REGULATION

ON

FINANCIAL INSTITUTIONS

TO PROMOTE CORPORATE RESTRUCTURING

Regulation on Financial Institutions to Promote Corporate Restructuring

CONTENTS

I.	General Provisions

§1.	Purpose

§2.	Definition

II.	Internal Accounting Management System

§3.	Public Disclosure of Internal Accounting Management System

III.	Credit Extension

§4.	Scope of Credit Extension

IV.	Selection and Change, Etc of Main Creditor Bank

§5.	Main Creditor Bank for Businesses under Main Debtor Groups

§6.	Main Creditor Bank for Businesses Other Than Those under Main Debtor Groups

V.	Assessment of Credit Risks and ExPost Management

§7.	Selection of Business Subject to Assessment

§8.	Standards for Credit Risk Assessment.

§9.	Basic Assessment

§10.	Detailed Assessment

§11.	Credit Risk Assessment Committee

§12.	Credit Risk Assessment of Domestic Branches of Foreign Bank

§13.	Ex Post Management of Credit Risk Assessment.

§14.	Notice of Standards for Credit Risk Assessment and ExPost Management

§15.	Measures of Main Creditor Bank Against Business under Management by Lead	Creditor Bank

VI.	Request for Deferment of Exercising Claims

§16.	Requirements for Request

Addenda

Enacted on September 18, 2001. FSC 2001-67

Amended on October 2, 2002. FSC 2002-67

CHAPTER I.

GENERAL PROVISIONS

§1. Purpose

The purpose of this Regulation is to prescribe matters determined  by the Financial Supervisory Commission (hereinafter, "FSC") under the Corporate Restructuring Promotion Act (hereinafter, "the Act") and the its enforcement decree (hereinafter, "the Decree") and details necessary for the enforcement of pertinent matters.

§2. Definition

The terms used in this Regulation shall have the same meanings as defined in the Act and the Decree.

CHAPTER II.

INTERNAL ACCOUNTING MANAGEMENT SYSTEM

§3. Public Disclosure of Internal Accounting Management System

(1) For the public disclosure under Article 4 paragraph (3) of the Decree, listed and association registered corporations shall attach documents pertaining to the matters applicable under each of the following subparagraphs (hereinafter, "operational report of internal accounting management system") to the business report submitted pursuant to Article 186-2 of the Securities and Exchange Act .

1. Matters pertaining to the rule for internal accounting management and the management and operation system under Article 4 paragraph (1) of the Act.

2. Operational status of the internal accounting management system reported to the board of directors and the auditor by the internal accounting manager under Article 4 paragraph (4) of the Act.

3. Contents of auditor's evaluation of the operational status of the internal accounting management system and report to the board of directors under Article 4 paragraph (5) of the Act.

4. Auditor's comprehensive opinions reflected in his audit reports under Article 5 paragraph (2) of the Act.

5. Matters necessary for the public disclosure of the internal accounting management system.

(2) The operational report of internal accounting management system under paragraph (1) shall be prepared in accordance with the format provided in the Attached Table 1.

CHAPTER III.

CREDIT EXTENSION

§4. Scope of Credit Extension

(1) The amount of credit extension under Article 2 subparagraphs (3) and (4) of the Act refers to the total sum of titles of accounts on the balance sheet of the financial institutions applicable under Article 2 subparagraph (1) items a through k of the Act prescribed by <Attached Table> and bonds of identical characteristic of the said titles of accounts retained by the creditor financial institutions applicable under Article 2 subparagraphs l and m of the Act.

(2) The credit extensions under Article 2 subparagraph (6) of the Act shall be loans (in the event of concluding a contract for transactions under credit limit between a financial institution and a corporation, credit limit shall be used as basis), payment guarantees, securities and other bonds for which repayment may be required. However, the amount a claim guaranteed by and among creditor financial institutions is excluded from the claim amount.

CHAPTER IV.

SELECTION AND CHANGE, ETC OF LEAD CREDITOR BANK

§5. Main Creditor Bank for Businesses under Main Debtor Groups

A main creditor bank of a business under main debtor groups selected by the Governor of the Financial Supervisory Service (hereinafter, "the Governor") under Article 79 paragraph (1) of the Regulation on Supervision of Banking Business shall be the main creditor bank for the business concerned as determined by Article 80 paragraph (2) of the Regulation on Supervision of Banking Business.

§6. Main Creditor Bank for Businesses Other Than Those under Main Debtor Groups

(1) A main creditor bank for any business other than those under main debtor groups shall be the bank extending the largest amount of credit based upon the business credit transaction information of the Korea Federation of Banks as of the end of February and July every year. Provided, however, that correction of errors in business credit transaction information by the Korea Federation of Banks is made within one month from the determination of main creditor bank for each business and other causes result in changing the amount of credit extension, main creditor bank shall be redetermined on the basis of the changed terms of credit extension.

(2) Notwithstanding paragraph (1), creditor banks may alter main creditor bank through mutual consultation, and the main creditor bank selected through the consultation shall immediately report changes in status to the Governor.

(3) Where a creditor bank intends to change main creditor bank pursuant to paragraph (2), but consultation does not proceed, the Governor may change main creditor bank at the request of main creditor bank or other creditor banks, in which case the Governor shall consider the following:

1. Opinions of creditor bank

2. Size, progress and composition of credit extensions by each creditor bank

3. Size and composition of collateral secured by each creditor bank

4. Opinions of the business concerned.

5. Size of credit extensions to all of the same business group for each creditor bank if the business concerned is an affiliate company of a business group prescribed under Article 2 paragraph (2) of the Monopoly Regulation and Fair Trade Act.

(4) The Governor shall notify each creditor bank of alteration of main creditor bank pursuant to paragraph (2) or (3).

CHAPTER V.

ASSESSMENT OF CREDIT RISKS AND EXPOST MANAGEMENT

§7. Selection of Business Subject to Assessment

(1) Creditor financial institutions applicable under Article 2 subparagraphs l and m of the Act shall notify the Korea Federation of Banks of the size of credit extensions for each business under Article 4 paragraph (1) as of the end of February and July every year until the end of March and August.

(2) A creditor bank shall identify the size of credit extensions for business pursuant to Article 4 paragraph (1) as of the end of February and July every year pursuant to the business credit transaction information of the Korea Federation of Banks and the contents notified to the Korea Federation of Banks under paragraph (1), and select the business applicable under Article 2 paragraph (4) of the Act (hereinafter, "business subject to assessment"); provided, however, that where correction of errors in business credit transaction information by the Korea Federation of Banks is made within one month from the selection of a business subject to assessment and other causes result in changing the amount of credit extension, business subject to assessment shall be reselected on the basis of the changed terms of credit extension.

§8. Standards for Credit Risk Assessment.

(1) For regular assessment of corporate credit risk, creditor bank shall prepare and operate the standards applicable under the following subparagraphs.

1. Assessment standard as to whether a business is likely to become insolvent with preliminary signs (hereinafter, "basic standard")

2. Assessment standard as to whether the business having the potential of becoming insolvent as a result of assessment based upon basic standard is applicable under the term of insolvent business (hereinafter, "detailed standard")

(2) Creditor bank shall prepare the basic standards in consideration of matters applicable under the following subparagraphs.

1. Whether interest coverage ratio (operating income/interest expenses) has been maintained below a certain level for the recent past 3 years consecutively

2. Whether the ensuing result of the model of credit risks assessment in accordance with standards for assets classification under Article 27 of the Regulation on Supervision of Banking Business is below the category of "precautionary"

3. Whether a business is managed as one with insolvency signs, etc pursuant to internal policies of a creditor bank

4. Whether audit opinion as a result of external audit performed by auditor (within recent 6 months) is qualified or is an adverse opinion or a disclaimer of opinion.

5. Whether prompt credit risk assessment is necessary due to a sudden credit rating deterioration, excessive credit extensions from non bank financial institutions, and concerns about long-term arrears and other reasons.

(3) Creditor bank shall prepare the detailed standards in consideration of matters applicable under the following subparagraphs.

1. Industry risks including economic cyclicality sensitivity, growth prospect for each industry for the next 3 years.

2. Business risks including market position, market share, and ranking.

3. Management risks including corporate governance, moral hazards of the management.

4. Financial risks including short term borrowings ratio, progress on sales and others.

5. Cashflows including interest coverage ratio and debt service ratio.

§9. Basic Assessment

(1) Creditor bank shall assess credit risks of a business subject to assessment in accordance with the basic standards based on the recent available reports on the final accounts at the end of the year or at semi annual period in April and September every year (hereinafter, "basic assessment")

(2) Creditor bank shall notify main creditor bank of the list of businesses having potential for becoming insolvent as a result of the basic assessment (hereinafter, "businesses subject to detailed assessment") by the end of April and September.

§10. Detailed Assessment

(1) Creditor bank shall assess credit risks of businesses subject to detailed assessment in accordance with the detailed standards based on the recently available reports on the final accounts from the end of the year or semi annual period (hereinafter, "detailed assessment"); provided, however, that where it is clear that businesses subject to detailed assessment are not applicable for the basic standards before the termination of detailed assessment, the businesses concerned may be excluded therefrom.

(2) Where a sudden credit rating deterioration and other emergency circumstances should arise, creditor bank shall so notify main creditor bank and immediately implement a detailed assessment in lieu of basic assessment.

(3) Creditor bank shall complete detailed assessment within 3 months from the termination of basic assessment.

(4) Main creditor bank shall prepare and notify creditor bank of a plan on the monthly detailed assessment of the businesses subject to detailed assessment within 10 days from the termination of basic assessment, and report to the Governor.

§11. Credit Risk Assessment Committee

(1) Creditor bank shall establish a committee for credit risk assessment in order to perform detailed assessment pursuant to Article 10 paragraph (1).

(2) Creditor bank shall not select officers and employees standing in direct relation to credit extension as members of the Credit Risk Assessment Committee and instead, shall ensure that objectivity of assessment is maintained.

(3) Creditor bank shall determine detailed matters necessary for the organization and operation of the Credit Risk Assessment Committee.

§12. Credit Risk Assessment of Domestic Branches of Foreign Bank

Notwithstanding Articles 8 and 11, creditor bank of a domestic branch of a foreign bank and business subject to assessment whose total credit extensions are less than KRW 300 million may perform a basic assessment pursuant to Article 9 paragraph (1) and a detailed assessment pursuant to Article 10 paragraphs (1) and (2) with respect to business subject to assessment based upon the standards for loan administration in operation.

§13. Ex Post Management of Credit Risk Assessment.

⑴ After performing detailed assessment, creditor bank shall classify businesses subject to detailed assessment in accordance with the following.

1. Business capable of conducting ordinary business

2. Business most likely to become insolvent with preliminary signs

3. Business with insolvency signs

4. Business incapable of normalization

⑵ Creditor bank shall take proper measures including financial support to enable conducting normal business with respect to business classified as one under paragraph (1) subparagraph 1.

⑶ Creditor bank shall issue a management improvement recommendation to a business classified as one under paragraph (1) subparagraph 2 pursuant to the provisions of Article 10 paragraph (3) of the Act, and shall so notify main creditor bank and take other appropriate measures such as reflecting the recommendation in credit review.

⑷ Creditor bank shall require main creditor bank of a business classified as one under paragraph (1) subparagraph 3 through 4 to take measures pursuant to Article 12 of the Act.

⑸ Creditor bank shall prepare and administrate detailed standards for ex-post management of regular assessment of businesses' credit risks (hereinafter, "ex-post management standards").

§14. Notice of Standards for Credit Risk Assessment and ExPost Management

Where standards for credit risk assessment and ex-post management are established or altered pursuant to Articles 8 and 13, creditor bank shall so notify business subject to assessment and most recently selected pursuant to Article 7 within 60 days from the date of establishment or alteration.

§15. Measures of Main Creditor Bank Against Business under Management by Main Creditor Bank

Where main creditor bank initiates bank management procedures pursuant to Article 12 paragraph (1) subparagraph 3 of the Act, main creditor bank shall so notify creditor bank without delay.

CHAPTER VI.

REQUEST FOR DEFERMENT OF EXERCISING CLAIMS

§16. Requirements for Request

(1) Main creditor bank shall report convocation of the creditor financial institutions' or the creditor banks' council for initiating joint management by the creditor financial institutions or by the creditor banks to the Governor in accordance with the format provided in Attached Table 2.

(2) The Governor may request creditor financial institution to defer exercise of claims pursuant to Article 14 paragraph (1) of the Act where main creditor bank attaches agreement on the deferment of exercising claims of the creditor financial institution whose credit extensions are at least 50 percentage of that provided under Article 4 paragraph (1) (hereinafter, "deferment agreement"), and submit an explanatory statement in writing for the deferment.

(3) Notwithstanding paragraph (2), the Governor may request creditor financial institution for the deferment of exercising claims under Article 14 paragraph (1) of the Act, where time and other constraints force main creditor bank from submitting the deferment  agreement, or where deferment is deemed necessary because the business concerned is experiencing difficulties in making efficient progress in corporate restructuring due to a surge of claim recoveries by the creditors.

Addenda

§1. Effective Date

This Regulation shall be effective on the date of promulgation.

§2. Cases on Credit Risk Assessment in 2001

Notwithstanding Articles 7 and 9, creditor bank shall perform basic assessment by October 15, 2001 in connection with credit risk assessment pursuant to the provisions of Chapter 5 in 2001, and notify main creditor bank of the list of businesses subject to detailed assessment.

Addendum

(October 12, 2002)

This Regulation shall be effective on the date of promulgation. This Regulation shall apply beginning with the "Operating Report on the Internal Accounting System" attached to the business reports of the businesses closing in December 2002.