		15.0
Mineral		24.6		4.7		17.6		4.0		15.5		3.8		20.3		4.2		22.0		4.1
Chemicals		43.9		8.4		39.6		9.1		39.1		9.6		44.0		9.2		50.0		9.3
Iron & Steel Products		27.0		5.1		21.2		4.9		18.9		4.7		20.3		4.2		19.7		3.7
Non-ferrous Metal		12.8		2.4		11.6		2.7		10.7		2.6		12.1		2.5		12.8		2.4
Others		108.0		20.5		74.0		16.9		62.5		15.4		76.8		16.1		94.1		17.6
Capital Goods		149.0		28.3		150.8		34.5		147.8		36.4		171.8		35.9		174.6		32.6
Machinery & Precision Equipment		50.8		9.7		49.1		11.2		47.8		11.8		63.1		13.2		60.5		11.3
Electric & Electronic Machines		84.5		16.1		87.5		20.0		84.9		20.9		95.8		20.0		100.4		18.8
Transport Equipment		11.6		2.2		12.4		2.8		13.0		3.2		10.8		2.3		11.5		2.1
Others		2.1		0.4		1.9		0.4		2.1		0.5		2.1		0.4		2.2		0.4
Consumer Goods		65.3		12.4		66.7		15.3		67.4		16.6		73.6		15.4		81.6		15.2
Cereals		7.9		1.5		6.9		1.6		6.2		1.5		6.0		1.3		6.8		1.3
Goods for Direct Consumption		16.7		3.2		17.1		3.9		17.8		4.4		19.7		4.1		22.3		4.2
Consumer Durable Goods		24.7		4.7		26.6		6.1		27.0		6.6		30.0		6.3		32.2		6.0
Consumer Nondurable Goods		16.0		3.0		16.0		3.7		16.4		4.0		17.9		3.7		20.3		3.8
Total		525.5		100.0		436.5		100.0		406.2		100.0		478.5		100.0		535.2		100.0

(1) These entries are derived from customs clearance statistics. C.I.F. means that the price of goods includes insurance and freight costs.

(2) Preliminary.

Source: The Bank of Korea; Korea Customs Service.

In 2014, the Republic recorded a trade surplus of US$47.2 billion. Exports increased by 2.3% to US$572.7 billion in 2014 from US$559.6 billion in 2013, primarily due to increased demand for semiconductors, wireless communication devices, iron and steel from the United States, the EU and the Southeast Asian nations. Imports increased by 1.9% to US$525.5 billion in 2014 from US$515.6 billion in 2013, primarily due to increased imports of cars, components for wireless communication devices and beef.

In 2015, the Republic recorded a trade surplus of US$90.3 billion in 2015. Exports decreased by 8.0% to US$526.8 billion in 2015 from US$572.7 billion in 2014, primarily due to adverse global economic conditions. Imports decreased by 16.9% to US$436.5 billion in 2015 from US$525.5 billion in 2014, primarily due to a decrease in oil prices, which also decreased unit prices of major raw materials.

In 2016, the Republic recorded a trade surplus of US$89.2 billion in 2016. Exports decreased by 6.0% to US$495.4 billion in 2016 from US$526.8 billion in 2015, primarily due to the continued slowdown of the global economy. Imports decreased by 6.9% to US$406.2 billion in 2016 from US$436.5 billion in 2015, primarily due to a continued decrease in oil prices, which also led to decreased unit prices of other major raw materials.

In 2017, the Republic recorded a trade surplus of US$95.2 billion. Exports increased by 15.8% to US$573.7 billion in 2017 from US$495.4 billion in 2016, primarily due to increased demand for semiconductors and steel products. Imports increased by 17.8% to US$478.5 billion in 2017 from US$406.2 billion in 2016, primarily due to an increase in oil prices, which also led to increased unit prices of other major raw materials, and increased imports of machinery, precision equipment and electronic machines.

Based on preliminary data, the Republic recorded a trade surplus of US$69.7 billion in 2018. Exports increased by 5.4% to US$604.9 billion in 2018 from US$573.7 billion in 2017, primarily due to increased

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demand for semiconductors and petroleum products. Imports increased by 11.8% to US$535.2 billion in 2018 from US$478.5 billion in 2017, primarily due to an increase in oil prices, which also led to increased unit prices of other major raw materials.

Based on preliminary data, the Republic recorded a trade surplus of US$9.3 billion in the first quarter of 2019. Exports decreased by 8.5% to US$132.7 billion and imports decreased by 6.8% to US$123.4 billion from US$145.1 billion of exports and US$132.4 billion of imports, respectively, in the corresponding period of 2018.

The following table sets forth the Republic’s exports trading partners:

Exports

	2014		As % of 2014 Total		2015		As % of 2015 Total		2016		As % of 2016 Total		2017		As % of 2017 Total		2018		As % of 2018 Total
	(millions of dollars, except percentages)
China		145,287.7		25.4		137,123.9		26.0		124,432.9		25.1		142,120.0		24.8		162,125.1		26.8
United States		70,284.9		12.3		69,832.1		13.3		66,462.3		13.4		68,609.7		12.0		72,719.9		12.0
Japan		32,183.8		5.6		25,576.5		4.9		24,355.0		4.9		26,816.1		4.7		30,528.6		5.0
Hong Kong		27,256.4		4.8		30,418.2		5.8		32,782.4		6.6		39,112.3		6.8		45,996.4		7.6
Singapore		23,749.9		4.1		15,011.2		2.8		12,458.9		2.5		11,651.9		2.0		11,782.2		1.9
Vietnam		22,351.7		3.9		27,770.8		5.3		32,630.5		6.6		47,753.8		8.3		48,622.1		8.0
Taiwan		15,077.4		2.6		12,004.3		2.3		12,220.5		2.5		14,898.4		2.6		20,783.5		3.4
India		12,782.5		2.2		12,029.6		2.3		11,596.3		2.3		15,055.5		2.6		15,606.2		2.6
Indonesia		11,360.7		2.0		7,872.4		1.5		6,608.5		1.3		8,403.7		1.5		8,833.2		1.5
Mexico		10,846.0		1.9		10,891.9		2.1		9,720.8		2.0		10,932.6		1.9		11,458.2		1.9
Australia		10,282.5		1.8		10,830.6		2.1		7,500.7		1.5		19,861.6		3.5		9,610.4		1.6
Russia		10,129.2		1.8		4,685.7		0.9		4,768.8		1.0		6,906.6		1.2		7,320.9		1.2
Germany		7,570.9		1.3		6,220.2		1.2		6,443.0		1.3		8,483.8		1.5		9,372.7		1.5
Others(1)		173,501.0		30.3		156,489.1		29.7		143,445.3		29.0		153,088.4		26.7		150,100.2		24.8
Total		572,664.6		100.0		526,756.5		100.0		495,425.9		100.0		573,694.4		100.0		604,859.7		100.0

(1) Preliminary

(2) Includes more than 200 countries and regions.

Source: The Bank of Korea; Korea Customs Service.

The following table sets forth the Republic’s imports trading partners:

Imports

	2014		As % of 2014 Total		2015		As % of 2015 Total		2016		As % of 2016 Total		2017		As % of 2017 Total		2018		As % of 2018 Total
	(millions of dollars, except percentages)
China		90,082.2		17.1		90,250.3		20.7		86,980.1		19.9		97,860.1		20.5		106,488.6		19.9
Japan		53,768.3		10.2		45,853.8		10.5		47,466.6		10.9		55,124.7		11.5		54,603.7		10.2
United States		45,283.3		8.6		44,024.4		10.1		43,215.9		9.9		50,749.4		10.6		58,868.3		11.0
Saudi Arabia		36,694.5		7.0		19,561.5		4.5		15,741.7		3.6		19,590.5		4.1		26,335.8		4.9
Qatar		25,723.1		4.9		16,474.8		3.8		10,081.3		2.3		11,267.1		2.4		16,293.6		3.0
Australia		20,413.0		3.9		16,437.8		3.8		15,175.9		3.5		19,159.7		4.0		20,718.6		3.9
Germany		21,298.8		4.0		20,956.5		4.8		18,917.0		4.3		19,748.7		4.1		20,854.0		3.9
Kuwait		16,892.0		3.2		8,973.4		2.1		7,262.3		1.7		9,594.0		2.0		12,794.3		2.4
Taiwan		15,689.8		3.0		16,653.9		3.8		16,403.1		3.8		18,073.0		3.8		16,738.4		3.1
United Arab Emirates		16,194.3		3.1		8,614.7		2.0		6,941.1		1.6		9,557.1		2.0		9,287.4		1.7
Indonesia		12,266.3		2.3		8,850.4		2.0		8,285.3		1.9		9,571.0		2.0		11,161.2		2.1
Malaysia		11,097.9		2.1		8,609.4		2.0		7,507.8		1.7		8,714.7		1.8		10,205.7		1.9
Others(1)		160,111.0		30.5		131,238.1		30.1		122,214.8		34.9		149,468.3		31.2		170,852.9		31.9
Total		525,514.5		100.0		436,499.0		100.0		406,192.9		100.0		478,478.3		100.0		535,202.4		100.0

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(1) Preliminary

(2) Includes more than 200 countries and regions.

Source: The Bank of Korea; Korea Customs Service.

In the past, the outbreak of severe health epidemics in Korea and various parts of the world increased uncertainty about prospects for international trade and economic growth for affected countries, as well as world economic prospects in general. In response to these outbreaks, the Government issued advisories on disease prevention and conducted special monitoring. In May 2015, an outbreak of Middle East Respiratory Syndrome, or MERS, resulted in the death of over 30 people and the quarantine of thousands. The Government continues to cooperate with regional and international efforts to develop and implement additional measures to contain and prevent MERS and other diseases. Another outbreak of MERS or similar incidents in the future, however, may have an adverse effect on Korean and world economies and on international trade.

In recent years, the value of the Won relative to the U.S. dollar and Japanese Yen has fluctuated widely. An appreciation of the Won against the U.S. dollar and Japanese Yen increases the Won value of the Republic’s export sales and diminishes the price-competitiveness of export goods in foreign markets in U.S. dollar and Japanese Yen terms, respectively. However, it also decreases the cost of imported raw materials in Won terms and the cost in Won of servicing the Republic’s U.S. dollar and Japanese Yen denominated debt. In general, when the Won appreciates, export dependent sectors of the Korean economy, including automobiles, electronics and shipbuilding, suffer from the resulting pressure on the price-competitiveness of export goods, which may lead to reduced profit margins and loss in market share, more than offsetting a decrease in the cost of imported raw materials. If the export dependent sectors of the Korean economy suffer reduced profit margins or a net loss, it could result in a material adverse effect on the Korean economy.

Since the Government announced its plans to pursue free trade agreements, or FTAs, in 2003, the Republic has entered into FTAs with key trading partners. The Republic has had bilateral FTAs in effect with Chile since 2004, Singapore since 2006, India since 2010, Peru since 2011, the United States since 2012, Turkey since 2013, Australia since 2014, Canada, China, New Zealand and Vietnam since 2015 and Colombia since July 2016. In March 2017, the Republic signed a regional FTA with each of Panama, Costa Rica, Guatemala, Honduras, El Salvador and Nicaragua. The Republic is currently in negotiations with a number of other key trading partners. In addition, the Republic has had regional FTAs in effect with the European Free Trade Association since 2006, the Association of Southeast Asian Nations since 2009 and the European Union since 2011 and is currently negotiating additional regional FTAs, including one with China and Japan. The Republic and the United States have recently completed revisions to their bilateral FTA, which became effective in January 2019.

Non-Commodities Trade Balance

The Republic had non-commodities trade deficits of US$4.5 billion in 2014, US$16.3 billion in 2015, US$19.7 billion in 2016 and US$38.4 billion in 2017. Based on preliminary data, the Republic had a non-commodities trade deficit of US$35.5 billion in 2018.

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Foreign Currency Reserves

The foreign currency reserves are external assets that are readily available to and controlled by monetary authorities for meeting balance of payments financing needs and for other related purposes. The following table shows the Republic’s total official foreign currency reserves:

Total Official Reserves

	December 31,
	2014		2015		2016		2017		2018
	(millions of dollars)
Gold	$	4,794.7	$	4,794.8	$	4,794.8	$	4,794.8	$	4,794.8
Foreign Exchange(1)		353,600.5		358,513.8		361,701.4		379,476.6		393,332.5
Total Gold and Foreign Exchange		358,395.2		363,308.6		366,496.2		384,271.3		398,127.2
Reserve Position at IMF		1,917.1		1,411.8		1,727.5		1,621.1		2,140.4
Special Drawing Rights		3,280.5		3,241.4		2,878.0		3,374.3		3,426.6
Total Official Reserves	$	363,592.7	$	367,961.9	$	371,101.6	$	389,266.7	$	403,694.3

(1) More than 95% of the Republic’s foreign currency reserves are comprised of convertible foreign currencies.

Source: The Bank of Korea; International Monetary Fund

The Government’s foreign currency reserves increased to US$262.2 billion as of December 31, 2007 from US$8.9 billion as of December 31, 1997, primarily due to continued balance of trade surpluses and capital inflows. In 2008, the Government’s foreign currency reserves decreased, falling to US$201.2 billion as of December 31, 2008, partially as a result of the Government’s use of the foreign currency reserve to provide foreign currency liquidity to Korean financial institutions. The Government’s foreign currency reserves increased to US$363.6 billion as of December 31, 2014, US$368.0 billion as of December 31, 2015, US$371.1 billion as of December 31, 2016, US$389.3 billion as of December 31, 2017 and US$403.7 billion as of December 31, 2018, primarily due to continued trade surpluses and capital inflows. The amount of the Government’s foreign currency reserve was US$402.0 billion as of May  31, 2019.

Government Finance

The Ministry of Economy and Finance prepares the Government budget and administers the Government’s finances.

The Government’s fiscal year commences on January 1. The Government must submit the budget, which is drafted by the Minister of Economy and Finance and approved by the President of the Republic, to the National Assembly not later than 90 days prior to the start of the fiscal year and may submit supplementary budgets revising the original budget at any time during the fiscal year.

2017 budgeted revenues increased by 5.8% to ￦391.2 trillion from ￦369.9 trillion in 2016, led by an increase in budgeted tax revenues (including revenues from social security contributions, taxes on goods and services and taxes on income, profits and capital gains). 2017 budgeted expenditures and net lending increased by 2.9% to ￦378.2 trillion from ￦367.4 trillion in 2016, led by increases in budgeted expenditures on welfare services for senior citizens, children, unemployed people and temporary workers, military services, infrastructure and community development. The 2017 budget anticipated a ￦13.0 billion budget surplus.

2018 budgeted revenues increased by 6.4% to ￦416.1 trillion from ￦391.2 trillion in 2017, led by an increase in budgeted tax revenues (including revenues from social security contributions, taxes on goods and services and taxes on income, profits and capital gains). 2018 budgeted expenditures and net lending increased

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by 5.2% to ￦397.7 trillion from ￦378.2 trillion in 2017, led by increases in budgeted expenditures on the agriculture, forestry and fisheries industry, welfare services for senior citizens, children, unemployed people and temporary workers, health and medical services, education services and military services. The 2018 budget anticipated a ￦18.4 billion budget surplus.

2019 budgeted revenues increased by 7.3% to ￦446.4 trillion from ￦416.1 trillion in 2018, led by an increase in budgeted tax revenues (including taxes on income, profits and capital gains). 2019 budgeted expenditures and net lending increased by 10.6% to ￦439.9 trillion from ￦397.7 trillion in 2018, led by increases in budgeted expenditures on economic growth (including job creation and research and development), child care and education, welfare services for senior citizens, children, disabled people, unemployed people and temporary workers and military services. The 2019 budget anticipated a ￦6.5 billion budget surplus.

The following table shows consolidated Government revenues and expenditures:

Consolidated Central Government Revenues and Expenditures

	Actual										Budget
	2014		2015		2016		2017		2018(1)		2017		2018		2019
	(billions of Won)
Total Revenues		320,895		339,186		371,264		403,839		438,262		391,175		416,085		446,398
Current Revenues		318,185		335,911		367,888		400,659		435,558		387,376		413,304		443,271
Total Tax Revenues		255,313		270,974		299,451		325,845		358,424		313,086		337,402		364,539
Taxes on income, profits and capital gains		95,976		105,751		120,612		134,242		155,399		126,847		135,942		159,618
Social security contributions		49,793		53,089		56,889		60,460		64,854		62,010		69,273		69,747
Tax on property		9,054		11,113		11,112		12,945		15,473		11,459		11,931		14,611
Taxes on goods and services		79,055		79,442		89,221		95,535		99,056		90,282		97,390		97,263
Taxes on international trade and transaction		8,721		8,495		8,045		8,529		8,815		8,991		9,418		9,056
Other tax		12,715		13,084		13,571		14,133		14,828		13,498		13,450		14,244
Non-Tax Revenues		62,872		64,936		68,437		74,814		77,134		74,290		75,902		78,732
Operating surpluses of departmental enterprise sales and property income		23,112		22,129		24,489		27,692		28,616		26,981		27,154		28,692
Administration fees & charges and non-industrial sales		7,997		8,664		8,469		9,067		9,004		8,978		9,460		9,940
Fines and forfeits		19,556		20,777		22,266		23,769		24,455		22,879		23,140		23,726
Contributions to government employee pension fund		9,915		10,929		11,289		12,311		13,206		12,370		13,200		6,476
Current revenue of non-financial public enterprises		2,292		2,437		1,924		1,974		1,853		3,082		2,947		2,929
Capital Revenues		2,710		3,276		3,376		3,180		2,703		3,800		2,781		3,127
Total Expenditures and Net Lending		312,394		339,351		354,354		379,809		407,099		378,196		397,739		439,868
Total Expenditures		311,507		330,537		342,612		363,671		389,610		367,705		388,134		425,270
Current Expenditures		280,466		296,216		309,981		332,719		360,176		336,209		358,912		394,567
Expenditure on goods and service		59,616		63,160		65,145		67,536		71,459		71,542		75,281		80,219
Interest payment		14,057		14,056		13,964		13,976		14,287		14,486		14,334		14,362
Subsidies and other current transfers		203,649		216,189		228,349		248,513		272,080		246,987		265,631		295,970
Current expenditure of non-financial public enterprises		3,143		2,810		2,524		2,694		2,350		3,193		3,666		4,016
Capital Expenditures		31,041		34,322		32,631		30,952		29,434		31,496		29,222		30,704
Net Lending		888		8,814		11,741		16,138		17,489		10,490		9,605		14,597

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(1) Preliminary.

Source: Ministry of Economy and Finance; The Bank of Korea; Korea National Statistical Office

The consolidated Government account consists of a General Account, Special Accounts (including a non-financial public enterprise special account) and Public Funds. The Government segregates the accounts of certain functions of the Government into Special Accounts and Public Funds for more effective administration and fiscal control. The Special Accounts and Public Funds relate to business type activities, such as economic development, road and railway construction and maintenance, monopolies, and communications developments and the administration of loans received from official international financial organizations and foreign governments.

Revenues derive mainly from national taxes and non-tax revenues. Taxes in Korea can be roughly classified into the following types:

• income tax and capital gains tax,

• property tax,

• value-added tax,

• customs duty tax, and

• other taxes.

Income tax and capital gains tax are imposed on income derived from labor, business operation and ownership of assets and profits derived from capital appreciation. Income tax and capital gains tax, depending on the type of taxpayer, can be further classified into corporate income tax and individual income tax. Property tax is imposed on exchange or ownership of property and includes inheritance tax and gift tax. Value-added tax is imposed on value added to goods and services. Customs duty tax is imposed on imported goods. Other taxes include tax on certain securities transactions and a stamp tax for certain documents.

Expenditures include general administration, national defense, community service, education, health, social security, certain annuities and pensions and local finance, which involves the transfer of tax revenues to local governments.

For 2014, the Republic recorded total revenues of ￦320.9 trillion and total expenditures and net lending of ￦312.4 trillion. The Republic had a fiscal surplus of ￦8.5 trillion in 2014.

For 2015, the Republic recorded total revenues of ￦339.2 trillion and total expenditures and net lending of ￦339.4 trillion. The Republic had a fiscal deficit of ￦0.2 trillion in 2015.

For 2016, the Republic recorded total revenues of ￦371.3 trillion and total expenditures and net lending of ￦354.4 trillion. The Republic had a fiscal surplus of ￦16.9 trillion in 2016.

For 2017, the Republic recorded total revenues of ￦403.8 trillion and total expenditures and net lending of ￦379.8 trillion. The Republic had a fiscal surplus of ￦24.0 trillion in 2017.

Based on preliminary data, the Republic recorded total revenues of ￦438.3 trillion and total expenditures and net lending of ￦407.1 trillion in 2018. The Republic had a fiscal surplus of ￦31.2 trillion in 2018.

Debt

The Government estimates that the total outstanding debt of the Government (including guarantees by the Government) as of December 31, 2017 amounted to approximately ￦648.5 trillion, an increase of 5.3% over the

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previous year. The Government estimates that the total outstanding debt of the Government (including guarantees by the Government) as of December 31, 2018 amounted to approximately ￦680.7 trillion, an increase of 5.0% over the previous year. The Ministry of Economy and Finance administers the national debt of the Republic.

External and Internal Debt of the Government

The following table sets out, by currency and the equivalent amount in U.S. dollars, the estimated outstanding direct external debt of the Government as of December 31, 2017:

Direct External Debt of the Government

	Amount in Original Currency		Equivalent Amount in U.S. Dollars(1)
	(millions)
US$		US$ 5,900.0	US$	5,900.0
Euro (EUR)		EUR1,125.0		1,287.1
Total			US$	7,187.1

(1) Amounts expressed in currencies other than US$ are converted to US$ at the arbitrage rate announced by the Seoul Money Brokerage Services, Ltd. in effect on December 31, 2018.

The following table summarizes, as of December 31 of the years indicated, the outstanding direct internal debt of the Republic:

Direct Internal Debt of the Government

	(billions of Won)
2014		493,584.9
2015		547,625.6
2016		584,785.0
2017		619,971.9
2018		643,550.9

The following table sets out all guarantees by the Government of indebtedness of others:

Guarantees by the Government

	December 31,
	2014		2015		2016		2017		2018
	(billions of Won)
Domestic		29,158.4		26,393.8		24,241.6		21,130.5		17,016.3
External(1)		—		—		—		—		—
Total		29,158.4		26,393.8		24,241.6		21,130.5		17,016.3

(1) Converted to Won at foreign exchange banks’ telegraphed transfer selling rates to customers or the market average exchange rates in effect on December 31 of each year.

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For further information on the outstanding indebtedness, including guarantees, of the Republic, see “—Tables and Supplementary Information”.

External Liabilities

The following tables set out certain information regarding the Republic’s external liabilities calculated under the criteria based on the sixth edition of Balance of Payment Manual, or BPM6, published by the International Monetary Fund in December 2010 and implemented by the Government in December 2013. Under BPM6, in particular, prepayments received in connection with the construction of ships are excluded from the external liabilities.

	December 31,
	2014		2015		2016		2017		2018(1)
	(billions of dollars)
Long-term Liabilities		307.9		291.7		277.4		296.1		314.0
General Government		65.2		62.8		64.5		78.0		83.5
Monetary Authorities		25.9		20.1		10.8		14.5		15.2
Banks		104.0		103.1		93.8		91.7		100.3
Other Sectors		112.9		105.7		108.2		111.8		115.1
Short-term Liabilities		116.4		104.3		104.8		116.0		126.6
General Government		1.8		2.3		2.5		2.0		1.0
Monetary Authorities		12.2		12.0		6.9		8.1		12.8
Banks		79.9		74.8		78.4		85.5		90.3
Other Sectors		22.5		15.2		17.0		20.4		22.5
Total External Liabilities		424.3		396.1		382.2		412.0		440.6

(1) Preliminary

Debt Record

The Government has always paid when due the full amount of principal of, interest on, and amortization of sinking fund requirements of, all of its indebtedness.

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Tables and Supplementary Information

A. External Debt of the Government

(1) External Bonds of the Government

Series	Issue Date		Maturity Date			Interest Rate (%)		Currency		Original Principal Amount		Principal Amount Outstanding as of December 31, 2018
2005-001		November 2, 2005		November 3, 2025			5.625		USD		400,000,000		400,000,000
2006-002		December 7, 2006		December 7, 2021			4.250		EUR		375,000,000		375,000,000
2009-001		April 16, 2009		April 16, 2019	*		7.125		USD		1,500,000,000		1,500,000,000
2013-001		September 11, 2013		September 11, 2023			3.875		USD		1,000,000,000		1,000,000,000
2014-001		June 10, 2014		June 10, 2044			4.125		USD		1,000,000,000		1,000,000,000
2014-002		June 10, 2014		June 10, 2024			2.125		EUR		750,000,000		750,000,000
2017-001		January 19, 2017		January 19, 2027			2.750		USD		1,000,000,000		1,000,000,000
2018-001		September 20, 2018		September 20, 2028			3.500		USD		500,000,000		500,000,000
2018-002		September 20, 2018		September 20, 2048			3.875		USD		500,000,000		500,000,000
Total External Bonds in Original Currencies													USD 5,900,000,000
													EUR 1,125,000,000
Total External Bonds in Equivalent Amount of Won(1)												￦	8,035,845,000,000

* Repaid on the maturity date.

(1) U.S. dollar amounts are converted to Won amounts at the rate of US$1.00 to ￦1,118.1, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd. Euro amounts are converted to Won amounts at the rate of EUR 1.00 to ￦1,279.16, the market average exchange rate in effect on December 31, 2018, as announced by Seoul Money Brokerage Services, Ltd.

(2) External Borrowings of the Government

None.

B. External Guaranteed Debt of the Government

None.

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C. Internal Debt of the Government

Title	Range of Interest Rates		Range of Years of Issue		Range of Years of Original Maturity		Principal Amounts Outstanding as of December 31, 2018
	(%)						(billions of Won)
1. Bonds
Interest-Bearing Treasury Bond for Treasury Bond Management Fund		1.00-5.75		2006-2018		2018-2068		567,044.0
Interest-Bearing Treasury Bond for National Housing I		1.25-3.00		2009-2018		2014-2023		72,545.6
Interest-Bearing Treasury Bond for National Housing II		0.0-3.0		1994-2017		2014-2030		718.9
Interest-Bearing Treasury Bond for National Housing III		0		2005		2015		1.6
Non-interest-Bearing Treasury Bond for Contribution to International Organizations(1)		0		1968-1985		—		9.4
Total Bonds								640,319.6
2. Borrowings
Borrowings from The Bank of Korea		1.362-1.652		2017-2018		2019		716.2
Borrowings from the Sports Promotion Fund		1.205-2.275		2016-2018		2019-2020		450.0
Borrowings from The Korea Foundation Fund		1.73-2.34		2017-2018		2019-2020		70.0
Borrowings from the Labor Welfare Promotion Fund		2.13		2018		2019		50.0
Borrowings from Korea Technology Finance Corporation		1.98-2.34		2018		2020-2022		195.0
Borrowings from the Credit Guarantee Fund for Agriculture, Forestry and Fisheries Suppliers		1.875-3.215		2014-2018		2019-2020		1,100.0
Borrowings from the Government Employees’ Pension Fund		1.51		2018		2021		10.0
Borrowings from the Film Industry Development Fund		1.385-2.235		2016-2018		2019-2020		114.0
Borrowings from the Housing Finance Credit Guarantee Fund		1.385-1.67		2016		2019		526.1
Total Borrowings								3,231.3
Total Internal Funded Debt								643,550.9

(1) Interest Rates and Years of Original Maturity not applicable.

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D. Internal Guaranteed Debt of the Government

Title	Range of Interest Rates		Range of Years of Issue		Range of Years of Original Maturity		Principal Amounts Outstanding as of December 31, 2018
	(%)						(billions of Won)
1. Bonds of Government-Affiliated Corporations
Korea Deposit Insurance Corporation		1.34-2.52		2015-2018		2019-2021		5,850.0
Korea Student Aid Foundation		0.00-5.07		2010-2018		2019-2037		11,160.0
Total Bonds								17,010.0
2. Borrowings of Government-Affiliated Corporations
Rural Development Corporation and Federation of Farmland		5.5		1989		2023		6.3
Total Borrowings								6.3
Total Internal Guaranteed Debt								17,016.3

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DESCRIPTION OF THE SECURITIES

Description of Debt Securities

We will issue debt securities under a fiscal agency agreement or agreements. The description below summarizes the material provisions of the debt securities and the fiscal agency agreement. Since it is only a summary, the description may not contain all of the information that may be important to you as a potential investor in the debt securities. Therefore, we urge you to read the form of fiscal agency agreement and the form of global debt security before deciding whether to invest in the debt securities. We have filed a copy of these documents with the Securities and Exchange Commission as exhibits to the registration statement of which this prospectus is a part. You should refer to such exhibits for more complete information.

The financial terms and other specific terms of your debt securities will be described in the prospectus supplement relating to your debt securities. The description in the prospectus supplement will supplement this description or, to the extent inconsistent with this description, replace it.

We will appoint a fiscal agent or agents in connection with debt securities whose duties will be governed by the fiscal agency agreement. We may replace the fiscal agent or appoint different fiscal agents for different series of debt securities.

General Terms of the Debt Securities

We may issue debt securities in separate series at various times. The Republic may irrevocably guarantee the payment of principal of, and interest on, one or more series of debt securities. The prospectus supplement that relates to your debt securities will specify some or all of the following terms:

• the aggregate principal amount;

• the currency of denomination and payment;

• any limitation on principal amount and authorized denominations;

• the percentage of their principal amount at which the debt securities will be issued;

• the maturity date or dates;

• the interest rate for the debt securities and, if variable, the method by which the interest rate will be calculated;

• whether any amount payable in respect of the debt securities will be determined based on an index or formula, and how any such amount will be determined;

• the dates from which interest, if any, will accrue for payment of interest and the record dates for any such interest payments;

• where and how we will pay principal and interest;

• whether and in what circumstances the debt securities may be redeemed before maturity;

• any sinking fund or similar provision;

• whether any part or all of the debt securities will be in the form of a global security and the circumstances in which a global security is exchangeable for certificated securities;

• if issued in certificated form, whether the debt securities will be in bearer form with interest coupons, if any, or in registered form without interest coupons, or both forms, and any restrictions on exchanges from one form to the other;

• whether any of the terms set out herein will differ for the debt securities;

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• whether the Republic will irrevocably guarantee the payment of principal of, and interest on, the debt securities; and

• other specific provisions.

Depending on the terms of the debt securities we issue, the prospectus supplement relating to the debt securities may also describe applicable U.S. federal income tax and other considerations additional to the disclosure in this prospectus.

Unless otherwise specified in the applicable prospectus supplement, we will maintain at an office in the Borough of Manhattan, The City of New York, a register for the registration of transfers of debt securities issued in registered form.

Payments of Principal, Premium and Interest

On every payment date specified in the relevant prospectus supplement, we will pay the principal, premium and/or interest due on that date to the registered holder of the relevant debt security at the close of business on the related record date. We will make all payments at the place and in the currency set out in the prospectus supplement. Unless otherwise specified in the relevant prospectus supplement or the debt securities, we will make payments in U.S. dollars at the New York office of the fiscal agent or, outside the United States, at the office of any paying agent. Unless otherwise specified in the applicable prospectus supplement or debt securities, we will pay interest by check, payable to the registered holder.

We will make any payments on debt securities in bearer form at the offices and agencies of the fiscal agent or any other paying agent outside the United States as we may designate. At the option of the holder of the bearer debt securities, we will make such payments by check or by transfer to an account maintained by the holder with a bank located outside of the United States. We will not make payments on bearer debt securities at the corporate trust office of the fiscal agent in the United States or at any other paying agency in the United States. In addition, we will not make any payment by mail to an address in the United States or by transfer to an account maintained by a holder of bearer debt securities with a bank in the United States. Nevertheless, we will make payments on a bearer debt security denominated and payable in U.S. dollars at an office or agency in the United States if:

• payment outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions; and

• the payment is then permitted under United States law, without material adverse consequences to us.

If we issue bearer debt securities, we will designate the offices of at least one paying agent outside the United States as the location for payment.

Repayment of Funds; Prescription

If no one claims money paid by us to the fiscal agent for the payment of principal or interest in respect of any series of debt securities for two years after the payment was due and payable, the fiscal agent or paying agent will repay the money to us. After such repayment, the fiscal agent or paying agent will not be liable with respect to the amounts so repaid, and you may look only to us for any payment under the debt securities.

Under Korean laws concerning prescriptive periods for filing claims, as generally interpreted, you will not be permitted to file a claim against us for payment of principal or interest on any series of debt securities unless you do so within five years, in the case of principal, and three years, in the case of interest, from the date on which payment was due.

Global Securities

The prospectus supplement relating to a series of debt securities will indicate whether any of that series of debt securities will be represented by a global security. The prospectus supplement will also describe any unique

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specific terms of the depositary arrangement with respect to that series. Unless otherwise specified in the prospectus supplement, we anticipate that the following provisions will apply to depositary arrangements.

Registered Ownership of the Global Security

The global security will be registered in the name of a depositary identified in the prospectus supplement, or its nominee, and will be deposited with the depositary, its nominee or a custodian. The depositary, or its nominee, will therefore be considered the sole owner or holder of debt securities represented by the global security for all purposes under the fiscal agency agreement. Except as specified below or in the applicable prospectus supplement, beneficial owners:

• will not be entitled to have any of the debt securities represented by the global security registered in their names;

• will not receive physical delivery of any debt securities in definitive form;

• will not be considered the owners or holders of the debt securities;

• must rely on the procedures of the depositary and, if applicable, any participants (institutions that have accounts with the depositary or a nominee of the depositary, such as securities brokers and dealers) to exercise any rights of a holder; and

• will receive payments of principal and interest from the depositary or its participants rather than directly from us.

We understand that, under existing industry practice, the depositary and participants will allow beneficial owners to take all actions required of, and exercise all rights granted to, the registered holders of the debt securities.

We will register debt securities in the name of a person other than the depositary or its nominee only if:

• the depositary for a series of debt securities is unwilling or unable to continue as depositary; or

• we determine, in our sole discretion, not to have a series of debt securities represented by a global security.

In either such instance, an owner of a beneficial interest in a global security will be entitled to registration of a principal amount of debt securities equal to its beneficial interest in its name and to physical delivery of the debt securities in definitive form.

Beneficial Interests in and Payments on a Global Security

Only participants, and persons that may hold beneficial interests through participants, can own a beneficial interest in the global security. The depositary keeps records of the ownership and transfer of beneficial interests in the global security by its participants. In turn, participants keep records of the ownership and transfer of beneficial interests in the global security by other persons (such as their customers). No other records of the ownership and transfer of beneficial interests in the global security will be kept.

All payments on a global security will be made to the depositary or its nominee. When the depositary receives payment of principal or interest on the global security, we expect the depositary to credit its participants’ accounts with amounts that correspond to their respective beneficial interests in the global security. We also expect that, after the participants’ accounts are credited, the participants will credit the accounts of the owners of beneficial interests in the global security with amounts that correspond to the owners’ respective beneficial interests in the global security.

The depositary and its participants establish policies and procedures governing payments, transfers, exchanges and other important matters that affect owners of beneficial interests in a global security. The

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depositary and its participants may change these policies and procedures from time to time. We have no responsibility or liability for the records of ownership of beneficial interests in the global security, or for payments made or not made to owners of such beneficial interests. We also have no responsibility or liability for any aspect of the relationship between the depositary and its participants or for any aspect of the relationship between participants and owners of beneficial interests in the global security.

Bearer Securities

We may issue debt securities in a series in the form of one or more bearer global debt securities deposited with a common depositary for the Euroclear and Clearstream, or with a nominee identified in the applicable prospectus supplement. The specific terms and procedures, including the specific terms of the depositary arrangement, with respect to any portion of a series of debt securities to be represented by a global security will be described in the applicable prospectus supplement.

Additional Amounts

We will make all payments of principal of, and premium and interest, if any, on the debt securities, without withholding or deducting any present or future taxes imposed by the Republic or any of its political subdivisions, unless required by law. If Korean law requires us to deduct or withhold taxes, we will pay additional amounts as necessary to ensure that you receive the same amount as you would have received without such withholding or deduction.

We will not pay, however, any additional amounts if you are liable for Korean tax because:

• you are connected with the Republic other than by merely owning the debt security or receiving income or payments on the debt security;

• you failed to complete and submit a declaration of your status as a non-resident of the Republic after we or the relevant tax authority requested you to do so; or

• you failed to present your debt security for payment within 30 days of when the payment is due or, if the fiscal agent did not receive the money prior to the due date, the date notice is given to holders that the fiscal agent has received the full amount due to holders. Nevertheless, we will pay additional amounts to the extent you would have been entitled to such amounts had you presented your debt security for payment on the last day of the 30-day period.

We will not pay any additional amounts for taxes on the debt securities except for taxes payable through deduction or withholding from payments of principal, premium or interest. Examples of the types of taxes for which we will not pay additional amounts include the following: estate or inheritance taxes, gift taxes, sales or transfer taxes, personal property or related taxes, assessments or other governmental charges. We will pay stamp or other similar taxes that may be imposed by the Republic, the United States or any political subdivision or taxing authority in one of those two countries on the fiscal agency agreement or be payable in connection with the issuance of the debt securities.

Status of Debt Securities

The debt securities will:

• constitute our direct, unconditional, unsecured and unsubordinated obligations; and

• rank without any preference among themselves and equally with all of our other unsecured and unsubordinated obligations. It is understood that this provision shall not be construed so as to require us to make payments under the debt securities ratably with payments being made under our any other debt securities.

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Negative Pledge Covenant

If any debt securities are outstanding, we will not create or permit any security interests on our assets as security for any of our Long-Term External Indebtedness or guarantees issued by us, unless the security interest also secures our obligations under the debt securities. “Long-Term External Indebtedness” means any obligation for the payment or repayment of money borrowed that is denominated in a currency other than the currency of the Republic and which has a final maturity of one year or more from its date of issuance.

We may, however, create or permit a security interest:

• in favor of the Government or The Bank of Korea or any other agency or instrumentality of or controlled by the Government;

• arising from, or any deposit or other arrangement made or entered into in connection with, the sale, assignment or other disposition or the discounting of any of our notes or receivables, or any other transaction in the ordinary course of our business; or

• on any asset (or documents of title to such asset) incurred when the asset was purchased or improved to secure payment of the cost of the activity.

Events of Default

Each of the following constitutes an event of default with respect to any series of debt securities:

1. Non-Payment: we do not pay principal or interest or premium or deposit any sinking fund payment on any debt securities of the series when due and such failure to pay continues for 30 days.

2. Breach of Other Obligations: we fail to observe or perform any of the covenants in the series of debt securities (other than non-payment) for 60 days after written notice of the default is delivered to us at the corporate trust office of the fiscal agent in New York City by holders representing at least 10% of the aggregate principal amount of the debt securities of the series.

3. Cross Default and Cross Acceleration:

• we default on any External Indebtedness, and, as a result, becomes obligated to pay an amount equal to or greater than US$10,000,000 in aggregate principal amount prior to its due date; or

• we fail to pay when due, including any grace period, any of our External Indebtedness in aggregate principal amount equal to or greater than US$10,000,000 or we fail to pay when requested and required by the terms thereof any guarantee for External Indebtedness of another person equal to or greater than US$10,000,000 in aggregate principal amount, except in any such case where such External Indebtedness or guarantee is being contested in good faith by appropriate proceedings.

4. Moratorium/Default:

• we declare a general moratorium on the payment of our External Indebtedness, including obligations under guarantees;

• the Republic declares a general moratorium on the payment of its External Indebtedness, including obligations under guarantees;

• the Republic becomes liable to repay prior to maturity any amount of External Indebtedness, including obligations under guarantees, as a result of a default under such External Indebtedness or obligations; or

• the international monetary reserves of the Republic become subject to a security interest or segregation or other preferential arrangement for the benefit of any creditors.

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5. Bankruptcy:

• we are declared bankrupt or insolvent by any court or administrative agency with jurisdiction over us;

• we pass a resolution to apply for bankruptcy or to request the appointment of a receiver or trustee or similar official in insolvency;

• a substantial part of our assets are liquidated;

• we are wound up or dissolved; or

• we cease to conduct the banking business.

6. Failure of Support: the Republic fails to provide financial support for us as required under Article 37 of the KEXIM Act as of the date of the debt securities of such series.

7. Control of Assets: the Republic ceases to control us (directly or indirectly).

8. IMF Membership/World Bank Membership: the Republic ceases to be a member in good standing of the IMF or the International Bank for Reconstruction and Development (World Bank).

For purposes of the foregoing, “External Indebtedness” means any obligation for the payment or repayment of money borrowed that is denominated in a currency other than the currency of the Republic.

If an event of default occurs, any holder may declare the principal amount of debt securities that it holds to be immediately due and payable by written notice to us and the fiscal agent.

You should note that:

• despite the procedure described above, no debt securities may be declared due and payable if we cure the applicable event of default before we receive the written notice from the debt security holder;

• we are not required to provide periodic evidence of the absence of defaults; and

• the fiscal agency agreement does not require us to notify holders of the debt securities of an event of default or grant any debt security holder a right to examine the security register.

Modifications and Amendments; Debt Securityholders’ Meetings

Each holder of a series of debt securities must consent to any amendment or modification of the terms of that series of debt securities or the fiscal agency agreement that would, among other things:

• change the stated maturity of the principal of the debt securities or any installment of interest;

• reduce the principal amount of such series of debt securities or the portion of the principal amount payable upon acceleration of such debt securities;

• change the debt security’s interest rate or premium payable;

• change the currency of payment of principal, interest or premium;

• amend either the procedures provided for a redemption event or the definition of a redemption event;

• shorten the period during which we are not allowed to redeem the debt securities or grant us a right to redeem the debt securities which we previously did not have; or

• reduce the percentage of the outstanding principal amount needed to modify or amend the fiscal agency agreement or the terms of such series of debt securities.

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We may, with the exception of the above changes, with the consent of the holders of at least 66 ²/₃% in principal amount of the debt securities of a series that are outstanding, modify and amend other terms of that series of debt securities.

The fiscal agency agreement and a series of debt securities may be modified or amended, without the consent of the holders of the debt securities, to:

• add covenants made by us that benefit holders of the debt securities;

• surrender any right or power given to us;

• secure the debt securities;

• permit registered securities to be exchanged for bearer securities or relax or eliminate restrictions on the payment of principal, premium or interest on bearer securities to the extent permitted under United States Department of Treasury regulations, provided that holders of the debt securities do not suffer any adverse tax consequences as a result; and

• cure any ambiguity or correct or supplement any defective provision in the fiscal agency agreement or the debt securities, without materially and adversely affecting the interests of the holders of the debt securities.

Fiscal Agent

The fiscal agency agreement governs the duties of each fiscal agent. We may maintain bank accounts and a banking relationship with each fiscal agent. The fiscal agent is our agent and does not act as a trustee for the holders of the debt securities.

Further Issues of Debt Securities

We may, without the consent of the holders of the debt securities, create and issue additional debt securities with the same terms and conditions as any series of debt securities (or that are the same except for the amount of the first interest payment and for the interest paid on the series of debt securities prior to the issuance of the additional debt securities); provided that if any such additional debt securities are not fungible with the outstanding series of debt securities for U.S. federal income tax purposes, they will be issued under a separate CUSIP or other identifying number. We may consolidate such additional debt securities with the outstanding debt securities to form a single series.

Description of Warrants

The description below summarizes some of the provisions of warrants for the purchase of debt securities that we may issue from time to time and of the warrant agreement. Copies of the forms of warrants and the warrant agreement are or will be filed as exhibits to the registration statement of which this prospectus is a part. Since it is only a summary, the description may not contain all of the information that is important to you as a potential investor in the warrants.

The description of the warrants that will be contained in the prospectus supplement will supplement this description and, to the extent inconsistent with this description, replace it.

General Terms of the Warrants

Each series of warrants will be issued under a warrant agreement to be entered into between us and a bank or trust company, as warrant agent. The prospectus supplement relating to the series of warrants will describe:

• the terms of the debt securities purchasable upon exercise of the warrants, as described above under “Description of the Securities—Description of Debt Securities—General Terms of the Debt Securities”;

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• the principal amount of debt securities purchasable upon exercise of one warrant and the exercise price;

• the procedures and conditions for the exercise of the warrants;

• the dates on which the right to exercise the warrants begins and expires;

• whether and under what conditions the warrants may be terminated or canceled by us;

• whether and under what conditions the warrants and any debt securities issued with the warrants will be separately transferable;

• whether the warrants will be issued in bearer or registered form;

• whether the warrants will be exchangeable between registered and bearer form, and, if issued in registered form, where they may be transferred and registered; and

• other specific provisions.

Terms Applicable to Debt Securities and Warrants

Governing Law

The fiscal agency agreement, any warrant agreement and the debt securities and any warrants will be governed by the laws of the State of New York without regard to any principles of New York law requiring the application of the laws of another jurisdiction. Nevertheless, all matters governing our authorization, execution and delivery of the debt securities and the fiscal agency agreement and any warrants and warrant agreement by us will be governed by the laws of the Republic.

Jurisdiction and Consent to Service

We are owned by a foreign sovereign government and all of our board of directors and executive officers and some of the experts named in this prospectus are residents of Korea. In addition, all or most our assets and the assets of the people named in the preceding sentence are located outside of the United States. For that reason, you may have difficultly serving process on us or the individuals described above in the United States or enforcing in a U.S. court a U.S.-court judgment based on the U.S. federal securities laws. Our Korean counsel has informed us that there is doubt regarding the enforceability in Korea, either in original actions or in actions for the enforcement of U.S.-court judgments, of civil liabilities based on the U.S. federal securities laws. The enforcement of U.S.-court judgments against us may be affected or limited by the general principle of good morals and other social order and the general principle of good faith and fairness provided in the Civil Code of Korea. The courts of Korea will recognize as a valid judgment and enforce any judgment obtained in a U.S. court without re-examination of the merits; provided, that (a) such judgment was finally and conclusively given by a court having valid jurisdiction in accordance with the international jurisdiction principles under Korean law and applicable treaties, (b) we were duly served with service of process (otherwise than by publication or similar means) in sufficient time to enable us to prepare our defense in conformity with applicable laws or responded to the action without being served with process, (c) in light of the substance of such judgment and the procedures of litigation, recognition of such judgment is not contrary to the public policy of Korea, and (d) judgments of the courts of Korea are accorded reciprocal treatment in the jurisdiction of the court which had issued such judgment or the requirements for the recognition of a foreign judgment in the jurisdiction of the court which had issued such judgment are neither manifestly inequitable nor substantially different in material respects from the requirements for recognition of a foreign judgment in Korea.

We have appointed the Chief Representative of our New York Representative Office, Mr. Dong Hoon Lee, and a Senior Representative of our New York Representative Office, Mr. Young-rok Kim, and each of their successors in the future, as our authorized agents to receive service of process in any suit which a holder of any series of debt securities or warrants may bring in any state or federal court in New York City and we have accepted the jurisdiction of those courts for those actions. Our New York Representative Office is located at

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460 Park Avenue, 8th Floor, New York, NY 10022. These appointments are irrevocable as long as any amounts of principal, premium or interest remain payable by us to the Fiscal Agent under any series of debt securities or any warrants have not expired or otherwise terminated under their terms. If for any reason either of these two men ceases to act as our authorized agent or ceases to have an address in Manhattan, we shall appoint a replacement. The appointment of agents for receipt of service of process and the acceptance of jurisdiction of state or federal courts in New York City do not, however, apply to actions brought under the United States federal securities laws. We may also be sued in courts having jurisdiction over us located in the Republic.

We will irrevocably consent to any relief and process in connection with a suit against us in relation to the debt securities or warrants, including the enforcement or execution of any order or judgment of the court. To the extent permitted by law, we will waive irrevocably any immunity from jurisdiction to which we might otherwise be entitled in any suit based on any series of debt securities or warrants.

Foreign Exchange Controls

Before we may issue debt securities outside the Republic, the Minister of Economy and Finance of Korea must receive a report with respect to the issuance by us of debt securities having a maturity of more than one year (if the issue amount is more than US$50 million or the equivalent thereof) in accordance with the Foreign Exchange Transactions Act of Korea and the Enforcement Decree and regulations promulgated thereunder. After issuance of debt securities outside the Republic, we are required to notify the Minister of Economy and Finance of such issuance. No further approval or authorization is required for us to pay principal of or interest on the debt securities.

Description of Guarantees

The description below summarizes some of the provisions of the guarantees that the Republic may issue from time to time to guarantee our debt securities. Since it is only a summary, the description may not contain all of the information that is important to you as a potential beneficiary of a guarantee.

The prospectus supplement relating to a guarantee to be issued by the Republic will specify other specific provisions. The description of a guarantee to be issued by the Republic that will be contained in the prospectus supplement will supplement this description and, to the extent inconsistent with this description, replace it.

General Terms of the Guarantees

Each guarantee will be issued by the Republic as guarantor. The prospectus supplement relating to a guarantee will specify:

• the relevant obligor and the obligations guaranteed under the guarantee;

• the nature and scope of the guarantee, including whether or not it is irrevocable and unconditional;

• the status of the guarantee in relation to the Republic’s other obligations;

• the governing law of the guarantee; and

• other relevant provisions of the guarantee.

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LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS

Bearer securities will not be offered, sold or delivered in the United States or its possessions or to a United States person; except in certain circumstances permitted by United States tax regulations. Bearer securities will initially be represented by temporary global securities, without interest coupons, deposited with a common depositary in London for Euroclear and Clearstream for credit to designated accounts. Unless otherwise indicated in the prospectus supplement:

• each temporary global security will be exchangeable for definitive bearer securities on or after the date that is 40 days after issuance only upon receipt of certification of non-United States beneficial ownership of the temporary global security as provided for in United States tax regulations, provided that no bearer security will be mailed or otherwise delivered to any location in the United States in connection with the exchange; and

• any interest payable on any portion of a temporary global security with respect to any interest payment date occurring prior to the issuance of definitive bearer securities will be paid only upon receipt of certification of non-United States beneficial ownership of the temporary global security as provided for in United States tax regulations.

Bearer securities, other than temporary global debt securities, and any related coupons will bear the following legend: “Any United States person who holds this obligation will be subject to limitations under the United States federal income tax laws, including the limitations provided in Section 165(j) and 1287(a) of the Internal Revenue Code.” The sections referred to in the legend provide that, with certain exceptions, a United States person who holds a bearer security or coupon will not be allowed to deduct any loss realized on the disposition of the bearer security, and any gain, which might otherwise be characterized as capital gain, recognized on the disposition will be treated as ordinary income.

For purposes of this section, “United States person” means:

• a citizen or resident of the United States;

• a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof; or

• an estate or trust the income of which is subject to United States federal income taxation regardless of its source.

For purposes of this section, “United States” means the United States of America, including each state and the District of Columbia, its territories, possessions and other areas subject to its jurisdiction.

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TAXATION

The following discussion summarizes certain Korean and U.S. federal income tax considerations that may be relevant to you if you invest in debt securities. This summary is based on laws, regulations, rulings and decisions in effect as of the date of this Prospectus. These laws, regulations, rulings and/or decisions may change; any such change could apply retroactively and could affect the continued validity of this summary.

This summary does not describe all of the tax considerations that may be relevant to you or your situation, particularly if you are subject to special tax rules. You should consult your tax adviser about the tax consequences of holding the debt securities, including the relevance to your particular situation of the considerations discussed below, as well as of state, local or other tax laws.

Korean Taxation

The following summary of Korean tax considerations applies to you so long as you are not:

• a resident of Korea;

• a company having its head office, principal place of business or place of effective management in Korea (a “Korean company”); or

• engaging in a trade or business in Korea through a permanent establishment or a fixed base to which the relevant income is attributable or with which the relevant income is effectively connected.

Tax on Interest Payments

Under the Special Tax Treatment Control Law (the “STTCL”), when we make payments of interest to you on the debt securities, no amount will be withheld from such payments for, or on account of, taxes of any kind imposed, levied, withheld or assessed by Korea or any political subdivision or taxing authority thereof or therein; provided that the debt securities are deemed to be foreign currency denominated bonds issued outside of Korea for the purpose of the STTCL.

Tax on Capital Gains

You will not be subject to any Korean income or withholding taxes in connection with the sale, exchange or other disposition of a debt security, provided that the disposition does not involve a transfer of the debt security to a Korean resident (or the Korean permanent establishment of a non-resident). In addition, the STTCL exempts you from Korean taxation on any capital gains that you earn from the transfer of the debt securities outside of Korea; provided that the offering of the debt securities is deemed to be an overseas issuance for the purpose of the STTCL. If you sell or otherwise dispose of debt securities to a Korean resident and such disposition or sale is made within Korea, any gain realized on the transaction will be taxable at ordinary Korean withholding tax rates at the lower of 22% (including local income surtax) of net gain (subject to the production of satisfactory evidence of the acquisition costs and certain direct transaction costs) or 11% (including local income surtax) of gross sale proceeds with respect to transactions, unless an exemption is available under an applicable income tax treaty. For example, if you are a resident of the United States for the purposes of the income tax treaty currently in force between Korea and the United States, you are generally entitled to an exemption from Korean taxation in respect of any gain realized on a disposition of a debt security, regardless of whether the disposition is to a Korean resident. For more information regarding tax treaties, please refer to the heading “Tax Treaties” below.

With respect to computing the above-mentioned 22% withholding taxes (including local income surtax) on net gain, please note that there is no provision under relevant Korean law for offsetting gains and losses or otherwise aggregating transactions for the purpose of computing the net gain attributable to sales of the debt securities. The purchaser of the debt securities or, in the case of the sale of the debt securities through a securities

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company in Korea, the securities company through which such sale is effected, is required under Korean law to withhold the applicable amount of Korean tax and make payment thereof to the relevant Korean tax authority. Unless you, as the seller, can either claim the benefit of an exemption or a reduced rate of tax under an applicable tax treaty or produce satisfactory evidence of your acquisition cost and certain direct transaction costs in relation to the debt securities being sold, the purchaser or the securities company, as applicable, must withhold an amount equal to 11% of the gross sale proceeds. Any withheld tax must be paid no later than the tenth day of the month following the month in which the payment for the purchase of the relevant debt securities occurred. Failure to timely transmit the withheld tax to the Korean tax authorities technically subjects the purchaser or the securities company to penalties under Korean tax laws.

Inheritance Tax and Gift Tax

If you die while domiciled in Korea, Korean inheritance tax will be imposed upon the transfer by succession of any of the debt securities, wherever located, that you own at the time of death. Furthermore, regardless of where you are domiciled when you die, Korean inheritance tax will be imposed upon the transfer by succession of any of the debt securities you own that are located in Korea at the time of death. Similarly, if you give the debt securities as a gift to any other person, the donee will be subject to Korean gift tax, based on where the donee or you are domiciled or where the debt securities are located at the time that you make the gift. The amount, if any, of the applicable inheritance or gift tax imposed in specific cases depends on the value of the debt securities (or other property) and the identities of the parties involved.

Under Korean inheritance and gift tax laws, debt securities issued by Korean companies are deemed to be located in Korea irrespective of where they are physically located or by whom they are owned.

Stamp Duty

You will not be subject to any Korean stamp duty, registration duty or similar documentary tax in respect of or in connection with a transfer of any debt securities or in connection with the exercise of exchange rights or conversion rights that may be acquired with the debt securities.

Guarantees

Although there are no Korean tax laws, regulations or rulings specific to the payment under the guarantee herein, we believe any payments of interest on and principal amount of the debt securities (or the issued price if the debt securities were originally issued at a discount) by the Republic under the Republic’s guarantee on the debt securities denominated in a foreign currency and issued by us are not subject to withholding tax, provided that the debt securities are deemed to be foreign currency denominated bonds issued outside of Korea for the purpose of the STTCL. Further details of the tax consequences of the holders of our debt securities guaranteed by the Republic may be provided in the relevant prospectus supplement.

Tax Treaties

At the date of this prospectus, Korea has tax treaties with, among others, Australia, Austria, Bangladesh, Belgium, Brazil, Bulgaria, Canada, China, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hong Kong, Hungary, India, Indonesia, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico, Mongolia, the Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Republic of Fiji, Romania, Singapore, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Tunisia, Turkey, the United Kingdom, the United States of America and Vietnam under which the rate of withholding tax on interest and dividends is reduced, generally to between 5% and 16.5%, and the tax on capital gains is often eliminated.

With respect to any gains subject to Korean withholding tax, as described under the heading “Tax on Capital Gains” above, you should inquire for yourself whether you are entitled to the benefit of a tax treaty with Korea. It

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will be your responsibility to claim the benefits of any tax treaty that may exist between your country and Korea in respect of capital gains, and to provide to the purchaser of the debt securities, or the relevant securities company through which the transfer of the debt securities is effected, as applicable, a certificate as to your country of tax residence. In the absence of sufficient proof, the purchaser, or the relevant securities company, as the case may be, must withhold tax at normal rates.

In addition, subject to certain exceptions, in order to receive the benefit of a tax exemption available under any applicable tax treaty, you may also be required to submit to the payer of such Korean source income an application for tax exemption under a tax treaty, together with a certificate as to your country of tax residence. Subject to certain exceptions, the Korean tax laws also require an overseas investment vehicle (an “OIV”, which is defined as an organization established in a foreign jurisdiction that manages funds collected through investment solicitation by way of acquiring, disposing or otherwise investing in proprietary targets and then distributes the outcome of such management to investors) to obtain the application for tax exemption from the beneficial owners together with a certificate of tax residence of the beneficial owner and submit a report of OIV to the payer, together with a detailed statement on the beneficial owner of the income and the obtained application for exemption from the beneficial owner. The payer of such Korean source income, in turn, will be required to submit such exemption application to the relevant district tax office in Korea by the ninth day of the month following the date of the first payment of such income. Even if the beneficial owner was unable to receive the benefit of a tax exemption due to his or her failure to timely submit such application, the beneficial owner may still receive tax treaty benefits by claiming tax refund with evidentiary documents to the relevant tax office within five years of the last day of the month during which the payment of such income occurred. Furthermore, the Corporation Income Tax Law (the “CITL”) and Individual Income Tax Law (the “IITL”) require the beneficial owner to submit an application for entitlement to a preferential tax rate together with evidence of tax residence (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available reduced tax rate pursuant to the relevant tax treaty. Subject to certain exceptions, the CITL and IITL also require an OIV to obtain the application for entitlement to a preferential tax rate from the beneficial owners and submit a report of OIV to the withholding obligor, together with a detailed statement on the beneficial owner of the income.

Due to recent amendment to the Korean tax laws, which applies for fiscal years beginning on or after January 1, 2020, OIVs may be regarded as beneficial owners of Korean sourced income in certain situations. Pursuant to such amendment, OIVs may be treated as beneficial owners to Korean source income if one of the following conditions are met: (i) the OIV is subject to taxation in the jurisdiction in which it resides and there is no intentional tax avoidance purpose to establishing the OIV in the jurisdiction; (ii) the OIV is deemed as the beneficial owner under a tax treaty; or (iii) the OIV is unable to confirm its list of beneficial owners investing in the OIV (if only a portion of the beneficial owners are confirmed, applies with respect to the remaining unconfirmed list of beneficial owners). OIVs that are not regarded as foreign “corporations” for purposes of the Korean tax law may be recognized as beneficial owners if one of the above conditions (ii) or (iii) are met. Further, OIVs that meet condition (iii) would be subject to the default statutory withholding tax rate under the Korean tax laws and the treaty withholding rates under relevant tax treaties would not apply even though the OIVs are deemed to be beneficial owners to Korean source income.

At present, Korea has not entered into any tax treaties regarding inheritance or gift tax.

United States Tax Considerations

The following discussion summarizes certain U.S. federal income tax considerations that may be relevant to you if you invest in debt securities and are a U.S. holder. You will be a U.S. holder if you are the beneficial owner of a debt security and you are an individual who is a citizen or resident of the United States, a U.S. domestic corporation, or any other person that is subject to U.S. federal income tax on a net income basis in respect of its investment in a debt security. This summary deals only with U.S. holders that hold debt securities

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as capital assets for tax purposes. This summary does not apply to you if you are an investor that is subject to special tax rules, such as:

• a bank or thrift;

• a real estate investment trust;

• a regulated investment company;

• an insurance company;

• a dealer in securities or currencies;

• a trader in securities or commodities that elects mark-to-market treatment;

• a person that will hold debt securities as a hedge against currency risk or as a position in a straddle or conversion transaction for tax purposes;

• an entity taxed as a partnership or a partner therein;

• a tax exempt organization; or

• a person whose functional currency for tax purposes is not the U.S. dollar.

This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed regulations promulgated thereunder, and published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.

Any special U.S. federal income tax considerations relevant to a particular issuance of debt securities will be discussed in the applicable prospectus supplement. This discussion does not address U.S. state, local and non-U.S. tax consequences, the Medicare tax on certain investment income or the alternative minimum tax. You should consult your tax adviser about the tax consequences of holding debt securities, including the relevance to your particular situation of the considerations discussed below, as well as of state, local or other tax laws.

U.S. holders that use an accrual method of accounting for tax purposes (“accrual method holders”) generally are required to include certain amounts in income no later than the time such amounts are reflected on certain financial statements (the “book/tax conformity rule”). The application of the book/tax conformity rule thus may require the accrual of income earlier than would be the case under the general tax rules described below It is not clear to what types of income the book/tax conformity rule applies, or in some cases, how the rule is to be applied if it is applicable. Accrual method holders should consult with their tax advisors regarding the potential applicability of the book/tax conformity rule to their particular situation.

Payments or Accruals of Interest

Payments or accruals of “qualified stated interest” (as defined below) on a debt security will be taxable to you as ordinary interest income at the time that you receive or accrue such amounts, in accordance with your regular method of tax accounting. If you use the cash method of tax accounting and you receive payments of interest pursuant to the terms of a debt security in a currency other than U.S. dollars (a “foreign currency”), the amount of interest income you will realize will be the U.S. dollar value of the foreign currency payment based on the exchange rate in effect on the date you receive the payment regardless of whether you convert the payment into U.S. dollars. If you are an accrual method holder, the amount of interest income you will realize will be based on the average exchange rate in effect during the interest accrual period or, with respect to an interest accrual period that spans two taxable years, at the average exchange rate for the partial period within the taxable year. Alternatively, as an accrual method holder you may elect to translate all interest income on foreign currency-denominated debt securities at the spot rate on the last day of the accrual period (or the last day of the taxable year, in the case of an accrual period that spans more than one taxable year), or on the date that you receive the interest payment if that date is within five business days of the end of the accrual period. If you make

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this election you must apply it consistently to all debt instruments from year to year and you cannot change the election without the consent of the United States Internal Revenue Service (the “IRS”). If you are an accrual method holder, you will recognize foreign currency gain or loss on the receipt of a foreign currency interest payment if the exchange rate in effect on the date the payment is received differs from the rate applicable to a previous accrual of that interest income. This foreign currency gain or loss will be treated as ordinary income or loss, but generally will not be treated as an adjustment to interest income received on the debt security.

Purchase, Sale and Retirement of Debt Securities

Initially, your tax basis in a debt security generally will equal the cost of the debt security to you. Your basis will increase by any amounts that you are required to include in income under the rules governing original issue discount and market discount, and will decrease by the amount of any amortized premium and any payments other than qualified stated interest made on the debt security. (The rules for determining these amounts are discussed below.) If you purchase a debt security that is denominated in a foreign currency, the cost to you, and therefore generally your initial tax basis, will be the U.S. dollar value of the foreign currency purchase price on the date of purchase calculated at the exchange rate in effect on that date. If the foreign currency-denominated debt security is traded on an established securities market and you use the cash method of tax accounting, or if you are an accrual method holder that makes a special election, then you will determine the U.S. dollar value of the cost of the debt security by translating the amount of the foreign currency that you paid for the debt security at the spot rate of exchange on the settlement date of your purchase. The amount of any subsequent adjustments to your tax basis in a foreign currency-denominated debt security in respect of original issue discount, market discount and premium will be determined in the manner described below. If you convert U.S. dollars into a foreign currency and then immediately use that foreign currency to purchase a debt security, you generally will not have any taxable gain or loss as a result of the purchase.

When you sell or exchange a debt security, or if a debt security that you hold is retired, you generally will recognize gain or loss equal to the difference between the amount you realize on the transaction, less any accrued qualified stated interest, which will be subject to tax in the manner described above, and your tax basis in the debt security. If you sell or exchange a debt security for a foreign currency, or receive foreign currency on the retirement of a debt security, the amount you will realize for U.S. tax purposes generally will be the U.S. dollar value of the foreign currency that you receive calculated at the exchange rate in effect on the date the foreign currency debt security is disposed of or retired. If you dispose of a foreign currency debt security that is traded on an established securities market and you are a cash-basis U.S. holder, or if you are an accrual-basis holder that makes a special election, then you will determine the U.S. dollar value of the amount realized by translating the amount of the foreign currency that you received on the debt security at the spot rate of exchange on the settlement date of the sale, exchange or retirement. Furthermore, regardless of which of the foregoing methods applies, if Korean tax is withheld on the sale, exchange or retirement of a debt security, the amount you realize will include the gross amount of the proceeds of that sale or exchange before deduction of the Korean tax.

The special election available to you if you are an accrual method holder in respect of the purchase and sale of foreign currency debt securities traded on an established securities market, which is discussed in the two preceding paragraphs, must be applied consistently to all debt instruments from year to year and cannot be changed without the consent of the IRS.

Except as discussed below with respect to market discount, short-term debt securities and foreign currency gain or loss, the gain or loss that you recognize on the sale, exchange or retirement of a debt security generally will be long-term capital gain or loss if you have held the debt security for more than one year. The Code provides preferential treatment under certain circumstances for net long-term capital gains recognized by individual U.S. holders. The ability of U.S. holders to offset capital losses against ordinary income is limited.

Under certain circumstances as described above under “Taxation—Korean Taxation—Tax on Capital Gains” and “Taxation—Korean Taxation—Tax Treaties”, you may be subject to Korean withholding tax upon

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the sale or other disposition of a debt security. If you are eligible for benefits of the Korea-United States tax treaty, which exempts capital gains from tax in Korea, you would not be eligible to credit against your U.S. federal income tax liability any such Korean tax withheld. In addition, any gain or loss that you recognize on the sale, exchange, redemption or retirement of a debt security generally will be treated as U.S. source income. Consequently, even if you are not eligible for an exemption from such taxes under the Korea-United States tax treaty, you may not be able to claim a credit for any Korean tax imposed upon the sale or exchange of a debt security unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources. You should consult their own tax advisers with respect to your eligibility for benefits under the Korea-United States tax treaty and, if you are not eligible for treaty benefits, your ability to credit any Korean tax withheld upon sale of the debt securities against your U.S. federal income tax liability.

Despite the foregoing, the gain or loss that you recognize on the sale, exchange or retirement of a foreign currency debt security generally will be treated as ordinary income or loss to the extent that the gain or loss is attributable to changes in exchange rates during the period in which you held the debt security. This foreign currency gain or loss will not be treated as an adjustment to interest income that you receive on the debt security.

Original Issue Discount

If we issue debt securities at a discount from their stated redemption price at maturity, and the discount is equal to or more than the product of one-fourth of one percent (0.25%) of the stated redemption price at maturity of the debt securities multiplied by the number of whole years to their maturity (the “de minimis threshold”), the debt securities will be “Original Issue Discount Debt Securities.” The difference between the issue price and their stated redemption price at maturity will be the “original issue discount.” The “issue price” of the Original Issue Discount Debt Securities will be the first price at which a substantial amount of the Original Issue Discount Debt Securities are sold to the public (i.e., excluding sales of Original Issue Discount Debt Securities to underwriters, placement agents, wholesalers, or similar persons). The “stated redemption price at maturity” will include all payments under the Original Issue Discount Debt Securities other than payments of qualified stated interest. The term “qualified stated interest” generally means stated interest that is unconditionally payable in cash or property, other than debt instruments issued by us, at least annually during the entire term of an Original Issue Discount Debt Security at a single fixed interest rate or, subject to certain conditions, based on one or more interest indices.

If you invest in Original Issue Discount Debt Securities you generally will be subject to the special tax accounting rules for original issue discount obligations provided by the Code and certain U.S. Treasury regulations (the “OID regulations”). You should be aware that, as described in greater detail below, if you invest in an Original Issue Discount Debt Security you generally will be required to include original issue discount in ordinary gross income for U.S. federal income tax purposes as it accrues, before you may have received the cash attributable to that income.

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In general, and regardless of whether you use the cash or the accrual method of tax accounting, if you are the holder of an Original Issue Discount Debt Security with a maturity greater than one year, you will be required to include in ordinary gross income the sum of the “daily portions” of original issue discount on that Original Issue Discount Debt Security for all days during the taxable year that you own the Original Issue Discount Debt Security. The daily portions of original issue discount on an Original Issue Discount Debt Security are determined by allocating to each day in any accrual period a ratable portion of the original issue discount allocable to that period. Accrual periods may be any length and may vary in length over the term of an Original Issue Discount Debt Security, so long as no accrual period is longer than one year and each scheduled payment of principal or interest occurs on the first or last day of an accrual period. If you are the initial holder of the Original Issue Discount Debt Security, the amount of original issue discount on an Original Issue Discount Debt Security allocable to each accrual period is determined by:

(i) multiplying the “adjusted issue price” (as defined below) of the Original Issue Discount Debt Security at the beginning of the accrual period by a fraction, the numerator of which is the annual yield to maturity (as defined below) of the Original Issue Discount Debt Security and the denominator of which is the number of accrual periods in a year; and

(ii) subtracting from that product the amount, if any, payable as qualified stated interest allocable to that accrual period.

In the case of an Original Issue Discount Debt Security that is a floating rate debt security, both the “annual yield to maturity” and the qualified stated interest will be determined for these purposes as though the Original Issue Discount Debt Security had borne interest in all periods at a fixed rate generally equal to the rate that would be applicable to interest payments on the Original Issue Discount Debt Security on its date of issue or, in the case of some floating rate debt securities, the rate that reflects the yield that is reasonably expected for the Original Issue Discount Debt Security. Additional rules may apply if interest on a floating rate debt security is based on more than one interest index. The “adjusted issue price” of an Original Issue Discount Debt Security at the beginning of any accrual period will generally be the sum of its issue price, including any accrued interest, and the amount of original issue discount allocable to all prior accrual periods, reduced by the amount of all payments other than any qualified stated interest payments on the Original Issue Discount Debt Security in all prior accrual periods. All payments on an Original Issue Discount Debt Security, other than qualified stated interest, will generally be viewed first as payments of previously accrued original issue discount, to the extent of the previously accrued discount, with payments considered made from the earliest accrual periods first, and then as a payment of principal. The “annual yield to maturity” of an Original Issue Discount Debt Security is the discount rate, appropriately adjusted to reflect the length of accrual periods, that causes the present value on the issue date of all payments on the Original Issue Discount Debt Security to equal the issue price. As a result of this “constant yield” method of including original issue discount income, the amounts you will be required to include in your gross income if you invest in an Original Issue Discount Debt Security denominated in U.S. dollars will generally be lesser in the early years and greater in the later years than amounts that would be includible on a straight-line basis.

You generally may make an irrevocable election to include in income your entire return on a debt security (i.e., the excess of all remaining payments to be received on the debt security, including payments of qualified stated interest, over the amount you paid for the debt security) under the constant yield method described above. For debt securities purchased at a premium or bearing market discount in your hands, if you make this election you will also be deemed to have made the election (discussed below under “Premium and Market Discount”) to amortize premium or to accrue market discount in income currently on a constant yield basis in respect of all other premium or market discount debt securities that you hold.

In the case of an Original Issue Discount Debt Security that is also a foreign currency-denominated debt security, you should determine the U.S. dollar amount includible as original issue discount for each accrual period by (i) calculating the amount of original issue discount allocable to each accrual period in the foreign currency using the constant yield method, and (ii) translating that foreign currency amount so determined at the

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average exchange rate in effect during that accrual period (or, with respect to an interest accrual period that spans two taxable years, at the average exchange rate for each partial period). Alternatively, you may translate the foreign currency amount so determined at the spot rate of exchange on the last day of the accrual period (or the last day of the taxable year, for an accrual period that spans two taxable years), or at the spot rate of exchange on the date of receipt, if that date is within five business days of the last day of the accrual period, provided that you have made the election described under the caption “Payments or Accruals of Interest” above. Because exchange rates may fluctuate, if you are the holder of an Original Issue Discount Debt Security that is also a foreign currency debt security you may recognize a different amount of original issue discount income in each accrual period than would be the case if you were the holder of an otherwise similar Original Issue Discount Debt Security denominated in U.S. dollars. Upon the receipt of an amount attributable to original issue discount, whether in connection with a payment of an amount that is not qualified stated interest or the sale or retirement of the Original Issue Discount Debt Security, you will recognize ordinary income or loss measured by the difference between the amount received, translated into U.S. dollars at the exchange rate in effect on the date of receipt or on the date of disposition of the Original Issue Discount Debt Security, as the case may be, and the amount accrued, using the exchange rate applicable to such previous accrual.

If you purchase an Original Issue Discount Debt Security outside of the initial offering at a cost less than its “remaining redemption amount”, or if you purchase an Original Issue Discount Debt Security in the initial offering at a price other than the Original Issue Discount Debt Security’s issue price, you will also generally be required to include in gross income the daily portions of original issue discount, calculated as described above. However, if you acquire an Original Issue Discount Debt Security at a price greater than its adjusted issue price, you will be required to reduce your periodic inclusions of original issue discount to reflect the premium paid over the adjusted issue price. The remaining redemption amount for an Original Issue Discount Debt Security is the total of all future payments to be made on the debt security other than qualified stated interest.

Floating rate debt securities generally will be treated as “variable rate debt instruments” under the OID regulations. Accordingly, the stated interest on a floating rate debt security generally will be treated as qualified stated interest, and such a debt security will not have original issue discount solely as a result of the fact that it provides for interest at a variable rate. A floating rate debt security that does not qualify as a variable rate debt instrument will be subject to special rules (the “contingent payment regulations”) that govern the tax treatment of debt obligations that provide for contingent payments (“contingent debt obligations”). A detailed description of the tax considerations relevant to U.S. holders of any such debt securities will be provided in the applicable prospectus supplement.

Certain Original Issue Discount Debt Securities may be redeemed prior to maturity, either at our option or at the option of the holder, or may have special repayment or interest rate reset features as indicated in the applicable prospectus supplement. Original Issue Discount Debt Securities containing these features may be subject to rules that differ from the general rules discussed above. If you purchase Original Issue Discount Debt Securities with these features, you should carefully examine the applicable prospectus supplement and consult your tax adviser about their treatment since the tax consequences with respect to original issue discount will depend, in part, on the particular terms and features of the Original Issue Discount Debt Securities.

If a debt security provides for a scheduled accrual period that is longer than one year (for example, as a result of a long initial period on a debt security with interest that is generally paid on an annual basis), then stated interest on the debt security will not qualify as “qualified stated interest” under the OID Regulations. As a result, the debt security would be an Original Issue Discount Debt Security. In that event, among other things, if you are a cash-method U.S. holder you will be required to accrue stated interest on the debt security under the rules for original issue discount described above, and regardless of your method of accounting for U.S. federal income tax purposes, you will be required to accrue original issue discount that would otherwise fall under the de minimis threshold.

The book/tax conformity rule, discussed above under “United States Tax Considerations,” applies to original issue discount in some cases, and therefore if you are an accrual method holder you may be required to

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include original issue discount on Original Issue Discount Debt Securities in a more accelerated manner than described above if you do so for financial accounting purposes. It is uncertain what adjustments, if any, should be made in later accrual periods when taxable income exceeds income reflected on your financial statements to reflect the accelerated accrual of income in earlier periods. In addition, it is possible, although less likely, that if you are an accrual method holder you may be required to include original issue discount that would otherwise fall under the de minimis threshold in gross income as such original issue discount accrues on your financial statements. The application of the book-tax conformity rule to original issue discount, including original issue discount that would otherwise fall under the de minimis threshold, is uncertain, and accrual method taxpayers should consult with their tax advisors on how the rule may apply to their investment in the debt securities.

Short-Term Debt Securities

The rules described above will also generally apply to Original Issue Discount Debt Securities with maturities of one year or less (“short-term debt securities”), but with some modifications.

First, the original issue discount rules treat none of the interest on a short-term debt security as qualified stated interest, but treat a short-term debt security as having original issue discount. Thus, all short-term debt securities will be Original Issue Discount Debt Securities. Except as noted below, if you are a cash-basis holder of a short-term debt security and you do not identify the short-term debt security as part of a hedging transaction you will generally not be required to accrue original issue discount currently, but you will be required to treat any gain realized on a sale, exchange or retirement of the short-term debt security as ordinary income to the extent such gain does not exceed the original issue discount accrued with respect to the short-term debt security during the period you held the short-term debt security. You may not be allowed to deduct all of the interest paid or accrued on any indebtedness incurred or maintained to purchase or carry a short-term debt security until the maturity of the short-term debt security or its earlier disposition in a taxable transaction. Notwithstanding the foregoing, if you are a cash-basis U.S. holder of a short-term debt security you may elect to accrue original issue discount on a current basis, in which case the limitation on the deductibility of interest described above will not apply. A U.S. holder using the accrual method of tax accounting and some cash method holders, including banks, securities dealers, regulated investment companies and certain trust funds, generally will be required to include original issue discount on a short-term debt security in gross income on a current basis. Original issue discount will be treated as accruing for these purposes on a ratable basis or, at the election of the holder, on a constant yield basis based on daily compounding.

Second, regardless of whether you are a cash- or accrual-basis holder, if you are the holder of a short-term debt security you can elect to accrue any “acquisition discount” with respect to the short-term debt security on a current basis. Acquisition discount is the excess of the remaining redemption amount of the short-term debt security at the time of acquisition (i.e., all amounts payable on the short-term debt security) over the purchase price. Acquisition discount will be treated as accruing ratably or, at the election of the holder, under a constant yield method based on daily compounding. If you elect to accrue acquisition discount, the original issue discount rules will not apply.

Finally, the market discount rules described below will not apply to short-term debt securities.

As described above, certain of the debt securities may be subject to special redemption features. These features may affect the determination of whether a debt security has a maturity of one year or less and thus is a short-term debt security. If you purchase debt securities with these features, you should carefully examine the prospectus supplement and consult your tax adviser about these features.

Premium and Market Discount

If you purchase a debt security at a cost greater than the debt security’s remaining redemption amount, you will be considered to have purchased the debt security at a premium, and you may elect to amortize the premium

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as an offset to interest income, using a constant yield method, over the remaining term of the debt security. If you make this election, it generally will apply to all debt instruments that you hold at the time of the election, as well as any debt instruments that you subsequently acquire. In addition, you may not revoke the election without the consent of the IRS. If you elect to amortize the premium, you will be required to reduce your tax basis in the debt security by the amount of the premium amortized during your holding period. Original Issue Discount Debt Securities purchased at a premium will not be subject to the original issue discount rules described above. In the case of premium on a foreign currency debt security, you should calculate the amortization of the premium in the foreign currency. Amortization deductions attributable to a period reduce interest payments in respect of that period, and therefore are translated into U.S. dollars at the rate that you use for those interest payments. Exchange gain or loss will be realized with respect to amortized premium on a foreign currency debt security based on the difference between the exchange rate computed on the date or dates the premium is amortized against interest payments on the debt security and the exchange rate on the date when the holder acquired the debt security. For a U.S. holder that does not elect to amortize premium, the amount of premium will be included in your tax basis when the debt security matures or is disposed of. Therefore, if you do not elect to amortize premium and you hold the debt security to maturity, you generally will be required to treat the premium as capital loss when the debt security matures.

If you purchase a debt security at a price that is lower than the debt security’s remaining redemption amount, or in the case of an Original Issue Discount Debt Security, the debt security’s adjusted issue price, by 0.25% or more of the remaining redemption amount, or adjusted issue price, multiplied by the number of remaining whole years to maturity, the debt security will be considered to bear “market discount” in your hands. In this case, any gain that you realize on the disposition of the debt security generally will be treated as ordinary interest income to the extent of the market discount that accrued on the debt security during your holding period. In addition, you could be required to defer the deduction of a portion of the interest paid on any indebtedness that you incurred or maintained to purchase or carry the debt security. In general, market discount will be treated as accruing ratably over the term of the debt security, or, at your election, under a constant yield method. You must accrue market discount on a foreign currency debt security in the specified currency. The amount that you will be required to include in income in respect of accrued market discount will be the U.S. dollar value of the accrued amount, generally calculated at the exchange rate in effect on the date that you dispose of the debt security.

You may elect to include market discount in gross income currently as it accrues (on either a ratable or constant yield basis), in lieu of treating a portion of any gain realized on a sale of the debt security as ordinary income. If you elect to include market discount on a current basis, the interest deduction deferral rule described above will not apply. If you do make such an election, it will apply to all market discount debt instruments that you acquire on or after the first day of the first taxable year to which the election applies. The election may not be revoked without the consent of the IRS. Any accrued market discount on a foreign currency debt security that is currently includible in income will be translated into U.S. dollars at the average exchange rate for the accrual period (or portion thereof within your taxable year).

Warrants

A description of the tax consequences of an investment in warrants will be provided in the applicable prospectus supplement.

Indexed Debt Securities and Other Debt Securities Providing for Contingent Payments

The contingent payment regulations generally require accrual of interest income on a constant yield basis in respect of contingent debt obligations at a yield determined at the time of issuance of the obligation, and may require adjustments to these accruals when any contingent payments are made. In addition, special rules may apply to floating rate debt securities if the interest payable on the debt securities is based on more than one interest index. We will provide a detailed description of the tax considerations relevant to U.S. holders of any debt securities that are subject to the special rules discussed in this paragraph in the relevant prospectus supplement.

200

Information Reporting and Backup Withholding

Information returns are required to be filed with the IRS in connection with debt security payments made to certain United States persons. If you are a United States person, you generally will not be subject to United States backup withholding tax on such payments if you provide your taxpayer identification number to the withholding agent. You may also be subject to information reporting and backup withholding tax requirements with respect to the proceeds from a sale of the debt securities. If you are not a U.S. holder, in order to avoid information reporting and backup withholding tax requirements you may have to comply with certification procedures to establish that you are not a U.S. holder.

Information with Respect to Foreign Financial Assets

Certain U.S. holders that own “specified foreign financial assets” with an aggregate value in excess of $50,000 are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which would include the debt securities) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. holders who fail to report the required information could be subject to substantial penalties. In addition, the statute of limitations for assessment of tax would be suspended, in whole or part. You should consult your own tax advisors regarding the possible application of these rules to your investment in the debt securities, including the application of the rules to your particular circumstances.

Reportable Transactions

A U.S. taxpayer that participates in a “reportable transaction” will be required to disclose its participation to the IRS. Under the relevant rules, if the debt securities are denominated in a foreign currency, a U.S. holder may be required to treat a foreign currency exchange loss from the debt securities as a reportable transaction if this loss exceeds the relevant threshold in the regulations ($50,000 in a single taxable year, if the U.S. holder is an individual or trust, or higher amounts for other non-individual U.S. holders), and to disclose its investment by filing Form 8886 with the IRS. A penalty in the amount of $10,000 in the case of a natural person and $50,000 in all other cases is generally imposed on any taxpayer that fails to timely file an information return with the IRS with respect to a transaction resulting in a loss that is treated as a reportable transaction. You are urged to consult your tax advisors regarding the application of these rules.

201

PLAN OF DISTRIBUTION

We and the Republic, if a guarantee by the Republic is furnished, may sell or issue the debt securities or warrants or guarantees in any of three ways:

• through underwriters or dealers;

• directly to one or more purchasers; or

• through agents.

The prospectus supplement relating to a particular series of debt securities or warrants or guarantees will state:

• the names of any underwriters;

• the purchase price of the securities;

• the proceeds to us from the sale;

• any underwriting discounts and other compensation;

• the initial public offering price;

• any discounts or concessions allowed or paid to dealers; and

• any securities exchanges on which the securities will be listed.

Any underwriter involved in the sale of securities will acquire the securities for its own account. The underwriters may resell the securities from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices to be determined at the time of sale. The securities may be offered to the public either by underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Unless the prospectus supplement states otherwise, certain conditions must be satisfied before the underwriters become obligated to purchase securities from us and the Republic, if applicable, and they will be obligated to purchase all of the securities if any are purchased. The underwriters may change any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers.

If we and the Republic, if a guarantee by the Republic is furnished, sell any securities through agents, the prospectus supplement will identify the agent and indicate any commissions payable by us and the Republic, if applicable. Unless the prospectus supplement states otherwise, all agents will act on a best efforts basis and will not acquire the securities for their own account.

We and the Republic, if a guarantee by the Republic is furnished, may authorize agents, underwriters or dealers to solicit offers by certain specified entities to purchase the securities from us and the Republic, if applicable, at the public offering price set forth in a prospectus supplement pursuant to delayed delivery contracts. The prospectus supplement will set out the conditions of the delayed delivery contracts and the commission receivable by the agents, underwriters or dealers for soliciting the contracts.

We and the Republic, if a guarantee by the Republic is furnished, may offer debt securities as consideration for the purchase of other of our debt securities, either in connection with a publicly announced tender offer or in privately negotiated transactions. The offer may be in addition to or in lieu of sales of debt securities directly or through underwriters or agents.

Agents and underwriters may be entitled to indemnification by us against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribution from us with respect to certain payments which the agents or underwriters may be required to make. Agents and underwriters may be customers of, engage in transactions with, or perform services (including commercial and investment banking services) for, us and the Republic in the ordinary course of business.

202

LEGAL MATTERS

The validity of any particular series of debt securities or warrants issued with debt securities will be passed upon for us and any underwriters or agents by United States and Korean counsel identified in the related prospectus supplement.

AUTHORIZED REPRESENTATIVES IN THE UNITED STATES

Our authorized agents in the United States are Mr. Dong Hoon Lee, Chief Representative of our New York Representative Office, and Mr. Young-rok Kim, Senior Representative of our New York Representative Office. The address of our New York Representative Office is 460 Park Avenue, 8th Floor, New York, NY 10022. The authorized representative of the Republic in the United States is Mr. Seong-Wook Kim, Financial Attaché, Korean Consulate General in New York, located at 460 Park Avenue, 9th Floor, New York, NY 10022.

OFFICIAL STATEMENTS AND DOCUMENTS

Our Chairman and President, in his official capacity, has supplied the information set forth under “The Export-Import Bank of Korea” (except for the information set out under “The Export-Import Bank of Korea—Business—Government Support and Supervision”). Such information is stated on his authority.

The Minister of Economy and Finance of The Republic of Korea, in his official capacity, has supplied the information set out under “The Export-Import Bank of Korea—Business—Government Support and Supervision” and “The Republic of Korea.” Such information is stated on his authority. The documents identified in the portion of this prospectus captioned “The Republic of Korea” as the sources of financial or statistical data are official public documents of the Republic or its agencies and instrumentalities.

EXPERTS

The separate financial statements of The Export-Import Bank of Korea as of and for the years ended December 31, 2018 and 2017 have been included in this Prospectus in reliance upon the report of KPMG Samjong Accounting Corp., independent auditor, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

203

FORWARD-LOOKING STATEMENTS

This prospectus includes future expectations, projections or “forward-looking statements”, as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “believe”, “expect”, “anticipate”, “estimate”, “project” and similar words identify forward-looking statements. In addition, all statements other than statements of historical facts included in this prospectus are forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove correct. This prospectus discloses important factors that could cause actual results to differ materially from our expectations (“Cautionary Statements”). All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.

Factors that could adversely affect the future performance of the Korean economy include:

• difficulties in the financial sectors in Europe and elsewhere and increased sovereign default risks in selected countries and the resulting adverse effects on the global financial markets;

• adverse conditions or uncertainty in the economies of countries and regions that are important export markets for Korea, such as the United States, Europe, Japan and China, or in emerging market economies in Asia or elsewhere, as well as increased uncertainty in the wake of a referendum in the United Kingdom in June 2016, in which the majority of voters voted in favor of an exit from the European Union (“Brexit”);

• adverse changes or volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including fluctuation of the U.S. dollar, the euro or Japanese yen exchange rates or revaluation of the Chinese renminbi and the overall impact of Brexit on the value of the Korean Won), interest rates, inflation rates or stock markets;

• declines in consumer confidence and a slowdown in consumer spending;

• increasing levels of household debt;

• increasing delinquencies and credit defaults by consumer and small- and medium-sized enterprise borrowers;

• further decreases in the market prices of Korean real estate;

• the continued growth of the Chinese economy, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and the relocation of the manufacturing base from Korea to China), as well as a slowdown in the growth of China’s economy, which is Korea’s most important export market;

• the investigations of large Korean conglomerates and their senior management for bribery, embezzlement and other possible misconduct relating to the recent impeachment and dismissal of former President Park Guen-hye;

• increased sovereign default risk in select countries and the resulting adverse effects on the global financial markets;

• the economic impact of any pending or future free trade agreements;

• social and labor unrest;

• a decrease in tax revenues and a substantial increase in the Government’s expenditures for fiscal stimulus measures, unemployment compensation and other economic and social programs that, together, would lead to an increased Government budget deficit;

• financial problems or lack of progress in the restructuring of Korean conglomerates, other large troubled companies, their suppliers or the financial sector;

204

• loss of investor confidence arising from corporate accounting irregularities or corporate governance issues at certain Korean companies;

• increases in social expenditures to support an aging population in Korea or decreases in economic productivity due to the declining population size in Korea;

• geo-political uncertainty and risk of further attacks by terrorist groups around the world;

• the occurrence of severe health epidemics in Korea or other parts of the world, including an outbreak of severe acute respiratory syndrome, swine or avian flu, Ebola or Middle East respiratory syndrome.

• deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from territorial or trade disputes or disagreements in foreign policy (such as the controversy between Korea and China regarding the decision to allow the United States to deploy the Terminal High Altitude Area Defense system in Korea);

• political uncertainty or increasing strife among or within political parties in Korea;

• natural or man-made disasters that have a significant adverse economic or other impact on Korea or its major trading partners;

• hostilities or political or social tensions involving oil producing countries in the Middle East or North Africa and any material disruption in the supply of oil or sudden increase in the price of oil; and

• an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States.

205

FURTHER INFORMATION

We filed a registration statement with respect to the securities with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and its related rules and regulations. You can find additional information concerning ourselves and the securities in the registration statement and any pre- or post-effective amendment, including its various exhibits, which may be inspected at the public reference facilities maintained by the Securities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549. These filings are also available to the public from the Securities and Exchange Commission’s website at http://www.sec.gov.

206

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 11. Estimated Expenses.*

It is estimated that our expenses in connection with the sale of the debt securities, warrants and guarantees hereunder, exclusive of compensation payable to underwriters and agents, will be as follows:

SEC Registration Fee	US$	560,000
Printing Costs		250,000
Legal Fees and Expenses		450,000
Fiscal Agent Fees and Expenses		50,000
Blue Sky Fees and Expenses		50,000
Rating Agencies’ Fees		350,000
Miscellaneous (including amounts to be paid to underwriters in lieu of reimbursement of certain expenses)		200,000
Total	US$	1,910,000

* Based on three underwritten offerings of the debt securities.

II-1

UNDERTAKINGS

The Registrants hereby undertake:

(a) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereto) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; and

(iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement;

(b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and

(c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(d) That, for purposes of determining liability under the Securities Act of 1933 to any purchaser:

each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(e) That, for the purpose of determining any liability under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

The undersigned registrants undertake that in a primary offering of securities of the undersigned registrants pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrants will be sellers to the purchaser and will be considered to offer or sell such securities to such purchaser;

(i) Any preliminary prospectus or prospectus of the undersigned registrants relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrants or used or referred to by the undersigned registrants;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrants or their securities provided by or on behalf of the undersigned registrants; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrants to the purchaser.

II-2

CONTENTS

This Registration Statement is comprised of:

(1) Facing Sheet.

(2) Explanatory Note.

(3) Part I, consisting of the Prospectus.

(4) Part II, consisting of pages II-1 to II-9.

(5) The following Exhibits:

A-1	-	Form of Underwriting Agreement Standard Terms, incorporated herein by reference to Exhibit A-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-1	-	Form of Fiscal Agency Agreement, including forms of Debt Securities, incorporated herein by reference to Exhibit B-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-2	-	Form of global Debt Security that bears interest at a fixed rate, incorporated herein by reference to Exhibit B-2 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-3	-	Letter of successor Fiscal Agent, incorporated herein by reference to Exhibit B-3 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-4	-	Letter of 2nd successor Fiscal Agent, incorporated herein by reference to Exhibit B-4 to the Registration Statement of The Export-Import Bank of Korea (No. 333-9564).
B-5	-	Letter of 3rd successor Fiscal Agent, incorporated herein by reference to Exhibit B-5 to the Registration Statement of The Export-Import Bank of Korea (No. 333-136378).
B-6	-	Form of Guarantee to be issued by The Republic of Korea.**
C	-	Form of Warrant Agreement, including form of Warrants.**
D-1	-	Consent of the Director General of The Export-Import Bank of Korea (included on page II-5).
D-2	-	Power of Attorney of the Director General of The Export-Import Bank of Korea.*
E-1	-	Consent of the Minister of Economy and Finance of The Republic of Korea (included on Page II-6).
E-2	-	Power of Attorney of the Minister of Economy and Finance of The Republic of Korea, incorporated herein by reference to Exhibit E-2 to the Registration Statement of The Export-Import Bank of Korea (No. 333-156218).
F	-	Consent of KPMG Samjong Accounting Corp.
G-1	-	Letter appointing certain persons as authorized agents of The Export-Import Bank of Korea in the United States.*
G-2	-	Letter appointing Authorized Agents of The Republic of Korea in the United States (included in Exhibit E-2).
H	-	The Export-Import Bank of Korea Act, incorporated herein by reference to Exhibit H to the Registration Statement of The Export-Import Bank of Korea (No. 333-212164).
I	-	The Enforcement Decree of The Export-Import Bank of Korea Act, incorporated herein by reference to Exhibit I to the Registration Statement of The Export-Import Bank of Korea (No. 333-180273).
J	-	The Articles of Incorporation of The Export-Import Bank of Korea.*

II-3

K	-	Form of Prospectus Supplement relating to The Export-Import Bank of Korea’s Medium-Term Notes, Series A, Due Not Less Than Nine Months From Date of Issue (the “MTNs”), incorporated herein by reference to Exhibit K to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
L	-	Form of Distribution Agreement between The Export-Import Bank of Korea and the Agents named therein relating to the offer and sale from time to time of the MTNs, incorporated herein by reference to Exhibit L to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
M-1	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants).*
M-2	-	Opinion (including consent) of Yoon & Yang LLC, 19th Floor, ASEM Tower, 517, Yeongdong-daero, Gangnam-gu, Seoul, Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants) and the Guarantees to be issued by The Republic of Korea.*
M-3	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$600,000,000 Floating Rate Notes due 2022, US$400,000,000 2.50% Notes due 2020 and US$1,000,000,000 3.00% Notes due 2022.*
M-4	-	Opinion (including consent) of Yulchon, Parnas Tower, 38F, 521 Teheran-ro, Gangnam-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$600,000,000 Floating Rate Notes due 2022, US$400,000,000 2.50% Notes due 2020 and US$1,000,000,000 3.00% Notes due 2022.*
M-5	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$800,000,000 Floating Rate Notes due 2021 and US$700,000,000 Floating Rate Notes due 2023.*
M-6	-	Opinion (including consent) of Shin & Kim, 9F, State Tower Namsan, 100 Toegye-ro, Jung-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$800,000,000 Floating Rate Notes due 2021 and US$700,000,000 Floating Rate Notes due 2023.*
M-7	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 3.50% Notes due 2021 and US$500,000,000 3.625% Notes due 2023.*
M-8	-	Opinion (including consent) of Shin & Kim, 9F, State Tower Namsan, 100 Toegye-ro, Jung-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 3.50% Notes due 2021 and US$500,000,000 3.625% Notes due 2023.*
M-9	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 Floating Rate Notes due 2022 and US$500,000,000 2.375% Notes due 2024.*
M-10	-	Opinion (including consent) of Yoon & Yang, 19th Floor, ASEM Tower, 517, Yeongdong-daero, Gangnam-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 Floating Rate Notes due 2022 and US$500,000,000 2.375% Notes due 2024.*

II-4

N-1	-	Form of the MTNs that bears interest at a fixed rate, incorporated herein by reference to Exhibit N-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
N-2	-	Form of the MTNs that bears interest at a floating rate, incorporated herein by reference to Exhibit N-2 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
O	-	Form of Calculation Agency Agreement between The Export-Import Bank of Korea and the calculation agent named therein relating to the MTNs that bear interest at a floating rate, incorporated herein by reference to Exhibit O to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).

* Previously filed

** May be filed by amendment.

II-5

SIGNATURE OF THE EXPORT-IMPORT BANK OF KOREA

Pursuant to the requirements of the Securities Act of 1933, as amended, The Export-Import Bank of Korea has duly caused this Registration Statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in Seoul, The Republic of Korea, on the 3rd day of July, 2019.

THE EXPORT-IMPORT BANK OF KOREA
By:	JIN-KYUN LEE*†
	Director General
†By:	/S/ HEE-KAP PARK
	Hee-kap Park
	(Attorney-in-fact)

* Consent is hereby given to use of his name in connection with the information specified in this Registration Statement or amendment thereto to have been supplied by him and stated on his authority.

II-6

SIGNATURE OF THE REPUBLIC OF KOREA

Pursuant to the requirements of the Securities Act of 1933, as amended, The Republic of Korea has duly caused this Registration Statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in The City of New York, New York, on the 3rd day of July, 2019.

THE REPUBLIC OF KOREA
By:	NAM-KI HONG*†
	Minister of Economy and Finance
†By:	/S/ SEONG-WOOK KIM
	Seong-Wook Kim
	(Attorney-in-fact)

* Consent is hereby given to use of his name in connection with the information specified in this Registration Statement or amendment thereto to have been supplied by him and stated on his authority.

II-7

SIGNATURE OF AUTHORIZED REPRESENTATIVE

OF THE EXPORT-IMPORT BANK OF KOREA

Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly authorized representative in the United States of The Export-Import Bank of Korea, has signed this Registration Statement or amendment thereto in The City of New York, New York, on the 3rd day of July, 2019.

†By:	/S/ DONG HOON LEE
	Dong Hoon Lee
	New York Representative Office
	The Export-Import Bank of Korea

II-8

SIGNATURE OF AUTHORIZED REPRESENTATIVE

OF THE EXPORT-IMPORT BANK OF KOREA

Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly authorized representative in the United States of The Export-Import Bank of Korea, has signed this Registration Statement or amendment thereto in The City of New York, New York, on the 3rd day of July, 2019.

†By:	/S/ YOUNG-ROK KIM
	Young-rok Kim
	New York Representative Office
	The Export-Import Bank of Korea

II-9

SIGNATURE OF AUTHORIZED REPRESENTATIVE

OF THE REPUBLIC OF KOREA

Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly authorized representative in the United States of The Republic of Korea, has signed this Registration Statement or amendment thereto in The City of New York, New York, on the 3rd day of July, 2019.

†By:	/S/ SEONG-WOOK KIM
	Seong-Wook Kim
	Financial Attaché
	Korean Consulate General in New York

II-10

EXHIBIT INDEX

A-1	-	Form of Underwriting Agreement Standard Terms, incorporated herein by reference to Exhibit A-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-1	-	Form of Fiscal Agency Agreement, including forms of Debt Securities, incorporated herein by reference to Exhibit B-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-2	-	Form of global Debt Security that bears interest at a fixed rate, incorporated herein by reference to Exhibit B-2 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-3	-	Letter of successor Fiscal Agent, incorporated herein by reference to Exhibit B-3 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-4	-	Letter of 2nd successor Fiscal Agent, incorporated herein by reference to Exhibit B-4 to the Registration Statement of The Export-Import Bank of Korea (No. 333-9564).
B-5	-	Letter of 3rd successor Fiscal Agent, incorporated herein by reference to Exhibit B-5 to the Registration Statement of The Export-Import Bank of Korea (No. 333-136378).
B-6	-	Form of Guarantee to be issued by The Republic of Korea.**
C	-	Form of Warrant Agreement, including form of Warrants.**
D-1	-	Consent of the Director General of The Export-Import Bank of Korea (included on page II-5).
D-2	-	Power of Attorney of the Director General of The Export-Import Bank of Korea.*
E-1	-	Consent of the Minister of Economy and Finance of The Republic of Korea (included on Page II-6).
E-2	-	Power of Attorney of the Minister of Economy and Finance of The Republic of Korea, incorporated herein by reference to Exhibit E-2 to the Registration Statement of The Export-Import Bank of Korea (No. 333-156218).
F	-	Consent of KPMG Samjong Accounting Corp.
G-1	-	Letter appointing certain persons as authorized agents of The Export-Import Bank of Korea in the United States.*
G-2	-	Letter appointing Authorized Agents of The Republic of Korea in the United States (included in Exhibit E-2).
H	-	The Export-Import Bank of Korea Act, incorporated herein by reference to Exhibit H to the Registration Statement of The Export-Import Bank of Korea (No. 333-212164).
I	-	The Enforcement Decree of The Export-Import Bank of Korea Act, incorporated herein by reference to Exhibit I to the Registration Statement of The Export-Import Bank of Korea (No. 333-180273).
J	-	The Articles of Incorporation of The Export-Import Bank of Korea.*
K	-	Form of Prospectus Supplement relating to The Export-Import Bank of Korea’s Medium-Term Notes, Series A, Due Not Less Than Nine Months From Date of Issue (the “MTNs”), incorporated herein by reference to Exhibit K to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
L	-	Form of Distribution Agreement between The Export-Import Bank of Korea and the Agents named therein relating to the offer and sale from time to time of the MTNs, incorporated herein by reference to Exhibit L to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
M-1	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul 04539, Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants).*

M-2	-	Opinion (including consent) of Yoon & Yang LLC, 19th Floor, ASEM Tower, 517, Yeongdong-daero, Gangnam-gu, Seoul, Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants) and the Guarantees to be issued by The Republic of Korea.*
M-3	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$600,000,000 Floating Rate Notes due 2022, US$400,000,000 2.50% Notes due 2020 and US$1,000,000,000 3.00% Notes due 2022.*
M-4	-	Opinion (including consent) of Yulchon, Parnas Tower, 38F, 521 Teheran-ro, Gangnam-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$600,000,000 Floating Rate Notes due 2022, US$400,000,000 2.50% Notes due 2020 and US$1,000,000,000 3.00% Notes due 2022.*
M-5	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$800,000,000 Floating Rate Notes due 2021 and US$700,000,000 Floating Rate Notes due 2023.*
M-6	-	Opinion (including consent) of Shin & Kim, 9F, State Tower Namsan, 100 Toegye-ro, Jung-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$800,000,000 Floating Rate Notes due 2021 and US$700,000,000 Floating Rate Notes due 2023.*
M-7		Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 3.50% Notes due 2021 and US$500,000,000 3.625% Notes due 2023.*
M-8		Opinion (including consent) of Shin & Kim, 9F, State Tower Namsan, 100 Toegye-ro, Jung-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 3.50% Notes due 2021 and US$500,000,000 3.625% Notes due 2023.*
M-9	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 Floating Rate Notes due 2022 and US$500,000,000 2.375% Notes due 2024.*
M-10	-	Opinion (including consent) of Yoon & Yang, 19th Floor, ASEM Tower, 517, Yeongdong-daero, Gangnam-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 Floating Rate Notes due 2022 and US$500,000,000 2.375% Notes due 2024.*
N-1	-	Form of the MTNs that bears interest at a fixed rate, incorporated herein by reference to Exhibit N-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
N-2	-	Form of the MTNs that bears interest at a floating rate, incorporated herein by reference to Exhibit N-2 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
O	-	Form of Calculation Agency Agreement between The Export-Import Bank of Korea and the calculation agent named therein relating to the MTNs that bear interest at a floating rate, incorporated herein by reference to Exhibit O to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).

* Previously filed

** May be filed by amendment.