REGULATION

ON

SUPERVISION OF CREDIT-SPECIALIZED FINANCIAL BUSINESS

Regulation on Supervision of Credit-Specialized Financial Business

CONTENTS

I.	General Provisions

§1.	Purpose

§2.	Definitions

II.	Registration

§3.	Application for Registration

§4.	Administration of Registration

§5.	Elimination of Registration by Requests

III.	Restrictions on Businesses

§6.	Matters to Be Observed by a Credit Card Company

§7.	Facilities Leasing to Small and Medium Sized Firms, etc.

IV.	Guidance for Sound Management

Section 1. Management Guidance Standards

§8.	Management Soundness Ratios

§9.	Asset Classification, Etc.

§10.	Calculation of Collectible Estimates

§11.	Loan Provisioning Standard

§12.	Risk Management System

§13.	Risk Management Organization

§14.	Risk Management Regulations

§15.	Accounting

Section 2. Management Status Evaluation and Prompt Corrective Action

§16.	Analysis and Evaluation of Management Status

§17.	Management Improvement Recommendation

§18.	Management Improvement Requirement

§19.	Management Improvement Order

§20.	Postponement of Prompt Corrective Action

§21.	Submission and Evaluation of Management Improvement Plan

§22.	Implementation Period of Management Improvement Plan

§23.	Public Disclosure of Management Performance

V.	Preservation of Consumers and Maintenance of Credit System

§24.	[Deleted]

§24-2.	Average Annual Membership Fee

§24-3.	Scope of Street

§24-4.	Procedures for Prior Consent and the Scope of Work Place

§24-5.	Standard of Review for Payment Ability and Credit Limit

§24-6.	Participating in Credit Card Merchant's Management

§24-7.	Credit Information Protection

§24-8.	Compliance Requirements for Collection of Claims

§24-9.	Dispute Procedures for Credit Card Charges

§24-10.	Classification Standard for	Credit Card Membership

§25.	[Deleted]

§26.	Preparation and Administration of Standardized Contracts

VI.	Supervision of Foreign Exchange Soundness

Section 1. Registration of Foreign Exchange Business Institutions

§27.	Foreign Exchange Business Institutions

§28.	Requirement for Registration

§29.	Alteration of Registration Contents

Section 2. Soundness of Foreign Exchange Business

§30.	Management of Liquidity Risk

§31.	Internal Management of Foreign Exchange Business Institutions

§32.	Exceptions to Application

Section 3. Sanctions against Violation of Foreign Exchange Prudential Regulation

§33.	Sanctions for Failure to Achieve Foreign Currency Liquidity

§34.	Reporting on the Present Conditions of Sanctions

Section 4. Reporting Matters Related to Foreign Exchange

§35.	Reporting

VII.	Reporting, etc.

§36.	Notification of Appointment or Dismissal of a Compliance Officer

§37.	Submission of Business Reports

§38.	Request for Designation of Auditor

VIII.	Supplementary Provisions

§39.	Advisory Assistance

§40.	Report

§41.	Detailed Matters

§42.	Special Cases on Asset Management

§43.	Special Cases on Credit Card Business

Addenda

Fully Amended on July 19, 2001. FSC 2001-48

Amended on October 4, 2001. FSC 2001-76

Amended on December 19. 2001. FSC 2001-103

Amended on May 1, 2002. FSC 2002-23

Amended on July 4, 2002. FSC 2002-40

Amended on January 3, 2003. FSC 2002-90

Amended on January 29, 2003. FSC 2003-4

Amended on July 15, 2003. FSC 2003-34

Amended on July 16, 2003. FSC 2003-36

CHAPTER I.

GENERAL PROVISIONS

§1. Purpose

The purpose of this regulation is to prescribe details necessary for the enforcement of pertinent matters related to the business operation, examination, and supervision of credit-specialized financial companies, etc. by the Financial Supervisory Commission (hereinafter, "FSC") as stipulated in the Credit-Specialized Financial Business Act (hereinafter, "the Act"), its enforcement decree (hereinafter, "the Decree"), its enforcement regulation (hereinafter, "the Enforcement Regulation"), Act on Establishment of Financial Supervisory Organizations (hereinafter, "the Supervisory Act") and its enforcement decree, etc.

§2. Definitions

(1) The terms to be used in this Regulation shall be as follows.

1. "Credit" means loans, discounted bills, installment financing, factoring, advance payments on acceptances and guarantees, allowance for payment on guarantee, and short term loans;

2. "Leased assets" include operating leased assets, financial lease payment receivables, advances for acquisition of assets to be leased, rental assets, and related accounts receivable;

3. "Credit card asset" means provisional payment made and settled for merchants, cash advances, credit card loans, and other credit card assets.  <Amended January 29, 2003>

4. "Investment" includes investment in stocks (including bonds) and conditional loans;

5. "Suspense payment of credit nature" means an amount that customers should bear from the advances occurs in relation with subparagraphs 1 through 4;

6. "Credit, etc." includes subparagraphs 1 through 5; and

7. "Overdue credits, etc." means credit, etc. unpaid by the appointed date and includes any of following (a) and (b);

a. Credit, etc. that lost term benefit, even though within the appointed date, for reasons of not paying interest

b. An installment repayment that was not repaid by the appointed date

8. "Debt collection" means collection by credit-specialized financial companies, etc. of their debt claims directly or through the efforts of third parties or collection by credit-specialized financial companies, etc. of debt claims on behalf of third parties.

9. "Corporate card" means a credit card issued to a business entity registered for the business engaged in pursuant to the Value Added Taxation Act, among others.  <Added July 15, 2003>

(2) The terms that are not defined in this Regulation shall be the same as defined in the Act, the Decree, the Enforcement Regulation, the Supervisory Act and its Decree.

CHAPTER II.

REGISTRATION

§3. Application for Registration

(1) A person conducting or intending to conduct leasing business, installment financing, or venture capital services pursuant to the provisions of Article 3 paragraph (2) of the Act, willing to become subject to the application of this Act, and intending to register to conduct credit card business pursuant to the proviso of Article 3 paragraph (1) of the Act shall submit an application that includes information under the following to the Governor of the Financial Supervisory Service (hereinafter, "the Governor").

1. A firm name and the place of main office;

2. Capital stock, and the name of shareholders and their respective shares (excluding minority contributors prescribed by the Article 3 of the Enforcement Regulation);

3. Names of executive directors;

4. Category of a credit-specialized financial business to be operated;

5. Purposes for which the person wishes to be a credit-specialized financial company; and

6. Contents of business being carried out by the person who wishes to be a concurrent credit-specialized financial company.

(2) Application under the provisions of paragraph (1) shall contain the following documents.

1. Articles of association;

2. A register copy of a corporation;

3. Documents certifying payment of capital;

4. Financial statements and attached documents;

5. Documents describing the current business status (amounts of loans, number of customers, etc.) of the person, if an applicant is a credit-specialized financial company, or a concurrent credit-specialized financial company; and

6. Resume and a career certificate of executive directors.

§4. Administration of Registration

(1) Where the applicant for registration under the provisions of Article 3 does not violate the provisions of Article 3 paragraph (3), Articles 5 and 6 of the Act, the Governor shall register the application immediately and notify the applicant.

(2) Where documents submitted under the provisions of Article 3 are insufficient, the Governor may request such documents to be supplemented within 10 days from the date of receipt.

§5. Elimination of Registration by Requests

(1) A person who wishes to request for elimination of registration under the provisions of Article 10 of the Act shall submit to the Governor an application for elimination of registration indicating the following subparagraphs.

1. Name of the corporation;

2. Contents of credit-specialized financial business to be eliminated; and

3. Reasons for elimination of registration;

(2) In case of a request according to paragraph (1) above, the Governor shall eliminate such registration immediately.

CHAPTER III.

RESTRICTIONS ON BUSINESSES

§6. Matters to be observed by credit card companies

A credit card company shall not finance corporate credit card holders under the provisions of Article 13 paragraph (1) subparagraph 1 of the Act; however this shall not apply to cash financing of the corporate credit card holders abroad in the case that they use password.

§7. Facilities Leasing to Small or Medium Sized Enterprises, etc.

The ratio under the provisions of Article 37 of the Act and Article 13-2 of the Decree shall be 30/100 or more of annual execution amount of facilities leasing.

CHAPTER IV.

GUIDANCE FOR SOUND MANAGEMENT

Section 1.

Management Guidance Standards

§8. Management Soundness Ratios

(1) Credit-specialized financial companies shall maintain the management guidance ratios under each of the following subparagraphs pursuant to Article 53-3 of the Act and Article 19-7 of the Decree.

1. Ratio of the adjusted equity capital to the adjusted total assets : 7% or greater (8% for credit card business); and  <Amended January 29, 2003>

2. Ratio of liquidity assets in won currency to liquidity liabilities in won currency: 100/100 or more.

3. 1 month or longer delinquency ratio : less than 10% (restricted to credit card business)  <Added July 16, 2003>

(2) In calculating the ratios stipulated under paragraph (1), the scope of the adjusted total assets, adjusted equity capital, Won currency liquid liabilities, Won currency liquid assets, and the accounts delinquent for 1 month or longer shall be decided by the Governor; provided that the adjusted total assets and adjusted equity capital under paragraph (1) subparagraph 1 shall be based upon the credit specialized financial business' balance sheet and shall be determined, reflective of the standards proposed by the International Bank of Settlement and the characteristics of the credit specialized financial business conducted, in observance of each of the following.  <Amended July 16, 2003>

1. The adjusted total assets shall be total assets subtracted by cash, unsecured short term deposits, government bonds maturing in 3 months or less, and deductible items.

2. The adjusted equity capital shall be core capital and tier 2 capital (within the bounds of the core capital), subtracted by the deductible items.

3. The total assets, deductible items, core capital and tier 2 capital under subparagraphs 1 and 2 shall be determined by the Governor.

(3) The Governor may require the submission of a plan or a contract for the improvement of a financial institution with the possible aggravation of management guidance ratio under paragraph (1) or the one with the management weakness in the management status analysis or evaluation under Article 16, or the Governor may conclude management improvement agreements with the financial institution concerned. However, this is not applicable to any financial institution in receipt of management improvement recommendation, management improvement request, or management improvement order pursuant to Articles 17 to 19  of this Regulation.

§9. Asset Classification, Etc.

(1) Pursuant to the provisions of Article 53-3 paragraph (1) of the Act and Article 19-7 subparagraph 2 of the Decree, credit specialized financial companies shall regularly classify the soundness of holding assets and loans, discounted bills, factoring, securities, account receivable, suspense payments, payment guarantees by authorized or registered business.

1. Credit card business : credit card assets and cash advance limit  <Amended January 29, 2003>

2. Facilities leasing business : leased assets

3. Installment financing business : installment financing

4. Venture financing : stock investments (including bonds) and leased assets

(2) The quality of assets under paragraph (1) shall be classified into "normal," "precautionary," "substandard," "doubtful," and "estimated loss," whereas "substandard" for securities, and "precautionary" and "substandard" for suspense payments (with the exclusion of those on credit) shall be excluded, and whereas only "normal" for cash advance limit shall be classified, and "precautionary," "substandard," "doubtful," and "estimated loss" shall not be classified on a separate basis. <Amended January 29, 2003>

(3) Credit-specialized financial companies must classify the soundness of the assets (actual status of assets regardless of account title) prescribed in paragraph (1) by entire claims to each transaction partner. However, following assets shall be separately classified from the entire claims to each transaction partner.

1. Factoring and discounts of commercial papers of which normal settlements are expected for assurance;

2. Acquired claims along with M&A transactions;

3. Claims related to industry rationalization; (Credit supported toward rationalization designated firms according to the rationalization standards prescribed by industry policy committee, including acquired claims of acquiring firms); and

4. Claims to be able to be classified separately from entire claims to each transaction partner according to the example in appendix table 1.

(4) Securities and suspense payments (excluding suspense payments of credit nature) are classified by an amount of each transaction.

(5) Credit-specialized financial companies must classify the soundness of assets according to asset soundness classification criteria of appendix table 1 on a quarterly basis. However, the evaluation of securities shall be done on a monthly basis, in principle, reflecting the price on the evaluation date.

(6) Notwithstanding the provisions of paragraph (5), criteria under appendix table 1 may not be applied to claims, etc prescribed in following subparagraphs.

1. Claims, etc. on foreign governments or foreign central banks guaranteed by Korean government;

2. Claims, etc. on government-invested institutions prescribed by Article 2 of Framework Act on the Management of Government-Invested Institutions and claims guaranteed by government-invested institutions;

3. Claims on the companies of which debts exceed sales due to the facility financing in the process of business conversion or restructuring, but the excessive debt is expected to be temporary phenomena due to good business growth potential; and

4. Claims on company to which the application of the criteria in appendix table 1 is adjudged to be inappropriate by considering the circumstances based on the objective materials such as financial status, liquidity, profitability, and transaction records of transaction partners.

(7) In case asset classification of credit specialized financial companies is deemed inadequate, the Governor may require credit-specialized financial companies to correct thereof.

§10. Calculation of Collectible Estimates

Credit-specialized financial companies shall calculate collectible estimates of claims, etc. which is classified as "substandard" or below pursuant to Article 9, according to the standard prescribed by the Governor.

§11. Loan Provisioning Standard

(1) Pursuant to Article 53-3 paragraph (1) of the Act and Article 19-7 subparagraph 3 of the Decree, credit specialized financial companies shall accumulate reserves for provisioning in accordance with the results from classifying credits, leased assets (including relevant portion of account receivable), and suspense payments of credit character as of the date of accounts settlement (including semi annual preliminary accounts settlement; the same hereinafter in this Article).

1. 0.5/100 or greater of the assets classified as "normal"; provided, however, 1% or greater for the installment financing and consumer loans extended to individuals by installment financing business. <Amended January 29, 2003>

2. 1/100 or greater of the assets classified as "precautionary"; provided, however, 2% or greater for the installment financing and consumer loans extended by individuals by installment financing business. <Amended January 29, 2003>

3. 20/100 or more of assets classified "substandard";

4. 75/100 or more of assets classified "doubtful"; and

5. 100/100 of assets classified "estimated loss".

(2) Credit specialized financial businesses shall accumulate loss provisioning reserves for the credit card assets and cash advance limits as of the date of accounts settlement as follows.

1. At least 1/100 of assets classified "normal" ;

2. 0.5/100 or greater of the amount subtracted by the cash advances made out of 75% of the cash advances classified as "normal" (with the exclusion of the limits of the accounts with no record of cash advance during the recent 6 months). <Added January 29, 2003>

3. 12% or greater of the assets classified as "precautionary"; <Amended January 29, 2003>

4. At least 20/100 of assets classified "substandard";

5. At least 60/100 of assets classified "doubtful"; and

6. 100/100 of assets classified "estimated loss".

(3) The Governor may stipulate matters about loss provision and other allowances.

§12. Risk Management System

(1) For prevention and efficient management of risks along with various business operation, credit-specialized financial companies shall build and operate a comprehensive risk management system, which can recognize, assess, monitor, and control the corresponding risk pursuant to the provisions of Article 53-3 paragraph (1) of the Act and Article 19-7 subparagraph 4 of the Decree,

(2) For efficient risk management, credit-specialized financial companies shall set up and operate an adequate risk-bearing ceiling and transaction limit by departments or transactions

§13. Risk Management Organization

(1) The board of directors of a credit-specialized financial company shall deliberate  and decide on the matters necessary for risk management, such as approval of  policies and strategies on risk management, and establishment and revision or   regulations on risk management.

(2) For efficient performance of the approvals and decisions on risk management, credit-specialized financial companies shall establish and operate the risk management committee (hereinafter, "the committee"), which shall conduct the business under any of the following subparagraphs.

1. Establishment of policies and strategies on risk management.

2. Decision on bearable risk levels

3. Determination of risk ceilings and approval of exceeding the ceilings.

4. Report to the board of directors on the matters approved or decided by the committee.

(3) Credit-specialized financial companies shall set up a risk management unit for comprehensive management of the risks which may occur in its business and support of the board of directors. As for credit-specialized financial companies with the total assets of one trillion Won or less as of the end of the previous fiscal year ,however, existing unit(s) or person(s) in charge may undertake this duties.

§14. Risk Management Regulations

Credit-specialized financial companies shall formulate and operate internal regulations or standards which contain a basic policy on risk management, organizations, procedures, limit management, internal control, and risk assessment and management system, in accordance with their specific needs and circumstances.

§15. Accounting

(1) Under the provisions of the Article 53-3 subparagraph 1 of the Act and Article 19-7 subparagraph 4 of the Decree. credit-specialized companies shall comply with Corporate Accounting Standards prescribed by Financial Supervisory Commission and Accounting Procedure for Credit-specialized Financial Business prescribed by Securities and Futures Commission.

(2) Credit-specialized financial companies shall keep accounts for credit-specialized financial business separately from the other business within the scope of Corporate Accounting Standards and Accounting Procedure for Leases under paragraph (1), according to document format for balance sheet and income statement determined by the Governor.

(3) Details and accounting standards for foreign exchange accounts consigned under the Enforcement Decree of the Foreign Exchange Transactions Act, which are not determined by Corporate Accounting Standards and Accounting Procedure for Credit-Specialized Financial Business under paragraph (1), such as accounting, species and orders of a title of accounts, etc,, shall be determined by the Governor.

Section 2.

Management Performance Evaluation and Prompt Corrective Action

§16. Management Performance Analysis and Evaluation

(1) The Governor must analyze the management performance of credit-specialized financial companies and thereby supervise the soundness of management practice.

(2) The Governor may evaluate the management performance through the examination(s) of credit-specialized financial companies, and reflect the result(s) thereof in his supervisory and examining functions.

(3) The management performance evaluation pursuant to paragraph (2) shall be conducted upon the head office of a credit-specialized financial company, with respect to such criteria as its "capital adequacy," "asset soundness," "management capacity," "profitability," and "liquidity,", the evaluation results of which being classified into five ratings as 1st grade (excellent), 2nd grade (good), 3rd grade (mediocre), 4th grade (weak), and 5th grade (risky), for each of the criteria separately as well as for the overall performance of the credit-specialized financial company.

(4) The specifics concerning the management performance analysis and evaluation pursuant to paragraphs (1) through (3) shall be determined by the Governor, wherein he or she may take into consideration the management status of controlled subsidiaries, under Article 1-3 of the enforcement Decree of the Act on External Audit of Stock Companies, that are running financial or insurance business.

§17. Management Improvement Recommendation

(1) Pursuant to Article 53-3 paragraph (2) of the Act, in the event a credit-specialized financial company is applicable under any one of the following subparagraphs, the Governor shall subject such a credit-specialized financial company to the implementation of the applicable recommendation(s) he or she issues.

1. When the adjusted equity capital ratio pursuant to Article 8 is 7% or less (8% for credit card business);  <Amended January 29, 2003>

2. When in receipt of Class 3 or better for asset quality or capital adequacy, while in receipt of an overall rating of Class 4 following the management performance evaluation pursuant to Article 16; provided that for a credit card business in receipt of Class 4 or 5 for asset quality or capital adequacy, while in receipt of Class 1 or 3 as a result of the management performance evaluation; and  <Amended January 29, 2003>

3. When a credit-specialized financial company is obviously adjudged to become applicable under subparagraph 1 or 2 as a consequence of the large scale financial accident(s) or bad loans.

4. When the 1 month or longer delinquency ratio is 10% or greater and the net profit for the recent 1 year is negative (restricted to credit card business) as of the end of the quarter <Added January 29, 2003>

(2) Recommendation(s) under paragraph (1) corresponds to either a part or all of the measures under the following subparagraphs.

1. Improvement in personnel management and organizational operation;

2. Cost reduction;

3. Enhancement in the efficiency of business offices administration;

4. Restriction on investment in fixed assets, expansion into new business, or new contribution;

5. Disposal of bad assets;

6. Increase or decrease in capital;

7. Restriction on distribution of dividends; and

8. Allocation of special loan loss provision.

(3) When issuing recommendation(s) pursuant to paragraph (1), the Governor may take such measures as "precaution" or "warning" against any credit-specialized financial company or executive officer(s) related thereof.

§18. Management Improvement Requirement

(1) Pursuant to Article 53-3 paragraph (2) of the Act, in the event a credit- specialized financial company is applicable under any one of the following subparagraphs, the FSC shall subject such a credit-specialized financial company to the implementation of the applicable requirement(s) it issues.

1. When the adjusted equity capital ratio pursuant to Article 8 is less than 4% (6% for credit card business); <Amended January 29, 2003>

2. When in receipt of Class 4 or less for asset quality or capital adequacy, while in receipt of an overall rating of Class 4 as a result of the management performance evaluation pursuant to Article 16; provided that for a credit card business in receipt of an overall rating of Class 4 or 5 as a result of the management performance evaluation <Amended January 29, 2003>

3. When an CSFC is obviously adjudged to become applicable under subparagraph 1 or 2 as a consequence of large scale financial accident(s) or bad loans; and <Revised December 29, 2000>

4. When a credit-specialized financial company in receipt of management improvement recommendation(s) pursuant to Article 17 paragraph (1) fail to implement its management improvement plan(s) with due diligence.

5. When the 1 month or longer delinquency ratio is 15% or greater and the net profit for the recent 1 year is negative (restricted to credit card business) as of the end of the quarter <Added January 29, 2003>

(2) Requirement(s) under paragraph (1) corresponds to either a part or all of the measures under the following subparagraphs.

1. Downsizing of organization;

2. Restrictions on entry into new business

3. Liquidation of subsidiaries;

4. Restriction on holding risky assets and disposal of such assets;

5. Restriction on borrowings;

6. Requiring replacement of executive officer(s); and

7. Matters under Article 17 paragraph (2).

§19. Management Improvement Order

(1) Pursuant to Article 53-3 paragraph (2) of the Act, in the event a credit- specialized financial company is applicable under any one of the following subparagraphs, the FSC shall subject such a credit-specialized financial company to the implementation of the applicable order(s) it issues, and the Governor shall check, after receiving a plan reflecting the contents of such measures within the period determined by the FSC not more than two months, the implementation of the plan by the concerned credit-specialized financial companies.

1. When the adjusted equity capital ratio pursuant to Article 8 is less than 1% (2% for credit card business);

2. When in receipt of an overall rating of Class 5 as a result of the management performance evaluation pursuant to Article 16 (with the exclusion of credit card business);  <Amended January 29, 2003>

3. When the normal operation of a credit-specialized financial company seems to be difficult because such a credit-specialized financial company does not, or can hardly, implement the material matters of its management improvement plan, even though it has been urged to do so pursuant to Article 21 paragraph (7) after such a credit-specialized financial company, which had received the management improvement requirement pursuant to Article 18 paragraph (1), has failed to do so.

(2) The necessary measures mentioned in paragraph (1) corresponds to those applicable under all or part of the following subparagraphs.

1. Disposal of all or part of the issued stocks;

2. Suspension of duties of officers and appointment of administrator;

3. Merger, acquisition by a third party or entry into the subsidiaries of Financial Holding Company.

4. Transfer of all or part of business;

5. Suspension of all or part business within a six months period ;

6. Transfer of all or part of contracts; and

7. Matters under Article 18 paragraph (2).

§20. Postponement of Prompt Corrective Action

Supervisors may postpone a prompt corrective action for a specified period of time when recognizing that a credit-specialized financial company under Article 17 paragraph (1), Article 18 paragraph (1), or any subparagraph of Article 19 paragraph (1) has clearly met the standards through the increase in its capital or sale of its assets, that it will probably satisfy such standards within a short period of time, or that there are some reasons corresponding thereto.

§21. Submission and Evaluation of Management Improvement Plan

(1) A credit-specialized financial company in receipt of management improvement recommendation(s), management improvement requirement(s), or management improvement order(s) pursuant to Articles 17, 18, or 19 respectively (hereinafter, "management improvement measure(s)") shall submit plan(s) (hereinafter, "management improvement plan") which shall reflect the measure(s) taken to the Governor within a time frame the proper authority prescribes, not exceeding two months from the issuing date of such measure(s).

(2) The proper authority shall decide on the approval of the plan(s) submitted pursuant to paragraph (1) within one month from such submission(s).

(3) For the issuance of a management improvement recommendation, requirement, or order pursuant to the provisions of Articles 17 through 19, the Governor shall receive a review of the Management Assessment Committee comprised of outside professionals in advance prior to making an approval decision pursuant to the provisions under paragraph (2). This, however, shall not apply in the event of emergency or deliberation deemed unnecessary by the Governor.

(4) In the event a credit-specialized financial company in receipt of management improvement recommendation(s) does not submit management improvement plan(s) pursuant to paragraph (1), or when such plan(s) submitted fail(s) to prove feasible, the Governor shall disapprove it(them), and shall require implementation of measure(s) partially or entirely applicable under Article 18 paragraph (2).

(5) In the event a credit-specialized financial company in receipt of management improvement requirement(s) does not submit management improvement plan(s) pursuant to paragraph (1), or when such plan(s) submitted fails to prove feasible, the FSC shall disapprove it(them), and shall require implementation of measure(s) partially or entirely applicable under Article 18 paragraph (2). In case of subsequent noncompliance, the FSC may issue management improvement order(s) pursuant to Article 19.

(6) In the event a credit-specialized financial company in receipt of management improvement order(s) does not submit management improvement plan(s) pursuant to paragraph (1), or when such plan(s) submitted fails to prove feasible and is(are) disapproved, the FSC may require implementation of measure(s) partially or entirely applicable under Article 19 paragraph (2) within a time frame it prescribes.

(7) A credit-specialized financial company in receipt of the approval(s) of its management improvement plan(s) pursuant to paragraph (2) shall submit to the Governor a quarterly report on the progress in implementation of the approved plan(s) by the tenth day of each new quarter, whereby the Governor shall examine the implementation results, and when it is adjudged insufficient or its further implementation is likely impractical due to modification(s) in relevant system(s), the Governor may take measure(s) necessary such as including, but not limited to, demanding full implementation of the approved plan(s) within a time frame it prescribes or requiring of modification(s) of the plan(s). However, when demanding implementation or requiring of modification(s) of management improvement plan(s) to a credit-specialized financial company in receipt of management improvement requirement(s) or management improvement order(s), the Governor shall submit a prior report to the FSC.

(8) The Governor shall determine specific matters pertaining to the organization and operation of the Management Assessment Committee under paragraph (3).

§22. Implementation Period of Management Improvement Plan

(1) The implementation period for the management improvement plan of a credit- specialized financial company in receipt of a management improvement recommendation shall be within one year from the date of the approval of the plan, and as for a credit- specialized financial company in receipt of a management improvement requirement the implementation period shall be within one year and six months from the date of the applicable approval, and as for a credit-specialized financial company in receipt of a management improvement order the implementation period shall be determined by the FSC.

(2) In the event of an early successful implementation of the management improvement plan by a credit-specialized financial company in receipt of management improvement measure(s) through such means as increase(s) in capital or resolution(s) of non-performing loans, as a consequence of which the credit-specialized financial company has achieved a significant management rehabilitation, the proper authority may alleviate the degree(s) of the measure(s) required or waive any further implementation.

(3) In the event the implementation period expires and the management of a credit- specialized financial company in receipt of management improvement measure(s) is adjudged sufficiently rehabilitated, the proper authority shall notify the credit- specialized financial company of the termination of the measure(s) taken. In the event the management performance of a credit-specialized financial company is applicable under Article 17 paragraph (1), Article 18 paragraph (1) or Article 19 paragraph (1), the proper authority shall take a separate and corresponding management improvement recommendation(s), management improvement requirement(s) or management improvement order(s).

§23. Management Disclosure

(1) A credit-specialized financial company must disclose the matters prescribed by each of the following subparagraphs within four (4) months from the settlement date. However, disclosure on the result of the first half-year settlement shall be made within two months from the settlement date of the first half year.

1. Matters on organization and manpower;

2. Matters on finance, and profit and loss;

3. Matters on financing and management of funds;

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

5. Matters significantly influencing management such as management policy, and risk management, that are separately required by the Governor.

(2) The specifics of items and methods for the matters prescribed under paragraph (2) shall be complied with the Uniform Disclosure Standards for credit-specialized financial companies stipulated by the Chairman of the Federation.

(3) A credit-specialized company must disclose the relevant contents, in the event the soundness of its management has been damaged or is likely to be damaged due to cases applicable under the following subparagraphs, as prescribed by the Governor.

1. When new bad loans (the sum total of credits which are classified into "doubtful" or "estimated loss" under Article 9 paragraph (2); hereinafter is the same) are incurred which exceed 5 billion Won or 10/100 of its equity capital(paid in capital in case equity capital is less than paid in capital ; hereinafter is the same) as of the end of the previous month;

2. When a credit-specialized financial company incurs, or is expected to incur, loss that exceeds 2/100 of its equity capital as a result of financial accident(s) or crime(s) prescribed by the Governor, except when either the amount of loss is less than one billion Won or the Governor announces the results of his or her investigation into the financial accident(s) or crime(s); and

3. When a credit-specialized financial company incurs loss that exceeds 2/100 of its equity capital as a result of loss in civil suit, etc., except when the amount of loss is less than one billion Won.

(4) The subjects, contents, methods, time, etc. of the disclosure under paragraph (3) shall be determined by the Governor.

(5) In the event a credit-specialized financial company makes disclosure(s) of matters prescribed under paragraphs (1) through (4) without due diligence through false statement(s) or omission(s) of material fact(s) or information, the Governor may require the credit-specialized financial company of redisclosure(s) or correction(s).

CHAPTER V.

CONSUMER PROTECTION AND PRESERVATION OF CREDIT ORDER

§24. [Deleted]

§24-2. Average Annual Membership Fee

The average annual membership fee under Article 6-7 paragraph (2) subparagraph 1 of the Decree shall be KRW 10,000.

§24-3. Scope of Street

"Street" where credit card companies are prohibited from soliciting application for their membership pursuant to Article 6-7 paragraph (2) subparagraph 2 of the Decree includes roads, private roads and passageways as applicable under the following.

1. Roads or private roads under Article 2 of the Road Act and Article 2 of the Private Road Act

2. Public areas and facilities such as parks, stations, bus terminals, playgrounds, shopping malls, museums, athletic fields and schools.

§24-4. Procedures for Prior Consent and the Scope of Work Place

(1) Credit card companies (including "solicitor" who concluded solicitation contract with credit card companies; as such hereinafter in this Article) intending to solicit application for their membership in areas other than work place through visitation by obtaining prior consent pursuant to Article 6-7 paragraph (2) subparagraph 3 and paragraph (3) of the Decree shall observe the following procedures.

1. Inform the purpose of visit : to accept applications for credit card membership and other details including names of visitor, time and place shall be notified before obtaining the consent to visit.

2. Prior consent to visit shall be obtained by objectively verifiable methods available after the visit, such as letter correspondence and electronic mail.

(2) A "work place" where credit card companies may visit for solicitation without prior consent pursuant to Article 6-7 paragraph (2) subparagraph 3 and paragraph (3) means "work place separated from residential facilities (including officetel and multi purpose building)."

§24-5. Standard of Review for Payment Ability and Credit Limit

(1) The following matters shall be included in the standard developed by credit card companies for evaluating payment ability of credit card applicants and membership (hereinafter, "membership") pursuant to Article 6-7 paragraph (1) subparagraph 2 and Article 7-2 paragraph (2) subparagraph 1 of the Decree.

1. Matters to be reviewed when evaluating income, assets and liabilities.

2. Matters concerning standards for evaluating average monthly payment ability

3. Methods for verifying matters under subparagraph 1 and Article 14 paragraph (2) of the Act

(2) Credit card companies shall observe the following for the purposes of administrating the evaluation criteria for the card member's ability to pay.

1. Matters under paragraph (1) subparagraph 1 shall be verified based upon objective data

2. Matters under paragraph (1) subparagraph 1 shall be reasonably reflected to review payment ability of membership

3. Data submitted by membership in connection with changes in their payment ability shall be fully reflected

(3) Pursuant to Article 7-2 paragraph (2) subparagraph 2 of the Decree, credit card companies shall observe the following to ensure that credit cards are not abused as a result of granting excessive credit limit.

1. Credit limit shall be determined within the range either requested or consented to in advance by membership.

2. Credit limit shall be determined based upon the membership's average monthly payment ability evaluated pursuant to the provisions of paragraph (1), credit rating, and transaction history.

(4) Credit card companies shall report to the Governor on any changes made in their standard of review for payment ability pursuant to Article 6-7 paragraph (1) subparagraph 2 of the Decree without delay.

§24-6. Participating in Credit Card Merchant's Management

Credit card companies shall ensure that the following are observed by credit card merchants for every credit card transaction by entering into a mutually binding contract pursuant to Article 7-2 paragraph (2) subparagraph 4 of the Decree; provided, however, where a transaction is conducted on line, credit card companies shall ensure that participating stores verify identity of credit card user by electronic certification, password, and etc.

1. Verify whether signature on credit card matches that on sales slip.

2. Verify whether photograph identifying credit card user matches the photograph on the credit card.

3. Verify identity of credit card user if transaction exceeds KRW 500,000 by checking identification cards.

§24-7. Credit Information Protection

(1) Credit card companies shall ensure that credit information of their membership is not disclosed for the purposes other than their business pursuant to Article 24 of the Act and Article 7-2 paragraph (2) subparagraph 5 of the Decree.

(2) Credit card companies shall obtain written consent to disclose credit information of their membership to any third party each paper drawn up for its own object separately from application form for membership pursuant to Article 23 and Article 24 paragraph (1) subparagraph 1 of the Use And Protection Of Credit Information Act.

(3) Credit card companies shall not deny issuance of credit card because their membership do not consent to disclosure of credit information to a third party other than credit information businesses and credit information collection agencies stipulated under Article 2 of the Use And Protection Of Credit Information Act.

§24-8. Compliance Requirements for Collection of Claims

(1) Credit card companies shall not commit acts under the following for the purposes of collection pursuant to Article 24 of the Act and Article 7-2 paragraph (2) subparagraph 6 of the Decree.

1. Act of violence, threat or intimidation

2. Act of causing concerns to, or demanding payment from, persons related to debtor (such as cosigner, relative and fiance, cohabitant, and coworker; the same hereinafter) without reasonable cause

3. Act of delivering false information on liability to debtor or person related

4. Act of informing disadvantages one would have when registered on credit delinquency list in a false or exaggerated manner

5. Act of threatening to sue for fraud or suing for fraud even when debtor had not forged documents to prove payment ability

6. Visiting or making telephone calls at late night (between 9 pm and 8 am)

7. Other acts of collection in misalignment with ordinary methods or procedures, resulting in damages to privacy and peace at work of the debtor or persons related to the debtor.

(2) Credit card companies shall ensure that any transferee or assignee of claims observe the provisions of paragraph (1).

§24-9. Dispute Procedures for Credit Card Charges

(1) Where a credit card holder raise any written objection charges made to his credit card account pursuant to Article 24 of the Act and Article 7-2 paragraph (2) subparagraph 7 of the Decree, the credit card company shall conduct a thorough investigation of card issuance, date and time of the disputed charges made, account statement, and the user of card, the results of which shall be notified to the credit card holder in writing. The notification shall also include statement that the credit card holder may request for reinvestigation to the Financial Supervisory Service within seven days from the date of notification if he should have any objection to the notification.

(2) Where a credit card holder requests for reinvestigation with the Financial Supervisory Service within seven days from the date of notification on investigation, the credit card company shall not collect charges under dispute until the reinvestigation is completed and shall not register the credit card holder on credit delinquency list.

§24-10. Classification Standard for Credit Card Membership

Credit card companies shall reflect credit rating and profitability contribution of membership when classifying membership for the purposes of applying differing rates for fees and etc. pursuant to Article 24 of the Act and Article 7-2 paragraph (2) subparagraph 8 of the Decree.

§25. [Deleted]

§26. Preparation and Administration of Standardized Contracts

(1) Pursuant to the provisions of Article 24 of the Act and Article 7-2 paragraph (2) subparagraph 3 of the Decree, credit card companies shall prepare and administrate standardized contracts in accordance with standards provided under the following subparagraphs.

1. A standardized contract shall be drawn up impartially in accordance with the principle of trust and good faith;

2. Interest of the customer shall be protected to the highest degree;

3. A sound financial business order shall be preserved;

4. The responsibility for illegal usage of a credit card shall not be imputed to customers unfairly;

5. In the event the meaning of a standardized contract is not clear, it shall be construed in favor of customers; and

6. Related laws and ordinances including Regulation of Standardized Contracts Act shall not be violated.

(2) Pursuant to the provisions of Article 24 of the Act and Article 7-2 paragraph (2) subparagraph 3 of the Decree, credit card companies shall prescribe matters provided under the following subparagraphs in their contracts.

1. Matters concerning procedures for renewal□substitutive issuance of credit card

2. Matters concerning procedures for determining credit limit

3. Matters concerning division of responsibilities among credit card company□member□participating store as a result of loss□theft□forgery□ alteration of credit card

4. Matters concerning responsibilities of credit card company and management procedures for charges disputed by card holder

5. Matters concerning reasons for termination of contract and termination procedures

6. Matters concerning notification procedures for disclosure of credit information of membership

7. Other matters concerning rights and responsibilities of membership and participating merchants, such as procedures for using credit card, annual membership fee, and etc..

CHAPTER VI.

SUPERVISION OF FOREIGN EXCHANGE SOUNDNESS

Section 1.

Registration of Institutions Handling Foreign Exchange Business

§27. Institutions Handling Foreign Exchange Business

"An institution handling foreign exchange business" in this Chapter mean those registered to conduct the foreign exchange business under Article 8 paragraph (1) of the Foreign Exchange Transactions Act.

§28. Requirements for Registration

(1) "Standards for financial soundness applicable to financial institutions concerned determined by the FSC" under Article 13 paragraph (2) subparagraph 1 of the enforcement decree of the Foreign Exchange Transactions Act shall be as the following subparagraphs.

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

2. Equity capital standards under Article 26;

(2) When the Minister of Finance and Economy requests the confirmation of adequacy of the requirement for registration under Article 13 paragraph (3) of Enforcement Decree on Foreign Exchange Transaction Act, the Governor shall confirm it in accordance with the standards under paragraph (1).

§29. Alteration of Registration

(1) When intending to establish or close its domestic offices handling foreign exchange business or to change its addresses pursuant to Article 16 paragraph (1) of the decree of the Foreign Exchange Transactions Act, an institution handling foreign exchange business shall report to the Governor at least seven days before the date thereof.

(2) Detailed matters concerning declaration under paragraph (1) shall be determined by the Governor.

Section 2.

Management of Foreign Exchange Soundness

§30. Liquidity Risk Management

(1) An institution handling foreign exchange business shall classify and manage its assets and liabilities in foreign currency  by each remaining maturity date under Article 21 subparagraph 4 of the enforcement Decree of the Foreign Exchange Transactions Act, and maintain the ratio under the following subparagraphs.

1. The Ratio of assets with remaining maturity of less than three months to liabilities with remaining maturity of less than three months : 80/100 or above; and

2. The ratio of mismatch in maturities of assets and liabilities in foreign currency.

a. Ratio of assets exceeding liabilities in the event of remaining maturity of less than seven days; 0/100 or above

b. Ratio of debts exceeding assets being in the event of remaining maturity of less than one month : 10/100 or below

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

§31. Internal Management of Financial Institution

(1) An institution handling foreign exchange business shall establish and operate its internal management standards for each kind of risks occurred in foreign currency transactions, such as country risks, large credit risks, financial derivatives transaction risks, market risks and others under Article 21 subparagraph 6 of the Enforcement Decree of the Foreign Exchange Transactions Act

(2) In the event an institution handling foreign exchange business intends to establish and alter the management standards or make foreign currency transactions beyond the management standards under paragraph (1), it shall pass through the resolution of an internal risk management organization.

(3) The Governor shall establish examplary standards, and when the risk management standards of an institution handling foreign exchange business are deemed inappropriate, the Governor may request the correction thereof .

§32. Preclusion

(1) The provisions under this chapter are not applicable to the management accounts such as trust accounts of the institutions handling foreign exchange business.

(2) The provisions under Sections 2 through 4 of this chapter are not applicable to the institution handling foreign exchange business whose head office is located overseas.

Section 3.

Sanctions against Violations of the Supervision on

Foreign Exchange Soundness

§33. Sanctions for Failure to Achieve Foreign Currency Liquidity

(1) In the event an institution conducting foreign exchange business fails to achieve and maintain the ratios prescribed under Article 30 twice or less during the past one year period (and three times or less during the past one year period with respect to the ratios provided under Article 30 paragraph (1) subparagraph 2 item a), it shall submit an explanatory statement and recovery plan to the Governor in accordance with the stipulations of the Governor.

(2) In the event an institution conducting foreign exchange business fails to achieve and maintain the ratios prescribed under Article 30 three times during the past one year period, ascended ratios under the following subparagraphs shall be applied notwithstanding Article 30.

1. Ratio provided under Article 30 paragraph (1) subparagraph 1 : 85/100 or above

2. Ratio provided under Article 30 paragraph (1) subparagraph 2 item b : 5/100 or below

(3) Where an institution conducting foreign exchange business becomes applicable under the following subparagraphs, it shall suspend new borrowings in foreign currency with maturity of less than three months (except the Call Money with maturity of less than 30 days) until it achieves the ratios under the following subparagraphs.

1. Failure to achieve and maintain the ratios provided under paragraph (2) subparagraph 1 or Article 30 paragraph (1) subparagraph 1 at least four times during the past one year period : 85/100 or above.

2. Failure to achieve and maintain the ratios provided under Article 30 paragraph (1) subparagraph 2 item a at least four times during the past one year period : 5/100 or above.

3. Failure to achieve and maintain the ratios provided under paragraph (2) subparagraph 1 or Article 30 paragraph (1) subparagraph 2 item b at least four times during the past one year period : 5/100 or below.

(4) Even where sanctions are applicable under paragraph (2) or (3), where inextricable due to economic and financial circumstances domestic and abroad, the Governor may recommend exemption, suspension or removal of sanctions in effect to the FSC; provided that, for exemption, sanction subject to exemption shall not be counted toward the number of violation.

(5) In the event an institution conducting foreign exchange business fails to achieve and maintain the ratios provided under Articles 30 at least twice during the past one year period, the Governor may take actions necessary to the company such as shortening the length of reporting cycle provided under Article 35.

§34. Status Report on Sanctions

When imposing sanctions against institutions handling foreign exchange business under Article 33, the Governor shall report the status of sanctions to the FSC within one month after the end of every quarter.

Section 4.

Reporting on Foreign Exchange

§35. Reporting

An institution handling foreign exchange business shall report its current status of assets and liabilities in foreign currency, its current status of financing and operation of funds in foreign currency and other matters necessary for enforcement of this Chapter in such manners as determined by the Governor.

CHAPTER VII.

REPORTING, ETC.

§36. Notification of appointment or dismissal of a compliance officer

Credit-specialized financial companies shall notify the Governor to appoint or dismiss a compliance officer in such manner as determined by the Governor, pursuant to Article 19-5 paragraph (1) of the Decree.

§37. Submission of Business Reports

(1) In accordance with Article 54 of the Act and Article 23-2 of the Decree, credit specialized financial companies shall submit quarterly business reports to the Governor through the Chairman of Korea Credit Specialized Financial Business Association.

(2) Submission of business reports under paragraph (1) may be undertaken in an electronic document form through the information communication network (under Article 2 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, Etc.).

(3) Specific standards and procedures for the business reports under paragraph (1) shall be separately determined by the Governor.

§38. Request for Designation of Auditor

(1) "Cases where the FSC deems it necessary to designate an auditor as a result of the examination" mentioned in Article 20 of the Decree mean the cases where the unsound assets (assets classified as substandard or below under the classification mentioned in Article 9 paragraph (2)) exceeds 200/100 of the equity capital.

(2) The Governor shall request the SFC(Securities and Futures Commission) to designate an auditor for the credit-specialized financial company which falls under paragraph (1) and Article 20 of the Decree.

(3) The detail matters on the request for designation of an auditor pursuant to paragraph (2) shall be determined by the Governor.

CHAPTER VIII.

SUPPLEMENTARY PROVISIONS

§39. Advisory Assistance

Pursuant to Article 37 subparagraph 3 of the Act Concerning the Establishment of Financial Supervisory Organizations, the Governor shall assist the FSC in the following services:

1. receiving reports and applications filed with the FSC;

2. writing propositions and reports to the FSC;

3. enforcing or implementing provisions or decisions of the FSC; and

4. administration or disposition of matters delegated or directed by the FSC

§40. Report

With respect to matters in the following subparagraphs, the Governor must make a quarterly report to the FSC on the results thereof:

1. registration pursuant to Article 4;

2. elimination of registration pursuant to Article 5;

3. notification of appointment or dismissal of a compliance officer pursuant to Article 35;

4. report pursuant to Article 37; and

5. other matter delegated by the FSC

§41. Detailed Matters

The Governor may determine detailed matters necessary for the enforcement of this regulation.

§42. Special Cases on Asset Management <Added January 3, 2003>

(1) In the event a credit specialized financial business intends to acquire beneficiary certificates of a securities investment trust or stocks of a securities investment company for the purposes of entrusting a trustee company established under the Securities Investment Trust Act or an asset management company established under the Securities Investment Company Act (hereinafter, "the asset manager") with asset management, each of the following standards shall be complied with.

1. That is shall be a securities investment trust company established under Article 33 paragraph (2) of the Securities Investment Trust Act, or a securities investment company established under Article 79 paragraph (1) of the Securities Investment Company Act, whose beneficiary or shareholder shall each be a single credit specialized financial business, securities investment trust, or a securities investment company (hereinafter, "the privately placed single fund");

2. That the asset management guidelines specifying the purpose of asset management, operating strategy such as major investment targets, investment restrictions, performance assessment, and termination of contract, among others, shall be observed;

3. That the following items shall be included in the internal control standards under Article 50-6 of the Act and Article 19-4 of the Enforcement Decree;

a. Matters pertaining to the appointment and dismissal of the asset manager;

b. Matters pertaining tot he asset manager's asset management performance and results;

c. Matters pertaining to the organization for monitoring the propriety of the asset management undertaken by the asset manager;

d. Matters pertaining to the organization for monitoring the propriety of the asset management by the credit specialized financial business; and

e. Other matters needed for the sound asset management by the credit specialized financial business.

(2) With respect to a securities investment trust or a securities investment company other than the privately placed single fund, whose beneficiary or shareholder is a single credit specialized financial business (hereinafter, "the publicly placed single fund"), the provisions of paragraph (1) subparagraphs 2 and 3 and paragraph (2) shall be applied mutatis mutandis.

§43. Special Cases on Credit Card Business

The provisions of Article 8 paragraph (1) subparagraphs 1 and 3; Article 17 paragraph (1) subparagraphs 1, 2, and 4; Article 18 paragraph (1) subparagraph (1) subparagraphs 1, 2, and 5; and Article 19 paragraph (1) subparagraphs 1 and 2 shall not apply with respect to the businesses having membership and conducting credit card business.

Addendum

This Regulation shall be effective on the date of promulgation. However, Articles 17 through 22 shall be effective from July 1, 2002.

Addendum

(October 4, 2001)

§1. Effective Date

This Regulation shall be effective on the date of promulgation.

Addendum

(December 19, 2001)

§1. Effective Date

This Regulation shall be effective on the date of promulgation; provided, however, that the amended provisions of Article 33 shall be effective from January 1, 2002.

Addendum

(May 1, 2002)

This Regulation shall be effective on the date of promulgation.

Addenda

(July 4, 2002)

§1. Effective Date

This Regulation shall be effective on the date of promulgation.

§2. Interim Measures

Where a credit card company determines credit limit for the use of credit card, and where current credit limit is maintained for the valid term of credit card issued prior to the promulgation of the amended provisions, the amended provisions of Article 24-5 paragraph (3) of this Regulation shall not apply.

Addenda

(January 3, 2003)

§1. Enforcement Date

This Regulation shall be effective on the date of promulgation.

§2. Applicable Cases

With respect to the application of the amended provisions of Article 42 to the privately or publicly placed single funds established prior to the enforcement of this Regulation, Article 42 paragraph (1) subparagraph 2 shall apply with respect to the acquisition of beneficiary certificates or stocks of the privately or publicly placed single funds following the enforcement of this Regulation.

Addendum

(January 29, 2003)

This Regulation shall be effective on the date of promulgation; provided, however, the provisions of Article 8; Article 11 paragraph (2) subparagraph 2; and Articles 17 through 19 shall be effective from April 1, 2003.

Addendum

(June 27, 2003)

This Regulation shall be effective on the date of promulgation.

Addendum

(July 11, 2003)

This Regulation shall be effective on the date of promulgation.