Filed pursuant to Rule 424(b)(5)
Registration Statement No. 333-217916
The information in this preliminary prospectus supplement is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. This preliminary prospectus supplement and the accompanying prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 5, 2020
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus Dated July 10, 2019)
The Export-Import Bank of Korea
(A statutory juridical entity established under The Export-Import Bank of Korea Act of 1969, as amended, in the Republic of Korea)
US$ % Notes due 20
Our US$ aggregate principal amount of notes due 20 (the Notes) will bear interest at a rate of % per annum. Interest on the Notes is payable semi-annually in arrears on and of each year. The first interest payment on the Notes will be made on , 2020 in respect of the period from (and including) , 2020 to (but excluding) , 2020. The Notes will mature on , 20 .
The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof. The Notes will be represented by one or more global securities registered in the name of a nominee of The Depository Trust Company, as depositary.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Notes | ||||||||
Per Note | Total | |||||||
Public offering price |
% | US$ | ||||||
Underwriting discounts |
% | US$ | ||||||
Proceeds to us, before expenses |
% | US$ |
In addition to the initial public offering price, you will have to pay for accrued interest, if any, from (and including) , 2020.
Approval in-principle has been received from the Singapore Exchange Securities Trading Limited (the SGX-ST) for the listing and quotation of the Notes on the SGX-ST. There can be no assurance that such listing will be obtained for the Notes. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained herein. Approval in-principle from, admission to the Official List of, and listing and quotation of any Notes on, the SGX-ST are not to be taken as an indication of the merits of the issuer or the Notes.
The underwriters expect to deliver the Notes to investors through the book-entry facilities of The Depository Trust Company on or about , 2020.
Joint Bookrunners and Lead Managers
BofA Securities | J.P. Morgan | Morgan Stanley |
Prospectus Supplement Dated , 2020
You should rely only on the information contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted.
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CERTAIN DEFINED TERMS
All references to we or us mean The Export-Import Bank of Korea. All references to Korea or the Republic contained in this prospectus supplement mean The Republic of Korea. All references to the Government mean the government of Korea. References to ₩, Won or Korean won are to the lawful currency of Korea and US$ or U.S. dollars are to the lawful currency of the United States. Terms used but not defined in this prospectus supplement shall have the same meanings given to them in the accompanying prospectus.
In this prospectus supplement and the accompanying prospectus, where information has been provided in units of thousands, millions or billions, such amounts have been rounded up or down. Accordingly, actual numbers may differ from those contained herein due to rounding. Any discrepancy between the stated total amount and the actual sum of the itemized amounts listed in a table, is due to rounding.
Our financial information included in this prospectus supplement was prepared under International Financial Reporting Standards as adopted by Korea (Korean IFRS or K-IFRS). References in this prospectus supplement 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 supplement is presented on a separate basis in accordance with Korean IFRS and does not include such information with respect to our subsidiaries.
ADDITIONAL INFORMATION
The information in this prospectus supplement is in addition to the information contained in our accompanying prospectus dated July 10, 2019. The accompanying prospectus contains information regarding ourselves and Korea, as well as a description of some terms of the Notes. You can find further information regarding us, Korea, and the Notes in registration statement no. 333-217916, as amended, relating to our debt securities, with or without warrants, and guarantees, which is on file with the U.S. Securities and Exchange Commission.
WE ARE RESPONSIBLE FOR THE ACCURACY OF THE INFORMATION IN THIS DOCUMENT
We are responsible for the accuracy of the information in this document and confirm that to the best of our knowledge we have included all facts that should be included not to mislead potential investors. The address of our registered office is 38 Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, The Republic of Korea. The SGX-ST assumes no responsibility for the contents of this prospectus supplement and the accompanying prospectus, and makes no representation as to liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and listing and quotation of any Notes on, the SGX-ST are not to be taken as an indication of the merits of the issuer or the Notes.
NOTIFICATION UNDER SECTION 309B(1)(C) OF THE SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE (THE SFA)
We have determined, and hereby notify all relevant persons (as defined in Section 309A(1) of the SFA), that the Notes are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
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NOT AN OFFER IF PROHIBITED BY LAW
The distribution of this prospectus supplement and the accompanying prospectus, and the offer of the Notes, may be legally restricted in some countries. If you wish to distribute this prospectus supplement or the accompanying prospectus, you should observe any restrictions. This prospectus supplement and the accompanying prospectus should not be considered an offer and it is prohibited to use them to make an offer, in any state or country which prohibits the offering.
The Notes may not be offered or sold in Korea, directly or indirectly, or to any resident of Korea, except as permitted by Korean law. For more information, see UnderwritingForeign Selling Restrictions.
INFORMATION PRESENTED ACCURATE AS OF DATE OF DOCUMENT
This prospectus supplement and the accompanying prospectus are the only documents on which you should rely for information about the offering. This prospectus supplement may only be used for the purposes for which it has been published. We have authorized no one to provide you with different information. You should not assume that the information in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date on the front of each document.
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This summary highlights selected information from this prospectus supplement and the accompanying prospectus and may not contain all of the information that is important to you. To understand the terms of our Notes, you should carefully read this prospectus supplement and the accompanying prospectus.
The Notes
We are offering US$ aggregate principal amount of % notes due , 20 (the Notes).
The Notes will bear interest at a rate of % per annum, payable semi-annually in arrears on and of each year. The first interest payment on the Notes will be made on , 2020 in respect of the period from (and including) , 2020 to (but excluding) , 2020. Interest on the Notes will accrue from , 2020 and will be computed based on a 360-day year consisting of twelve 30-day months. See Description of the NotesPayment of Principal and Interest.
The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof. The Notes will be represented by one or more global securities registered in the name of a nominee of The Depository Trust Company (DTC), as depositary.
We do not have any right to redeem the Notes prior to maturity.
Listing
Approval in-principle has been received from the SGX-ST for the listing and quotation of the Notes on the SGX-ST. Settlement of the Notes is not conditioned on obtaining the listing. There can be no assurance that such listing will be obtained for the Notes. For so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Notes, if traded on the SGX-ST, will be traded in a minimum board lot size of S$200,000 (or its equivalent in foreign currencies). Accordingly, the Notes, if traded on the SGX-ST, will be traded in a minimum board lot size of US$200,000.
Form and settlement
We will issue the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC. Except as described in the accompanying prospectus under Description of the SecuritiesDescription of Debt SecuritiesGlobal Securities, the global notes will not be exchangeable for Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest through book-entry accounts. You may hold your beneficial interests in the Notes through Euroclear Bank S.A./N.V. (Euroclear) or Clearstream Banking, société anonyme (Clearstream) if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Any secondary market trading of book-entry interests in the Notes will take place through DTC participants, including Euroclear and Clearstream. See Clearance and SettlementTransfers Within and Between DTC, Euroclear and Clearstream.
Further Issues
We may from time to time, without the consent of the holders of the Notes, create and issue additional debt securities with the same terms and conditions as the Notes in all respects so that such further issue shall be consolidated and form a single series with the Notes. We will not issue any such additional debt securities unless the issuance would constitute a qualified reopening for U.S. federal income tax purposes or such additional debt securities would otherwise be part of the same issue for U.S. federal income tax purposes.
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Delivery of the Notes
We expect to make delivery of the Notes, against payment in same-day funds on or about , 2020, which we expect will be the business day following the date of this prospectus supplement, referred to as T+ . You should note that initial trading of the Notes may be affected by the T+ settlement. See UnderwritingDelivery of the Notes.
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This section provides information that supplements the information about our bank and the Republic included under the headings corresponding to the headings below in the accompanying prospectus dated July 10, 2019. Defined terms used in this section have the meanings given to them in the accompanying prospectus. If the information in this section differs from the information in the accompanying prospectus, you should rely on the information in this section.
THE EXPORT-IMPORT BANK OF KOREA
Unless specified otherwise, the information provided below is stated on a separate basis in accordance with Korean IFRS. Our financial information as of and for the nine months ended September 30, 2019 and 2018 in this prospectus supplement is presented based on our unaudited internal management accounts.
Overview
As of June 30, 2019, we had ₩73,810 billion of outstanding loans, including ₩38,877 billion of outstanding export credits, ₩27,692 billion of outstanding overseas investment credits and ₩4,765 billion of outstanding import credits, as compared to ₩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 of December 31, 2018.
Capitalization
As of June 30, 2019, our authorized capital was ₩15,000 billion and our capitalization was as follows:
June 30, 2019(1) | ||||
(billions of Won) (unaudited) |
||||
Long-Term Debt(2)(3)(4)(5): |
||||
Borrowings in Korean Won |
₩ | | ||
Borrowings in Foreign Currencies |
3,447 | |||
Export-Import Financing Debentures |
46,380 | |||
|
|
|||
Total Long-term Debt |
₩ | 49,827 | ||
|
|
|||
Capital: |
||||
Paid-in Capital(6) |
₩ | 11,841 | ||
Additional Paid-in Capital |
| |||
Capital Adjustments |
(129 | ) | ||
Retained Earnings |
1,545 | |||
Legal Reserve |
406 | |||
Voluntary Reserve |
542 | |||
Reserve for Bad Loan(7) |
107 | |||
Unappropriated Retained Earnings |
491 | |||
Other Components of Equity(8) |
618 | |||
|
|
|||
Total Capital |
₩ | 13,875 | ||
|
|
|||
Total Capitalization |
₩ | 63,702 | ||
|
|
(1) | Except as described in this prospectus supplement, there has been no material adverse change in our capitalization since June 30, 2019. |
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(2) | We have translated borrowings in foreign currencies as of June 30, 2019 into Won at the rate of ₩1,156.80 to US$1.00, which was the market average exchange rate as announced by the Seoul Monetary Brokerage Services Ltd., on June 30, 2019. |
(3) | As of June 30, 2019, we had contingent liabilities totaling ₩40,031 billion, which consisted of ₩33,978 billion under confirmed guarantees and ₩6,053 billion under unconfirmed guarantees issued on behalf of our clients. |
(4) | As of June 30, 2019, we had entered into 455 interest rate related derivative contracts with a notional amount of ₩41,409 billion and 581 currency related derivative contracts with a notional amount of ₩35,759 billion in accordance with our policy to hedge interest rate and currency risks. |
(5) | All of our borrowings, whether domestic or international, are unsecured and unguaranteed. |
(6) | As of June 30, 2019, authorized ordinary share capital was ₩15,000 billion and issued fully-paid ordinary share capital was ₩11,841 billion. See BusinessGovernment Support and Supervision. |
(7) | If the estimated allowance for credit loss determined by K-IFRS for accounting purposes is lower than that for regulatory purposes as required by Supervisory Regulation of Banking Business, we reserve such difference as regulatory reserve for bad loans. See Financial Statements and the AuditorsNotes to Separate Financial Statements as of and for the six months ended June 30, 2019 and 2018Note 23. |
(8) | See Financial Statements and the AuditorsNotes to Separate Financial Statements as of June 30, 2019 and for the six months ended June 30, 2019 and 2018Note 22. |
Selected Financial Statement Data
Recent Developments
The following tables present selected separate financial information as of September 30, 2019 and December 31, 2018 and for the nine months ended September 30, 2019 and 2018, which has been derived from our unaudited separate internal management accounts as of September 30, 2019 and for the nine months ended September 30, 2019 and 2018 prepared in accordance with Korean IFRS.
Nine Months
Ended September 30, |
||||||||
2019 | 2018 | |||||||
(billions of Won) (unaudited) |
||||||||
Income Statement Data |
||||||||
Total Interest Income |
₩ | 2,370 | ₩ | 2,111 | ||||
Total Interest Expense |
1,717 | 1,463 | ||||||
Net Interest Income |
653 | 648 | ||||||
Operating Income |
634 | 899 | ||||||
Income before Income Tax |
660 | 911 | ||||||
Income Tax Expense |
197 | 220 | ||||||
Net Income |
463 | 691 |
As of September 30, 2019 (unaudited) |
As of December 31, 2018 |
|||||||
(billions of Won) | ||||||||
Balance Sheet Data |
||||||||
Total Loan Credits(1) |
₩ | 75,604 | ₩ | 72,120 | ||||
Total Borrowings(2) |
75,697 | 70,836 | ||||||
Total Assets |
95,015 | 89,799 | ||||||
Total Liabilities |
81,134 | 76,317 | ||||||
Total Shareholders Equity |
13,881 | 13,483 |
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(1) | 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. |
(2) | Includes debentures. |
For the nine months ended September 30, 2019, we had net income of ₩463 billion compared to net income of ₩691 billion for the nine months ended September 30, 2018, primarily due to an increase in provision for loan loss allowance to ₩564 billion in the first nine months of 2019 from ₩45 billion in the corresponding period of 2018. Such increase in provision for loan loss allowance was attributable mainly to an increase in impairment loss on loans to overseas long-term financing projects. The effect of such change was partially offset by (i) an increase in reversal of impairment on other financial assets to ₩165 billion in the first nine months of 2019 from ₩0.1 billion in the corresponding period of 2018, primarily due to a decrease in other financial assets to shipbuilding companies and (ii) an increase in reversal of impairment on financial guarantee contacts to ₩91 billion in the first nine months of 2019 from ₩11 billion in the corresponding period of 2018, primarily due to a decrease in financial guarantees to shipbuilding companies.
As of September 30, 2019, our total assets increased to ₩95,015 billion from ₩89,799 billion as of December 31, 2018, primarily due to an increase in Loan Credits to ₩75,604 billion as of September 30, 2019 from ₩72,120 billion as of December 31, 2018.
As of September 30, 2019, our total liabilities increased to ₩81,134 billion from ₩76,317 billion as of December 31, 2018. The increase in liabilities was primarily due to an increase in debentures to ₩69,863 billion as of September 30, 2019 from ₩65,943 billion as of December 31, 2018.
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 September 30, 2019 compared to December 31, 2018 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 September 30, 2019, our total shareholders equity increased to ₩13,881 billion from ₩13,483 billion as of December 31, 2018, primarily due to an increase in retained earnings to ₩1,517 billion as of September 30, 2019 from ₩1,117 billion as of December 31, 2018.
As of September 30, 2019, our capital adequacy ratio, on a consolidated basis, was 14.43%, a slight increase from 14.42% as of December 31, 2018.
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Separate Financial Statement Data
You should read the following financial statement data together with our separate financial statements and notes included in this prospectus supplement. The following tables present selected separate financial information as of June 30, 2019 and December 31, 2018 and for the six months ended June 30, 2019 and 2018, which has been derived from our unaudited separate K-IFRS financial statements as of June 30, 2019 and for the six months ended June 30, 2019 and 2018 included in this prospectus supplement:
Six Months
Ended June 30, |
||||||||
2019 | 2018 | |||||||
(billions of Won) | ||||||||
(unaudited) | ||||||||
Income Statement Data |
||||||||
Total Interest Income |
₩ | 1,585 | ₩ | 1,336 | ||||
Total Interest Expense |
1,153 | 894 | ||||||
Net Interest Income |
432 | 442 | ||||||
Operating Income |
679 | 709 | ||||||
Income before Income Tax |
705 | 723 | ||||||
Income Tax Expense |
215 | 164 | ||||||
Net Income |
491 | 559 |
As of June 30, 2019 (unaudited) |
As of December 31, 2018 |
|||||||
(billions of Won) | ||||||||
Balance Sheet Data |
||||||||
Total Loan Credits(1) |
₩ | 73,810 | ₩ | 72,120 | ||||
Total Borrowings(2) |
73,563 | 70,836 | ||||||
Total Assets |
92,623 | 89,799 | ||||||
Total Liabilities |
78,749 | 76,317 | ||||||
Total Shareholders Equity |
13,875 | 13,483 |
(1) | 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. |
(2) | Includes debentures. |
In the first half of 2019, we had net income of ₩491 billion compared to net income of ₩559 billion in the corresponding period of 2018, primarily due to a decrease in reversal of impairment on credit to ₩65 billion in the first half of 2019 from ₩121 billion in the corresponding period of 2018. Such decrease in reversal of impairment on credit was attributable mainly to an increase in impairment loss on loans to shipping companies.
As of June 30, 2019, our total assets increased to ₩92,623 billion from ₩89,799 billion as of December 31, 2018, primarily due to an increase in Loan Credits to ₩73,810 billion as of June 30, 2019 from ₩72,120 billion as of December 31, 2018.
As of June 30, 2019, our total liabilities increased to ₩78,749 billion from ₩76,317 billion as of December 31, 2018. The increase in liabilities was primarily due to an increase in debentures to ₩68,080 billion as of June 30, 2019 from ₩65,943 billion as of December 31, 2018.
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 June 30, 2019 compared to December 31, 2018 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).
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As of June 30, 2019, our total shareholders equity increased to ₩13,875 billion from ₩13,483 billion as of December 31, 2018, primarily due to an increase in retained earnings to ₩1,545 billion as of June 30, 2019 from ₩1,117 billion as of December 31, 2018.
Operations
Loan Operations
In the first half of 2019, we provided total loans of ₩23,412 billion, a decrease of 1% from the corresponding period of 2018.
Export Credits
As of June 30, 2019, export credits in the amount of ₩38,877 billion represented 53% of our total outstanding Loan Credits. Our disbursements of export credits amounted to ₩13,737 billion in the first half of 2019, an increase of 3% from the corresponding period of 2018, which was mainly due to an increase in demand for loan and trade financing from domestic exporters. The depreciation of the Won against the U.S. dollar as of June 30, 2019 compared to June 30, 2018 magnified the effect of the increase in the volume of export credits in the first half of 2019, as a majority of our export credits consisted of foreign currency credits (including a significant percentage in U.S. dollars).
Overseas Investment Credits
As of June 30, 2019, overseas investment credits amounted to ₩27,692 billion, representing 38% of our total outstanding Loan Credits. Our disbursements of overseas investment credits in the first half 2019 decreased by 23% to ₩5,524 billion from the corresponding period of 2018, primarily due to decreased demand in overseas investment and project credits. The depreciation of the Won against the U.S. dollar as of June 30, 2019 compared to June 30, 2018 partially offset the effect of the decrease in the volume of overseas investment credits in the first half of 2019, as a majority of our overseas investment credits consisted of foreign currency credits (including a significant percentage in U.S. dollars).
Import Credits
As of June 30, 2019, import credits in the amount of ₩4,765 billion represented 6% of our total outstanding Loan Credits. Our disbursements of import credits amounted to ₩4,151 billion in the first half of 2019, an increase of 30% over the corresponding period of 2018, which was mainly due to an increase in demand for financing for raw materials used for export and domestic consumption. The depreciation of the Won against the U.S. dollar as of June 30, 2019 compared to June 30, 2018 magnified the effect of the increase in the volume of import credits in the first half of 2019, as a significant portion of our import credits consisted of foreign currency credits (including a significant percentage in U.S. dollars).
Guarantee Operations
Guarantee commitments as of June 30, 2019 increased slightly to ₩40,031 billion from ₩40,011 billion as of December 31, 2018. Guarantees we had confirmed as of June 30, 2019 decreased to ₩33,978 billion from ₩34,795 billion as of December 31, 2018.
For further information regarding our guarantee and letter of credit operations, see Financial Statements and the AuditorsNotes to Separate Financial Statements as of June 30, 2019 and for the six months ended June 30, 2019 and 2018Note 36.
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Description of Assets and Liabilities
Total Credit Exposure
The following table sets out our Credit Exposure as of June 30, 2019, categorized by type of exposure extended:
June 30, 2019 | ||||||||||
(billions of Won, except for percentages) |
||||||||||
A | Loans in Won |
₩ | 17,429 | 16 | % | |||||
B | Loans in Foreign Currencies |
53,190 | 50 | |||||||
C | Loans (A+B) |
70,619 | 67 | |||||||
D | Other Loans(1) |
3,192 | 3 | |||||||
E | Loan Credits (C+D) |
73,810 | 70 | |||||||
F | Allowances for Possible Loan Losses |
1,903 | 2 | |||||||
G | Loan Credits (including present value discounts) (E-F) |
71,907 | 68 | |||||||
H | Confirmed Guarantees |
33,978 | 32 | |||||||
|
|
|
|
|||||||
I | Credit Exposure (G+H) |
₩ | 105,885 | 100 | % | |||||
|
|
|
|
(1) | Includes call loans, inter-bank loans, other loans. |
Loan Credits by Geographic Area
The following table sets out the total amount of our outstanding Loan Credits (including call loans and inter-bank loans in foreign currency) as of June 30, 2019, categorized by geographic area(1)(2):
June 30, 2019(1) | As %
of June 30, 2019 Total |
|||||||
(billions of Won, except for percentages) | ||||||||
Asia(2) |
₩ | 57,665 | 78 | % | ||||
Europe |
5,487 | 7 | ||||||
America |
8,137 | 11 | ||||||
Africa |
2,521 | 3 | ||||||
|
|
|
|
|||||
Total |
₩ | 73,810 | 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. |
Individual Exposure
As of June 30, 2019, our largest Credit Exposure was to Daewoo Shipbuilding & Marine Engineering (DSME) in the amount of ₩3,349 billion, a decrease from ₩4,157 billion as of December 31, 2018, primarily due to a decrease in refund guarantees.
As of June 30, 2019, our second and third largest Credit Exposures were to Samsung Heavy Industries in the amount of ₩3,340 billion and Doosan Heavy Industries & Construction in the amount of ₩1,925 billion.
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The following table sets out our five largest Credit Exposures as of June 30, 2019(1):
Rank |
Name of Borrower |
Loans | Guarantees | Total | ||||||||||
(billions of Won) | ||||||||||||||
1 | Daewoo Shipbuilding & Marine Engineering | 548 | 2,801 | 3,349 | ||||||||||
2 | Samsung Heavy Industries | 1,281 | 2,060 | 3,340 | ||||||||||
3 | Doosan Heavy Industries & Construction | 853 | 1,072 | 1,925 | ||||||||||
4 | Hanwha Engineering & Construction | | 1,779 | 1,779 | ||||||||||
5 | Korea Shipbuilding & Offshore Engineering | 737 | 998 | 1,735 |
(1) | Excludes loans and guarantees extended to affiliates. |
Source: Internal accounting records.
Asset Quality
Asset Classifications
The following table provides information on our asset quality and loan loss reserves as of June 30, 2019:
As of June 30, 2019 | ||||||||
Loan Amount(1) |
Loan
Loss Reserve(2) |
|||||||
Normal |
₩ | 123,621 | ₩ | 919 | ||||
Precautionary |
8,541 | 801 | ||||||
Sub-standard |
509 | 58 | ||||||
Doubtful |
1,004 | 556 | ||||||
Estimated Loss |
543 | 527 | ||||||
|
|
|
|
|||||
Total |
₩ | 134,218 | ₩ | 2,861 | ||||
|
|
|
|
(1) | These figures include loans (excluding interbank loans and call loans), domestic usance, bills bought, foreign exchange bought, advances for customers, and confirmed acceptances and guarantees. |
(2) | These figures include present value discount. |
Reserves for Credit Losses
As of June 30, 2019, the amount of our non-performing assets was ₩2,056 billion, an increase of 17% from ₩1,757 billion as of December 31, 2018. As of June 30, 2019, our non-performing asset ratio was 1.5%, compared to 1.4% as of December 31, 2018.
We cannot provide any assurance that our current level of exposure to non-performing assets will not increase in the future or that any of our borrowers (including our largest borrowers as described above) is not currently facing, or in the future will not face, material financial difficulties.
The following table sets forth information regarding our loan loss reserves as of June 30, 2019:
June 30, 2019 | ||||||||
(billions of Won, except for percentages) |
||||||||
Loan Loss Reserve (A) |
₩ | 2,861 | ||||||
NPA (B)(1) |
2,056 | |||||||
Total Equity (C) |
13,875 | |||||||
Reserve to NPA (A/B) |
139 | % | ||||||
Equity at Risk (B-A)/C |
|
S-15
(1) | Non-performing assets, which are defined as assets that are classified as substandard or below. |
Source: Internal accounting records.
Investments
As of June 30, 2019, our total investment in securities amounted to ₩11,657 billion, representing 13% of our total assets.
The following table sets out the composition of our investment securities as of June 30, 2019:
Type of Investment Securities |
Amount | % | ||||||
(billions of Won) | ||||||||
Financial Assets at FVOCI |
₩ | 8,957 | 77 | % | ||||
Financial Assets at Amortized Cost |
589 | 5 | ||||||
Investments in Associates and Subsidiaries |
2,111 | 18 | ||||||
|
|
|
|
|||||
Total |
₩ | 11,657 | 100 | % | ||||
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|
|
|
For further information relating to the classification guidelines and methods of valuation of our financial instruments (including securities), see Financial Statements and the AuditorsNotes to Separate Financial Statements as of June 30, 2019 and for the six months ended June 30, 2019 and 2018Note 5.
Guarantees and Acceptances and Contingent Liabilities
As of June 30, 2019, we had issued a total amount of ₩33,978 billion in confirmed guarantees and acceptances, of which ₩30,744 billion, representing 90% of the total amount, was classified as normal and ₩2,957 billion, representing 9% of the total amount, was classified as precautionary, and ₩276 billion, representing 1% of the total amount, was classified as substandard or below.
Derivatives
As of June 30, 2019, our outstanding loans made at floating rates of interest totaled approximately ₩52,368 billion, whereas our outstanding borrowings made at floating rates of interest totaled approximately ₩52,022 billion, including those raised in Australian Dollar, Indonesia Rupiah and Brazil Real and swapped into U.S. dollar floating rate borrowings. As of June 30, 2019, we had entered into 455 interest rate related derivative contracts with a notional amount of ₩41,409 billion and had entered into 581 currency related derivative contracts with a notional amount of ₩35,759 billion. See Financial Statements and the AuditorsNotes to Separate Financial Statements as of June 30, 2019 and for the six months ended June 30, 2019 and 2018Note 20.
Sources of Funding
We raised a net total of ₩23,011 billion (new borrowings plus loan repayments by our clients less repayment of our existing debt) during the first half of 2019, a decrease of 12% from ₩26,075 billion in the corresponding period of 2018. The total loan repayments, including prepayments by our clients, during the first half of 2019 amounted to ₩23,746 billion, an increase of 0.2% from ₩23,695 billion during the corresponding period of 2018.
As of June 30, 2019, we had no outstanding borrowings from the Government. We issued Won-denominated domestic bonds in the aggregate amount of ₩4,990 billion during the first half of 2019.
During the first half of 2019, we issued bonds in the aggregate principal amount of US$1,993 million in various types of currencies under our existing global medium term notes program, a 38% decrease from
S-16
US$3,197 million in the corresponding period of 2018. In addition, we issued bonds during the first half of 2019 in the aggregate amount of US$1,000 million under our U.S. shelf registration statement compared with US$1,500 million in the corresponding period of 2018. As of June 30, 2019, the outstanding amounts of our notes and debentures were US$34,748 million, JPY 132,820 million, HKD 4,881 million, BRL 4,245 million, EUR 3,527 million, THB 10,300 million, CHF 1,200 million, AUD 3,660 million, INR 32,042 million, CNY 8,583 million, IDR 12,533,400 million, PEN 266 million, NZD 1,022 million, ZAR 1,354 million, NOK 2,250 million, SEK 250 million, GBP 60 million, CAD 690 million, MXN 150 million and SGD 200 million.
We also borrow from foreign financial institutions in the form of loans that are principally made bilaterally or by syndicates of commercial banks at floating or fixed interest rates and in foreign currencies, with original maturities ranging from one to five years. As of June 30, 2019, the outstanding amount of such borrowings from foreign financial institutions was US$1,700 million.
As of June 30, 2019, our total paid-in capital amounted to ₩11,841 billion, and the Government, The Bank of Korea and Korea Development Bank owned 66%, 10% and 24%, respectively, of our paid-in capital.
As of June 30, 2019, the aggregate outstanding principal amount of our borrowings (including export-import financing debentures), which was ₩73,135 billion, was equal to 19% of the authorized amount of ₩386,850 billion.
Debt
Debt Repayment Schedule
The following table sets out the principal repayment schedule for our debt outstanding as of June 30, 2019:
Debt Principal Repayment Schedule
Maturing on or before December 31, | ||||||||||||||||||||
Currency(1) |
2019 | 2020 | 2021 | 2022 | Thereafter | |||||||||||||||
(billions of won) | ||||||||||||||||||||
Won |
₩ | 5,400 | ₩ | 5,370 | ₩ | 645 | ₩ | 210 | ₩ | 2,860 | ||||||||||
Foreign(2) |
5,824 | 10,811 | 11,092 | 8,448 | 22,476 | |||||||||||||||
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|
|
|
|
|
|
|||||||||||
Total Won Equivalent |
₩ | 11,224 | ₩ | 16,181 | ₩ | 11,737 | ₩ | 8,658 | ₩ | 25,336 | ||||||||||
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|
|
|
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|
|
|||||||||||
(1) | Borrowings in foreign currency have been translated into Won at the market average exchange rates on June 30, 2019, as announced by the Seoul Money Brokerage Services Ltd. |
(2) | This figure includes debentures, bank loans, commercial papers and repurchase agreements. |
As of June 30, 2019, 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$5,856 million, US$7,104 million and US$6,828 million, respectively. As of June 30, 2019, our total foreign currency liabilities exceeded our total foreign currency assets by US$35 million.
Capital Adequacy
As of June 30, 2019, our capital adequacy ratio, on a consolidated basis, was 14.43%, a slight increase from 14.42% as of December 31, 2018.
S-17
The following table sets forth our capital base and capital adequacy ratios (on a consolidated basis) reported as of June 30, 2019:
June 30, 2019 | ||||
(billions of Won, except for percentages) |
||||
Tier I |
₩ | 13,914 | ||
Paid-in Capital (including capital adjustments) |
11,712 | |||
Retained Earnings(1) |
1,549 | |||
Accumulated other comprehensive income |
687 | |||
Common shares issued by consolidated subsidiaries of the bank and held by third parties |
3 | |||
Deductions from Tier I Capital |
(37 | ) | ||
Capital Adjustments |
| |||
Deferred Tax Asset |
| |||
Others |
(37 | ) | ||
Tier II (General Loan Loss Reserves) |
1,818 | |||
Total Capital |
15,732 | |||
Risk Adjusted Assets |
109,051 | |||
Capital Adequacy Ratios |
||||
Tier I common equity |
12.76 | % | ||
Tier 1 |
12.76 | % | ||
Tier I and Tier II |
14.43 | % |
(1) | Net amount after deducting regulatory reserve for bad loans. |
Source: Internal accounting records.
Financial Statements and the Auditors
Our interim separate financial statements as of June 30, 2019 and December 31, 2018 and for the six months ended June 30, 2019 and 2018 appearing in this prospectus supplement were prepared in conformity with Korean IFRS, as summarized in Note 2 of the notes to our unaudited separate financial statements as of June 30, 2019 and for the six months ended June 30, 2019 and 2018 included in this prospectus supplement.
S-18
THE EXPORT-IMPORT BANK OF KOREA
CONDENSED SEPARATE INTERIM STATEMENTS OF FINANCIAL POSITION
AS OF JUNE 30, 2019 AND DECEMBER 31, 2018
Korean won | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
(In millions) | ||||||||
ASSETS: |
||||||||
Cash and due from financial institutions (Notes 4, 5 and 7) |
₩ | 4,396,226 | ₩ | 3,682,863 | ||||
Financial assets at fair value through profit or loss |
2,004,165 | 2,298,223 | ||||||
Hedging derivative assets (Notes 4, 5 and 20) |
365,044 | 75,743 | ||||||
Loans at amortized cost (Notes 4, 5, 10 and 37) |
71,502,046 | 70,199,721 | ||||||
Financial investments (Notes 4, 5 and 9) |
9,546,767 | 8,844,756 | ||||||
Investments in associates and subsidiaries (Note 11) |
2,111,497 | 2,511,497 | ||||||
Tangible assets, net (Note 12) |
264,912 | 266,102 | ||||||
Intangible assets, net (Note 13) |
36,122 | 38,454 | ||||||
Deferred tax assets (Note 34) |
1,055,176 | 902,252 | ||||||
Other assets (Notes 4, 5, 14 and 37) |
1,341,544 | 979,628 | ||||||
|
|
|
|
|||||
₩ | 92,623,499 | ₩ | 89,799,239 | |||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
LIABILITIES: |
||||||||
Financial liabilities at FVTPL (Notes 4, 5 and 20) |
₩ | 683,961 | ₩ | 905,901 | ||||
Hedging derivative liabilities (Notes 4, 5 and 20) |
904,979 | 1,628,303 | ||||||
Borrowings (Notes 4, 5 and 15) |
5,483,074 | 4,893,478 | ||||||
Debentures (Notes 4, 5 and 16) |
68,080,002 | 65,942,970 | ||||||
Provisions (Note 17) |
700,697 | 751,882 | ||||||
Retirement benefit liabilities, net (Note 18) |
11,791 | 6,350 | ||||||
Other liabilities (Notes 4, 5, 19 and 37) |
2,884,192 | 2,187,742 | ||||||
|
|
|
|
|||||
78,748,696 | 76,316,626 | |||||||
|
|
|
|
|||||
STOCKHOLDERS EQUITY: |
||||||||
Capital stock (Note 21) |
11,841,143 | 11,814,963 | ||||||
Capital adjustments |
(129,339 | ) | (129,339 | ) | ||||
Other components of equity (Notes 20 and 22) |
618,436 | 680,329 | ||||||
Retained earnings (Note 23) |
1,544,563 | 1,116,660 | ||||||
|
|
|
|
|||||
13,874,803 | 13,482,613 | |||||||
|
|
|
|
|||||
₩ | 92,623,499 | ₩ | 89,799,239 | |||||
|
|
|
|
See accompanying notes to condensed separate interim financial statements.
S-19
THE EXPORT-IMPORT BANK OF KOREA
CONDENSED SEPARATE INTERIM STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
Korean won | ||||||||
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
(In millions) | ||||||||
OPERATING INCOME: |
||||||||
Net interest income (Notes 24 and 37): |
||||||||
Interest income |
₩ | 1,584,826 | ₩ | 1,335,892 | ||||
Interest expenses |
(1,152,549 | ) | (894,190 | ) | ||||
|
|
|
|
|||||
432,277 | 441,702 | |||||||
|
|
|
|
|||||
Net commission income (Notes 25 and 37): |
||||||||
Commission income |
163,163 | 154,765 | ||||||
Commission expenses |
(6,000 | ) | (4,135 | ) | ||||
|
|
|
|
|||||
157,163 | 150,630 | |||||||
|
|
|
|
|||||
Dividend income (Note 26) |
28,833 | 35,390 | ||||||
Gain (loss) on financial assets at FVTPL (Note 27) |
162,404 | (97,488 | ) | |||||
Gain (loss) on hedging derivative assets (Notes 20 and 28) |
1,253,688 | (1,005,560 | ) | |||||
Loss on financial investments (Note 29) |
(6,777 | ) | (1,463 | ) | ||||
Gain (loss) on foreign exchange transaction |
(286,953 | ) | 495,145 | |||||
Other net operating income (loss) (Note 30) |
(1,025,115 | ) | 672,105 | |||||
Reversal of impairment on credit (Note 31) |
64,814 | 121,193 | ||||||
General and administrative expenses (Note 32) |
(101,727 | ) | (102,608 | ) | ||||
|
|
|
|
|||||
Total operating income |
678,657 | 709,046 | ||||||
|
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|
|||||
NON-OPERATING INCOME (EXPENSES) (Note 33): |
||||||||
Net gain on investments in associates and subsidiaries |
30,647 | 4,577 | ||||||
Net other non-operating income (expenses) |
(4,148 | ) | 9,291 | |||||
|
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|
|||||
26,499 | 13,868 | |||||||
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|
|||||
PROFIT BEFORE INCOME TAX |
705,156 | 722,914 | ||||||
INCOME TAX EXPENSES (Note 34) |
(214,597 | ) | (164,026 | ) | ||||
|
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|
|||||
PROFIT FOR THE PERIOD |
490,599 | 558,888 | ||||||
|
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|
|||||
(Adjusted profit for the period after regulatory reserve for loan losses for the six months ended June 30, 2019 and 2018: ₩509,773 million and ₩546,766 million) (Note 23) |
||||||||
OTHER COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD (Note 22) |
||||||||
Items not reclassified subsequently to profit or loss: |
||||||||
Gain (Loss) on equity securities at FVOCI |
(116,708 | ) | 653,145 | |||||
Income tax effect |
28,244 | (158,061 | ) | |||||
Items that are or may be reclassified subsequently to profit or loss: |
||||||||
Gain (loss) on debt securities at FVOCI |
34,872 | (22,749 | ) | |||||
Cash flow hedging gain (loss) |
182 | (1,702 | ) | |||||
Income tax effect |
(8,483 | ) | 5,831 | |||||
|
|
|
|
|||||
(61,893 | ) | 476,464 | ||||||
|
|
|
|
|||||
TOTAL COMPREHENSIVE INCOME |
₩ | 428,666 | ₩ | 1,035,352 | ||||
|
|
|
|
See accompanying notes to condensed separate interim financial statements.
S-20
THE EXPORT-IMPORT BANK OF KOREA
CONDENSED SEPARATE INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
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, 2018 |
₩ | 11,814,963 | ₩ | (129,339 | ) | ₩ | (114,032 | ) | ₩ | 586 | ₩ | 17,168 | ₩ | (13,817 | ) | ₩ | 579,217 | ₩ | 12,154,746 | |||||||||||||
Payment of dividends |
| | | | | | (59,596 | ) | (59,596 | ) | ||||||||||||||||||||||
Profit for the period |
| | | | | | 558,888 | 558,888 | ||||||||||||||||||||||||
Other comprehensive income: |
476,464 | |||||||||||||||||||||||||||||||
Gain on valuation of FVOCI financial instruments, net of tax |
| | 491,217 | | | | | 491,217 | ||||||||||||||||||||||||
Loss on valuation of cash flow hedge, net of tax |
| | | (1,376 | ) | | | | (1,376 | ) | ||||||||||||||||||||||
Loss on disposal of FVOCI financial instruments, net of tax |
| | | | | (13,377 | ) | | (13,377 | ) | ||||||||||||||||||||||
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|||||||||||||||||
June 30, 2018 |
₩ | 11,814,963 | ₩ | (129,339 | ) | ₩ | 377,185 | ₩ | (790 | ) | ₩ | 17,168 | ₩ | (27,194 | ) | ₩ | 1,078,509 | ₩ | 13,130,502 | |||||||||||||
|
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January 1, 2019 |
₩ | 11,814,963 | ₩ | (129,339 | ) | ₩ | 691,647 | ₩ | (137 | ) | ₩ | 9,917 | ₩ | (21,098 | ) | ₩ | 1,116,660 | ₩ | 13,482,613 | |||||||||||||
Paid in capital increase |
26,180 | | | | | | | 26,180 | ||||||||||||||||||||||||
Payment of dividends |
| | | | | | (62,656 | ) | (62,656 | ) | ||||||||||||||||||||||
Profit for the period |
| | | | | | 490,559 | 490,559 | ||||||||||||||||||||||||
Other comprehensive income: |
(61,893 | ) | ||||||||||||||||||||||||||||||
Loss on valuation of FVOCI financial instruments, net of tax |
| | (60,923 | ) | | | | | (60,923 | ) | ||||||||||||||||||||||
Gain on valuation of cash flow hedge, net of tax |
| | | 137 | | | | 137 | ||||||||||||||||||||||||
Loss on disposal of FVOCI financial instruments, net of tax |
| | | | | (1,107 | ) | | (1,107 | ) | ||||||||||||||||||||||
|
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|||||||||||||||||
June 30, 2019 |
₩ | 11,841,143 | ₩ | (129,339 | ) | ₩ | 630,724 | ₩ | | ₩ | 9,917 | ₩ | (22,205 | ) | ₩ | 1,544,563 | ₩ | 13,874,803 | ||||||||||||||
|
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See accompanying notes to condensed separate interim financial statements.
S-21
THE EXPORT-IMPORT BANK OF KOREA
CONDENSED SEPARATE INTERIM STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
Korean won | ||||||||
Six months June 30, 2019 |
Six months June 30, 2018 |
|||||||
(In millions) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Profit for the period |
₩ | 490,559 | ₩ | 558,888 | ||||
|
|
|
|
|||||
Adjustments to reconcile profit for the period to net cash used in operating activities: |
||||||||
Income tax expense |
214,597 | 164,026 | ||||||
Interest income |
(1,584,826 | ) | (1,335,892 | ) | ||||
Interest expenses |
1,152,549 | 894,190 | ||||||
Dividend income |
(28,881 | ) | (35,390 | ) | ||||
Dividend received from subsidiaries and associates |
(11,929 | ) | (4,577 | ) | ||||
Loss on financial assets at FVTPL |
5,297 | 2,722 | ||||||
Loss on financial assets at FVOCI |
6,917 | 1,674 | ||||||
Transfer to derivatives credit risk provision |
6,274 | 49,545 | ||||||
Loss on foreign exchange transactions |
753,449 | 490,760 | ||||||
Loss on fair value hedged items |
1,062,298 | 33,767 | ||||||
Depreciation and amortization |
9,473 | 10,766 | ||||||
Loss on disposals of tangible, intangible and other assets |
2 | 1 | ||||||
Loss on valuation of derivative assets |
666,951 | 1,675,519 | ||||||
Retirement benefits |
5,431 | 4,416 | ||||||
Gain on financial assets at FVTPL |
(10,143 | ) | (13,844 | ) | ||||
Gain on financial assets at FVOCI |
(140 | ) | (211 | ) | ||||
Gain on investments in associates |
(18,719 | ) | | |||||
Reversal of derivatives credit risk provision |
(15,890 | ) | (40,533 | ) | ||||
Gain on foreign exchange transactions |
(468,253 | ) | (983,186 | ) | ||||
Impairment reversal on credit |
(64,814 | ) | (121,193 | ) | ||||
Gain on fair value hedged items |
(28,221 | ) | (717,545 | ) | ||||
Gain on valuation of derivative assets |
(1,531,078 | ) | (523,640 | ) | ||||
Gain on disposals of tangible assets, intangible assets and other assets |
(12 | ) | (101 | ) | ||||
Changes in operating assets and liabilities: |
||||||||
Due from financial institutions |
626,162 | (1,256,633 | ) | |||||
Financial assets and liabilities at FVTPL |
171,946 | 540,681 | ||||||
Trading derivative net assets |
(68,817 | ) | | |||||
Hedging derivative net assets |
(169,146 | ) | (864,781 | ) | ||||
Loans at amortized cost |
345,044 | (506,497 | ) | |||||
Other assets |
(259,014 | ) | (304,171 | ) | ||||
Provisions |
| (20,081 | ) | |||||
Payment of retirement benefits |
10 | 139 | ||||||
Other liabilities |
368,433 | 670,946 | ||||||
Payment of income tax |
(39,519 | ) | (18,306 | ) | ||||
Interest received |
1,585,457 | 1,218,802 | ||||||
Interest paid |
(1,017,391 | ) | (764,694 | ) | ||||
Dividend received |
40,810 | 38,575 | ||||||
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
2,194,866 | (1,155,858 | ) | |||||
|
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|
|
S-22
THE EXPORT-IMPORT BANK OF KOREA
CONDENSED SEPARATE INTERIM STATEMENTS OF CASH FLOWS(Continued)
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
Korean won | ||||||||
Six months June 30, 2019 |
Six months June 30, 2018 |
|||||||
(In millions) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Disposals of investment instruments |
₩ | 472,218 | ₩ | 101,809 | ||||
Disposals of investments in associates |
18,719 | 475 | ||||||
Disposals of tangible assets |
13 | 1 | ||||||
Disposals of intangible assets |
| 380 | ||||||
Acquisitions of investment instruments |
(768,894 | ) | (240,362 | ) | ||||
Investments in subsidiaries and associates |
| (44,370 | ) | |||||
Acquisitions of tangible assets |
(2,737 | ) | (906 | ) | ||||
Acquisitions of intangible assets |
(3,218 | ) | (1,217 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
(283,899 | ) | (184,190 | ) | ||||
|
|
|
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Increase in call money |
| 68 | ||||||
Proceeds from borrowings |
1,237,358 | 3,290,567 | ||||||
Proceeds from debentures |
8,857,375 | 11,571,264 | ||||||
Capital increase with consideration |
26,180 | | ||||||
Increase in deposits |
| 2 | ||||||
Repayment of borrowings |
(811,657 | ) | (3,010,978 | ) | ||||
Repayment of debentures |
(9,783,607 | ) | (8,951,815 | ) | ||||
Decrease in deposits |
| (4 | ) | |||||
Payment of dividends |
(62,656 | ) | (59,596 | ) | ||||
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
(536,907 | ) | 2,839,508 | |||||
|
|
|
|
|||||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
1,374,060 | 1,499,460 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD |
1,020,067 | 815,994 | ||||||
EFFECTS OF FOREIGN EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS IN FOREIGN CURRENCIES |
(100,473 | ) | (76,231 | ) | ||||
|
|
|
|
|||||
CASH AND CASH EQUIVALENTS, END OF THE PERIOD (Note 7, 35) |
₩ | 2,293,654 | ₩ | 2,239,223 | ||||
|
|
|
|
See accompanying notes to condensed separate interim financial statements.
S-23
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO THE CONDENSED SEPARATE INTERIM FINANCIAL STATEMENTS
AS OF JUNE 30, 2019, AND DECEMBER 31, 2018,
AND FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
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 June 30, 2019, the Bank operates 10 domestic branches, three domestic offices, four overseas subsidiaries and 24 overseas offices.
The Banks authorized capital is ₩15,000,000 million, and through numerous capital increases since the establishment, its paid-in capital is ₩11,841,143 million as of June 30, 2019. The Government of the Republic of Korea (the Government), the Bank of Korea (BOK), and the Korea Development Bank hold 66.34%, 9.84%, and 23.82%, respectively, of the ownership of the Bank as of June 30, 2019.
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 Banks separate interim 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 June 30, 2019, and December 31, 2018, are as follows:
(June 30, 2019)
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 | Jun. 30, 2019 | ||||||||||||||||
KEXIM Vietnam Leasing Co.(*1) |
Vietnam | USD 13 mil. | Finance | | 100.00 | Jun. 30, 2019 | ||||||||||||||||
PT.KOEXIM Mandiri Finance |
Indonesia | IDR52,000 mil. | Finance | 442 | 85.00 | Jun. 30, 2019 | ||||||||||||||||
KEXIM Asia Limited |
Hong Kong | USD 30 mil. | Finance | 30,000,000 | 100.00 | Jun. 30, 2019 |
(*1) | This entity does not issue share certificates. |
S-24
(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 | IDR52,000 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. |
2) Associates of the Bank as of June 30, 2019, and December 31, 2018, are as follows:
(June 30, 2019)
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 | Jun. 30, 2019 | |||||||||||||
Credit Guarantee and Investment Fund |
Philippines | USD | 859 mil. | Financial service |
100,000,000 | 11.64 | Mar. 31, 2019 | |||||||||||||
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd. |
Korea | KRW | 1,319,693 mil. | Shipbuilding | 96,575,200 | 69.39 | Jun. 30, 2019 | |||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. |
Korea | KRW | 6,262 mil. | Shipbuilding | 1,040,000 | 83.03 | Jun. 30, 2019 | |||||||||||||
KTB Newlake Global Healthcare PEF |
Korea | KRW | 35,180 mil. | Financial service |
879,500,000 | 25.00 | Jun. 30, 2019 | |||||||||||||
KBS-KDB Private Equity Fund |
Korea | KRW | 29,713 mil. | Financial service |
6,031,875,000 | 20.30 | Jun. 30, 2019 | |||||||||||||
Korea Aerospace Industries. Ltd. |
Korea | KRW | 487,376 mil. | Manufacturing | 25,745,964 | 26.41 | Jun. 30, 2019 | |||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
Korea | KRW | 541,029 mil. | Shipbuilding | | | Jun. 30, 2019 |
S-25
(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 | |||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
Korea | KRW | 541,029 mil. | Shipbuilding | | | Dec. 31, 2018 |
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
(1) Basis of condensed separate financial statement preparation
These condensed separate interim financial statements were prepared in accordance with K-IFRS No.1034, Interim Financial Reporting as part of the period covered by the Banks K-IFRS annual financial statements. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.
These financial statements are separate financial statements prepared in accordance with K-IFRS No.1027, Separate Financial Statements presented by a parent, an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost.
The Banks accounting policies applied for the accompanying condensed separate interim financial statements are the same as the policies applied for the preparation of separate financial statements as of and for the year ended December 31, 2018.
(2) Functional Currency
Items included in the separate financial statements of each entity in the Bank are measured using the currency of the primary economic environment in which the entity operates (the functional currency).
3. SIGNIFICANT ESTIMATES AND JUDGMENTS:
The preparation of separate financial statements requires the application of accounting policies, especially certain critical accounting estimates and assumptions that may have a significant impact on assets (liabilities) and income (expenses). The managements estimate of outcome may differ from an actual outcome if the managements estimate and assumption based on its best judgment at the reporting date are different from the actual environment.
S-26
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. Significant judgments are the same as those applied in preparation of the annual separate financial statements for the year ended December 31, 2018.
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 Banks key risks.
The Banks 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 Banks 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 Banks target risk appetite, approves significant risk matters and reviews the level of risks that the Bank is exposed to and the appropriateness of the Banks 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 Banks 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 counterpartys default, breach of contract and deterioration in the credit quality of the counterparty. For the risk management reporting purposes, the individual borrowers default risk, country risk, specific risks and other credit risk exposure components are considered as a whole.
S-27
(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.
(3) Maximum exposure to credit risk
The Banks maximum exposure of financial instruments to credit risk as of June 30, 2019, and December 31, 2018, is as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||
Cash and due from financial institutions |
₩ | 4,396,226 | ₩ | 3,682,863 | ||||
Financial assets at FVTPL(*1) |
730,623 | 904,273 | ||||||
Hedging derivative assets |
365,044 | 75,743 | ||||||
Loans at amortized cost(*2) |
73,394,313 | 71,741,225 | ||||||
Financial investments(*3) |
1,261,864 | 1,059,067 | ||||||
Other financial assets |
1,307,139 | 1,135,012 | ||||||
Acceptances and guarantee contracts |
40,031,071 | 40,010,549 | ||||||
Commitments(*4) |
22,962,044 | 17,619,116 | ||||||
|
|
|
|
|||||
₩ | 144,448,324 | ₩ | 136,227,848 | |||||
|
|
|
|
(*1) | Financial assets at FVTPL exclude debt securities related to Beneficiary certificates 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.
S-28
Loans are categorized as follows (Korean won in millions):
(June 30, 2019)
12 month expected credit losses |
Lifetime expected credit losses |
Credit-impaired financial assets |
Total | |||||||||||||
Collective assessment: |
||||||||||||||||
Best |
₩ | 19,973,281 | ₩ | 9,612 | ₩ | 4,799 | ₩ | 19,987,692 | ||||||||
Outstanding |
25,431,709 | | 40,000 | 25,471,709 | ||||||||||||
Good |
23,963,179 | 1,686,992 | 12,271 | 25,662,442 | ||||||||||||
Below normal |
| 424,788 | 87,644 | 512,432 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
69,368,169 | 2,121,392 | 144,714 | 71,634,275 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Individual assessment: |
||||||||||||||||
Best |
| | 95,494 | 95,494 | ||||||||||||
Outstanding |
| | 1,029 | 1,029 | ||||||||||||
Good |
| | 79,846 | 79,846 | ||||||||||||
Below normal |
| 584,977 | 1,414,541 | 1,999,518 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
| 584,977 | 1,590,910 | 2,175,887 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
69,368,169 | 2,706,369 | 1,735,624 | 73,810,162 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net deferred origination fees and costs |
(415,849 | ) | ||||||||||||||
|
|
|||||||||||||||
Total |
₩ | 73,394,313 | ||||||||||||||
|
|
(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 | ||||||||||||||
|
|
S-29
(5) Credit quality of financial investments (debt securities)
Financial assets at FVTPL and financial investments (debt securities) exposed to credit risk as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
12 month expected credit losses |
Lifetime expected credit losses |
Credit- impaired financial assets |
Total | |||||||||||||
Grade 1 |
₩ | 1,231,737 | | | ₩ | 1,231,737 | ||||||||||
Grade 2 |
30,127 | | | 30,127 | ||||||||||||
Grade 3 |
| | | | ||||||||||||
Grade 4 |
| | | | ||||||||||||
Grade 5 |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
₩ | 1,261,864 | ₩ | | ₩ | | ₩ | 1,261,864 | ||||||||
|
|
|
|
|
|
|
|
(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 | ||||||||
|
|
|
|
|
|
|
|
(6) Concentration of credit risk
The amounts disclosed below exclude loan valuation adjustment related to fair value hedging amounting to ₩10,589 million and ₩12,801 million as of June 30, 2019, and December 31, 2018, respectively.
S-30
1) Loans by country where the credit risk belongs to as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Loans in local currency |
Loans in foreign currencies |
Others | Total | Ratio (%) |
Deferred loan origination fees |
Allowances | ||||||||||||||||||||||
Asia: |
||||||||||||||||||||||||||||
Korea |
₩ | 17,397,006 | ₩ | 7,414,582 | ₩ | 735,859 | ₩ | 25,547,447 | 34.61 | ₩ | (8,980 | ) | ₩ | (1,085,465 | ) | |||||||||||||
China |
| 2,665,755 | 257,487 | 2,923,242 | 3.96 | (3,162 | ) | (29,100 | ) | |||||||||||||||||||
Saudi Arabia |
| 3,650,247 | 466 | 3,650,713 | 4.95 | (41,287 | ) | (8,462 | ) | |||||||||||||||||||
India |
| 2,792,664 | 36,762 | 2,829,426 | 3.83 | (12,360 | ) | (3,261 | ) | |||||||||||||||||||
Indonesia |
17,000 | 3,209,718 | 9,861 | 3,236,579 | 4.39 | (56,920 | ) | (13,505 | ) | |||||||||||||||||||
Uzbekistan |
| 999,477 | | 999,477 | 1.35 | (11,412 | ) | (27,551 | ) | |||||||||||||||||||
Vietnam |
| 3,973,044 | 36,632 | 4,009,676 | 5.43 | (29,107 | ) | (22,947 | ) | |||||||||||||||||||
Australia |
| 2,056,759 | 37,362 | 2,094,121 | 2.84 | (16,994 | ) | (2,612 | ) | |||||||||||||||||||
Philippines |
| 127,454 | 4,375 | 131,829 | 0.18 | (114 | ) | (902 | ) | |||||||||||||||||||
Qatar |
| 750,181 | | 750,181 | 1.02 | (2,560 | ) | (3,777 | ) | |||||||||||||||||||
Singapore |
| 614,598 | 46,949 | 661,547 | 0.90 | (2,391 | ) | (1,136 | ) | |||||||||||||||||||
Oman |
| 930,462 | 97 | 930,559 | 1.26 | (15,680 | ) | (4,297 | ) | |||||||||||||||||||
Hong Kong |
| 537,462 | 783,831 | 1,321,293 | 1.79 | (150 | ) | (11,016 | ) | |||||||||||||||||||
The United Arab Emirates |
| 3,871,269 | 6,149 | 3,877,418 | 5.25 | (22,956 | ) | (1,428 | ) | |||||||||||||||||||
Others |
15,000 | 3,618,414 | 1,067,767 | 4,701,181 | 6.37 | (102,329 | ) | (78,019 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Subtotal |
17,429,006 | 37,212,086 | 3,023,597 | 57,664,689 | 78.13 | (326,402 | ) | (1,293,478 | ) | |||||||||||||||||||
|
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Europe: |
||||||||||||||||||||||||||||
Russia |
| 224,922 | | 224,922 | 0.30 | | (716 | ) | ||||||||||||||||||||
United Kingdom |
| 1,332,785 | 583 | 1,333,368 | 1.81 | (6,821 | ) | (112,072 | ) | |||||||||||||||||||
France |
| 159,816 | 16,093 | 175,909 | 0.24 | (1,320 | ) | (227 | ) | |||||||||||||||||||
Netherlands |
| 49,974 | 15,683 | 65,657 | 0.09 | | (803 | ) | ||||||||||||||||||||
Greece |
| 822,857 | | 822,857 | 1.11 | (4,358 | ) | (608 | ) | |||||||||||||||||||
Turkey |
| 1,017,914 | | 1,017,914 | 1.38 | (15,124 | ) | (46,390 | ) | |||||||||||||||||||
Germany |
| 258,673 | 3,860 | 262,533 | 0.36 | (347 | ) | (1,151 | ) | |||||||||||||||||||
Ukraine |
| 64,298 | | 64,298 | 0.09 | (725 | ) | | ||||||||||||||||||||
Hungary |
| 19,233 | 836 | 20,069 | 0.03 | (12 | ) | (299 | ) | |||||||||||||||||||
Others |
| 1,408,760 | 90,695 | 1,499,455 | 2.02 | (9,458 | ) | (6,670 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Subtotal |
| 5,359,232 | 127,750 | 5,486,982 | 7.43 | (38,165 | ) | (168,936 | ) | |||||||||||||||||||
|
|
|
|
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|
|
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|
|||||||||||||||
America: |
||||||||||||||||||||||||||||
Panama |
| 736,924 | | 736,924 | 1.00 | (2,197 | ) | (57,600 | ) | |||||||||||||||||||
United States |
| 2,967,334 | 20,432 | 2,987,766 | 4.05 | (6,062 | ) | (44,581 | ) | |||||||||||||||||||
The British Virgin Islands |
| 14,219 | | 14,219 | 0.02 | (160 | ) | (18 | ) | |||||||||||||||||||
Mexico |
| 721,735 | | 721,735 | 0.98 | (5,022 | ) | (2,253 | ) | |||||||||||||||||||
Bermuda |
| 119,758 | | 119,758 | 0.16 | (831 | ) | (72 | ) | |||||||||||||||||||
Brazil |
| 2,137,289 | | 2,137,289 | 2.90 | (4,696 | ) | (5,307 | ) | |||||||||||||||||||
Others |
| 1,407,654 | 11,749 | 1,419,403 | 1.91 | (4,961 | ) | (61,935 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Subtotal |
| 8,104,913 | 32,181 | 8,137,094 | 11.02 | (23,929 | ) | (171,766 | ) | |||||||||||||||||||
|
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Africa: |
||||||||||||||||||||||||||||
Marshall Islands |
| 739,684 | | 739,684 | 1.00 | (4,167 | ) | (24,261 | ) | |||||||||||||||||||
Madagascar |
| 401,311 | | 401,311 | 0.54 | (1,410 | ) | (119,149 | ) | |||||||||||||||||||
Others |
| 1,372,292 | 8,110 | 1,380,402 | 1.88 | (21,776 | ) | (125,266 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Subtotal |
| 2,513,287 | 8,110 | 2,521,397 | 3.42 | (27,353 | ) | (268,676 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Total |
₩ | 17,429,006 | ₩ | 53,189,518 | ₩ | 3,191,638 | ₩ | 73,810,162 | 100.00 | ₩ | (415,849 | ) | ₩ | (1,902,856 | ) | |||||||||||||
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|
S-31
(December 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 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-32
2) Loans by industry as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Loans | Deferred loan origination fees |
Allowances | ||||||||||||||||||||||||||
Loans in local currency |
Loans in foreign currencies |
Others | Total | Ratio (%) |
||||||||||||||||||||||||
Manufacturing |
₩ | 11,026,027 | ₩ | 24,729,253 | ₩ | 180,309 | ₩ | 35,935,589 | 48.69 | ₩ | (207,520 | ) | ₩ | (1,447,027 | ) | |||||||||||||
Transportation |
629,330 | 6,361,124 | | 6,990,454 | 9.47 | (34,405 | ) | (169,826 | ) | |||||||||||||||||||
Financial institutions |
4,769,016 | 7,401,936 | 2,956,273 | 15,127,225 | 20.49 | (4,479 | ) | (19,491 | ) | |||||||||||||||||||
Wholesale and retail |
483,386 | 1,225,162 | 43,308 | 1,751,856 | 2.37 | (2,762 | ) | (27,374 | ) | |||||||||||||||||||
Real estate |
| 337,271 | | 337,271 | 0.46 | (1,811 | ) | (1,088 | ) | |||||||||||||||||||
Construction |
231,062 | 389,109 | | 620,171 | 0.84 | (8,134 | ) | (33,061 | ) | |||||||||||||||||||
Public sector and others |
290,185 | 12,745,663 | 11,748 | 13,047,596 | 17.68 | (156,738 | ) | (204,989 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
₩ | 17,429,006 | ₩ | 53,189,518 | ₩ | 3,191,638 | ₩ | 73,810,162 | 100.00 | ₩ | (415,849 | ) | ₩ | (1,902,856 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-33
3) Concentration of credit risk of financial assets at FVTPL and financial investments (debt securities) by industry as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||||||||||
Amount | Ratio (%) | Amount | Ratio (%) | |||||||||||||
Financial Assets at FVTPL |
||||||||||||||||
Government and government sponsored institutions |
₩ | | | ₩ | | | ||||||||||
Banking and insurance |
11,930 | 47.00 | 45,272 | 67.83 | ||||||||||||
Others |
13,455 | 53.00 | 21,469 | 32.17 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
25,385 | 100.00 | 66,741 | 100.00 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Assets at FVOCI |
||||||||||||||||
Government and government sponsored institutions |
102,547 | 15.25 | 102,096 | 12.11 | ||||||||||||
Banking and insurance |
564,149 | 83.91 | 709,109 | 84.10 | ||||||||||||
Others |
5,628 | 0.84 | 32,013 | 3.79 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
672,324 | 100.00 | 843,218 | 100.00 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Assets at amortized cost |
||||||||||||||||
Government and government sponsored institutions |
4,655 | 0.79 | 4,476 | 2.07 | ||||||||||||
Banking and insurance |
571,583 | 96.95 | 187,419 | 86.83 | ||||||||||||
Others |
13,302 | 2.26 | 23,954 | 11.10 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
589,540 | 100.00 | 215,849 | 100.00 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
₩ | 1,287,249 | ₩ | 1,125,808 | ||||||||||||
|
|
|
|
4) Concentration of credit risk of financial assets at FVTPL and financial investments (debt securities) by country as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||||||||||
Amount | Ratio (%) | Amount | Ratio (%) | |||||||||||||
Financial Assets at FVTPL |
||||||||||||||||
Korea |
₩ | 13,455 | 53.00 | ₩ | 16,960 | 25.41 | ||||||||||
Others |
11,930 | 47.00 | 49,781 | 74.59 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
25,385 | 100.00 | 66,741 | 100.00 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Assets at FVOCI |
||||||||||||||||
Korea |
205,963 | 30.63 | 224,580 | 26.63 | ||||||||||||
Others |
466,361 | 69.37 | 618,638 | 73.37 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
672,324 | 100.00 | 843,218 | 100.00 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Assets at amortized cost |
||||||||||||||||
Korea |
108,257 | 18.36 | 84,613 | 39.20 | ||||||||||||
Others |
481,283 | 81.64 | 131,236 | 60.80 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
589,540 | 100.00 | 215,849 | 100.00 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
₩ | 1,287,249 | ₩ | 1,125,808 | ||||||||||||
|
|
|
|
S-34
5) Credit enhancement and its financial effect as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Loans (*1) | Acceptances and guarantees |
Unused loan commitments |
Total | Ratio (%) |
||||||||||||||||
Maximum exposure to credit risk |
₩ | 73,394,313 | ₩ | 40,031,071 | ₩ | 22,962,044 | ₩ | 136,387,428 | 100.00 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Credit enhancement: |
||||||||||||||||||||
Deposits and savings |
103,441 | 84,894 | 7,473 | 195,808 | 0.14 | |||||||||||||||
Export guarantee insurance |
| 726,198 | 6,148 | 732,346 | 0.54 | |||||||||||||||
Guarantee |
4,691,927 | 1,951,405 | 1,029,277 | 7,672,609 | 5.63 | |||||||||||||||
Securities |
143,840 | 368,637 | 2,400 | 514,877 | 0.38 | |||||||||||||||
Real estate |
2,033,710 | 1,618,333 | 22,602 | 3,674,645 | 2.69 | |||||||||||||||
Ships |
797,537 | 247,325 | 28,498 | 1,073,360 | 0.79 | |||||||||||||||
Others |
1,237,075 | | 6,247 | 1,243,322 | 0.91 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Subtotal |
9,007,530 | 4,996,792 | 1,102,645 | 15,106,967 | 11.08 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Exposure to credit risk after deducting credit enhancement |
₩ | 64,386,783 | ₩ | 35,034,279 | ₩ | 21,859,399 | ₩ | 121,280,461 | 88.92 | |||||||||||
|
|
|
|
|
|
|
|
|
|
(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. |
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.
S-35
(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 Banks strategies.
(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 June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
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 |
₩ | 683,961 | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | 683,961 | ||||||||||||||||
Hedging derivative liabilities |
| 2,004 | 132,841 | 82,904 | 202,850 | 334,959 | 149,421 | 904,979 | ||||||||||||||||||||||||
Borrowings |
| 372,233 | 307,727 | 437,955 | 1,043,119 | 3,439,620 | 176,428 | 5,777,082 | ||||||||||||||||||||||||
Debentures |
| 950,103 | 3,266,726 | 6,384,638 | 11,938,596 | 35,345,727 | 16,943,974 | 74,829,764 | ||||||||||||||||||||||||
Other financial liabilities |
| 1,128,210 | 285 | 7,761 | 9,060 | 107,343 | 933,903 | 2,186,652 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
₩ | 683,961 | ₩ | 2,452,550 | ₩ | 3,707,579 | ₩ | 6,913,258 | ₩ | 13,193,625 | ₩ | 39,227,649 | ₩ | 18,203,726 | ₩ | 84,382,348 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Off-balance sheet items(*1): |
||||||||||||||||||||||||||||||||
Commitments |
₩ | 22,962,044 | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | 22,962,044 | ||||||||||||||||
Financial guarantee contracts |
15,185,728 | | | | | | | 15,185,728 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
₩ | 38,147,772 | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | 38,147,772 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-36
(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 | ||||||||||||||||||||||||
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|||||||||||||||||
₩ | 905,901 | ₩ | 1,851,131 | ₩ | 3,345,387 | ₩ | 6,270,761 | ₩ | 11,607,367 | ₩ | 40,360,417 | ₩ | 19,372,973 | ₩ | 83,713,937 | |||||||||||||||||
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|||||||||||||||||
Off-balance sheet items(*1): |
||||||||||||||||||||||||||||||||
Commitments |
₩ | 17,619,116 | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | 17,619,116 | ||||||||||||||||
Financial guarantee contracts |
14,500,508 | | | | | | | 14,500,508 | ||||||||||||||||||||||||
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|
|||||||||||||||||
₩ | 32,119,624 | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | | ₩ | 32,119,624 | |||||||||||||||||
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(*1) | Financial guarantees and loan commitments provided by the Bank have maturities. The Bank should fulfill the obligation immediately when the counterparty requests payment. |
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.
S-37
(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 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 June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||||||||||||||||||||||||||
Average | Minimum | Maximum | Ending | Average | Minimum | Maximum | Ending | |||||||||||||||||||||||||
Foreign exchange risk |
₩ | 35,307 | ₩ | 10,362 | ₩ | 68,010 | ₩ | 35,510 | ₩ | 27,714 | ₩ | 4,635 | ₩ | 68,602 | ₩ | 26,897 |
S-38
(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 Banks 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 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 June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||||||||||||||||||||||||||
Average | Minimum | Maximum | Ending | Average | Minimum | Maximum | Ending | |||||||||||||||||||||||||
Interest rate risk |
₩52,525 | ₩39,952 | ₩64,874 | ₩51,585 | ₩79,086 | ₩37,129 | ₩112,921 | ₩37,129 |
S-39
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, the Bank 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 Banks 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.
S-40
5. FINANCIAL ASSETS AND FINANCIAL LIABILITIES:
5-1. Classification and fair value
(1) Carrying amounts and fair values of financial instruments as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
June 30, 2019 | December 31, 2018 | |||||||||||||||||
Carrying amount |
Fair value | Carrying amount |
Fair value | |||||||||||||||
Financial assets: |
||||||||||||||||||
Cash and due from financial institutions |
Non-recurring | ₩ | 4,396,226 | ₩ | 4,396,832 | ₩ | 3,682,863 | ₩ | 3,682,864 | |||||||||
Financial assets at FVTPL |
Recurring | 2,004,165 | 2,004,165 | 2,298,223 | 2,298,223 | |||||||||||||
Hedging derivative assets |
Recurring | 365,044 | 365,044 | 75,743 | 75,743 | |||||||||||||
Loans at amortized cost |
Non-recurring | 71,502,046 | 71,975,312 | 70,199,721 | 70,374,963 | |||||||||||||
Financial assets at FVOCI |
Recurring | 8,957,318 | 8,957,318 | 8,628,968 | 8,628,968 | |||||||||||||
Financial assets at amortized cost |
Non-recurring | 589,449 | 597,845 | 215,788 | 217,237 | |||||||||||||
Other financial assets |
Non-recurring | 1,300,517 | 1,300,517 | 964,721 | 964,721 | |||||||||||||
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|
|
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|
|||||||||||
₩ | 89,114,765 | ₩ | 89,597,033 | ₩ | 86,066,027 | ₩ | 86,242,719 | |||||||||||
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|
|||||||||||
Financial liabilities: |
||||||||||||||||||
Financial liabilities at FVTPL |
Recurring | ₩ | 683,961 | ₩ | 683,961 | ₩ | 905,901 | ₩ | 905,901 | |||||||||
Hedging derivative liabilities |
Recurring | 904,979 | 904,979 | 1,628,303 | 1,628,303 | |||||||||||||
Borrowings |
Non-recurring | 5,483,074 | 5,462,755 | 4,893,478 | 4,833,791 | |||||||||||||
Debentures |
Non-recurring | 68,080,002 | 65,634,089 | 65,942,970 | 66,493,992 | |||||||||||||
Other financial liabilities |
Non-recurring | 2,186,562 | 2,186,562 | 1,837,678 | 1,837,678 | |||||||||||||
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|||||||||||
₩ | 77,338,578 | ₩ | 74,872,346 | ₩ | 75,208,330 | ₩ | 75,699,665 | |||||||||||
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Fair value is the amount at which the assets could be exchanged or the liabilities could be settled in transaction between knowledgeable and willing independent parties. For each class of financial assets and financial 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 estimate of the fair value of a financial instrument is the price quoted 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. |
S-41
Financial instruments |
Method of measuring fair value | |
Investment securities |
Financial investments 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.
(2) Fair value hierarchy
Fair value hierarchy of financial assets and liabilities, which are not measured at fair value as of June 30, 2019, and December 31, 2018, is as follows (Korean won in millions):
(June 30, 2019)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets: |
||||||||||||||||
Cash and due from financial institutions |
₩ | 2,293,654 | ₩ | | ₩ | 2,103,178 | ₩ | 4,396,832 | ||||||||
Loans at amortized cost |
| | 71,975,312 | 71,975,312 | ||||||||||||
Financial assets at amortized cost |
| 597,845 | | 597,845 | ||||||||||||
Other financial assets |
| | 1,300,517 | 1,300,517 | ||||||||||||
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|
|
|
|
|
|
|||||||||
Total |
₩ | 2,293,654 | ₩ | 597,845 | ₩ | 75,379,007 | ₩ | 78,270,506 | ||||||||
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|
|
|||||||||
Financial liabilities: |
||||||||||||||||
Borrowings |
₩ | | ₩ | 5,462,755 | ₩ | | ₩ | 5,462,755 | ||||||||
Debentures |
| 65,634,089 | | 65,634,089 | ||||||||||||
Other financial liabilities |
| | 2,186,562 | 2,186,562 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
₩ | | ₩ | 71,096,844 | ₩ | 2,186,562 | ₩ | 73,283,406 | ||||||||
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S-42
(December 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 | ||||||||
|
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|
|
|
|
|||||||||
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 | ||||||||
|
|
|
|
|
|
|
|
Fair value hierarchy of financial assets and liabilities measured at fair value as of June 30, 2019, and December 31 2018, is as follows (Korean won in millions):
(June 30, 2019)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets: |
||||||||||||||||
Financial assets at FVTPL |
₩ | | ₩ | 1,697,530 | ₩ | 306,635 | ₩ | 2,004,165 | ||||||||
Hedging derivative assets |
| 365,044 | | 365,044 | ||||||||||||
Financial assets at FVOCI |
307,462 | 572,099 | 8,077,757 | 8,957,318 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
₩ | 307,462 | ₩ | 2,634,673 | ₩ | 8,384,392 | ₩ | 11,326,527 | |||||||||
|
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|
|
|
|
|
|
|||||||||
Financial liabilities: |
||||||||||||||||
Financial liabilities at FVTPL |
₩ | | ₩ | 683,961 | ₩ | | ₩ | 683,961 | ||||||||
Hedging derivative liabilities |
| 904,979 | | 904,979 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
₩ | | ₩ | 1,588,940 | ₩ | | ₩ | 1,588,940 | |||||||||
|
|
|
|
|
|
|
|
(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 | ||||||||||||
|
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|
|
|
|
|
|||||||||
₩ | 283,102 | ₩ | 2,851,293 | ₩ | 7,868,539 | ₩ | 11,002,934 | |||||||||
|
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|
|
|
|
|
|
|||||||||
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 | |||||||||
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|
S-43
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. |
The valuation techniques and input variables of Level 2 financial instruments subsequently not measured at fair value as of June 30, 2019 and December 31, 2018 are as follows (Korean won in millions):
(June 30, 2019)
Fair value | Valuation techniques |
Input variables | ||||||||||
Financial assets |
||||||||||||
Financial assets at amortized cost |
||||||||||||
Debt securities |
₩ | 597,845 | DCF Model | Discount rate | ||||||||
Financial liabilities |
||||||||||||
Borrowings |
5,462,755 | DCF Model | Discount rate | |||||||||
Debentures |
65,634,089 | DCF Model | Discount rate |
(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 |
The valuation techniques and input variables of Level 3 financial instruments subsequently not measured at fair value as of June 30, 2019 and December 31, 2018 are as follows (Korean won in millions):
(June 30, 2019)
Fair value | Valuation techniques |
Input variables | ||||||||||
Financial assets |
||||||||||||
Loans at amortized cost |
₩ | 71,975,312 | DCF Model | Discount rate | ||||||||
Other financial assets |
1,300,517 | DCF Model | Discount rate | |||||||||
Financial liabilities |
||||||||||||
Other financial liabilities |
2,186,562 | DCF Model | Discount rate |
S-44
(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 |
The valuation techniques and input variables of Level 2 financial instruments, measured at fair value after initial recognition, as of June 30, 2019 and December 31, 2018 are as follows (Korean won in millions):
(June 30, 2019)
Fair value | Valuation techniques |
Input variables | ||||||||||
Financial assets |
||||||||||||
Financial assets at FVTPL: |
||||||||||||
Debt securities |
₩ | 992,292 | DCF Model | Discount rate | ||||||||
Derivative assets for trading |
705,238 | DCF Model | Discount rate | |||||||||
Hedging derivative assets |
365,044 | DCF Model | Discount rate | |||||||||
Financial assets at FVOCI: |
||||||||||||
Debt securities |
572,099 | DCF Model | Discount rate | |||||||||
Financial liabilities |
||||||||||||
Financial liabilities at FVTPL: |
||||||||||||
Derivative liabilities for trading |
683,961 | DCF Model | Discount rate | |||||||||
Hedging derivative liabilities |
904,979 | DCF Model | Discount rate |
(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 |
S-45
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, as of June 30, 2019 and December 31, 2018 are as follows(Korean won in millions):
(June 30, 2019)
Fair value (Korean won in million) |
Valuation techniques |
Significant unobservable input factors |
Range | Relationship between unobservable input factors and fair | ||||||||||||||
Financial assets at FVTPL: |
|
|||||||||||||||||
Unlisted stock |
₩ | 21,822 | |
Binomial Model CCA Methods NAV Methods |
|
Volatility | 19.93 ~ 25.93% | If discount rate is decreased (increased)/if growth rate is increased (decreased), fair value is increased (decreased). | ||||||||||
Beneficiary certificates |
176,404 | |||||||||||||||||
Paid-in capital |
94,954 | Growth rate | | |||||||||||||||
Loans |
13,455 | |||||||||||||||||
Financial assets at FVOCI: |
|
|||||||||||||||||
Unlisted stock |
₩ | 8,061,021 | |
DCF Model CCA Methods NAV Methods |
|
Discount rate | 3.21 ~ 15.48% | If discount rate is decreased (increased)/ if growth rate is increased (decreased), fair value is increased (decreased). | ||||||||||
Paid-in capital |
16,736 | Growth rate |
(December 31, 2018)
Fair value (Korean won in million) |
Valuation |
Significant unobservable input factors |
Range |
Relationship between unobservable input factors and fair | ||||||||||
Financial assets at FVTPL: |
||||||||||||||
Unlisted stock |
₩ | 17,223 | DCF Model CCA Methods NAV Methods |
Discount rate | 7.85% | If discount rate is decreased (increased)/ if growth rate is increased (decreased), fair value is increased (decreased). | ||||||||
Beneficiary certificates |
159,765 | |||||||||||||
Paid-in capital |
72,029 | Growth rate | | |||||||||||
Loans |
16,960 | |||||||||||||
Financial assets at FVOCI: |
||||||||||||||
Unlisted stock |
₩ | 7,585,686 | DCF Model CCA Methods NAV 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 | |
S-46
1) Changes in Level 3 financial assets that are measured at fair value for the six months ended June 30, 2019, and for the year ended December 31, 2018, are as follows (Korean won in millions):
(Six months ended June 30, 2019)
Beginning balance |
Profit | Other comprehensive income |
Purchases/ issues |
Sales/ settlements |
Transfers into Level 3 / Transfers out of Level 3 |
Ending balance |
||||||||||||||||||||||
Financial assets |
||||||||||||||||||||||||||||
Securities at FVTPL |
₩ | 249,017 | ₩ | 1,339 | ₩ | | ₩ | 59,218 | ₩ | (16,394 | ) | ₩ | | ₩ | 293,180 | |||||||||||||
Loans at FVTPL |
16,960 | 150 | | | (3,655 | ) | | 13,455 | ||||||||||||||||||||
Financial assets at FVOCI |
7,602,562 | | (83,032 | ) | 558,501 | (274 | ) | | 8,077,757 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
₩ | 7,868,539 | ₩ | 1,489 | ₩ | (83,032 | ) | ₩ | 617,719 | ₩ | (20,323 | ) | ₩ | | ₩ | 8,384,392 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
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 six months ended June 30, 2019, and for the year ended December 31, 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
2018 | |||||||
Total gains (losses) on financial instruments held at the end of the reporting period |
₩ | 1,489 | ₩ | 3,633 | ||||
Total gains (losses) included in profit or loss for the period |
₩ | 1,489 | ₩ | 3,633 |
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.
S-47
Sensitivity analysis details per market risk variable of each Level 3 financial instrument held and measured at fair value as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Profit (loss) | Other comprehensive income (loss) | |||||||||||||||
Favorable | Unfavorable | Favorable | Unfavorable | |||||||||||||
Financial assets: |
||||||||||||||||
Financial assets at FVOCI(*1) |
₩ | | ₩ | | ₩ | 8,953,268 | ₩ | (1,363,303 | ) |
(December 31, 2018)
Profit (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 | ) |
(*1) | Changes in fair value of stocks are computed along with the increases or decreases in either growth rate (0 ~ 1%) and discount rate, which are unobservable inputs. |
5-2. Classification by categories of financial instruments
The carrying amounts of each category of financial assets and financial liabilities as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
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 |
₩ | | ₩ | 4,396,226 | ₩ | | ₩ | | ₩ | 4,396,226 | ||||||||||
Financial assets at FVTPL |
2,004,165 | | | | 2,004,165 | |||||||||||||||
Hedging derivative assets |
| | | 365,044 | 365,044 | |||||||||||||||
Loans at amortized cost |
| 71,502,046 | | | 71,502,046 | |||||||||||||||
Financial investments |
| 589,449 | 8,957,318 | | 9,546,767 | |||||||||||||||
Other financial assets |
| 1,300,517 | | | 1,300,517 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
₩ | 2,004,165 | ₩ | 77,788,238 | ₩ | 8,957,318 | ₩ | 365,044 | ₩ | 89,114,765 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Financial liabilities at FVTPL |
Financial liabilities at amortized cost |
Hedging derivative liabilities |
Total | |||||||||||||
Financial liabilities: |
||||||||||||||||
Financial liabilities at FVTPL |
₩ | 683,961 | ₩ | | ₩ | | ₩ | 683,961 | ||||||||
Hedging derivative liabilities |
| | 904,979 | 904,979 | ||||||||||||
Borrowings |
| 5,483,074 | | 5,483,074 | ||||||||||||
Debentures |
| 68,080,002 | | 68,080,002 | ||||||||||||
Other financial liabilities |
| 2,186,562 | | 2,186,562 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
₩ | 683,961 | ₩ | 75,749,638 | ₩ | 904,979 | ₩ | 77,338,578 | ||||||||
|
|
|
|
|
|
|
|
S-48
(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 | ||||||||
|
|
|
|
|
|
|
|
5-3. Offset of financial instruments
The bank holds the financial instruments which grant it the rights to offset in case of default, insolvency, or bankruptcy of the counterparties though it does not meet the criteria for offsetting of K-IFRS No. 1032. Cash collaterals do not meet the offsetting criteria in K-IFRS No. 1032, but they can be set off with net amount of financial instruments.
The effects of netting agreements as of June 30, 2019, and December 31, 2018, are as follow (Korean won in millions):
(June 30, 2019)
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 |
Net amount |
||||||||||||||||||||
Financial instruments |
Cash collateral |
|||||||||||||||||||||||
Financial assets: |
||||||||||||||||||||||||
Derivatives |
₩ | 1,070,282 | ₩ | | ₩ | 1,070,282 | ₩ | (489,902 | ) | ₩ | (20,081 | ) | ₩ | 560,299 | ||||||||||
Financial liabilities: |
||||||||||||||||||||||||
Derivatives |
1,588,940 | | 1,588,940 | (489,902 | ) | (535,662 | ) | 563,376 |
S-49
(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 |
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 |
5-4. Transfer of financial assets
The Bank continues to recognize the financial assets related to repurchase agreements on the statement of financial position since those transactions are not qualified for derecognition even though the Bank transfers the financial assets. Financial asset is sold under a repurchase agreements to repurchase the some asset at fixed price. Thus, the Bank retains substantially all the risks and rewards of ownership of the financial asset. There are no carrying amounts of transferred assets and relevant liabilities as of June 30, 2019 and December 31, 2018.
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.
7. CASH AND DUE FROM FINANCIAL INSTITUTIONS:
(1) Cash and cash equivalents as of June 30, 2019 and December 31, 2018 are as follows (Korean won in millions):
Detail |
Jun. 30, 2019 | Dec. 31, 2018 | ||||||
Due from financial institutions in local currency |
₩ | 855,887 | ₩ | 604,286 | ||||
Due from financial institutions in foreign currencies |
3,540,339 | 3,078,577 | ||||||
|
|
|
|
|||||
Subtotal |
4,396,226 | 3,682,863 | ||||||
|
|
|
|
|||||
Restricted due from financial institutions |
(1,252,572 | ) | (2,132,796 | ) | ||||
Due from financial institutions with original maturities of more than three months at acquisition date |
(850,000 | ) | (530,000 | ) | ||||
|
|
|
|
|||||
Subtotal |
(2,102,572 | ) | (2,662,796 | ) | ||||
|
|
|
|
|||||
Total(*) |
₩ | 2,293,654 | ₩ | 1,020,067 | ||||
|
|
|
|
(*) | Equal to the cash and due from financial institutions as presented on the separate statements of cash flows. |
S-50
(2) Details of due from financial institutions as of June 30, 2019, and December 31, 2018 are as follows (Korean won in millions):
Detail |
Jun. 30, 2019 | Dec. 31, 2018 | ||||||||||||||
Amount | Interest (%) | Amount | Interest (%) | |||||||||||||
Due from financial institutions in local currency: |
||||||||||||||||
Demand deposits |
₩ | 1,187 | | ₩ | 2,026 | | ||||||||||
Time deposits |
850,000 | 1.77 ~ 2.10 | 600,000 | 1.83 ~ 2.27 | ||||||||||||
Others |
4,700 | 1.10 | 600 | 1.10 | ||||||||||||
Margin for derivatives |
| | 1,660 | | ||||||||||||
|
|
|
|
|||||||||||||
Subtotal |
855,887 | 604,286 | ||||||||||||||
|
|
|
|
|||||||||||||
Due from financial institutions in foreign currencies: |
||||||||||||||||
Demand deposits |
370,624 | | 43,379 | | ||||||||||||
On demand |
1,884,244 | | 865,382 | | ||||||||||||
Offshore demand deposits |
32,899 | | 38,680 | | ||||||||||||
Others |
716,276 | 2.36 ~ 2.40 | 1,836,348 | 0.00 ~ 0.45 | ||||||||||||
Margin for derivatives |
536,296 | | 294,788 | | ||||||||||||
|
|
|
|
|||||||||||||
Subtotal |
3,540,339 | 3,078,577 | ||||||||||||||
|
|
|
|
|||||||||||||
Total |
₩ | 4,396,226 | ₩ | 3,682,863 | ||||||||||||
|
|
|
|
(3) Restricted due from financial institutions as of June 30, 2019 and December 31, 2018 are as follows (Korean won in millions):
Detail |
Financial Institution |
Jun. 30, 2019 | Dec. 31, 2018 | Reason for restriction | ||||||||
Others |
DEUTSCHE BANK TRUST COMPANY AMERICAS and others | ₩ | 1,252,572 | ₩ | 2,132,796 | Credit support annex for derivative transactions |
S-51
8. FINANCIAL ASSETS AT FVTPL:
Details of financial assets at FVTPL as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||
Debt securities in local currency |
||||||||
Paid-in capital |
₩ | 90,387 | ₩ | 67,614 | ||||
Beneficiary certificates |
1,056,347 | 1,212,517 | ||||||
|
|
|
|
|||||
Subtotal |
1,146,734 | 1,280,131 | ||||||
|
|
|
|
|||||
Debt securities in foreign currency |
||||||||
Debt securities |
11,930 | 49,781 | ||||||
Paid-in capital |
4,567 | 4,415 | ||||||
Beneficiary certificates |
100,419 | 92,181 | ||||||
Equity securities in foreign currency stocks |
21,822 | 17,223 | ||||||
|
|
|
|
|||||
Subtotal |
138,738 | 163,600 | ||||||
|
|
|
|
|||||
Loans at FVTPL |
||||||||
Privately placed corporate bonds |
13,455 | 16,960 | ||||||
Derivative assets for trading |
||||||||
Equity related |
492 | 583 | ||||||
Interest rates related |
395,623 | 445,329 | ||||||
Foreign currency related |
309,098 | 391,596 | ||||||
Others |
25 | 24 | ||||||
|
|
|
|
|||||
Subtotal |
705,238 | 837,532 | ||||||
|
|
|
|
|||||
Total |
₩ | 2,004,165 | ₩ | 2,298,223 | ||||
|
|
|
|
9. FINANCIAL INVESTMENTS:
Details of financial investments as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||
Financial assets at FVOCI |
||||||||
Debt securities in local currency |
||||||||
National bond |
₩ | 100,225 | ₩ | 99,914 | ||||
Derivative linked securities |
30,127 | 50,000 | ||||||
Equity securities in local currency |
||||||||
Stocks |
8,268,257 | 7,768,874 | ||||||
Paid-in capital |
16,737 | 16,876 | ||||||
|
|
|
|
|||||
Subtotal |
8,415,346 | 7,935,664 | ||||||
|
|
|
|
|||||
Debt securities in foreign currencies |
||||||||
Corporate bonds and etc.(*1) |
541,972 | 693,304 | ||||||
|
|
|
|
|||||
Financial assets at amortized cost |
||||||||
Debt securities in foreign currencies |
||||||||
Corporate bonds and etc.(*1) |
589,449 | 215,788 | ||||||
|
|
|
|
|||||
Total |
₩ | 9,546,767 | ₩ | 8,844,756 | ||||
|
|
|
|
(*1) | It includes debt securities, which are pledged as collateral amounting to ₩64,298 million and ₩60,229 million as of June 30, 2019, and December 31, 2018, respectively. |
S-52
10. LOANS AT AMORTIZED COST:
Loans as presented below exclude loan valuation adjustment related to fair value hedging amounting to ₩10,589 million and ₩12,801 million as of June 30, 2019, and December 31, 2018, respectively.
(1) Details of loans as of June 30, 2019 and December 31, 2018 are as follows (Korean won in millions):
Detail |
Jun. 30, 2019 | Dec. 31, 2018 | ||||||||
Loans in local currency |
Loans for export | ₩ | 11,810,008 | ₩ | 11,509,858 | |||||
Loans for foreign investments | 1,575,053 | 1,290,776 | ||||||||
Loans for import | 3,013,149 | 2,550,627 | ||||||||
Troubled Debt Restructuring | 504,105 | 951,800 | ||||||||
Others | 526,691 | 533,547 | ||||||||
|
|
|
|
|||||||
Subtotal |
17,429,006 | 16,836,608 | ||||||||
|
|
|
|
|||||||
Loans in foreign currencies |
Loans for export | 27,600,330 | 26,938,880 | |||||||
Loans for foreign investments | 21,930,506 | 21,167,724 | ||||||||
Loans for rediscounted trading notes | 1,208,856 | 1,017,471 | ||||||||
Loans for import | 1,527,584 | 1,921,810 | ||||||||
Overseas funding loans | 660,771 | 585,160 | ||||||||
Domestic usance bills | 224,603 | 180,301 | ||||||||
Others |
36,868 | 49,906 | ||||||||
|
|
|
|
|||||||
Subtotal |
53,189,518 | 51,861,252 | ||||||||
|
|
|
|
|||||||
Others | Foreign-currency bills bought | 684,034 | 876,098 | |||||||
Advance payments on acceptances and guarantees | 29,876 | 30,473 | ||||||||
Call loans | 2,362,048 | 2,515,725 | ||||||||
Interbank loans in foreign currencies | 115,680 | | ||||||||
|
|
|
|
|||||||
Subtotal |
3,191,638 | 3,422,296 | ||||||||
|
|
|
|
|||||||
Total |
73,810,162 | 72,120,156 | ||||||||
Net deferred origination fees and costs |
(415,849 | ) | (378,931 | ) | ||||||
Allowance for loan losses |
(1,902,856 | ) | (1,554,304 | ) | ||||||
|
|
|
|
|||||||
Total |
₩ | 71,491,457 | ₩ | 70,186,920 | ||||||
|
|
|
|
S-53
(2) Changes in allowance for loan losses for the six months ended June 30, 2019 and for the year ended December 31, 2018, are as follows (Korean won in millions):
(Six months ended June 30, 2019)
12 month expected credit losses |
Lifetime expected credit losses |
Credit- impaired financial assets |
Total | |||||||||||||
Beginning balance |
₩ | 257,157 | ₩ | 558,740 | ₩ | 738,407 | ₩ | 1,554,304 | ||||||||
- Transfer to 12 month expected credit losses |
2,466 | (1,223 | ) | (1,243 | ) | | ||||||||||
- Transfer to lifetime expected credit losses |
(7,795 | ) | 8,117 | (322 | ) | | ||||||||||
- Transfer to credit-impaired financial assets |
(8,434 | ) | (13,085 | ) | 21,519 | | ||||||||||
Written-off |
(6,460 | ) | | (13,339 | ) | (19,799 | ) | |||||||||
Collection |
82,398 | | | 82,398 | ||||||||||||
Loan-for-equity swap |
| | (7,837 | ) | (7,837 | ) | ||||||||||
Others |
48,757 | | | 48,757 | ||||||||||||
Unwinding effect |
(47 | ) | (1 | ) | (18,818 | ) | (18,866 | ) | ||||||||
Foreign exchange translation |
4,031 | 16,868 | 5,701 | 26,600 | ||||||||||||
Additional provisions, net of reversals |
(110,904 | ) | 14,531 | 333,672 | 237,299 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Ending balance |
₩ | 261,169 | ₩ | 583,947 | ₩ | 1,057,740 | ₩ | 1,902,856 | ||||||||
|
|
|
|
|
|
|
|
(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 |
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 |
S-54
11. INVESTMENTS IN ASSOCIATES AND SUBSIDIARIES:
(1) Details of investments in associates and subsidiaries as of June 30, 2019 and December 31, 2018 are as follows (Korean won in millions):
(June 30, 2019)
Company (*1) |
Detail | Location | Business | Year-end | Ownership (%) |
Net asset | Carrying amount |
|||||||||||||||||||||
KEXIM Bank UK Limited |
Subsidiary | United Kingdom | |
Financial service |
|
December | 100.00 | ₩ | 47,804 | ₩ | 48,460 | |||||||||||||||||
KEXIM Vietnam Leasing Co. |
Subsidiary | Vietnam | |
Financial service |
|
December | 100.00 | 18,511 | 10,275 | |||||||||||||||||||
PT.KOEXIM Mandiri Finance |
Subsidiary | Indonesia | |
Financial service |
|
December | 85.00 | 24,207 | 25,270 | |||||||||||||||||||
KEXIM Asia Limited |
Subsidiary | Hong Kong | |
Financial service |
|
December | 100.00 | 70,550 | 49,139 | |||||||||||||||||||
Korea Asset Management Corporation |
Associate | Korea | |
Financial service |
|
December | 25.86 | 487,142 | 380,520 | |||||||||||||||||||
Credit Guarantee and Investment Fund(*2,3) |
Associate | Philippines | |
Financial service |
|
December | 11.64 | 124,704 | 115,486 | |||||||||||||||||||
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.(*5) |
Associate | Korea | Shipbuilding | December | 69.39 | (1,245,778 | ) | | ||||||||||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd.(*6) |
Associate | Korea | Shipbuilding | December | 83.03 | (269,585 | ) | | ||||||||||||||||||||
KTB Newlake Global Healthcare PEF |
Associate | Korea | |
Financial service |
|
December | 25.00 | 8,062 | 8,795 | |||||||||||||||||||
KBS-KDB Private Equity Fund |
Associate | Korea | |
Financial service |
|
December | 20.30 | 3,935 | 6,032 | |||||||||||||||||||
Korea Aerospace Industries. Ltd. |
Associate | Korea | Manufacturing | December | 26.41 | 297,436 | 1,467,520 | |||||||||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd.(*7) |
Associate | Korea | Shipbuilding | December | | | | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Total |
₩ | 2,111,497 | ||||||||||||||||||||||||||
|
|
S-55
(December 31, 2018)
Company (*1) |
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 | |||||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd.(*7) |
Associate | Korea | Shipbuilding | December | | | | |||||||||||||||||
|
|
|||||||||||||||||||||||
Total |
₩ | 2,511,497 | ||||||||||||||||||||||
|
|
(*1) | The amounts represent net asset after taking into account percentage of ownership. |
(*2) | As of June 30, 2019 and December 31, 2018 the 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) | The most recent financial statements were using (due to the unavailability of the ones as of June 30, 2019) 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. |
(*4) | The most recent financial statements were using (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 year ended December 31, 2018 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 creditors loans to have substantive control based on the creditors agreement. As the Bank had only 70.60% of the total creditors loans, this was classified into associates. |
(*7) | This entity is not an associate with the current ownership. However, considering potential voting rights, the Bank has classified the entity as an associate. The Bank holds convertible bonds issued by the entity amounting to KRW 2,332,832 million. |
S-56
(2) Changes in investments in associates and subsidiaries for the six months ended June 30, 2019 and for the year ended December 31, 2018, are as follows (Korean won in millions):
(Six months ended June 30, 2019)
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 | ||||||||||||||||||
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd. |
Associate | | | | | | ||||||||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. |
Associate | | | | | | ||||||||||||||||||
KTB Newlake Global Healthcare PEF |
Associate | 8,795 | | | | 8,795 | ||||||||||||||||||
KBS-KDB Private Equity Fund |
Associate | 6,032 | | | | 6,032 | ||||||||||||||||||
Korea Shipping and Maritime Transportation |
Associate | 400,000 | | (400,000 | ) | | | |||||||||||||||||
Korea Aerospace Industries. LTD. |
Associate | 1,467,520 | | | | 1,467,520 | ||||||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
Associate | | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
₩ | 2,511,497 | ₩ | | ₩ | (400,000 | ) | ₩ | | ₩ | 2,111,497 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
(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 | ||||||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
Associate | | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
₩ | 2,598,607 | ₩ | 48,365 | ₩ | (135,475 | ) | ₩ | | ₩ | 2,511,497 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
S-57
(3) Summarized financial information of associates and subsidiaries as of and for the six months ended June 30, 2019, and as of and for the year ended December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Company |
Assets | Liabilities | Operating income (loss) |
Profit (loss) for the period |
Comprehensive income (loss) |
|||||||||||||||
KEXIM Bank UK Limited |
₩ | 417,625 | ₩ | 369,821 | ₩ | 516 | ₩ | (659 | ) | ₩ | 1,930 | |||||||||
KEXIM Vietnam Leasing Co. |
180,853 | 162,342 | 687 | 589 | 1,195 | |||||||||||||||
PT.KOEXIM Mandiri Finance |
193,519 | 165,040 | 598 | 52 | 1,797 | |||||||||||||||
KEXIM Asia Limited |
518,765 | 448,216 | 1,809 | 1,509 | 6,650 | |||||||||||||||
Korea Asset Management Corporation |
4,230,263 | 2,346,498 | 57,000 | 52,933 | 52,933 | |||||||||||||||
Credit Guarantee and Investment Fund |
1,140,649 | 69,307 | 21,868 | 12,137 | 29,592 | |||||||||||||||
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd. |
899,688 | 2,704,902 | (6,162 | ) | (41,587 | ) | (41,579 | ) | ||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. |
396,858 | 778,706 | 5,249 | 1,731 | 1,731 | |||||||||||||||
KTB Newlake Global Healthcare PEF |
32,395 | 146 | (65 | ) | 180 | 180 | ||||||||||||||
KBS-KDB Private Equity Fund |
19,830 | 446 | (9,638 | ) | (9,638 | ) | (9,638 | ) | ||||||||||||
Korea Aerospace Industries. Ltd. |
4,152,790 | 2,984,157 | 150,038 | 135,316 | 135,337 | |||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
11,898,045 | 7,709,970 | 394,456 | 340,506 | 347,853 |
(December 31, 2018)
Company |
Assets | Liabilities | Operating income (loss) |
Profit (loss) for the period |
Comprehensive 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 | |||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
11,918,522 | 8,078,300 | 1,024,832 | 344,722 | 332,469 |
S-58
12. TANGIBLE ASSETS:
Changes in tangible assets for the six months ended June 30, 2019, and for the year ended December 31, 2018, are as follows (Korean won in millions):
(Six months ended June 30, 2019)
Detail |
Beginning balance |
Acquisitions | Disposals | Depreciation | Ending balance |
|||||||||||||||
Lands |
₩ | 190,807 | ₩ | | ₩ | | ₩ | | ₩ | 190,807 | ||||||||||
Buildings |
64,524 | | | (1,019 | ) | 63,505 | ||||||||||||||
Vehicles |
600 | 83 | | (185 | ) | 498 | ||||||||||||||
Furniture and fixture |
10,171 | 2,565 | (3 | ) | (2,717 | ) | 10,016 | |||||||||||||
Structures in leased office |
| 89 | | (3 | ) | 86 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
₩ | 266,102 | ₩ | 2,737 | ₩ | (3 | ) | ₩ | (3,924 | ) | ₩ | 264,912 | ||||||||
|
|
|
|
|
|
|
|
|
|
(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 | ||||||||
|
|
|
|
|
|
|
|
|
|
13. INTANGIBLE ASSETS:
Changes in intangible assets for the six months ended June 30, 2019, and for the year ended December 31, 2018, are as follows (Korean won in millions):
(Six months ended June 30, 2019)
Detail |
Beginning balance |
Acquisitions | Disposals | Amortization | Impairment | Ending balance |
||||||||||||||||||
Computer software |
₩ | 11,003 | ₩ | 1,438 | ₩ | | ₩ | (1,843 | ) | ₩ | | ₩ | 10,598 | |||||||||||
System development fees |
23,985 | 1,641 | | (3,706 | ) | | 21,920 | |||||||||||||||||
Memberships |
3,466 | 138 | | | | 3,604 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
₩ | 38,454 | ₩ | 3,217 | ₩ | | ₩ | (5,549 | ) | ₩ | | ₩ | 36,122 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(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 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
S-59
14. OTHER ASSETS:
(1) Details of other assets as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||
Other financial assets: |
||||||||
Guarantee deposits |
₩ | 40,596 | ₩ | 37,638 | ||||
Accounts receivable |
376,000 | 203,866 | ||||||
Accrued income |
890,490 | 893,465 | ||||||
Receivable spot exchange |
53 | 43 | ||||||
Allowances for loan losses on other assets |
(6,622 | ) | (170,291 | ) | ||||
|
|
|
|
|||||
Subtotal |
1,300,517 | 964,721 | ||||||
|
|
|
|
|||||
Other assets: |
||||||||
Prepaid expenses |
7,023 | 1,693 | ||||||
Current income tax asset |
670 | 852 | ||||||
Sundry assets |
33,334 | 12,362 | ||||||
|
|
|
|
|||||
Subtotal |
41,027 | 14,907 | ||||||
|
|
|
|
|||||
Total |
₩ | 1,341,544 | ₩ | 979,628 | ||||
|
|
|
|
(2) Changes in allowances for loan losses on other assets for the six months ended June 30, 2019, and for the year ended December 31, 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
2018 | |||||||
Beginning balance(*1) |
₩ | 170,291 | ₩ | 168,156 | ||||
Written-off |
| 42 | ||||||
Collection |
107 | | ||||||
Additional(reversal of) provisions |
(163,669 | ) | 2,136 | |||||
Others |
(107 | ) | (43 | ) | ||||
|
|
|
|
|||||
Ending balance |
₩ | 6,622 | ₩ | 170,291 | ||||
|
|
|
|
(*1) | The beginning balance of the year ended December 31, 2018 was restated in accordance with K-IFRS No.1109 |
S-60
15. BORROWINGS:
(1) Details of borrowings as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
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 | ₩ | 3,040,163 | ||||
Long term borrowings from foreign financial institutions |
CREDIT AGRICOLE CIB and others | LIBOR 3M+0.45 ~ LIBOR 3M+0.85 | 1,966,560 | |||||
Discount on borrowings |
(695 | ) | ||||||
Offshore commercial papers denominated in foreign currency |
BRED BANQUE POPULAIRE and others |
(-)0.38 ~ 2.79 | 85,725 | |||||
Others (Foreign banks) |
DBS BANK LTD and others | LIBOR+0.25 | 224,603 | |||||
Others (CSA) |
ING BANK N.V. AMSTERDAM and others |
2.36 ~ 2.40 | 166,718 | |||||
|
|
|||||||
Total |
₩ | 5,483,074 | ||||||
|
|
(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 | ||||||
|
|
(2) Details of the borrowings from other financial institutions as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Type |
Call-money | Borrowings in foreign currencies |
Total | |||||||||
Commercial banks |
₩ | | ₩ | 2,442,911 | ₩ | 2,442,911 |
S-61
(December 31, 2018)
Type |
Call-money | Borrowings in foreign currencies |
Total | |||||||||
Commercial banks |
₩ | | ₩ | 1,955,022 | ₩ | 1,955,022 |
The above borrowings excluded the present value discounting effect.
16. DEBENTURES:
Details of debentures as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Detail |
Jun. 30, 2019 | Dec. 31, 2018 | ||||||||||||||
Interest rate (%) | Amount | Interest rate (%) | Amount | |||||||||||||
Local currency: |
||||||||||||||||
Floating rate |
| ₩ | | 1.98 ~ 2.01 | ₩ | 480,000 | ||||||||||
Fixed rate |
1.57 ~ 4.70 | 14,485,000 | 1.67 ~ 4.70 | 14,185,000 | ||||||||||||
|
|
|
|
|||||||||||||
Subtotal |
14,485,000 | 14,665,000 | ||||||||||||||
|
|
|
|
|||||||||||||
Fair value hedging adjusting |
(21,491 | ) | (51,844 | ) | ||||||||||||
Discount on debentures: |
(82,965 | ) | (81,024 | ) | ||||||||||||
|
|
|
|
|||||||||||||
Subtotal |
14,380,544 | 14,532,132 | ||||||||||||||
|
|
|
|
|||||||||||||
Foreign currencies: |
||||||||||||||||
Floating rate |
|
LIBOR+0.20 ~LIBOR+1.00 |
|
10,370,802 | |
LIBOR+0.26 ~LIBOR+1.00 |
|
9,442,431 | ||||||||
Fixed rate |
0.16 ~ 8.52 | 42,795,570 | 0.16 ~ 8.52 | 42,442,911 | ||||||||||||
|
|
|
|
|||||||||||||
Subtotal |
53,166,372 | 51,885,342 | ||||||||||||||
|
|
|
|
|||||||||||||
Fair value hedging adjusting |
642,937 | (360,624 | ) | |||||||||||||
Discount on debentures |
(109,851 | ) | (113,880 | ) | ||||||||||||
|
|
|
|
|||||||||||||
Subtotal |
53,699,458 | 51,410,838 | ||||||||||||||
|
|
|
|
|||||||||||||
Total |
₩ | 68,080,002 | ₩ | 65,942,970 | ||||||||||||
|
|
|
|
17. PROVISIONS:
(1) Details of provisions as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||
Provisions for acceptances and guarantees |
₩ | 562,870 | ₩ | 602,435 | ||||
Provisions for unused loan commitments |
137,827 | 149,447 | ||||||
|
|
|
|
|||||
Total |
₩ | 700,697 | ₩ | 751,882 | ||||
|
|
|
|
S-62
(2) Changes in provisions for the six months ended June 30, 2019, and for the year ended December 31, 2018, are as follows (Korean won in millions):
(Six months ended June 30, 2019)
Acceptances and guarantees | ||||||||||||||||
12 month expected credit losses |
Lifetime expected credit losses |
Credit-impaired financial assets |
Total | |||||||||||||
Beginning balance |
₩ | 46,487 | ₩ | 504,663 | ₩ | 51,285 | ₩ | 602,435 | ||||||||
- Transfer to 12 month expected credit losses |
| | | | ||||||||||||
- Transfer to lifetime expected credit losses |
(294 | ) | 294 | | | |||||||||||
- Transfer to credit-impaired financial assets |
(127 | ) | | 127 | | |||||||||||
Foreign exchange translation |
1,223 | 13,353 | 547 | 15,123 | ||||||||||||
Additional provisions (reversal of provision) |
114 | (64,884 | ) | 10,082 | (54,688 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Ending balance |
₩ | 47,403 | ₩ | 453,426 | ₩ | 62,041 | ₩ | 562,870 | ||||||||
|
|
|
|
|
|
|
|
Unused loan commitments | ||||||||||||||||
12 month expected credit losses |
Lifetime expected credit losses |
Credit-impaired financial assets |
Total | |||||||||||||
Beginning balance |
₩ | 27,089 | ₩ | 119,894 | ₩ | 2,464 | ₩ | 149,447 | ||||||||
- Transfer to 12 month expected credit losses |
1,374 | (1,374 | ) | | | |||||||||||
- Transfer to lifetime expected credit losses |
| 153 | (153 | ) | | |||||||||||
- Transfer to credit-impaired financial assets |
| (401 | ) | 401 | | |||||||||||
Foreign exchange translation |
396 | 213 | 80 | 689 | ||||||||||||
Additional provisions (Reversal of provision) |
(5,592 | ) | (8,433 | ) | 1,716 | (12,309 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Ending balance |
₩ | 23,267 | ₩ | 110,052 | ₩ | 4,508 | ₩ | 137,827 | ||||||||
|
|
|
|
|
|
|
|
(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 | ||||||||
|
|
|
|
|
|
|
|
S-63
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 |
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. |
| 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 June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||
Present value of defined benefit obligations |
₩ | 101,598 | ₩ | 97,160 | ||||
Fair value of plan assets |
(89,807 | ) | (90,810 | ) | ||||
|
|
|
|
|||||
Defined benefit obligations, net |
₩ | 11,791 | ₩ | 6,350 | ||||
|
|
|
|
S-64
(3) Changes in net defined benefit obligations for the six months ended June 30, 2019, and for the year ended December 31, 2018, are as follows (Korean won in millions):
(Six months ended June 30, 2019)
Present value of the defined benefit obligation |
Plan assets | Net defined benefit obligation |
||||||||||
Beginning balance |
₩ | 97,160 | ₩ | (90,810 | ) | ₩ | 6,350 | |||||
Contributions from the employer |
| | | |||||||||
Current service cost |
5,330 | | 5,330 | |||||||||
Interest expense (income) |
1,610 | (1,509 | ) | 101 | ||||||||
Return on plan assets, excluding the interest expense (income) |
| | | |||||||||
Actuarial gains and losses arising from changes in financial assumptions |
| | | |||||||||
Actuarial gains and losses arising from experience adjustments |
| | | |||||||||
Management fee on plan assets |
| | | |||||||||
Benefits paid |
(2,502 | ) | 2,512 | 10 | ||||||||
|
|
|
|
|
|
|||||||
Ending balance |
₩ | 101,598 | ₩ | (89,807 | ) | ₩ | 11,791 | |||||
|
|
|
|
|
|
(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 | |||||
|
|
|
|
|
|
(4) Details of plan assets as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||
Cash and cash equivalent |
₩ | 36,405 | ₩ | 35,943 | ||||
Debt securities |
5,617 | 5,551 | ||||||
Others |
47,785 | 49,316 | ||||||
|
|
|
|
|||||
Total |
₩ | 89,807 | ₩ | 90,810 | ||||
|
|
|
|
S-65
(5) Retirement benefit costs incurred from the defined contribution plan for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Retirement benefit cost |
₩ | 252 | ₩ | 259 |
19. OTHER LIABILITIES:
Details of other liabilities as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||
Other financial liabilities: |
||||||||
Financial guarantee contract liabilities |
₩ | 1,055,717 | ₩ | 1,119,984 | ||||
Foreign exchanges payable |
21,612 | 157 | ||||||
Accounts payable |
359,223 | 14,130 | ||||||
Accrued expenses |
749,849 | 703,247 | ||||||
Guarantee deposit received |
161 | 161 | ||||||
|
|
|
|
|||||
Subtotal |
2,186,562 | 1,837,679 | ||||||
|
|
|
|
|||||
Other liabilities: |
||||||||
Allowance for credit loss in derivatives |
79,481 | 89,097 | ||||||
Unearned income |
228,707 | 210,728 | ||||||
Current tax payable |
359,509 | 42,917 | ||||||
Sundry liabilities |
29,933 | 7,321 | ||||||
|
|
|
|
|||||
Subtotal |
697,630 | 350,063 | ||||||
|
|
|
|
|||||
Total |
₩ | 2,884,192 | ₩ | 2,187,742 | ||||
|
|
|
|
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.
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
S-66
(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 June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Derivative assets | ||||||||||||||||||||
Detail |
Notional | Fair value hedge |
Cash flow hedge |
Trading | Total | |||||||||||||||
Interest: |
||||||||||||||||||||
Interest rate swaps |
₩ | 41,408,727 | ₩ | 244,016 | ₩ | | ₩ | 395,624 | ₩ | 639,640 | ||||||||||
Currency: |
||||||||||||||||||||
Currency forwards |
6,019,565 | | | 59,721 | 59,721 | |||||||||||||||
Currency swaps |
29,739,840 | 121,028 | | 249,376 | 370,404 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Subtotal |
35,759,405 | 121,028 | | 309,097 | 430,125 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Stock: |
||||||||||||||||||||
Stock options |
46,952 | | | 492 | 492 | |||||||||||||||
Others: |
||||||||||||||||||||
Other derivatives |
| | | 25 | 25 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
₩ | 77,215,084 | ₩ | 365,044 | ₩ | | ₩ | 705,238 | ₩ | 1,070,282 | ||||||||||
|
|
|
|
|
|
|
|
|
|
S-67
Derivative liabilities | ||||||||||||||||||||
Detail |
Notional | Fair value hedge |
Cash flow hedge |
Trading | Total | |||||||||||||||
Interest: |
||||||||||||||||||||
Interest rate swaps |
₩ | 41,408,727 | ₩ | 97,961 | ₩ | | ₩ | 264,105 | ₩ | 362,066 | ||||||||||
Currency: |
||||||||||||||||||||
Currency forwards |
6,019,565 | | | 77,677 | 77,677 | |||||||||||||||
Currency swaps |
29,739,840 | 807,018 | | 341,876 | 1,148,894 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Subtotal |
35,759,405 | 807,018 | | 419,553 | 1,226,571 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Stock: |
||||||||||||||||||||
Stock options |
46,952 | | | 284 | 284 | |||||||||||||||
Others: |
||||||||||||||||||||
Other derivatives |
| | | 19 | 19 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
₩ | 77,215,084 | ₩ | 904,979 | ₩ | | ₩ | 683,961 | ₩ | 1,588,940 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(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 | ||||||||||
|
|
|
|
|
|
|
|
|
|
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 | ||||||||||
|
|
|
|
|
|
|
|
|
|
S-68
(4) Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Fair value hedgehedged items |
₩ | (1,034,077 | ) | ₩ | 683,778 | |||
Fair value hedgehedging instruments |
1,253,651 | (1,005,560 | ) |
(5) The Bank recognized ₩182 million and ₩(1,702) million as other comprehensive income (loss) (before tax effect) for the six months ended June 30, 2019 and 2018, and cash flow hedge ineffectiveness recognized in earnings was nil for the six months ended June 30, 2019 and 2018.
(6) Hedge accounting
1) Purpose and strategy of risk avoidance
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 June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
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 |
₩5,994,117 | ₩6,129,320 | ₩4,281,033 | ₩2,593,820 | ₩2,592,513 | ₩10,682,315 | ₩32,273,118 | |||||||||||||||||||||
Nominal values of hedging derivatives |
5,652,189 | 6,129,320 | 4,279,905 | 2,596,197 | 2,612,683 | 9,831,731 | 31,102,025 | |||||||||||||||||||||
Average hedge ratio |
94.30 | % | 100.00 | % | 99.97 | % | 100.09 | % | 100.78 | % | 92.04 | % | 96.37 | % | ||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||||||
Nominal values of hedged items |
| | | | | | | |||||||||||||||||||||
Nominal values of hedging derivatives |
| | | | | | | |||||||||||||||||||||
Average hedge ratio |
| | | | | | |
S-69
(December 31, 2018)
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 | % |
3) Effect of hedge accounting on statement of financial position, statement of comprehensive income, statement of changes in equity
① Effect of derivatives on statement of financial position, statement of comprehensive income, statement of changes in equity as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Detail |
Nominal amount |
BV of asset | BV of liabilities | Changes of fair value in six months ended June 30, 2019 |
||||||||||||
Fair value hedges |
||||||||||||||||
Interest swap |
₩ | 18,079,221 | ₩ | 244,016 | ₩ | 97,961 | ₩ | 624,880 | ||||||||
Currency swap |
13,022,804 | 121,028 | 807,018 | 387,746 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
31,102,025 | 365,044 | 904,979 | 1,012,626 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash flow hedges |
| | | 182 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
₩ | 31,102,025 | ₩ | 365,044 | ₩ | 904,979 | ₩ | 1,012,808 | ||||||||
|
|
|
|
|
|
|
|
(December 31, 2018)
Detail |
Nominal amount |
BV of asset | BV of liabilities | Changes of fair value in six months ended June 30, 2018 |
||||||||||||
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 | ) | |||||||
|
|
|
|
|
|
|
|
S-70
② Effect of hedging items on statement of financial position, statement of comprehensive income, statement of changes in equity as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Detail |
Nominal amount |
BV of asset | BV of liabilities | Changes of fair value in six months ended June 30, 2019 |
||||||||||||
Fair value hedges |
||||||||||||||||
Loans in foreign currencies |
₩ | 85,252 | ₩ | | ₩ | 3,363 | ₩ | 323 | ||||||||
Debentures in local currency |
1,000,000 | | 30,600 | (30,353 | ) | |||||||||||
Debentures in foreign currencies |
31,187,866 | 365,044 | 871,016 | (666,525 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
32,273,118 | 365,044 | 904,979 | (696,555 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash flow hedges |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
₩ | 32,273,118 | ₩ | 365,044 | ₩ | 904,979 | ₩ | (696,555 | ) | |||||||
|
|
|
|
|
|
|
|
(December 31, 2018)
Detail |
Nominal amount |
BV of asset | BV of liabilities | Changes of fair value in six months ended June 30, 2018 |
||||||||||||
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 six months ended June 30, 2019, and 2018 are as follows (Korean won in millions):
(Six months ended June 30, 2019)
Gains on hedged items |
Gains
on hedging instruments |
Hedge
ineffectiveness recognized in profit or loss |
||||||||||
Fair value hedges |
₩ | (1,028,670 | ) | ₩ | 959,442 | ₩ | (69,228 | ) | ||||
Cash flow hedges |
(182 | ) | 182 | | ||||||||
|
|
|
|
|
|
|||||||
Total |
₩ | (1,028,852 | ) | ₩ | 959,624 | ₩ | (69,228 | ) | ||||
|
|
|
|
|
|
(Six months ended June 30, 2018)
Gains on hedged items |
Gains
on hedging instruments |
Hedge
ineffectiveness recognized in profit or loss |
||||||||||
Fair value hedges |
₩ | 680,126 | ₩ | (542,153 | ) | ₩ | 137,973 | |||||
Cash flow hedges |
2,028 | (2,028 | ) | | ||||||||
|
|
|
|
|
|
|||||||
Total |
₩ | 682,154 | ₩ | (544,181 | ) | ₩ | 137,973 | |||||
|
|
|
|
|
|
S-71
21. CAPITAL STOCK:
As of June 30, 2019, the authorized capital and paid-in capital of the Bank are ₩15,000,000 million and ₩11,814,143 million, respectively. The Bank does not issue share certificates.
Changes in capital stock for the six months ended June 30, 2019, and for the year ended December 31, 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
2018 | |||||||
Beginning balance |
₩ | 11,814,963 | ₩ | 11,814,963 | ||||
Paid-in capital increase |
26,180 | | ||||||
|
|
|
|
|||||
Ending balance |
₩ | 11,841,143 | ₩ | 11,814,963 | ||||
|
|
|
|
22. OTHER COMPONENTS OF EQUITY:
(1) Details of other components of equity as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||
Gain(Loss) on equity securities at FVOCI |
₩ | 691,755 | ₩ | 780,219 | ||||
Gain(Loss) on debt securities at FVOCI |
(83,235 | ) | (109,669 | ) | ||||
Gain(Loss) on valuation of cash flow hedge |
| (137 | ) | |||||
Remeasurement of net defined benefit obligation |
9,916 | 9,916 | ||||||
|
|
|
|
|||||
Total |
₩ | 618,436 | ₩ | 680,329 | ||||
|
|
|
|
(2) Changes in other components for the six months ended June 30, 2019, and for the year ended December 31, 2018, are as follows (Korean won in millions):
(Six months ended June 30, 2019)
Beginning Balance |
Increase (decrease) |
Tax effect | Ending balance |
|||||||||||||
Gain (loss) on equity securities at FVOCI |
₩ | 780,219 | ₩ | (116,708 | ) | ₩ | 28,244 | ₩ | 691,755 | |||||||
Gain (loss) on debt securities at FVOCI |
(109,669 | ) | 34,872 | (8,438 | ) | (83,235 | ) | |||||||||
Gain (loss) on valuation of cash flow hedge |
(137 | ) | 182 | (45 | ) | | ||||||||||
Remeasurement of net defined benefit liability |
9,916 | | | 9,916 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
₩ | 680,329 | ₩ | (81,654 | ) | ₩ | 19,761 | ₩ | 618,436 | |||||||
|
|
|
|
|
|
|
|
(2018)
Beginning Balance(*1) |
Increase (decrease) |
Tax effect | Ending balance |
|||||||||||||
Gain (loss) on equity securities at FVOCI |
₩ | (35,656 | ) | ₩ | 1,062,901 | ₩ | (257,221 | ) | ₩ | 780,219 | ||||||
Gain (loss) on debt securities at FVOCI |
(92,192 | ) | (9,606 | ) | 2,325 | (109,669 | ) | |||||||||
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 |
₩ | (110,096 | ) | ₩ | 1,042,775 | ₩ | (252,351 | ) | ₩ | 680,329 | ||||||
|
|
|
|
|
|
|
|
(*1) | The beginning balance was restated in accordance with K-IFRS No.1109 |
S-72
23. RETAINED EARNINGS:
(1) Details of retained earnings as of as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 | Dec. 31, 2018 | |||||||
Legal reserve(*1) |
₩ | 405,839 | ₩ | 346,136 | ||||
Voluntary reserve(*2) |
541,515 | | ||||||
Regulatory reserve for loan losses |
106,650 | 302,248 | ||||||
Adjustments on initial application of K-IFRS No.1109 |
| (128,763 | ) | |||||
Unappropriated retained earnings |
490,559 | 597,039 | ||||||
|
|
|
|
|||||
Total |
₩ | 1,544,563 | ₩ | 1,116,660 | ||||
|
|
|
|
(*1) | Pursuant to the EXIM Bank Act, the Bank appropriates 10% of separate profit for each accounting period as legal reserve, until the accumulated reserve equals to its paid-in capital. |
(*2) | The Bank appropriates the remaining balance of profit for the year, after the appropriation of regulatory reserve for loan losses and declaration of dividends, to voluntary reserve. |
(2) Changes in retained earnings for the six months ended June 30, 2019, and for the year ended December 31, 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
2018 | |||||||
Beginning balance(*1) |
₩ | 1,116,660 | ₩ | 579,217 | ||||
Profit for the period |
490,559 | 597,039 | ||||||
Dividends |
(62,656 | ) | (59,596 | ) | ||||
|
|
|
|
|||||
Ending balance |
₩ | 1,544,563 | ₩ | 1,116,660 | ||||
|
|
|
|
(*1) | The beginning balance of the year ended December 31, 2018 was restated in accordance with K-IFRS No.1109 |
(3) Regulatory reserve for loan losses
Regulatory reserve for loan losses 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 loan losses. Due to the fact that regulatory reserve for loan losses is a voluntary reserve, the amounts that exceed the existing regulatory reserve for loan losses over the compulsory regulatory reserve for loan losses at the period-end date are reversed in profit. In case of accumulated deficit, the Bank should recommence setting aside regulatory reserve for loan losses at the time when accumulated deficit is reduced to zero.
1) Regulatory reserve for loan losses
Details of regulatory reserve for loan losses as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Jun. 30, 2019 |
Dec. 31, 2018 | |||||||
Accumulated regulatory reserve for loan losses |
₩ | 106,650 | ₩ | 302,248 | ||||
Expected reversal of regulatory reserve for loan losses |
(19,214 | ) | (195,598 | ) | ||||
|
|
|
|
|||||
Regulatory reserve for loan losses |
₩ | 87,436 | ₩ | 106,650 | ||||
|
|
|
|
S-73
2) Provision for regulatory reserve for loan losses and profit for the period after adjusting regulatory reserve for loan losses
Details of regulatory reserve for loan losses and profit for the period after adjusting the reserve for six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Profit for the period |
₩ | 490,559 | ₩ | 558,888 | ||||
Reversal of (provision for) regulatory reserve for loan losses |
19,214 | (12,122 | ) | |||||
|
|
|
|
|||||
Net profit after adjusting the regulatory reserve for loan losses(*) |
₩ | 509,773 | ₩ | 546,766 | ||||
|
|
|
|
(*) | Adjusted profit considering regulatory reserve for loan losses as above is calculated by assuming that the provision in regulatory reserve for loan losses before income tax is reflected in profit for the period. |
(4) Details of dividends for the six months ended June 30, 2019, and for the six months ended June 30, 2018 are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
The Government |
₩ | 41,520 | ₩ | 39,493 | ||||
BOK |
6,178 | 5,876 | ||||||
Korea Development Bank |
14,958 | 14,227 | ||||||
|
|
|
|
|||||
Total |
₩ | 62,656 | ₩ | 59,596 | ||||
|
|
|
|
S-74
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 six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Interest of due from financial institutions: |
||||||||
Due from financial institutions in local currency |
₩ | 7,398 | ₩ | 4,878 | ||||
Due from financial institutions in foreign currencies |
48,304 | 14,546 | ||||||
|
|
|
|
|||||
Subtotal |
55,702 | 19,424 | ||||||
|
|
|
|
|||||
Interest of financial assets at FVTPL: |
||||||||
Interest of trading securities at FVTPL |
1,057 | 667 | ||||||
Interest of loans at FVTPL |
76 | 83 | ||||||
|
|
|
|
|||||
Subtotal |
1,133 | 750 | ||||||
|
|
|
|
|||||
Interest of financial investments: |
||||||||
Interest of securities at FVOCI |
11,498 | 11,711 | ||||||
Interest of securities at amortized cost |
6,005 | 503 | ||||||
|
|
|
|
|||||
Subtotal |
17,503 | 12,214 | ||||||
|
|
|
|
|||||
Interest of loans: |
||||||||
Interest of loans in local currency |
276,699 | 278,592 | ||||||
Interest of loans in foreign currencies |
1,202,085 | 987,811 | ||||||
Interest of advance for customers |
11,682 | 9,894 | ||||||
Interest of bills bought |
33 | 384 | ||||||
Interest of call loans |
19,334 | 21,108 | ||||||
Interest of interbank loans |
56 | 5,106 | ||||||
|
|
|
|
|||||
Subtotal |
1,509,889 | 1,302,895 | ||||||
|
|
|
|
|||||
Other interest income |
599 | 609 | ||||||
|
|
|
|
|||||
Total |
₩ | 1,584,826 | ₩ | 1,335,892 | ||||
|
|
|
|
(2) Details of interest expenses for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Interest of borrowings: |
||||||||
Borrowings in foreign currencies |
₩ | 80,813 | ₩ | 74,623 | ||||
Interest of call money |
36 | 198 | ||||||
Interest of debentures: |
||||||||
Interest of debentures in local currency |
139,208 | 125,793 | ||||||
Interest of debentures in foreign currencies |
929,922 | 689,166 | ||||||
|
|
|
|
|||||
Subtotal |
1,069,130 | 814,959 | ||||||
|
|
|
|
|||||
Other interest expenses |
2,570 | 4,410 | ||||||
|
|
|
|
|||||
Total |
₩ | 1,152,549 | ₩ | 894,190 | ||||
|
|
|
|
S-75
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 six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Commission income in local currency: |
||||||||
Commission income on management of EDCF(*1) |
₩ | 9,001 | ₩ | 8,088 | ||||
Commission income on management of IKCF(*2) |
1,125 | 1,135 | ||||||
Other commission income in local currency |
| 6 | ||||||
|
|
|
|
|||||
Subtotal |
10,126 | 9,229 | ||||||
|
|
|
|
|||||
Commission income in foreign currencies: |
||||||||
Commission income on letter of credit |
949 | 852 | ||||||
Commission income on confirmation on export letter of credit |
105 | 176 | ||||||
Commission income on loan commitments |
16,382 | 16,020 | ||||||
Arrangement fee |
2,698 | 1,115 | ||||||
Advisory fee |
1,263 | 105 | ||||||
Prepayment fee |
7,704 | 304 | ||||||
Sundry commission income on foreign exchange |
63 | 54 | ||||||
Structuring fee |
953 | | ||||||
Brokerage fee for foreign currencies exchange funds |
455 | 1,101 | ||||||
Other commission income in foreign currencies |
1,649 | 596 | ||||||
|
|
|
|
|||||
Subtotal |
32,221 | 20,323 | ||||||
|
|
|
|
|||||
Others: |
||||||||
Other commission income |
5,583 | 6,697 | ||||||
Guarantee fees in foreign currencies: |
||||||||
Guarantee fees in foreign currencies |
76,486 | 82,164 | ||||||
Premium for guarantee |
38,747 | 36,352 | ||||||
|
|
|
|
|||||
Subtotal |
115,233 | 118,516 | ||||||
|
|
|
|
|||||
Total |
₩ | 163,163 | ₩ | 154,765 | ||||
|
|
|
|
(*1) | Economic Development Cooperation Fund |
(*2) | Inter Korean Cooperation Fund |
S-76
(2) Details of commission expenses for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Commission expenses in local currency: |
||||||||
Commission expenses on domestic transaction |
₩ | 146 | ₩ | 182 | ||||
Commission expenses in foreign currencies: |
||||||||
Service fees paid to credit-rating agency |
740 | 675 | ||||||
Sundry commission expenses on foreign exchange |
1,563 | 1,061 | ||||||
|
|
|
|
|||||
Subtotal |
2,303 | 1,736 | ||||||
|
|
|
|
|||||
Other commissions expenses |
3,551 | 2,217 | ||||||
|
|
|
|
|||||
Total |
₩ | 6,000 | ₩ | 4,135 | ||||
|
|
|
|
26. DIVIDEND INCOME:
Details of dividend income for six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Financial assets at FVTPL |
₩ | 14 | ₩ | 1,618 | ||||
Financial assets at FVOCI |
28,869 | 33,772 | ||||||
Investments in associates (*1) |
11,928 | 4,577 | ||||||
|
|
|
|
|||||
Total |
₩ | 40,811 | ₩ | 39,967 | ||||
|
|
|
|
(*1) | Classified as net gain on investments in associates and subsidiaries |
S-77
27. GAIN (LOSS) ON FINANCIAL ASSETS AT FVTPL:
Details of gain (loss) on financial assets at FVTPL for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Securities at FVTPL: |
||||||||
Gain on valuation |
₩ | 3,277 | ₩ | 13,518 | ||||
Loss on valuation |
(5,265 | ) | (2,523 | ) | ||||
Gain on disposal |
5,194 | 6,320 | ||||||
Loss on disposal |
(1,776 | ) | (427 | ) | ||||
Others |
8,089 | 302 | ||||||
|
|
|
|
|||||
Subtotal |
9,519 | 17,190 | ||||||
|
|
|
|
|||||
Loans at FVTPL |
||||||||
Gain on valuation |
183 | 24 | ||||||
Loss on valuation |
(33 | ) | (199 | ) | ||||
Gain on disposal |
1,607 | | ||||||
|
|
|
|
|||||
Subtotal |
1,757 | (175 | ) | |||||
|
|
|
|
|||||
Trading derivatives: |
||||||||
Gain on valuation |
653,110 | 514,440 | ||||||
Loss on valuation |
(632,281 | ) | (636,645 | ) | ||||
Gain on transaction |
457,189 | 296,613 | ||||||
Loss on transaction |
(326,890 | ) | (288,911 | ) | ||||
|
|
|
|
|||||
Subtotal |
151,128 | (114,503 | ) | |||||
|
|
|
|
|||||
Total |
₩ | 162,404 | ₩ | (97,488 | ) | |||
|
|
|
|
28. GAIN (LOSS) ON HEDGING DERIVATIVES:
Details of gain (loss) on hedging derivatives for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Gain on hedging derivatives |
₩ | 1,289,090 | ₩ | 173,444 | ||||
Loss on hedging derivatives |
(35,402 | ) | (1,179,004 | ) | ||||
|
|
|
|
|||||
Total |
₩ | 1,253,688 | ₩ | (1,005,560 | ) | |||
|
|
|
|
S-78
29. GAIN (LOSS) ON FINANCIAL INVESTMENTS:
Details of gain (loss) on financial investments for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Financial assets at FVOCI: |
||||||||
Gain on disposals |
₩ | 140 | ₩ | 211 | ||||
Loss on disposals |
(6,917 | ) | (1,674 | ) | ||||
|
|
|
|
|||||
Total |
₩ | (6,777 | ) | ₩ | (1,463 | ) | ||
|
|
|
|
30. OTHER OPERATING INCOME (EXPENSES):
Details of other operating income (expenses) for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Other operating income: |
||||||||
Gains on sale of loans |
₩ | 2,000 | ₩ | | ||||
Gain on fair value hedged items |
28,221 | 717,545 | ||||||
Others |
9,705 | 313 | ||||||
|
|
|
|
|||||
Subtotal |
39,926 | 717,858 | ||||||
|
|
|
|
|||||
Other operating expenses: |
||||||||
Loss on fair value hedged items |
(1,062,298 | ) | (33,767 | ) | ||||
Contribution to Credit Guarantee Fund and Technology Credit Guarantee Fund |
(2,192 | ) | (2,391 | ) | ||||
Transfer to other provision |
(200 | ) | | |||||
Others |
(351 | ) | (9,595 | ) | ||||
|
|
|
|
|||||
Subtotal |
(1,065,041 | ) | (45,753 | ) | ||||
|
|
|
|
|||||
Total |
₩ | (1,025,115 | ) | ₩ | 672,105 | |||
|
|
|
|
S-79
31. IMPAIRMENT LOSS (REVERSAL) ON CREDIT:
Details of impairment loss (reversal) on credit for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Loans at amortized cost |
₩ | 237,299 | ₩ | 11,060 | ||||
Other financial assets |
(163,669 | ) | 1,006 | |||||
Guarantees |
(54,688 | ) | (97,999 | ) | ||||
Unused loan commitments |
(12,309 | ) | (77,022 | ) | ||||
Financial guarantee contract |
(71,266 | ) | 41,690 | |||||
Financial assets at FVOCI |
(208 | ) | 79 | |||||
Financial assets at amortized cost |
27 | (7 | ) | |||||
|
|
|
|
|||||
Total |
₩ | (68,814 | ) | ₩ | (121,193 | ) | ||
|
|
|
|
32. GENERAL AND ADMINISTRATIVE EXPENSES:
Details of general and administrative expenses for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Detail |
Six months |
Six months | ||||
General and administrative |
Short-term salaries | ₩ 51,925 | ₩ 48,834 | |||
Other expenses in financing department |
Office expenses | 26,623 | 25,606 | |||
|
| |||||
Subtotal |
78,548 | 74,440 | ||||
|
| |||||
Office expenses of EDCF |
657 | 761 | ||||
General and administrative |
Postemployment benefit (defined contributions) |
252 | 259 | |||
Others |
Postemployment benefit (defined benefits) |
5,431 | 4,416 | |||
Depreciation of tangible assets |
3,924 | 4,327 | ||||
Amortization of intangible assets |
5,549 | 6,439 | ||||
Taxes and dues |
7,366 | 11,966 | ||||
Subtotal |
22,522 | 27,407 | ||||
|
| |||||
Total |
₩ 101,727 | ₩ 102,608 | ||||
|
|
S-80
33. NON-OPERATING INCOME (EXPENSES):
Details of non-operating income (expenses) for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Detail |
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
||||||||
Gain(loss) on investments in associates and subsidiaries |
Dividend income | ₩ | 11,928 | ₩ | 4,577 | |||||
Gain on disposals | 18,719 | | ||||||||
|
|
|
|
|||||||
Subtotal |
30,647 | 4,577 | ||||||||
|
|
|
|
|||||||
Others income |
Gain on disposals of tangible assets | 12 | 1 | |||||||
Gain on disposals of intangible assets | | 100 | ||||||||
Rental income | 84 | 80 | ||||||||
Damages paid for breach of contracts | | 2 | ||||||||
Interest on other loans` | 69 | 55 | ||||||||
Revenue on research project | 4,380 | 15,680 | ||||||||
Other miscellaneous income | 203 | 328 | ||||||||
|
|
|
|
|||||||
Subtotal |
4,748 | 16,246 | ||||||||
|
|
|
|
|||||||
Others expenses |
Loss on disposal of tangible assets | (2 | ) | (1 | ) | |||||
Expenses for contribution | (2,436 | ) | (1,985 | ) | ||||||
Court cost | (2,255 | ) | (2,153 | ) | ||||||
Expenses on research project | (4,053 | ) | (2,790 | ) | ||||||
Other miscellaneous expenses | (150 | ) | (26 | ) | ||||||
|
|
|
|
|||||||
Subtotal |
(8,896 | ) | (6,955 | ) | ||||||
|
|
|
|
|||||||
Total |
₩ | 26,499 | ₩ | 13,868 | ||||||
|
|
|
|
34. INCOME TAX EXPENSE:
(1) Details of income tax expenses (benefit) for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Current income tax payable |
₩ | 323,298 | ₩ | | ||||
Adjustment recognized in the period for current tax of prior periods |
24,880 | 23,004 | ||||||
Changes in deferred income taxes due to temporary differences |
(152,924 | ) | 297,492 | |||||
Changes in deferred income taxes directly recognized in equity |
19,343 | (156,469 | ) | |||||
|
|
|
|
|||||
Income tax expense |
₩ | 214,597 | ₩ | 164,026 | ||||
|
|
|
|
S-81
(2) Details of the reconciliation between profit before income tax and income tax expense (benefit) for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Profit before income tax |
₩ | 705,156 | ₩ | 722,914 | ||||
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 ₩300 billion) |
183,556 | 174,482 | ||||||
Adjustments: |
||||||||
Effect on non-taxable income |
(6,896 | ) | (7,797 | ) | ||||
Effect on non-deductible expense |
5,473 | 3,831 | ||||||
Others |
32,464 | (6,490 | ) | |||||
|
|
|
|
|||||
Subtotal |
31,041 | (10,456 | ) | |||||
|
|
|
|
|||||
Income tax expense |
₩ | 214,597 | ₩ | 164,026 | ||||
|
|
|
|
|||||
Effective tax rate from operations |
30.43 | % | 22.69 | % |
35. STATEMENTS OF CASH FLOWS:
Details of significant noncash investing and financing transactions for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
|||||||
Loan-for-equity swap |
₩ | (59,143 | ) | ₩ | (6,170 | ) | ||
Loss (gain) on valuation of financial assets at FVOCI |
80,375 | (648,043 | ) | |||||
Transfers investments in associates to financial assets at FVOCI |
(400,000 | ) | | |||||
Written-off |
(19,802 | ) | (602,640 | ) |
36. CONTINGENT LIABILITIES AND COMMITMENTS:
(1) Details of contingent liabilities and commitments as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
Detail |
Jun. 30, 2019 | Dec. 31, 2018 | ||||||||
Guarantees |
Confirmed | ₩ | 33,977,631 | ₩ | 34,794,577 | |||||
Unconfirmed | 6,053,440 | 5,215,972 | ||||||||
|
|
|
|
|||||||
Subtotal |
40,031,071 | 40,010,549 | ||||||||
|
|
|
|
|||||||
Loan commitments |
Local currency, foreign currency loan commitments |
20,395,021 | 16,884,935 | |||||||
Others | 2,754,688 | 944,320 | ||||||||
|
|
|
|
|||||||
Subtotal |
23,149,709 | 17,829,254 | ||||||||
|
|
|
|
|||||||
Total |
₩ | 63,180,780 | ₩ | 57,839,803 | ||||||
|
|
|
|
S-82
(2) | Details of guarantees that have been provided for others as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions): |
Detail |
Jun. 30, 2019 | Dec. 31, 2018 | ||||||||
Confirmed guarantees |
Local currency: | |||||||||
Performance of contracts |
₩ | 76,148 | ₩ | 59,467 | ||||||
Repayment of advances |
375,986 | 283,203 | ||||||||
Others |
199,078 | 290,108 | ||||||||
|
|
|
|
|||||||
Subtotal |
651,212 | 632,778 | ||||||||
|
|
|
|
|||||||
Foreign currency: | ||||||||||
Performance of contracts |
9,013,118 | 9,232,888 | ||||||||
Repayment of advances |
6,983,874 | 7,990,136 | ||||||||
Acceptances of imported goods |
1,385 | 3,864 | ||||||||
Acceptances of import letter of credit outstanding |
27,361 | 68,786 | ||||||||
Foreign liabilities |
12,254,089 | 11,912,436 | ||||||||
Others |
5,046,592 | 4,953,689 | ||||||||
|
|
|
|
|||||||
Subtotal |
33,326,419 | 34,161,799 | ||||||||
|
|
|
|
|||||||
Unconfirmed guarantees |
Foreign liabilities | 1,576,195 | 1,424,174 | |||||||
Repayment of advances |
4,349,331 | 3,661,665 | ||||||||
Performance of contracts |
106,101 | 130,099 | ||||||||
Acceptances of import letter of credit outstanding |
21,778 | | ||||||||
Others |
35 | 34 | ||||||||
|
|
|
|
|||||||
Subtotal |
6,053,440 | 5,215,972 | ||||||||
|
|
|
|
|||||||
Total |
₩ | 40,031,071 | ₩ | 40,010,549 | ||||||
|
|
|
|
S-83
(3) Details of guarantees classified by country as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Confirmed guarantees | Unconfirmed guarantees | Total | ||||||||||||||||||||||||
Detail |
Amount | Ratio (%) | Amount | Ratio (%) | Amount | Ratio (%) | ||||||||||||||||||||
Asia |
Korea | ₩ | 20,149,740 | 59.30 | ₩ | 4,417,902 | 72.98 | ₩ | 24,567,642 | 61.37 | ||||||||||||||||
China | 250,317 | 0.74 | | | 250,317 | 0.63 | ||||||||||||||||||||
Saudi Arabia | 1,820,458 | 5.36 | | | 1,820,458 | 4.55 | ||||||||||||||||||||
India | 464,297 | 1.37 | 5,206 | 0.08 | 469,503 | 1.17 | ||||||||||||||||||||
Indonesia | 957,947 | 2.82 | 106,455 | 1.76 | 1,064,402 | 2.66 | ||||||||||||||||||||
Vietnam | 1,173,718 | 3.45 | 260,249 | 4.30 | 1,433,967 | 3.58 | ||||||||||||||||||||
Uzbekistan | 328,003 | 0.96 | 79,852 | 1.32 | 407,855 | 1.02 | ||||||||||||||||||||
Australia | 626,748 | 1.84 | 54,704 | 0.90 | 681,452 | 1.70 | ||||||||||||||||||||
Qatar | 278,395 | 0.82 | | | 278,395 | 0.70 | ||||||||||||||||||||
Singapore | 29,915 | 0.09 | | | 29,915 | 0.07 | ||||||||||||||||||||
Oman | 396,562 | 1.17 | 212,417 | 3.51 | 608,979 | 1.52 | ||||||||||||||||||||
Others | 1,960,829 | 5.77 | 465,905 | 7.70 | 2,426,734 | 6.06 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Subtotal |
28,436,929 | 83.69 | 5,602,690 | 92.55 | 34,039,619 | 85.03 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Europe |
United Kingdom | 757,537 | 2.23 | | | 757,537 | 1.89 | |||||||||||||||||||
Belgium | 93,559 | 0.27 | | | 93,559 | 0.24 | ||||||||||||||||||||
France | 389,536 | 1.15 | | | 389,536 | 0.97 | ||||||||||||||||||||
Others | 471,122 | 1.39 | 286,911 | 4.74 | 758,033 | 1.89 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Subtotal |
1,711,754 | 5.04 | 286,911 | 4.74 | 1,998,665 | 4.99 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
America |
United States | 2,174,486 | 6.40 | 12,725 | 0.21 | 2,187,211 | 5.46 | |||||||||||||||||||
Brazil | 399,903 | 1.18 | | | 399,903 | 1.00 | ||||||||||||||||||||
Mexico | 246,863 | 0.72 | 2,097 | 0.03 | 248,960 | 0.62 | ||||||||||||||||||||
Bermuda | 326,078 | 0.96 | | | 326,078 | 0.82 | ||||||||||||||||||||
Others | 223,548 | 0.66 | 98,967 | 1.64 | 322,515 | 0.81 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Subtotal |
3,370,878 | 9.92 | 113,789 | 1.88 | 3,484,667 | 8.71 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Africa |
Madagascar | 171,990 | 0.51 | | | 171,990 | 0.43 | |||||||||||||||||||
Others | 286,080 | 0.84 | 50,050 | 0.83 | 336,130 | 0.84 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Subtotal |
458,070 | 1.35 | 50,050 | 0.83 | 508,120 | 1.27 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
₩ | 33,977,631 | 100.00 | ₩ | 6,053,440 | 100.00 | ₩ | 40,031,071 | 100.00 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
S-84
(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 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(4) Details of guarantees classified by industry as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Confirmed guarantees | Unconfirmed guarantees | Total | ||||||||||||||||||||||
Detail |
Amount | Ratio (%) | Amount | Ratio (%) | Amount | Ratio (%) | ||||||||||||||||||
Manufacturing |
₩ | 15,503,432 | 45.63 | ₩ | 5,492,861 | 90.74 | ₩ | 20,996,293 | 52.45 | |||||||||||||||
Transportation |
2,071,593 | 6.10 | 2,584 | 0.04 | 2,074,177 | 5.18 | ||||||||||||||||||
Finance |
2,229,431 | 6.56 | 23,340 | 0.39 | 2,252,771 | 5.63 | ||||||||||||||||||
Wholesale and retail |
732,522 | 2.15 | 5,737 | 0.08 | 738,259 | 1.84 | ||||||||||||||||||
Property related business |
394,497 | 1.16 | 47,571 | 0.79 | 442,068 | 1.11 | ||||||||||||||||||
Construction |
7,217,188 | 21.24 | 240,660 | 3.98 | 7,457,848 | 18.63 | ||||||||||||||||||
Public and others |
5,828,968 | 17.16 | 240,687 | 3.98 | 6,069,655 | 15.16 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
₩ | 33,977,631 | 100.00 | ₩ | 6,053,440 | 100.00 | ₩ | 40,031,071 | 100.00 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
S-85
(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 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(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, Euro 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 renewed every year, MYR MTN program to issue Malaysian Ringgit-denoted bonds with issuance limits of MYR 1 billion. |
5) | Established in 1995, initially, and every other yearly renewed, 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 6 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 June 30, 2019, 12 lawsuits (aggregated claim amount: ₩111,255 million) were filed as a plaintiff and 15 pending litigations as a defendant were filed (aggregated claim amount: ₩30,436 million). The Banks 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 June 30, 2019, and December 31, 2018, are ₩3,345,509 million and ₩3,413,713 million, respectively.
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 persons family, an entity controlled or jointly controlled and an entity influenced significantly.
S-86
(1) Details of related parties as of June 30, 2019, 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 | 69.39 | ||||||
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 Aerospace Industries. Ltd. |
Associate | 26.41 | ||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
Associate | |
(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 June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Detail |
Receivables | Allowance /Provisions |
Payables | |||||||||
Subsidiaries: |
||||||||||||
KEXIM Bank UK Limited |
₩ | 148,688 | ₩ | | ₩ | | ||||||
PT.KOEXIM Mandiri Finance |
162,810 | 276 | | |||||||||
KEXIM Vietnam Leasing Co. |
135,950 | 245 | 1 | |||||||||
KEXIM Asia Limited |
201,331 | 111 | | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
648,779 | 632 | 1 | |||||||||
|
|
|
|
|
|
|||||||
Associates: |
||||||||||||
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd. |
376,840 | 181,464 | | |||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. |
487,111 | 416,099 | 129 | |||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
548,701 | 521,607 | 1,473 | |||||||||
Subtotal |
1,412,652 | 1,119,170 | 1,602 | |||||||||
|
|
|
|
|
|
|||||||
Total |
₩ | 2,061,431 | ₩ | 1,119,802 | ₩ | 1,603 | ||||||
|
|
|
|
|
|
S-87
(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 | | | |||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
635,804 | 691,620 | 1,587 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
1,775,989 | 1,298,362 | 1,726 | |||||||||
|
|
|
|
|
|
|||||||
Total |
₩ | 2,346,253 | ₩ | 1,298,995 | ₩ | 1,848 | ||||||
|
|
|
|
|
|
2) Guarantees provided to the related parties as of June 30, 2019, and December 31, 2018, are as follows (Korean won in millions):
(June 30, 2019)
Detail |
Confirmed guarantees |
Unconfirmed guarantees |
Loans commitments |
Other commitments |
||||||||||||
Subsidiaries: |
||||||||||||||||
KEXIM Bank UK Limited |
₩ | | ₩ | | ₩ | 212,754 | ₩ | 10,411 | ||||||||
PT.KOEXIM Mandiri Finance |
| | 11,568 | | ||||||||||||
KEXIM Vietnam Leasing Co. |
| 1,562 | 33,485 | | ||||||||||||
KEXIM Asia Limited |
| | 228,959 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
| 1,562 | 486,766 | 10,411 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Associates: |
||||||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. |
177,010 | 60,163 | | | ||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
2,800,878 | 935,930 | 1,450,000 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
2,977,888 | 996,093 | 1,450,000 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
₩ | 2,977,888 | ₩ | 997,655 | ₩ | 1,936,766 | ₩ | 10,411 | ||||||||
|
|
|
|
|
|
|
|
S-88
(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 | | | ||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
3,521,377 | 877,185 | 1,350,000 | 527,368 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
3,642,166 | 1,001,229 | 1,350,000 | 527,368 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
₩ | 3,642,166 | ₩ | 1,001,375 | ₩ | 1,797,937 | ₩ | 539,667 | ||||||||
|
|
|
|
|
|
|
|
(3) Profit and loss transactions with related parties
Profit and loss transactions with related parties for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Detail |
Related party |
Six months ended June 30, 2019 | Six months ended June 30, 2018 | |||||||||||||||||||||||
Revenue | Bad debt expenses |
Expenses | Revenue | Bad debt expenses |
Expenses | |||||||||||||||||||||
Subsidiaries |
KEXIM Bank UK Limited |
₩ | 2,689 | ₩ | | ₩ | 121 | ₩ | 1,227 | ₩ | | ₩ | 232 | |||||||||||||
PT.KOEXIM Mandiri Finance |
2,410 | 14 | | 1,721 | 18 | | ||||||||||||||||||||
KEXIM Vietnam Leasing Co. |
1,958 | (58 | ) | | 1,504 | 8 | | |||||||||||||||||||
KEXIM Asia Limited | 2,464 | 41 | | 1,301 | 12 | 13 | ||||||||||||||||||||
Associate |
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd. |
14,514 | 14,309 | | 31,504 | 11,841 | 6 | |||||||||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd |
3,563 | (8,777 | ) | | 15,792 | (339 | ) | | ||||||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
3,468 | (72,570 | ) | | | | | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
₩ | 31,066 | ₩ | (67,041 | ) | ₩ | 121 | ₩ | 53,049 | ₩ | 11,540 | ₩ | 251 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
S-89
(4) Loan transactions with related parties
Loan transactions with related parties for six months ended June 30, 2019, and for the year ended December 31, 2018, is as follows (Korean won in millions):
Detail |
Six months ended June 30, 2019 | 2018 | ||||||||||||||
Financing transaction | Financing transaction | |||||||||||||||
Loan | Collection | Loan | Collection | |||||||||||||
Subsidiaries: |
||||||||||||||||
KEXIM Bank UK Limited |
₩ | 318,078 | ₩ | 325,437 | ₩ | 236,787 | ₩ | 228,162 | ||||||||
PT.KOEXIM Mandiri Finance |
310,243 | 304,554 | 304,758 | 305,054 | ||||||||||||
KEXIM Vietnam Leasing Co. |
395,113 | 388,574 | 244,567 | 247,818 | ||||||||||||
KEXIM Asia Limited |
457,819 | 406,192 | 309,166 | 297,815 | ||||||||||||
Associates: |
||||||||||||||||
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd. |
| 246,179 | 24,345 | 25,048 | ||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd |
| 100,000 | 60,387 | 295,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
₩ | 1,481,253 | ₩ | 1,770,936 | ₩ | 1,180,010 | ₩ | 1,398,897 | ||||||||
|
|
|
|
|
|
|
|
(5) Details of compensation for key executives for the six months ended June 30, 2019 and 2018, are as follows (Korean won in millions):
Detail |
Six months ended June 30, 2019 |
Six months ended June 30, 2018 |
||||||
Salaries |
₩ | 1,236 | ₩ | 1,137 | ||||
Severance and retirement benefits |
74 | 76 | ||||||
|
|
|
|
|||||
Total |
₩ | 1,310 | ₩ | 1,213 | ||||
|
|
|
|
S-90
THE REPUBLIC OF KOREA
The Economy
Gross Domestic Product
Based on preliminary data, GDP growth in 2019 was 2.0% at chained 2015 year prices, as aggregate private and general government consumption expenditures increased by 3.0%, exports of goods and services increased by 1.5% and imports of goods and services decreased by 0.6%, which more than offset a decrease in gross domestic fixed capital formation of 3.5%, each compared with 2018.
Prices, Wages and Employment
Based on preliminary data, the inflation rate was 0.4% in 2019 and the unemployment rate was 3.8% in 2019.
The Financial System
Securities Markets
The following table shows the value of the Korea Composite Stock Price Index as of the dates indicated:
July 31, 2019 |
2,024.6 | |||
August 31, 2019 |
1,967.8 | |||
September 30, 2019 |
2,063.1 | |||
October 31, 2019 |
2,083.5 | |||
November 29, 2019 |
2,088.0 | |||
December 30, 2019 |
2,197.7 | |||
January 31, 2020 |
2,119.0 |
The index was 2,157.9 on February 4, 2020.
Monetary Policy
Interest Rates
In order to address the sluggishness of the global and domestic economy, the Bank of Korea lowered its policy rate to 1.5% from 1.75% on July 18, 2019 and to 1.25% from 1.5% on October 16, 2019.
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:
July 31, 2019 |
1,182.0 | |||
August 31, 2019 |
1,215.1 | |||
September 30, 2019 |
1,201.3 | |||
October 31, 2019 |
1,168.4 | |||
November 29, 2019 |
1,179.3 | |||
December 31, 2019 |
1,157.8 | |||
January 31, 2020 |
1,183.5 |
The market average exchange rate was ₩1,196.0 to US$1.00 on February 4, 2020.
Balance of Payments and Foreign Trade
Balance of Payments
Based on preliminary data, the Republic recorded a current account surplus of approximately US$41.5 billion in the first nine months of 2019. The current account surplus in the first nine months of 2019
S-91
decreased from the current account surplus of US$57.0 billion in the corresponding period of 2018, primarily due to a decrease in surplus from the goods account, which more than offset (i) a surplus from the income account in the first nine months of 2019 compared to a deficit from the income account in the corresponding period of 2018 and (ii) a decrease in deficit from the services account.
Trade Balance
Based on preliminary data, the Republic recorded a trade surplus of US$28.7 billion in the first nine months of 2019. Exports decreased by 9.8% to US$406.1 billion and imports decreased by 4.7% to US$377.4 billion from US$450.3 billion of exports and US$395.9 billion of imports, respectively, in the corresponding period of 2018.
Foreign Currency Reserves
The amount of the Governments foreign currency reserves was US$408.8 billion as of December 31, 2019.
S-92
The following is a description of some of the terms of the Notes we are offering. Since it is only a summary, we urge you to read the fiscal agency agreement described below and the form of global note before deciding whether to invest in the Notes. We have filed a copy of these documents with the U.S. Securities and Exchange Commission as exhibits to the registration statement no. 333-217916.
The general terms of our Notes are described in the accompanying prospectus. The description in this prospectus supplement further adds to that description or, to the extent inconsistent with that description, replaces it.
Governed by Fiscal Agency Agreement
We will issue the Notes under the fiscal agency agreement, dated as of August 1, 1991, between us and The Bank of New York Mellon (formerly known as The Bank of New York) (as successor to JPMorgan Chase Bank, N.A.), as fiscal agent, as amended or supplemented from time to time (the Fiscal Agency Agreement). The fiscal agent will maintain a register for the Notes.
Payment of Principal and Interest
The Notes are initially limited to US$ aggregate principal amount. The Notes will mature on , 20 (the Maturity Date). The Notes will bear interest at a rate of % per annum, payable semi-annually in arrears on and of each year (each an Interest Payment Date). The first interest payment on the Notes will be made on , 2020 in respect of the period from (and including) , 2020 to (but excluding) , 2020.
Interest on the Notes will accrue from , 2020. If any Interest Payment Date or the Maturity Date falls on a day that is not a business day (as defined below), then payment will not be made on such date but will be made on the next succeeding day that is a business day, with the same force and effect as if made on such Interest Payment Date or the Maturity Date (as the case may be), and no interest shall be payable in respect of such delay. The term business day as used herein means a day other than a Saturday, a Sunday, or any other day on which banking institutions in The City of New York, London or Seoul are authorized or required by law or executive order to remain closed.
We will pay interest to the person who is registered as the owner of a Note at the close of business on the fifteenth day (whether or not a business day) preceding such Interest Payment Date. Interest on the Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months. We will make principal and interest payments on the Notes in immediately available funds in U.S. dollars.
Denomination
The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof.
Redemption
We may not redeem the Notes prior to maturity. At maturity, we will redeem the Notes at par.
Form and Registration
We will issue the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of and deposited with the custodian for DTC. Except as described in the accompanying prospectus under Description of the SecuritiesDescription of Debt SecuritiesGlobal Securities, the global notes will
S-93
not be exchangeable for Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest through book-entry accounts. You may hold your beneficial interests in the Notes through Euroclear Bank S.A./N.V. (Euroclear) or Clearstream Banking, société anonyme (Clearstream) if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Any secondary market trading of book-entry interests in the Notes will take place through DTC participants, including Euroclear and Clearstream. See Clearance and SettlementTransfers Within and Between DTC, Euroclear and Clearstream.
The fiscal agent will not charge you any fees for the Notes, other than reasonable fees for the replacement of lost, stolen, mutilated or destroyed Notes. However, you may incur fees for the maintenance and operation of the book-entry accounts with the clearing systems in which your beneficial interests are held.
For so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, in the event that a global note is exchanged for Notes in definitive form, we will appoint and maintain a paying agent in Singapore, where the certificates representing the Notes may be presented or surrendered for payment or redemption. In addition, in the event that a global note is exchanged for Notes in definitive form, an announcement of such exchange will be made by or on behalf of us through the SGX-ST. Such announcement will include all material information with respect to the delivery of the certificates representing the Notes, including details of the paying agent in Singapore.
Further Issues
We may from time to time, without the consent of the holders of the Notes, create and issue additional debt securities with the same terms and conditions as the Notes in all respects so that such further issue shall be consolidated and form a single series with the Notes. We will not issue any such additional debt securities unless the issuance would constitute a qualified reopening for U.S. federal income tax purposes or such additional debt securities would otherwise be part of the same issue for U.S. federal income tax purposes.
Notices
While the Notes are represented by the global note deposited with the custodian for DTC, notices to holders may be given by delivery to DTC, and such notices will be deemed to be given on the date of delivery to DTC. The fiscal agent may also mail notices by first-class mail, postage prepaid, to each registered holders last known address as it appears in the security register that the fiscal agent maintains. The fiscal agent will only mail these notices to the registered holder of the Notes. You will not receive notices regarding the Notes directly from us unless we reissue the Notes to you in fully certificated form.
Neither the failure to give any notice to a particular holder, nor any defect in a notice given to a particular holder, will affect the sufficiency of any notice given to another holder.
S-94
We have obtained the information in this section from sources we believe to be reliable, including DTC, Euroclear and Clearstream. We accept responsibility only for accurately extracting information from such sources. DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform the procedures described below, and they may modify or discontinue them at any time. Neither we nor the registrar will be responsible for DTCs, Euroclears or Clearstreams performance of their obligations under their rules and procedures. Nor will we or the registrar be responsible for the performance by direct or indirect participants of their obligations under their rules and procedures.
Introduction
The Depository Trust Company
DTC is:
| a limited-purpose trust company organized under the New York Banking Law; |
| a banking organization under the New York Banking Law; |
| a member of the Federal Reserve System; |
| a clearing corporation under the New York Uniform Commercial Code; and |
| a clearing agency registered under Section 17A of the Securities Exchange Act of 1934. |
DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between its participants. It does this through electronic book-entry changes in the accounts of its direct participants, eliminating the need for physical movement of securities certificates. DTC is owned by a number of its direct participants and by the New York Stock Exchange Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers Inc.
Euroclear and Clearstream
Like DTC, Euroclear and Clearstream hold securities for their participants and facilitate the clearance and settlement of securities transactions between their participants through electronic book-entry changes in their accounts. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance and settlement and lending and borrowing of internationally traded securities. Participants in Euroclear and Clearstream are financial institutions such as underwriters, securities brokers and dealers, banks and trust companies. Some of the underwriters participating in this offering are participants in Euroclear or Clearstream. Other banks, brokers, dealers and trust companies have indirect access to Euroclear or Clearstream by clearing through or maintaining a custodial relationship with a Euroclear or Clearstream participant.
Ownership of Notes through DTC, Euroclear and Clearstream
We will issue the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the Notes. These financial institutions will record the ownership and transfer of your beneficial interests through book-entry accounts. You may also hold your beneficial interests in the Notes through Euroclear or Clearstream, if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Euroclear and Clearstream will hold their participants beneficial interests in the global notes in their customers securities accounts with their depositaries. These depositaries of Euroclear and Clearstream in turn will hold such interests in their customers securities accounts with DTC.
S-95
We and the fiscal agent generally will treat the registered holder of the Notes, initially Cede & Co., as the absolute owner of the Notes for all purposes. Once we and the fiscal agent make payments to the registered holder, we and the fiscal agent will no longer be liable on the Notes for the amounts so paid. Accordingly, if you own a beneficial interest in the global notes, you must rely on the procedures of the institutions through which you hold your interests in the Notes, including DTC, Euroclear, Clearstream and their respective participants, to exercise any of the rights granted to holders of Notes. Under existing industry practice, if you desire to take any action that Cede & Co., as the holder of the global notes, is entitled to take, then Cede & Co. would authorize the DTC participant through which you own your beneficial interest to take such action. The participant would then either authorize you to take the action or act for you on your instructions.
DTC may grant proxies or authorize its participants, or persons holding beneficial interests in the Notes through such participants, to exercise any rights of a holder or take any actions that a holder is entitled to take under the fiscal agency agreement or the Notes. Euroclears or Clearstreams ability to take actions as holder under the Notes or the fiscal agency agreement will be limited by the ability of their respective depositaries to carry out such actions for them through DTC. Euroclear and Clearstream will take such actions only in accordance with their respective rules and procedures.
Transfers Within and Between DTC, Euroclear and Clearstream
Trading Between DTC Purchasers and Sellers
DTC participants will transfer interests in the Notes among themselves in the ordinary way according to DTC rules. Participants will pay for such transfers by wire transfer. The laws of some states require certain purchasers of securities to take physical delivery of the securities in definitive form. These laws may impair your ability to transfer beneficial interests in the global notes to such purchasers. DTC can act only on behalf of its direct participants, who in turn act on behalf of indirect participants and certain banks. Thus, your ability to pledge a beneficial interest in the global notes to persons that do not participate in the DTC system, and to take other actions, may be limited because you will not possess a physical certificate that represents your interest.
Trading Between Euroclear and/or Clearstream Participants
Participants in Euroclear and Clearstream will transfer interests in the Notes among themselves according to the rules and operating procedures of Euroclear and Clearstream.
Trading Between a DTC Seller and a Euroclear or Clearstream Purchaser
When the Notes are to be transferred from the account of a DTC participant to the account of a Euroclear or Clearstream participant, the purchaser must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to receive the Notes and make payment for them. On the settlement date, the depositary will make payment to the DTC participants account and the Notes will be credited to the depositarys account. After settlement has been completed, DTC will credit the Notes to Euroclear or Clearstream, Euroclear or Clearstream will credit the Notes, in accordance with its usual procedures, to the participants account, and the participant will then credit the purchasers account. These securities credits will appear the next day (European time) after the settlement date. The cash debit from the account of Euroclear or Clearstream will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the cash debit will instead be valued at the actual settlement date.
Participants in Euroclear and Clearstream will need to make funds available to Euroclear or Clearstream to pay for the Notes by wire transfer on the value date. The most direct way of doing this is to pre-position funds (i.e., have funds in place at Euroclear or Clearstream before the value date), either from cash on hand or existing lines of credit. Under this approach, however, participants may take on credit exposure to Euroclear and Clearstream until the Notes are credited to their accounts one day later.
S-96
As an alternative, if Euroclear or Clearstream has extended a line of credit to a participant, the participant may decide not to pre-position funds, but to allow Euroclear or Clearstream to draw on the line of credit to finance settlement for the Notes. Under this procedure, Euroclear or Clearstream would charge the participant overdraft charges for one day, assuming that the overdraft would be cleared when the Notes were credited to the participants account. However, interest on the Notes would accrue from the value date. Therefore, in many cases the interest income on Notes which the participant earns during that one-day period will substantially reduce or offset the amount of the participants overdraft charges. Of course, this result will depend on the cost of funds (i.e., the interest rate that Euroclear or Clearstream charges) to each participant.
Since the settlement will occur during New York business hours, a DTC participant selling an interest in the Notes can use its usual procedures for transferring global securities to the depositories of Euroclear or Clearstream for the benefit of Euroclear or Clearstream participants. The DTC seller will receive the sale proceeds on the settlement date. Thus, to the DTC seller, a cross-market sale will settle no differently than a trade between two DTC participants.
Finally, day traders who use Euroclear or Clearstream and who purchase Notes from DTC participants for credit to Euroclear participants or Clearstream participants should note that these trades will automatically fail unless one of three steps is taken:
| borrowing through Euroclear or Clearstream for one day, until the purchase side of the day trade is reflected in the day traders Euroclear or Clearstream account, in accordance with the clearing systems customary procedures; |
| borrowing the Notes in the United States from DTC participants no later than one day prior to settlement, which would allow sufficient time for the Notes to be reflected in the Euroclear or Clearstream account in order to settle the sale side of the trade; or |
| staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Euroclear or Clearstream participant. |
Trading Between a Euroclear or Clearstream Seller and a DTC Purchaser
Due to time-zone differences in their favor, Euroclear and Clearstream participants can use their usual procedures to transfer Notes through their depositaries to a DTC participant. The seller must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to credit the Notes to the DTC participants account and receive payment. The payment will be credited in the account of the Euroclear or Clearstream participant on the following day, but the receipt of the cash proceeds will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the receipt of the cash proceeds will instead be valued at the actual settlement date.
If the Euroclear or Clearstream participant selling the Notes has a line of credit with Euroclear or Clearstream and elects to be in debit for the Notes until it receives the sale proceeds in its account, then the back-valuation may substantially reduce or offset any overdraft charges that the participant incurs over that period.
Settlement in other currencies between DTC and Euroclear and Clearstream is possible using free-of-payment transfers to move the Notes, but funds movement will take place separately.
S-97
Korean Taxation
For a discussion of Korean tax considerations that may be relevant to you if you invest in the Notes, please refer to the section TaxationKorean Taxation in the accompanying prospectus.
United States Tax Considerations
The last introductory paragraph under TaxationUnited States Tax Considerations with respect to the book/tax conformity rule in the accompanying prospectus shall be deleted and replaced with the following:
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 entirely 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. However, recently released proposed regulations generally would exclude, among other items, original issue discount and market discount (in either case, whether or not de minimis) from the applicability of the book/tax conformity rule. Although the proposed regulations generally will not be effective until taxable years beginning after the date on which they are issued in final form, taxpayers generally are permitted to elect to rely on their provisions currently. Accrual method holders should consult with their tax advisors regarding the potential applicability of the book/tax conformity rule to their particular situation.
The last paragraph under TaxationUnited States Tax ConsiderationsOriginal Issue Discount in the accompanying prospectus shall be deleted.
For a discussion of additional U.S. federal income tax considerations that may be relevant to you if you invest in the Notes and are a U.S. holder, see TaxationUnited States Tax Considerations in the accompanying prospectus.
S-98
Relationship with the Underwriters
We and the underwriters named below (the Underwriters) have entered into a Terms Agreement dated , 2020 (the Terms Agreement) with respect to the Notes relating to the Underwriting AgreementStandard Terms (together with the Terms Agreement, the Underwriting Agreement) filed as an exhibit to the registration statement. Subject to the terms and conditions set forth in the Underwriting Agreement, we have agreed to sell to each of the Underwriters, severally, and each of the Underwriters has severally agreed to purchase, the following principal amount of the Notes set out opposite its name below:
Name of the Underwriters |
Principal Amount of the Notes |
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BofA Securities, Inc. |
US$ | |||
J.P. Morgan Securities LLC |
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Morgan Stanley & Co. International plc |
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US$ | ||||
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Under the terms and conditions of the Underwriting Agreement, if the Underwriters take any of the Notes, then the Underwriters are obligated to take and pay for all of the Notes.
The Underwriters initially propose to offer the Notes directly to the public at the offering price described on the cover page. After the initial offering of the Notes, the Underwriters may from time to time vary the offering price and other selling terms.
If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Underwriters or any affiliate of the Underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by that Underwriter or its affiliate on behalf of us in such jurisdiction.
The Notes are a new class of securities with no established trading market. Approval in-principle has been received from the SGX-ST for the listing and quotation of the Notes on the SGX-ST. The Underwriters have advised us that they intend to make a market in the Notes. However, they are not obligated to do so and they may discontinue any market making activities with respect to the Notes at any time without notice. Accordingly, we cannot assure you as to the liquidity of any trading market for the Notes.
We have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments which the Underwriters may be required to make in respect of any such liabilities.
In connection with this offering, any of the Underwriters appointed and acting in its capacity as stabilizing manager (the Stabilizing Managers) or any person acting on their behalf may purchase and sell the Notes in the open market. These transactions may include over-allotment, covering transactions and stabilizing transactions. Over-allotment involves sales of the Notes in excess of the principal amount of the Notes to be purchased by the Underwriters in this offering, which creates a short position for the Underwriters. Covering transactions involve purchases of the Notes in the open market after the distribution has been completed in order to cover short positions. Stabilizing transactions consist of certain bids or purchases of the Notes made for the purpose of preventing or retarding a decline in the market price of the Notes while the offering is in progress. Any of these activities may have the effect of preventing or retarding a decline in the market price of the Notes. They may also cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of these transactions. The Stabilizing Managers may conduct these transactions in the over-the-counter market or otherwise. If the Stabilizing Managers commence any of these transactions, they may discontinue such transactions at any time, and must discontinue them after a limited period.
S-99
The amount of net proceeds from our Notes is US$ after deducting underwriting discounts but not estimated expenses. Our expenses associated with the Notes offering are estimated to be US$ . The Underwriters have agreed to pay certain of our expenses incurred in connection with the offering of the Notes.
The Underwriters and certain of their affiliates may have performed certain commercial banking, investment banking and advisory services for us and/or our affiliates from time to time for which they have received customary fees and expenses and may, from time to time, engage in transactions with and perform services for us and/or our affiliates in the ordinary course of their business.
The Underwriters or certain of their affiliates may purchase Notes and be allocated Notes for asset management and/or proprietary purposes but not with a view to distribution. The Underwriters or their respective affiliates may purchase Notes for its or their own account and enter into transactions, including credit derivatives, such as asset swaps, repackaging and credit default swaps relating to Notes and/or other securities of us or our subsidiaries or affiliates at the same time as the offer and sale of Notes or in secondary market transactions. Such transactions would be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of Notes to which this prospectus supplement relates (notwithstanding that such selected counterparties may also be purchasers of Notes).
Delivery of the Notes
We expect to make delivery of the Notes, against payment in same-day funds on or about , 2020, which we expect will be the business day following the date of this prospectus supplement. Under Rule 15c6-l promulgated under the Securities Exchange Act of 1934, as amended, U.S. purchasers are generally required to settle trades in the secondary market in two business days, unless they and the other parties to any such trade expressly agree otherwise. Accordingly, if you wish to trade in the Notes on any day prior to the second business day before the settlement date, because the Notes will initially settle in T+ , you may be required to specify an alternate settlement cycle at the time of your trade to prevent a failed settlement. Purchasers in other countries should consult with their own advisors.
Foreign Selling Restrictions
Each Underwriter has agreed to the following selling restrictions in connection with the offering with respect to the following jurisdictions:
Korea
Each Underwriter has severally represented and agreed that (i) it has not offered, sold or delivered and will not offer, sell or deliver, directly or indirectly, any Notes in Korea or to, or for the account or benefit of, any resident of Korea, except as permitted by applicable Korean laws and regulations; and (ii) any securities dealer to whom it sells Notes will agree that it will not offer any Notes, directly or indirectly, in Korea or to any resident of Korea, except as permitted by applicable Korean laws and regulations, or to any dealer who does not so represent and agree.
United Kingdom
Each Underwriter has severally represented and agreed that (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any of the Notes in circumstances in which section 21(1) of the FSMA does not apply to us; and (ii) it has complied, and will comply with, all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.
S-100
Japan
Each Underwriter has severally represented and agreed that the Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the Financial Instruments and Exchange Act). Accordingly, each Underwriter has represented and agreed that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and other relevant laws and regulations of Japan.
Hong Kong
Each Underwriter has severally represented and agreed that:
| it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than (a) to professional investors as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the SFO) and any rules made under the SFO; or (b) in other circumstances which do not result in the document being a prospectus as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong (the C(WUMP)O) or which do not constitute an offer to the public within the meaning of the C(WUMP)O; and |
| it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the SFO and any rules made under the SFO. |
Singapore
Each Underwriter has acknowledged that this prospectus supplement and the accompanying prospectus have not been and will not be registered as a prospectus with the Monetary Authority of Singapore under the Securities and Futures Act, Chapter 289 of Singapore (the SFA).
Accordingly, each Underwriter has severally represented and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this prospectus supplement or the accompanying prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor under Section 274 of the SFA; (ii) to a relevant person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018 of Singapore; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
S-101
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
securities or securities-based derivatives contracts (each term as defined in the SFA) of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:
(i) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(ii) where no consideration is or will be given for the transfer;
(iii) where the transfer is by operation of law;
(iv) as specified in Section 276(7) of the SFA; or
(v) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018 of Singapore.
Italy
The offering of the Notes has not been registered with the Commissione Nazionale per le Società e la Borsa (CONSOB) pursuant to Italian securities legislation and, accordingly, no Notes may be offered, sold or delivered, nor may copies of this prospectus supplement or the accompanying prospectus or of any other document relating to any Notes be distributed in the Republic of Italy (Italy), except, in accordance with any Italian securities, tax and other applicable laws and regulations.
Each Underwriter has severally represented and agreed that it has not offered, sold or delivered, and will not offer, sell or deliver any Notes or distribute any copy of this prospectus supplement or the accompanying prospectus or any other document relating to the Notes in Italy except:
(a) to qualified investors (investitori qualificati), as defined pursuant to Article 100 of Legislative Decree no. 58 of February 24, 1998 (the Financial Services Act) and Article 34-ter, paragraph 1, letter (b) of CONSOB regulation No. 11971 of May 14, 1999 (the Issuers Regulation), all as amended from time to time; or
(b) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and Issuers Regulation.
In any event, any offer, sale or delivery of the Notes or distribution of copies of this prospectus supplement or the accompanying prospectus or any other document relating to the Notes in Italy under paragraphs (a) or (b) above must be:
(i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in Italy in accordance with the Financial Services Act, Legislative Decree No. 385 of September 1, 1993 (the Banking Act) and CONSOB Regulation No. 20307 of February 15, 2018, all as amended from time to time;
(ii) in compliance with Article 129 of the Banking Act, as amended from time to time, and the implementing guidelines of the Bank of Italy, as amended from time to time; and
(iii) in compliance with any other applicable laws and regulations, including any limitation or requirement which may be imposed from time to time by CONSOB or the Bank of Italy or other competent authority.
Any investor purchasing the Notes in this offering is exclusively responsible for ensuring that any offer or resale of the Notes it purchased in this offering occurs in compliance with applicable laws and regulations. No person resident or located in Italy other than the original addressees of this document may rely on this document or its contents.
S-102
This prospectus supplement and the accompanying prospectus, any other document relating to the Notes, and the information contained therein are intended only for the use of its recipient and, unless in circumstances which are exempted from the rules governing offers of securities to the public pursuant to Article 100 of the Financial Services Act and Article 34-ter of the Issuers Regulation, are not to be distributed, for any reason, to any third party resident or located in Italy.
Canada
The Notes may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement or the accompanying prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchasers province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchasers province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
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The validity of the Notes is being passed upon for us by Cleary Gottlieb Steen & Hamilton LLP, New York, New York, and by Yoon & Yang LLC, Seoul, Korea. Certain legal matters will also be passed upon for the Underwriters by Linklaters LLP, Seoul, Korea. In giving their opinions, Cleary Gottlieb Steen & Hamilton LLP and Linklaters LLP, Seoul, Korea may rely as to matters of Korean law upon the opinions of Yoon & Yang LLC.
OFFICIAL STATEMENTS AND DOCUMENTS
Our Chairman and President, in his official capacity, has supplied the information set forth in this prospectus supplement under Recent DevelopmentsThe Export-Import Bank of Korea. Such information is stated on his authority. The documents identified in the portion of this prospectus supplement captioned Recent DevelopmentsThe Republic of Korea as the sources of financial or statistical data are derived from official public documents of the Republic and of its agencies and instrumentalities.
We were established in 1976 as a special governmental financial institution pursuant to the Export-Import Bank of Korea Act, as amended. Our corporate registry number is 111235-0000158. Our authorized share capital is ₩15,000 billion. As of September 30, 2019, our paid-in capital was ₩13,881 billion.
Our board of directors can be reached at the address of our registered office: c/o 38 Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, The Republic of Korea.
The issue of the Notes has been authorized by the Executive Director of our Risk Management Group on January 30, 2020. On January 23, 2020, we filed our report on the proposed issuance of the Notes with the Ministry of Economy and Finance of Korea.
The registration statement with respect to us and the Notes has been filed with the Securities and Exchange Commission in Washington, D.C. under the Securities Act of 1933, as amended. Additional information concerning us and the Notes is contained in the registration statement and post-effective amendments to such registration statement, including their various exhibits, which may be inspected at the public reference facilities maintained by the Securities and Exchange Commission at Room 1580, 100 F Street N.E., Washington, D.C. 20549, United States.
The Notes have been accepted for clearance through DTC, Euroclear and Clearstream:
CUSIP |
ISIN | |
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S-104
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 July 10, 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.
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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 Peoples 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 entitys 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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 39.
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THE EXPORT-IMPORT BANK OF KOREA
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 Governments 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 Governments 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. |
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): |
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Borrowings in Korean Won |
₩ | | ||
Borrowings in Foreign Currencies |
3,830 | |||
Export-Import Financing Debentures |
47,021 | |||
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Total Long-Term Debt |
₩ | 50,851 | ||
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Capital and Reserves: |
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Capital Stock(7) |
₩ | 11,815 | ||
Additional Paid-in-Capital |
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Capital Adjustments |
(129 | ) | ||
Retained Earnings |
1,117 | |||
Legal Reserve(8) |
346 | |||
Voluntary Reserve(8) |
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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 | |||
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Total Capital and Reserve |
₩ | 13,483 | ||
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Total Capitalization(8) |
₩ | 64,334 | ||
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(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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 20. |
(6) | See Description of Assets and LiabilitiesSources 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 BusinessGovernment Support and Supervision. |
(8) | See BusinessGovernment 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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 23. |
(10) | See Financial Statements and the AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 22. |
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 Governments 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 Governments 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.
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Government Support and Supervision
The Governments 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 Governments 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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 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 LiabilitiesSources 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
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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,
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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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 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.
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 Governments 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 industrys rank in the order of priorities established by the Governments 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 ManagementCredit 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 importers 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 borrowers 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 borrowers 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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 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 Koreas 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 |
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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 | ||||||||||||
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Total |
₩ | 76,724 | ₩ | 71,884 | ₩ | 72,120 | 100 | % | ||||||||
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(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 DSMEs 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 assets carrying amount and the present value of the estimated future cash flows discounted at such assets 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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 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) |
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(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 | ||||||||||||||||||
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Total |
₩ | 153,610 | ₩ | 4,785 | ₩ | 131,748 | ₩ | 4,359 | ₩ | 127,248 | ₩ | 2,636 | ||||||||||||
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(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 | |||||||||
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Total |
₩ | 1,030 | ₩ | 295 | ₩ | 1,325 | ||||||
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In the early 1990s, 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 Governments 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) |
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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) |
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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 | ||||||||||||||||||
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Total |
₩ | 7,904 | 100 | % | ₩ | 9,381 | 100 | % | ₩ | 11,356 | 100 | % | ||||||||||||
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(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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 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 AuditorsNotes to separate financial statements and of and for the years ended December 31, 2018 and 2017Note 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 |
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(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 | |||||||||||||||||||||||||||
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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 AuditorsNotes to Separate Financial Statements as of and for the years ended December 31, 2018 and 2017Note 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 years ₩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
23
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 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 suppliers 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.
27
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.
Under the Financial Supervisory Services 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.
28
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.
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 | Banks 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 |
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
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, one Senior Executive Director and three External 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 |
32
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 |
33
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(15) | ₩ | 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(16) | ₩ | 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(17) | ₩ | 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(18) | ₩ | 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(19) | ₩ | 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(20) | ₩ | 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) | 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. |
(16) | 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. |
(17) | 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. |
(18) | 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. |
(19) | 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. |
(20) | 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 |
₩ | 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 2017Note 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 entitys 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 2017Notes 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 2017Note 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 2017Note 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 Banks 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 Banks 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 Banks 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 managements 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 Banks 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 |
| 1,616,973 | ||||||
Financial assets at fair value through profit or loss (FVTPL) |
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) |
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.
49
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 Banks 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 Banks 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. |
50
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 |
51
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
(1) Basis of Financial Statement Presentation
The Banks 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 managements estimate may differ from the actual outcome if the managements 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.
52
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.
53
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 Banks 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 Banks presentation currency, are translated into the Banks 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.
54
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 Banks 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.
55
3) Debt instruments
Subsequent measurement of debt instruments depends on the Banks 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 Banks 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.
56
(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 hedge 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 |
58
| corporate borrowers that are considered impaired (internally rating S, D, or F); |
| a borrower with the external auditors 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 assets carrying amount and the present value of estimated future cash flows discounted at the financial assets 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 managements 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 assets 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 |
1060 years | |
Vehicles |
4 years | |
Tools, furniture and fixtures |
420 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 assets 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 borrowers 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 Banks 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.
62
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.
63
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.1116Leases
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).
64
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 Banks key risks.
The Banks 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 Banks 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 Banks target risk appetite, approves significant risk matters and reviews the level of risks that the Bank is exposed to and the appropriateness of the Banks 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 Banks 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 counterpartys default, breach of contract and deterioration in the credit quality of the counterparty. For the risk management reporting purposes, the individual borrowers 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 Banks 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 Banks 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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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
69
(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 | ||
|
|
2) 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.
70
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 Banks 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. |
78
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
79
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 Banks 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 Banks 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.
81
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
82
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.
83
(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. |
84
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. |
85
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 |
86
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 |
87
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 |
Significant unobservable input factors |
Range |
Relationship between unobservable input factors and fair | ||||||||||
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 |
Significant |
Range |
Relationship between unobservable input factors and fair | ||||||||
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. |
88
(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. |
89
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 |
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 |
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 Banks 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 creditors loans to have substantive control based on the creditors agreement. As the Bank had only 69.01% of the total creditors 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 creditors loans to have a substantive control based on the creditors agreement. As the Bank had only 70.60% of the total creditors 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 | ||||
|
|
|
|
104
(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 hedgehedged items |
₩ | 229,518 | ₩ | 93,296 | ||||
Fair value hedgehedging 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 administrativeOthers |
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 ₩300 billion) |
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 investments 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 Banks 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 persons 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 | ||||||||
|
|
|
|
|
|
|
|
132
(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 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
133
(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.
134
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 Banks 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 |
Classification under |
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. |
135
(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. |
136
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 | ) | ||
|
|
137
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 countrys 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 Republics founding in 1948. Shortly after President Rhees 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
138
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 Rohs 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 Kims administration reformed the political sector and deregulated and internationalized the Korean economy.
In December 1997, the country elected Kim Dae Jung as President. President Kims 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 Kims 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 prosecutors 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 prosecutors 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 administrations key policy priorities include:
| investigating corruption involving high-ranking government officials, anti-corruption and reform of chaebol (Korean conglomerates); |
139
| denuclearization of and establishing peace on the Korean Peninsula and enhancing Koreas core military strength in response to North Koreas 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 Alzheimers disease treatment; and |
| protecting small business owners and restricting establishment of large-scale stores and multi-complex shopping malls. |
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 countrys 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 countrys 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 Republics 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 Republics 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 Koreas political leadership and concern regarding its implications for political and economic stability in the region. Kim Jong-ils third son, Kim Jong-eun, has assumed power as his fathers designated successor.
In addition, there have been heightened security concerns in recent years stemming from North Koreas 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 Koreas long-range ballistic missile program), the United Nations Security Council unanimously passed several rounds of resolutions condemning North Koreas 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 Koreas 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 Koreas 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 Republics 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 Republics 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 following table sets forth information regarding certain of the Republics 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 DebtExternal and Internal Debt of the GovernmentGuarantees 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 SystemSecurities 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 |
| 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 governments 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 Republics 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 countrys 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 countrys 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 Republics GDP at current market and chained 2010 year prices and the annual average increase in the Republics 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 Republics 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 Republics 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 Republics 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 Republics 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 Republics 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 Koreas 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 Republics 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 Republics 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 Republics 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 Republics 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 Republics 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 Republics 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 Republics 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 Republics 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 Republics 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 Republics 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 Governments 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 Republics 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 Republics 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 Republics 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 Republics 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, Koreas 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 Governments 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 Peoples 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 partys five lawmakers from the National Assembly for violating the Republics 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.
Structure of the Financial Sector
The Republics 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 countrys 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 Governments 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 Governments 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 Governments 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 Governments 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:
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 Ministers 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 Republics 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 ₩50 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.
The Bank of Korea
The Bank of Korea was established in 1950 as Koreas central bank and the countrys 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 Koreas 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 Committees 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 Republics 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 Republics 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 investors 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 investors 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:
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 countrys 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 nations savings, finances the overall deficit of the countrys 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 Republics 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 Republics 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 | |||||||||||||||
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|
|
|
|
|
|
|
|||||||||||
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 | |||||||||||||||
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|
|
|
|
|
|
|
|
Source: Ministry of Trade, Industry and Energy.
Trade Balance
Trade balance figures measure the difference between a countrys 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 countrys receipts from abroad fall short of its payments to foreigners, must be financed, rendering the country a debtor nation. A surplus, indicating that a countrys 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 Republics 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 |
168
(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 Republics economy.
The following tables give information regarding the Republics 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(2) | As % of 2018 Total(2) |
|||||||||||||||||||||||||||||||
(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 | ||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||
Total |
572.7 | 100.0 | 526.8 | 100.0 | 495.4 | 100.0 | 573.7 | 100.0 | 604.9 | 100.0 | ||||||||||||||||||||||||||||||
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|
(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.
169
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(2) | As % of 2018 Total(2) |
|||||||||||||||||||||||||||||||
(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 | ||||||||||||||||||||||||||||||
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|
|
|
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|
|
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|
|
|
|||||||||||||||||||||
Total |
525.5 | 100.0 | 436.5 | 100.0 | 406.2 | 100.0 | 478.5 | 100.0 | 535.2 | 100.0 | ||||||||||||||||||||||||||||||
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|
(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
170
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 Republics 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(1) | As % of 2018 Total(1) |
|||||||||||||||||||||||||||||||
(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(2) |
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 | ||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||
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|
(1) | Preliminary. |
(2) | Includes more than 200 countries and regions. |
Source: The Bank of Korea; Korea Customs Service.
The following table sets forth the Republics 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(1) | As % of 2018 Total(1) |
|||||||||||||||||||||||||||||||
(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(2) |
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 | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||
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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|
171
(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 Republics 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 Republics 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.
172
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 Republics 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 | |||||||||||||||
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|||||||||||
Total Gold and Foreign Exchange |
358,395.2 | 363,308.6 | 366,496.2 | 384,271.3 | 398,127.2 | |||||||||||||||
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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 | ||||||||||
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|
|
|
|
|
|
|
|
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(1) | More than 95% of the Republics foreign currency reserves are comprised of convertible foreign currencies. |
Source: The Bank of Korea; International Monetary Fund.
The Governments 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 Governments foreign currency reserves decreased, falling to US$201.2 billion as of December 31, 2008, partially as a result of the Governments use of the foreign currency reserve to provide foreign currency liquidity to Korean financial institutions. The Governments 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 Governments foreign currency reserve was US$402.0 billion as of May 31, 2019.
The Ministry of Economy and Finance prepares the Government budget and administers the Governments finances.
The Governments 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.
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) |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
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Total |
29,158.4 | 26,393.8 | 24,241.6 | 21,130.5 | 17,016.3 | |||||||||||||||
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|
|
|
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|
|
|
|
(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 Republics 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.
178
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 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; |
181
| 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
182
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 securitys 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.
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 SecuritiesDescription of Debt SecuritiesGeneral 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.
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 Republics 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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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.
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 Republics 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 TaxationKorean TaxationTax on Capital Gains and TaxationKorean TaxationTax 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 Securitys 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 securitys 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 securitys remaining redemption amount, or in the case of an Original Issue Discount Debt Security, the debt securitys 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.
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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.
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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.
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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 KoreaBusinessGovernment 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 KoreaBusinessGovernment 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.
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.
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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 Chinas economy, which is Koreas 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 Governments 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
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 Commissions website at http://www.sec.gov.
206
HEAD OFFICE OF THE BANK
38 Eunhaeng-ro
Yeongdeungpo-gu
Seoul 07242
Korea
FISCAL AGENT AND PRINCIPAL PAYING AGENT
The Bank of New York Mellon
Global Finance Americas
101 Barclay St, 4E
New York, NY 10286
United States of America
LEGAL ADVISORS TO THE BANK
as to Korean law | as to U.S. law | |
Yoon & Yang LLC (Hwawoo) |
Cleary Gottlieb Steen & Hamilton LLP | |
19F, ASEM Tower 517 Yeongdong-daero, Gangnam-gu Seoul 06164 Korea |
c/o 19th Floor, Ferrum Tower 19 Eulji-ro 5-gil, Jung-gu Seoul 04539 Korea |
LEGAL ADVISOR TO THE UNDERWRITERS
as to U.S. law |
Linklaters LLP |
22nd Floor, Center One Building 26, Eulji-ro 5-gil, Jung-gu Seoul 04539 Korea |
AUDITOR OF THE BANK
KPMG Samjong Accounting Corp.
10th Floor, Gangnam Finance Center
152 Tehran-ro, Gangnam-gu
Seoul 06236
Korea
SINGAPORE LISTING AGENT
Shook Lin & Bok LLP
1 Robinson Road
#18-00 AIA Tower
Singapore 048542
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