POS AM

As filed with the Securities and Exchange Commission on June 26, 2020

Registration Statement No. 333-217916

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

POST-EFFECTIVE AMENDMENT NO. 11

TO

REGISTRATION STATEMENT

UNDER

SCHEDULE B

OF

THE SECURITIES ACT OF 1933

THE EXPORT-IMPORT BANK OF KOREA

(Name of Registrant)

THE REPUBLIC OF KOREA

(Co-Registrant and Guarantor)

Names and Addresses of Authorized Representatives in the United States:

Jung-Hyun Lee or Young-rok Kim Duly Authorized Representatives of The Export-Import Bank of Korea 460 Park Avenue, 8^th Floor New York, NY 10022 Minsik Shin Duly Authorized Representative of The Republic of Korea 460 Park Avenue, 9^th Floor New York, NY 10022

Copies to:

Jinduk Han, Esq.

Cleary Gottlieb Steen & Hamilton LLP

19F, Ferrum Tower

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

Seoul 04539, Korea

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

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

SUBJECT TO COMPLETION, DATED JUNE 26, 2020

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                 , 2020

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, or 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, US$500,000,000 2.375% notes due 2024 and US$500,000,000 1.875% notes due 2025, and US$6,082,248,627 aggregate amount of securities remain unsold.

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

TABLE OF CONTENTS

	Page
Certain Defined Terms and Conventions		1
Use of Proceeds		2
The Export-Import Bank of Korea		3
Overview		3
Capitalization		4
Business		5
Selected Financial Statement Data		7
Operations		9
Description of Assets and Liabilities		14
Debt		24
Credit Policies, Credit Approval and Risk Management		26
Capital Adequacy		28
Overseas Operations		29
Property		29
Management and Employees		29
Tables and Supplementary Information		32
Financial Statements and the Auditors		41
The Republic of Korea		135
Land and History		135
Government and Politics		137
The Economy		140
Principal Sectors of the Economy		149
The Financial System		156
Monetary Policy		161
Balance of Payments and Foreign Trade		165
Government Finance		173
Debt		176
Tables and Supplementary Information		178
Description of the Securities		181
Description of Debt Securities		181
Description of Warrants		187
Terms Applicable to Debt Securities and Warrants		188
Description of Guarantees		189
Limitations on Issuance of Bearer Debt Securities and Bearer Warrants		190
Taxation		191
Korean Taxation		191
United States Tax Considerations		193
Plan of Distribution		202
Legal Matters		203
Authorized Representatives in the United States		203
Official Statements and Documents		203
Experts		203
Forward-Looking Statements		204
Further Information		206

CERTAIN DEFINED TERMS AND CONVENTIONS

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

Unless otherwise indicated, all references to “won”, “Won” or “￦” contained in this prospectus are to the currency of Korea, references to “U.S. dollars”, “Dollars”, “USD”, “$” or “US$” are to the currency of the United States of America, references to “Canadian Dollar” or “CAD” are to the currency of Canada, references to “Euro”, “EUR” or “€” are to the currency of the European Union, references to “Japanese Yen”, “JPY” or “¥” are to the currency of Japan, references to “Chinese Yuan” or “CNY” are to the currency of the People’s Republic of China, references to “Swiss Franc” or “CHF” are to the currency of Switzerland, references to “British Pound” or “GBP” are to the currency of the United Kingdom, references to “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 “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 “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 “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 “Norwegian Krone” or “NOK” are to the currency of Norway, references to “Peruvian Sol” or “PEN” are to the currency of Peru, references to “Polish Zloty” or “PLN” are to the currency of Poland and references to “Czech Koruna” or “CZK” are to the currency of the Czech Republic.

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, or Korean IFRS or K-IFRS. References in this prospectus to “separate” financial statements and information are to financial statements and information prepared on a non-consolidated basis. Unless specified otherwise, our financial and other information included in this prospectus is presented on a separate basis in accordance with Korean IFRS and does not include such information with respect to our subsidiaries.

K-IFRS 1109, Financial Instruments, which is aimed at improving and simplifying the accounting treatment of financial instruments, is effective for annual periods beginning on or after January 1, 2018 and replaces K-IFRS 1039, Financial Instruments: Recognition and Measurement. We have applied the new accounting standard, K-IFRS 1109, which requires all financial assets to be classified and measured on the basis of an entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets, in our separate financial statements as of and for the years ended December 31, 2019 and 2018 included in this prospectus. As permitted by the transition rules of K-IFRS 1109, our comparative separate financial information as of and for the year ended December 31, 2017 included in this prospectus 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 years ended December 31, 2019 and 2018.

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USE OF PROCEEDS

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

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THE EXPORT-IMPORT BANK OF KOREA

Overview

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

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

As of December 31, 2019, we had ￦74,144 billion of outstanding loans, including ￦38,118 billion of outstanding export credits, ￦27,546 billion of outstanding overseas investment credits and ￦5,030 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.

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

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

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

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

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

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

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In March 2016, the Government amended the KEXIM Act to strengthen its enforcement powers by allowing:

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

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

Capitalization

As of December 31, 2019, our authorized capital was ￦15,000 billion and our capitalization was as follows:

	December 31, 2019(1)
	(billions of Won)
Long-Term Debt (2)(3)(4)(5)(6):
Borrowings in Korean Won	￦	—
Borrowings in Foreign Currencies		2,583
Export-Import Financing Debentures		46,634
Total Long-Term Debt	￦	49,217
Capital and Reserves:
Capital Stock(7)	￦	11,871
Additional Paid-in-Capital		—
Capital Adjustments		(129	)
Retained Earnings		1,356
Legal Reserve(8)		406
Voluntary Reserve(8)		542
Regulatory Reserve for Loan Losses(9)		107
Unappropriated Retained Earnings		302
Other Components of Equity(10)		594
Total Capital and Reserve	￦	13,692
Total Capitalization	￦	62,909

(1) Except as described in this prospectus, there has been no material adverse change in our capitalization since December 31, 2019.

(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, 2019 into Won at the rate of ￦1,157.80 to US$1.00, which was the market average exchange rate as announced by the Seoul Money Brokerage Services Ltd., on December 31, 2019.

(4) As of December 31, 2019, we had contingent liabilities totaling ￦38,121 billion, which consisted of ￦32,276 billion under outstanding guarantees and acceptances and ￦5,846 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, 2019, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2019 and 2018—Note 36.”

(5) As of December 31, 2019, we had entered into 455 interest rate related derivative contracts with a notional amount of ￦40,361 billion and 547 currency related derivative contracts with a notional amount of ￦35,251 billion in accordance with our policy to hedge interest rate and currency risks. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2019 and 2018—Note 20.”

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

(7) As of December 31, 2019, our authorized ordinary share capital was ￦15,000 billion and issued fully-paid capital stock was ￦11,871 billion. See “—Business—Government Support and Supervision.”

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

(9) If the estimated allowance for credit loss determined by K-IFRS for the accounting purposes is lower than that for regulatory purposes as required by Regulation of Supervision of Banking Business, we reserve such difference as the regulatory reserve for loan losses. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2019 and 2018—Note 23.”

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(10) See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2019 and 2018—Note 22.”

Business

Purpose and Authority

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

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

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

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

• export credits;

• overseas investment credits;

• import credits; and

• guarantee facilities.

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

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

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

Government Support and Supervision

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

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

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As of December 31, 1996, the capital contribution from the Government was approximately ￦686 billion, all in cash. Since 1997, the Government has made capital contributions not only in cash but also in the form of shares of common stock of Government-affiliated entities. Recent examples include the Government’s contributions to our capital of (i) ￦130 billion, ￦40 billion, ￦75 billion, ￦15 billion, ￦10 billion, ￦935 billion, ￦10 billion, ￦65 billion, ￦26 billion and ￦30 billion in cash in January 2014, January 2015, August 2015, September 2015, July 2016, September 2016, October 2016, November 2016, May 2019 and August 2019, 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 ￦11,871 billion as of December 31, 2019.

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, 2019, the Government directly owned 66% of our capital stock and indirectly owned, through The Bank of Korea and The Korea Development Bank, 10% and 24%, respectively, of our capital stock. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2019 and 2018—Note 1.”

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

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

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

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

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

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

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• 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 within three months following the end of each fiscal year and, upon request from the National Assembly during its annual audit period, to the National Assembly within ten days from the date of the request from the National Assembly, 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 (each before deducting allowance for loan losses) are collectively referred to as the “Loans”; bills bought, foreign exchange bought, advances for customers, call loans and interbank loans in foreign currencies (each before deducting allowance for loan losses) 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.”

K-IFRS 1109, Financial Instruments, which is aimed at improving and simplifying the accounting treatment of financial instruments, is effective for annual periods beginning on or after January 1, 2018 and replaces K-IFRS 1039, Financial Instruments: Recognition and Measurement. We have applied the new accounting standard, K-IFRS 1109, which requires all financial assets to be classified and measured on the basis of an entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets, in our separate financial statements as of and for the years ended December 31, 2019 and 2018 included in this prospectus. As permitted by the transition rules of K-IFRS 1109, our separate financial information as of and for the year ended December 31, 2017 included in this prospectus 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 years ended December 31, 2019 and 2018.

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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,
	2017		2018(1)		2019(1)
	(billions of Won)
Income Statement Data
Total Interest Income	￦	2,684	￦	2,951	￦	3,095
Total Interest Expense		1,604		1,968		2,217
Net Interest Income		1,080		983		879
Operating Income (Loss)		229		742		896
Income (Loss) before Income Tax		229		753		470
Income Tax Expense (Benefit)		56		156		169
Net Income (Loss)		173		597		302
	As of December 31,
	2017		2018(1)		2019(1)
	(billions of Won)
Balance Sheet Data
Total Loan Credits(2)	￦	71,884	￦	72,120	￦	74,144
Total Borrowings(3)		66,699		70,836		73,934
Total Assets		83,946		89,799		92,254
Total Liabilities		71,433		76,317		78,562
Total Shareholders’ Equity		12,513		13,483		13,692

(1) Reflects the application of K-IFRS 1109.

(2) Gross amount, including bills bought, foreign exchange bought, call loans, inter-bank loans in foreign currency, advance for customers and others and before deducting valuation adjustment of loans in foreign currencies, allowance for loan losses and deferred loan origination fees. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2019 and 2018—Note 10.”

(3) Includes debentures.

2019

We had net income of ￦302 billion in 2019 compared to net income of ￦597 billion in 2018. The principal factor for the decrease in net income to ￦302 billion in 2019 from ￦597 billion in 2018 was a net loss on investments in associates and subsidiaries of ￦415 billion in 2019 compared to a net gain of ￦2 billion in 2018, primarily due to an increase in our impairment loss recognized in connection with our investments in Korea Aerospace Industries. That factor was partially offset by a 24% decrease in impairment loss on credit to ￦323 billion in 2019 from ￦423 billion in 2018, primarily due to a decrease in guarantees to Daewoo Shipbuilding & Marine Engineering Co., Ltd., or DSME, in 2019.

As of December 31, 2019, our total assets increased by 3% to ￦92,254 billion from ￦89,799 billion as of December 31, 2018, primarily due to a 2% increase in loans at amortized cost to ￦71,576.5 billion as of December 31, 2019 from ￦70,199.7 billion as of December 31, 2018.

As of December 31, 2019, our total liabilities increased by 3% to ￦78,562 billion from ￦76,317 billion as of December 31, 2018, primarily due to a 39% increase in borrowings to ￦6,796 billion as of December 31, 2019 from ￦4,893 billion as of December 31, 2018.

As of December 31, 2019, our total shareholders’ equity increased by 2% to ￦13,692 billion from ￦13,483 billion as of December 31, 2018, primarily due to an increase in retained earnings.

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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 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.

Operations

Loan Operations

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

Before approving a credit, we consider:

• economic benefits to the Republic;

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

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

• the goal of diversifying our lending activities.

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

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In 2019, we provided Loans of ￦51,407 billion, an increase of 6% from the previous year, and our commitments of Loans amounted to ￦52,635 billion, an increase of 9% from the previous year. The increases in disbursements and commitments for Loans was primarily attributable to increased demand from the petrochemical industry.

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

	As of December 31,							As % of 2019 Total
	2017			2018		2019
	(billions of Won)
Export Credits
Industrial Plants	￦	15,082		￦	15,416	￦	15,824		21.3	%
Shipbuilding		14,855			10,036		9,471		12.8	%
Ferrous & nonferrous metal products		1,738			1,683		1,847		2.5	%
Petrochemical products		1,577			1,562		1,613		2.2	%
Automobiles		1,945			1,797		1,802		2.4	%
Electronic machineries		2,048			2,280		2,245		3.0	%
Others(1)		4,124			5,750		5,316		7.2	%
Sub-total		41,369			38,525		38,118		51.4	%
Overseas Investment Credits		24,107			26,442		27,546		37.2	%
Import Credits		3,726			4,653		5,030		6.8	%
Others(2)		3,981			2,496		3,427		4.6	%
Present Value Premium/Discount		(1,297	)		4		23		0.0	%
Total Loan Credits	￦	71,884		￦	72,120	￦	74,144		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

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 2019 Total
	2017		2018		2019
	(billions of Won)
Export Credits
Industrial Plants	￦	5,051	￦	4,378	￦	2,381		5	%
Shipbuilding		7,352		4,615		5,792		11
Ferrous & nonferrous metal products		1,352		1,292		1,786		3
Petrochemical products		4,206		3,455		4,414		8
Automobiles		3,535		2,418		2,454		5
Electronic machineries		2,108		2,152		2,513		5
Others(1)		7,446		8,849		8,823		17
Sub-total		31,050		27,159		28,163		54
Overseas Investment Credits		12,361		13,666		15,093		29
Import Credits		6,905		7,598		8,883		17
Others		—		—		495		1
Total	￦	50,316	￦	48,423	￦	52,635		100	%

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(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;

• 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, 2019, export credits in the amount of ￦38,118 billion represented 51% of our total outstanding Loan Credits. Our disbursements of export credits in 2019 amounted to ￦29,077 billion, an increase of 2% from the previous year, primarily due to increased shipbuilding activity. Our commitments of export credits in 2019 amounted to ￦28,163 billion, an increase of 4% 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

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interest with maturities of up to 12 years for ships and maturities of varying terms, from two to 18 years, for financings of other eligible items. We typically require a minimum down payment of 20% of the contract amount for ship export financings and a minimum down payment of 15% for financings of other eligible items. When the credit rating of a prospective borrower does not meet our internal rating criteria, these export credits are secured by promissory notes issued in connection with the relevant transaction, or letters of guarantees or letters of credit issued or confirmed by a creditworthy international bank or the importer’s government or central bank. Other terms and conditions under such export credit facilities must be in accordance with the Arrangement on Guidelines for Officially Supported Export Credits by the Organization for Economic Cooperation and Development, or 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.

As of December 31, 2019, overseas investment credits amounted to ￦27,546 billion, representing 37% of our total outstanding Loan Credits. Our commitments of overseas investment credits in 2019 amounted to ￦15,093 billion, an increase of 10% from the previous year. Our disbursements of overseas investment credits in 2019 amounted to ￦13,607 billion, an increase of 5% from the previous year. The increases in new commitments and disbursements for overseas investment credits were primarily due to increased demand in overseas investment and project credits.

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

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

Import Credits

We offer import credits to Korean companies that directly import essential materials, natural resources and high-technology materials whose stable and timely supply is required for the national economy, or to Korean

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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, 2019, import credits in the amount of ￦5,030 billion represented 7% of our total outstanding Loan Credits. Disbursements and new commitments of import credits amounted to ￦8,722 billion and ￦8,883 billion, respectively, in 2019, an increase of 18% and 17%, respectively, from the previous year, primarily due to an increase in demand for financing for raw materials used for export and domestic consumption.

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

Guarantee Operations

We provide guarantees in favor of Korean commercial banks and foreign banks or foreign importers in respect of the obligations of Korean exporters in order to facilitate export and import financings. Such guarantee programs for Korean exporters and importers include (1) financial guarantees to co-financing banks that provide loans for transactions that satisfy our eligibility requirements and (2) project-related guarantees to foreign importers for the performance of Korean exporters on eligible projects in the form of bid bonds, advance payment bonds, performance bonds and retention bonds. Guarantee commitments as of December 31, 2019 decreased to ￦38,121 billion from ￦40,011 billion as of December 31, 2018. Guarantees we had confirmed as of December 31, 2019 decreased to ￦32,276 billion from ￦34,795 billion as of December 31, 2018.

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

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

In 2019, we issued project-related confirmed guarantees in the amount of ￦5,510 billion, a decrease of 11% from the previous year.

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

For further information regarding our guarantee and letter of credit operations, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2019 and 2018—Note 36.”

Government Account Operations

Economic Development Cooperation Fund

In 1987, the Government established the Economic Development Cooperation Fund, or the EDCF, to provide loans, at concessional interest rates, to governments or agencies of developing countries for projects that

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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 2019 amounted to ￦1,052 billion for 104 projects in 32 countries, an increase of 23% from the previous year. As of December 31, 2019, the total outstanding loans extended by the EDCF was ￦7,934 billion, an increase of 12% from the previous year.

Inter-Korea Cooperation Fund

In 1991, the Government established the Inter-Korea Cooperation Fund, or 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 2019 amounted to ￦75 billion for 61 projects, and cumulative total disbursements as of December 31, 2019 were ￦7,032 billion, an increase of 1% from ￦6,957 billion as of December 31, 2018.

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;

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

• management of Korea’s foreign direct investment database.

Description of Assets and Liabilities

Total Credit Exposure

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

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The following table sets out our Credit Exposure as of December 31, 2017, 2018 and 2019, categorized by type of exposure extended:

		As of December 31,
		2017					2018					2019
		(billions of Won, except for percentages)
A	Loans in Won	￦	18,956		18	%	￦	16,837		16	%	￦	18,568		18	%
B	Loans in Foreign Currencies		47,873		45			51,861		49			51,338		49
C	Loans (A+B)		66,829		62			68,698		65			69,906		67
D	Other Loans		5,056		5			3,422		3			4,238		4
E	Loan Credits (C+D)		71,884		67			72,120		68			74,144		71
F	Allowances for Loan Losses		(3,287	)	(3	)		(1,554	)	(1	)		(2,176	)	(2	)
G	Loan Credits including allowance for loan losses (E-F)		68,597		64			70,566		67			71,968		69
H	Guarantees		38,961		36			34,795		33			32,276		31
I	Credit Exposure (G+H)		107,558		100			105,361		100			104,244		100

Loan Credits by Geographic Area

The following table sets out the total amount of our outstanding Loan Credits as of December 31, 2017, 2018 and 2019, categorized by geographic area ⁽¹⁾:

	As of December 31,(1)						As % of 2019 Total
	2017		2018		2019
	(billions of Won)
Asia(2)	￦	55,044	￦	56,209	￦	57,575		78	%
Europe		3,509		5,630		6,064		8
America		9,229		7,757		7,850		11
Africa		4,102		2,524		2,656		4
Total	￦	71,884	￦	72,120	￦	74,144		100	%

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

(2) Includes Australia.

Source: Internal accounting records

The U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC, administers and enforces certain laws and regulations, or OFAC Sanctions, that impose restrictions regarding dealings with or related to certain countries and territories, governments, entities and individuals, including Iran, that have a connection to U.S. jurisdiction. Even though non-U.S. persons generally are not always directly bound to comply with OFAC Sanctions, non-U.S. persons can be held liable for violations of OFAC Sanctions to the extent a transaction involves actions within U.S. jurisdiction, such as obtaining U.S. goods, services or technology, or involving U.S. parties, for the benefit of sanctioned persons or making U.S. dollar wire transfers that clear through the U.S. financial system. In addition to the OFAC Sanctions, the United States maintains numerous secondary sanction programs that provide authority for the imposition of U.S. sanctions on foreign parties that engage in certain dealings with Iran and other U.S. sanctions targets regardless of whether there is a nexus to the United States. These secondary sanction programs may be strongly influenced by political considerations.

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 believe our activities with respect to Iran have not involved any U.S. person in either a managerial or operational

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role, or any other nexus to U.S. jurisdiction, and such activities have been subject to policies and procedures designed to ensure compliance with applicable Korean laws and regulations.

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. None of these transactions was conducted in the U.S. dollar or involved U.S-origin goods or services. Our Loans to Iran represented 0.5%, 0.0% and 0.0% of our total assets as of December 31, 2017, 2018 and 2019, respectively, and also represented 0.7%, 0.0% and 0.0% of our Loan Credits as of those respective dates. Our total operating revenues from transactions with Iran in 2017, 2018 and 2019 represented 0.3%, 0.1% and 0.0% of our total operating revenues, respectively.

The political and legal environment surrounding transactions with Iran is unstable, and the U.S. Administration has announced a strategy of applying “maximum pressure” to dealings with Iran and rapidly expanded the scope of secondary sanctions. Our business and reputation could be adversely affected if the U.S. government were to determine that our activities relating to Iran violate OFAC Sanctions or involve sanctionable activity under U.S. secondary sanctions, or if any other government were to determine that our activities violate applicable sanctions of other countries. Any prohibition or conditions placed on our use of U.S. correspondent accounts could effectively eliminate our access to the U.S. financial system, including U.S. dollar clearing transactions, which would adversely affect our business, and any other sanctions or civil or criminal penalties imposed could also adversely affect our business.

Furthermore, we are aware, through press reports and other means, of initiatives by governmental entities in the United States 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. 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, with which requirements we are in compliance with as of the date hereof. However, our large exposure to various business groups in Korea means that we are also exposed to financial difficulties experienced by our borrowers as a result of, among other things, adverse economic conditions in Korea and globally. For example, the impact of the ongoing outbreak of a global pandemic caused by a new strain of coronavirus, or COVID-19, on the Korean economy could disrupt the business, activities and operations of many of our borrowers, including large business groups, which in turn could have an adverse impact on the ability of our borrowers to meet existing payment or other obligations to us. See “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties.” A continued deterioration in the financial condition of our borrowers could result in a deterioration in the quality of our loan portfolio, which in turn could result in an increase in delinquency ratios, increased charge-offs and higher provisioning, as well as an increase in impairment losses on such loans, which could have a material adverse impact on our business, financial condition or results of operations.

As of December 31, 2019, our largest Credit Exposure was to Samsung Heavy Industries Co., Ltd. in the amount of ￦3,659 billion. As of December 31, 2019, our second largest and third largest Credit Exposures, respectively, were to DSME in the amount of ￦2,928 billion and to Doosan Heavy Industries Co., Ltd. in the amount of ￦1,891 billion.

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The following table sets out our five largest Credit Exposures as of December 31, 2019⁽¹⁾:

Rank	Name of Borrower	Loan Credits	Guarantees	Total
		(billions of Won)
1	Samsung Heavy Industries Co., Ltd.	￦1,423	￦2,236	￦3,659
2	Daewoo Shipbuilding & Marine Engineering Co., Ltd	548	2,380	2,928
3	Doosan Heavy Industries Co., Ltd.	840	1,051	1,891
4	Hyundai Heavy Industries Co., Ltd	826	1,036	1,863
5	Hanwha Engineering & Construction Co., Ltd	—	1,712	1,712

(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 improve DSME’s capital structure, we exchanged a term loan in the amount of ￦1 trillion provided by us to DSME for perpetual bonds newly issued by DSME, while KDB engaged in debt-for-equity swaps amounting to ￦1.8 trillion. In March 2017, we and The Korea Development Bank announced a second joint plan to provide an additional ￦2.9 trillion in financial support to DSME, which was approved by the other creditors in April 2017. Based on such plan, we exchanged a term loan in the amount of ￦1.28 trillion provided by us to DSME for perpetual bonds issued by DSME and The Korea Development Bank provided additional debt-to-equity swaps of ￦0.3 trillion in June 2017. Other creditors also provided debt-to-equity swaps for up to 80% of their debt with DSME and rescheduled the maturities of the remainder. In March 2019, KDB and Hyundai Heavy Industries Co., Ltd., or 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 currently pending 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. In December 2019, a consortium led by HSG Heavy Industries Co., Ltd., or the HSG Consortium, signed a purchase agreement under which HSG Consortium will acquire all shares of common stock in Sungdong Shipbuilding & Marine Engineering for ￦200 billion. In May 2020, Sungdong Shipbuilding & Marine Engineering exited court receivership. As of December 31, 2019, our Credit Exposure to STX Offshore & Shipbuilding and Sungdong Shipbuilding & Marine Engineering amounted to ￦62 billion and ￦171 billion, respectively.

Asset Quality

The Supervisory Regulation of Banking Business, or the 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

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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, or 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, or 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 the financial asset’s carrying amount and the present value of the estimated future cash flows discounted at such asset’s original effective interest rate. Future cash flows are estimated through a case-by-case analysis of individually assessed assets, which takes into account the benefit of any guarantee or other collateral held. The value and timing of future cash flow receipts are based on available estimates in conjunction with facts available at the time of review and reassessed on a periodic basis as new information becomes available. For collectively assessed loans, we base the level of provisions for credit losses on a portfolio basis in light of the homogenous

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nature of the assets included in each portfolio. The provisions are determined based on a quantitative review of the relevant portfolio, taking into account such factors as the level of arrears, the value of any security, and historical and projected cash recovery trends over the recovery period. For more detailed information regarding our loan loss provisioning policy, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2019 and 2018—Note 3(7).”

Asset Classifications

The following table provides information on our loan loss reserves:

	As of December 31, 2017				As of December 31, 2018				As of December 31, 2019
	Loan Amount(1)		Loan Loss Reserve(2)(3)		Loan Amount(1)		Loan Loss Reserve(2)(3)		Loan Amount(1)		Loan Loss Reserve(2)(3)
	(billions of Won)
Normal	￦	114,923	￦	290	￦	117,870	￦	844	￦	119,954	￦	556
Precautionary		12,387		880		7,622		900		8,353		1,277
Sub-standard		605		167		529		48		299		32
Doubtful		2,395		1,732		845		523		1,169		758
Estimated Loss		1,436		1,291		383		321		440		414
Total	￦	131,748	￦	4,359	￦	127,248	￦	2,636	￦	130,215	￦	3,038

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

(2) Consists of (i) allowance for loan losses, (ii) provisions for confirmed and unconfirmed acceptances and guarantees and (iii) certain financial guarantee contract liabilities.

(3) These figures include present value discount.

Reserves for Credit Losses

Non-performing assets, or NPAs, 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, 2019:

Borrower	Loans		Guarantees		Total
	(billions of Won)
Daesun Shipbuilding & Engineering Co., Ltd..	￦	491	￦	132	￦	623
Atinum Energy Investments, LLC		244		—		244
Sungdong Shipbuilding & Marine Engineering Co., Ltd.		161		—		161
DB Metal Co., Ltd.		99		—		99
Recaudo Bogota S.A.S.		63		19		82
STX Offshore & Shipbuilding Co., Ltd.		55		9		64
DAT PACIFIC2 MARITIME S.A.		49		—		49
DAT PACIFIC1 MARITIME S.A.		48		—		48
Dong-A Tanker		40		—		40
DAT PACIFIC ETERNITY S.A..		36		—		36
Total	￦	1,286	￦	160	￦	1,446

In the early 1990’s, at the direction of the Government, we extended a commodity loan in the aggregate amount of US$466 million to Vnesheconombank, the Bank for Foreign Economic Affairs of the former Soviet Union, which was guaranteed by the government of the former Soviet Union, as part of the Government’s policy to enhance economic cooperation between the two countries. Since the dissolution of the Soviet Union, the

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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, 2019, our exposure to the government of the Russian Federation amounted to ￦73 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, 2019, the amount of our non-performing assets was ￦1,908 billion, an increase of 9% from ￦1,757 billion as of December 31, 2018. As of December 31, 2019, our non-performing asset ratio was 1.5%, compared to 1.4% as of December 31, 2018.

The following table sets forth our reserves for possible credit losses as of December 31, 2017, 2018 and 2019:

	As of December 31,
	2017			2018			2019
	(billions of Won, except for percentages)
Loan Loss Reserve (A)(1)	￦	4,359		￦	2,636		￦	3,038
NPA (B)(2)		4,437			1,757			1,908
Total Shareholders’ Equity (C)		12,513			13,483			13,692
Reserve to NPA (A/B)		98	%		150	%		159	%
Equity at Risk (B-A)/C		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, 2017, 2018 and 2019:

Classification of Loans	Actual Reserve Coverage (as of December 31, 2017)			Actual Reserve Coverage (as of December 31, 2018)			Actual Reserve Coverage (as of December 31, 2019)
Normal		0.3	%		0.9	%		0.5	%
Precautionary		12.2	%		21.4	%		15.3	%
Substandard		28.0	%		9.6	%		10.8	%
Doubtful		80.0	%		76.6	%		64.8	%
Estimated Loss		97.8	%		91.4	%		94.2	%

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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, 2019, our total investment in securities amounted to ￦11,099 billion, representing 12% of our total assets. Our securities portfolio consists primarily of financial assets at fair value through other comprehensive income, or 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 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. In 2019, we sold 417,978 shares of common stock of Dongbu Steel Co., Ltd., which represented all of our holdings of common stock in the company, for ￦3 billion.

The following table sets out the composition of our securities as of December 31, 2017, 2018 and 2019:

	As of December 31, 2017						As of December 31, 2018(1)					As of December 31, 2019(1)
Type of Investment Securities	Amount			%			Amount		%			Amount		%
	(billions of Won, except for percentages)
Financial Assets at FVOCI	￦	6,693	(2)		71	%	￦	8,629		76	%	￦	8,729		79	%
Financial Assets at Amortized Cost		89	(3)		1			216		2			584		5
Investments in Associates and Subsidiaries		2,599			28			2,511		22			1,785		16
Total	￦	9,381			100	%	￦	11,356		100	%	￦	11,099		100	%

(1) Reflects the application of K-IFRS 1109.

(2) Formerly classified as available-for-sale securities under K-IFRS 1039 prior to the application of K-IFRS 1109 beginning on January 1, 2018.

(3) Formerly classified as held-to-maturity securities under K-IFRS 1039 prior to the application of K-IFRS 1109 beginning on January 1, 2018.

For further information relating to the classification guidelines and methods of valuation of our financial instruments (including securities), see “—Financial Statements and the Auditors—Notes to separate financial statements and of and for the years ended December 31, 2019 and 2018—Notes 3 and 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 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.

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As of December 31, 2019, we had issued a total amount of ￦32,276 billion in confirmed guarantees and acceptances, of which ￦29,211 billion, representing 91% of the total amount, was classified as normal, ￦2,874 billion, representing 9% of the total amount, was classified as precautionary, and ￦191 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, 2019, our outstanding loans made at floating rates of interest totaled ￦50,325 billion, whereas our outstanding borrowings made at floating rates of interest totaled ￦49,263 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,
	2017						2018						2019
	Unsettled Notional Amount		Fair Value of Assets		Fair Value of Liabilities		Unsettled Notional Amount		Fair Value of Assets		Fair Value of Liabilities		Unsettled Notional Amount		Fair Value of Assets		Fair Value of Liabilities
	(billions of Won)
Currency forwards	￦	6,451	￦	113	￦	152	￦	5,349	￦	49	￦	56	￦	5,816	￦	53	￦	88
Currency swaps		24,519		547		1,136		29,145		392		1,597		29,435		339		1,038
Interest rate swaps		38,781		419		681		40,969		471		881		40,361		696		359
Total	￦	69,751	￦	1,079	￦	1,969	￦	75,463	￦	912	￦	2,534	￦	75,612	￦	1,088	￦	1,485

As of December 31, 2019, we had entered into 547 currency related derivative contracts with a notional amount of ￦35,251 billion and had entered into 455 interest rate related derivative contracts with a notional amount of ￦40,361 billion. In connection with our currency forwards and currency swaps, we had a net valuation gain of ￦5,979 billion in 2019, compared to a net valuation loss of ￦1,211 billion in 2018, primarily due to the appreciation of the U.S. dollar against other currencies. In connection with our interest rate swaps, we recorded a net valuation gain of ￦9,779 billion in 2019, compared to a net valuation loss of ￦411 billion in 2018, primarily due to fluctuations in benchmark interest swap rates, such as the U.S. dollar interest swap rate in

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2019. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the years ended December 31, 2019 and 2018—Note 20.”

Sources of Funding

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

We raised a net total of ￦59,291 billion (new borrowings plus loan repayments by our clients less repayment of our existing debt) during 2019, a 10% increase compared with the previous year’s ￦54,005 billion. The total loan repayments, including prepayments by our clients, during 2019 amounted to ￦52,375 billion, an increase of 3% from ￦50,616 billion during 2018.

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, 2019, we had no outstanding borrowings from the Government. We also issued Won-denominated domestic bonds in the aggregate amounts of ￦13,670 billion, ￦12,865 billion and ￦11,310 billion during 2017, 2018 and 2019, 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, Japanese Yen, Australian Dollar, Euro, Hong Kong Dollar, Singapore Dollar, Swiss Franc, Brazilian Real, Mexican Peso, Peruvian Sol, Indian Rupee, Indonesian Rupiah, Chinese Yuan, New Zealand Dollar, Philippine Peso, South African Rand, Danish Krone, Swedish Krona, Czech Koruna, Norwegian Krone, British Pound, Canadian Dollar and Polish Zloty and have original maturities ranging from one to thirty years.

During 2019, we issued Eurobonds in the aggregate principal amount of US$4,213 million in various types of currencies under our existing medium term notes program, a 22% decrease from US$5,395 million in 2018. These bond issues consisted of offerings of US$1,328 million, HKD 1,020 million, BRL 711 million, EUR 900 million, CNY 200 million, AUD 883 million, IDR 5,330,000 million and CHF 150 million. In addition, we issued global bonds during 2019 in the aggregate amount of US$1,000 million under our U.S. shelf registration statement, or the U.S. Shelf Program, compared with US$2,500 million in 2018. As of December 31, 2019, the outstanding amounts of our notes and debentures were US$34,044 million, JPY 57,820 million, HKD 5,101 million, BRL 3,317 million, EUR 3,942 million, THB 10,300 million, CHF 1,250 million, AUD 4,333 million, INR 27,400 million, CNY 7,340 million, IDR 13,658,400 million, PEN 473 million, NZD 810 million, ZAR 1954 million, NOK 2,250 million, GBP 35 million, CAD 365 million, SEK 250 million, MXN 7,150 million, SGD 200 million, CZK 3,420 million and PLN 194 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 maturities ranging from one to five years. As of December 31, 2019, the outstanding amount of such borrowings from foreign financial institutions was US$1,700 million.

Our capital stock has increased from time to time since our establishment. From January 1998 to December 2019, the Government contributed ￦10,491 billion to our capital. As of December 31, 2019, our total capital stock amounted to ￦11,871 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.

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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, 2019, the aggregate outstanding principal amount of our borrowings (including export-import financing debentures), which was ￦73,504 billion, was equal to 19% of the authorized amount of ￦387,750 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 2020:

Sources of Fund	(billions of Won)
Capital Contribution		—
Borrowings		22,000
Net Collection of Loans		29,000
Collection of Loans		51,431
Repayment of Debts		(22,431	)
Others		—
Total	￦	51,000

Debt

Debt Repayment Schedule

The following table sets out the principal repayment schedule for our outstanding debt (consisting of borrowings and debentures) as of December 31, 2019:

Debt Principal Repayment Schedule

	Maturing on or before December 31,
Currency(1)	2020		2021		2022		2023		Thereafter
	(billions of Won)
Won	￦	10,790	￦	1,445	￦	210	￦	630	￦	2,330
Foreign(2)		13,298		11,203		8,994		6,130		18,275
Total Won Equivalent	￦	24,088	￦	12,648	￦	9,204	￦	6,760	￦	20,605

(1) Borrowings and debentures in foreign currency have been translated into Won at the market average exchange rates on December 31, 2019, as announced by the Seoul Money Brokerage Services Ltd.

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

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 2018 and 2019 were approximately US$3,246 million and US$3,826 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.

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As of December 31, 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$6,474 million, US$6,911 million and US$7,894 million, respectively. As of December 31, 2019, our total foreign currency liabilities exceeded our total foreign currency assets by US$521 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)
2015		9,700
2016		12,080
2017		14,120
2018		14,665
2019		15,405

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, 2019:

External Debt of the Bank

	Amount in Original Currency		Equivalent Amount in U.S. Dollars(1)
	(billions)
US$	US$	34.3	US$	34.3
Euro (EUR)	EUR	3.9		4.4
Japanese yen (JPY)	JPY	57.8		0.5
Brazilian real (BRL)	BRL	3.3		0.8
Australian Dollars (AUD)	AUD	4.3		3.0
British Pound (GBP)	GBP	0.0		0.0
Thai Baht (THB)	THB	10.3		0.3
Hong Kong dollar (HKD)	HKD	5.1		0.7
Swiss franc (CHF)	CHF	1.3		1.3
Swedish Krona (SEK)	SEK	0.3		0.0
Indonesian rupiah (IDR)	IDR	13,658.4		1.0
Chinese Yuan (CNY)	CNY	7.3		1.1
Norwegian Krone (NOK)	NOK	2.3		0.3
Mexican Peso (MXN)	MXN	7.2		0.4
New Zealand Dollar (NZD)	NZD	0.8		0.5
Indian Rupee (INR)	INR	27.4		0.4
South African Rand (ZAR)	ZAR	2.0		0.1
Peru Nuevo sol (PEN)	PEN	0.5		0.1
Canadian Dollar (CAD)	CAD	0.4		0.3
Singapore Dollar (SGD)	SGD	0.2		0.1
Czech Koruna (CZK)	CZK	3.4		0.2
Polish Zloty (PLN)	PLN	0.2		0.1
			US$	50.0

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(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, 2019 or the prevailing market rate on December 31, 2019.

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)
2015		54,631
2016		59,847
2017		52,710
2018		56,594
2019		57,899

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

Debt Record

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

Credit Policies, Credit Approval and Risk Management

Credit Policies

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

Credit Approval

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

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

• eligibility of the transaction under our financing criteria;

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

• credit risk of the borrower;

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

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

• availability of collateral.

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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, 2019, approximately 9% 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.

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. Recently, in light of the ongoing global outbreak of the COVID-19 pandemic, we closely monitor foreign currency risks that could result from the depreciation of the Won against major foreign currencies (including the U.S. dollar), which in turn may increase our cost in servicing our foreign currency denominated debt and result in foreign exchange losses.

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, 2019 for our Won- and foreign currency-denominated loans was 17 months and 45 months, respectively, and for Won- and foreign currency-denominated liabilities was 15 months and 42 months, respectively.

Our Risk Management Department also monitors and manages various operational risks that we face from time to time. For example, in light of the ongoing global outbreak of the COVID-19 pandemic, we are currently focused on monitoring and managing risks associated with disruption in the normal course of our business resulting from the potential contraction of the COVID-19 infection by our employees, which may necessitate our employees to be quarantined and/or our offices to be temporarily shut down, or disruption resulting from the necessity for social distancing, including implementation of temporary adjustment of work arrangements requiring employees to work remotely, which may lead to a reduction in labor productivity.

In managing our risks, 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.

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Capital Adequacy

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

The current capital adequacy requirements of the Financial Services Commission are derived from a new set of bank capital measures, referred to as Basel III, which the Basel Committee on Banking Supervision initially introduced in 2009 and began phasing in starting from 2013. Commencing in July 2013, the Financial Services Commission promulgated a series of amended regulations implementing Basel III, pursuant to which Korean banks, including us, were required to maintain a minimum ratio of Tier I common equity capital (which principally includes equity capital, capital surplus and retained earnings less reserve for credit losses) to risk-weighted assets of 3.5% and Tier I capital to risk-weighted assets of 4.5% from December 1, 2013, which minimum ratios were increased to 4.0% and 5.5%, respectively, from January 1, 2014 and increased further to 4.5% and 6.0%, respectively, from January 1, 2015. Such requirements are in addition to the pre-existing requirement for a minimum ratio of Tier I and Tier II capital (less any capital deductions) to risk-weighted assets of 8.0%, which remains unchanged. The amended regulations also require an additional capital conservation buffer of 2.5% in 2019 and 2020, as well as a potential counter-cyclical capital buffer of up to 2.5%, which is 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, 2019, our capital adequacy ratio, on a consolidated basis, was 14.5%, an increase from 13.8% as of December 31, 2018, which was primarily due to an increase in retained earnings.

The following table sets forth our capital base and capital adequacy ratios (on a consolidated basis) reported as of December 31, 2017, 2018 and 2019:

	As of December 31,
	2017			2018			2019
	(billions of Won, except for percentages)
Tier I	￦	12,448		￦	13,431		￦	13,531
Capital stock (including capital surplus and capital adjustments)		11,686			11,686			11,742
Retained Earnings(1)		623			1,048			1,354
Accumulated other comprehensive income		185			734			467
Others		3			2			2
Deductions from Tier I Capital		(49	)		(39	)		(34	)
Capital Adjustments		—			—			—
Deferred Tax Asset		—			—			—
Others		(49	)		(39	)		(34	)
Tier II (General Loan Loss Reserves)		1,678			1,776			1,830
Total Capital		14,126			15,207			15,361
Risk Adjusted Assets		109,485			105,485			106,112
Capital Adequacy Ratios
Tier I common equity		11.4	%		12.7	%		12.8	%
Tier I		11.4	%		12.7	%		12.8	%
Tier I and Tier II		12.9	%		14.4	%		14.5	%

(1) Net amount after deducting regulatory reserve for loan losses.

Source: Internal accounting records

28

Overseas Operations

We maintain an international presence through 24 overseas representative offices, which are located in New York City, Tokyo, Beijing, São Paolo, Paris, Washington D.C., Shanghai, New Delhi, Dubai, Moscow, Mexico City, Tashkent, Hanoi, Manila, Jakarta, Yangon, Bogota, Istanbul, Dar es Salaam, Dhaka, 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, 2019:

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

Property

Our head office is located at 38 Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, Korea, a 45,715 square meter building on a site of 9,110 square meters and owned by us. In addition to the head office, we own a staff training center located near Seoul on a site of 47,881 square meters and a marine finance center, a 4,423 square meter building, located in Busan on a site of 556 square meters. We also maintain 13 branches in Busan, Gwangju, Daegu, Changwon, Daejeon, Suwon, Incheon, Ulsan, Cheongju, Jeonju, Gumi, Yeosu and Wonju. Our domestic branch offices and overseas representative offices are located in facilities held under long-term leases.

Management and Employees

Management

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

29

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

Name	Age		Board Member Since		Position
Moon-kyu Bang		58		October 30, 2019		Chairman and President
Seung-joong Kang		60		May 15, 2018		Deputy President
Deog-yong Shin		59		January 18, 2018		Senior Executive Director
Meong-heon Na		65		June 1, 2018		Non-standing Executive Director
Bok-hwan Yu		61		January 6, 2020		Non-standing Executive Director
Tammy Chung		59		January 6, 2020		Non-standing Executive 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;

• 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.

30

The members of the Operations Committee are currently as follows:

Name	Age		Member Since	Position
Moon-kyu Bang		57	October 30, 2019	Chairman and President of KEXIM
Chang Huh		56	February 18, 2020	Deputy Minister for International Economic Affairs, Ministry of Economy and Finance
Kang-hyeon Yun		56	September 22, 2017	Deputy Minister for Economic Affairs, Ministry of Foreign Affairs
Tae Sung Park		56	January 28, 2019	Deputy Minister for International Trade and Investment, Ministry of Trade, Industry & Energy
Seong Hai Lee		53	January 31, 2019	Assistant Minister for Construction Policy Bureau, Ministry of Land, Infrastructure and Transport
Junseok Kim		49	September 19, 2019	Director of Shipping & Logistics Bureau, Ministry of Oceans and Fisheries
Taehyun Kim		53	July 5, 2019	Secretary General, Financial Services Commission
Kyuil Chung		56	December 20, 2019	Deputy Governor, The Bank of Korea
Ho Hyoung Lee		54	March 9, 2020	Senior Executive Director, Korea Federation of Banks
Jin Hyun Han		60	February 27, 2018	Executive Vice Chairman, Korea International Trade Association
Do Yeol Lee		56	March 18, 2019	Deputy President, Korea Trade Insurance Corporation
Jung-Han Koo		49	May 1, 2019	Senior Research Fellow, Korea Institute of Finance
Hae Sun Park		56	January 22, 2020	Professor, Konkuk University

Employees

As of December 31, 2019, we had 1,126 employees, among whom 950 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.

31

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, 2019
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
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		30,000,000		3.3	July 07, 2014	July 07, 2024		30,000,000
USD		500,000,000		3.25	August 12, 2014	August 12, 2026		500,000,000
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

32

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2019
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
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		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		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		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		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		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
USD		500,000,000		LIBOR 3M+0.875	January 25, 2017	January 25, 2022		500,000,000

33

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2019
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		400,000,000		LIBOR 3M+0.80	July 05, 2017	July 05, 2022		400,000,000
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		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
USD		100,000,000		LIBOR 3M+0.32	January 15, 2019	January 15, 2021		100,000,000
USD		150,000,000		LIBOR 3M+0.44	January 28, 2019	January 28, 2022		150,000,000
USD		50,000,000		LIBOR 3M+0.20	February 1, 2019	February 1, 2020*		50,000,000
USD		50,000,000		LIBOR 3M+0.20	February 8, 2019	February 8, 2020*		50,000,000
USD		50,000,000		LIBOR 3M+0.42	February 12, 2019	February 12, 2021		50,000,000
USD		50,000,000		LIBOR 3M+0.42	February 13, 2019	February 13, 2021		50,000,000
USD		21,900,000		2.64	February 27, 2019	February 22, 2024		21,900,000
USD		50,000,000		LIBOR 3M+0.39	March 14, 2019	March 14, 2022		50,000,000
USD		50,000,000		LIBOR 3M+0.39	March 15, 2019	March 15, 2022		50,000,000
USD		50,000,000		2.89	March 20, 2019	March 20, 2021		50,000,000
USD		50,000,000		2.89	March 21, 2019	March 21, 2021		50,000,000
USD		500,000,000		LIBOR 3M+0.525	June 25, 2019	June 25, 2022		500,000,000
USD		500,000,000		2.375	June 25, 2019	June 25, 2024		500,000,000
USD		21,200,000		1.3	August 29, 2019	August 28, 2024		21,200,000
USD		45,000,000		LIBOR 3M+0.39	September 6, 2019	September 6, 2022		45,000,000
USD		50,000,000		LIBOR 3M+0.40	September 9, 2019	September 9, 2022		50,000,000
USD		50,000,000		LIBOR 3M+0.42	October 8, 2019	October 7, 2022		50,000,000

34

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2019
USD		100,000,000		LIBOR 3M+0.20	October 8, 2019	October 8, 2020		100,000,000
USD		50,000,000		LIBOR 3M+0.42	October 10, 2019	October 11, 2022		50,000,000
USD		50,000,000		LIBOR 3M+0.34	October 11, 2019	February 11, 2022		50,000,000
USD		50,000,000		LIBOR 3M+0.34	October 11, 2019	February 11, 2022		50,000,000
USD		50,000,000		LIBOR 3M+0.20	October 14, 2019	October 14, 2020		50,000,000
USD		100,000,000		LIBOR 3M+0.42	October 29, 2019	September 29, 2021		100,000,000
USD		40,000,000		LIBOR 3M+0.42	October 31, 2019	October 31, 2022		40,000,000
USD		50,000,000		LIBOR 3M+0.45	November 12, 2019	November 12, 2022		50,000,000
USD		50,000,000		LIBOR 3M+0.42	October 10, 2019	October 11, 2022		50,000,000
USD		50,000,000		LIBOR 3M+0.34	October 11, 2019	February 11, 2022		50,000,000
				Subtotal in Original Currency			USD	28,968,700,000
				Subtotal in Equivalent Amount of Won(1)			￦	33,539,960,860,000
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		50,000,000,000		0.27	June 28, 2018	June 28, 2021		50,000,000,000
				Subtotal in Original Currency			JPY	57,820,000,000
				Subtotal in Equivalent Amount of Won(2)			￦	614,898,354,000
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		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		345,000,000		1.93	June 24, 2016	June 24, 2021		345,000,000
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
HKD		380,000,000		2.0775	September 25, 2019	September 25, 2024		380,000,000
HKD		390,000,000		2.05	September 26, 2019	September 26, 2024		390,000,000
HKD		250,000,000		2.24	November 21, 2019	November 20, 2020		250,000,000
				Subtotal in Original Currency			HKD	5,101,000,000
				Subtotal in Equivalent Amount of Won(3)			￦	758,314,660,000
MXN		150,000,000		7.78	November 5, 2018	November 8, 2021		150,000,000
MXN		7,000,000,000		7.93	August 8, 2019	July 30, 2026		7,000,000,000
				Subtotal in Original Currency			MXN	7,150,000,000
				Subtotal in Equivalent Amount of Won(4)			￦	437,151,000,000
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
BRL		184,000,000		BRL CDI 3M+0.00	January 17, 2019	January 14, 2021		184,000,000

35

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2019
BRL		152,000,000		BRL CDI 3M+0.00	February 28, 2019	December 23, 2020		152,000,000
BRL		375,000,000		BRL CDI 3M+0.00	March 28, 2019	May 22, 2020*		375,000,000
				Subtotal in Original Currency			BRL	3,317,400,000
				Subtotal in Equivalent Amount of Won(5)			￦	955,543,896,000
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		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
EUR		20,000,000		1.54	August 23, 2018	August 23, 2028		20,000,000
EUR		750,000,000		0.375	March 26, 2019	March 26, 2024		750,000,000
EUR		150,000,000		-0.421	December 16, 2019	December 16, 2024		150,000,000
				Subtotal in Original Currency			EUR	3,647,000,000
				Subtotal in Equivalent Amount of Won(6)			￦	4,731,727,210,000
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)			￦	398,198,000,000
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		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
CHF		150,000,000		0.0	November 27, 2019	May 27, 2025		150,000,000
				Subtotal in Original Currency			CHF	1,250,000,000
				Subtotal in Equivalent Amount of Won(8)			￦	1,494,400,000,000
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		22,000,000		5.975	August 08, 2013	August 08, 2023		22,000,000
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		100,000,000		4.75	June 03, 2014	June 03, 2021		100,000,000
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

36

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2019
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
AUD		33,800,000		2.2	February 27, 2019	February 22, 2024		33,800,000
AUD		500,000,000		BBSW 3M+0.85	May 23, 2019	May 23, 2024		500,000,000
AUD		34,100,000		0.93	August 29, 2019	August 28, 2024		34,100,000
AUD		200,000,000		BBSW 3M+0.37	September 03, 2019	September 01, 2020		200,000,000
AUD		400,000,000		BBSW 3M+0.8	October 08, 2019	October 08, 2024		400,000,000
AUD		72,600,000		1.525	November 15, 2019	November 15, 2022		72,600,000
AUD		142,900,000		2.51	December 06, 2019	December 06, 2049		142,900,000
				Subtotal in Original Currency			AUD	4,333,200,000
				Subtotal in Equivalent Amount of Won(9)			￦	3,511,365,288,000
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
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	27,400,000,000
				Subtotal in Equivalent Amount of Won(10)			￦	444,702,000,000
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		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		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
CNY		200,000,000		3.58	April 23, 2019	April 23, 2024		200,000,000
				Subtotal in Original Currency			CNY	7,340,000,000
				Subtotal in Equivalent Amount of Won(11)			￦	1,216,531,600,000
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

37

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2019
IDR		635,000,000,000		7.25	April 19, 2018	December 07, 2024		635,000,000,000
IDR		500,000,000,000		8.4	November 30, 2018	November 30, 2021		500,000,000,000
IDR		500,000,000,000		8.4	January 22, 2019	November 30, 2021		500,000,000,000
IDR		675,000,000,000		8.4	February 14, 2019	November 30, 2021		675,000,000,000
IDR		675,000,000,000		8.4	February 25, 2019	November 30, 2021		675,000,000,000
IDR		700,000,000,000		8	February 28, 2019	May 15, 2024		700,000,000,000
IDR		675,000,000,000		8	April 03, 2019	May 15, 2024		675,000,000,000
IDR		700,000,000,000		6.65	September 25, 2019	May 15, 2023		700,000,000,000
IDR		700,000,000,000		6.71	November 25, 2019	November 25, 2024		700,000,000,000
IDR		705,000,000,000		6.7	December 02, 2019	December 02, 2024		705,000,000,000
				Subtotal in Original Currency			IDR	13,658,400,000,000
				Subtotal in Equivalent Amount of Won(12)			￦	1,135,013,040,000
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
PEN		105,000,000		4.14	November 21, 2019	November 21, 2024		105,000,000
PEN		102,000,000		4.15	December 10, 2019	December 10, 2024		102,000,000
				Subtotal in Original Currency			PEN	472,600,000
				Subtotal in Equivalent Amount of Won(13)			￦	164,984,660,000
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)			￦	171,710,000,000
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	810,000,000
				Subtotal in Equivalent Amount of Won(15)			￦	631,054,800,000
ZAR		653,600,000		8	November 25, 2016	November 16, 2020		653,600,000
ZAR		700,000,000		8.5	May 28, 2019	May 28, 2025		700,000,000
ZAR		600,000,000		8.43	November 27, 2019	November 27, 2026		600,000,000
				Subtotal in Original Currency			ZAR	1,953,600,000
				Subtotal in Equivalent Amount of Won(16)			￦	160,253,808,000
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	365,000,000
				Subtotal in Equivalent Amount of Won(17)			￦	323,594,400,000
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

38

Currency	Original Principal Amount		Interest Rate (%)		Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2019
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)			￦	295,447,500,000
GBP		35,000,000		1.2	November 15, 2019	November 15, 2022		35,000,000
				Subtotal in Original Currency			GBP	35,000,000
				Subtotal in Equivalent Amount of Won(19)			￦	53,154,150,000
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)			￦	30,965,000,000
CZK		1,140,000,000		1.52	November 6, 2019	November 6, 2024		1,140,000,000
CZK		1,140,000,000		1.55	November 06, 2019	November 06, 2024		1,140,000,000
CZK		1,140,000,000		1.54	November 14, 2019	November 14, 2024		1,140,000,000
				Subtotal in Original Currency			CZK	3,420,000,000
				Subtotal in Equivalent Amount of Won(21)			￦	174,556,800,000
PLN		194,000,000		2.12	October 25, 2019	October 25, 2024		194,000,000
				Subtotal in Original Currency			PLN	194,000,000
				Subtotal in Equivalent Amount of Won(22)			￦	59,142,840,000
		Total External Bonds of the Bank in Equivalent Amount of Won					￦	51,302,669,866,000

* 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 1,157.80, the market average exchange rate in effect on December 31, 2019, 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 1,063.47, the market average exchange rate in effect on December 31, 2019, 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 148.66, the market average exchange rate in effect on December 31, 2019, as announced by Seoul Money Brokerage Services, Ltd.

(4) Mexican Peso amounts are converted to Won amounts at the rate of MXN 1.00 to Won 61.11, the market average exchange rate in effect on December 31, 2019, 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 288.05, the market average exchange rate in effect on December 31, 2019, 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 1,297.43, the market average exchange rate in effect on December 31, 2019, 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 38.66, the market average exchange rate in effect on December 31, 2019, 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 1,195.52, the market average exchange rate in effect on December 31, 2019, 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 810.34, the market average exchange rate in effect on December 31, 2019, 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 16.23, the market average exchange rate in effect on December 31, 2019, as announced by Seoul Money Brokerage Services, Ltd.

(11) Chinese Yuan amounts are converted to Won amounts at the rate of CNY 1.00 to Won 165.74, the prevailing market rate on December 31, 2019.

(12) Indonesian Rupiah amounts are converted to Won amounts at the rate of IDR 100.00 to Won 8.31, the market average exchange rate in effect on December 31, 2019, 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 349.10, the prevailing market rate on December 31, 2019.

(14) Singapore Dollar amounts are converted to Won amounts at the rate of SGD 1.00 to Won 858.55, the market average exchange rate in effect on December 31, 2019, 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 779.08, the market average exchange rate in effect on December 31, 2019, as announced by Seoul Money Brokerage Services, Ltd.

39

(16) South African Rand amounts are converted to Won amounts at the rate of ZAR 1.00 to Won 82.05, the market average exchange rate in effect on December 31, 2019, 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 886.56, the market average exchange rate in effect on December 31, 2019, 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 131.31, the market average exchange rate in effect on December 31, 2019, 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 1,518.69, the market average exchange rate in effect on December 31, 2019, 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 123.86, the market average exchange rate in effect on December 31, 2019, as announced by Seoul Money Brokerage Services, Ltd.

(21) Czech Koruna amounts are converted to Won amounts at the rate of CZK 1.00 to Won 51.05, the market average exchange rate in effect on December 31, 2019, as announced by Seoul Money Brokerage Services, Ltd.

(22) Polish Zloty amounts are converted to Won amounts at the rate of PLN 1.00 to Won 304.87, the market average exchange rate in effect on December 31, 2019, as announced by Seoul Money Brokerage Services, Ltd.

(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, 2019(1)
		(%)						(millions of Won)
Agricultural Bank of China, Seoul	Borrowings from ABC		LIBOR 3M+0.85		2016		2021		115,780
Syndicated Lenders	Borrowings from Syndicated Lenders		LIBOR 3M+0.57		2017		2020		289,450
Bank of America, N.A.	Borrowings from BofA		LIBOR 3M+0.7		2017		2021		173,670
Syndicated Lenders	Borrowings from Syndicated Lenders		LIBOR 3M+0.52		2018		2021		578,900
Mizuho Bank, Seoul	Borrowings from Mizuho		LIBOR 3M+0.45		2019		2021		231,560
Bank of America, N.A.	Borrowings from BofA		LIBOR 3M+0.55		2019		2022		231,560
MUFG Bank, Seoul	Borrowings from MUFG		LIBOR 3M+0.27		2019		2020		347,340
Long-term Borrowings from Foreign Financial Institution								￦	1,968,260
Compulsory Loan			LIBOR 3M + 0.6 ~ 0.78		2014		2024	￦	2,808,221
Foreign Currency CP			-0.52 ~ 2.17		2019		2020	￦	1,482,652
Others								￦	337,639
Total External Borrowings of the Bank								￦	6,596,773

(1) Converted to Won amounts at the relevant market average exchange rates in effect on December 31, 2019 as announced by Seoul Money Brokerage Services, Ltd.

40

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, 2019
	(%)						(millions of Won)
Bonds
Short-term Industrial Finance Bonds		1.25~1.86		2019		2020	￦	9,900,000
Long-term Industrial Finance Bonds		1.32~4.70		2014~2019		2021~2032		5,505,000
Total Bonds		1.25~4.70		2014~2019		2020~2032		15,405,000
Total Internal Debt							￦	15,405,000

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, 152 Teheran-ro, Gangnam-gu, Seoul, 06236, Korea, which has audited our separate financial statements as of and for the years ended December 31, 2019 and 2018 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, 2019 and 2018—Note 2.” These principles and procedures differ in certain material respects from generally accepted accounting principles in the United States.

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, 2019 and 2018—Note 3(15).”

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 1109 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 1109, Financial Instruments, which is aimed at improving and simplifying the accounting treatment of financial instruments, is effective for annual periods beginning on or after January 1, 2018 and replaces K-IFRS 1039, Financial Instruments: Recognition and Measurement. We have applied the new accounting standard, K-IFRS 1109, which requires all financial assets to be classified and measured on the basis of an entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets, in our separate financial statements as of and for the years ended December 31, 2019 and 2018 included in this prospectus.

K-IFRS 1116, Leases, which was enacted on May 22, 2017, is aimed at facilitating a more faithful representation of, and improving the transparency of information relating to, lease-related assets and liabilities, and is effective for annual periods beginning on or after January 1, 2019. K-IFRS 1116, which replaces K-IFRS 1017, Leases, requires a lessee to recognize a right-of-use asset representing the lessee’s right to use the underlying leased asset and a lease liability representing the present value of the lessee’s obligation to make future lease payments. We have applied K-IFRS 1116 in our separate financial statements beginning with the year ended December 31, 2019. For additional information relating to K-IFRS 1116, see “—Notes to Separate Financial Statements as of and for the years ended December 31, 2019 and 2018—Note 2(5).”

42

Independent Auditors’ Report

The Board of Directors and Shareholders of

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 statements of financial position as of December 31, 2019 and 2018, the separate statements of comprehensive income, changes in equity and cash flows for the years then ended, 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, 2019 and 2018, 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 separate financial statements may differ from those generally accepted and applied in other countries.

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

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

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

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

Auditors’ Responsibilities for the Audit of the Separate Financial Statements

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

43

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

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

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

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

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

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

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

KPMG Samjong Accounting Corp.

Seoul, Korea

March 31, 2020

This report is effective as of March 31, 2020, 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, 2019 AND 2018

	Korean won
	December 31, 2019			December 31, 2018
	(In millions)
ASSETS:
Cash and due from financial institutions (Notes 4, 5 and 7)	￦	4,852,816		￦	3,682,863
Financial assets at fair value through profit or loss (“FVTPL”) (Notes 4, 5, 8 and 20)		1,834,497			2,298,223
Hedging derivative assets (Notes 4, 5 and 20)		390,645			75,743
Loans at amortized cost (Notes 4, 5, 10 and 37)		71,576,511			70,199,721
Financial investments (Notes 4, 5 and 9)		9,313,662			8,844,756
Investments in associates and subsidiaries (Note 11)		1,784,901			2,511,497
Tangible assets, net (Note 12)		265,116			266,102
Intangible assets, net (Note 13)		34,382			38,454
Deferred tax assets (Note 34)		1,212,263			902,252
Retirement benefit assets, net (Note 18)		3,243			—
Other assets (Notes 4, 5, 14 and 37)		986,093			979,628
	￦	92,254,129		￦	89,799,239
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Financial liabilities at FVTPL (Notes 4, 5 and 20)	￦	686,613		￦	905,901
Hedging derivative liabilities (Notes 4, 5 and 20)		798,786			1,628,303
Borrowings (Notes 4, 5 and 15)		6,796,372			4,893,478
Debentures (Notes 4, 5 and 16)		67,137,591			65,942,970
Provisions (Note 17 and 36)		539,381			751,882
Retirement benefit liabilities, net (Note 18)		—			6,350
Other liabilities (Notes 4, 5, 19 and 37)		2,603,751			2,187,742
		78,562,494			76,316,626
STOCKHOLDERS’ EQUITY:
Capital stock (Note 21)		11,871,143			11,814,963
Capital adjustments		(129,487	)		(129,339	)
Other components of equity (Notes 20 and 22)		594,408			680,329
Retained earnings (Note 23) (Regulatory reserve for loan losses as of December 31, 2019 and 2018: ￦106,650 million and ￦302,248 million)		1,355,571			1,116,660
		13,691,635			13,482,613
	￦	92,254,129		￦	89,799,239

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, 2019 AND 2018

	Korean Won
	2019			2018
	(In millions)
OPERATING INCOME:
Net interest income (Notes 24 and 37):
Interest income	￦	3,095,252		￦	2,951,416
Interest expenses		(2,216,731	)		(1,968,269	)
		878,521			983,147
Net commission income (Notes 25 and 37):
Commission income		354,713			323,614
Commission expenses		(15,077	)		(8,348	)
		339,636			315,266
Dividend income (Note 26)		33,575			36,710
Net gain (loss) on financial assets at FVTPL (Note 27)		206,269			(7,626	)
Net gain (loss) on hedging derivative assets (Notes 20 and 28)		1,406,148			(755,066	)
Net loss on financial investments (Note 29)		(3,574	)		(5,043	)
Net gain (loss) on foreign exchange transaction		(456,456	)		599,891
Other net operating income (expenses) (Note 30)		(955,878	)		204,813
Impairment loss on credit (Note 31 and 37)		(322,660	)		(422,737	)
General and administrative expenses (Note 32)		(229,142	)		(207,827	)
		896,439			741,528
NON-OPERATING INCOME (EXPENSES) (Note 33):
Net gain (loss) on investments in associates and subsidiaries		(414,872	)		1,526
Net other non-operating income (expenses)		(11,426	)		10,040
		(426,298	)		11,566
PROFIT BEFORE INCOME TAX		470,141			753,094
INCOME TAX EXPENSES (Note 34)		(168,574	)		(156,055	)
PROFIT FOR THE YEAR		301,567			597,039
(Profit for the year adjusted for regulatory reserve for loan losses for the years ended December 31, 2019 and 2018: ￦69,643 million and ￦725,015 million) (Note 23)
OTHER COMPREHENSIVE INCOME (LOSS) FOR THE YEAR (Note 22):
Items that will not be reclassified subsequently to profit or loss
Net gain (loss) on equity securities at FVOCI		(184,271	)		1,076,352
Remeasurements of net defined benefit liability		6,829			(9,566	)
Income tax effect		64,477			(258,162	)
Items that are or may be reclassified subsequently to profit or loss
Net gain (loss) on debt securities at FVOCI		35,497			(23,057	)
Cash flow hedging gains or losses		182			(954	)
Income tax effect		(8,635	)		5,811
		(85,921	)		790,424
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	￦	215,646		￦	1,387,463

See accompanying notes to separate financial statements

46

THE EXPORT-IMPORT BANK OF KOREA

SEPARATE STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

						Other components of equity
	Capital stock		Capital adjustments			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	)	￦	579,216		￦	12,154,746
Payment of dividends		—		—			—			—			—			—			(59,596	)		(59,596	)
Total comprehensive Income																						1,387,463
Profit for the year		—		—			—			—			—			—			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	￦	11,814,963	￦	(129,339	)	￦	691,647		￦	(137	)	￦	9,917		￦	(21,098	)	￦	1,116,660		￦	13,482,613
January 1, 2019	￦	11,814,963	￦	(129,339	)	￦	691,647		￦	(137	)	￦	9,917		￦	(21,098	)	￦	1,116,660		￦	13,482,613
Payment of dividends		—		—			—			—			—			—			(62,656	)		(62,656	)
Paid-in Capital Increase		56,180		(148	)		—			—			—			—			—			56,032
Total comprehensive Income																						215,646
Profit for the year		—		—			—			—			—			—			301,567			301,567
Other comprehensive income:																						(85,921	)
Loss on valuation of FVOCI financial instruments, net of tax		—		—			(48,918	)		—			—			—			—			(48,918	)
Loss on valuation of cash flow hedge, net of tax		—		—			—			137			—			—			—			137
Remeasurement elements of defined benefit plans, net of tax		—		—			—			—			5,177			—			—			5,177
Loss on disposal of FVOCI financial instruments, net of tax		—		—			—			—			—			(42,317	)		—			(42,317	)
December 31, 2019	￦	11,871,143	￦	(129,487	)	￦	642,729		￦	—		￦	15,094		￦	(63,415	)	￦	1,355,571		￦	13,691,635

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, 2019 AND 2018

	Korean Won
	2019			2018
	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit for the year	￦	301,567		￦	597,039
Adjustments for:
Income tax expense		168,574			156,055
Interest income		(3,095,252	)		(2,951,416	)
Interest expenses		2,216,731			1,968,269
Dividend and distribution income		(57,555	)		(36,710	)
Dividend received from subsidiaries and associates		(11,928	)		(4,883	)
Loss on financial assets at FVTPL		9,108			4,807
Loss on financial assets at FVOCI		6,917			5,364
Transfer to derivatives’ credit risk provision		25,257			61,404
Loss on foreign exchange transactions		1,651,369			796,800
Impairment loss on credit		322,660			422,737
Loss on investments in subsidiaries and associates		445,520			3,356
Loss on fair value hedged items		1,104,469			200,634
Depreciation and amortization		18,968			20,058
Loss on disposals of tangible, intangible and other assets		12			5
Impairment loss on tangible, intangible and other assets		3			—
Loss on valuation of derivative assets for trading		680,963			533,372
Loss on valuation of derivative assets for hedging		161,204			949,911
Retirement benefits		11,069			9,047
Gain on financial assets at FVTPL		(9,157	)		(13,130	)
Gain on financial assets at FVOCI		(3,343	)		(321	)
Reversal of derivatives’ credit risk provision		(93,448	)		(42,217	)
Gain on foreign exchange transactions		(1,195,959	)		(1,395,173	)
Gain on fair value hedged items		(84,142	)		(430,152	)
Gain on valuation of derivative assets for trading		(677,029	)		(468,312	)
Gain on valuation of derivative assets for hedging		(907,285	)		(73,947	)
Gain on disposals of tangible, intangible and other assets		(73	)		(141	)
Reversal of impairment loss on tangible, intangible and other assets		(55	)		—
Gain on investments in subsidiaries and associates		(18,720	)		—
		668,878			(284,583	)
Changes in operating assets and liabilities:
Due from financial institutions		796,509			(1,304,270	)
Financial assets and liabilities at FVTPL		240,572			(592,657	)
Hedging derivative net assets		(398,155	)		(154,432	)
Loans at amortized cost		(290,058	)		(1,086,911	)
Other assets		(13,111	)		(8,019	)
Provisions		150,843			(16,741	)
Payment of retirement benefits		(13,833	)		(35	)
Other liabilities		92,663			(283,530	)
		565,430			(3,446,595	)

(Continued)

48

THE EXPORT-IMPORT BANK OF KOREA

SEPARATE STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	Korean Won
	2019			2018
	(In millions)
Payment of income tax	￦	(30,065	)	￦	(18,272	)
Interest received		3,090,772			2,703,902
Interest paid		(2,058,405	)		(1,718,725	)
Dividend received		69,483			41,593
Net cash provided by (used in) operating activities		2,607,660			(2,125,641	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposal of financial investments		652,172			829,035
Disposal of investments in associates and subsidiaries		2,024			1,025
Disposal of tangible assets		103			42
Disposal of intangible assets		—			380
Acquisition of financial investments		(837,333	)		(902,061	)
Acquisition of investments in associates and subsidiaries		(29,934	)		(48,365	)
Acquisition of tangible assets		(6,827	)		(5,897	)
Acquisition of intangible assets		(7,073	)		(2,916	)
Net cash used in investing activities		(226,868	)		(128,757	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in call money		200,000			68
Proceeds from borrowings		4,498,883			4,568,261
Proceeds from debentures		18,183,732			23,295,958
Paid-in capital increase		56,180			—
Repayment of borrowings		(2,941,247	)		(5,990,207	)
Repayment of debentures		(20,089,596	)		(19,146,697	)
Expense related to paid-in capital increases		(148	)		—
Payment of dividends		(62,656	)		(59,596	)
Decrease in deposits		—			(2	)
Net cash provided by (used in) financing activities		(154,852	)		2,667,785
NET INCREASE IN CASH AND CASH EQUIVALENTS		2,225,940			413,387
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR		1,020,067			815,994
EFFECTS OF FOREIGN EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS IN FOREIGN CURRENCIES		(332,331	)		(209,314	)
CASH AND CASH EQUIVALENTS, END OF THE YEAR (Note 7 and 35)	￦	2,913,676		￦	1,020,067

See accompanying notes to separate financial statements.

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THE EXPORT-IMPORT BANK OF KOREA

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 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 December 31, 2019, the Bank operates a head office in Seoul, ten domestic branches, three domestic offices, four overseas subsidiaries and twenty-four overseas offices.

The Bank’s authorized capital is ￦15,000,000 million, and through numerous capital increases since the establishment, its paid-in capital is ￦11,871,143 million as of December 31, 2019. The Government of the Republic of Korea (the “Government”), the Bank of Korea (“BOK”), and the Korea Development Bank hold 66.43%, 9.81%, and 23.76%, respectively, of the ownership of the Bank as of December 31, 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 Bank’s separate financial statements. The Bank receives fees from the Government for the trustee services.

(2) Summary of subsidiaries and associates

1) Subsidiaries of the Bank as of December 31, 2019 and 2018, are as follows (Korean won in millions):

(December 31, 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		Dec. 31, 2019
KEXIM Vietnam Leasing Co.(*1)	Vietnam		USD 13 mil.		Finance		—		100.00		Dec. 31, 2019
PT.KOEXIM Mandiri Finance	Indonesia		IDR 52,000 mil.		Finance		442		85.00		Dec. 31, 2019
KEXIM Asia Limited	Hong Kong		USD 30 mil.		Finance		30,000,000		100.00		Dec. 31, 2019
EXIM PLUS Co., Ltd.	Korea		KRW 950 mil.		Service		190,000		100.00		Dec. 31, 2019

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

(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.

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2) Associates of the Bank as of December 31, 2019 and 2018, are as follows :

(December 31, 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		Dec. 31, 2019
Credit Guarantee and Investment Fund	Philippines		USD 1,078 mil.	Financial service		123,800,000		11.49		Dec. 31, 2019
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.	Korea		KRW 1,391,693 mil.	Shipbuilding		96,575,200		69.39		Dec. 31, 2019
DAESUN Shipbuilding & Engineering Co., Ltd.	Korea		KRW 6,262 mil.	Shipbuilding		1,040,000		83.03		Dec. 31, 2019
KTB Newlake Global Healthcare PEF	Korea		KRW 35,180 mil.	Financial service		1,004,500,000		25.00		Dec. 31, 2019
KBS-KDB Private Equity Fund	Korea		KRW 29,713 mil.	Financial service		6,031,875,000		20.30		Dec. 31, 2019
Korea Aerospace Industries. Ltd.	Korea		KRW 487,376 mil.	Manufacturing		25,745,964		26.41		Dec. 31, 2019
Daewoo Shipbuilding & Marine Engineering Co., Ltd	Korea		KRW 541,029 mil.	Shipbuilding		—		—		Dec. 31, 2019

(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

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2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:

(1) Basis of Financial Statement Presentation

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

(2) Basis of measurement

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

• Derivative financial instruments measured at fair value

• Financial assets measured at fair value through profit or loss

• Financial assets measured at fair value through other comprehensive income

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

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

(3) Functional and presentation currency

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

(4) Significant Estimates and Judgments

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

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

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

1) Fair value of financial instruments

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

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

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

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

3) Defined benefit obligation

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

4) Income taxes

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

5) Hedging relationship

The Bank 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 that applied to the separate financial statements as of and for the year ended December 31, 2018, except for the application of the first amendment standard, effective from January 1, 2019, as explained below.

1) K-IFRS No.1116, ‘Leases’

K-IFRS No.1116, published on May 22, 2017, replaces existing standards including K-IFRS No.1017, ‘Leases’, K-IFRS No.2104, ‘Determining whether an Arrangement contains a Lease’, K-IFRS No.2015, ‘Operating Leases—Incentives’ and K-IFRS No.2027, ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’.

The Bank has applied K-IFRS No.1116 from the year beginning on January 1, 2019, the date of initial application.

At inception of a contract, the Bank assessed whether the contract is, or contains, a lease, and identified whether the contract is, or contains, a lease in accordance with K-IFRS No.1116 at the date of initial application.

For a contract that is, or contains, a lease, a lessee or a lessor shall account for each lease component within the contract as a lease separately from non-lease components (hereinafter called ‘non-lease components’) of the contract.

A lessee shall recognize a lease right-of-use asset, which represents a lessee’s right to use an underlying asset (leased asset) for the lease term, and a lease liability, which represents an obligation to make lease payments. However, a lessee may elect not to apply the requirements to short-term leases and

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leases for which the underlying asset is of low value. Also, the Bank used the following practical expedients when applying K-IFRS No.1116 to leases previously classified as operating leases under K-IFRS No.1017.

• Elects not to apply the requirements to recognize lease right-of-use assets and lease liabilities to leases for which the lease term ends within 12 months of the date of initial application.

• Excludes initial direct costs from the measurements of the right-of-use assets at the date of initial application.

• If the contract contains an option to extend or terminate the lease, hindsight is used to determine the lease term.

The application of K-IFRS No.1116 has no significant impact on the separate financial statements.

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) Investments in subsidiaries and associates

The accompanying separate financial statements have been prepared on a stand-alone basis in accordance with K-IFRS No.1027, ‘Separate Financial Statements’. The Bank’s investments in subsidiaries and associates are recorded at cost in accordance with K-IFRS No.1027. Dividend received from its subsidiaries and associates is recognized in profit or loss when the Bank is entitled to receive the dividend.

(3) Foreign Currency

1) Foreign currency transactions

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

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

2) Foreign operations

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

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

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

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

(4) 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.

(5) Non-derivative Financial Assets

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

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

1) Financial assets designated at FVTPL

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

2) Equity instruments

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

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

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

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3) Debt instruments

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

① 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.

② 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 credit’ in the separate statement of comprehensive income, respectively.

③ 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.

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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.

(6) 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.

① 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.

② 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.

③ 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

57

other comprehensive income and the ineffective portion of the hedge is recognized in profit or loss. 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.

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.

(7) Impairment: Financial 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 Bank 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. When the contractual cash flows of a financial asset are renegotiated or otherwise modified, the Bank 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

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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

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

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

• refinancing; and

• debt restructuring.

1) Forward-looking information

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

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

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

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

The Bank 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 Bank collectively estimates expected credit loss by grouping loans with homogeneous credit risk profile (collective assessment of impairment).

① Individual assessment of impairment

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

② 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

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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.

(8) 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.

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

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

2) Depreciation

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

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

Property and equipment	Estimated useful lives
Buildings and structures	10–60 years
Leasehold Improvements	5 years
Vehicles	4 years
Tools, furniture and fixtures	4–20 years

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

(9) 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

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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.

(10) 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.

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

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

(11) 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.

(12) 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, and unused credit line of 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.

(13) 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.

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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’

(14) 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

(15) 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.

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.

(16) Fee and commission income

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

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

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

2) Fees earned as services are provided

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

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

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

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(17) 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 investments is recognized in profit or loss as part of dividend income in the separate statements of comprehensive income.

(18) Employee compensation and benefits

1) Defined contribution plans

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

2) Defined benefit plans

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

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.

(19) 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

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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.

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.

(20) 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, 2019, and the Bank has not early adopted them.

The following new standards and amendments to existing standards are not expected to significantly affect the Bank :

• Amendments to the conceptual framework for financial reporting

• Definition of Business (Amendments to K-IFRS 1103 ‘Business combinations’)

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• Definition of Materiality (Amendments to K-IFRS 1001 ‘Presentation of Financial Statements’, and K-IFRS 1008 ‘Changes in Accounting Estimates and Errors’)

4. RISK MANAGEMENT:

4-1. Summary

(1) Overview of Risk Management Policy

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

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

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

(2) Risk Management Group

1) Risk Management Committee

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

2) Risk Management Council

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

3) Risk Management Practices Committee

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

4-2. Credit risk

(1) Overview of Credit Risk

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

(2) Credit Risk Management

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

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(3) Maximum exposure to credit risk

The Bank’s maximum exposure of financial instruments to credit risk as of December 31, 2019 and 2018, is as follows (Korean won in millions):

	Dec. 31, 2019		Dec. 31, 2018
Cash and due from financial institutions	￦	4,852,816	￦	3,682,863
Financial assets at FVTPL(*1)		726,816		904,273
Hedging derivative assets		390,645		75,743
Loans at amortized cost(*2)		73,744,546		71,741,225
Financial investments(*3)		1,177,893		1,059,067
Other financial assets		950,778		1,135,012
Acceptances and guarantee contracts		38,121,355		40,010,549
Commitments(*4)		21,401,516		17,619,116
	￦	141,366,365	￦	136,227,848

(*1) Financial assets at FVTPL exclude beneficiary certificates and paid-in capital classified as debt securities.

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

(*3) Allowances for loan losses for financial assets 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, 2019)

	12 month expected credit losses		Lifetime expected credit losses		Credit-impaired financial assets		Total
Collective assessment:
Best	￦	21,038,485	￦	9,537	￦	4,463	￦	21,052,485
Outstanding		23,537,313		—		40,000		23,577,313
Good		25,355,627		817,515		10,555		26,183,697
Below normal		23,156		1,047,905		93,226		1,164,287
Subtotal		69,954,581		1,874,957		148,244		71,977,782
Individual assessment:
Best		—		—		99,101		99,101
Outstanding		—		—		—		—
Good		—		—		37,093		37,093
Below normal		—		575,730		1,454,461		2,030,191
Subtotal		—		575,730		1,590,655		2,166,385
		69,954,581		2,450,687		1,738,899		74,144,167
Net deferred origination fees and costs								(399,621	)
Total							￦	73,744,546

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(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

The above carrying amounts exclude loan valuation adjustment related to fair value hedging amounting to ￦7,924 million and ￦12,801 million as of December 31, 2019 and 2018, respectively.

(5) Credit quality of Financial investments (debt securities)

Financial investments (debt securities) exposed to credit risk as of December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

	12 month expected credit losses		Lifetime expected credit losses		Credit-impaired financial assets		Total
Grade1	￦	1,177,893	￦	—	￦	—	￦	1,177,893
Grade2		—		—		—		—
Grade3		—		—		—		—
Grade4		—		—		—		—
Grade5		—		—		—		—
Total	￦	1,177,893	￦	—	￦	—	￦	1,177,893

(December 31, 2018)

	12 month expected credit losses		Lifetime expected credit losses		Credit-impaired financial assets		Total
Grade1	￦	1,059,067	￦	—	￦	—	￦	1,059,067
Grade2		—		—		—		—
Grade3		—		—		—		—
Grade4		—		—		—		—
Grade5		—		—		—		—
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 ￦7,924 million and ￦12,801 million as of December 31, 2019 and 2018, respectively.

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1) Loans by country where the credit risk belongs to as of December 31, 2019 and 2018, are as follows (Korean won in millions):

(December 31, 2019)

	Loans in local currency		Loans in foreign currencies		Others		Total		Ratio (%)		Deferred loan origination fees			Allowances
Asia:
Korea	￦	18,536,778	￦	6,350,010	￦	1,185,905	￦	26,072,693		35.16	￦	(9,234	)	￦	(993,265	)
China		—		2,487,039		348,370		2,835,409		3.82		(2,023	)		(31,462	)
Saudi Arabia		—		3,498,638		691		3,499,329		4.72		(37,505	)		(11,947	)
India		—		2,189,516		118,073		2,307,589		3.11		(10,320	)		(2,767	)
Indonesia		17,000		3,165,380		10,255		3,192,635		4.31		(55,693	)		(13,291	)
Vietnam		—		3,706,636		1,952		3,708,588		5.00		(25,672	)		(29,129	)
Australia		—		1,902,578		1,865		1,904,443		2.57		(15,556	)		(2,481	)
Philippines		—		117,128		—		117,128		0.16		(76	)		(917	)
Qatar		—		696,564		—		696,564		0.94		(2,350	)		(3,604	)
Singapore		—		589,009		248,013		837,022		1.13		(2,289	)		(1,058	)
Oman		—		908,383		7,620		916,003		1.24		(15,162	)		(4,804	)
Hong Kong		—		474,247		100,052		574,299		0.77		(127	)		(10,962	)
The United Arab Emirates		—		4,033,392		570		4,033,962		5.44		(20,965	)		(1,723	)
Uzbekistan		—		1,081,962		—		1,081,962		1.46		(10,888	)		(30,276	)
Others		14,600		3,704,356		2,078,006		5,796,962		7.82		(100,760	)		(99,572	)
Subtotal		18,568,378		34,904,838		4,101,372		57,574,588		77.65		(308,620	)		(1,237,258	)
Europe:
Russia		—		155,296		—		155,296		0.21		—			(563	)
United Kingdom		—		1,248,648		—		1,248,648		1.68		(9,827	)		(106,277	)
France		—		148,039		2,521		150,560		0.20		(1,231	)		(195	)
Netherlands		—		49,302		12,944		62,246		0.08		—			(793	)
Greece		—		1,013,076		—		1,013,076		1.37		(6,302	)		(1,164	)
Turkey		—		1,054,238		903		1,055,141		1.42		(14,513	)		(60,931	)
Germany		—		243,133		358		243,491		0.33		(338	)		(1,290	)
Ukraine		—		42,902		—		42,902		0.06		(349	)		—
Hungary		—		369,157		983		370,140		0.50		(490	)		(355	)
Others		—		1,632,140		90,552		1,722,692		2.32		(7,442	)		(9,174	)
Subtotal		—		5,955,931		108,261		6,064,192		8.17		(40,492	)		(180,742	)
America:
Panama		—		680,469		—		680,469		0.92		(3,870	)		(61,164	)
United States		—		2,938,762		14,077		2,952,839		3.98		(5,839	)		(227,585	)
The British Virgin Islands		—		13,215		—		13,215		0.02		(148	)		(17	)
Mexico		—		497,591		—		497,591		0.67		(4,058	)		(2,060	)
Bermuda		—		111,300		—		111,300		0.15		(771	)		(16	)
Brazil		—		2,338,393		—		2,338,393		3.15		(4,487	)		(6,175	)
Others		—		1,241,666		14,404		1,256,070		1.70		(5,429	)		(64,205	)
Subtotal		—		7,821,396		28,481		7,849,877		10.59		(24,602	)		(361,222	)
Africa:
Marshall Islands	￦	—	￦	844,922	￦	—	￦	844,922		1.14	￦	(4,142	)	￦	(23,003	)
Madagascar		—		401,658		—		401,658		0.54		(1,296	)		(241,642	)
Others		—		1,408,932		—		1,408,932		1.91		(20,469	)		(132,093	)
Subtotal		—		2,655,512		—		2,655,512		3.59		(25,907	)		(396,738	)
Total	￦	18,568,378	￦	51,337,677	￦	4,238,114	￦	74,144,169		100.00	￦	(399,621	)	￦	(2,175,960	)

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(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	)		—
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		0.53		(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	)

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2) Loans by industry as of December 31, 2019 and 2018, are as follows (Korean won in millions):

(December 31, 2019)

	Loans										Deferred loan origination fees			Allowances
	Loans in local currency		Loans in foreign currencies		Others		Total		Ratio (%)
Manufacturing	￦	11,470,884	￦	24,118,850	￦	203,973	￦	35,793,707		48.28	￦	(200,949	)	￦	(1,698,064	)
Transportation		709,600		6,519,485		—		7,229,085		9.75		(35,307	)		(170,978	)
Financial institutions		5,344,448		6,178,243		3,971,318		15,494,009		20.90		(3,492	)		(19,220	)
Wholesale and retail		288,358		1,147,824		47,517		1,483,699		2.00		(2,520	)		(27,962	)
Real estate		—		371,642		—		371,642		0.50		(1,764	)		(1,392	)
Construction		363,748		529,110		—		892,858		1.20		(11,063	)		(35,041	)
Public sector and others		391,340		12,472,523		15,306		12,879,169		17.37		(144,526	)		(223,303	)
Total	￦	18,568,378	￦	51,337,677	￦	4,238,114	￦	74,144,169		100.00	￦	(399,621	)	￦	(2,175,960	)

(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	)

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3) Concentration of credit risk of financial assets at FVTPL and financial investments (debt securities) by industry as of December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019				Dec. 31, 2018
	Amount		Ratio (%)		Amount		Ratio (%)
Financial assets at FVTPL
Banking and insurance	￦	17,655		61.45	￦	45,272		67.83
Others		11,074		38.55		21,469		32.17
Subtotal		28,729		100.00		66,741		100.00
Financial assets at FVOCI
Government and government sponsored institutions		102,510		17.27		102,096		12.11
Banking and insurance		485,230		81.75		709,109		84.10
Others		5,793		0.98		32,013		3.79
Subtotal		593,533		100.00		843,218		100.00
Financial assets at amortized cost
Government and government sponsored institutions		4,685		0.80		4,476		2.07
Banking and insurance		566,398		96.93		187,419		86.83
Others		13,277		2.27		23,954		11.10
Subtotal		584,360		100.00		215,849		100.00
Total	￦	1,206,622			￦	1,125,808

4) Concentration of credit risk of financial assets at FVTPL and financial investments (debt securities) by country as of December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019				Dec. 31, 2018
	Amount		Ratio (%)		Amount		Ratio (%)
Financial assets at FVTPL
Korea	￦	11,074		38.55	￦	16,960		25.41
Others		17,655		61.45		49,781		74.59
Subtotal		28,729		100.00		66,741		100.00
Financial assets at FVOCI
Korea		142,803		24.06		224,580		26.63
Others		450,730		75.94		618,638		73.37
Subtotal		593,533		100.00		843,218		100.00
Financial assets at amortized cost
Korea		38,857		6.65		84,613		39.20
Others		545,503		93.35		131,236		60.80
Subtotal		584,360		100.00		215,849		100.00
Total	￦	1,206,622			￦	1,125,808

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5) Credit enhancement and its financial effect as of December 31, 2019 and 2018, are as follows (Korean won in millions):

(December 31, 2019)

	Loans(*1)		Acceptances and guarantees		Unused loan commitments		Total		Ratio (%)
Maximum exposure to credit risk	￦	73,744,546	￦	38,121,355	￦	21,401,516	￦	133,267,417		100.00
Credit enhancement:
Deposits and savings		130,115		55,652		2,633		188,400		0.14
Export guarantee insurance		—		745,779		6,153		751,932		0.56
Guarantee		2,107,144		1,827,847		343,946		4,278,937		3.21
Securities		136,406		417,217		10,000		563,623		0.42
Real estate		1,998,198		1,474,527		35,480		3,508,205		2.63
Ships		634,906		169,149		28,522		832,577		0.62
Others		1,052,345		—		2,694		1,055,039		0.79
Subtotal		6,059,114		4,690,171		429,428		11,178,713		8.37
Exposure to credit risk after deducting credit enhancement	￦	67,685,432	￦	33,431,184	￦	20,972,088	￦	122,088,704		91.63

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

(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,

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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.

(2) Principles of the liquidity risk management

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

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

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

(3) Liquidity risk management

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

(4) Measurement of liquidity risk

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

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(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, 2019 and 2018, are as follows (Korean won in millions):

(December 31, 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	￦	686,613	￦	—	￦	—	￦	—	￦	—	￦	—	￦	—	￦	686,613
Hedging derivative liabilities		—		364		11,922		217,118		29,449		405,185		134,748		798,786
Borrowings		—		619,772		1,332,484		1,091,075		1,260,812		2,677,567		—		6,981,710
Debentures		—		1,943,375		2,989,105		6,572,727		9,686,275		35,582,548		16,702,068		73,476,098
Other financial liabilities		—		859,000		114		8,720		8,511		74,497		1,015,234		1,966,076
Total	￦	686,613	￦	3,422,511	￦	4,333,625	￦	7,889,640	￦	10,985,047	￦	38,739,797	￦	17,852,050	￦	83,909,283
Off-balance sheet items(*1):
Commitments	￦	21,401,516	￦	—	￦	—	￦	—	￦	—	￦	—	￦	—	￦	21,401,516
Financial guarantee contracts		14,630,370		—		—		—		—		—		—		14,630,370
Total	￦	36,031,886	￦	—	￦	—	￦	—	￦	—	￦	—	￦	—	￦	36,031,886

(*1) Financial guarantees and loan commitments provided by the Bank have maturities. The Bank should fulfill the obligation immediately when the counter party requests payments.

(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
Total	￦	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
Total	￦	32,119,624	￦	—	￦	—	￦	—	￦	—	￦	—	￦	—	￦	32,119,624

(*1) Financial guarantees and loan commitments provided by the Bank have maturities. The Bank should fulfill the obligation immediately when the counter party requests payments.

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4-4. Market risk

(1) Overview of market risk

1) Definition of market risk

Market risk is the risk of possible losses that arise from the changes of market factors, such as interest rate, stock price, foreign exchange rate, commodity value. The Bank classifies exposures to market risk into either foreign exchange rate risk or interest rate risk. Foreign exchange risk is the possible losses on assets and liabilities denominated in foreign currencies due to changes of foreign exchange rate. Interest rate risk is the 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 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. Interest rate risk is measured by IRRBB 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 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 Value at Risk (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.

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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.

③ Results of measurement

Results of foreign exchange VaR as of December 31, 2019 and 2018, are as follows (Korean won in millions):

December 31, 2019

December 31, 2018

Average

Minimum

Maximum

Ending

Average

Minimum

Maximum

Ending

Foreign exchange risk

￦

30,268

￦

4,798

￦

68,010

￦

24,140

￦

27,714

￦

4,635

￦

68,602

￦

26,897

(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 DNII (Change in Net Interest Income) and DEVE (Change in Economic Value of Equity) and uses interest rate sensitivity gap and duration gap as supplementary index. DNII and DEVE are measured on a monthly basis, and interest rate sensitivity gap and duration gap are measured on a daily basis. The Bank simulates analysis reflecting market environment, product features and the Bank’s strategies.

3) Measurement method

① Change in Economic Value of Equity (DEVE)

The Bank uses a yearly DEVE to measure interest rate risk. The yearly DEVE is the maximum amount of loss that could occur in one year under normal distribution of financial variables. The Bank calculates the yearly DEVE by using variance-covariance method at a 99% single tail confidence level based on the previous five years data using equal weighted-average method.

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DEVE 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.

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 and is performed at least once in every quarter.

③ Results of measurement

Results of interest rate VaR as of December 31, 2019 and 2018, are as follows (Korean won in millions):

December 31, 2019

December 31, 2018

Average

Minimum

Maximum

Ending

Average

Minimum

Maximum

Ending

Interest rate risk

￦

55,045

￦

32,209

￦

80,562

￦

80,562

￦

79,086

￦

37,129

￦

112,921

￦

37,129

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 Bank’s capitals are mainly divided into two categories:

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

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

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

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5. FINANCIAL ASSETS AND FINANCIAL LIABILITIES:

5-1. Classification and fair value

(1) Carrying amounts and fair values of financial instruments as of December 31, 2019 and 2018, are as follows (Korean won in millions):

		Dec. 31, 2019				Dec. 31, 2018
		Carrying amount		Fair value		Carrying amount		Fair value
Financial assets:
Cash and due from financial institutions	Non-recurring	￦	4,852,816	￦	4,853,034	￦	3,682,863	￦	3,682,864
Financial assets at FVTPL	Recurring		1,834,497		1,834,497		2,298,223		2,298,223
Hedging derivative assets	Recurring		390,645		390,645		75,743		75,743
Loans at amortized cost	Non-recurring		71,576,511		71,957,864		70,199,721		70,374,963
Financial assets at FVOCI	Recurring		8,729,394		8,729,394		8,628,968		8,628,968
Financial assets at amortized cost	Non-recurring		584,268		593,025		215,788		217,237
Other financial assets	Non-recurring		942,890		942,890		964,721		964,721
Total		￦	88,911,021	￦	89,301,349	￦	86,066,027	￦	86,242,719
Financial liabilities:
Financial liabilities at FVTPL	Recurring	￦	686,613	￦	686,613	￦	905,901	￦	905,901
Hedging derivative liabilities	Recurring		798,786		798,786		1,628,303		1,628,303
Borrowings	Non-recurring		6,796,372		6,785,597		4,893,478		4,833,791
Debentures	Non-recurring		67,137,591		67,739,080		65,942,970		66,493,992
Other financial liabilities	Non-recurring		1,966,076		1,966,076		1,837,678		1,837,678
Total		￦	77,385,438	￦	77,976,152	￦	75,208,330	￦	75,699,665

Fair value is the amount at which the assets could be exchanged, or the liabilities could be settled in transection 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 estimated fair value is the published price quotation in an active market.

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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	Financial assets and liabilities at FVTPL and financial assets at FVOCI 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 with 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 valuation techniques. The Bank uses internally developed valuation models using valuation techniques 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.

79

(2) Fair value hierarchy

Fair value hierarchy of financial assets and liabilities, which are not measured at fair value as of December 31, 2019 and 2018, is as follows (Korean won in millions):

(December 31, 2019)

	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from financial institutions(*1)	￦	2,913,676	￦	—	￦	1,939,358	￦	4,853,034
Loans at amortized cost		—		—		71,957,864		71,957,864
Financial assets at amortized cost		—		593,025		—		593,025
Other financial assets		—		—		942,890		942,890
Total	￦	2,913,676	￦	593,025	￦	74,840,112	￦	78,346,813
Financial liabilities:
Borrowings	￦	—	￦	6,785,597	￦	—	￦	6,785,597
Debentures		—		67,739,080		—		67,739,080
Other financial liabilities		—		—		1,966,076		1,966,076
Total	￦	—	￦	74,524,677	￦	1,966,076	￦	76,490,753

(*1) 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.

(December 31, 2018)

	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from financial institutions(*1)	￦	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

(*1) 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.

80

Fair value hierarchy of financial assets and liabilities measured at fair value as of December 31, 2019, and December 31, 2018, is as follows (Korean won in millions):

(December 31, 2019)

	Level 1		Level 2		Level 3		Total
Financial assets:
Financial assets at FVTPL	￦	—	￦	1,494,318	￦	340,179	￦	1,834,497
Hedging derivative assets		—		390,645		—		390,645
Financial assets at FVOCI		177,931		593,533		7,957,930		8,729,394
Total	￦	177,931	￦	2,478,496	￦	8,298,109	￦	10,954,536
Financial liabilities:
Financial liabilities at FVTPL	￦	—	￦	686,613	￦	—	￦	686,613
Hedging derivative liabilities		—		798,786		—		798,786
Total	￦	—	￦	1,485,399	￦	—	￦	1,485,399

(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
Total	￦	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
Total	￦	—	￦	2,534,204	￦	—	￦	2,534,204

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.

81

The valuation techniques and input variables of Level 2 financial instruments subsequently not measured at fair value as of December 31, 2019 and December 31, 2018 are as follows (Korean won in millions):

(December 31, 2019)

	Fair value		Valuation techniques		Input variables
Financial assets
Financial assets at amortized cost
Debt securities	￦	593,025		DCF Model		Discount rate
Financial liabilities
Borrowings		6,785,597		DCF Model		Discount rate
Debentures		67,739,080		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 December 31, 2019 and December 31, 2018 are as follows (Korean won in millions):

(December 31, 2019)

	Fair value		Valuation techniques		Input variables
Financial assets
Loans at amortized cost	￦	71,957,864		DCF Model		Discount rate
Other financial assets		942,890		DCF Model		Discount rate
Financial liabilities
Other financial liabilities		1,966,076		DCF Model		Discount rate

(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

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The valuation techniques and input variables of Level 2 financial instruments, measured at fair value after initial recognition, as of December 31, 2019 and December 31, 2018 are as follows (Korean won in millions):

(December 31, 2019)

	Fair value		Valuation techniques		Input variables
Financial assets
Financial assets at FVTPL:
Debt securities	￦	796,231		DCF Model		Discount rate
Derivative assets for trading		698,087		DCF Model		Discount rate
Hedging derivative assets		390,645		DCF Model		Discount rate
Financial assets at FVOCI:
Debt securities		593,533		DCF Model		Discount rate
Financial liabilities
Financial liabilities at FVTPL:
Derivative liabilities for trading		686,613		DCF Model		Discount rate
Hedging derivative liabilities		798,786		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

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Below table accounts for quantitative information of fair value (Level 3) using input factor, which is significant but unobservable, and relation between unobservable input factor and estimate of fair value.

(December 31, 2019)

	Fair value (Korean won in million)		Valuation techniques	Significant unobservable input factors		Range	Relationship between unobservable input factors and fair value estimates
Financial assets at FVTPL:
Unlisted stock	￦	21,659	DCF Model CCA Methods NAV Methods		Discount rate	2.45 ~ 12.47%	If discount rate is decreased (increased)/if growth rate is increased (decreased), fair value is increased (decreased).
Beneficiary certificates		193,977
Paid-in capital		113,469			Growth rate	—
Loans		11,074
Financial assets at FVOCI:
Unlisted stock	￦	7,940,380	DCF Model CCA Methods NAV Methods		Discount rate	3.04 ~ 17.74%	If discount rate is decreased (increased)/if growth rate is increased (decreased), fair value is increased (decreased).
Paid-in capital		17,550			Growth rate	—

(December 31, 2018)

	Fair value (Korean won in million)		Valuation techniques	Significant unobservable input factors		Range	Relationship between unobservable input factors and fair value estimates
Financial assets at FVTPL:
Unlisted stock	￦	17,223	DCF Model 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	—

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1) Changes in Level 3 financial assets that are measured at fair value for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(2019)

	Beginning balance		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	￦	249,017	￦	9,674		￦	—		￦	96,107	￦	(25,693	)	￦	—	￦	329,105
Loans at FVTPL		16,960		(2,231	)		—			—		(3,655	)		—		11,074
Financial assets at FVOCI		7,602,562		—			(61,226	)		417,101		(507	)		—		7,957,930
Total	￦	7,868,539	￦	7,443		￦	(61,226	)	￦	513,208	￦	(29,855	)	￦	—	￦	8,298,109

(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 year 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, 2019 and 2018 are as follows (Korean won in millions):

	Net gain (loss) from financial investments
	2019		2018
Total gains (losses) on financial instruments held at the end of year	￦	7,443	￦	3,633
Total gains (losses) included in profit or loss for the year		7,443		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.

85

Sensitivity analysis details per market risk variable of each Level 3 financial instrument held and measured at fair value as of December 31, 2019 and 2018, are as follows (Korean won in millions):

(December 31, 2019)

	Profit or loss				Other comprehensive income (loss)
	Favorable		Unfavorable		Favorable		Unfavorable
Financial assets:
Financial assets at FVOCI(*1)	￦	—	￦	—	￦	10,694,679	￦	(1,459,904	)

(*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.

(December 31, 2018)

	Profit or 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 category of financial instruments

The carrying amounts of each category of financial assets and financial liabilities as of December 31, 2019 and 2018, are as follows (Korean won in millions):

(December 31, 2019)

	Financial assets at FVTPL		Financial assets at amortized cost		Financial assets at FVOCI		Hedging derivative assets		Total
Financial assets:
Cash and due from financial institutions	￦	—	￦	4,852,816	￦	—	￦	—	￦	4,852,816
Financial assets at FVTPL		1,834,497		—		—		—		1,834,497
Hedging derivative assets		—		—		—		390,645		390,645
Loans at amortized cost		—		71,576,511		—		—		71,576,511
Financial investments		—		584,268		8,729,394		—		9,313,662
Other financial assets		—		942,890		—		—		942,890
Total	￦	1,834,497	￦	77,956,485	￦	8,729,394	￦	390,645	￦	88,911,021

	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Hedging derivative liabilities		Total
Financial liabilities:
Financial liabilities at FVTPL	￦	686,613	￦	—	￦	—	￦	686,613
Hedging derivative liabilities		—		—		798,786		798,786
Borrowings		—		6,796,372		—		6,796,372
Debentures		—		67,137,591		—		67,137,591
Other financial liabilities		—		1,966,076		—		1,966,076
Total	￦	686,613	￦	75,900,039	￦	798,786	￦	77,385,438

86

(December 31, 2018)

	Financial assets at FVTPL		Financial assets at amortized cost		Financial assets at FVOCI		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 amounts of financial instruments.

The effects of netting agreements as of December 31, 2019 and 2018, are as follow (Korean won in millions):

(December 31, 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 the separate statement of financial position						Net amount
							Financial instruments			Cash collateral
Financial assets:
Derivatives	￦	1,088,732	￦	—	￦	1,088,732	￦	(476,720	)	￦	(16,196	)	￦	595,816
Financial liabilities:
Derivatives		1,485,399		—		1,485,399		(476,720	)		(432,436	)		576,243

87

(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 separate statement of financial position						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 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 December 31, 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. The Bank determines geographic information of its revenue and non-current assets based on originating location. As the Bank’s originating location for all transactions is in Korea, the geographical information for revenue and non-current assets is omitted.

7. CASH AND DUE FROM FINANCIAL INSTITUTIONS:

(1) Cash and cash equivalents as of December 31, 2019 and 2018 are as follows (Korean won in millions):

Detail	Dec. 31, 2019			Dec. 31, 2018
Due from financial institutions in local currency	￦	856,283		￦	604,286
Due from financial institutions in foreign currencies		3,996,533			3,078,577
Subtotal		4,852,816			3,682,863
Restricted due from financial institutions		(1,089,140	)		(2,132,796	)
Due from financial institutions with original maturities of more than three months at acquisition date		(850,000	)		(530,000	)
Subtotal		(1,939,140	)		(2,682,796	)
Total(*1)	￦	2,913,676		￦	1,020,067

(*1) Equal to the cash and cash equivalents as presented on the separate statements of cash flows.

88

(2) Details of due from financial institutions as of December 31, 2019 and 2018 are as follows (Korean won in millions):

Detail	Dec. 31, 2019				Dec. 31, 2018
	Amount		Interest (%)		Amount		Interest (%)
Due from financial institutions in local currency:
Demand deposits	￦	1,081		—	￦	2,026		—
Time deposits		850,000		1.60 ~ 2.15		600,000		1.83 ~ 2.27
Others		4,200		1.10		600		1.10
Margin for derivatives		1,002		—		1,660		—
Subtotal		856,283				604,286
Due from financial institutions in foreign currencies:
Demand deposits		168,532		—		43,379		—
On demand		2,679,319		—		865,382		—
Offshore demand deposits		60,544		—		38,680		—
Others		521,979		0.00 ~ 0.45		1,836,348		0.00 ~ 0.45
Margin for derivatives		566,159		—		294,788		—
Subtotal		3,996,533				3,078,577
Total	￦	4,852,816			￦	3,682,863

(3) Restricted due from financial institutions as of December 31, 2019 and 2018 are as follows (Korean won in millions):

Detail	Financial Institution	Dec. 31, 2019		Dec. 31, 2018		Reason for restriction
Others	DEUTSCHE BANK TRUST COMPANY AMERICAS and others	￦	1,089,140	￦	2,132,796	Credit support annex for derivative transactions

89

8. FINANCIAL ASSETS AT FVTPL:

Details of financial assets at FVTPL as of December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019		Dec. 31, 2018
Debt securities in local currency
Paid-in capital	￦	101,887	￦	67,614
Beneficiary certificates		860,911		1,212,517
Subtotal		962,798		1,280,131
Debt securities in foreign currency
Bonds		17,655		49,781
Paid-in capital		11,582		4,415
Beneficiary certificates		111,641		92,181
Subtotal		140,878		146,377
Equity securities in foreign currency
Stocks		21,660		17,223
Loans at FVTPL
Privately placed corporate bonds		11,074		16,960
Derivative assets for trading
Equity related		664		583
Interest rates related		433,822		445,329
Foreign currency related		263,573		391,596
Others		28		24
Subtotal		698,087		837,532
Total	￦	1,834,497	￦	2,298,223

9. FINANCIAL INVESTMENTS:

Details of financial investments as of December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019		Dec. 31, 2018
Financial assets at FVOCI
Debt securities in local currency
National bond	￦	100,175	￦	99,914
Derivative linked securities		—		50,000
		100,175		149,914
Equity securities in local currency
Stocks		8,118,311		7,768,874
Paid-in capital		17,550		16,876
Subtotal		8,135,861		7,785,750
Debt securities in foreign currencies
Corporate bonds and etc.(*1)		493,358		693,304
Financial assets at amortized cost
Debt securities in foreign currencies
Corporate bonds and etc.(*1)		584,268		215,788
Total	￦	9,313,662	￦	8,844,756

(*1) It includes debt securities, which are pledged as collateral amounting to ￦98,384 million and ￦60,229 million as of December 31, 2019 and 2018, respectively.

90

10. LOANS AT AMORTIZED COST:

Loans as presented below exclude loan valuation adjustment related to fair value hedging amounting to ￦7,924 million and ￦12,801 million as of December 31, 2019 and 2018, respectively.

(1) Details of loans as of December 31, 2019 and December 31, 2018 are as follows (Korean won in millions):

	Detail	Dec. 31, 2019			Dec. 31, 2018
Loans in local currency	Loans for export	￦	12,521,584		￦	11,509,858
	Loans for foreign investments		1,857,260			1,290,776
	Loans for import		3,302,360			2,550,627
	Troubled Debt Restructuring(*1)		519,655			951,800
	Others		367,519			533,547
	Subtotal		18,568,378			16,836,608
Loans in foreign currencies	Loans for export		26,765,183			26,938,880
	Loans for foreign investments		21,955,101			21,167,724
	Loans for rediscounted trading notes		243,138			1,017,471
	Loans for import		1,550,839			1,921,810
	Overseas funding loans		618,989			585,160
	Domestic usance bills(*2)		176,475			180,301
	Others		27,952			49,906
	Subtotal		51,337,677			51,861,252
Others	Foreign-currency bills bought		773,367			876,098
	Advance payments on acceptances and guarantees		26,063			30,473
	Call loans		3,438,684			2,515,725
	Subtotal		4,238,114			3,422,296
	Total		74,144,169			72,120,156
	Net deferred origination fees and costs		(399,621	)		(378,932	)
	Allowance for loan losses		(2,175,960	)		(1,554,304	)
	Total	￦	71,568,588		￦	70,186,920

(*1) Representing loans originated by the Consolidated Entity to companies that are undergoing debt restructuring activities.

(*2) Representing receivables associated with letters of credit issued by domestic banks in Korea.

91

(2) Loans classified by type of customers as of December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

	Detail	Loans in local currency			Loans in foreign currencies			Others			Total			Ratio (%)
Customer	Large enterprise	￦	7,141,305		￦	30,272,411		￦	319,364		￦	37,733,080			59.64
	Small and medium sized enterprise		6,465,224			5,742,427			123,004			12,330,655			19.49
	Public sector and others		2,638,425			10,567,827			903			13,207,155			20.87
	Subtotal		16,244,954			46,582,665			443,271			63,270,890			100.00
	Net deferred origination fees and costs		(6,380	)		(391,424	)		—			(397,804	)
	Allowance for loan losses		(788,341	)		(1,346,541	)		(26,633	)		(2,161,515	)
	Subtotal		15,450,233			44,844,700			416,638			60,711,571
Financial institution	Bank		2,323,424			2,440,985			3,402,529			8,166,938			75.11
	Others		—			2,137,551			568,789			2,706,340			24.89
	Subtotal		2,323,424			4,578,536			3,971,318			10,873,278			100.00
	Net deferred origination fees and costs		—			(1,817	)		—			(1,817	)
	Allowance for loan losses		(211	)		(13,747	)		(486	)		(14,444	)
	Subtotal		2,323,213			4,562,972			3,970,832			10,857,017
	Total	￦	17,773,446		￦	49,407,672		￦	4,387,470		￦	71,568,588

92

(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

(3) Changes in allowance for loan losses for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(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		16,495			(1,223	)		(15,272	)		—
- Transfer to lifetime expected credit losses		(1,275	)		2,268			(993	)		—
- Transfer to credit-impaired financial assets		(14,993	)		(13,198	)		28,191			—
Written-off		(6,660	)		—			(196,229	)		(202,889	)
Collection of written-off loans		102,070			—			—			102,070
Loan-for-equity swap		—			—			(25,061	)		(25,061	)
Others		39,432			—			—			39,432
Unwinding effect		(642	)		(1	)		(32,784	)		(33,427	)
Foreign exchange translation		3,634			16,957			5,034			25,625
Additional provisions (reversals of provisions)		(108,928	)		194,850			629,984			715,906
Ending balance	￦	286,290		￦	758,393		￦	1,131,277		￦	2,175,960

93

(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 (reversals of provisions)		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.

94

11. INVESTMENTS IN ASSOCIATES AND SUBSIDIARIES:

(1) Details of investments in associates and subsidiaries as of December 31, 2019 and December 31, 2018 are as follows (Korean won in millions):

(December 31, 2019)

Company

Detail

Location

Business

Year-end

Ownership (%)

Net asset(*1)

Carrying amount

KEXIM Bank UK Limited

Subsidiary

United Kingdom

Financial service

December

100.00

￦

50,683

￦

48,460

KEXIM Vietnam Leasing Co.

Subsidiary

Vietnam

Financial service

December

100.00

19,280

10,275

PT.KOEXIM Mandiri Finance

Subsidiary

Indonesia

Financial service

December

85.00

24,332

25,270

KEXIM Asia Limited

Subsidiary

Hong Kong

Financial service

December

100.00

72,297

49,139

EXIM PLUS Co., Ltd.

Subsidiary

Korea

Service

December

100.00

854

950

Korea Asset Management Corporation

Associate

Korea

Financial service

December

25.86

490,171

380,520

Credit Guarantee and Investment Fund(*2)

Associate

Philippines

Financial service

December

11.49

156,768

143,220

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

Associate

Korea

Shipbuilding

December

69.39

(1,222,949

)

—

DAESUN Shipbuilding & Engineering Co., Ltd.(*5)

Associate

Korea

Shipbuilding

December

83.03

(315,442

)

—

KTB Newlake Global Healthcare PEF

Associate

Korea

Financial service

December

25.00

9,259

10,045

KBS-KDB Private Equity Fund

Associate

Korea

Financial service

December

20.30

4,023

6,032

Korea Aerospace Industries. Ltd.

Associate

Korea

Manufacturing

December

26.41

302,348

1,110,990

Daewoo Shipbuilding & Marine Engineering Co., Ltd(*6)

Associate

Korea

Shipbuilding

December

—

—

—

Total

￦

1,784,901

95

(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(*2,3)

Associate

Philippines

Financial service

September

11.64

116,502

115,486

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

Associate

Korea

Shipbuilding

December

81.25

(1,216,974

)

—

DAESUN Shipbuilding & Engineering Co., Ltd.(*5)

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(*6)

Associate

Korea

Shipbuilding

December

—

—

—

Total

￦

2,511,497

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

(*2) As of December 31, 2019 and December 31, 2018, 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) 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.

(*4) 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 having substantial control over the entity.

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

(*6) 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.

96

(2) Changes in investments in associates and subsidiaries for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(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
EXIM PLUS Co., Ltd.		Subsidiary		—		950		—			—			950
Korea Asset Management Corporation		Associate		380,520		—		—			—			380,520
Credit Guarantee and Investment Fund		Associate		115,486		27,734		—			—			143,220
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		Associate		—		—		—			—			—
DAESUN Shipbuilding & Engineering Co., Ltd.		Associate		—		—		—			—			—
KTB Newlake Global Healthcare PEF		Associate		8,795		1,250		—			—			10,045
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		—		—			(356,530	)		1,110,990
Daewoo Shipbuilding & Marine Engineering Co., Ltd		Associate		—		—		—			—			—
Total			￦	2,511,497	￦	29,934	￦	(400,000	)	￦	(356,530	)	￦	1,784,901

97

(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

98

(3) Summarized financial information of associates and subsidiaries as of and for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

Company	Assets		Liabilities		Operating income (loss)			Profit (loss) for the year			Total comprehensive income (loss)
KEXIM Bank UK Limited	￦	452,741	￦	402,058	￦	1,388		￦	(55	)	￦	4,8097
KEXIM Vietnam Leasing Co.		194,716		175,436		1,266			1,358			1,964
PT.KOEXIM Mandiri Finance		183,472		154,847		563			(250	)		1,944
KEXIM Asia Limited		500,469		428,172		3,608			3,065			8,398
EXIM PLUS Co., Ltd.		1,239		385		(96	)		(96	)		(96	)
Korea Asset Management Corporation		4,897,223		3,001,745		85,698			66,826			51,885
Credit Guarantee and Investment Fund		1,453,117		88,728		26,340			32,532			57,163
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		815,900		2,578,329		(12,471	)		32,328			1,207
DAESUN Shipbuilding & Engineering Co., Ltd.		388,670		768,583		11,309			3,665			3,665
KTB Newlake Global Healthcare PEF		37,187		151		(277	)		(33	)		(33	)
KBS-KDB Private Equity Fund		19,969		152		(9,218	)		(9,205	)		(9,205	)
Korea Aerospace Industries. Ltd.		4,404,485		3,259,784		275,196			134,373			113,762
Daewoo Shipbuilding & Marine Engineering Co., Ltd		11,276,079		7,521,182		292,761			(46,485	)		(85,325	)

(December 31, 2018)

Company	Assets		Liabilities		Operating income (loss)			Profit (loss) for the year			Total 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

99

12. TANGIBLE ASSETS:

(1) Details of tangible assets as of December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

Detail	Acquisition cost		Accumulated depreciation			Government grants			Carrying amount
Lands	￦	190,807	￦	—		￦	—		￦	190,807
Buildings		100,778		(38,265	)		(17	)		62,496
Leasehold improvements		158		(13	)		—			145
Vehicles		4,137		(3,354	)		—			783
Furniture and fixture		42,529		(31,644	)		—			10,885
Total	￦	338,409	￦	(73,276	)	￦	(17	)	￦	265,116

(December 31, 2018)

Detail	Acquisition cost		Accumulated depreciation			Government grants			Carrying amount
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

(2) Changes in tangible assets for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(2019)

Detail	Beginning balance		Acquisitions		Disposals			Depreciation			Ending balance
Lands	￦	190,807	￦	—	￦	—		￦	—		￦	190,807
Buildings		64,524		—		—			(2,028	)		62,496
Leasehold improvements		—		158		—			(13	)		145
Vehicles		600		588		(17	)		(388	)		783
Furniture and fixture		10,171		6,081		(25	)		(5,342	)		10,885
Total	￦	266,102	￦	6,827	￦	(42	)	￦	(7,771	)	￦	265,116

(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

100

13. INTANGIBLE ASSETS:

(1) Details of intangible assets as of December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

Detail	Acquisition cost		Accumulated Depreciation			Accumulated Impairment Losses			Carrying amount
Computer software	￦	27,220	￦	(16,464)		￦	—		￦	10,756
System development fees		51,241		(31,271	)		—			19,970
Memberships		3,822		—			(166	)		3,656
Total	￦	82,283	￦	(47,735	)	￦	(166	)	￦	34,382

(December 31, 2018)

Detail	Acquisition cost		Accumulated Depreciation			Accumulated Impairment Losses			Carrying amount
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

(2) Changes in intangible assets for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(2019)

Detail	Beginning balance		Acquisitions		Disposals		Amortization			Reversal of (additional) impairment		Ending balance
Computer software	￦	11,003	￦	3,514	￦	—	￦	(3,761	)	￦	—	￦	10,756
System development fees		23,985		3,421		—		(7,436	)		—		19,970
Memberships		3,466		138		—		—			52		3,656
Total	￦	38,454	￦	7,073	￦	—	￦	(11,197	)	￦	52	￦	34,382

(2018)

Detail	Beginning balance		Acquisitions		Disposals			Amortization			Reversal of (additional) 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

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14. OTHER ASSETS:

(1) Details of other assets as of December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019			Dec. 31, 2018
Other financial assets :
Guarantee deposits	￦	40,922		￦	37,638
Accounts receivable		69,680			203,866
Accrued income		840,104			893,465
Receivable spot exchange		72			43
Allowances for loan losses on other assets		(7,888	)		(170,291	)
Subtotal		942,890			964,721
Other assets :
Advance payments		134			—
Prepaid expenses		11,551			1,693
Current income tax asset		1,333			852
Sundry assets		30,185			12,362
Subtotal		43,203			14,907
Total	￦	986,093		￦	979,628

(2) Changes in allowances for loan losses on other assets for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019			2018(*1)
Beginning balance	￦	170,291		￦	168,156
Collection		116			42
Additional provisions (reversals of provisions)		(162,403	)		2,136
Others		(116	)		(43	)
Ending balance	￦	7,888		￦	170,291

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

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15. BORROWINGS:

(1) Details of borrowings as of December 31, 2019 and 2018, are as follows (Korean won in millions):

(December 31, 2019)

Detail	Lender	Interest rate (%)	Amount
Borrowings in foreign currencies:
Borrowings from the Government	MINISTRY OF ECONOMY AND FINANCE	LIBOR 3M+0.60 ~ LIBOR 3M+0.78	￦	2,808,220
Short term borrowings from foreign financial institutions	THE BANK OF TOKYO-MITSUBISHI UFJ, LTD, SEOUL BRANCH and others	LIBOR 3M+0.27		347,340
Long term borrowings from foreign financial institutions	CREDIT AGRICOLE CIB and others	LIBOR 3M+0.45 ~ LIBOR 3M+0.85		1,620,920
Discount on borrowings				(401	)
Commercial papers denominated in foreign currency	NOMURA BANK INTERNATIONAL PLC and others	(-)0.45 ~ 2.17		1,414,086
Offshore commercial papers denominated in foreign currency	BRED BANQUE POPULAIRE and others	(-)0.52 ~ 1.96		68,566
Others (Foreign banks)	DBS BANK LTD, and others	0.04 ~ 0.20		176,475
Others (CSA)	ING BANK N.V. AMSTERDAM and others	1.55		161,166
Subtotal				6,596,372
Borrowings in local currencies:
Call-money	KOREA DEVELOPMENT BANK, SEOUL	1.29		200,000
Total			￦	6,796,372

(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

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(2) Details of the borrowings from other financial institutions as of December 31, 2019 and 2018, are as follows (Korean won in millions):

(December 31, 2019)

Type	Call-money		Borrowings in foreign currencies		Total
Commercial banks	￦	200,000	￦	3,788,551	￦	3,988,551

(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 December 31, 2019 and 2018, are as follows (Korean won in millions):

Detail	Dec. 31, 2019					Dec. 31, 2018
	Interest rate (%)		Amount			Interest rate (%)		Amount
Local currency:
Floating rate		—	￦	—			1.98 ~ 2.01	￦	480,000
Fixed rate		1.25 ~ 4.70		15,405,000			1.67 ~ 4.70		14,185,000
Subtotal				15,405,000					14,665,000
Fair value hedging adjusting				(29,401	)				(51,844	)
Discount on debentures:				(81,602	)				(81,024	)
Subtotal				15,293,997					14,532,132
Foreign currencies:
Floating rate		LIBOR 3M+0.20 ~ LIBOR 3M+1.00		10,198,720			LIBOR 3M+0.26 ~ LIBOR 3M+1.00		9,442,431
Fixed rate		0.00 ~ 8.50		41,103,950			0.16 ~ 8.52		42,442,911
Subtotal				51,302,670					51,885,342
Fair value hedging adjusting				635,004					(360,624	)
Discount on debentures				(94,080	)				(113,880	)
Subtotal				51,843,594					51,410,838
Total			￦	67,137,591				￦	65,942,970

17. PROVISIONS:

(1) Details of provisions as of December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019		Dec. 31, 2018
Provisions for acceptances and guarantees	￦	306,441	￦	602,435
Provisions for unused loan commitments		232,940		149,447
Total	￦	539,381	￦	751,882

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(2) Changes in provisions for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(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		7,364			(253	)		(7,111	)		—
- Transfer to lifetime expected credit losses		(329	)		329			—			—
- Transfer to credit-impaired financial assets		(108	)		—			108			—
Foreign exchange translation		1,255			10,550			305			12,110
Additional provisions (reversals of provisions)		(6,155	)		(305,449	)		3,500			(308,104	)
Ending balance	￦	48,514		￦	209,840		￦	48,087		￦	306,441

	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		1,638			(1,638	)		—			—
- Transfer to lifetime expected credit losses		—			457			(457	)		—
- Transfer to credit-impaired financial assets		—			(401	)		401			—
Foreign exchange translation		172			16			52			240
Additional provisions (reversals of provisions)		(5,128	)		82,367			6,014			83,253
Ending balance	￦	23,771		￦	200,695		￦	8,474		￦	232,940

(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 (reversals of provision)		(12,126	)		70,343			(1,350	)		56,867
Ending balance	￦	46,487		￦	504,663		￦	51,285		￦	602,435

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	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 (reversals 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 December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019			Dec. 31, 2018
Present value of defined benefit obligations	￦	100,628		￦	97,160
Fair value of plan assets		(103,871	)		(90,810	)
Net defined benefit liabilities (assets)	￦	(3,243	)	￦	6,350

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(3) Changes in net defined benefit obligations for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(2019)

	Present value of the defined benefit obligations			Plan assets			Net defined benefit liabilities
Beginning balance	￦	97,160		￦	(90,810	)	￦	6,350
Contributions from the employer		—			(14,700	)		(14,700	)
Current service cost		10,659			—			10,659
Interest expense (income)		3,220			(3,017	)		203
Return on plan assets, excluding the interest expense (income)		—			—			—
Actuarial gains and losses arising from changes in demographic assumptions		(720	)		—			(720	)
Actuarial gains and losses arising from changes in financial assumptions		(1,336	)		828			(508	)
Actuarial gains and losses arising from experience adjustments		(4,562	)		—			(4,562	)
Management fee on plan assets		—			207			207
Benefits paid		(3,793	)		3,621			(172	)
Ending balance	￦	100,628		￦	(103,871	)	￦	(3,243	)

(2018)

	Present value of the defined benefit obligations			Plan assets			Net defined benefit liabilities
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 fair value of plan assets as of December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019		Dec. 31, 2018
Cash and cash equivalent	￦	19,035	￦	35,943
Debt securities		—		5,551
Others		84,836		49,316
Total	￦	103,871	￦	90,810

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(5) Actuarial assumptions used in retirement benefit obligations assessment as of December 31, 2019 and 2018 are as follows:

	Dec. 31, 2019			Dec. 31, 2018
Discount rate		3.09	%		3.38	%
Expected wage growth rate		1.63	%		2.03	%

(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, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

Detail	1%p Increase			1%p Decrease
Change of discount rate	￦	(10,877	)	￦	12,922
Change of future salary increase rate		12,988			(11,128	)

(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	)

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, 2019 and 2018 are as follows (Korean won in millions):

	2019		2018
Retirement benefits	￦	785	￦	797

108

19. OTHER LIABILITIES:

Details of other liabilities as of December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019		Dec. 31, 2018
Other financial liabilities:
Financial guarantee contract liabilities	￦	1,109,018	￦	1,119,984
Foreign exchanges payable		79,049		157
Accounts payable		43,350		14,130
Accrued expenses		734,498		703,247
Guarantee deposit received		161		161
Subtotal		1,966,076		1,837,679
Other liabilities:
Allowance for credit loss in derivatives		20,906		89,097
Unearned income		185,720		210,728
Current tax payable		416,148		42,917
Sundry liabilities		14,901		7,321
Subtotal		637,675		350,063
Total	￦	2,603,751	￦	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

(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

109

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, 2019 and 2018, are as follows (Korean won in millions):

(December 31, 2019)

			Derivative assets
Detail	Notional		Fair value hedge		Cash flow hedge		Trading		Total
Interest:
Interest rate swaps	￦	40,360,597	￦	261,998	￦	—	￦	433,820	￦	695,818
Currency:
Currency forwards		5,815,589		—		—		53,006		53,006
Currency swaps		29,435,322		128,647		—		210,568		339,215
Subtotal		35,250,911		128,647		—		263,574		392,221
Stock:
Stock options		46,952		—		—		664		664
Others:
Other derivatives		—		—		—		29		29
Total	￦	75,658,460	￦	390,645	￦	—	￦	698,087	￦	1,088,732

			Derivative liabilities
Detail	Notional		Fair value hedge		Cash flow hedge		Trading		Total
Interest:
Interest rate swaps	￦	40,360,597	￦	78,976	￦	—	￦	280,314	￦	359,290
Currency:
Currency forwards		5,815,589		—		—		87,987		87,987
Currency swaps		29,435,322		719,810		—		318,055		1,037,865
Subtotal		35,250,911		719,810		—		406,042		1,125,852
Stock:
Stock options		46,952		—		—		242		242
Others:
Other derivatives		—		—		—		15		15
Total	￦	75,658,460	￦	798,786	￦	—	￦	686,613	￦	1,485,399

110

(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

(4) Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019			2018
Fair value hedge—hedged items	￦	(1,020,327	)	￦	229,518
Fair value hedge—hedging instruments		1,406,111			(755,066	)

(5) As a result of cash flow hedge, the Bank recognized ￦182 million and ￦(954) million as other comprehensive income (loss) (before tax effect) for the years ended December 31, 2019 and 2018 and there is no ineffectiveness recognized in relation to cash flow hedge for the years ended December 31, 2019 and 2018.

(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

111

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, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 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		￦5,938,169			￦8,422,627			￦5,245,966			￦3,987,768			￦4,979,797			￦13,211,746			￦41,786,073
Nominal values of hedging instruments		5,600,838			8,000,341			5,233,688			4,007,789			5,174,411			12,371,968			40,389,035
Average hedge ratio		94.32	%		94.99	%		99.77	%		100.50	%		103.91	%		93.64	%		96.66	%

(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 instruments		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 instruments		480,000			—			—			—			—			—			480,000
Average hedge ratio		100.00	%		—			—			—			—			—			100.00	%

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

① Effect of hedging instruments on statement financial position, statement of comprehensive income, statement of changes in equity as of December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

Detail	Nominal amounts		Carrying amounts of assets		Carrying amounts of liabilities		Changes of fair value in the year
Fair value hedges
Interest swap	￦	26,057,349	￦	261,998	￦	78,976	￦	888,149
Currency swap		14,331,689		128,647		719,810		96,781
Subtotal		40,389,038		390,645		798,786		984,930
Cash flow hedges		—		—		—		182
Total	￦	40,389,038	￦	390,645	￦	798,786	￦	985,112

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(December 31, 2018)

Detail	Nominal amounts		Carrying amounts of assets		Carrying amounts of liabilities		Changes of fair value in the year
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 hedged items on statement financial position, statement of comprehensive income, statement of changes in equity as of December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

Detail	Nominal amount		Carrying amounts of assets		Carrying amounts of liabilities		Changes of fair value in the year
Fair value hedges
Loans in foreign currencies	￦	70,818	￦	—	￦	2,364	￦	(1,266	)
Debentures in local currency		1,000,000		—		38,791		(22,442	)
Debentures in foreign currencies		40,715,255		390,645		757,631		(985,684	)
Subtotal		41,786,073		390,645		798,786		(1,009,392	)
Cash flow hedges		—		—		—		(182	)
Total	￦	41,786,073	￦	390,645	￦	798,786	￦	(1,009,574	)

(December 31, 2018)

Detail	Nominal amount		Carrying amounts of assets		Carrying amounts of liabilities		Changes of fair value in the year
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		—		—		954
Total	￦	34,618,319	￦	75,743	￦	1,628,303	￦	156,845

4) Gains (losses) on hedged items and hedging instruments attributable to the hedged ineffectiveness for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

	Gains on hedged items			Gains on hedging instruments		Hedge ineffectiveness recognized in profit or loss
Fair value hedges	￦	(1,009,392	)	￦	1,082,638	￦	73,246
Cash flow hedges		(182	)		182		—
Total	￦	(1,009,574	)	￦	1,082,820	￦	73,246

113

(December 31, 2018)

	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, 2019, the authorized capital and paid-in capital of the Bank are ￦ 15,000,000 million and ￦ 11,871,143 million, respectively. The Bank does not issue share certificates.

Changes in capital stock for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019		2018
Beginning balance	￦	11,814,963	￦	11,814,963
Paid-in capital increase		56,180		—
Ending balance	￦	11,871,143	￦	11,814,963

22. OTHER COMPONENTS OF EQUITY:

(1) Details of other components of equity as of December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019		Dec. 31, 2018
Gain (loss) on equity securities at FVOCI	￦	573,088	￦	691,230
Gain (loss) on debt securities at FVOCI		6,226		(20,681	)
Gain (loss) on valuation of cash flow hedge		—		(137	)
Remeasurement of net defined benefit liabilities		15,094		9,917
Total	￦	594,408	￦	680,329

(2) Changes in other components for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(2019)

	Beginning Balance			Increase (decrease)			Tax effect			Ending balance
Gain (loss) on equity securities at FVOCI	￦	691,230		￦	(184,271	)	￦	66,129		￦	573,088
Gain (loss) on debt securities at FVOCI		(20,681	)		35,497			(8,590	)		6,226
Gain (loss) on valuation of cash flow hedge		(137	)		182			(45	)		—
Remeasurement of net defined benefit liabilities		9,917			6,829			(1,652	)		15,094
Total	￦	680,329		￦	(141,763	)	￦	55,842		￦	594,408

114

(2018)

	Beginning Balance(*1)			Increase (decrease)			Tax effect			Ending balance
Gain (loss) on equity securities at FVOCI	￦	(124,645	)	￦	1,076,352		￦	(260,477	)	￦	691,230
Gain (loss) on debt securities at FVOCI		(3,204	)		(23,057	)		5,580			(20,681	)
Gain (loss) on valuation of cash flow hedge		586			(954	)		231			(137	)
Remeasurement of net defined benefit liabilities		17,168			(9,566	)		2,315			9,917
Total	￦	(110,095	)	￦	1,042,775		￦	(252,351	)	￦	680,329

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

23. RETAINED EARNINGS:

(1) Details of retained earnings as of as of December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019		Dec. 31, 2018
Legal reserve(*1)	￦	405,840	￦	346,136
Voluntary reserve		541,514		—
Regulatory reserve for loan losses		106,650		302,248
Adjustments on initial application of K-IFRS No.1109		—		(128,763	)
Unappropriated retained earnings		301,567		597,039
Total	￦	1,355,571	￦	1,116,660

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

(2) Changes in retained earnings for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019			2018
Beginning balance(*1)	￦	1,116,660		￦	579,217
Profit for the year		301,567			597,039
Dividends		(62,656	)		(59,596	)
Ending balance	￦	1,355,571		￦	1,116,660

(*1) The beginning balance of the year ended December 31, 2018 was restated in accordance with K-IFRS No.1109.

(3) Details of dividends for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019		2018
The Government	￦	41,520	￦	39,493
BOK		6,179		5,876
Korea Development Bank		14,957		14,227
Total	￦	62,656	￦	59,596

115

(4) Statements of appropriations of retained earnings for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019 (Expected date of appropriation: Mar. 31, 2020)				2018 (Date of appropriation: Mar. 29, 2019)
I. Retained earnings before appropriations:			￦	301,567			￦	597,039
1. Unappropriated retained earnings carried over from prior years	￦	—			￦	—
2. Profit for the year		301,567				597,039
II. Other reserve transferred				69,551				195,598
III. Appropriations:				371,118				792,637
1. Legal reserve		30,157				59,704
2. Dividend		109,037				62,656
3. Other reserve		—				670,277
4. Regulatory reserve for loan losses		231,924				—
IV. Unappropriated retained earnings at the end of the year			￦	—			￦	—

(5) 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 year-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 December 31, 2019 and 2018, are as follows (Korean won in millions):

	Dec. 31, 2019		Dec. 31, 2018
Accumulated regulatory reserve for loan losses	￦	106,650	￦	302,248
Expected (reversal of) regulatory reserve for loan losses		231,924		(195,598	)
Regulatory reserve for loan losses	￦	338,574	￦	106,650

2) Provision for regulatory reserve for loan losses and profit for the year after adjusting regulatory reserve for loan losses.

Details of regulatory reserve for loan losses and profit for the year after adjusting the reserve for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019		2018
Profit for the year	￦	301,567	￦	597,039
Provision for (Reversal of) regulatory reserve for loan losses		231,924		(127,976	)
Profit after adjusting the regulatory reserve for loan losses(*1)	￦	69,643	￦	725,015

(*1) Adjusted profit for the year considering 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 year.

116

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, 2019 and 2018, are as follows (Korean won in millions):

	2019		2018
Interest of due from financial institutions:
Due from financial institutions in local currency	￦	17,806	￦	12,159
Due from financial institutions in foreign currencies		87,136		51,488
Subtotal		104,942		63,647
Interest of financial assets at FVTPL:
Interest of securities at FVTPL		1,330		1,393
Interest of loans at FVTPL		150		186
Subtotal		1,480		1,579
Interest of financial investments:
Interest of securities at FVOCI		20,075		27,074
Interest of securities at amortized cost		13,220		2,557
Subtotal		33,295		29,631
Interest of loans at amortized cost:
Interest of loans in local currency		552,674		617,409
Interest of loans in foreign currencies		2,335,811		2,165,524
Interest of bills bought		20,605		23,440
Interest of advances for customers		15		304
Interest of call loans		44,367		41,234
Interest of interbank loans		776		7,420
Subtotal		2,954,248		2,855,331
Other interest income		1,287		1,228
Total	￦	3,095,252	￦	2,951,416

(2) Details of interest expenses for the years ended December 31, 2019 and 2018, are as follows (Korean won in millions):

	2019		2018
Interest of borrowings:
Borrowings in foreign currencies	￦	159,282	￦	155,254
Interest of call money		1,099		1,468
Interest of debentures:
Interest of debentures in local currency		281,416		270,436
Interest of debentures in foreign currencies		1,771,251		1,532,844
Subtotal		2,052,667		1,803,280
Other interest expenses		3,683		8,267
Total	￦	2,216,731	￦	1,968,269

117

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, 2019 and 2018 are as follows (Korean won in millions):

	2019		2018
Commission income in local currency:
Commission income on management of EDCF(*1)	￦	18,003	￦	16,176
Commission income on management of IKCF(*2)		2,250		2,270
Other commission income in local currency		—		6
Subtotal		20,253		18,452
Commission income in foreign currencies:
Commission income on letter of credit		1,811		1,821
Commission income on confirmation on export letter of credit		341		275
Commission income on loan commitments		34,866		34,853
Management fees		30		—
Arrangement fees		5,657		4,641
Advisory fees		1,268		1,815
Prepayment fees		12,274		5,831
Sundry commission income on foreign exchange		131		115
Structuring fees		2,875		1,233
Brokerage fee for foreign currencies exchange funds		829		1,827
Other commission income in foreign currencies		2,811		1,339
Subtotal		62,893		53,750
Others:
Other commission income		16,965		11,136
Guarantee fees in foreign currencies:
Guarantee fees in foreign currencies		170,905		166,882
Premium for guarantee		83,697		73,394
Subtotal		254,602		240,276
Total	￦	354,713	￦	323,614

(*1) Economic Development Cooperation Fund

(*2) Inter Korean Cooperation Fund

118

(2) Details of commission expenses for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019		2018
Commission expenses in local currency:
Commission expenses on domestic transaction	￦	336	￦	387
Commission expenses in foreign currencies:
Service fees paid to credit-rating agency		3,138		2,394
Sundry commission expenses on foreign exchange		3,003		2,144
Subtotal		6,141		4,538
Others:
Other commissions expenses		8,600		3,423
Total	￦	15,077	￦	8,348

26. DIVIDEND INCOME:

Details of dividend income for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019		2018
Financial assets at FVTPL	￦	13	￦	2,938
Financial assets at FVOCI		33,562		33,772
Total	￦	33,575	￦	36,710

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

Details of gain (loss) on financial assets at FVTPL for the years ended December 31, 2019 and 2018, are as follows (Korean won in millions):

	2019			2018
Securities at FVTPL:
Gain on valuation	￦	8,726		￦	13,106
Loss on valuation		(9,108	)		(4,608	)
Gain on disposal		12,344			12,290
Loss on disposal		(1,864	)		(805	)
Others		23,980			2,990
Subtotal		34,078			22,973
Loans at FVTPL
Gain on valuation		431			24
Loss on valuation		—			(199	)
Gain on disposal		1,991			—
Subtotal		2,422			(175	)
Trading derivatives:
Gain on valuation		677,029			468,312
Loss on valuation		(680,963	)		(533,372	)
Gain on transaction		925,575			695,385
Loss on transaction		(751,872	)		(660,749	)
Subtotal		169,769			(30,424	)
Total	￦	206,269		￦	(7,626	)

119

28. GAIN (LOSS) ON HEDGING DERIVATIVES:

Details of gain (loss) on hedging derivatives for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019			2018
Gain on hedging instruments	￦	1,572,911		￦	278,348
Loss on hedging instruments		(166,763	)		(1,033,413	)
Total	￦	1,406,148		￦	(755,065	)

29. GAIN (LOSS) ON FINANCIAL INVESTMENTS:

Details of gain (loss) on financial investments for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019			2018
Financial assets at FVOCI:
Gain on disposals	￦	3,343		￦	321
Loss on disposals		(6,917	)		(5,364	)
Total	￦	(3,574	)	￦	(5,043	)

30. OTHER OPERATING INCOME (EXPENSES):

Details of other operating income (expenses) for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019			2018
Other operating income:
Gains on sale of loans at amortized cost	￦	2,000		￦	—
Gain on fair value hedged items		84,142			430,152
Others		68,354			485
Subtotal		154,496			430,637
Other operating expenses:
Loss on fair value hedged items		(1,104,469	)		(200,634	)
Contribution to miscellaneous funds		(4,943	)		(4,861	)
Transfer of other provisions		(200	)		(162	)
Others		(762	)		(20,167	)
Subtotal		(1,110,374	)		(225,824	)
Total	￦	(955,878	)	￦	204,813

120

31. IMPAIRMENT LOSS (REVERSAL) ON CREDIT:

Details of impairment loss (reversal) on credit for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019			2018
Loans at amortized cost	￦	715,906		￦	327,386
Other financial assets		(162,403	)		2,136
Guarantees		(308,104	)		56,867
Unused loan commitments		83,253			(42,003	)
Financial guarantee contract		(5,710	)		80,069
Financial assets at FVOCI		(310	)		(1,739	)
Financial assets at amortized cost		28			21
Total	￦	322,660		￦	422,737

32. GENERAL AND ADMINISTRATIVE EXPENSES:

Details of general and administrative expenses for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	Detail	2019		2018
General and administrative	Short-term salaries	￦	109,498	￦	103,839
Other expenses in financing department	Office expenses		60,331		58,256
	Subtotal		169,829		162,095
Office expenses of EDCF			1,885		1,737
General and administrative—Others	Retirement benefits (defined contributions)		785		797
	Retirement benefits (defined benefits)		11,069		9,047
	Depreciation of tangible assets		7,771		8,254
	Amortization of intangible assets		11,197		11,804
	Taxes and dues		17,606		12,093
	Donations and contributions		9,000		2,000
	Subtotal		57,428		43,995
	Total	￦	229,142	￦	207,827

121

33. NON-OPERATING INCOME (EXPENSES):

Details of non-operating income (expenses) for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	Detail	2019			2018
Gain (loss) on investments in associates and subsidiaries	Dividend income	￦	11,928		￦	4,883
	Impairment loss		(445,520	)		—
	Gain (loss) on disposal		18,720			(3,357	)
	Subtotal		(414,872	)		1,526
Other income	Gain on disposals of tangible assets		73			41
	Reversal of impairment loss on intangible assets		55			—
	Gain on disposals of intangible assets		—			100
	Rental income		170			166
	Damages paid for breach of contracts		—			2
	Interest on other loans		137			123
	Revenue on research project		9,241			19,090
	Other miscellaneous income		373			7,015
	Subtotal		10,049			26,537
Other expenses	Loss on disposal of tangible assets		(12	)		(5	)
	Impairment loss on intangible assets		(3	)		—
	Donations and contributions		(10,169	)		(4,748	)
	Court cost		(3,333	)		(5,505	)
	Expenses on research project		(7,669	)		(6,171	)
	Other miscellaneous expenses		(289	)		(68	)
	Subtotal		(21,475	)		(16,497	)
	Total	￦	(11,426	)	￦	10,040

34. INCOME TAX EXPENSE:

(1) Details of income tax expenses for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019			2018
Current income tax payable	￦	435,465		￦	66,212
Changes in deferred income taxes due to temporary differences		(310,011	)		338,433
Changes in deferred income taxes directly recognized in equity		43,120			(248,590	)
Income tax expense	￦	168,574		￦	156,055

122

(2) Changes in temporary differences and deferred income tax assets (liabilities) for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(2019)

Detail	Temporary differences									Deferred tax assets (liabilities)— ending balance
	Beginning balance			Increase (Decrease)			Ending balance
Depreciation	￦	118		￦	(11	)	￦	107		￦	26
Fair value hedging income (loss)		(425,268	)		1,022,947			597,679			144,638
Financial guarantee contract liability		947,825			41,860			989,685			239,504
Loans		(140,601	)		71,279			(69,322	)		(16,776	)
Allowance for loan losses		17,031			588,746			605,777			146,598
Unused commitment provisions		149,447			83,493			232,940			56,371
Net deferred origination fees and costs		378,931			20,690			399,621			96,708
Long-term income in advance		(4,389	)		861			(3,528	)		(854	)
Provisions for acceptances and guarantees		602,435			(295,994	)		306,441			74,159
Loan-for-equity swap		2,028,178			3,203			2,031,381			491,594
Loss on valuation of derivatives		(1,323,800	)		535,855			(787,945	)		(190,683	)
Gain on valuation of derivatives		1,600,946			(1,216,352	)		384,594			93,072
Defined benefit liability		2,742			16,750			19,492			4,717
Accrued interest receivables and payables related to swap transaction		(284,804	)		(46,372	)		(331,176	)		(80,145	)
Tangible assets		(175,325	)		29			(175,296	)		(42,422	)
Others		1,397,544			277,896			1,675,440			404,968
Subtotal		4,771,010			1,104,880			5,875,890			1,421,475
Deferred income tax assets (liabilities) directly adjusted in equity											(209,212	)
Total										￦	1,212,263

123

(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 receivables and payables 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.

(3) Details of the reconciliation between profit before income tax and income tax expense (benefit) for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

	2019			2018
Profit before income tax	￦	470,141		￦	753,094
Income tax calculated at statutory tax rate (11% up to ￦200 million, 22% over ￦200 million to ￦20 billion, 24.2% over ￦20 billion to ￦300 billion, and 27.5% over ￦300billion)		118,927			196,739
Adjustments:
Effect on non-taxable income		(21,604	)		(9,466	)
Effect on non-deductible expense		7,037			3,830
Effect on tax deduction		(6,567	)		(12,265	)
Others		47,868			(22,783	)
		26,734			(40,684	)
Adjustment recognized as current tax for the prior periods		22,913			—
Income tax expense	￦	168,574		￦	156,055
Effective tax rate		35.86	%		20.72	%

124

(4) Details of deferred tax relating to items that are recognized directly in equity as of December 31, 2019 and 2018 are as follows (Korean won in millions):

Detail	Dec. 31, 2019			Dec. 31, 2018
Loss on valuation of financial investments	￦	(205,434	)	￦	(249,210	)
Gain on valuation of cash flow hedge		—			44
Remeasurement of net defined benefit liability		(3,778	)		(3,166	)
Total	￦	(209,212	)	￦	(252,332	)

(5) Unrecognized deferred tax assets and liabilities

The Bank does not recognize deferred tax liabilities for taxable temporary difference of ￦ 53,480 million related to investments in associates and subsidiaries as of December 31, 2019 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 financial investments as of December 31, 2019 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, 2019 and 2018 are as follows (Korean won in millions):

Detail	2019		2018
Written-off	￦	202,889	￦	2,019,538
Transfer to financial investments from the investments in associates		416,695		131,094
Investment in kind		70,700		—
Remeasurement of net defined benefit liability	￦	6,829	￦	9,566

(2) Changes in liabilities arising from financing activities for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

(2019)

Detail	Borrowings		Debentures			Total
Beginning balance	￦	4,893,478	￦	65,942,970		￦	70,836,448
Change in cash flows		1,757,636		(1,905,864	)		(148,228	)
Amortization		800		193,209			194,009
Foreign exchange transaction		144,458		1,888,215			2,032,673
Change in fair value hedged items		—		1,019,061			1,019,061
Ending balance	￦	6,796,372	￦	67,137,591		￦	73,933,963

125

(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

36. CONTINGENT LIABILITIES AND COMMITMENTS:

(1) Details of contingent liabilities and commitments as of December 31, 2019 and 2018 are as follows (Korean won in millions):

Detail		Dec. 31, 2019		Dec. 31, 2018
Guarantees	Confirmed	￦	32,275,698	￦	34,794,577
	Unconfirmed		5,845,657		5,215,972
	Subtotal		38,121,355		40,010,549
Loan commitments	Local currency, foreign currency loan commitments		19,723,522		16,884,935
	Others		1,850,049		944,320
	Subtotal		21,573,571		17,829,255
	Total	￦	59,694,926	￦	57,839,804

126

(2) Details of guarantees that have been provided for others as of December 31, 2019 and 2018 are as follows (Korean won in millions):

Detail		Dec. 31, 2019		Dec. 31, 2018
Confirmed guarantees	Local currency:
	Performance of contracts	￦	83,107	￦	59,467
	Repayment of advances		333,788		283,203
	Others		194,208		290,108
	Subtotal		611,103		632,778
	Foreign currency:
	Performance of contracts		7,993,537		9,232,888
	Repayment of advances		6,768,655		7,990,136
	Acceptances of imported goods		979		3,864
	Acceptances of import letter of credit outstanding		19,890		68,786
	Foreign liabilities		12,078,140		11,912,436
	Others		4,803,394		4,953,689
	Subtotal		31,664,595		34,161,799
Unconfirmed guarantees	Foreign liabilities		1,707,043		1,424,174
	Repayment of advances		4,007,536		3,661,665
	Performance of contracts		130,624		130,099
	Underwriting of import credit		419		—
	Others		35		34
	Subtotal		5,845,657		5,215,972
	Total	￦	38,121,355	￦	40,010,549

127

(3) Details of guarantees classified by country as of December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

		Confirmed guarantees				Unconfirmed guarantees				Total
Detail		Amount		Ratio (%)		Amount		Ratio (%)		Amount		Ratio (%)
Asia	Korea	￦	18,761,136		58.13	￦	4,102,193		70.18	￦	22,863,329		59.98
	China		295,174		0.92		—		—		295,174		0.77
	Saudi Arabia		1,731,599		5.37		—		—		1,731,599		4.54
	India		418,459		1.30		—		—		418,459		1.10
	Indonesia		906,878		2.81		92,426		1.58		999,304		2.62
	Uzbekistan		336,739		1.04		37,489		0.64		374,228		0.98
	Vietnam		952,594		2.95		607,299		10.39		1,559,893		4.09
	Australia		542,138		1.68		54,752		0.94		596,890		1.57
	Qatar		266,167		0.82		—		—		266,167		0.70
	Singapore		30,049		0.09		—		—		30,049		0.08
	Oman		398,277		1.23		193,441		3.31		591,718		1.55
	Others		2,159,823		6.69		468,175		8.00		2,627,998		6.89
	Subtotal		26,799,033		83.03		5,555,775		95.04		32,354,808		84.87
Europe	United Kingdom		740,086		2.29		—		—		740,086		1.94
	France		360,823		1.12		—		—		360,823		0.95
	Others		583,739		1.81		200,288		3.43		784,027		2.06
	Subtotal		1,684,648		5.22		200,288		3.43		1,884,936		4.95
America	United States		1,911,553		5.92		12,736		0.22		1,924,289		5.05
	Brazil		398,728		1.24		—		—		398,728		1.05
	Mexico		443,260		1.37		—		—		443,260		1.16
	Bermuda		309,600		0.96		—		—		309,600		0.81
	Others		236,657		0.73		75,578		1.29		312,235		0.82
	Subtotal		3,299,798		10.22		88,314		1.51		3,388,112		8.89
Africa	Madagascar		172,139		0.53		—		—		172,139		0.45
	Others		320,080		1.00		1,280		0.02		321,360		0.84
	Subtotal		492,219		1.53		1,280		0.02		493,499		1.29
	Total	￦	32,275,698		100.00	￦	5,845,657		100.00	￦	38,121,355		100.00

128

(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	￦	5,215,972		100.00	￦	40,010,549		100.00

(4) Details of guarantees classified by industry as of December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

	Confirmed guarantees				Unconfirmed guarantees				Total
Detail	Amount		Ratio (%)		Amount		Ratio (%)		Amount		Ratio (%)
Manufacturing	￦	15,224,619		47.17	￦	4,973,595		85.08	￦	20,198,214		52.98
Transportation		1,985,386		6.15		2,587		0.04		1,987,973		5.21
Financial institutions		2,150,063		6.66		419		0.01		2,150,482		5.64
Wholesale and retail		656,715		2.03		47,706		0.82		704,421		1.85
Real estate related business		43,888		0.14		46,932		0.80		90,820		0.24
Construction		6,317,051		19.57		231,865		3.97		6,548,916		17.18
Public sector and others		5,897,976		18.28		542,553		9.28		6,440,529		16.90
Total	￦	32,275,698		100.00	￦	5,845,657		100.00	￦	38,121,355		100.00

129

(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
Financial institutions		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
Real estate 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 sector 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, 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 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 December 31, 2019, 8 lawsuits (aggregated claim amount: ￦96,237 million) were filed as a plaintiff and 10 pending litigations as a defendant were filed (aggregated claim amount: ￦35,055 million). The Bank’s management expects that there is no significant impact on the financial statements due to these lawsuits, but it is possible to make additional loss to the Bank due to the results of future litigation.

(7) Written-off loans

The Bank manages written-off loans that have claims on debtors due to the statute of limitations, uncollected after write-off, etc. The written-off loans as of December 31, 2019 and 2018, are ￦3,472,397 million and ￦3,413,713 million, respectively.

(8) COVID-19 impact after reporting date

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The outbreak is expected to have a direct impact on global and domestic markets and potential impacts on the asset quality of the bank, however the impact on the bank cannot be estimated at this stage.

130

37. TRANSACTIONS AND BALANCES WITH RELATED PARTIES:

Related parties consist of entities related to the Bank, postemployment benefits, a key management personnel and a close member of that person’s family, an entity controlled or jointly controlled and an entity influenced significantly.

(1) Details of related parties as of December 31, 2019, are as follows:

Detail	Relationship		Ownership- percentage (%)
Parent:
Korean government		Parent		66.43
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
EXIM PLUS Co., Ltd.		Subsidiary		100.00
Korea Asset Management Corporation		Associate		25.86
Credit Guarantee and Investment Fund		Associate		11.49
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 December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

Detail	Receivables		Allowance /Provisions		Payables
Subsidiaries:
KEXIM Bank UK Limited	￦	155,609	￦	—	￦	—
PT.KOEXIM Mandiri Finance		153,450		273		—
KEXIM Vietnam Leasing Co.		139,581		253		—
KEXIM Asia Limited		157,719		74		—
Subtotal		606,359		600		—
Associates:
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		170,762		16,464		—
DAESUN Shipbuilding & Engineering Co., Ltd.		518,111		437,078		91
Daewoo Shipbuilding & Marine Engineering Co., Ltd		2,158,447		643,761		1,472
Subtotal		2,847,320		1,097,303		1,563
Total	￦	3,453,679	￦	1,097,903	￦	1,563

131

(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 December 31, 2019 and 2018 are as follows (Korean won in millions):

(December 31, 2019)

Detail	Confirmed guarantees		Unconfirmed guarantees		Loans commitments		Other commitments
Subsidiaries:
KEXIM Bank UK Limited	￦	—	￦	—	￦	204,750	￦	5,789
PT.KOEXIM Mandiri Finance		—		—		20,840		—
KEXIM Vietnam Leasing Co.		—		—		31,420		—
KEXIM Asia Limited		—		—		98,409		—
Subtotal		—		—		355,419		5,789
Associates:
DAESUN Shipbuilding & Engineering Co., Ltd.		131,822		108,996		6,500		—
Daewoo Shipbuilding & Marine Engineering Co., Ltd		2,380,357		12,616		1,450,000		—
Subtotal		2,512,179		121,612		1,456,500		—
Total	￦	2,512,179	￦	121,612	￦	1,811,919	￦	5,789

132

(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 years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

Detail	2019							2018
	Revenue		Bad debt expenses			Expenses		Revenue		Bad debt expenses		Expenses
Subsidiaries:
KEXIM Bank UK Limited	￦	3,748	￦	—		￦	163	￦	3,634	￦	—	￦	371
PT.KOEXIM Mandiri Finance		4,514		11			—		3,889		23		—
KEXIM Vietnam Leasing Co.		3,686		(50	)		—		3,326		97		—
KEXIM Asia Limited		4,754		5			—		3,396		11		13
EXIM PLUS Co., Ltd.		—		—			434		—		—		—
Subtotal		16,702		(34	)		597		14,245		131		384
Associates:
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd		23,558		39,465			—		29,241		24,565		6
DAESUN Shipbuilding & Engineering Co., Ltd.		7,186		12,539			—		34,759		143,754		—
Korea Shipping and Maritime Transportation		—		—			—		619		—		—
Daewoo Shipbuilding & Marine Engineering Co., Ltd		48,841		(171,830	)		—		43,206		219,405		55,009
Subtotal		79,585		(119,826	)		—		107,825		387,724		55,015
Total	￦	96,287	￦	(119,860	)	￦	597	￦	122,070	￦	387,855	￦	55,399

133

(4) Loan transactions with related parties

Loan transactions with related parties for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

Detail	2019				2018
	Financing transaction				Financing transaction
	Loan		Collection		Loan		Collection
Subsidiaries:
KEXIM Bank UK Limited	￦	340,709	￦	340,548	￦	236,787	￦	228,162
PT.KOEXIM Mandiri Finance		316,463		320,260		304,758		305,054
KEXIM Vietnam Leasing Co.		551,681		541,613		244,567		247,818
KEXIM Asia Limited		468,846		462,785		309,166		297,815
Associates:
SUNGDONG Shipbuilding & Marine Engineering Co., Ltd.		—		466,019		24,345		25,048
Daewoo Shipbuilding & Marine Engineering Co., Ltd.		31,000		—		60,387		295,000
Total	￦	1,708,699	￦	2,131,225	￦	1,180,010	￦	1,398,897

(5) Details of compensation for key executives for the years ended December 31, 2019 and 2018 are as follows (Korean won in millions):

Detail	2019		2018
Salaries	￦	3,078	￦	2,944
Severance and retirement benefits		269		201
Total	￦	3,347	￦	3,145

38. SPECIAL ACCOUNT

The Bank introduced a special account in accordance with the amendments of the Enforcement Decree of the EXIM Bank Act in May 2019. A special account is separately managed and includes 30 billion Korean won of capital stock and 430 billion Korean won of retained earnings as of December 31, 2019. There are no loans and guarantees originated from the special account as of December 31, 2019.

39. APPROVAL OF FINANCIAL STATEMENTS:

The financial statements of the Bank were approved by Board of Directors on March 27, 2020 and were finally approved by the Operations Committee on March 31, 2020.

134

THE REPUBLIC OF KOREA

Land and History

Territory and Population

Located generally south of the 38th parallel on the Korean peninsula, The Republic of Korea covers about 38,000 square miles, approximately one-fourth of which is arable. The Republic has a population of approximately 51 million people. The country’s largest city and capital, Seoul, has a population of about 10 million people.

Map of the Republic of Korea

Political History

Dr. Rhee Seungman, who was elected President in each of 1948, 1952, 1956 and 1960, dominated the years after the Republic’s founding in 1948. Shortly after President Rhee’s resignation in 1960 in response to student-led demonstrations, a group of military leaders headed by Park Chung Hee assumed power by coup. The military leaders established a civilian government, and the country elected Mr. Park as President in October 1963. President Park served as President until his assassination in 1979 following a period of increasing strife between the Government and its critics. The Government declared martial law and formed an interim

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government under Prime Minister Choi Kyu Hah, who became the next President. After clashes between the Government and its critics, President Choi resigned, and General Chun Doo Hwan, who took control of the Korean army, became President in 1980.

In late 1980, the country approved, by national referendum, a new Constitution, providing for indirect election of the President by an electoral college and for certain democratic reforms, and shortly thereafter, in early 1981, re-elected President Chun.

Responding to public demonstrations in 1987, the legislature revised the Constitution to provide for direct election of the President. In December 1987, Roh Tae Woo won the Presidency by a narrow plurality, after opposition parties led by Kim Young Sam and Kim Dae Jung failed to unite behind a single candidate. In February 1990, two opposition political parties, including the one led by Kim Young Sam, merged into President Roh’s ruling Democratic Liberal Party.

In December 1992, the country elected Kim Young Sam as President. The election of a civilian and former opposition party leader considerably lessened the controversy concerning the legitimacy of the political regime. President Kim’s administration reformed the political sector and deregulated and internationalized the Korean economy.

In December 1997, the country elected Kim Dae Jung as President. President Kim’s party, the Millennium Democratic Party (formerly known as the National Congress for New Politics), formed a coalition with the United Liberal Democrats led by Kim Jong Pil, with Kim Jong Pil becoming the first prime minister in President Kim’s administration. The coalition, which temporarily ended before the election held in April 2000, continued with the appointment of Lee Han Dong of the United Liberal Democrats as the Prime Minister in June 2000. The coalition again ended in September 2001.

In December 2002, the country elected Roh Moo Hyun as President. President Roh and his supporters left the Millennium Democratic Party in 2003 and formed a new party, the Uri Party, in November 2003. On August 15, 2007, 85 members of the National Assembly, previously belonging to the Uri Party, or the Democratic Party, formed the United New Democratic Party, or the UNDP. The Uri Party merged into the UNDP on August 20, 2007. In February 2008, the UNDP merged back into the Democratic Party. In December 2011, the Democratic Party merged with the Citizens Unity Party to form the Democratic United Party, which changed its name to the Democratic Party in May 2013.

In December 2007, the country elected Lee Myung-Bak as President. He commenced his term on February 25, 2008. On April 9, 2018, the Korean prosecutor’s office indicted former President Lee on 16 counts of corruption, including bribery, abuse of power, embezzlement and other irregularities.

In December 2012, the country elected Park Geun-hye as President. She commenced her term on February 25, 2013. On December 9, 2016, the National Assembly voted in favor of impeaching President Park for a number of alleged constitutional and criminal violations, including violation of the Constitution and abuse of power by allowing her confidant to exert influence on state affairs and allowing senior presidential aides to aid in her extortion from companies. President Park was suspended from power immediately, with the prime minister simultaneously taking over the role of acting President. On March 10, 2017, the Constitutional Court unanimously upheld the parliamentary vote to impeach President Park, triggering her immediate dismissal. On April 17, 2017, the Korean prosecutor’s office indicted former President Park on charges of bribery, abuse of power and coercion, among others. On August 24, 2018, the Seoul High Court found former President Park guilty on many of the charges, including bribery, abuse of power and coercion, and sentenced her to 25 years in prison and assessed a fine of Won 20 billion.

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A special election to elect a new President was held on May 9, 2017 and the country elected Moon Jae-in as President. He commenced his term on May 10, 2017. The Moon administration’s key policy priorities include:

• investigating corruption involving high-ranking government officials, anti-corruption and reform of chaebol (Korean conglomerates);

• denuclearization of and establishing peace on the Korean Peninsula and enhancing Korea’s core military strength in response to North Korea’s nuclear capabilities;

• reducing fine dust emissions, closing old nuclear power plants and reexamining the construction of new nuclear power plants;

• creating new jobs, resolving youth unemployment and enacting laws prohibiting discrimination against non-regular workers;

• creating jobs for senior citizens, increasing basic pension and providing government subsidies for Alzheimer’s disease treatment; and

• protecting small business owners and restricting establishment of large-scale stores and multi-complex shopping malls.

Government and Politics

Government and Administrative Structure

Governmental authority in the Republic is centralized and concentrated in a strong Presidency. The President is elected by popular vote and can only serve one term of five years. The President chairs the State Council, which consists of the President, the prime minister, the deputy prime ministers, the respective heads of Government ministries and the ministers of state. The President can select the members of the State Council and appoint or remove all other Government officials, except for elected local officials.

The President can veto new legislation and take emergency measures in cases of natural disaster, serious fiscal or economic crisis, state of war or other similar circumstances. The President must promptly seek the concurrence of the National Assembly for any emergency measures taken and failing to do so automatically invalidates the emergency measures. In the case of martial law, the President may declare martial law without the consent of the National Assembly; provided, however, that the National Assembly may request the President to rescind such martial law.

The National Assembly exercises the country’s legislative power. The Constitution and the Election for Public Offices Act provide for the direct election of about 84% of the members of the National Assembly and the distribution of the remaining seats proportionately among parties winning more than five seats in the direct election or receiving over 3% of the popular vote. National Assembly members serve four-year terms. The National Assembly enacts laws, ratifies treaties and approves the national budget. The executive branch drafts most legislation and submits it to the National Assembly for approval.

The country’s judicial branch comprises the Supreme Court, the Constitutional Court and lower courts of various levels. The President appoints the Chief Justice of the Supreme Court and appoints the other Justices of the Supreme Court upon the recommendation of the Chief Justice. All appointments to the Supreme Court require the consent of the National Assembly. The Chief Justice, with the consent of the conference of Supreme Court Justices, appoints all the other judges in Korea. Supreme Court Justices serve for six years and all other judges serve for ten years. Other than the Chief Justice, justices and judges may be reappointed to successive terms.

The President formally appoints all nine judges of the Constitutional Court, but three judges must be designated by the National Assembly and three by the Chief Justice of the Supreme Court. Constitutional Court judges serve for six years and may be reappointed to successive terms.

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Administratively, the Republic comprises eight provinces, one special autonomous province (Jeju), one special city (Seoul), six metropolitan cities (Busan, Daegu, Incheon, Gwangju, Daejeon 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.

Political Parties

The 21st legislative general election was held on April 15, 2020 and the term of the National Assembly members elected in the 21st legislative general election commenced on May 30, 2020. Currently, there are three major political parties: The Democratic Party of Korea, or the DPK, the United Future Party, or the UFP and the Justice Party, or the JP.

As of May 31, 2020, the parties controlled the following number of seats in the National Assembly:

	DPK		UFP		JP		Others		Total
Number of seats		177		103		6		14		300

Relations with North Korea

Relations between the Republic and North Korea have been tense over most of the Republic’s history. The Korean War began with the invasion of the Republic by communist forces from the north in 1950, which was repelled by the Republic and the United Nations forces led by the United States. Following a military stalemate, an armistice was reached establishing a demilitarized zone monitored by the United Nations in the vicinity of the 38th parallel in 1953.

North Korea maintains a military force estimated at more than a million regular troops, mostly concentrated near the northern side of the demilitarized zone, and approximately 7.6 million reserves. The Republic’s military forces, composed of approximately 599,000 regular troops and 3 million reserves, maintain a state of military preparedness along the southern side of the demilitarized zone. In addition, the United States has maintained its military presence in the Republic since the signing of the armistice and currently has approximately 28,500 troops stationed in the Republic. The Republic and the United States share a joint command structure over their military forces in Korea. In October 2014, the United States and the Republic agreed to implement a conditions-based approach to the dissolution of their joint command structure at an appropriate future date, which would allow the Republic to assume the command of its own armed forces in the event of war on the Korean peninsula.

The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In particular, since the death of Kim Jong-il in December 2011, there has been increased uncertainty with respect to the future of North Korea’s political leadership and concern regarding its implications for political and economic stability in the region. Kim Jong-il’s third son, Kim Jong-eun, has assumed power as his father’s designated successor.

In addition, there have been heightened security concerns in recent years stemming from North Korea’s nuclear weapons and ballistic missile programs as well as its hostile military and other actions against Korea. Some of the significant incidents in recent years include the following:

• From time to time, North Korea has conducted ballistic missile tests. In February 2016, North Korea launched a long-range rocket in violation of its agreement with the United States as well as United Nations sanctions barring it from conducting launches that use ballistic missile technology. Despite international condemnation, North Korea released a statement that it intends to continue its rocket launch program and it conducted a series of ballistic missile tests in 2016 and 2017. In response, the

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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 September 2016, North Korea conducted a fifth nuclear test, claiming to have successfully detonated a nuclear warhead that could be mounted on ballistic missiles. In September 2017, North Korea announced that it successfully conducted its sixth nuclear test by detonating a hydrogen bomb designed to be mounted on an intercontinental ballistic missile, which resulted in increased tensions in the region and elicited strong objections worldwide. In response to such tests (as well as North Korea’s long-range ballistic missile program), the United Nations Security Council unanimously passed several rounds of resolutions condemning North Korea’s actions and significantly expanding the scope of the sanctions applicable to North Korea, while the United States and the European Union also imposed additional sanctions on North Korea.

• In August 2015, two Korean soldiers were injured in a landmine explosion near the Korean demilitarized zone. Claiming the landmines were set by North Koreans, the Korean army re-initiated its propaganda program toward North Korea utilizing loudspeakers near the demilitarized zone. In retaliation, the North Korean army fired artillery rounds on the loudspeakers, resulting in the highest level of military readiness for both Koreas.

• In March 2010, a Korean naval vessel was destroyed by an underwater explosion, killing many of the crewmen on board. The Government formally accused North Korea of causing the sinking, while North Korea denied responsibility. Moreover, in November 2010, North Korea fired more than one hundred artillery shells that hit Korea’s Yeonpyeong Island near the Northern Limit Line, which acts as the de facto maritime boundary between Korea and North Korea on the west coast of the Korean peninsula, causing casualties and significant property damage. The Government condemned North Korea for the attack and vowed stern retaliation should there be further provocation.

North Korea’s economy also faces severe challenges, which may further aggravate social and political pressures within North Korea. Although bilateral summit meetings were held between Korea and North Korea in April and May 2018 and between the United States and North Korea in June 2018, February 2019 and June 2019, there can be no assurance that the level of tension on the Korean peninsula will not escalate in the future or that such escalation will not have a material adverse impact on the Republic’s economy and us. Any further increase in tension, which may occur, for example, if North Korea experiences a leadership crisis, high-level contacts between the Republic and North Korea break down or further military hostilities occur, could have a material adverse effect on the Republic’s economy and us. Over the longer term, reunification of the two Koreas could occur. Reunification may entail a significant economic commitment by the Republic.

Foreign Relations and International Organizations

The Republic maintains diplomatic relations with most nations of the world, most importantly with the United States with which it entered into a mutual defense treaty and several economic agreements. The Republic also has important relationships with Japan and China, its largest trading partners together with the United States.

The Republic belongs to a number of supranational organizations, including:

• United Nations;

• the International Monetary Fund, or the IMF;

• the World Bank;

• the Asian Development Bank, or the ADB;

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• the Multilateral Investment Guarantee Agency;

• the International Finance Corporation;

• the International Development Association;

• the African Development Bank;

• the European Bank for Reconstruction and Development;

• the Bank for International Settlements;

• the World Health Organization, or the WHO;

• the World Trade Organization, or the WTO;

• the International Atomic Energy Agency;

• the Inter-American Development Bank, or the IDB;

• the Organization for Economic Cooperation and Development, or the OECD; and

• the Asian Infrastructure Investment Bank.

The Economy

The following table sets forth information regarding certain of the Republic’s key economic indicators for the periods indicated.

	As of or for the year ended December 31,
	2015			2016			2017			2018			2019
	(billions of dollars and trillions of Won, except percentages)
GDP Growth (at current prices)		6.1	%		5.0	%		5.5	%		3.1	%(6)		1.1	%(6)
GDP Growth (at chained 2015 year prices)		2.8	%		2.9	%		3.2	%		2.7	%(6)		2.0	%(6)
Inflation		0.7	%		1.0	%		1.9	%		1.5	%		0.4	%
Unemployment(1)		3.6	%		3.7	%		3.7	%		3.8	%		3.8	%
Trade Surplus(2)	$	90.3		$	89.2		$	95.2		$	69.7		$	39.0
Foreign Currency Reserves	$	368.0		$	371.1		$	389.3		$	403.7		$	408.8
External Liabilities(3)	$	396.1		$	382.2		$	412.0		$	441.2	(6)	$	467.0	(6)
Fiscal Balance	￦	(0.2	)	￦	16.9		￦	24.0		￦	31.2	(6)	￦	12.0	(6)
Direct Internal Debt of the Government(4) (as % of GDP(5))		33.0	%		34.2	%		35.2	%		35.6	%(6)		37.4	%(6)
Direct External Debt of the Government(4) (as % of GDP(5))		0.4	%		0.4	%		0.4	%		0.4	%(6)		0.4	%(6)

(1) Average for year.

(2) Derived from customs clearance statistics on a C.I.F. basis, meaning that the price of goods includes insurance and freight cost.

(3) Calculated under the criteria based on the sixth edition of the Balance of Payment Manual published by the International Monetary Fund in December 2010.

(4) Does not include guarantees by the Government. See “—Debt—External and Internal Debt of the Government—Guarantees by the Government” for information on outstanding guarantees by the Government.

(5) At chained 2015 year prices.

(6) Preliminary.

Source: The Bank of Korea

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Worldwide Economic and Financial Difficulties

In recent years, the global financial markets have experienced significant volatility as a result of, among other things:

• the ongoing outbreak of the COVID-19 pandemic caused by a new strain of coronavirus, as further described below;

• a deterioration in economic and trade relations between the United States and its major trading partners, including China;

• increased uncertainties resulting from the United Kingdom’s exit from the European Union;

• financial and social 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 changes in policy rates by the U.S. Federal Reserve and other central banks;

• political and social instability in various countries in the Middle East, including Iraq, Syria and Yemen; and

• fluctuations in oil and commodity prices.

COVID-19, an infectious disease caused by severe acute respiratory syndrome coronavirus 2 that was first reported to have been transmitted to humans in late 2019 and was declared a “pandemic” by the WHO in March 2020, has spread globally over the course of 2020 to date and has led to significant global economic and financial disruptions, including an adverse impact on international trade and business activities. In addition, there has been significant volatility in global financial markets, including in Korea, due to the COVID-19 pandemic in recent months. See “—The Financial System—Securities Markets”. There is no guarantee that the stock prices of Korean companies will not decline 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. Moreover, the value of the Won relative to major foreign currencies in general and the U.S. dollar in particular has fluctuated widely in 2020. 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 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. In addition, in the event that difficult conditions in the global credit markets continue or the global economy continues to deteriorate 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:

• a slowdown in consumer spending and depressed consumer sentiment due to the outbreak of infectious diseases, such as the ongoing outbreak of the COVID-19 pandemic discussed above and the outbreak of the Middle East Respiratory Syndrome, or MERS, in May 2015, and national tragedies, such as the sinking of the Sewol passenger ferry in April 2014, which led to the death of hundreds of passengers;

• increasing delinquencies and credit defaults by consumer and small- and medium-sized enterprise borrowers, which may occur due to, among others, the impact of the ongoing global outbreak of the COVID-19 pandemic;

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• steadily rising household debt consisting of housing loans and merchandise credit, which increased to approximately Won 1,600.1 trillion as of December 31, 2019 from Won 843.2 trillion as of December 31, 2010, primarily due to increases in mortgage loans and purchases with credit cards;

• deterioration in economic or diplomatic relations between Korea and other countries resulting from territorial or trade disputes or disagreements in foreign policy (such as the ongoing trade disputes between Korea and Japan);

• a substantial increase in the Korean government’s expenditures for pension and social welfare programs, due in part to an aging population (defined as the population of people aged 65 years or older) that accounts for approximately 14.9% of the Republic’s total population as of December 31, 2019, an increase from 7.2% as of December 31, 2000, and is expected to surpass 20.3% in 2025, which could lead to a Korean government budget deficit;

• decreases in the market prices of Korean real estate; and

• the occurrence of severe health epidemics that affect the livestock industry.

The first confirmed case of the COVID-19 disease in Korea was announced on January 20, 2020 and the subsequent spread of the disease has since resulted in more than 11,400 confirmed cases and the deaths of more than 260 people in Korea as of May 31, 2020. The Government has been implementing a number of measures in order to contain the spread of the COVID-19 disease, including, among others, a nationwide order for social distancing, implementation of strict self-isolation and quarantine measures for those who may be infected, or have a higher chance of being infected, and the temporary closure of all school facilities until the possibility of further contamination has subsided sufficiently. In addition, during the months of March, April and May of 2020, the Government has implemented the following measures, among others, in order to alleviate the adverse impact of the COVID-19 pandemic on the Korean economy and stabilize the financial markets:

• lowering of The Bank of Korea’s policy rate from 1.25% to 0.75% in March 2020 and subsequently to 0.5% in May 2020 (See “—Monetary Policy—Interest Rates”);

• execution of a bilateral currency swap agreement with the U.S. Federal Reserve for the provision of US$60 billion in exchange for the Republic’s Won-denominated treasury bonds;

• injection of cash into corporate and financial markets in the form of loans, guarantees and maturity extensions to eligible banks and financial institutions, small- and medium business enterprises, small merchants and self-employed business owners facing liquidity crises; and

• offer of emergency relief payments and expansion of social security contribution reliefs for those impacted by the COVID-19 pandemic.

However, the economic outlook for Korea and its financial services sector in 2020 and for the foreseeable future remains highly uncertain as a result of, among others, (i) uncertainty regarding the scope and duration of the COVID-19 outbreak and its lasting social, political and economic effects, which may last for a significant period of time, and the fiscal and monetary policies being implemented by the Government and regulatory authorities to alleviate such effects by increasing liquidity and supporting incomes, (ii) adverse conditions in the Korean and global economies and financial markets due to the COVID-19 pandemic and (iii) factors such as fluctuations in oil and commodity prices and interest and exchange rates, higher unemployment, lower consumer confidence and stock market volatility due to the impact of the COVID-19 pandemic.

Gross Domestic Product

GDP measures the market value of all final goods and services produced within a country for a given period and reveals whether a country’s productive output rises or falls over time. Economists present GDP in both current market prices and “real” or “inflation-adjusted” terms. In March 2009, the Republic adopted a method known as the “chain-linked” measure of GDP, replacing the previous fixed-base, or “constant” measure of GDP, to show the real growth of the aggregate economic activity, as recommended by the System of National Accounts 1993. GDP at current market prices values a country’s output using the actual prices of each year, whereas the

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“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. The Republic has updated the reference year from 2010 to 2015 in July 2019 to better align Korean national accounts statistics with the recommendations of the previously implemented System of National Accounts 2008 and to maintain comparability with other countries’ accounts.

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The following table sets out the composition of the Republic’s GDP at current market and chained 2015 year prices and the annual average increase in the Republic’s GDP.

Gross Domestic Product

	2015			2016			2017			2018(1)			2019(1)			As % of GDP 2019(1)
	(billions of Won)
Gross Domestic Product at Current Market Prices:
Private		804,812.4			834,804.8			872,791.4			908,273.7			929,728.0			48.6
Government		250,088.0			265,295.2			283,045.8			305,513.0			330,273.1			17.3
Gross Capital Formation		489,601.5			524,717.6			592,711.4			592,858.4			597,085.1			31.2
Exports of Goods and Services		712,775.7			698,621.0			751,428.5			788,279.0			762,252.1			39.8
Less Imports of Goods and Services		(599,257.2	)		(582,659.1	)		(664,278.8	)		(701,150.7	)		(705,937.8	)		36.9
Statistical Discrepancy		0.0			0.0			0.0			(276.4	)		563.1			0.0
Expenditures on Gross Domestic Product		1,658,020.4			1,740,779.6			1,835,698.2			1,893,497.0			1,913,963.6			100.0
Net Factor Income from the Rest of the World		5,186.2			6,363.9			7,482.6			4,955.7			17,678.1			0.9
Gross National Income(2)		1,663,206.6			1,747,143.5			1,843,180.9			1,898,452.7			1,931,641.7			100.9
Gross Domestic Product at Chained 2015 Year Prices:
Private		804,812.4			825,676.2			848,589.3			872,304.4			888,951.5			48.2
Government		250,088.0			261,162.3			271,428.7			286,644.8			305,315.7			16.6
Gross Capital Formation		489,601.5			520,296.3			576,996.7			566,376.1			552,228.6			29.9
Exports of Goods and Services		712,775.7			729,684.8			747,783.5			773,752.6			786,709.6			42.7
Less Imports of Goods and Services		(599,257.2	)		(630,266.6	)		(686,089.2	)		(691,374.1	)		(688,285.5	)		(37.3	)
Statistical Discrepancy		—			327.1			(1,130.3	)		(2,511.7	)		(2,805.2	)		0.2
Expenditures on Gross Domestic Product(3)		1,658,020.4			1,706,880.3			1,760,811.5			1,807,735.9			1,844,489.9			100.0
Net Factor Income from the Rest of the World in the Terms of Trade		5,186.2			6,177.2			7,084.6			4,519.5			16,257.3			0.9
Trading Gains and Losses from Changes in the Terms of Trade		0.0			23,569.7			25,915.5			3,272.8			(40,365.3	)		(2.2	)
Gross National Income(4)		1,663,206.6			1,736,627.2			1,793,818.4			1,815,558.4			1,820,450.4			98.7
Percentage Increase (Decrease) of GDP over Previous Year:
At Current Prices		6.1			5.0			5.5			3.1			1.1
At Chained 2015 Year Prices		2.8			2.9			3.2			2.7			2.0

(1) Preliminary.

(2) GDP plus net factor income from the rest of the world is equal to the Republic’s gross national income.

(3) Under the “chain-linked” measure of GDP, the components of GDP will not necessarily add up to the total GDP.

(4) Under the “chain-linked” measure of Gross National Income, the components of Gross National Income will not necessarily add up to the total Gross National Income.

Source: The Bank of Korea

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The following table sets out the Republic’s GDP by economic sector at current market prices:

Gross Domestic Product by Economic Sector

(at current market prices)

	2015		2016		2017		2018(1)		2019(1)		As % of GDP 2019(1)
	(billions of Won)
Industrial Sectors:		599,438.1		629,410.8		672,178.8		680,553.1		663,369.5		34.7
Agriculture, Forestry and Fishing		33,225.2		32,361.7		33,974.3		34,528.9		32,408.5		1.7
Manufacturing, Mining and Quarrying		443,278.3		461,198.3		496,993.7		506,854.7		488,050.4		25.5
Mining and Quarrying		2,144.8		2,367.7		2,348.8		2,247.7		2,208.5		0.1
Manufacturing		441,133.5		458,830.6		494,644.9		504,607.0		485,841.9		25.4
Electricity, Gas and Water Supply		41,760.4		44,307.8		40,014.2		36,813.2		38,032.2		2.0
Construction		81,174.2		91,543.0		101,196.6		102,356.3		104,878.4		5.5
Services:		921,469.8		963,671.9		1,006,839.9		1,049,864.7		1,086,641.1		56.8
Wholesale and Retail Trade, Accommodation and Food Services		160,345.6		169,240.8		175,124.9		180,661.0		180,377.0		9.4
Transportation and Storage		58,499.6		58,803.1		58,283.7		57,088.1		59,182.2		3.1
Finance and Insurance		88,257.8		89,593.7		96,983.7		104,336.2		105,245.2		5.5
Real Estate		122,197.8		128,539.4		133,152.6		135,890.3		140,657.6		7.3
Information and Communication		69,789.1		74,469.7		76,712.2		79,242.9		82,112.2		4.3
Business Activities		141,918.6		147,218.4		154,495.4		161,832.1		170,753.9		8.9
Public Administration, Defense and Social Security		95,491.0		100,787.1		107,325.6		115,086.1		122,079.5		6.4
Education		82,133.7		84,528.3		87,880.4		90,933.2		93,732.5		4.9
Human Health and Social Work		63,337.3		68,704.8		74,706.8		80,937.0		87,813.8		4.6
Cultural and Other Services		39,499.3		41,786.5		42,174.6		43,857.8		44,687.3		2.3
Taxes Less Subsidies on Products		137,112.5		147,696.8		156,679.6		163,079.3		163,953.1		8.6
Gross Domestic Product at Current Market Prices		1,658,020.4		1,740,779.6		1,835,698.2		1,893,497.0		1,913,963.6		100.0
Net Factor Income from the Rest of the World		5,186.2		6,363.9		7,482.6		4,955.7		17,678.1		0.9
Gross National Income at Current Market Price		1,663,206.6		1,747,143.5		1,843,180.9		1,898,452.7		1,931,641.7		100.9

(1) Preliminary.

Source: The Bank of Korea

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The following table sets out the Republic’s GDP per capita:

Gross Domestic Product per capita

(at current market prices)

	2015		2016		2017		2018(1)		2019(1)
GDP per capita (thousands of Won)		32,501		33,988		35,740		36,691		37,014
GDP per capita (U.S. dollar)		28,724		29,287		31,605		33,346		31,754
Average Exchange Rate (in Won per U.S. dollar)		1,131.5		1,160.5		1,130.8		1,100.3		1,165.7

(1) Preliminary.

Source: The Bank of Korea

The following table sets out the Republic’s Gross National Income, or GNI, per capita:

Gross National Income per capita

(at current market prices)

	2015		2016		2017		2018(1)		2019(1)
GNI per capita (thousands of Won)		32,602		34,112		35,886		36,787		37,356
GNI per capita (U.S. dollar)		28,814		29,394		31,734		33,434		32,047
Average Exchange Rate (in Won per U.S. dollar)		1,131.5		1,160.5		1,130.8		1,100.3		1,165.7

(1) Preliminary.

Source: The Bank of Korea

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The following table sets out the Republic’s GDP by economic sector:

Gross Domestic Product by Economic Sector

(at chained 2015 year prices)

	2015		2016		2017		2018(1)		2019(1)		As % of GDP 2019(1)
	(billions of Won)
Industrial Sectors:		599,438.1		615,346.0		640,516.9		654,072.8		660,959.8		35.8
Agriculture, Forestry and Fishing		33,225.2		31,353.2		32,059.8		32,540.4		33,307.2		1.8
Manufacturing, Mining and Quarrying		443,278.30		453,590.20		470,274.80		485,854.0		492,620.80		26.7
Mining and Quarrying		2,144.8		2,296.0		2,204.5		2,030.9		2,002.4		0.1
Manufacturing		441,133.5		451,294.2		468,070.3		483,823.1		490,626.5		26.6
Electricity, Gas and Water Supply		41,760.4		41,262.6		43,813.8		45,116.2		47,169.5		2.6
Construction		81,174.2		89,140.0		94,368.5		90,562.2		87,862.3		4.8
Services:		921,469.80		948,419.20		973,106.40		1,003,834.7		1,030,649.9		55.9
Wholesale and Retail Trade, Accommodation and Food Services		160,345.6		164,704.5		167,746.5		171,599.5		173,401.8		9.4
Transportation and Storage		58,499.6		58,713.7		60,289.1		61,888.5		62,033.8		3.4
Finance and Insurance		88,257.8		89,948.0		93,709.2		98,999.7		103,417.3		5.6
Real Estate		122,197.8		126,461.1		129,307.2		132,057.6		134,943.1		7.3
Information and Communication		69,789.1		73,517.0		75,814.3		78,941.7		81,872.4		4.4
Business Activities		141,918.6		145,077.1		147,949.8		150,522.3		153,597.2		8.3
Public Administration, Defense and Social Security		95,491.0		98,023.2		100,722.8		104,100.3		107,845.8		5.8
Education		82,133.7		83,160.6		84,806.1		86,440.9		87,447.3		4.7
Human Health and Social Work		63,337.3		67,974.6		72,330.1		78,160.0		84,627.4		4.6
Cultural and Other Services		39,499.3		40,839.4		40,495.8		41,218.1		41,447.6		2.2
Taxes Less Subsidies on Products		137,112.5		143,115.2		147,105.4		149,966.5		153,599.8		8.3
Gross Domestic Product(2)		1,658,020.4		1,706,880.3		1,760,811.5		1,807,735.9		1,844,489.9		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 2015 was 2.8% at chained 2015 year prices, as aggregate private and general government consumption expenditures increased by 2.6%, gross domestic fixed capital formation increased by 5.4% and exports of goods and services increased by 0.2%, which more than offset an increase in imports of goods and services by 2.1%, each compared with 2014.

GDP growth in 2016 was 2.9% at chained 2015 year prices, as aggregate private and general government consumption expenditures increased by 3.0%, gross domestic fixed capital formation increased by 6.6% and

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exports of goods and services increased by 2.4%, which more than offset an increase in imports of goods and services by 5.2%, each compared with 2015.

GDP growth in 2017 was 3.2% at chained 2015 year prices, as aggregate private and general government consumption expenditures increased by 3.1%, gross domestic fixed capital formation increased by 9.8% and exports of goods and services increased by 2.5%, which more than offset an increase in imports of goods and services by 8.9%, each compared with 2016.

Based on preliminary data, GDP growth in 2018 was 2.7% at chained 2015 year prices, as aggregate private and general government consumption expenditures increased by 3.5% and exports of goods and services increased by 3.5%, which more than offset a decrease in gross domestic fixed capital formation by 2.4% and an increase in imports of goods and services by 0.8%, each compared with 2017.

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 3.1%, exports of goods and services increased by 1.7% and imports of goods and services decreased by 0.4%, which more than offset a decrease in gross domestic fixed capital formation by 3.3%, each compared with 2018.

Based on preliminary data, GDP growth in the first quarter of 2020 was 1.3% at chained 2015 year prices, as exports of goods and services increased by 4.9% and gross domestic fixed capital formation increased by 4.4%, which more than offset a decrease in aggregate private and general government consumption expenditures by 1.5% and an increase in imports of goods and services by 0.5%, each compared with the corresponding period of 2019.

The Government expects that GDP will be adversely affected in 2020, primarily due to the ongoing global outbreak of the COVID-19 pandemic.

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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)		2015		2016		2017		2018		2019(2)
Industries		10,000.0		100.0		102.2		104.8		106.4		106.3
Mining and Manufacturing		9,532.3		100.0		102.3		104.7		106.1		106.1
Mining		31.6		100.0		103.4		100.2		89.5		85.3
Manufacturing		9,500.7		100.0		102.3		104.7		106.1		106.2
Food Products		505.9		100.0		102.7		102.9		104.1		107.1
Beverage Products		136.6		100.0		103.7		105.7		105.4		103.4
Tobacco Products		59.4		100.0		113.0		122.7		111.1		121.1
Textiles		136.2		100.0		98.5		95.2		88.7		83.6
Wearing Apparel, Clothing Accessories and Fur Articles		98.1		100.0		96.8		95.9		93.6		87.0
Tanning and Dressing of Leather, Luggage and Footwear		29.0		100.0		92.5		82.0		82.8		71.5
Wood and Products of Wood and Cork (Except Furniture)		34.2		100.0		99.3		103.7		95.3		86.3
Pulp, Paper and Paper Products		157.3		100.0		99.4		97.5		97.0		95.5
Printing and Reproduction of Recorded Media		48.8		100.0		101.3		102.0		100.4		94.9
Coke, hard-coal and lignite fuel briquettes and Refined Petroleum Products		194.4		100.0		106.9		114.8		117.0		114.7
Chemicals and Chemical Products		878.8		100.0		105.5		109.1		111.6		108.8
Pharmaceuticals, Medicinal Chemicals and Botanical Products		232.1		100.0		109.9		118.6		128.2		129.9
Rubber and Plastic Products		480.4		100.0		100.6		99.9		95.1		92.2
Non-metallic Minerals		258.6		100.0		109.0		111.3		107.3		104.0
Basic Metals		623.8		100.0		101.9		102.9		100.1		97.7
Fabricated Metal Products		544.8		100.0		102.1		96.6		88.9		88.5
Electronic Components, Computer, Radio, Television and Communication Equipment and Apparatuses		2,108.9		100.0		105.1		112.6		125.9		132.0
Medical, Precision and Optical Instruments, Watches and Clocks		344.5		100.0		101.1		119.5		136.1		120.9
Electrical Equipment		461.5		100.0		103.5		106.6		106.5		107.7
Other Machinery and Equipment		835.5		100.0		101.7		115.5		111.9		105.3
Motor Vehicles, Trailers and Semitrailers		966.2		100.0		97.6		95.1		93.9		93.1
Other Transport Equipment		263.4		100.0		88.8		68.0		61.6		71.7
Furniture		58.2		100.0		106.2		109.5		101.9		99.9
Other Products		44.1		100.0		104.4		108.2		102.9		106.4
Electricity, Gas		467.7		100.0		100.8		106.3		110.3		108.6
Total Index		10,000.0		100.0		102.2		104.8		106.4		106.3

(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 decreased by 0.3% in 2015, primarily due to decreased exports. Industrial production increased by 2.2% in 2016, primarily due to increased domestic consumption. Industrial production increased by

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2.5% in 2017, primarily due to increased domestic consumption and exports. Industrial production increased by 1.5% in 2018, primarily due to increased domestic consumption and exports. Based on preliminary data, industrial production decreased by 0.1% in 2019, primarily due to decreased exports.

Manufacturing

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 2.3% 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. The manufacturing sector increased production by 1.3% in 2018, primarily due to increased demand for consumer electronics products and electronic components (including semiconductors). Based on preliminary data, the manufacturing sector increased production by 0.1% in 2019, primarily due to increased demand for consumer electronics products and electronic components (including semiconductors).

Automobiles. 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. 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 United States and China. In 2018, automobile production decreased by 2.1%, domestic sales volume recorded a decrease of 0.5% and exports sales volume recorded a decrease of 3.2%, compared with 2017, primarily due to decreased domestic production of automobiles resulting mainly from partial strikes by unionized workers of automobile manufacturers and the restructuring of GM Korea’s production units and decreased exports to countries in South America and the Middle East. Based on preliminary data, in 2019, automobile production decreased by 1.9%, domestic sales volume recorded a decrease of 1.8% and export sales volume recorded a decrease of 2.0%, compared with 2018, primarily due to decreased domestic production of automobiles resulting mainly from partial strikes by unionized workers of automobile manufacturers, increased overseas production, decreased domestic demand for automobiles and decreased demand for automobiles in China.

Electronics. In 2015, electronics production amounted to ￦316,600 billion, a decrease of 3.9% from the previous year, and exports amounted to US$172.9 billion, a decrease of 0.6% from the previous year, primarily due to adverse global economic conditions and the expansion of overseas production. In 2015, export sales of semiconductor memory chips constituted approximately 11.9% of the Republic’s total exports. In 2016, electronics production amounted to ￦309,016 billion, a decrease of 2.4% from the previous year, and exports amounted to US$162.5 billion, a decrease of 6.0% from the previous year, primarily due to continued adverse global economic conditions and the expansion of overseas production. In 2016, export sales of semiconductor memory chips constituted approximately 12.6% of the Republic’s total exports. In 2017, electronics production amounted to ￦342,755 billion, an increase of 10.9% from the previous year, and exports amounted to US$197.6 billion, an increase of 21.6% from the previous year, primarily due to increases in demand for semiconductors, organic light-emitting diode, or OLED, display panels and computers. In 2017, export sales of semiconductor memory chips constituted approximately 17.4% of the Republic’s total exports. In 2018, electronics production amounted to ￦365,548 billion, an increase of 6.6% from the previous year, 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

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constituted approximately 21.2% of the Republic’s total exports. Based on preliminary data, in the first eleven months of 2019, electronic production amounted to ￦293,648 billion, a decrease of 12.6% from ￦335,846 billion in the corresponding period of 2018. Based on preliminary data, in 2019, exports amounted to US$176.9 billion, a decrease of 19.7% from the previous year, primarily due to a significant decrease in semiconductor prices. In 2019, export sales of semiconductor memory chips constituted approximately 17.6% of the Republic’s total exports.

Iron and Steel. 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. 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. Based on preliminary data, in 2019, crude steel production totaled 71.4 million tons, a decrease of 1.5% from 2018, primarily due to adverse conditions in the construction and shipbuilding industries, and export sales volume of iron and steel products decreased by 0.2%, primarily due to continued restrictions on imports of steel products imposed by the United States, Canada and the European Union.

Shipbuilding. In 2015, the Republic’s shipbuilding orders amounted to approximately 11 million compensated gross tons, a decrease of 15.4% compared to 2014, primarily due to the continued downturn in the domestic and global shipbuilding industry. In 2016, the Republic’s shipbuilding orders amounted to approximately 2 million compensated gross tons, a decrease of 81.8% compared to 2015, primarily due to the continued adverse conditions in the domestic and global shipbuilding industry. In 2017, the Republic’s shipbuilding orders amounted to approximately 8 million compensated gross tons, an increase of 300% compared to 2016, primarily due to increased demand for LNG carriers, bulk carriers and container carriers. In 2018, the Republic’s shipbuilding orders amounted to approximately 13 million compensated gross tons, an increase of 62.5% compared to 2017, primarily due to increased demand for LNG carriers, oil tankers and container carriers. Based on preliminary data, in 2019, the Republic’s shipbuilding orders amounted to approximately 9 million compensated gross tons, a decrease of 30.8% compared to 2018, primarily due to decreased demand for container carriers and bulk carriers, which more than offset increased demand for LNG carriers.

Agriculture, Forestry and Fisheries

The Government’s agricultural policy has traditionally focused on:

• grain production;

• development of irrigation systems;

• land consolidation and reclamation;

• seed improvement;

• mechanization measures to combat drought and flood damage; and

• increasing agricultural incomes.

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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.

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. In 2018, rice production decreased 2.5% from 2017 to 3.9 million tons. In 2019, rice production decreased 5.1% from 2017 to 3.7 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 2015, the agriculture, forestry and fisheries industry decreased by 0.2% compared to 2014, primarily due to unfavorable weather conditions. In 2016, the agriculture, forestry and fisheries industry decreased by 5.6% compared to 2015, primarily due to unfavorable weather conditions and a decrease in fishing catch. In 2017, the agriculture, forestry and fisheries industry increased by 2.3% 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. Based on preliminary data, in 2019, the agriculture, forestry and fisheries industry increased by 2.4% compared to 2018, primarily due to an increase in farming and livestock production.

Construction

In 2015, the construction industry increased by 6.2% compared to 2014, primarily due to an increase in the construction of private residential and commercial buildings. In 2016, the construction industry increased by 9.8% compared to 2015, primarily due to an increase in the construction of private residential and commercial buildings. In 2017, the construction industry increased by 5.9% 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 4.0% compared to 2017, primarily due to a decrease in the construction of residential and commercial buildings. Based on preliminary data, in 2019, the construction industry decreased by 3.0% compared to 2018, primarily due to a continued decrease in the construction of residential buildings.

Electricity and Gas

The following table sets out the Republic’s dependence on imports for energy consumption:

Dependence on Imports for Energy Consumption

	Total Primary Energy Supply		Imports		Imports Dependence Ratio
	(millions of tons of oil equivalents(1), except ratios)
2015		286.9		272.0		94.8
2016		293.8		277.9		94.6
2017		302.1		284.0		94.0
2018		307.5		288.1		93.7
2019(2)		303.4		283.4		93.4

(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

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Korea has almost no domestic oil or gas production and depends on imported oil and gas to meet its energy requirements. Accordingly, the international prices of oil and gas significantly affect the Korean economy. Any significant long-term increase in the prices of oil and gas will increase inflationary pressures in Korea and adversely affect the Republic’s balance of trade.

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)
2015		85,401		29.8		109,090		38.0		34,765		12.1		57,675		20.1		286,931		100.0
2016		81,499		27.7		117,606		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		64,874		21.5		302,066		100.0
2018		86,651		28.2		118,521		38.5		28,437		9.2		73,892		24.0		307,501		100.0
2019(3)		82,075		27.0		117,579		38.7		31,079		10.2		72,714		24.0		303,446		100.0

(1) Includes natural gas, hydroelectric power and renewable energy.

(2) Conversion to tons of oil equivalents was calculated based on energy conversion factors under the Energy Act Enforcement Decree as amended in July 2017.

(3) Preliminary.

Source: Korea Energy Economics Institute; The Bank of Korea

The Republic’s first nuclear power plant went into full operation in 1978 with a rated generating capacity of 587 megawatts. As of December 31, 2019, the Republic had 24 nuclear plants with a total estimated nuclear power installed generating capacity of 23,250 megawatts and four 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 in the upcoming 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 2020.

Services Sector

In 2015, the service industry increased by 3.1% compared to 2014 as the finance and insurance sector increased by 7.5%, the business activities sector increased by 5.0% and the health and social work sector

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increased by 4.7%, each compared with 2014. In 2016, the service industry increased by 2.9% compared to 2015 as the health and social work sector increased by 7.3%, the wholesale and retail trade, restaurants and hotels sector increased by 2.7% and the finance and insurance sector increased by 1.9%, each compared with 2015. In 2017, the service industry increased by 2.6% compared to 2016 as the health and social work sector increased by 6.4%, the finance and insurance sector increased by 4.2% and the public administration and defense sector increased by 2.8%, each compared with 2016. Based on preliminary data, in 2018, the service industry increased by 3.2% compared to 2017 as the health and social work sector increased by 8.1%, the finance and insurance sector increased by 5.6% and the public administration and defense sector increased by 3.4%, each compared with 2017. Based on preliminary data, in 2019, the service industry increased by 2.7% compared to 2018 as the health and social work sector increased by 8.3%, the public administration and defense sector increased by 3.6% and the finance and insurance sector increased by 4.5%, each compared with 2018.

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)
	(2015=100)		(%)			(2015=100)		(%)		(2015=100)			(%)			(%)
2015		100.0		(4.0	)		100.0		0.7		100.0			2.9			3.6
2016		98.2		(1.8	)		101.0		1.0		104.2			4.2			3.7
2017		101.6		3.5			102.9		1.9		106.4			2.1			3.7
2018		103.5		1.9			104.5		1.5		113.6			6.8			3.8
2019		103.5		0.0			104.9		0.4		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 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 2019, the inflation rate decreased to 0.4%, primarily due to decreases in the prices of agricultural and livestock products and oil. Based on preliminary data, the inflation rate was 1.2% in the first quarter of 2020.

In 2015, the unemployment rate increased to 3.6%, primarily due to the 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 2019, the unemployment rate remained constant at 3.8%. Based on preliminary data, the unemployment rate was 4.2% in the first quarter of 2020.

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 63% over the past decade. Literacy among workers under 50 is almost universal. As of December 31, 2019, the economically active population of the Republic was 28.2 million and the number of employees was 27.1 million.

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The following table shows selected employment information by industry and by gender:

	2015		2016		2017		2018		2019
	(all figures in percentages, except as indicated)
Labor force (in thousands of persons)		26,178		26,409		26,725		26,822		27,123
Employment by Industry:
Agriculture, Forestry and Fishing		5.1		4.9		4.8		5.0		5.1
Mining and Manufacturing		17.6		17.2		17.2		16.9		16.4
S.O.C. & Services		77.2		77.9		78.0		78.1		78.5
Electricity, Transport, Communication and Finance		11.8		11.8		11.4		11.8		11.7
Business, Private & Public Service and Other Services		35.4		36.3		36.4		36.5		37.4
Construction		7.0		7.0		7.4		7.6		7.4
Wholesale & Retail Trade, Hotels and Restaurants		23.0		22.9		22.8		22.2		22.0
Total Employed		100.0		100.0		100.0		100.0		100.0
Employment by Gender:
Male		57.7		57.6		57.5		57.3		57.0
Female		42.3		42.4		42.5		42.7		43.0
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 is in the process of 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 has been extended to workplaces with 50 or more but fewer than 300 workers from January 1, 2020, and will further be extended to workplaces with five or more but fewer than 50 workers from July 1, 2021.

Approximately 11.8% of the Republic’s workers were unionized as of December 31, 2018. 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 the past several years include the following:

• 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, or Kia Motors, went on partial strike protesting the wage gap between workers at Kia Motors and workers at Hyundai Motor.

• In September 2017, several thousand unionized workers at KBS and MBC, Korea’s two largest television and radio broadcasters, went on strike, which lasted several months, to protest against alleged management interference in news coverage and unfair labor practices.

• In 2017, unionized workers at Hyundai Motor went on a series of partial strikes demanding higher wages and bonuses.

• In July 2018, unionized workers at Hyundai Heavy Industries went on full strike demanding higher wages.

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• In May 2019, unionized bus drivers launched a nationwide strike seeking higher wages and increased manpower in time for the 52-hour work week that was implemented in July 2019.

• In September 2019, unionized workers at GM Korea went on full strike, the first in more than 20 years, demanding higher wages and protesting against GM Korea’s restructuring plans.

• In October and November 2019, several thousand members of the National Railroad Workers’ Union went on full strike demanding a normalization of wages and requesting the hiring of additional personnel.

Actions such as these by labor unions may hinder implementation of the labor reform measures and disrupt the Government’s plans to create a more flexible labor market. Although much effort is being expended to resolve labor disputes in a peaceful manner, there can be no assurance that further labor unrest will not occur in the future. Continued labor unrest in key industries of the Republic may have an adverse effect on the economy.

In 1997, the Korean Confederation of Trade Unions organized a political alliance, which led to the formation of the Democratic Labor Party in January 2000. The Democratic Labor Party merged with The New People’s Participation Party and changed its name to The Unified Progressive Party, or the UPP, in December 2011. In October 2012, the UPP split and seven UPP members of the National Assembly and their supporters formed a new party, the Progressive Justice Party, which changed its name to the Justice Party in July 2013. In December 2014, the Constitutional Court ordered the dissolution of the UPP and the removal of the party’s five lawmakers from the National Assembly for violating the Republic’s Constitution after certain of its members were convicted of trying to instigate an armed rebellion and supporting North Korea. In the legislative general election held on April 13, 2016, the Justice Party won six seats in the National Assembly, and the members-elect began their four-year terms on May 30, 2016. As of May 31, 2020, the Justice Party holds six seats in the National Assembly.

The Financial System

Structure of the Financial Sector

The Republic’s financial sector includes the following categories of financial institutions:

• The Bank of Korea;

• banking institutions;

• non-bank financial institutions; and

• other financial entities, including:

• financial investment companies;

• credit guarantee institutions;

• venture capital companies; and

• miscellaneous others.

To increase transparency in financial transactions and enhance the integrity and efficiency of the financial markets, Korean law requires that financial institutions confirm that their clients use their real names when transacting business. 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

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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.

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, the Financial Investment Businesses).

Accordingly, all financial businesses relating to financial investment products are reclassified as one or more of the Financial Investment Businesses described above, and financial institutions are subject to the regulations applicable to their relevant Financial Investment Businesses, irrespective of what type of financial institution it is. For example, under the FSCMA, derivative businesses conducted by securities companies and future companies are subject to the same regulations, at least in principle.

The banking business and the insurance business are not subject to the FSCMA and will continue to be regulated under separate laws; provided, however, that they are subject to the FSCMA if their activities involve any Financial Investment Businesses requiring a license based on the FSCMA.

Banking Industry

The banking industry comprises commercial banks and specialized banks. Commercial banks serve the general public and corporate sectors. They include nationwide banks, regional banks and branches of foreign banks. Regional banks provide services similar to nationwide banks, but operate in a geographically restricted region. Branches of foreign banks have operated in the Republic since 1967 but provide a relatively small proportion of the country’s banking services. As of December 31, 2019, there were six nationwide banks, six regional banks, two internet banks and 36 foreign banks with branches operating in the Republic.

Specialized banks meet the needs of specific sectors of the economy in accordance with Government policy; they are organized under, or chartered by, special laws. Specialized banks include (i) The Korea Development Bank, (ii) The Export-Import Bank of Korea, (iii) The Industrial Bank of Korea, (iv) SuHyup Bank and (v) NongHyup Bank. The Government has made capital contributions to three of these specialized banks as follows:

• The Korea Development Bank: the Government owns directly all of its paid-in capital and has made capital contributions since its establishment in 1954. Recent examples include the Government’s contributions to its capital of ￦2,055 billion in 2015, ￦308 billion in 2016, ￦395 billion in 2017, ￦170 billion in 2018 and ￦555 billion in 2019. Taking into account these capital contributions, its total paid-in capital was ￦18,663 billion as of December 31, 2019.

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• The Export-Import Bank of Korea: the Government owns, directly and indirectly, all of its paid-in capital and has made capital contributions since its establishment in 1976. Recent examples include the Government’s contributions to its capital of ￦1,130 billion in 2015, ￦1,620 billion in 2016, ￦1,417 billion in 2017, ￦0 billion in 2018 and ￦56 billion in 2019. Taking into account these capital contributions, its total paid-in capital was ￦11,871 billion as of December 31, 2019.

• The Industrial Bank of Korea: the Government owned, directly and indirectly, 56.5% of its common shares and all of its preferred shares as of December 31, 2019. The Government had owned all of the issued share capital of The Industrial Bank of Korea until 1994, but the Government’s minimum share ownership requirement was repealed in 1997, and the Government has since periodically adjusted its ownership percentage in the Industrial Bank of Korea through transactions involving the purchase and sale of its common shares. In 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. In March 2019, the Industrial Bank of Korea issued an aggregate of 14,965,579 new shares to the Government for ￦200 billion in cash. In September 2019, the Industrial Bank of Korea issued an aggregate of 2,212,585 new shares to the Government for ￦25 billion in cash. Taking into account such transactions, the Government’s total paid-in capital was ￦1,899 billion as of December 31, 2019.

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, 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		1,872.6		18.2		1.0
December 31, 2019(2)		1,980.6		15.3		0.8

(1) Assets classified as substandard or below.

(2) Preliminary.

Source: Financial Supervisory Service

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. In 2018, these banks posted an aggregate net profit of ￦15.6 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. Based on preliminary data, in 2019, these banks posted an aggregate net profit of ￦14.4 trillion, compared to an aggregate net profit of ￦15.6 trillion in 2018, primarily due to losses on investments in subsidiaries and associates in 2019 compared to gains on investments in subsidiaries and associates in 2018, which more than offset decreased loan loss provisions.

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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;

• life insurance institutions; and

• credit card companies.

As of December 31, 2019, 79 mutual savings banks, 24 life insurance institutions, which includes joint venture life insurance institutions and wholly-owned subsidiaries of foreign life insurance companies, and eight credit card companies operated in the Republic.

Money Markets

In the Republic, the money markets consist of the call market and markets for a wide range of other short-term financial instruments, including treasury bills, monetary stabilization bonds, negotiable certificates of deposits, repurchase agreements and commercial paper.

Securities Markets

On January 27, 2005, the Korea Exchange was established pursuant to the now repealed Korea Securities and Futures Exchange Act by consolidating the Korea Stock Exchange, the Korea Futures Exchange, the KOSDAQ Stock Market, Inc., or the KOSDAQ, and the KOSDAQ Committee of the Korea Securities Dealers Association, which had formerly managed the KOSDAQ. There are three major markets operated by the Korea Exchange: the KRX KOSPI Market, the KRX KOSDAQ Market, and the KRX Derivatives Market. The Korea Exchange has two trading floors located in Seoul, one for the KRX KOSPI Market and one for the KRX KOSDAQ Market, and one trading floor in Busan for the KRX Derivatives Market. The Korea Exchange is a joint stock company with limited liability, the shares of which are held by (i) financial investment companies that were formerly members of the Korea Futures Exchange or the Korea Stock Exchange and (ii) the stockholders of the KOSDAQ. Currently, the Korea Exchange is the only stock exchange in Korea and is operated by membership, having as its members Korean financial investment companies and some Korean branches of foreign financial investment companies.

The Korea Exchange publishes the Korea Composite Stock Price Index every ten seconds, which is an index of all equity securities listed on the Korea Exchange. The Korea Composite Stock Price Index is computed using the aggregate value method, whereby the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed companies as of the base date, January 4, 1980.

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The following table shows the value of the Korea Composite Stock Price Index as of the dates indicated:

December 30, 2015	1,960.3
January 29, 2016	1,912.1
February 29, 2016	1,916.7
March 31, 2016	1,995.8
April 29, 2016	1,994.2
May 31, 2016	1,983.4
June 30, 2016	1,970.4
July 29, 2016	2,016.2
August 31, 2016	2,034.7
September 30, 2016	2,043.6
October 31, 2016	2,008.2
November 30, 2016	1,983.5
December 29, 2016	2,026.5
January 31, 2017	2,067.6
February 28, 2017	2,091.6
March 31, 2017	2,160.2
April 28, 2017	2,205.4
May 31, 2017	2,347.4
June 30, 2017	2,391.8
July 31, 2017	2,402.7
August 31, 2017	2,363.2
September 29, 2017	2,394.5
October 31, 2017	2,523.4
November 30, 2017	2,476.4
December 28, 2017	2,467.5
January 31, 2018	2,566.5
February 28, 2018	2,427.4
March 30, 2018	2,445.9
April 30, 2018	2,515.4
May 31, 2018	2,423.0
June 29, 2018	2,326.1
July 31, 2018	2,295.3
August 31, 2018	2,322.9
September 28, 2018	2,343.1
October 31, 2018	2,029.7
November 30, 2018	2,096.9
December 28, 2018	2,041.0
January 31, 2019	2,204.9
February 28, 2019	2,195.4
March 29, 2019	2,140.7
April 30, 2019	2,203.6
May 31, 2019	2,041.7
June 28, 2019	2,130.6
July 31, 2019	2,024.6
August 30, 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
February 28, 2020	1,987.0
March 31, 2020	1,754.6
April 30, 2020	1,947.6
May 29, 2020	2,029.6

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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. During the first quarter of 2020, there was a significant overall decline in the stock prices of Korean companies due to deteriorating market conditions domestically and abroad due to the ongoing global outbreak of the COVID-19 pandemic. The index was 2,134.7 on June 26, 2020.

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 Supervisory Service. The Financial Services Commission acts as the executive body over the Financial Supervisory Service. The Financial Services Commission reports to, but operates independently of, the Prime Minister’s office.

The Ministry of Economy and Finance focuses on financial policy and foreign currency regulations. The Bank of Korea manages monetary policy focusing on price stabilization.

Deposit Insurance System

The Republic’s deposit insurance system insures amounts on deposit with banks, non-bank financial institutions, securities companies and life insurance companies.

Since January 2001, deposits at any single financial institution are insured only up to ￦50 million per person regardless of the amount deposited.

The Government excluded certain deposits, such as repurchase agreements, from the insurance scheme, expanded the definition of unsound financial institutions to which the insurance scheme would apply and gradually increased the insurance premiums payable by insured financial institutions.

Monetary Policy

The Bank of Korea

The Bank of Korea was established in 1950 as Korea’s central bank and the country’s sole currency issuing bank. A seven-member Monetary Policy Committee, chaired by the Governor of The Bank of Korea, formulates and controls monetary and credit policies.

Inflation targeting is the basic system of operation for Korean monetary policy. The consumer price index is used as The Bank of Korea’s target indicator. To achieve its established inflation target, the Monetary Policy Committee of The Bank of Korea determines and announces the “Bank of Korea Base Rate”, the reference rate applied in transactions such as repurchase agreements between The Bank of Korea and its financial institution counterparts. The Bank of Korea uses open market operations as its primary instrument to keep the call rate in line with the Monetary Policy Committee’s target rate. In addition, The Bank of Korea is able to establish policies regarding its lending to banks in Korea and their reserve requirements.

Interest Rates

On 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

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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. 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 to address the sluggishness of the global and domestic economy. On March 16, 2020, The Bank of Korea further lowered its policy rate to 0.75% from 1.25%, which was further lowered to 0.5% on May 28, 2020, in response to deteriorating economic conditions resulting from the ongoing global outbreak of the COVID-19 pandemic.

With the deregulation of interest rates on banks’ demand deposits on February 2, 2004, The Bank of Korea completed the interest rate deregulation based upon the “Four-Stage Interest Rate Liberalization Plan” announced in 1991. The prohibition on the payment of interest on ordinary checking accounts was, however, maintained.

Money Supply

The following table shows the volume of the Republic’s money supply:

	December 31,
	2015			2016			2017			2018			2019
	(billions of Won)
Money Supply (M1)(1)		708,452.9			795,531.1			849,862.4			865,851.8			952,922.8
Quasi-money(2)		1,538,922.1			1,611,928.0			1,680,491.2			1,834,510.6			1,960,686.8
Money Supply (M2)(3)		2,247,375.0			2,407,459.1			2,530,353.6			2,700,362.4			2,913,609.6
Percentage Increase Over Previous Year		8.2	%		7.1	%		5.1	%		6.7	%		7.9	%

(1) Consists of currency in circulation and demand and instant access savings deposits at financial institutions.

(2) Includes time and installment savings deposits, marketable instruments, yield-based dividend instruments and financial debentures, excluding financial instruments with a maturity of more than two years.

(3) Money Supply (M2) is the sum of Money Supply (M1) and quasi-money.

Source: The Bank of Korea

Exchange Controls

Authorized foreign exchange banks, as registered with the Ministry of Economy and Finance, handle foreign exchange transactions. The ministry has designated other types of financial institutions to handle foreign exchange transactions on a limited basis.

Korean laws and regulations generally require a report to either the Ministry of Economy and Finance, The Bank of Korea or authorized foreign exchange banks, as applicable, for issuances of international bonds and other instruments, overseas investments and certain other transactions involving foreign exchange payments.

In 1994 and 1995, the Government relaxed regulations of foreign exchange position ceilings and foreign exchange transaction documentation and created free Won accounts which may be opened by non-residents at Korean foreign exchange banks. The Won funds deposited into the free Won accounts may be converted into foreign currencies and remitted outside Korea without any governmental approval. In December 1996, after joining the OECD, the Republic freed the repatriation of investment funds, dividends and profits, as well as loan repayments and interest payments. The Government continues to reduce exchange controls in response to changes in the world economy, including the new trade regime under the WTO, anticipating that such foreign exchange reform will improve the Republic’s competitiveness and encourage strategic alliances between domestic and foreign entities.

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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.

In January 2010, the Financial Supervisory Services released FX Derivative Transactions Risk Management Guideline to prevent over-hedging of foreign exchange risk by corporate investors. According to the guideline as amended in July 2010, if a corporate investor, other than a financial institution or a public enterprise, wishes to enter into a foreign exchange forward, option or swap agreement with a bank, the bank is required to verify whether the corporate investor’s assets, liabilities or contracts face foreign exchange risks that could be mitigated by a foreign exchange forward, option or swap agreement. In addition, the bank is required to ensure that the corporate investor’s risk hedge ratio, which is the ratio of the aggregate notional amount to the aggregate amount of risk, does not exceed 100%.

Foreign Exchange

The following table shows the exchange rate between the Won and the U.S. Dollar (in Won per U.S. Dollar) as announced by the Seoul Money Brokerage Services, Ltd. as of the dates indicated:

	Won/U.S. Dollar Exchange Rate
December 31, 2015		1,172.0
January 29, 2016		1,208.4
February 29, 2016		1,235.4
March 31, 2016		1,153.5
April 29, 2016		1,143.9
May 31, 2016		1,190.6
June 30, 2016		1,164.7
July 31, 2016		1,125.7
August 31, 2016		1,118.5
September 30, 2016		1,096.3
October 31, 2016		1,145.2
November 30, 2016		1,168.5

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	Won/U.S. Dollar Exchange Rate
December 30, 2016		1,208.5
January 31, 2017		1,157.8
February 28, 2017		1,132.1
March 31, 2017		1,116.1
April 28, 2017		1,130.1
May 31, 2017		1,123.9
June 30, 2017		1,139.6
July 31, 2017		1,119.1
August 31, 2017		1,122.8
September 29, 2017		1,146.7
October 31, 2017		1,125.0
November 30, 2017		1,082.4
December 29, 2017		1,071.4
January 31, 2018		1,071.5
February 28, 2018		1,071.0
March 30, 2018		1,066.5
April 30, 2018		1,076.2
May 31, 2018		1,081.3
June 29, 2018		1,121.7
July 31, 2018		1,116.7
August 31, 2018		1,108.8
September 28, 2018		1,112.7
October 31, 2018		1,140.6
November 30, 2018		1,121.8
December 31, 2018		1,118.1
January 31, 2019		1,117.2
February 28, 2019		1,117.8
March 29, 2019		1,137.8
April 30, 2019		1,158.2
May 31, 2019		1,190.0
June 28, 2019		1,156.8
July 31, 2019		1,182.0
August 30, 2019		1,215.2
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
February 28, 2020		1,215.9
March 31, 2020		1,222.6
April 30, 2020		1,225.2
May 29, 2020		1,239.4

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. During the first quarter of 2020, the value of the Won relative to the U.S. dollar declined significantly, due primarily to the impact of the ongoing global outbreak of the COVID-19 pandemic. The market average exchange rate was Won 1,205.2 to US$1.00 on June 26, 2020.

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Balance of Payments and Foreign Trade

Balance of Payments

Balance of payments figures measure the relative flow of goods, services and capital into and out of the country as represented in the current balance and the capital balance. The current balance tracks a country’s trade in goods and services and transfer payments and measures whether a country is living within its income from trading and investments. The capital balance covers all transactions involving the transfer of capital into and out of the country, including loans and investments. The overall balance represents the sum of the current and capital balances. An overall balance surplus indicates a net inflow of foreign currencies, thereby increasing demand for and strengthening the local currency. An overall balance deficit indicates a net outflow of foreign currencies, thereby decreasing demand for and weakening the local currency. The financial account mirrors the overall balance. If the overall balance is positive, the surplus, which represents the nation’s savings, finances the overall deficit of the country’s trading partners. Accordingly, the financial account will indicate cash outflows equal to the overall surplus. If, however, the overall balance is negative, the nation has an international deficit which must be financed. Accordingly, the financial account will indicate cash inflows equal to the overall deficit.

The following table sets out certain information with respect to the Republic’s balance of payments:

Balance of Payments⁽¹⁾

Classification	2015			2016			2017			2018			2019(4)
	(millions of dollars)
Current Account		105,118.6			97,923.7			75,230.9			77,466.5			59,971.2
Goods		120,275.0			116,461.7			113,592.9			110,086.8			76,856.0
Exports(2)		543,082.5			511,926.1			580,310.2			626,266.5			561,962.6
Imports(2)		422,807.5			395,464.4			466,717.3			516,179.7			485,106.6
Services		(14,625.8	)		(17,338.4	)		(36,734.1	)		(29,369.4	)		(23,020.8	)
Income		4,454.6			4,567.1			5,336.9			4,901.9			12,198.8
Current Transfers		(4,985.2	)		(5,766.7	)		(6,964.8	)		(8,152.8	)		(6,062.8	)
Capital and Financial Account		102,724.3			99,765.1			84,398.5			77,251.1			60,886.3
Capital Account		(60.2	)		(46.2	)		(26.8	)		316.7			(64.2	)
Financial Account(3)		102,784.5			99,811.3			84,425.3			76,934.4			60,950.5
Net Errors and Omissions		(2,273.9	)		1,933.8			9,221.2			(848.8	)		1,043.5

(1) Figures are prepared based on the sixth edition of the Balance of Payment Manual published by International Monetary Fund in December 2010 and implemented by the Government in December 2013. In December 2018, The Bank of Korea revised the Republic’s balance of payments information to capture new economic activities and reflect the changes in raw data.

(2) These entries are derived from trade statistics and are valued on a free on board basis, meaning that the insurance and freight costs are not included.

(3) Includes borrowings from the IMF, syndicated bank loans and short-term borrowings.

(4) Preliminary.

Source: The Bank of Korea

The current account surplus in 2018 increased to US$77.5 billion 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. The current account surplus in 2019 decreased to US$60.0 billion from the current account surplus of US$77.5 billion in 2018, primarily due to a decrease in surplus from the goods account, which more than offset an increase in surplus from the income account and a decrease in deficit from the services account. Based on preliminary data, the current account surplus in the first quarter of 2020 increased to US$13.6 billion from the current account surplus of US$12.2 billion in the corresponding period of 2019, primarily due to an increase in surplus from the income account and a decrease in deficit from the services account, which more than offset a decrease in surplus from the goods 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

	2015		2016		2017		2018		2019(2)
	(billions of dollars)
Contracted and Reported Investment
Greenfield Investment(1)		14.1		15.0		15.7		20.0		15.9
Merger & Acquisition		6.8		6.3		7.2		6.9		7.4
Total		20.9		21.3		22.9		26.9		23.3
Actual Investment		16.6		10.8		13.8		17.3		13.1

(1) Includes building new factories and operational facilities.

(2) Preliminary.

Source: Ministry of Trade, Industry and Energy

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.

Based on preliminary data, in 2019, the contracted and reported amount of foreign direct investment in the Republic decreased to US$23.3 billion from US$26.9 billion in 2018, primarily due to a decrease in foreign investment in the manufacturing sector to US$8.2 billion in 2019 from US$10.0 billion in 2018.

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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

	2015		2016		2017		2018		2019
	(billions of dollars)
North America
U.S.A.		5.5		3.9		4.7		5.9		6.8
Others		2.9		1.4		1.6		1.9		1.7
		8.4		5.3		6.3		7.8		8.6
Asia
Japan		1.7		1.2		1.8		1.3		1.4
Hong Kong		1.5		2.1		1.8		1.5		1.9
Singapore		2.5		2.3		1.8		1.5		1.3
China		2.0		2.0		0.8		2.7		1.0
Others		0.7		0.5		2.0		2.4		1.0
		8.4		8.1		8.2		9.4		6.6
European Union
Malta		0.7		4.1		1.1		2.6		1.5
Netherlands		0.5		1.5		1.7		1.4		1.7
England		0.3		0.4		2.2		1.2		2.1
Germany		0.5		0.3		0.7		0.5		0.4
France		0.1		0.2		0.3		0.7		0.1
Luxembourg		0.2		0.2		0.2		0.2		0.1
Others		0.4		0.8		1.1		2.4		1.4
		2.7		7.5		7.3		9.0		7.4
Others regions and countries		1.4		0.4		1.1		0.6		0.7
Total		20.9		21.3		22.9		26.9		23.3

Source: Ministry of Trade, Industry and Energy

Trade Balance

Trade balance figures measure the difference between a country’s exports and imports. If exports exceed imports the country has a trade balance surplus while if imports exceed exports the country has a deficit. A deficit, indicating that a country’s receipts from abroad fall short of its payments to foreigners, must be financed, rendering the country a debtor nation. A surplus, indicating that a country’s receipts exceed its payments to foreigners, allows the country to finance its trading partners’ net deficit to the extent of the surplus, rendering the country a creditor nation.

The following table summarizes the Republic’s trade balance for the periods indicated:

Trade Balance

	Exports(1)		As % of GDP(2)			Imports(3)		As % of GDP(2)			Balance of Trade		Exports as % of Imports
	(billions of dollars, except percentages)
2015		526.8		36.0	%		436.5		29.8	%		90.3		120.7
2016		495.4		33.0	%		406.2		27.1	%		89.2		122.0
2017		573.7		35.3	%		478.5		29.5	%		95.2		119.9
2018		604.9		35.2	%		535.2		31.1	%		69.7		113.0
2019(4)		542.2		33.0	%		503.3		30.7	%		38.9		107.7

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(1) These entries are derived from customs clearance statistics on a C.I.F. basis, meaning that the price of goods includes 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 includes insurance and freight cost.

(4) Preliminary.

Source: The Bank of Korea; Korea Customs Service

The Republic, due to its lack of natural resources, relies on extensive trading activity for growth. The country meets virtually all domestic requirements for petroleum, wood and rubber with imports, as well as much of its coal and iron needs. Exports consistently represent a high percentage of GDP and, accordingly, the international economic environment is of crucial importance to the Republic’s economy. See “—The Economy—Worldwide Economic and Financial Difficulties”.

The following tables give information regarding the Republic’s exports and imports by major commodity groups:

Exports by Major Commodity Groups (C.I.F.)⁽¹⁾

	2015		As % of 2015 Total		2016		As % of 2016 Total		2017		As % of 2017 Total		2018		As % of 2018 Total		2019(2)		As % of 2019 Total(2)
	(billions of dollars, except percentages)
Foods & Consumer Goods		6.8		1.3		7.4		1.5		7.8		1.4		7.9		1.3		8.2		1.5
Raw Materials and Fuels		39.5		7.5		33.0		6.7		43.1		7.5		55.1		9.1		48.8		9.0
Petroleum & Derivatives		32.4		6.1		26.8		5.4		35.4		6.2		47.0		7.8		41.3		7.6
Others		7.1		1.3		6.2		1.3		7.7		1.3		8.1		1.3		7.5		1.4
Light Industrial Products		35.4		6.7		35.4		7.1		36.0		6.3		35.8		5.9		34.2		6.3
Heavy & Chemical Industrial Products		445.1		84.5		419.7		84.7		486.8		84.9		506.1		83.7		451.0		83.2
Electronic & Electronic Products		170.5		32.4		159.4		32.2		192.0		33.5		214.8		35.5		171.4		31.6
Chemicals & Chemical Products		55.9		10.6		55.3		11.2		65.7		11.5		74.0		12.2		67.4		12.4
Metal Goods		41.4		7.9		39.9		8.1		46.9		8.2		48.1		8.0		44.1		8.1
Machinery & Precision Equipment		57.3		10.9		55.2		11.1		63.3		11.0		69.4		11.5		67.6		12.5
Transport Equipment		112.8		21.4		101.0		20.4		108.8		19.0		87.4		14.4		87.7		16.2
Passenger Cars		41.7		7.9		37.5		7.6		38.8		6.8		38.2		6.3		40.5		7.5
Ship & Boat		38.8		7.4		33.5		6.8		41.4		7.2		20.7		3.4		19.5		3.6
Others		32.3		6.1		30.0		6.1		28.6		5.0		28.4		4.7		27.7		5.1
Others		7.2		1.4		8.9		1.8		10.1		1.8		12.5		2.1		12.7		2.3
Total		526.8		100.0		495.4		100.0		573.7		100.0		604.9		100.0		542.2		100.0

(1) These entries are derived from customs clearance statistics. C.I.F. means that the price of goods includes insurance and freight costs.

(2) Preliminary.

Source: The Bank of Korea; Korea Customs Service

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Imports by Major Commodity Groups (C.I.F.)⁽¹⁾

	2015		As % of 2015 Total		2016		As % of 2016 Total		2017		As % of 2017 Total		2018		As % of 2018 Total		2019(2)		As % of 2019 Total(2)
	(billions of dollars, except percentages)
Industrial Materials and Fuels		219.0		50.2		191.0		47.0		233.1		48.7		279.0		52.1		254.0		50.5
Crude Petroleum		55.1		12.6		44.3		10.9		59.6		12.5		80.4		15.0		70.3		14.0
Mineral		17.6		4.0		15.5		3.8		20.3		4.2		22.0		4.1		21.7		4.3
Chemicals		39.6		9.1		39.1		9.6		44.0		9.2		50.0		9.3		47.0		9.3
Iron & Steel Products		21.2		4.9		18.9		4.7		20.3		4.2		19.7		3.7		19.8		3.9
Non-ferrous Metal		11.6		2.7		10.7		2.6		12.1		2.5		12.8		2.4		12.0		2.4
Others		74.0		16.9		62.5		15.4		76.8		16.1		94.1		17.6		83.2		16.5
Capital Goods		150.8		34.5		147.8		36.4		171.8		35.9		174.6		32.6		164.9		32.8
Machinery & Precision Equipment		49.1		11.2		47.8		11.8		63.1		13.2		60.5		11.3		50.7		10.1
Electric & Electronic Machines		87.5		20.0		84.9		20.9		95.8		20.0		100.4		18.8		100.4		20.0
Transport Equipment		12.4		2.8		13.0		3.2		10.8		2.3		11.5		2.1		11.6		2.3
Others		1.9		0.4		2.1		0.5		2.1		0.4		2.2		0.4		2.1		0.4
Consumer Goods		66.7		15.3		67.4		16.6		73.6		15.4		81.6		15.2		84.5		16.8
Cereals		6.9		1.6		6.2		1.5		6.0		1.3		6.8		1.3		6.9		1.4
Goods for Direct Consumption		17.1		3.9		17.8		4.4		19.7		4.1		22.3		4.2		22.2		4.4
Consumer Durable Goods		26.6		6.1		27.0		6.6		30.0		6.3		32.2		6.0		34.5		6.9
Consumer Nondurable Goods		16.0		3.7		16.4		4.0		17.9		3.7		20.3		3.8		20.9		4.2
Total		436.5		100.0		406.2		100.0		478.5		100.0		535.2		100.0		503.3		100.0

(1) These entries are derived from customs clearance statistics. C.I.F. means that the price of goods includes insurance and freight costs.

(2) Preliminary.

Source: The Bank of Korea; Korea Customs Service

In 2015, the Republic recorded a trade surplus of US$90.3 billion. 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. 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.

In 2018, the Republic recorded a trade surplus of US$69.7 billion. Exports increased by 5.4% to US$604.9 billion in 2018 from US$573.7 billion in 2017, primarily due to increased 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$38.9 billion in 2019. Exports decreased by 10.4% to US$542.2 billion in 2019 from US$604.9 billion in 2018, primarily due to a significant decrease in semiconductor prices. Imports decreased by 6.0% to US$503.3 billion in 2019 from US$535.2 billion in 2018, primarily due to a decrease in oil prices, which also led to decreased unit prices of other major raw materials.

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Based on preliminary data, the Republic recorded a trade surplus of US$10.6 billion in the first quarter of 2020. Exports decreased by 1.4% to US$130.8 billion in the first quarter of 2020 from US$132.7 billion in the corresponding period of 2019, primarily due to adverse global economic conditions resulting mainly from the ongoing global outbreak of the COVID-19 pandemic. Imports decreased by 1.4% to US$122.1 billion in the first quarter of 2020 from US$123.8 billion in the corresponding period of 2019, primarily due to a decrease in oil prices, which also led to decreased unit prices of other major raw materials, as well as decreased domestic consumption, which were mainly attributed to the ongoing global outbreak of the COVID-19 pandemic.

The following table sets forth the Republic’s exports trading partners:

Exports

	2015		As % of 2015 Total		2016		As % of 2016 Total		2017		As % of 2017 Total		2018		As % of 2018 Total		2019(1)		As % of 2019 Total(1)
	(millions of dollars, except percentages)
China		137,123.9		26.0		124,432.9		25.1		142,120.0		24.8		162,125.1		26.8		136,202.5		25.1
United States		69,832.1		13.3		66,462.3		13.4		68,609.7		12.0		72,719.9		12.0		73,343.9		13.5
Japan		25,576.5		4.9		24,355.0		4.9		26,816.1		4.7		30,528.6		5.0		28,420.2		5.2
Hong Kong		30,418.2		5.8		32,782.4		6.6		39,112.3		6.8		45,996.4		7.6		31,912.9		5.9
Singapore		15,011.2		2.8		12,458.9		2.5		11,651.9		2.0		11,782.2		1.9		12,768.0		2.4
Vietnam		27,770.8		5.3		32,630.5		6.6		47,753.8		8.3		48,622.1		8.0		48,177.7		8.9
Taiwan		12,004.3		2.3		12,220.5		2.5		14,898.4		2.6		20,783.5		3.4		15,666.3		2.9
India		12,029.6		2.3		11,596.3		2.3		15,055.5		2.6		15,606.2		2.6		15,096.3		2.8
Indonesia		7,872.4		1.5		6,608.5		1.3		8,403.7		1.5		8,833.2		1.5		7,650.1		1.4
Mexico		10,891.9		2.1		9,720.8		2.0		10,932.6		1.9		11,458.2		1.9		10,927.0		2.0
Australia		10,830.6		2.1		7,500.7		1.5		19,861.6		3.5		9,610.4		1.6		7,890.6		1.5
Russia		4,685.7		0.9		4,768.8		1.0		6,906.6		1.2		7,320.9		1.2		7,774.1		1.4
Germany		6,220.2		1.2		6,443.0		1.3		8,483.8		1.5		9,372.7		1.5		8,685.7		1.6
Others(1)		156,489.1		29.7		143,445.3		29.0		153,088.4		26.7		150,100.2		24.8		137,717.3		25.4
Total		526,756.5		100.0		495,425.9		100.0		573,694.4		100.0		604,859.7		100.0		542,232.6		100.0

(1) Preliminary.

(2) Includes more than 200 countries and regions.

Source: The Bank of Korea; Korea Customs Service

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The following table sets forth the Republic’s imports trading partners:

Imports

	2015		As % of 2015 Total		2016		As % of 2016 Total		2017		As % of 2017 Total		2018		As % of 2018 Total		2019(1)		As % of 2019 Total(1)
	(millions of dollars, except percentages)
China		90,250.3		20.7		86,980.1		21.4		97,860.1		20.5		106,488.6		19.9		107,228.7		21.3
Japan		45,853.8		10.5		47,466.6		11.7		55,124.7		11.5		54,603.7		10.2		47,580.9		9.5
United States		44,024.4		10.1		43,215.9		10.6		50,749.4		10.6		58,868.3		11.0		61,878.6		12.3
Saudi Arabia		19,561.5		4.5		15,741.7		3.9		19,590.5		4.1		26,335.8		4.9		21,840.6		4.3
Qatar		16,474.8		3.8		10,081.3		2.5		11,267.1		2.4		16,293.6		3.0		13,036.6		2.6
Australia		16,437.8		3.8		15,175.9		3.7		19,159.7		4.0		20,718.6		3.9		20,608.2		4.1
Germany		20,956.5		4.8		18,917.0		4.7		19,748.7		4.1		20,854.0		3.9		19,936.9		4.0
Kuwait		8,973.4		2.1		7,262.3		1.8		9,594.0		2.0		12,794.3		2.4		10,771.1		2.1
Taiwan		16,653.9		3.8		16,403.1		4.0		18,073.0		3.8		16,738.4		3.1		15,717.7		3.1
United Arab Emirates		8,614.7		2.0		6,941.1		1.7		9,557.1		2.0		9,287.4		1.7		8,991.1		1.8
Indonesia		8,850.4		2.0		8,285.3		2.0		9,571.0		2.0		11,161.2		2.1		8,819.8		1.8
Malaysia		8,609.4		2.0		7,507.8		1.8		8,714.7		1.8		10,205.7		1.9		9,279.9		1.8
Others(1)		131,238.1		30.1		122,214.8		30.1		149,468.3		31.2		170,852.9		31.9		157,652.8		31.3
Total		436,499.0		100.0		406,192.9		100.0		478,478.3		100.0		535,202.4		100.0		503,342.9		100.0

(1) Preliminary.

(2) Includes more than 200 countries and regions.

Source: The Bank of Korea; Korea Customs Service

The outbreak of severe health epidemics in Korea and various parts of the world, in particular the ongoing global outbreak of the COVID-19 pandemic, raises significant uncertainty about prospects for international trade and economic growth for affected countries, as well as world economic prospects in general. See “—The Economy—Worldwide Economic and Financial Difficulties”. The COVID-19 pandemic, among others, has disrupted global supply chains, lowered equity market valuations, caused a sharp contraction in global economic activity, increased market volatility and led to a rise in unemployment levels. In the medium- to long-term, if the spread of the COVID-19 outbreak is prolonged or if there are significant subsequent outbreaks of the COVID-19 pandemic, the long-term prospects for Korea’s economy and financial markets and of many other countries, including Korea’s major trading partners, will be adversely affected, resulting in an economic downturn that would further reduce the demand for many of the Republic’s products and services. In addition, the outbreak of other similar diseases that give rise to similar effects in the future may have an adverse effect on Korean and world economies and on international trade. In order to contain further spread of such epidemics and to prevent the outbreak of similar epidemics in the future, the Government continues to cooperate actively with regional and international efforts to develop and implement various measures to combat such outbreaks. The extent to which the COVID-19 pandemic continues to impact Korea and its economy will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the ongoing outbreak of the COVID-19 pandemic as well as the efficacy of actions taken by governmental authorities, central banks and other third parties around the world in response to the pandemic.

In recent years and in 2020, the value of the Won relative to the U.S. dollar and Japanese Yen has fluctuated widely, in particular due to the impact of the ongoing global outbreak of the COVID-19 pandemic. See “—The Economy—Worldwide Economic and Financial Difficulties”. An appreciation of the Won against the U.S. dollar and Japanese Yen increases the Won value of the Republic’s export sales and diminishes the price-competitiveness of export goods in foreign markets in U.S. dollar and Japanese Yen terms, respectively. However, it also decreases the cost of imported raw materials in Won terms and the cost in Won of servicing the

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Republic’s U.S. dollar and Japanese Yen denominated debt. In general, when the Won appreciates, export dependent sectors of the Korean economy, including automobiles, electronics and shipbuilding, suffer from the resulting pressure on the price-competitiveness of export goods, which may lead to reduced profit margins and loss in market share, more than offsetting a decrease in the cost of imported raw materials. If the export dependent sectors of the Korean economy suffer reduced profit margins or a net loss, it could result in a material adverse effect on the Korean economy.

Since the Government announced its plans to pursue free trade agreements, or FTAs, in 2003, the Republic has entered into FTAs with key trading partners. The Republic has had bilateral FTAs in effect with Chile since 2004, Singapore since 2006, India since 2010, Peru since 2011, the United States since 2012, Turkey since 2013, Australia since 2014, Canada, China, New Zealand and Vietnam since 2015 and Colombia since July 2016. In March 2017, the Republic signed a regional FTA with each of Panama, Costa Rica, Guatemala, Honduras, El Salvador and Nicaragua. The Republic is currently in negotiations with a number of other key trading partners. In addition, the Republic has had regional FTAs in effect with the European Free Trade Association since 2006, the Association of Southeast Asian Nations since 2009 and the European Union since 2011 and is currently negotiating additional regional FTAs, including one with China and Japan. The Republic and the United States completed revisions to their bilateral FTA, which became effective in January 2019. The Republic and Turkey also 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$15.2 billion in 2015, US$18.5 billion in 2016, US$49.0 billion in 2017 and US$32.6 billion in 2018. Based on preliminary data, the Republic had a non-commodities trade deficit of US$16.9 billion in 2019.

Foreign Currency Reserves

The foreign currency reserves are external assets that are readily available to and controlled by monetary authorities for meeting balance of payments financing needs and for other related purposes. The following table shows the Republic’s total official foreign currency reserves:

Total Official Reserves

	December 31,
	2015		2016		2017		2018		2019
	(millions of dollars)
Gold	$	4,794.8	$	4,794.8	$	4,794.8	$	4,794.8	$	4,794.8
Foreign Exchange(1)		358,513.8		361,701.4		379,476.6		393,332.5		397,876.1
Total Gold and Foreign Exchange		363,308.6		366,496.2		384,271.3		398,127.2		402,670.9
Reserve Position at IMF		1,411.8		1,727.5		1,621.1		2,140.4		2,792.9
Special Drawing Rights		3,241.4		2,878.0		3,374.3		3,426.6		3,352.4
Total Official Reserves	$	367,961.9	$	371,101.6	$	389,266.7	$	403,694.3	$	408,816.2

(1) More than 95% of the Republic’s foreign currency reserves are comprised of convertible foreign currencies.

Source: The Bank of Korea; International Monetary Fund

The Government’s foreign currency reserves increased to US$262.2 billion as of December 31, 2007 from US$8.9 billion as of December 31, 1997, primarily due to continued balance of trade surpluses and capital inflows. In 2008, the Government’s foreign currency reserves decreased, falling to US$201.2 billion as of December 31, 2008, partially as a result of the Government’s use of the foreign currency reserve to provide

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foreign currency liquidity to Korean financial institutions. The Government’s foreign currency reserves increased to 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, US$403.7 billion as of December 31, 2018 and US$408.8 billion as of December 31, 2019, primarily due to continued trade surpluses and capital inflows. The amount of the Government’s foreign currency reserve was US$400.2 billion as of March 31, 2020.

Government Finance

The Ministry of Economy and Finance prepares the Government budget and administers the Government’s finances.

The Government’s fiscal year commences on January 1. The Government must submit the budget, which is drafted by the Minister of Economy and Finance and approved by the President of the Republic, to the National Assembly not later than 90 days prior to the start of the fiscal year and may submit supplementary budgets revising the original budget at any time during the fiscal year.

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 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.

2020 budgeted revenues increased by 1.0% to ￦450.9 trillion from ￦446.4 trillion in 2019, led by an increase in budgeted tax revenues (including social security contributions and tax on property). 2020 budgeted expenditures and net lending increased by 9.4% to ￦481.4 trillion from ￦439.9 trillion in 2019, led by increases in budgeted expenditures on economic growth (including job creation, research and development and support for start-ups and small businesses), social security, welfare services for senior citizens, unemployed people and temporary workers, and public housing. The 2020 budget anticipated a ￦30.5 billion budget deficit.

In March 2020, the National Assembly approved a supplementary budget for 2020 in the amount of ￦11.7 trillion as part of the Government’s efforts to mitigate adverse effects on the Korean economy resulting from the ongoing global outbreak of the COVID-19 pandemic. See “—The Economy—Worldwide Economic and Financial Difficulties”. In April 2020, the National Assembly approved the second supplementary budget in the amount of ￦7.6 trillion, which amount was subsequently increased to ￦11.2 trillion. The third supplementary budget, which is currently expected to amount to approximately ￦30 trillion, is currently being reviewed for submission to the National Assembly during June 2020. These supplementary budgets, the largest of their kind drawn up in response to an outbreak of an infectious disease in Korea, focuses on the provision of financial support for certain industries that are most vulnerable to, or adversely impacted by, the COVID-19 pandemic, such as tourism, aviation, shipping, logistics and food services, among others. The Government has used, and will continue to use, the supplementary budgets for the following: (i) provision of loans and guarantees for small businesses, (ii) household support, including daycare vouchers and emergency livelihood support, (iii) disease prevention and treatment, (iv) various forms of financial support for local communities most affected by the COVID-19 pandemic and (v) measures to revitalize the economy from the impact of the COVID-19 pandemic.

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The supplementary budgets have been, and will continue to be, funded through the issuance of treasury bonds by the Government, The Bank of Korea’s unappropriated surplus and other surplus funds available to the Government, among others.

The budget deficit anticipated for 2020, together with the additional spending measures as stipulated by the supplementary budgets, will likely result in a deterioration in the Government’s fiscal position and an increase in borrowings. The impact of such effects is highly uncertain and will depend on, among others, the speed and extent of the economic recovery in Korea and internationally, which in turn will likely depend significantly on the scope and duration of the COVID-19 pandemic.

The following table shows consolidated Government revenues and expenditures:

Consolidated Central Government Revenues and Expenditures

	Actual										Budget
	2015		2016		2017		2018		2019(1)		2018		2019		2020
	(billions of Won)
Total Revenues		339,186		371,264		403,839		438,262		443,853		416,085		446,398		450,873
Current Revenues		335,911		367,888		400,659		435,558		441,148		413,304		443,271		447,925
Total Tax Revenues		270,974		299,451		325,845		358,424		363,005		337,402		364,539		365,389
Taxes on income, profits and capital gains		105,751		120,612		134,242		155,399		155,736		135,942		159,618		152,837
Social security contributions		53,089		56,889		60,460		64,854		69,550		69,273		69,747		73,392
Tax on property		11,113		11,112		12,945		15,473		15,474		11,931		14,611		16,013
Taxes on goods and services		79,442		89,221		95,535		99,056		98,614		97,390		97,263		98,154
Taxes on international trade and transaction		8,495		8,045		8,529		8,815		7,882		9,418		9,056		8,791
Other tax		13,084		13,571		14,133		14,828		15,748		13,450		14,244		16,202
Non-Tax Revenues		64,936		68,437		74,814		77,134		78,143		75,902		78,732		82,536
Operating surpluses of departmental enterprise sales and property income		22,129		24,489		27,692		28,616		29,345		27,154		28,692		31,026
Administration fees & charges and non-industrial sales		8,664		8,469		9,067		9,004		10,181		9,460		9,940		10,355
Fines and forfeits		20,777		22,266		23,769		24,455		22,554		23,140		23,726		24,643
Contributions to government employee pension fund		10,929		11,289		12,311		13,206		13,523		13,200		13,445		13,944
Current revenue of non-financial public enterprises		2,437		1,924		1,974		1,853		2,540		2,947		2,929		2,568
Capital Revenues		3,276		3,376		3,180		2,703		2,705		2,781		3,127		2,948
Total Expenditures and Net Lending		339,351		354,354		379,809		407,099		455,850		397,739		439,868		481,352
Total Expenditures		330,537		342,612		363,671		389,610		436,698		388,134		425,270		460,044
Current Expenditures		296,216		309,981		332,719		360,176		387,100		358,912		394,567		426,721
Expenditure on goods and service		63,160		65,145		67,536		71,459		60,196		75,281		80,219		85,521
Interest payment		14,056		13,964		13,976		14,287		13,837		14,334		14,362		15,525
Subsidies and other current transfers		216,189		228,349		248,513		272,080		309,575		265,631		295,970		321,672
Current expenditure of non-financial public enterprises		2,810		2,524		2,694		2,350		3,492		3,666		4,016		4,003
Capital Expenditures		34,322		32,631		30,952		29,434		49,598		29,222		30,704		33,323
Net Lending		8,814		11,741		16,138		17,489		19,152		9,605		14,597		21,308

(1) Preliminary.

Source: Ministry of Economy and Finance; The Bank of Korea; Korea National Statistical Office

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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 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.

For 2018, the Republic recorded total revenues of ￦438.3 trillion and total expenditures and net lending of ￦407.1 trillion. The Republic had a fiscal surplus of ￦31.2 trillion in 2018.

Based on preliminary data, the Republic recorded total revenues of ￦443.9 trillion and total expenditures and net lending of ￦455.9 trillion in 2019. The Republic had a fiscal deficit of ￦12.0 trillion in 2019.

The Government expects that the Republic’s fiscal deficit will increase in 2020, primarily due to a significant increase in expenditures and a significant decrease in tax revenues, primarily due to the adverse impact of the ongoing global outbreak of the COVID-19 pandemic on the Korean economy.

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Debt

The Government estimates that the total outstanding debt of the Government (including guarantees by the Government) as of December 31, 2018 amounted to approximately ￦668.8 trillion, an increase of 3.1% over the previous year.

The Government estimates that the total outstanding debt of the Government (including guarantees by the Government) as of December 31, 2019 amounted to approximately ￦713.8 trillion, an increase of 6.7% over the previous year.

The Government expects that the amount of the Government’s debt will increase significantly in 2020 as it plans to execute a large stimulus plan to support the Korean economy in light of the ongoing global outbreak of the COVID-19 pandemic. 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, 2019:

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, 2019.

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)
2015		547,625.6
2016		584,785.0
2017		619,971.9
2018		643,550.9
2019		690,524.1

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The following table sets out all guarantees by the Government of indebtedness of others:

Guarantees by the Government

	December 31,
	2015		2016		2017		2018		2019
	(billions of Won)
Domestic		26,393.8		24,241.6		21,130.5		17,016.3		14,760.0
External(1)		—		—		—		—		—
Total		26,393.8		24,241.6		21,130.5		17,016.3		14,760.0

(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.

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

External Liabilities

The following tables set out certain information regarding the Republic’s external liabilities calculated under the criteria based on the sixth edition of the Balance of Payment Manual 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,
	2015		2016		2017		2018		2019(1)
	(billions of dollars)
Long-term Liabilities		291.7		277.4		296.1		315.6		332.5
General Government		62.8		64.5		78.0		83.5		91.2
Monetary Authorities		20.1		10.8		14.5		15.2		14.4
Banks		103.1		93.8		91.7		100.1		103.1
Other Sectors		105.7		108.2		111.8		116.8		123.7
Short-term Liabilities		104.3		104.8		116.0		125.6		134.5
General Government		2.3		2.5		2.0		1.0		1.6
Monetary Authorities		12.0		6.9		8.1		12.8		10.9
Banks		74.8		78.4		85.5		90.3		101.9
Other Sectors		15.2		17.0		20.4		21.5		20.1
Total External Liabilities		396.1		382.2		412.0		441.2		467.0

(1) Preliminary.

Commitments to Assume Treasury Obligations

The Government may, if deemed necessary for recovery from disasters and calamities, make commitments to assume treasury obligations to the extent resolved by the National Assembly each fiscal year. In such cases, such commitments shall be executed in accordance with the procedures for spending reserve funds within general accounts. As of December 31, 2019, such commitments assumed by the Government amounted to ￦136.4 billion.

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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.

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, 2019
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
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
2019-001		June 19, 2019		June 19, 2029		2.500		USD		1,000,000,000		1.000,000,000
2019-002		June 19, 2019		June 19, 2024		2.000		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)											￦	8,290,628,750,000

(1) U.S. dollar amounts are converted to Won amounts at the rate of US$1.00 to ￦1,157.8, the market average exchange rate in effect on December 31, 2019, as announced by Seoul Money Brokerage Services, Ltd. Euro amounts are converted to Won amounts at the rate of EUR 1.00 to ￦1,297.43, the market average exchange rate in effect on December 31, 2019, as announced by Seoul Money Brokerage Services, Ltd.

(2) External Borrowings of the Government

None.

B. External Guaranteed Debt of the Government

None.

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C. Internal Debt of the Government

Title	Range of Interest Rates		Range of Years of Issue		Range of Years of Original Maturity		Principal Amounts Outstanding as of December 31, 2019
	(%)						(billions of Won)
1. Bonds
Interest-Bearing Treasury Bond for Treasury Bond Management Fund		1.00-5.75		2006-2019		2020-2068		611,533.0
Interest-Bearing Treasury Bond for National Housing I		1.25-3.00		2010-2019		2015-2024		76,324.3
Interest-Bearing Treasury Bond for National Housing II		0.0-3.0		1995-2017		2015-2030		98.8
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								687,967.1
2. Borrowings
Borrowings from The Bank of Korea		1.696		2019		2020		313.0
Borrowings from the Sports Promotion Fund		1.285-2.275		2018-2019		2020-2021		620.0
Borrowings from The Korea Foundation Fund		1.71-2.34		2018-2019		2020-2021		90.0
Borrowings from the Labor Welfare Promotion Fund		1.815-1.825		2019		2020		60.0
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		1.43-2.095		2015-2019		2020-2021		1,100.0
Borrowings from the Government Employees’ Pension Fund		1.51		2018		2021		10.0
Borrowings from the Film Industry Development Fund		1.43-2.235		2017-2019		2020-2021		169.0
Total Borrowings								2,557.0
Total Internal Funded Debt								690,524.1

(1) Interest Rates and Years of Original Maturity not applicable.

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, 2019
	(%)						(billions of Won)
1. Bonds of Government-Affiliated Corporations
Korea Deposit Insurance Corporation		2.12-2.52		2015-2018		2020-2021		3,880.0
Korea Student Aid Foundation		0.00-5.07		2010-2019		2020-2037		10,880.0
Total Internal Guaranteed Debt								14,760.0

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E. Others

(1) Commitments to Assume Treasury Obligations

The Government may, if deemed necessary for recovery from disasters and calamities, make commitments to assume treasury obligations to the extent resolved by the National Assembly each fiscal year. In such cases, such commitments shall be executed in accordance with the procedures for spending reserve funds within general accounts. As of December 31, 2019, such commitments assumed by the Government amounted to ￦136.4 billion.

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DESCRIPTION OF THE SECURITIES

Description of Debt Securities

We will issue debt securities under a fiscal agency agreement or agreements. The description below summarizes the material provisions of the debt securities and the fiscal agency agreement. Since it is only a summary, the description may not contain all of the information that may be important to you as a potential investor in the debt securities. Therefore, we urge you to read the form of fiscal agency agreement and the form of global debt security before deciding whether to invest in the debt securities. We have filed a copy of these documents with the Securities and Exchange Commission as exhibits to the registration statement of which this prospectus is a part. You should refer to such exhibits for more complete information.

The financial terms and other specific terms of your debt securities will be described in the prospectus supplement relating to your debt securities. The description in the prospectus supplement will supplement this description or, to the extent inconsistent with this description, replace it.

We will appoint a fiscal agent or agents in connection with debt securities whose duties will be governed by the fiscal agency agreement. We may replace the fiscal agent or appoint different fiscal agents for different series of debt securities.

General Terms of the Debt Securities

We may issue debt securities in separate series at various times. The Republic may irrevocably guarantee the payment of principal of, and interest on, one or more series of debt securities. The prospectus supplement that relates to your debt securities will specify some or all of the following terms:

• the aggregate principal amount;

• the currency of denomination and payment;

• any limitation on principal amount and authorized denominations;

• the percentage of their principal amount at which the debt securities will be issued;

• the maturity date or dates;

• the interest rate for the debt securities and, if variable, the method by which the interest rate will be calculated;

• whether any amount payable in respect of the debt securities will be determined based on an index or formula, and how any such amount will be determined;

• the dates from which interest, if any, will accrue for payment of interest and the record dates for any such interest payments;

• where and how we will pay principal and interest;

• whether and in what circumstances the debt securities may be redeemed before maturity;

• any sinking fund or similar provision;

• whether any part or all of the debt securities will be in the form of a global security and the circumstances in which a global security is exchangeable for certificated securities;

• if issued in certificated form, whether the debt securities will be in bearer form with interest coupons, if any, or in registered form without interest coupons, or both forms, and any restrictions on exchanges from one form to the other;

• whether any of the terms set out herein will differ for the debt securities;

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• whether the Republic will irrevocably guarantee the payment of principal of, and interest on, the debt securities; and

• other specific provisions.

Depending on the terms of the debt securities we issue, the prospectus supplement relating to the debt securities may also describe applicable U.S. federal income tax and other considerations additional to the disclosure in this prospectus.

Unless otherwise specified in the applicable prospectus supplement, we will maintain at an office in the Borough of Manhattan, The City of New York, a register for the registration of transfers of debt securities issued in registered form.

Payments of Principal, Premium and Interest

On every payment date specified in the relevant prospectus supplement, we will pay the principal, premium and/or interest due on that date to the registered holder of the relevant debt security at the close of business on the related record date. We will make all payments at the place and in the currency set out in the prospectus supplement. Unless otherwise specified in the relevant prospectus supplement or the debt securities, we will make payments in U.S. dollars at the New York office of the fiscal agent or, outside the United States, at the office of any paying agent. Unless otherwise specified in the applicable prospectus supplement or debt securities, we will pay interest by check, payable to the registered holder.

We will make any payments on debt securities in bearer form at the offices and agencies of the fiscal agent or any other paying agent outside the United States as we may designate. At the option of the holder of the bearer debt securities, we will make such payments by check or by transfer to an account maintained by the holder with a bank located outside of the United States. We will not make payments on bearer debt securities at the corporate trust office of the fiscal agent in the United States or at any other paying agency in the United States. In addition, we will not make any payment by mail to an address in the United States or by transfer to an account maintained by a holder of bearer debt securities with a bank in the United States. Nevertheless, we will make payments on a bearer debt security denominated and payable in U.S. dollars at an office or agency in the United States if:

• payment outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions; and

• the payment is then permitted under United States law, without material adverse consequences to us.

If we issue bearer debt securities, we will designate the offices of at least one paying agent outside the United States as the location for payment.

Repayment of Funds; Prescription

If no one claims money paid by us to the fiscal agent for the payment of principal or interest in respect of any series of debt securities for two years after the payment was due and payable, the fiscal agent or paying agent will repay the money to us. After such repayment, the fiscal agent or paying agent will not be liable with respect to the amounts so repaid, and you may look only to us for any payment under the debt securities.

Under Korean laws concerning prescriptive periods for filing claims, as generally interpreted, you will not be permitted to file a claim against us for payment of principal or interest on any series of debt securities unless you do so within five years, in the case of principal, and three years, in the case of interest, from the date on which payment was due.

Global Securities

The prospectus supplement relating to a series of debt securities will indicate whether any of that series of debt securities will be represented by a global security. The prospectus supplement will also describe any unique

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specific terms of the depositary arrangement with respect to that series. Unless otherwise specified in the prospectus supplement, we anticipate that the following provisions will apply to depositary arrangements.

Registered Ownership of the Global Security

The global security will be registered in the name of a depositary identified in the prospectus supplement, or its nominee, and will be deposited with the depositary, its nominee or a custodian. The depositary, or its nominee, will therefore be considered the sole owner or holder of debt securities represented by the global security for all purposes under the fiscal agency agreement. Except as specified below or in the applicable prospectus supplement, beneficial owners:

• will not be entitled to have any of the debt securities represented by the global security registered in their names;

• will not receive physical delivery of any debt securities in definitive form;

• will not be considered the owners or holders of the debt securities;

• must rely on the procedures of the depositary and, if applicable, any participants (institutions that have accounts with the depositary or a nominee of the depositary, such as securities brokers and dealers) to exercise any rights of a holder; and

• will receive payments of principal and interest from the depositary or its participants rather than directly from us.

We understand that, under existing industry practice, the depositary and participants will allow beneficial owners to take all actions required of, and exercise all rights granted to, the registered holders of the debt securities.

We will register debt securities in the name of a person other than the depositary or its nominee only if:

• the depositary for a series of debt securities is unwilling or unable to continue as depositary; or

• we determine, in our sole discretion, not to have a series of debt securities represented by a global security.

In either such instance, an owner of a beneficial interest in a global security will be entitled to registration of a principal amount of debt securities equal to its beneficial interest in its name and to physical delivery of the debt securities in definitive form.

Beneficial Interests in and Payments on a Global Security

Only participants, and persons that may hold beneficial interests through participants, can own a beneficial interest in the global security. The depositary keeps records of the ownership and transfer of beneficial interests in the global security by its participants. In turn, participants keep records of the ownership and transfer of beneficial interests in the global security by other persons (such as their customers). No other records of the ownership and transfer of beneficial interests in the global security will be kept.

All payments on a global security will be made to the depositary or its nominee. When the depositary receives payment of principal or interest on the global security, we expect the depositary to credit its participants’ accounts with amounts that correspond to their respective beneficial interests in the global security. We also expect that, after the participants’ accounts are credited, the participants will credit the accounts of the owners of beneficial interests in the global security with amounts that correspond to the owners’ respective beneficial interests in the global security.

The depositary and its participants establish policies and procedures governing payments, transfers, exchanges and other important matters that affect owners of beneficial interests in a global security. The

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depositary and its participants may change these policies and procedures from time to time. We have no responsibility or liability for the records of ownership of beneficial interests in the global security, or for payments made or not made to owners of such beneficial interests. We also have no responsibility or liability for any aspect of the relationship between the depositary and its participants or for any aspect of the relationship between participants and owners of beneficial interests in the global security.

Bearer Securities

We may issue debt securities in a series in the form of one or more bearer global debt securities deposited with a common depositary for the Euroclear and Clearstream, or with a nominee identified in the applicable prospectus supplement. The specific terms and procedures, including the specific terms of the depositary arrangement, with respect to any portion of a series of debt securities to be represented by a global security will be described in the applicable prospectus supplement.

Additional Amounts

We will make all payments of principal of, and premium and interest, if any, on the debt securities, without withholding or deducting any present or future taxes imposed by the Republic or any of its political subdivisions, unless required by law. If Korean law requires us to deduct or withhold taxes, we will pay additional amounts as necessary to ensure that you receive the same amount as you would have received without such withholding or deduction.

We will not pay, however, any additional amounts if you are liable for Korean tax because:

• you are connected with the Republic other than by merely owning the debt security or receiving income or payments on the debt security;

• you failed to complete and submit a declaration of your status as a non-resident of the Republic after we or the relevant tax authority requested you to do so; or

• you failed to present your debt security for payment within 30 days of when the payment is due or, if the fiscal agent did not receive the money prior to the due date, the date notice is given to holders that the fiscal agent has received the full amount due to holders. Nevertheless, we will pay additional amounts to the extent you would have been entitled to such amounts had you presented your debt security for payment on the last day of the 30-day period.

We will not pay any additional amounts for taxes on the debt securities except for taxes payable through deduction or withholding from payments of principal, premium or interest. Examples of the types of taxes for which we will not pay additional amounts include the following: estate or inheritance taxes, gift taxes, sales or transfer taxes, personal property or related taxes, assessments or other governmental charges. We will pay stamp or other similar taxes that may be imposed by the Republic, the United States or any political subdivision or taxing authority in one of those two countries on the fiscal agency agreement or be payable in connection with the issuance of the debt securities.

Status of Debt Securities

The debt securities will:

• constitute our direct, unconditional, unsecured and unsubordinated obligations; and

• rank without any preference among themselves and equally with all of our other unsecured and unsubordinated obligations. It is understood that this provision shall not be construed so as to require us to make payments under the debt securities ratably with payments being made under our any other debt securities.

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Negative Pledge Covenant

If any debt securities are outstanding, we will not create or permit any security interests on our assets as security for any of our Long-Term External Indebtedness or guarantees issued by us, unless the security interest also secures our obligations under the debt securities. “Long-Term External Indebtedness” means any obligation for the payment or repayment of money borrowed that is denominated in a currency other than the currency of the Republic and which has a final maturity of one year or more from its date of issuance.

We may, however, create or permit a security interest:

• in favor of the Government or The Bank of Korea or any other agency or instrumentality of or controlled by the Government;

• arising from, or any deposit or other arrangement made or entered into in connection with, the sale, assignment or other disposition or the discounting of any of our notes or receivables, or any other transaction in the ordinary course of our business; or

• on any asset (or documents of title to such asset) incurred when the asset was purchased or improved to secure payment of the cost of the activity.

Events of Default

Each of the following constitutes an event of default with respect to any series of debt securities:

1. Non-Payment: we do not pay principal or interest or premium or deposit any sinking fund payment on any debt securities of the series when due and such failure to pay continues for 30 days.

2. Breach of Other Obligations: we fail to observe or perform any of the covenants in the series of debt securities (other than non-payment) for 60 days after written notice of the default is delivered to us at the corporate trust office of the fiscal agent in New York City by holders representing at least 10% of the aggregate principal amount of the debt securities of the series.

3. Cross Default and Cross Acceleration:

• we default on any External Indebtedness, and, as a result, becomes obligated to pay an amount equal to or greater than US$10,000,000 in aggregate principal amount prior to its due date; or

• we fail to pay when due, including any grace period, any of our External Indebtedness in aggregate principal amount equal to or greater than US$10,000,000 or we fail to pay when requested and required by the terms thereof any guarantee for External Indebtedness of another person equal to or greater than US$10,000,000 in aggregate principal amount, except in any such case where such External Indebtedness or guarantee is being contested in good faith by appropriate proceedings.

4. Moratorium/Default:

• we declare a general moratorium on the payment of our External Indebtedness, including obligations under guarantees;

• the Republic declares a general moratorium on the payment of its External Indebtedness, including obligations under guarantees;

• the Republic becomes liable to repay prior to maturity any amount of External Indebtedness, including obligations under guarantees, as a result of a default under such External Indebtedness or obligations; or

• the international monetary reserves of the Republic become subject to a security interest or segregation or other preferential arrangement for the benefit of any creditors.

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5. Bankruptcy:

• we are declared bankrupt or insolvent by any court or administrative agency with jurisdiction over us;

• we pass a resolution to apply for bankruptcy or to request the appointment of a receiver or trustee or similar official in insolvency;

• a substantial part of our assets are liquidated;

• we are wound up or dissolved; or

• we cease to conduct the banking business.

6. Failure of Support: the Republic fails to provide financial support for us as required under Article 37 of the KEXIM Act as of the date of the debt securities of such series.

7. Control of Assets: the Republic ceases to control us (directly or indirectly).

8. IMF Membership/World Bank Membership: the Republic ceases to be a member in good standing of the IMF or the International Bank for Reconstruction and Development (World Bank).

For purposes of the foregoing, “External Indebtedness” means any obligation for the payment or repayment of money borrowed that is denominated in a currency other than the currency of the Republic.

If an event of default occurs, any holder may declare the principal amount of debt securities that it holds to be immediately due and payable by written notice to us and the fiscal agent.

You should note that:

• despite the procedure described above, no debt securities may be declared due and payable if we cure the applicable event of default before we receive the written notice from the debt security holder;

• we are not required to provide periodic evidence of the absence of defaults; and

• the fiscal agency agreement does not require us to notify holders of the debt securities of an event of default or grant any debt security holder a right to examine the security register.

Modifications and Amendments; Debt Securityholders’ Meetings

Each holder of a series of debt securities must consent to any amendment or modification of the terms of that series of debt securities or the fiscal agency agreement that would, among other things:

• change the stated maturity of the principal of the debt securities or any installment of interest;

• reduce the principal amount of such series of debt securities or the portion of the principal amount payable upon acceleration of such debt securities;

• change the debt security’s interest rate or premium payable;

• change the currency of payment of principal, interest or premium;

• amend either the procedures provided for a redemption event or the definition of a redemption event;

• shorten the period during which we are not allowed to redeem the debt securities or grant us a right to redeem the debt securities which we previously did not have; or

• reduce the percentage of the outstanding principal amount needed to modify or amend the fiscal agency agreement or the terms of such series of debt securities.

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We may, with the exception of the above changes, with the consent of the holders of at least 66 ²/₃% in principal amount of the debt securities of a series that are outstanding, modify and amend other terms of that series of debt securities.

The fiscal agency agreement and a series of debt securities may be modified or amended, without the consent of the holders of the debt securities, to:

• add covenants made by us that benefit holders of the debt securities;

• surrender any right or power given to us;

• secure the debt securities;

• permit registered securities to be exchanged for bearer securities or relax or eliminate restrictions on the payment of principal, premium or interest on bearer securities to the extent permitted under United States Department of Treasury regulations, provided that holders of the debt securities do not suffer any adverse tax consequences as a result; and

• cure any ambiguity or correct or supplement any defective provision in the fiscal agency agreement or the debt securities, without materially and adversely affecting the interests of the holders of the debt securities.

Fiscal Agent

The fiscal agency agreement governs the duties of each fiscal agent. We may maintain bank accounts and a banking relationship with each fiscal agent. The fiscal agent is our agent and does not act as a trustee for the holders of the debt securities.

Further Issues of Debt Securities

We may, without the consent of the holders of the debt securities, create and issue additional debt securities with the same terms and conditions as any series of debt securities (or that are the same except for the amount of the first interest payment and for the interest paid on the series of debt securities prior to the issuance of the additional debt securities); provided that if any such additional debt securities are not fungible with the outstanding series of debt securities for U.S. federal income tax purposes, they will be issued under a separate CUSIP or other identifying number. We may consolidate such additional debt securities with the outstanding debt securities to form a single series.

Description of Warrants

The description below summarizes some of the provisions of warrants for the purchase of debt securities that we may issue from time to time and of the warrant agreement. Copies of the forms of warrants and the warrant agreement are or will be filed as exhibits to the registration statement of which this prospectus is a part. Since it is only a summary, the description may not contain all of the information that is important to you as a potential investor in the warrants.

The description of the warrants that will be contained in the prospectus supplement will supplement this description and, to the extent inconsistent with this description, replace it.

General Terms of the Warrants

Each series of warrants will be issued under a warrant agreement to be entered into between us and a bank or trust company, as warrant agent. The prospectus supplement relating to the series of warrants will describe:

• the terms of the debt securities purchasable upon exercise of the warrants, as described above under “Description of the Securities—Description of Debt Securities—General Terms of the Debt Securities”;

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• the principal amount of debt securities purchasable upon exercise of one warrant and the exercise price;

• the procedures and conditions for the exercise of the warrants;

• the dates on which the right to exercise the warrants begins and expires;

• whether and under what conditions the warrants may be terminated or canceled by us;

• whether and under what conditions the warrants and any debt securities issued with the warrants will be separately transferable;

• whether the warrants will be issued in bearer or registered form;

• whether the warrants will be exchangeable between registered and bearer form, and, if issued in registered form, where they may be transferred and registered; and

• other specific provisions.

Terms Applicable to Debt Securities and Warrants

Governing Law

The fiscal agency agreement, any warrant agreement and the debt securities and any warrants will be governed by the laws of the State of New York without regard to any principles of New York law requiring the application of the laws of another jurisdiction. Nevertheless, all matters governing our authorization, execution and delivery of the debt securities and the fiscal agency agreement and any warrants and warrant agreement by us will be governed by the laws of the Republic.

Jurisdiction and Consent to Service

We are owned by a foreign sovereign government and all of our board of directors and executive officers and some of the experts named in this prospectus are residents of Korea. In addition, all or most our assets and the assets of the people named in the preceding sentence are located outside of the United States. For that reason, you may have difficultly serving process on us or the individuals described above in the United States or enforcing in a U.S. court a U.S.-court judgment based on the U.S. federal securities laws. Our Korean counsel has informed us that there is doubt regarding the enforceability in Korea, either in original actions or in actions for the enforcement of U.S.-court judgments, of civil liabilities based on the U.S. federal securities laws. The enforcement of U.S.-court judgments against us may be affected or limited by the general principle of good morals and other social order and the general principle of good faith and fairness provided in the Civil Code of Korea. The courts of Korea will recognize as a valid judgment and enforce any judgment obtained in a U.S. court without re-examination of the merits; provided, that (a) such judgment was finally and conclusively given by a court having valid jurisdiction in accordance with the international jurisdiction principles under Korean law and applicable treaties, (b) we were duly served with service of process (otherwise than by publication or similar means) in sufficient time to enable us to prepare our defense in conformity with applicable laws or responded to the action without being served with process, (c) in light of the substance of such judgment and the procedures of litigation, recognition of such judgment is not contrary to the public policy of Korea, and (d) judgments of the courts of Korea are accorded reciprocal treatment in the jurisdiction of the court which had issued such judgment or the requirements for the recognition of a foreign judgment in the jurisdiction of the court which had issued such judgment are neither manifestly inequitable nor substantially different in material respects from the requirements for recognition of a foreign judgment in Korea.

We have appointed the Chief Representative of our New York Representative Office, Mr. Dong Hoon Lee, and a Senior Representative of our New York Representative Office, Mr. Young-rok Kim, and each of their successors in the future, as our authorized agents to receive service of process in any suit which a holder of any series of debt securities or warrants may bring in any state or federal court in New York City and we have accepted the jurisdiction of those courts for those actions. Our New York Representative Office is located at

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460 Park Avenue, 8th Floor, New York, NY 10022. These appointments are irrevocable as long as any amounts of principal, premium or interest remain payable by us to the Fiscal Agent under any series of debt securities or any warrants have not expired or otherwise terminated under their terms. If for any reason either of these two men ceases to act as our authorized agent or ceases to have an address in Manhattan, we shall appoint a replacement. The appointment of agents for receipt of service of process and the acceptance of jurisdiction of state or federal courts in New York City do not, however, apply to actions brought under the United States federal securities laws. We may also be sued in courts having jurisdiction over us located in the Republic.

We will irrevocably consent to any relief and process in connection with a suit against us in relation to the debt securities or warrants, including the enforcement or execution of any order or judgment of the court. To the extent permitted by law, we will waive irrevocably any immunity from jurisdiction to which we might otherwise be entitled in any suit based on any series of debt securities or warrants.

Foreign Exchange Controls

Before we may issue debt securities outside the Republic, the Minister of Economy and Finance of Korea must receive a report with respect to the issuance by us of debt securities having a maturity of more than one year (if the issue amount is more than US$50 million or the equivalent thereof) in accordance with the Foreign Exchange Transactions Act of Korea and the Enforcement Decree and regulations promulgated thereunder. After issuance of debt securities outside the Republic, we are required to notify the Minister of Economy and Finance of such issuance. No further approval or authorization is required for us to pay principal of or interest on the debt securities.

Description of Guarantees

The description below summarizes some of the provisions of the guarantees that the Republic may issue from time to time to guarantee our debt securities. Since it is only a summary, the description may not contain all of the information that is important to you as a potential beneficiary of a guarantee.

The prospectus supplement relating to a guarantee to be issued by the Republic will specify other specific provisions. The description of a guarantee to be issued by the Republic that will be contained in the prospectus supplement will supplement this description and, to the extent inconsistent with this description, replace it.

General Terms of the Guarantees

Each guarantee will be issued by the Republic as guarantor. The prospectus supplement relating to a guarantee will specify:

• the relevant obligor and the obligations guaranteed under the guarantee;

• the nature and scope of the guarantee, including whether or not it is irrevocable and unconditional;

• the status of the guarantee in relation to the Republic’s other obligations;

• the governing law of the guarantee; and

• other relevant provisions of the guarantee.

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LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS

Bearer securities will not be offered, sold or delivered in the United States or its possessions or to a United States person; except in certain circumstances permitted by United States tax regulations. Bearer securities will initially be represented by temporary global securities, without interest coupons, deposited with a common depositary in London for Euroclear and Clearstream for credit to designated accounts. Unless otherwise indicated in the prospectus supplement:

• each temporary global security will be exchangeable for definitive bearer securities on or after the date that is 40 days after issuance only upon receipt of certification of non-United States beneficial ownership of the temporary global security as provided for in United States tax regulations, provided that no bearer security will be mailed or otherwise delivered to any location in the United States in connection with the exchange; and

• any interest payable on any portion of a temporary global security with respect to any interest payment date occurring prior to the issuance of definitive bearer securities will be paid only upon receipt of certification of non-United States beneficial ownership of the temporary global security as provided for in United States tax regulations.

Bearer securities, other than temporary global debt securities, and any related coupons will bear the following legend: “Any United States person who holds this obligation will be subject to limitations under the United States federal income tax laws, including the limitations provided in Section 165(j) and 1287(a) of the Internal Revenue Code”. The sections referred to in the legend provide that, with certain exceptions, a United States person who holds a bearer security or coupon will not be allowed to deduct any loss realized on the disposition of the bearer security, and any gain, which might otherwise be characterized as capital gain, recognized on the disposition will be treated as ordinary income.

For purposes of this section, “United States person” means:

• a citizen or resident of the United States;

• a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof; or

• an estate or trust the income of which is subject to United States federal income taxation regardless of its source.

For purposes of this section, “United States” means the United States of America, including each state and the District of Columbia, its territories, possessions and other areas subject to its jurisdiction.

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TAXATION

The following discussion summarizes certain Korean and U.S. federal income tax considerations that may be relevant to you if you invest in debt securities. This summary is based on laws, regulations, rulings and decisions in effect as of the date of this Prospectus. These laws, regulations, rulings and/or decisions may change; any such change could apply retroactively and could affect the continued validity of this summary.

This summary does not describe all of the tax considerations that may be relevant to you or your situation, particularly if you are subject to special tax rules. You should consult your tax adviser about the tax consequences of holding the debt securities, including the relevance to your particular situation of the considerations discussed below, as well as of state, local or other tax laws.

Korean Taxation

The following summary of Korean tax considerations applies to you so long as you are not:

• a resident of Korea;

• a company having its head office, principal place of business or place of effective management in Korea, or 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, or the STTCL, when we make payments of interest to you on the debt securities, no amount will be withheld from such payments for, or on account of, taxes of any kind imposed, levied, withheld or assessed by Korea or any political subdivision or taxing authority thereof or therein; provided that the debt securities are deemed to be foreign currency denominated bonds issued outside of Korea for the purpose of the STTCL.

Tax on Capital Gains

You will not be subject to any Korean income or withholding taxes in connection with the sale, exchange or other disposition of a debt security, provided that the disposition does not involve a transfer of the debt security to a Korean resident (or the Korean permanent establishment of a non-resident). In addition, the STTCL exempts you from Korean taxation on any capital gains that you earn from the transfer of the debt securities outside of Korea; provided that the offering of the debt securities is deemed to be an overseas issuance for the purpose of the STTCL. If you sell or otherwise dispose of debt securities to a Korean resident and such disposition or sale is made within Korea, any gain realized on the transaction will be taxable at ordinary Korean withholding tax rates at the lower of 22% (including local income surtax) of net gain (subject to the production of satisfactory evidence of the acquisition costs and certain direct transaction costs) or 11% (including local income surtax) of gross sale proceeds with respect to transactions, unless an exemption is available under an applicable income tax treaty. For example, if you are a resident of the United States for the purposes of the income tax treaty currently in force between Korea and the United States, you are generally entitled to an exemption from Korean taxation in respect of any gain realized on a disposition of a debt security, regardless of whether the disposition is to a Korean resident. For more information regarding tax treaties, please refer to the heading “Tax Treaties” below.

With respect to computing the above-mentioned 22% withholding taxes (including local income surtax) on net gain, please note that there is no provision under relevant Korean law for offsetting gains and losses or otherwise aggregating transactions for the purpose of computing the net gain attributable to sales of the debt securities. The purchaser of the debt securities or, in the case of the sale of the debt securities through a securities

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company in Korea, the securities company through which such sale is effected, is required under Korean law to withhold the applicable amount of Korean tax and make payment thereof to the relevant Korean tax authority. Unless you, as the seller, can either claim the benefit of an exemption or a reduced rate of tax under an applicable tax treaty or produce satisfactory evidence of your acquisition cost and certain direct transaction costs in relation to the debt securities being sold, the purchaser or the securities company, as applicable, must withhold an amount equal to 11% of the gross sale proceeds. Any withheld tax must be paid no later than the tenth day of the month following the month in which the payment for the purchase of the relevant debt securities occurred. Failure to timely transmit the withheld tax to the Korean tax authorities technically subjects the purchaser or the securities company to penalties under Korean tax laws.

Inheritance Tax and Gift Tax

If you die while domiciled in Korea, Korean inheritance tax will be imposed upon the transfer by succession of any of the debt securities, wherever located, that you own at the time of death. Furthermore, regardless of where you are domiciled when you die, Korean inheritance tax will be imposed upon the transfer by succession of any of the debt securities you own that are located in Korea at the time of death. Similarly, if you give the debt securities as a gift to any other person, the donee will be subject to Korean gift tax, based on where the donee or you are domiciled or where the debt securities are located at the time that you make the gift. The amount, if any, of the applicable inheritance or gift tax imposed in specific cases depends on the value of the debt securities (or other property) and the identities of the parties involved.

Under Korean inheritance and gift tax laws, debt securities issued by Korean companies are deemed to be located in Korea irrespective of where they are physically located or by whom they are owned.

Stamp Duty

You will not be subject to any Korean stamp duty, registration duty or similar documentary tax in respect of or in connection with a transfer of any debt securities or in connection with the exercise of exchange rights or conversion rights that may be acquired with the debt securities.

Guarantees

Although there are no Korean tax laws, regulations or rulings specific to the payment under the guarantee herein, we believe any payments of interest on and principal amount of the debt securities (or the issued price if the debt securities were originally issued at a discount) by the Republic under the Republic’s guarantee on the debt securities denominated in a foreign currency and issued by us are not subject to withholding tax, provided that the debt securities are deemed to be foreign currency denominated bonds issued outside of Korea for the purpose of the STTCL. Further details of the tax consequences of the holders of our debt securities guaranteed by the Republic may be provided in the relevant prospectus supplement.

Tax Treaties

At the date of this prospectus, Korea has tax treaties with, among others, Australia, Austria, Bangladesh, Belgium, Brazil, Bulgaria, Canada, China, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hong Kong, Hungary, India, Indonesia, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico, Mongolia, the Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Republic of Fiji, Romania, Singapore, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Tunisia, Turkey, the United Kingdom, the United States of America and Vietnam under which the rate of withholding tax on interest and dividends is reduced, generally to between 5% and 16.5%, and the tax on capital gains is often eliminated.

With respect to any gains subject to Korean withholding tax, as described under the heading “Tax on Capital Gains” above, you should inquire for yourself whether you are entitled to the benefit of a tax treaty with Korea. It

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will be your responsibility to claim the benefits of any tax treaty that may exist between your country and Korea in respect of capital gains, and to provide to the purchaser of the debt securities, or the relevant securities company through which the transfer of the debt securities is effected, as applicable, a certificate as to your country of tax residence. In the absence of sufficient proof, the purchaser, or the relevant securities company, as the case may be, must withhold tax at normal rates.

In addition, subject to certain exceptions, in order to receive the benefit of a tax exemption available under any applicable tax treaty, you may also be required to submit to the payer of such Korean source income an application for tax exemption under a tax treaty, together with a certificate as to your country of tax residence. Subject to certain exceptions, the Korean tax laws also require an overseas investment vehicle, or 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, or the CITL, and Individual Income Tax Law, or 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

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respect of its investment in a debt security. This summary deals only with U.S. holders that hold debt securities 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, or 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.

Book-Tax Conformity

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.

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

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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 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 U.S. Internal Revenue Service, or 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, exchange or retirement 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

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provides preferential treatment under certain circumstances for net long-term capital gains recognized by individual U.S. holders. The ability of U.S. holders to offset capital losses against ordinary income is limited.

Under certain circumstances as described above under “Taxation—Korean Taxation—Tax on Capital Gains” and “Taxation—Korean Taxation—Tax Treaties,” you may be subject to Korean withholding tax upon 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, or if such Korean tax is not otherwise compulsory for you, 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 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 or otherwise, you may not be able to claim a credit for any Korean tax imposed upon the sale, exchange or retirement 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 your 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, exchange or retirement 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 debt securities will be the first price at which a substantial amount of the debt securities are sold to the public (i.e., excluding sales of debt securities to underwriters, placement agents, wholesalers, or similar persons). The “stated redemption price at maturity” will include all payments under the 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 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, or 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.

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

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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 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

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currency debt security you may recognize a different amount of original issue discount income in each accrual period than would be the case if you were the holder of an otherwise similar Original Issue Discount Debt Security denominated in U.S. dollars. Upon the receipt of an amount attributable to original issue discount, whether in connection with a payment of an amount that is not qualified stated interest or the sale or retirement of the Original Issue Discount Debt Security, you will recognize ordinary income or loss measured by the difference between the amount received, translated into U.S. dollars at the exchange rate in effect on the date of receipt or on the date of disposition of the Original Issue Discount Debt Security, as the case may be, and the amount accrued, using the exchange rate applicable to such previous accrual.

If you purchase an Original Issue Discount Debt Security outside of the initial offering at a cost less than its “remaining redemption amount”, or if you purchase an Original Issue Discount Debt Security in the initial offering at a price other than the Original Issue Discount Debt Security’s issue price, you will also generally be required to include in gross income the daily portions of original issue discount, calculated as described above. However, if you acquire an Original Issue Discount Debt Security at a price greater than its adjusted issue price, you will be required to reduce your periodic inclusions of original issue discount to reflect the premium paid over the adjusted issue price. The remaining redemption amount for an Original Issue Discount Debt Security is the total of all future payments to be made on the debt security other than qualified stated interest.

Floating rate debt securities generally will be treated as “variable rate debt instruments” under the OID regulations. Accordingly, the stated interest on a floating rate debt security generally will be treated as qualified stated interest, and such a debt security will not have original issue discount solely as a result of the fact that it provides for interest at a variable rate. A floating rate debt security that does not qualify as a variable rate debt instrument will be subject to special rules (the “contingent payment regulations”) that govern the tax treatment of debt obligations that provide for contingent payments (“contingent debt obligations”). A detailed description of the tax considerations relevant to U.S. holders of any such debt securities will be provided in the applicable prospectus supplement.

Certain Original Issue Discount Debt Securities may be redeemed prior to maturity, either at our option or at the option of the holder, or may have special repayment or interest rate reset features as indicated in the applicable prospectus supplement. Original Issue Discount Debt Securities containing these features may be subject to rules that differ from the general rules discussed above. If you purchase Original Issue Discount Debt Securities with these features, you should carefully examine the applicable prospectus supplement and consult your tax adviser about their treatment since the tax consequences with respect to original issue discount will depend, in part, on the particular terms and features of the Original Issue Discount Debt Securities.

If a debt security provides for a scheduled accrual period that is longer than one year (for example, as a result of a long initial period on a debt security with interest that is generally paid on an annual basis), then stated interest on the debt security will not qualify as “qualified stated interest” under the OID Regulations. As a result, the debt security would be an Original Issue Discount Debt Security. In that event, among other things, if you are a cash-method U.S. holder you will be required to accrue stated interest on the debt security under the rules for original issue discount described above, and regardless of your method of accounting for U.S. federal income tax purposes, you will be required to accrue original issue discount that would otherwise fall under the de minimis threshold.

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

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of a short-term debt security and you do not identify the short-term debt security as part of a hedging transaction you will generally not be required to accrue original issue discount currently, but you will be required to treat any gain realized on a sale, exchange or retirement of the short-term debt security as ordinary income to the extent such gain does not exceed the original issue discount accrued with respect to the short-term debt security during the period you held the short-term debt security. You may not be allowed to deduct all of the interest paid or accrued on any indebtedness incurred or maintained to purchase or carry a short-term debt security until the maturity of the short-term debt security or its earlier disposition in a taxable transaction. Notwithstanding the foregoing, if you are a cash-basis U.S. holder of a short-term debt security you may elect to accrue original issue discount on a current basis, in which case the limitation on the deductibility of interest described above will not apply. A U.S. holder using the accrual method of tax accounting and some cash method holders, including banks, securities dealers, regulated investment companies and certain trust funds, generally will be required to include original issue discount on a short-term debt security in gross income on a current basis. Original issue discount will be treated as accruing for these purposes on a ratable basis or, at the election of the holder, on a constant yield basis based on daily compounding.

Second, regardless of whether you are a cash- or accrual-basis holder, if you are the holder of a short-term debt security you can elect to accrue any “acquisition discount” with respect to the short-term debt security on a current basis. Acquisition discount is the excess of the remaining redemption amount of the short-term debt security at the time of acquisition (i.e., all amounts payable on the short-term debt security) over the purchase price. Acquisition discount will be treated as accruing ratably or, at the election of the holder, under a constant yield method based on daily compounding. If you elect to accrue acquisition discount, the original issue discount rules will not apply.

Finally, the market discount rules described below will not apply to short-term debt securities.

As described above, certain of the debt securities may be subject to special redemption features. These features may affect the determination of whether a debt security has a maturity of one year or less and thus is a short-term debt security. If you purchase debt securities with these features, you should carefully examine the prospectus supplement and consult your tax adviser about these features.

Premium and Market Discount

If you purchase a debt security at a cost greater than the debt security’s remaining redemption amount, you will be considered to have purchased the debt security at a premium, and you may elect to amortize the premium as an offset to interest income, using a constant yield method, over the remaining term of the debt security. If you make this election, it generally will apply to all debt instruments that you hold at the time of the election, as well as any debt instruments that you subsequently acquire. In addition, you may not revoke the election without the consent of the IRS. If you elect to amortize the premium, you will be required to reduce your tax basis in the debt security by the amount of the premium amortized during your holding period. Original Issue Discount Debt Securities purchased at a premium will not be subject to the original issue discount rules described above. In the case of premium on a foreign currency debt security, you should calculate the amortization of the premium in the foreign currency. Amortization deductions attributable to a period reduce interest payments in respect of that period, and therefore are translated into U.S. dollars at the rate that you use for those interest payments. Exchange gain or loss will be realized with respect to amortized premium on a foreign currency debt security based on the difference between the exchange rate computed on the date or dates the premium is amortized against interest payments on the debt security and the exchange rate on the date when the holder acquired the debt security. For a U.S. holder that does not elect to amortize premium, the amount of premium will be included in your tax basis when the debt security matures or is disposed of. Therefore, if you do not elect to amortize premium and you hold the debt security to maturity, you generally will be required to treat the premium as capital loss when the debt security matures.

If you purchase a debt security at a price that is lower than the debt security’s remaining redemption amount, or in the case of an Original Issue Discount Debt Security, the debt security’s adjusted issue price, by

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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.

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 U.S. 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 United States person, 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 United States person. The amount of any backup withholding from a payment to a United States or non-United States person will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle the holder to a refund, provided that the required information is timely furnished to the IRS.

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 on the last day of the taxable year or $75,000 at any time during the taxable year are generally required

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to file an information statement along with their tax returns, currently on IRS 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 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 IRS 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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PLAN OF DISTRIBUTION

We and the Republic, if a guarantee by the Republic is furnished, may sell or issue the debt securities or warrants or guarantees in any of three ways:

• through underwriters or dealers;

• directly to one or more purchasers; or

• through agents.

The prospectus supplement relating to a particular series of debt securities or warrants or guarantees will state:

• the names of any underwriters;

• the purchase price of the securities;

• the proceeds to us from the sale;

• any underwriting discounts and other compensation;

• the initial public offering price;

• any discounts or concessions allowed or paid to dealers; and

• any securities exchanges on which the securities will be listed.

Any underwriter involved in the sale of securities will acquire the securities for its own account. The underwriters may resell the securities from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices to be determined at the time of sale. The securities may be offered to the public either by underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Unless the prospectus supplement states otherwise, certain conditions must be satisfied before the underwriters become obligated to purchase securities from us and the Republic, if applicable, and they will be obligated to purchase all of the securities if any are purchased. The underwriters may change any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers.

If we and the Republic, if a guarantee by the Republic is furnished, sell any securities through agents, the prospectus supplement will identify the agent and indicate any commissions payable by us and the Republic, if applicable. Unless the prospectus supplement states otherwise, all agents will act on a best efforts basis and will not acquire the securities for their own account.

We and the Republic, if a guarantee by the Republic is furnished, may authorize agents, underwriters or dealers to solicit offers by certain specified entities to purchase the securities from us and the Republic, if applicable, at the public offering price set forth in a prospectus supplement pursuant to delayed delivery contracts. The prospectus supplement will set out the conditions of the delayed delivery contracts and the commission receivable by the agents, underwriters or dealers for soliciting the contracts.

We and the Republic, if a guarantee by the Republic is furnished, may offer debt securities as consideration for the purchase of other of our debt securities, either in connection with a publicly announced tender offer or in privately negotiated transactions. The offer may be in addition to or in lieu of sales of debt securities directly or through underwriters or agents.

Agents and underwriters may be entitled to indemnification by us against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribution from us with respect to certain payments which the agents or underwriters may be required to make. Agents and underwriters may be customers of, engage in transactions with, or perform services (including commercial and investment banking services) for, us and the Republic in the ordinary course of business.

202

LEGAL MATTERS

The validity of any particular series of debt securities or warrants issued with debt securities will be passed upon for us and any underwriters or agents by United States and Korean counsel identified in the related prospectus supplement.

AUTHORIZED REPRESENTATIVES IN THE UNITED STATES

Our authorized agents in the United States are Mr. Jung-Hyun Lee, Chief Representative of our New York Representative Office, and Mr. Young-rok Kim, 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. Minsik Shin, Financial Attaché, Korean Consulate General in New York, located at 460 Park Avenue, 9th Floor, New York, NY 10022.

OFFICIAL STATEMENTS AND DOCUMENTS

Our Chairman and President, in his official capacity, has supplied the information set forth under “The Export-Import Bank of Korea” (except for the information set out under “The Export-Import Bank of Korea—Business—Government Support and Supervision”). Such information is stated on his authority.

The Minister of Economy and Finance of The Republic of Korea, in his official capacity, has supplied the information set out under “The Export-Import Bank of Korea—Business—Government Support and Supervision” and “The Republic of Korea”. Such information is stated on his authority. The documents identified in the portion of this prospectus captioned “The Republic of Korea” as the sources of financial or statistical data are official public documents of the Republic or its agencies and instrumentalities.

EXPERTS

The separate financial statements of The Export-Import Bank of Korea as of and for the years ended December 31, 2019 and 2018 have been included in this prospectus in reliance upon the report of KPMG Samjong Accounting Corp., independent auditor, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

203

FORWARD-LOOKING STATEMENTS

This prospectus includes future expectations, projections or “forward-looking statements”, as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “believe”, “expect”, “anticipate”, “estimate”, “project” and similar words identify forward-looking statements. In addition, all statements other than statements of historical facts included in this prospectus are forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove correct. This prospectus discloses important factors that could cause actual results to differ materially from our expectations (“Cautionary Statements”). All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.

Factors that could adversely affect the future performance of the Korean economy include:

• the occurrence of severe health epidemics in Korea or other parts of the world, including the ongoing global outbreak of the COVID-19 pandemic, swine or avian flu, Ebola or Middle East respiratory syndrome;

• 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, in particular in light of the ongoing global outbreak of the COVID-19 pandemic;

• 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 yuan and the overall impact of Brexit on the value of the Korean Won), interest rates, inflation rates or stock markets;

• 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;

• a substantial decrease in tax revenues and a substantial increase in the Government’s expenditures for fiscal stimulus measures, unemployment compensation and other economic and social programs, in particular in light of the Government’s ongoing efforts to provide emergency relief payments to households and corporations in need of funding, which, together, would lead to an increased Government budget deficit as well as an increase in the Government’s debt;

• declines in consumer confidence and a slowdown in consumer spending, in particular due to the outbreak of infectious diseases, including the ongoing global outbreak of the COVID-19 pandemic;

• 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;

• increased uncertainties resulting from the United Kingdom’s exit from the European Union;

• the continued growth of the Chinese economy, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and the relocation of the manufacturing base from Korea to China), as well as a slowdown in the growth of China’s economy, which is Korea’s most important export market;

• the investigations of large Korean conglomerates and their senior management for bribery, embezzlement and other possible misconduct relating to the impeachment and dismissal of former President Park Geun-hye in March 2017;

• the economic impact of any pending or future free trade agreements;

204

• social and labor unrest;

• financial problems or lack of progress in the restructuring of Korean conglomerates, other large troubled companies, their suppliers or the financial sector;

• 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;

• 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 ongoing trade disputes between Korea and Japan and 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 changes in the price of oil; and

• an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States.

205

FURTHER INFORMATION

We filed a registration statement with respect to the securities with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and its related rules and regulations. You can find additional information concerning ourselves and the securities in the registration statement and any pre- or post-effective amendment, including its various exhibits, which may be inspected at the public reference facilities maintained by the Securities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549. These filings are also available to the public from the Securities and Exchange Commission’s website at http://www.sec.gov.

206

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 11. Estimated Expenses.*

It is estimated that our expenses in connection with the sale of the debt securities, warrants and guarantees hereunder, exclusive of compensation payable to underwriters and agents, will be as follows:

SEC Registration Fee	US$	560,000
Printing Costs		250,000
Legal Fees and Expenses		450,000
Fiscal Agent Fees and Expenses		50,000
Blue Sky Fees and Expenses		50,000
Rating Agencies’ Fees		350,000
Miscellaneous (including amounts to be paid to underwriters in lieu of reimbursement of certain expenses)		200,000
Total	US$	1,910,000

* Based on three underwritten offerings of the debt securities.

II-1

UNDERTAKINGS

The Registrants hereby undertake:

(a) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereto) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; and

(iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement;

(b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and

(c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(d) That, for purposes of determining liability under the Securities Act of 1933 to any purchaser:

each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(e) That, for the purpose of determining any liability under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

The undersigned registrants undertake that in a primary offering of securities of the undersigned registrants pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrants will be sellers to the purchaser and will be considered to offer or sell such securities to such purchaser;

(i) Any preliminary prospectus or prospectus of the undersigned registrants relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrants or used or referred to by the undersigned registrants;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrants or their securities provided by or on behalf of the undersigned registrants; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrants to the purchaser.

II-2

CONTENTS

This Registration Statement is comprised of:

(1) Facing Sheet.

(2) Explanatory Note.

(3) Part I, consisting of the Prospectus.

(4) Part II, consisting of pages II-1 to II-10.

(5) The following Exhibits:

A-1	-	Form of Underwriting Agreement Standard Terms, incorporated herein by reference to Exhibit A-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-1	-	Form of Fiscal Agency Agreement, including forms of Debt Securities, incorporated herein by reference to Exhibit B-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-2	-	Form of global Debt Security that bears interest at a fixed rate, incorporated herein by reference to Exhibit B-2 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-3	-	Letter of successor Fiscal Agent, incorporated herein by reference to Exhibit B-3 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-4	-	Letter of 2nd successor Fiscal Agent, incorporated herein by reference to Exhibit B-4 to the Registration Statement of The Export-Import Bank of Korea (No. 333-9564).
B-5	-	Letter of 3rd successor Fiscal Agent, incorporated herein by reference to Exhibit B-5 to the Registration Statement of The Export-Import Bank of Korea (No. 333-136378).
B-6	-	Form of Guarantee to be issued by The Republic of Korea.**
C	-	Form of Warrant Agreement, including form of Warrants.**
D-1	-	Consent of the Director General of The Export-Import Bank of Korea (included on page II-6).
D-2	-	Power of Attorney of the Director General of The Export-Import Bank of Korea.*
E-1	-	Consent of the Minister of Economy and Finance of The Republic of Korea (included on Page II-7).
E-2	-	Power of Attorney of the Minister of Economy and Finance of The Republic of Korea, incorporated herein by reference to Exhibit E-2 to the Registration Statement of The Export-Import Bank of Korea (No. 333-156218).
F	-	Consent of KPMG Samjong Accounting Corp.
G-1	-	Letter appointing certain persons as authorized agents of The Export-Import Bank of Korea in the United States.*
G-2	-	Letter appointing Authorized Agents of The Republic of Korea in the United States (included in Exhibit E-2), incorporated herein by reference to Exhibit E-2 to the Registration Statement of The Export-Import Bank of Korea (No. 333-156218).
H	-	The Export-Import Bank of Korea Act, incorporated herein by reference to Exhibit H to the Registration Statement of The Export-Import Bank of Korea (No. 333-212164).
I	-	The Enforcement Decree of The Export-Import Bank of Korea Act.
J	-	The Articles of Incorporation of The Export-Import Bank of Korea.*

II-3

K	-	Form of Prospectus Supplement relating to The Export-Import Bank of Korea’s Medium-Term Notes, Series A, Due Not Less Than Nine Months From Date of Issue, or the MTNs, incorporated herein by reference to Exhibit K to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
L	-	Form of Distribution Agreement between The Export-Import Bank of Korea and the Agents named therein relating to the offer and sale from time to time of the MTNs, incorporated herein by reference to Exhibit L to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
M-1	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants).*
M-2	-	Opinion (including consent) of Yoon & Yang LLC, 19th Floor, ASEM Tower, 517, Yeongdong-daero, Gangnam-gu, Seoul, Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants) and the Guarantees to be issued by The Republic of Korea.*
M-3	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$600,000,000 Floating Rate Notes due 2022, US$400,000,000 2.50% Notes due 2020 and US$1,000,000,000 3.00% Notes due 2022.*
M-4	-	Opinion (including consent) of Yulchon, Parnas Tower, 38F, 521 Teheran-ro, Gangnam-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$600,000,000 Floating Rate Notes due 2022, US$400,000,000 2.50% Notes due 2020 and US$1,000,000,000 3.00% Notes due 2022.*
M-5	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$800,000,000 Floating Rate Notes due 2021 and US$700,000,000 Floating Rate Notes due 2023.*
M-6	-	Opinion (including consent) of Shin & Kim, 9F, State Tower Namsan, 100 Toegye-ro, Jung-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$800,000,000 Floating Rate Notes due 2021 and US$700,000,000 Floating Rate Notes due 2023.*
M-7	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 3.50% Notes due 2021 and US$500,000,000 3.625% Notes due 2023.*
M-8	-	Opinion (including consent) of Shin & Kim, 9F, State Tower Namsan, 100 Toegye-ro, Jung-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 3.50% Notes due 2021 and US$500,000,000 3.625% Notes due 2023.*
M-9	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 Floating Rate Notes due 2022 and US$500,000,000 2.375% Notes due 2024.*
M-10	-	Opinion (including consent) of Yoon & Yang, 19th Floor, ASEM Tower, 517, Yeongdong-daero, Gangnam-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 Floating Rate Notes due 2022 and US$500,000,000 2.375% Notes due 2024.*

II-4

M-11	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 1.875% Notes due 2025.*
M-12	-	Opinion (including consent) of Yoon & Yang, 19th Floor, ASEM Tower, 517, Yeongdong-daero, Gangnam-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 1.875% Notes due 2025.*
N-1	-	Form of the MTNs that bears interest at a fixed rate, incorporated herein by reference to Exhibit N-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
N-2	-	Form of the MTNs that bears interest at a floating rate, incorporated herein by reference to Exhibit N-2 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
O	-	Form of Calculation Agency Agreement between The Export-Import Bank of Korea and the calculation agent named therein relating to the MTNs that bear interest at a floating rate, incorporated herein by reference to Exhibit O to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).

* Previously filed

** May be filed by amendment.

II-5

SIGNATURE OF THE EXPORT-IMPORT BANK OF KOREA

Pursuant to the requirements of the Securities Act of 1933, as amended, The Export-Import Bank of Korea has duly caused this Registration Statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in Seoul, The Republic of Korea, on the 26th day of June, 2020.

THE EXPORT-IMPORT BANK OF KOREA
By:	SANG-HUN LEE*†
	Director General
†By:	/s/ JAE-KYUN IM
	Jae-Kyun Im
	(Attorney-in-fact)

* Consent is hereby given to use of his name in connection with the information specified in this Registration Statement or amendment thereto to have been supplied by him and stated on his authority.

II-6

SIGNATURE OF THE REPUBLIC OF KOREA

Pursuant to the requirements of the Securities Act of 1933, as amended, The Republic of Korea has duly caused this Registration Statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in The City of New York, New York, on the 26th day of June, 2020.

THE REPUBLIC OF KOREA
By:	NAM-KI HONG*†
	Minister of Economy and Finance
†By:	/S/ MINSIK SHIN
	Minsik Shin
	(Attorney-in-fact)

* Consent is hereby given to use of his name in connection with the information specified in this Registration Statement or amendment thereto to have been supplied by him and stated on his authority.

II-7

SIGNATURE OF AUTHORIZED REPRESENTATIVE

OF THE EXPORT-IMPORT BANK OF KOREA

Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly authorized representative in the United States of The Export-Import Bank of Korea, has signed this Registration Statement or amendment thereto in The City of New York, New York, on the 26th day of June, 2020.

†By:	/s/ JUNG-HYUN LEE
	Jung-Hyun Lee
	New York Representative Office
	The Export-Import Bank of Korea

II-8

SIGNATURE OF AUTHORIZED REPRESENTATIVE

OF THE EXPORT-IMPORT BANK OF KOREA

Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly authorized representative in the United States of The Export-Import Bank of Korea, has signed this Registration Statement or amendment thereto in The City of New York, New York, on the 26th day of June, 2020.

†By:	/S/ YOUNG-ROK KIM
	Young-rok Kim
	New York Representative Office
	The Export-Import Bank of Korea

II-9

SIGNATURE OF AUTHORIZED REPRESENTATIVE

OF THE REPUBLIC OF KOREA

Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly authorized representative in the United States of The Republic of Korea, has signed this Registration Statement or amendment thereto in The City of New York, New York, on the 26th day of June, 2020.

†By:	/s/ MINSIK SHIN
	Minsik Shin
	Financial Attaché
	Korean Consulate General in New York

II-10

EXHIBIT INDEX

A-1	-	Form of Underwriting Agreement Standard Terms, incorporated herein by reference to Exhibit A-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-1	-	Form of Fiscal Agency Agreement, including forms of Debt Securities, incorporated herein by reference to Exhibit B-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-2	-	Form of global Debt Security that bears interest at a fixed rate, incorporated herein by reference to Exhibit B-2 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-3	-	Letter of successor Fiscal Agent, incorporated herein by reference to Exhibit B-3 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-4	-	Letter of 2nd successor Fiscal Agent, incorporated herein by reference to Exhibit B-4 to the Registration Statement of The Export-Import Bank of Korea (No. 333-9564).
B-5	-	Letter of 3rd successor Fiscal Agent, incorporated herein by reference to Exhibit B-5 to the Registration Statement of The Export-Import Bank of Korea (No. 333-136378).
B-6	-	Form of Guarantee to be issued by The Republic of Korea.**
C	-	Form of Warrant Agreement, including form of Warrants.**
D-1	-	Consent of the Director General of The Export-Import Bank of Korea (included on page II-5).
D-2	-	Power of Attorney of the Director General of The Export-Import Bank of Korea.*
E-1	-	Consent of the Minister of Economy and Finance of The Republic of Korea (included on Page II-6).
E-2	-	Power of Attorney of the Minister of Economy and Finance of The Republic of Korea, incorporated herein by reference to Exhibit E-2 to the Registration Statement of The Export-Import Bank of Korea (No. 333-156218).
F	-	Consent of KPMG Samjong Accounting Corp.
G-1	-	Letter appointing certain persons as authorized agents of The Export-Import Bank of Korea in the United States.*
G-2	-	Letter appointing Authorized Agents of The Republic of Korea in the United States (included in Exhibit E-2), incorporated herein by reference to Exhibit E-2 to the Registration Statement of The Export-Import Bank of Korea (No. 333-156218).
H	-	The Export-Import Bank of Korea Act, incorporated herein by reference to Exhibit H to the Registration Statement of The Export-Import Bank of Korea (No. 333-212164).
I	-	The Enforcement Decree of The Export-Import Bank of Korea Act.
J	-	The Articles of Incorporation of The Export-Import Bank of Korea.*
K	-	Form of Prospectus Supplement relating to The Export-Import Bank of Korea’s Medium-Term Notes, Series A, Due Not Less Than Nine Months From Date of Issue, or the MTNs, incorporated herein by reference to Exhibit K to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
L	-	Form of Distribution Agreement between The Export-Import Bank of Korea and the Agents named therein relating to the offer and sale from time to time of the MTNs, incorporated herein by reference to Exhibit L to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
M-1	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul 04539, Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants).*

M-2	-	Opinion (including consent) of Yoon & Yang LLC, 19th Floor, ASEM Tower, 517, Yeongdong-daero, Gangnam-gu, Seoul, Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants) and the Guarantees to be issued by The Republic of Korea.*
M-3	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$600,000,000 Floating Rate Notes due 2022, US$400,000,000 2.50% Notes due 2020 and US$1,000,000,000 3.00% Notes due 2022.*
M-4	-	Opinion (including consent) of Yulchon, Parnas Tower, 38F, 521 Teheran-ro, Gangnam-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$600,000,000 Floating Rate Notes due 2022, US$400,000,000 2.50% Notes due 2020 and US$1,000,000,000 3.00% Notes due 2022.*
M-5	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$800,000,000 Floating Rate Notes due 2021 and US$700,000,000 Floating Rate Notes due 2023.*
M-6	-	Opinion (including consent) of Shin & Kim, 9F, State Tower Namsan, 100 Toegye-ro, Jung-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$800,000,000 Floating Rate Notes due 2021 and US$700,000,000 Floating Rate Notes due 2023.*
M-7	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 3.50% Notes due 2021 and US$500,000,000 3.625% Notes due 2023.*
M-8	-	Opinion (including consent) of Shin & Kim, 9F, State Tower Namsan, 100 Toegye-ro, Jung-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 3.50% Notes due 2021 and US$500,000,000 3.625% Notes due 2023.*
M-9	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 Floating Rate Notes due 2022 and US$500,000,000 2.375% Notes due 2024.*
M-10	-	Opinion (including consent) of Yoon & Yang, 19th Floor, ASEM Tower, 517, Yeongdong-daero, Gangnam-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 Floating Rate Notes due 2022 and US$500,000,000 2.375% Notes due 2024.*
M-11	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, c/o 19F, Ferrum Tower, 19, Eulji-ro 5-gil, Jung-gu, Seoul, The Republic of Korea, United States counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 1.875% Notes due 2025.*
M-12	-	Opinion (including consent) of Yoon & Yang, 19th Floor, ASEM Tower, 517, Yeongdong-daero, Gangnam-gu, Seoul, The Republic of Korea, Korean counsel to The Export-Import Bank of Korea, in respect of the legality of The Export-Import Bank of Korea’s US$500,000,000 1.875% Notes due 2025.*
N-1	-	Form of the MTNs that bears interest at a fixed rate, incorporated herein by reference to Exhibit N-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).

N-2	-	Form of the MTNs that bears interest at a floating rate, incorporated herein by reference to Exhibit N-2 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
O	-	Form of Calculation Agency Agreement between The Export-Import Bank of Korea and the calculation agent named therein relating to the MTNs that bear interest at a floating rate, incorporated herein by reference to Exhibit O to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).

* Previously filed

** May be filed by amendment.

EX-99.(F)

Exhibit F

CONSENT OF INDEPENDENT AUDITORS

We consent to the use of our report dated March 31, 2020, with respect to the separate statements of financial position of The Export-Import Bank of Korea as of December 31, 2019 and 2018, and the related separate statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2019 and 2018, and the related notes (collectively, the “separate financial statements”), included herein, and to the reference to our firm under the heading “Experts” in this prospectus.

/s/    KPMG Samjong Accounting Corp.

KPMG Samjong Accounting Corp.

Seoul, Korea

June 26, 2020

EX-99.(I)

Exhibit I

THE ENFORCEMENT DECREE OF THE EXPORT-IMPORT BANK OF KOREA ACT

Presidential Decree No.4099, Oct. 6, 1969

Amended by Presidential Decree No.7561, Feb. 28, 1975

Presidential Decree No.12091, Mar. 9, 1987

Presidential Decree No.12603, Dec. 31, 1988

Presidential Decree No.13870, Mar. 6, 1993

Presidential Decree No.14438, Dec. 23, 1994

Presidential Decree No.15750, Apr. 1, 1998

Presidential Decree No.15904, Oct. 2, 1998

Presidential Decree No.16743, Mar. 4, 2000

Presidential Decree No.17020, Dec. 27, 2000

Presidential Decree No.18824, May. 13, 2005

Presidential Decree No.19422, Mar. 29, 2006

Presidential Decree No.19551, Jun. 29, 2006

Presidential Decree No.20720, Feb. 29, 2008

Presidential Decree No.20827, Jun. 20, 2008

Presidential Decree No.21449, Apr. 30, 2009

Presidential Decree No.22220, Jun. 28, 2010

Presidential Decree No.24088, Sep. 7, 2012

Presidential Decree No.24441, Mar. 23, 2013

Presidential Decree No.25312, Apr. 21, 2014

Presidential Decree No.29079, Aug. 7, 2018

Presidential Decree No.29789, May 28, 2019

CHAPTER I. CAPITAL CONTRIBUTION

<Amended by Presidential Decree No. 20827, Jun. 20, 2008>

Article 1 (Capital Contribution)

The government portion of the capital contribution prescribed in Article 4 of the Export-Import Bank of Korea Act (hereinafter referred to as the “Act”) shall be made in cash by annual installments: provided, however, that a part of the capital contribution may be made in kind, if necessary. [This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

CHAPTER II. REGISTRATION

<Amended by Presidential Decree No. 20827, Jun. 20, 2008>

Article 2 (Registration of Establishment)

The following matters shall be stated in the registration of establishment of the Export-Import Bank of Korea (hereinafter referred to as the “Export-Import Bank”) in accordance with Article 6 of the Act:

1. Purpose;

2. Name;

3. Location of the head office;

4. Capital;

5. Total amount of the paid-in capital;

6. Method of capital contribution;

7. Names and addresses of executive officers; and

8. Method of public notice.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 3 (Registration of New Branches and Sub-branches)

(1) Where the Export-Import Bank establishes branches or sub-branches, the Export-Import Bank shall register the relevant matters according to the classification of the following subparagraphs: <Amended by Presidential Decree No.21449, Apr. 30, 2009>

1. The fact of such establishment, at the location of its head office within two weeks;

2. The particulars prescribed in Article 2, at the location of each newly established branch or sub-branch within three weeks; and

3. The fact of such establishment, at the location of branches or sub-branches other than those prescribed in subparagraph 2 above within three weeks.

(2) If branches or sub-branches are newly established within the jurisdiction of the registry office governing the head office or an existing branch or sub-branch, the Export-Import Bank shall register only the fact of such establishment within two weeks.

[<This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 4 (Registration of Change of Location)

(1) Where the Export-Import Bank moves its head office to another location, the Export-Import Bank shall register the fact of such change of location within two weeks.

(2) Where the Export-Import Bank moves its branch or sub-branch to another location, the Export-Import Bank shall register the fact of such change of location, at the original location within three weeks, and at the new location within four weeks with the particulars mentioned in each Subparagraph of Article 2. : <Amended by Presidential Decree No. 21449, Apr. 30, 2009>

(3) If the movement of a branch or sub-branch is made within the jurisdiction of the same registry office governing such branch or sub-branch, the Export-Import Bank shall register only the fact of such movement within two weeks.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 5 (Registration of Change)

If any change has occurred in any of the particulars mentioned in Article 2, such change shall be registered within two weeks at the location of the head office, and within three weeks at the locations of branches or sub-branches. <Amended by Presidential Decree No. 21449, Apr. 30, 2009>

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 6 (Registration of Appointment of Agent)

If an agent is appointed pursuant to Article 15 of the Act, the following particulars shall, within two weeks following the appointment, be registered at the location of the head office, branches or sub-branches for which the agent is appointed. If any change occurs after the registration, such change shall be registered in the same manner:

1. Name and address of the agent;

2. Head office, branches or sub-branches for which the agent is appointed; and

3. Details of restrictions, if any, on the powers of the agent.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 7 Deleted. <by Presidential Decree No. 12091, Mar. 9, 1987>

Article 8 (Reckoning Period of Registration)

If any authorization or approval of the Minister of Strategy and Finance is required for registration of any matters prescribed in Articles 2 through 6, the registration period shall be reckoned from the date when the relevant written authorization or approval is delivered.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 9 (Registry Office)

(1) The competent registry offices for the Export-Import Bank’s registration shall be the district courts, their branch offices or registry offices which exercise jurisdiction over the locations of the head office, branches or sub-branches.

(2) The registry office shall make available to the public the register of the Export-Import Bank.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 10 (Applicants for Registration and Supporting Documents for Application)

The registration of establishment pursuant to Article 2 shall be applied for collectively by the organizing members, and the registrations pursuant to Articles 3 through 6 shall be applied by the president of the Export-Import Bank. Applications thereof shall be accompanied by the following documents:

1. For the registration of the establishment pursuant to Article 2, the articles of incorporation of the Export-Import Bank, the certified copy of the authorization on the articles of incorporation, the certificate by the Minister of Strategy and Finance proving that the first installment for capital contribution has been completed, and the certificate for the appointment of the president of the Export-Import Bank pursuant to Article 11 (1) of the Act;

2. For the registration of the establishment of the new branches or sub-branches referred to in Article 3, the certificate that proves the establishment of such branches or sub-branches;

3. For the registration of the change of locations of the head office, branches or sub-branches referred to in Article 4, the certificate that proves such relocation;

4. For the registration of change prescribed in Article 5, the certificate that proves such change; and

5. For the registration of appointment of an agent as specified in Article 6, the certificate proving that the appointment is made pursuant to the provisions of Article 15 of the Act, and in the case there being restrictions on the powers of an agent, the certificate that proves it accordingly.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 11 (Provisions to be Applied Mutatis Mutandis on Registration)

The relevant provisions in the Non-Contentious Case Litigation Procedure Act shall, unless otherwise prescribed by this Decree, apply mutatis mutandis to the registration of the Export-Import Bank.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 12 (Public Notice of Registration of Establishment)

As soon as the Export-Import Bank completes the registration of establishment pursuant to Article 2, it shall publicly announce such registration.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

CHAPTER II-2. OPERATING COMMITTEE

Article 12-2 (Composition of Operating Committee) <Amended by Presidential Decree No. 22220, Jun. 28, 2010 and 24441, Mar. 23, 2013>

(1) The Operating Committee (hereinafter referred to as the “Committee”) shall be composed of the following members:

1. The president of the Export-Import Bank;

2. One person whom the Minister of Strategy and Finance, the Minister of Foreign Affairs, the Minister of Trade, Industry and Energy, the Minister of Land, Infrastructure and Transport, the Minister of Oceans and Fisheries, and the Chairman of the Financial Services Commission designate respectively amongst public officials under the control of them;

3. One person whom the Governor of the Bank of Korea and the Chairman of the Korea Federation of Banks established with permission of the Financial Services Commission under the provisions of Article 32 of the Civil Act designate respectively amongst their executive officials or directors;

4. One person whom the Minister of Trade, Industry and Energy designates amongst representatives of exporters’ organizations after consultation with the Minister of Knowledge Economy;

5. One person whom the president of the Korea Trade Insurance Corporation under the Trade Insurance Act designates amongst executive officials of the Corporation; and

6. Two or less persons whom the Minister of Strategy and Finance designates upon recommendation by the president of Export-Import Bank who have extensive knowledge and experience in international economic cooperation.

(2) When the Committee deliberates any matter related to another ministry whose public official is not a member of the Committee provided in paragraph (1)2 above, the chairman of the Committee may request a public official nominated by the minister of that another ministry to attend and express his/her opinion at the meeting of the Committee.

(3) The term of office of the member of paragraph (1)4 above shall be three years and the term of office of the member of paragraph (1)6 above shall be two years.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 12-3 (Chairman)

(1) The president of the Export-Import Bank shall be the chairman of the Committee.

(2) Where the chairman may not perform his/her duties due to inevitable reasons, one of the members of the Committee shall act for the chairman, in the order of priority designated in advance by the chairman.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 12-4 (Meetings)

(1) Meetings of the Committee shall be called by the chairman in accordance with the provisions of the articles of incorporation of the Export-Import Bank.

(2) The chairman shall call a meeting without delay when a majority of all the members of the Committee or the auditor requests that a meeting be held.

(3) Attendance by a majority of all the members of the Committee shall constitute a quorum, and resolutions shall be adopted upon the acceptance of a majority of the members present.

(4) Where any member of the Committee has personal interests in a particular matter subject to the resolutions of the committee, he/she shall not exercise his/her vote on that matter.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

CHAPTER III. BUSINESS

<Amended by Presidential Decree No. 20827, Jun. 20, 2008>

Articles 13 <Type of Securities and Restriction on Investment or Guarantee>

(1) Type of securities subject to Article 18 (2) 2 are the following securities among securities pursuant to the subparagraphs of Article 4 (2) of Financial Investment Services and Capital Markets Act

1. Debt securities

2. Equity securities

3. Beneficiary certificates

(2) Export-Import Bank, pursuant to Article 18 (3), shall restrict its business to investment or guarantee according to the classification of the following subparagraphs:

1. For debt securities under Article 1 (1) (of Financial Investment Services and Capital Markets Act), investment and guarantee; and

2. For equity securities under Article 1 (2) (of Financial Investment Services and Capital Markets Act), investment.

[This Article Newly Inserted by Presidential Decree No. 25312, Apr. 21, 2014]

Article 14 Deleted. <by Presidential Decree No. 15904, Oct. 2, 1998>

Article 15 Deleted. <by Presidential Decree No. 25312, Apr. 21, 2014>

Article 15-2 Deleted. <by Presidential Decree No. 25312, Apr. 21, 2014>

Article 16 <Overseas Guarantee of Obligations>

(1) “Transactions Prescribed by the Presidential Decree” under Article 18(4) shall mean any transaction that falls under any of the following: <Amended by Presidential Decree No. 22220, Jun. 28, 2010 and 25312, Apr. 21, 2014>

1. Any transaction whose percentage of loan equals to or is greater than fifty percent (50%) of the total amount of loans and guarantees that the Export-Import Bank supports;

2. Any transaction requested by the president of the Korea Trade Insurance Corporation under the Trade Insurance Act who has deemed that the guarantee by the Export-Import Bank is appropriate; or

3. Any transaction that the president of the Korea Trade Insurance Corporation approves after consultation with the president of the Export-Import Bank who has deemed that the guarantee by the Export-Import Bank is appropriate.

(2) The total amount of guarantee that the Export-Import Bank may extend per year in accordance with paragraph 1 above shall not exceed 35/100 of the total amount underwritten annually by insurance in accordance with the Trade Insurance Act in respect of transactions subject to Article 18(4) of the Act. <Amended by Presidential Decree No. 22220, Jun. 28, 2010>

[This Article Newly Inserted by Presidential Decree No. 20827, Jun. 20, 2008]

Article 16-2 (Special Account)

(1) If the Export-Import Bank intends to support a business that falls under Article 18 (5) of the Act and to which the Export-Import Bank cannot provide financing due to the counterparty country’s high risk, the Export-Import Bank shall create and operate a separate account under Article 18 (6) of the Act (the “Special Account”) in order to support such business.

(2) The Special Account shall be included in the accounting of Export-Import Bank, and shall be managed as an account separate from its other accounts.

(3) Each of the following funds shall become the financial resources of the Special Account:

1. Capital contribution from the government, etc. under Article 4 of the Act;

2. Profit under Subparagraph 3 of Article 36 of the Act, which is determined to be put aside in the Special Account by a resolution of the committee with the approval of the Minister of Economy and Finance; and

3. Other funds that the committee decides to operate as part of the Special Account with the approval of the Minister of Economy and Finance.

[This Article Newly Inserted by Presidential Decree No. 29789, May 28, 2019]

[Previous Article 16-2 Moved to Article 16-3 by Presidential Decree No. 29789, May 28, 2019]

Article 16-3 <Restriction on Investment in Juristic Person>

Export and Import Bank, pursuant to Article 20-2 (2), shall make investment (investment in collective investment scheme under Article 16-4 is excluded) only in the form of joint equity investment with the following juristic persons:

1. Korean nationals (including the juristic persons established under the laws of the Republic of Korea);

2. Foreign governments (including foreign government agency and foreign local public entities); and

3. Foreign nationals (including the juristic persons established under the laws of foreign nations).

(2) The amount of investment made by the Export-Import Bank pursuant to Paragraph (1) above may not exceed 15/100 of collective investment property of each collective investment scheme.

[This Article Newly Inserted by Presidential Decree No. 25312, Apr. 21, 2014]

[This Article Moved from Article 16-2 by Presidential Decree No. 29789, May 28, 2019]

Article 16-4 (Investment in Collective Investment Scheme)

(1) The collective investment schemes in which the Export-Import Bank may invest pursuant to Article 20-2 (3) of the Act shall be as follows:

1. Collective investment scheme established for the purpose of import and export, overseas investment, overseas business and exploitation of overseas natural resources, pursuant to Article 18 (1) of Act or overseas expansion of small and medium enterprises under Article 2 of Framework Act on Small and Medium Enterprises and middle-standing enterprises under Article 2 (1) of Special Act on the Promotion of Growth and Competitiveness Improvement for Middle-Standing Enterprises; and

2. Collective investment scheme established for the purpose of making investment in overseas greenhouse gas reduction project in connection with coping with climatic changes;

(2) The amount of investment made by the Export-Import Bank pursuant to Paragraph (1) above may not exceed 25/100 of collective investment property of each collective investment scheme.

[This Article Newly Inserted by Presidential Decree No. 21449, April 30, 2009]

[This Article Moved from Article 16-3 by Presidential Decree No. 29789, May 28, 2019]

Article 17 (Settlement of Accounts)

The documents for settlement of accounts (income statement, balance sheet and surplus disposition statement) reported pursuant to Article 35 of the Act shall have the following documents attached:

1. Report on the appraisal of the achievement of the operational program;

2. Documents annexed to the financial statements; and

3. Other documents necessary to clarify matters concerning the settlement of accounts.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 17-2 (Distribution of Profits)

Where the Minister of Strategy and Finance approves distribution of profits for capital contributors other than the Government pursuant to subparagraph 2 of Article 36 of the Act, such preferential distribution rate shall not exceed fifteen percent.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

CHAPTER III-2. STANDARDS FOR SOUND MANAGEMENT AND SUPERVISION

Article 17-3 (Definitions)

The definitions of terms used in this Chapter shall be as follows:

1. The term “equity capital” means the equity capital under Article 2 (1) 5 of the Banking Act;

2. The term “credit extension” means the credit extension under Article 2 (1) 7 of the Banking Act; and

The term “enterprise group” means the enterprise group under subparagraph 2 of Article 2 of the Monopoly Regulation and Fair Trade Act.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 17-4 (Supervision for Sound Management)

(1) The Financial Services Commission shall conduct supervision over the Export-Import Bank as referred to in Articles 17-5, and 17-7 through 17-13 below pursuant to Article 39 (2) of the Act.

(2) The Financial Services Commission may determine the detailed matters necessary for conducting the supervision under paragraph (1) above.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 17-5 (Ceiling on Credit Extension to Same Borrower)

(1) The Export-Import Bank may not extend credits in excess of 50/100 of its equity capital to the same individual or juristic person, and a person belonging to the same enterprise group as such individual or juristic person (hereinafter referred to as the “same borrower”); provided, however, that the same shall not apply to any of the following cases: <Amended by Presidential Decree No. 24088, Sep. 7, 2012>

1. Where an additional credit is extended to a company for which the rehabilitation procedure is under way in accordance with the Debtor Rehabilitation and Bankruptcy Act or of which the normalization of operation is in progress by joint financial institutions as a part of the adjustment of enterprise structure;

2. Where an additional credit is extended to a person who underwrote a company falling under subparagraph 1 above in compliance with underwriting agreement;

3. Where a ceiling on the credit extension is exceeded due to the following causes, in spite of the absence of any additional credit extension:

(a) Where the amount of money converted into won currency is increased by the fluctuation of exchange rate;

(b) Where the equity capital of the Export-Import Bank is decreased;

(c) Where any alteration is made in the constitution of the same borrower;

(d) Where any merger or any transfer or taking over of business is made among the enterprises to which credits are extended; and

(e) Where there exist any compelling cause such as the sudden change in economic conditions, which is recognized by the Financial Services Commission.

4. Where it is recognized that there exist no credit risks, or where it is necessary for the achievement of aims for the establishment of the Export-Import Bank, and which are recognized by the Financial Services Commission in consultation with the Minister of Strategy and Finance.

(2) Where a ceiling on credit extension referred to in paragraphs (1), (3) and (4) is exceeded due to such cause as provided in paragraph (1)3, such ceiling shall be adjusted to suit the ceiling as referred to paragraphs (1), (3) and (4) within one year from the date the ceiling is exceeded; provided, however, that in the following cases, the Financial Services Commission may extend such period by the period it designates:

1. Where it is difficult to collect the extended credit within the said period because the deadline for the collection has yet to come;

2. Where any cause falling under paragraph (1)3(a) or (b) continues to exist for a long period, and if the extended credit is collected, the stabilization of management of the person to whom such credit is extended may be noticeably impaired; and

3. Where the Financial Services Commission deems that the soundness of assets of the Export-Import Bank may not be noticeably impaired even if the state of excess of the ceiling continues for a certain period of time, which is similar to any causes referred to in subparagraphs 1 and 2.

(3) The Export-Import Bank may not extend the credit in excess of 40/100 of its equity capital to the same individual or juristic person, respectively; provided, however, that the same shall not apply in any of the cases under paragraph 1 above.

(4) The total sum of a large amount of credit extension of the Export-Import Bank (referring to the amount of credit extension to the respective same borrowers in excess of 10/100 of the equity capital of the Export-Import Bank) may not exceed sixfold of its equity capital; provided, however, that the same shall not apply in any of the cases under paragraph 1 above. <Amended by Presidential Decree No. 24088, Sep. 7, 2012>

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 17-6 Deleted. <by Presidential Decree No. 20827, Jun. 20, 2008>

Article 17-7 (Restriction on Investment, etc. in Other Juristic Person)

(1) The Export-Import Bank may not acquire stocks in excess of 15/100 of the voting stocks issued by other juristic persons (including the contribution quota; hereafter in this Article, the same shall apply); provided, however, that the same shall not apply to the following cases: <Amended by Presidential Decree No. 25312, Apr. 21, 2014>

1. Where the stocks of other juristic persons are acquired in consequence of investment in the Export-Import Bank by the Government;

2. Where the stocks are acquired in consequence of the stock dividends or increase of capital stocks without consideration;

3. Where the stocks are acquired by the exercise of security right;

4. Where the stocks are acquired by the participation in the increase of capital stocks with consideration within the scope of the existing shares in holding;

5. Where the stocks are acquired in consequence of converting the stock-related claims, such as bond with warrant, into stocks;

6. Where the Export-Import Bank acquires the stocks by investment in the company in which the Export-Import Bank owns the stocks in excess of 15/100 of issued voting stocks (hereinafter referred to as the “subsidiary company”) and which belongs to the business type designated by the Financial Services Commission. In this case, the total sum of investments in each subsidiary company shall not exceed 15/100 of the equity capital of the Export-Import Bank;

7. Where stocks are acquired in consequence of debt-for-equity swap after company restructuring; and

8. Where it is necessary to achieve the aims for the establishment of the Export-Import Bank, and which are recognized by the Minister of Strategy and Finance upon hearing opinions of the Financial Services Commission.

(2) The Export-Import Bank shall, in the transactions with its subsidiary companies, not conduct the following activities:

1. Extending credits to its subsidiary companies in excess of the ceiling designated by the Financial Services Commission;

2. Extending credits by taking the stocks of its subsidiary companies as security; and

3. Extending credits in order to solicit for the purchase of the stocks of its subsidiary companies.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 17-8 (Restriction on Holding, etc. of Securities)

The Export-Import Bank shall not conduct the following businesses: <Amended by Presidential Decree No. 25312, Apr. 21, 2014>

1. Holding stocks or securities of more than three years’ maturity in excess of 60/100 of its equity capital; provided, however, that the following securities shall be excluded:

(a) Bonds issued by the State;

(b) Currency stabilization bonds of the Bank of Korea;

(c) Securities acquired by contributions of the Government; and

(d) Securities which the Export-Import Bank acquires by making such contributions or investments as approved by the Minister of Strategy and Finance under Article 20-2 (1) 1 and 3 of the Act.

2. Owning real estates other than those for business use; provided, however, that the case of acquiring the real estates by an exercise of security interest such as a mortgage shall be excluded;

3. Owning real estates for business use in excess of 60/100 of its equity capital;

4. Loaning funds for the purpose of speculation on the merchandises or securities; and

5. Loaning funds to the officers and employees of the Export-Import Bank and its subsidiary companies; provided, however, that the small loan designated by the Financial Services Commission shall be excluded.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 17-9 (Disposal of Assets for Non-Business Use, etc.)

Where the Export-Import Bank acquires through the exercise of security right any assets of which the acquisition or ownership is prohibited by this Decree, it shall dispose of them under the conditions as prescribed by the Financial Services Commission.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 17-10 (Building of Risk-Control System)

The Export-Import Bank shall, for the purpose of controlling various risks which are likely to occur in its overall operations, set up the adequate criteria for operational processing and procedures, and build and operate the risk-control systems such as the integrated management of assets and liabilities.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 17-11 (Criteria for Accounting Settlements)

The criteria for accounting settlements of the Export-Import Bank shall be based on the accounting rules of banking business determined by the Securities and Futures Commission in accordance with the Act on the Establishment, etc. of Financial Services Commission and on the bank-related accounting standards determined by the Financial Services Commission, and those matters which are not determined by these rules and standards shall be based on the enterprise accounting standards.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 17-12 (Scope of Supervision over Soundness)

The supervision and inspection on soundness by the Financial Services Commission shall be conducted only with respect to the matters which are not subject to the accounting inspection under Article 22 of the Board of Audit and Inspection Act and the supervision of duties under Article 24 of the same Act.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 17-13 (Guidance of Sound Management)

(1) The Export-Import Bank shall, in order to secure the soundness of asset operating, observe the criteria as provided by the Financial Services Commission in regard to the matters of the following subparagraphs:

1. Classification of the soundness of possessing assets, and the reservation and maintenance of adequate allowance for bad debts;

2. Maintenance of equity capital ratio for the risk-aggravating assets under the criteria of the Bank for International Settlements;

3. Maintenance of the ratio of liquidity assets on foreign currency to the liquidity debts on foreign currency;

4. Construction and operation of the risk control systems for efficient management of possessed assets and debts; and

5. Observation of laws and regulations on the soundness of assets operation.

(2) Where the Financial Services Commission deems that the soundness of management of the Export-Import Bank may be severely impaired by a failure to meet the standards of sound management under this Chapter, it may request that the Export-Import Bank take necessary measures to correct it after consultation with the Minister of Strategy and Finance.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

CHAPTER IV. EXPORT-IMPORT FINANCING DEBENTURES

Article 18 Deleted. <by Presidential Decree No. 19551, June 29, 2006>

Article 19 (Form of Export-Import Financing Debentures)

Export-import financing debentures shall be issued in the form of “bearer”; provided, however, that at the request of applicants for subscription or holders, the form of “bearer” may be converted to the form of “registered”, and vice versa.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 20 (Subscription to Export-Import Financing Debentures)

(1) Anyone intending to subscribe to export-import financing debentures shall indicate on each sheet the number of debentures by denomination which he/her intends to underwrite and his/her address on two copies of the application form for export-import financing debentures, and he/her shall sign and seal thereto.

(2) The following shall be stated in the application form for export-import financing debentures:

1. Name of the Export-Import Bank;

2. Total amount of export-import financing debentures to be issued;

3. Face value by denomination of export-import financing debentures;

4. Interest rates of export-import financing debentures;

5. Method and period of redemption of the principal;

6. Method and period of payment of interest;

7. Issuing price or minimum price of export-import financing debentures;

8. Total amount of the capital plus reserves of the Export-Import Bank; and

9. In the case of repayment for the foregoing issuance of export-import financing debentures being still pending, the total amount outstanding.

(3) Where export-import financing debentures are issued at a fixed minimum price, the applicant for subscription shall specify the subscription price at which he/she intends to apply for subscription on the application form for export-import financing debentures.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 21 (Total Underwriting of Export-Import Financing Debentures)

The provisions of Article 20 shall not apply to underwriting by contract of the total amount of the export-import financing debentures issued.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 22 (Total Amount of Export-Import Financing Debentures Issued)

The Export-Import Bank may indicate on the application form for export-import financing debenture subscription that the Export-Import Bank shall issue the export-import financing debentures concerned even if the total amount subscribed to in the said application form falls short of the total amount of the issue specified on the said application form, and, in such cases, the amount of the subscription shall be regarded as the total amount of the issue.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 23 (Collection of Subscribed Value of Export-Import Financing Debentures)

The Export-Import Bank shall collect the total amount of the subscribed value for each export-import financing debentures without delay upon the completion of the application for subscription of the export-import financing debentures.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 24 (Issuing Time for Debentures)

The Export-Import Bank shall issue export-import financing debentures only after the total amount of the subscribed value is paid; provided, however, that the exceptions shall apply under Article 26.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 25 (Matters to be Specified in Export-Import Financing Debentures)

Debentures shall bear the serial number, the issuing date, and matters prescribed in Article 20 (2) 1 through 6 and shall be signed and sealed by the president of the Export-Import Bank.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 26 (Sales of Debentures)

(1) The Export-Import Bank, after it fixes the sales period in advance, may issue export-import financing debentures by the method of public sale.

(2) In the case of paragraph (1), the application form for export-import financing debentures pursuant to Article 20 shall not be drawn up.

(3) In the case of the Export-Import Bank issuing export-import debentures pursuant to paragraph (1), those matters referred to in Article 20 (2) 2 shall not be indicated.

(4) Where the Export-Import Bank intends to issue export-import debentures pursuant to paragraph (1), it shall make a public notice on the sales period and those matters prescribed in Article 20 (1) 1 through 7.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 27 (Register of Export-Imported Financing Debentures)

(1) The Export-Import Bank shall keep the original register of export-import financing debentures at the head office which shall indicate the following matters therein:

1. The number and serial numbers of export-import debentures;

2. Issuing date of the export-import financing debentures; and

3. Those matters prescribed in Article 20 (2) 2 through 6.

(2) Where export-import financing debentures are issued in the form of registration, the following matters shall be also indicated in the original register of export-import financing debentures in addition to the matters prescribed in paragraph (1):

1. Names and addresses of holders of export-import financing debentures; and

2. Acquisition date of export-import financing debentures.

(3) Any holder of rights in respect of export-import financing debentures is entitled to request an inspection of the register of export-import financing debentures at any time during the business hours of the Export-Import Bank

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 28 (Registered Export-Import Financing Debentures)

(1) The transfer of registered export-import financing debentures shall not be invoked against the Export-Import Bank or any third parties unless the name and address of the transferee have been entered into the original register of export-import financing debentures.

(2) In the case of registered export-import financing debentures being used as collateral for a pledge, the pledge shall not be invoked against the Export-Import Bank or other third parties, unless the name and address of the pledgee have been entered into the original register of the export-import financing debentures.

(3) Where the registration of the pledge pursuant to paragraph (2) has been done, the Export-Import Bank shall make indication thereof on the export-import financing debentures concerned.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 29 (Repurchase and Destruction of Export-Import Financing Debentures)

The Export-Import Bank may, within the extent not interfering with the performance of its business prescribed under Article 18 of the Act, repurchase and destroy the export-import financing debentures concerned.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 30 (Deficiency of Concession)

(1) In redeeming export-import financing debentures in bearer form and if there exists deficiency of concession, the Export-Import Bank shall deduct from the redemption an amount to cover the deficiency of concession.

(2) The owner of concession referred to in paragraph (1) may claim any time the deducted amount in return for the concession.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

Article 31 (Notice, etc. to Applicants of Export-Import Financing Debentures)

(1) Any notification or any reminder notice to applicants for subscription or holders of rights before the issuance of export-import financing debentures shall be delivered to the address indicated on the application form for export-import financing debentures; provided, however, that if the applicants or holders of rights have notified the Export-Import Bank of another address, it shall use such address for the delivery.

(2) Any notification or any reminder notice to holders of registered export-import financing debentures shall be delivered to the address indicated in the original register of export-import financing debentures; provided, however, that if the holders have notified the Export-Import Bank of another address, it shall use such address for the delivery.

(3) Any notification or any reminder notice to holders of export-import financing debentures in the bearer form shall be made by means of public notice; provided, however, that if the addresses of the holders are known, such addresses may be used for such notification or remainder notice.

[This Article Wholly Amended by Presidential Decree No. 20827, Jun. 20, 2008]

CHAPTER V. Deleted.

<by Presidential Decree No. 16743, Mar. 4, 2000>

Article 32 Deleted. <by Presidential Decree No. 16743, Mar. 4, 2000>

Article 33 Deleted. <by Presidential Decree No. 16743, Mar. 4, 2000>

Article 34 Deleted. <by Presidential Decree No. 16743, Mar. 4, 2000>

Article 35 Deleted. <by Presidential Decree No. 16743, Mar. 4, 2000>

ADDENDUM

<Presidential Decree No. 4099, Oct. 6, 1969>

This Decree shall enter into force on the date of its promulgation.

ADDENDA

<Presidential Decree No. 7561, Feb. 28, 1975>

(1) (Enforcement Date) This Decree shall enter into force on the date of its promulgation.

(2) (Separate Accounting for Delegated Operations) During the time when the Korea Exchange Bank performs the operations of the Export-Import Bank in delegation pursuant to Article 3 (1) of the Addenda to the Act, such operations and any accounting thereunder shall be conducted independently from the operations and the accounting conducted in accordance with the Korea Exchange Bank Act.

(3) (Reserving Profit Accruing from Delegated Operations) The Korea Exchange Bank shall, following the determination of the Minister of Finance, reserve each fiscal year’s profit accruing from the operations of the Export-Import Bank performed in delegation in the separate account of the Export-Import Bank.

ADDENDUM

<Presidential Decree No. 12091, Mar. 9, 1987>

This Decree shall enter into force on the date of its promulgation.

ADDENDA

<Presidential Decree No. 12603, Dec. 31, 1988>

(1) (Enforcement Date) This Decree shall enter into force on the date of its promulgation.

(2) (Transitional Measures concerning Designation of Products, etc.) The products, materials or resources designated before the effective date of this Decree by the Minister of Finance pursuant to the provisions of the previous Decree shall be construed as the products, materials or resources designated by the president of the Export-Import Bank pursuant to the provisions of this Decree.

ADDENDA

<Presidential Decree No. 13870, Mar. 6, 1993>

Article 1 (Enforcement Date)

This Decree shall enter into force on the date of its promulgation.

Articles 2 and 3 Omitted.

Article 4 (Amendment of Other Acts) (1) through <40> omitted.

<41> The Decree of the Act shall be amended as the following:

The “Minister of Trade and Industry” under subparagraphs 2 and 4 of paragraph 1 of Article 12-2 shall be changed to the “Minister of Trade, Industry and Energy” respectively and subparagraph 4 of paragraph 1 of Article 32 shall be interpreted as referring to the “Assistant Minister I of Ministry of Trade, Industry and Energy.”

<42> through <188> omitted.

ADDENDA

<Presidential Decree No. 14438, Dec. 23, 1994>

Article 1 (Enforcement Date)

This Decree shall enter into force on the date of its promulgation.

Articles 2 through 4 Omitted.

Article 5 (Amendment of Other Acts) (1) through <73> omitted

<74> The Decree of the Act shall be amended as the following:

The “Minister of Finance” under Article 8, subparagraph 1 of Article 10, subparagraphs 2 and 4 of paragraph 1 of Article 12-2, Article 17-2, Articles 18 and 29, subparagraph 8 of paragraph 1 of Article 32, paragraph 6 of Article 32, paragraphs 1 and 3 of Article 33, Article 34, paragraph 1 of Article 36 shall be changed to the “Minister of Finance and Economy” respectively and the “Minister of Trade and Industry under subparagraphs 2 and 4 of paragraph 1 of Article 12-2 shall be changed to “Minister of Trade, Industry and Energy” respectively. The “Deputy Minister of Finance” under subparagraph 1 of paragraph 1 and paragraph 3 of Article 32 shall be changed to the “Deputy Minister of Finance and Economy.”

<75> through <327> omitted.

ADDENDA

<Presidential Decree No. 15750, Apr. 1, 1998>

Article 1 (Enforcement Date)

This Decree shall enter into force on April 1, 1998.

Article 2 Omitted.

Article 3 (Amendment of Other Acts) (1) through <18> omitted

<19> The Decree of the Act shall be amended as follows:

“Director” under subparagraph 3 of paragraph 1 of Article 12-2 shall be changed to “executive officials or directors.”

Article 4 Omitted.

ADDENDUM

<Presidential Decree No. 15904, Oct. 2, 1998>

This Decree shall enter into force on the date of its promulgation.

ADDENDA

<Presidential Decree No. 16743, Mar. 4, 2000>

Article 1 (Enforcement Date)

This Decree shall enter into force on the date of its promulgation.

Article 2 (Application Example concerning Calculation of Total Contribution to Subsidiary Company)

In making the calculation of gross total sum of contributions to the subsidiary companies under the amendments to the latter part of Article 17- 7 (1) 6, the amount of contributions by the Export-Import Bank to the domestic subsidiary companies prior to the enforcement date of this Decree, shall not be included.

Article 3 (Transitional Measures concerning Limit of Credits)

(1) The Export-Import Bank shall, in case where it has the credits in excess of the limit under the amendments to Articles 17-5 (1) and 17- 6 (1) at the time of enforcement of this Decree, exert the efforts to make it comply with the relevant amendments by liquidating it not later than December 31, 2002, and submit the detailed plans for implementing it to the Financial Supervisory Commission within one month from the date of promulgation of this Decree and obtain its approval.

(2) The Export-Import Bank shall, in case where it has the credits in excess of the limit under the amendments to Articles 17-6 (2) at the time of enforcement of this Decree, exert the efforts to make it comply with the relevant amendments by liquidating it not later than April 30, 2000, and submit the detailed plans for implementing it to the Financial Supervisory Commission within one month from the date of promulgation of this Decree and obtain its approval.

ADDENDUM

<Presidential Decree No. 17020, Dec. 27, 2000>

This Decree shall enter into force on the date of its promulgation.

ADDENDUM

<Presidential Decree No. 18824, May 13, 2005>

This Decree shall enter into force on the date of its promulgation.

ADDENDA

<Presidential Decree No. 19422, Mar. 29, 2006>

Article 1 (Enforcement Date)

This Decree shall enter into force on April 1, 2006.

Article 2 (Amendment of Other Acts) (1) through <25> omitted.

<26> The Decree of the Act shall be amended in part as follows:

The “rehabilitation procedures in accordance with the Debtor Rehabilitation and Bankruptcy Act” under subparagraph 1 of paragraph 1 of Article 17-5 shall mean the “reorganization procedures in accordance with the Company Reorganization Act or the composition procedures in accordance with the Composition Act”.

ADDENDUM

<Presidential Decree No. 19551, Jun. 29, 2006>

This Decree shall enter into force on the date of its promulgation.

ADDENDA

<Presidential Decree No. 20720, Feb. 29, 2008>

Article 1 (Enforcement Date)

This Decree shall enter into force on date of its promulgation; provided, however, that among the provisions of the Presidential Decree that are amended in accordance with Article 8 of the Addenda, those provisions which have been announced prior to the enforcement date of this Decree but whose enforcement dates have not been arrived shall be enforced from the respective enforcement date of the relevant Presidential Decree.

Articles 2 through 7 omitted.

Article 8 (Amendment of Other Acts) (1) through <63> omitted.

<64> The Decree of the Act shall be amended in part as follows:

The “Minister of Finance and Economy” under Article 8, Paragraph 1 of Article 10, subparagraphs 2 through 4 of paragraph 1 of Article 12-2, Article 17-2, subparagraph 4 of paragraph 1 of Article 17-5, subparagraph 7 of paragraph 1 of Article 17-7, subparagraph 1(d) of Article 17-8 and paragraph 3 of Article 17-13 shall be changed to the “Minister of Strategy and Finance” respectively.

The “Financial Supervisory Commission” under Paragraphs 1 and 2 of Article 17-4, subparagraph 3(e) of paragraph 1 of Article 17-5, subparagraph 4 of paragraph 1 of Article 17-5, exceptions under each subparagraphs of paragraph 2 of Article 17-5, subparagraph 3 of paragraph 2 of Article 17-5, first part of subparagraph 6, and subparagraph 7 of paragraph 1 of Article 17-7, subparagraph 1 of paragraph 2 of Article 17-7, exceptions under subparagraph 5 of Article 17-8, Article 17-9, Article 17-11, Article 17-12, parts other than each subparagraph of paragraph 2 of Article 17-13, and paragraph 3 of Article 17-3 shall be changed to the “Financial Services Commission.”

The “Minister of Commerce, Industry, and Energy” under subparagraphs 2 and 4 of paragraph 1 of Article 12-2 shall be changed to the “Minister of Knowledge Economy.”

The “Minister of Construction and Transportation” under subparagraph 2 of paragraph 1 of Article 12-2 shall be changed to the “Minister of Land, Transport and Maritime Affairs.” The “Chairman of the Financial Supervisory Commission” under subparagraph 2 of paragraph 1 of Article 12-2 shall be changed to the “Chairman of the Financial Services Commission.”

The “Act on the Establishment, etc. of Financial Supervisory Organizations” and the “Financial Supervisory Commission” under Article 17-11 shall be changed to the “Act on the Establishment, etc. of Financial Services Commission” and the “Financial Services Commission” respectively.

<65> through <68> omitted.

ADDENDUM

<Presidential Decree No. 20827, Jun. 20, 2008>

This Decree shall enter into force on the date of its promulgation.

ADDENDUM

<Presidential Decree No. 21449, Apr. 30, 2009>

This Decree shall enter into force on May 1, 2009.

ADDENDUM

<Presidential Decree No. 22220, Jun. 28, 2010>

Article 1 (Enforcement Date)

This Decree shall enter into force on July 6, 2010.

Article 2 (Amendment of Other Acts) (1) through (12) omitted.

(13) The Decree of the Act shall be amended in part as follows:

The “Korea Export Insurance Corporation under the Export Insurance Act” under subparagraph 5 of paragraph 1 of Article 12-2 shall be changed to the “Korea Trade Insurance Corporation under the Trade Insurance Act”.

The “Korea Export Insurance Corporation under the Export Insurance Act” under subparagraph 2 of paragraph 1 of Article 16 shall be changed to the “Korea Trade Insurance under the Trade Insurance Act”.

The “Korea Export Insurance Corporation” under subparagraph 3 of paragraph 1 of Article 16 shall be changed to the “Korea Trade Insurance Corporation”.

The “Export Insurance Act” under paragraph 2 of Article 16 shall be changed to the “Trade Insurance Act”.

(14) Omitted.

Article 3 Omitted.

ADDENDUM

<Presidential Decree No. 24088, Sep. 7, 2012>

This Decree shall enter into force on the date of its promulgation.

ADDENDA

<Presidential Decree No. 24441, Mar. 23, 2013>

Article 1 (Enforcement Date)

This Decree shall enter into force on the date of its promulgation.

Articles 2 through 4 omitted.

Article 5 (Amendment of Other Acts) (1) through <41> omitted.

<64> The Decree of the Act shall be amended in part as follows:

The “Minister of Foreign Affairs and Trade, the Minister of Knowledge Economy, the Minister of Land, Transport and Maritime Affairs” under subparagraph 2 of paragraph 1 of Article 12-2 shall be changed to the “Minister of Foreign Affairs, the Minister of Trade, Industry and Energy, the Minister of Land, Infrastructure and Transport, the Minister of Oceans and Fisheries.”

The “Minister of Strategy and Finance” under subparagraph 4 of paragraph 1 of Article 12-2 shall be changed to the “Minister of Trade, Industry and Energy.”

<43> omitted.

ADDENDA

<Presidential Decree No. 25312, Apr. 21, 2014>

Article 1 (Enforcement Date)

This Decree shall enter into force on April 22, 2014.

Articles 2 (Transitional Measure on Amendment of Industrial Development Act)

Before July 21, 2014, among the amendment of subparagraph 1 of paragraph 1 of Article 16-3, paragraph 1 of Article 2 of Special Act on the Promotion of Growth and Competitiveness Improvement for Middle-Standing Enterprises shall be construed as paragraph 2 of Article 10 of Industrial Development Act.

ADDENDA

<Presidential Decree No. 29789, May 28, 2019>

This Decree shall enter into force on the date of its promulgation.