www.keb.co.kr

SMART &PROFITABLEGROWTH
Enhancing value through differentiation

Korea Exchange Bank
2009
Annual ReportKEB’s corporate identity (CI) encapsulates our strategic
vision as a global bank expanding throughout Asia andthe world. It also symbolizes our unfaltering desire toprovide our customers with the highest level of service.

Contents

p1

Profilep2

Letter to Shareholders from the Chairman

p4

Letter to Shareholders from the President and CEO

p8

Financial Highlights

p 10

Review of Operations

p 46

Management Discussion & Analysis

p 54

Financial Statements

p 198 Organization Chart
p 199 Board of Directors & Managing Directors
p 200 Global Directoryp 201 Overseas Network
p 203 Domestic Network

Profile

SMART &PROFITABLE GROWTH
Korea Exchange Bank (KEB) was established in 1967 as

Unlike many other domestic banks, however, we survived

a government-owned banking institution specializing

without government rescue or public bailout. With thein foreign exchange and international trade financenew capital from our majority shareholder, Lone Starand has maintained a preeminent position in these

Funds, and a new spirit, the men and women of KEB havefields. KEB was privatized in 1989, and has continuously

managed a remarkable turnaround. The platform forstrengthened capabilities to grow as one of the

profitable growth was built in 2004.

country’s premiere commercial banks. Today, we are
Korea’s leading international bank, with strong retail

Since 2005, we have proved ourselves as a healthy andbanking and credit card operations complementing

strong institution, with profitability, capital adequacy andour longstanding corporate banking and trade financeportfolio quality at the best levels in our history. We are able

expertise.

to continue “Smart & Profitable” growth by leveraging theunique strengths of our franchise and by focusing on the

Similar to other domestic banks, KEB confronted thequality of our business.

dual threats posed by the collapse of large corporations
following the 1997 Asian financial crisis and the bursting

KEB avoided toxic assets that have damaged many otherof the consumer credit card bubble in 2003.

financial institutions since global economic difficulties
began in 2008. We worked diligently to ensure thesoundness of our balance sheet and to strength ourcompetitive differentiation. As a result, we delivered strong
financial results in 2009.

Letter to Shareholders from the Chairman

ChairmanRichard F. Wacker002

To Our Shareholders
I am pleased to once again report to you that Korea Exchange Bank remains a healthy financial
institution with resilient core franchise positions that allowed the Bank to successfully navigate
through the difficulties of the global economic crisis. KEB closed a challenging 2009 with the best
profitability levels in our market, good asset quality, and strong capital levels.
We worked hard to ensure that we managed our risks and exposures within the limits of ourcapital. We applied all our systems and tools for customer management, credit underwriting, andrisk management in the strategic allocation of the bank’s capital to our most important customers
and those where the bank realizes the proper returns. We took the difficult decisions and actions
to de-risk our balance sheet, but in a way that maintained our customer positions and franchise
strengths, especially in FX, trade finance, and international banking.
KEB was the only major Korean bank that neither called upon the government’s Bank
Recapitalization Fund nor raised expensive new equity capital in the middle of the crisis.
Nonetheless, we strengthened KEB’s capital position, with our Tier 1 capital ratio rising to11.04% and Tangible Common Equity increasing to 8.20% at the end of 2009… after paying
our fourth consecutive annual dividend. We believe that a management commitment to asustainable dividend keeps us focused on the value and importance of protecting shareholder
capital as we run our businesses.
KEB is the most global Korean bank. We provide the best capabilities for Korean companies doing
business around the world, as well as the best capabilities for foreign customers living and doing
business in Korea. As such, we strive to meet global standards in all areas of our bank, from risk
management to compliance to customer service and the effectiveness of our business processes.
While that effort is a continuous journey - and the road has many bumps and hazards - you cantrust that the men and women of KEB are working every day to improve the bank and do a betterjob for our customers and our shareholders.
We are grateful for the support of our shareholders, and we look forward to meeting the challengesof the new environment to make KEB the most competitive bank in the markets where weparticipate.

Richard F. Wacker
Chairman003

Letter to Shareholders from the President and CEO

President & CEO

Larry A. Klane004

To Our Shareholders
It has been a great honor for me to serve as the new President & CEO during the past year. I am
most proud that the dedicated men and women of KEB delivered strong financial results despite
the unprecedented economic turmoil around the world.
KEB reported net income of KRW 891.7 billion in 2009. This represents an increase of 13.9%
from 2008. At the same time, KEB strengthened its capital position to an exceptional level. Our
Tier 1 capital ratio increased to 11.04%, up from 8.82% at the end of 2008.
As the year 2009 began, the global economic crisis intensified. The Bank of Korea’s aggressive
reduction in the short-term policy rate led to a sharp decline in our net interest margin, an
influential driver of our revenues. The asset quality looked bleak at the beginning of 2009 and was
the primary factor for our loss during the first quarter.
I am proud to report that our earnings performance improved steadily throughout the remainderof the year. Better funding cost drove a marked increase in net interest margin during the second
half of the year. Improving credit quality and a more benign market environment substantiallyreduced loan loss provision without jeopardizing our reserve coverage. Our non-performing
loan (NPL) ratio declined steadily after peaking in 1Q09 and ended the year at 0.94%, below
the regulatory target of 1%. We continued to maintain robust reserves for loan losses, as NPL
coverage ratio improved to 152.5% at the end of the year.
We managed our balance sheet prudently. We focused on serving higher-quality customers andcontrolling our exposure to more economically sensitive clients. As a result, KEB reduced totalloans by 5.9% in 2009. In my view, our ability to adjust KEB’s business efforts dynamicallywould not have been possible without significant investments in improved systems and tools forcustomer management, credit underwriting and risk management over the past several years.
We maintained our leadership position in FX and trade finance. Our market shares in 2009were 46% in FX and 29% in trade finance, despite aggressive sales efforts by our competitors.
The management remains focused on enhancing KEB’s competitive position in these importantbusinesses. I am proud that the Korean government recognized KEB’s excellence by awarding the2009 Presidential Medal. We received this award for our support for foreign companies invested
in Korea as well as foreign customers. In addition, Euromoney named us the 2009 Best Bankin Korea. And, many industry professionals continued to rank KEB as the best in FX and tradefinance.

005

Letter to Shareholders from the President and CEO

We strive to create fundamental value through differentiated focus, excellent workforce andprudent and systematic management systems. I believe that our superior financial performance
validates our approach. For instance, in 2009, KEB produced return on assets that is more than 2.6
times higher than the peer average. And, even though the scale of our operations is smaller than anumber of our peers, our operating income per employee was 18% higher than the peer average,
while our operating income per branch was 51% higher.
Our dividend plan reflects KEB’s capital management strategy that is focused on maintaining
sufficient capital to meet or exceed regulatory requirements and, at the same time, supporting
our growth plans and providing a cushion for unanticipated risks. We also aim to increase
capital efficiency and to deliver regular, ongoing and perhaps more frequent dividend returns toshareholders. After considering the robust earnings performance, KEB’s growth plan and strong
current capital position, the Board declared dividends of KRW 328.9 billion or KRW 510 per
share. This is the fourth consecutive annual dividend and represents an increase from KRW 125
per share in 2008. This dividend is consistent with KEB’s previous public guidance.
Many are now anticipating the economic conditions to improve in 2010, even though thestrength of recovery is uncertain. In such a macro environment, I expect KEB’s normalized
profitability to improve this year versus 2009, as we return to modest loan growth and experience
upturn in net interest margin, growth in our fee income and downward trend in loan loss
provision. Therefore, in 2010, we seek to achieve return on equity of at least 10% and net income
excluding non-recurring items of KRW 800 billion. These goals represent a substantial increase
from normalized ROE and normalized net income in 2009.
Even though the macro outlook has improved, several important issues remain. KEB faces
intensifying competition amid slower industry growth as well as residual uncertainties suchas negative credit events. Moreover, KEB operates within a regulatory environment that is
implementing additional rules regarding capital, liquidity and foreign currency borrowings.
However, I am confident that KEB can navigate through these issues and emerge, once again, as
the Best Bank in Korea.

We strive to create fundamental value throughdifferentiated focus, excellent workforce and prudent
and systematic management systems. I believe that our
superior financial performance validates our approach.

006

For 2010 and beyond, KEB’s management has three strategic priorities. The first priority is
generating sustainable and profitable growth. I believe that KEB possesses excellent “battle-tested”
systems to emphasize businesses with superior long-term returns and efficient use of our capitaland resources. We will continue to optimize our balance sheet, while remaining vigilant about our
portfolio quality. We will put a greater emphasis on achieving operational leverage.
Second is enhancing KEB’s competitiveness and differentiation. We plan to intensify ourmarketing in 2010, focusing on high-quality new customers and cross-sell initiatives. We plan todevelop additional unique products that capitalize on KEB’s expertise.
Third is improving our operations, ensuring that they are compliant and controlled. One of theBank’s key assets is the quality of our people and we will endeavor to enhance their capabilities andto continue to provide the highest-quality service to our customers.
In 2009, everyone at KEB concentrated on navigating through aftershocks from the financial
crisis. We performed well and delivered strong financial results. In 2010, we are focused on
generating high-quality growth and enhancing our valuable franchise. I believe that KEB iswell-positioned to take advantage of opportunities as the economy begins to recover. With thecontinued support and encouragement of our shareholders, we will endeavor to build KEB into
the Best Bank in Korea.
Thank you and I would like to wish you and your families a peaceful and healthy 2010.

Larry A. Klane
President & CEO

007

Financial Highlights

Summary			
of Balance Sheet & Income Statement(In billions of KRW)

2008		

			2009			

YoY

Balance Sheet			
Total Assets		

114,351.9		

107,728.9		

Total Credits		

-5.8%

70,945.9		

70,550.5		

-0.6%

		

Corporate		

52,505.9		

50,529.7 		

-3.8%

		

Household		

15,883.8		

17,596.4		

+10.8%

		

Credit Card		

2,556.1		

2,424.4 		

-5.2%

NPL (Substandard & Below) Ratio		

1.09%		

0.94%		

-0.15%p-0.42%p

Delinquency Ratio		

0.92%		

0.50%		

Total Deposit		

67,933.1		

67,371.3 		

-0.8%

Total Shareholders’ Equity		

6,663.5 		

7,954.8 		

+19.4%

		Paid-in Capital		

3,224.5		

3,224.5 		

-BIS Ratio (BaselⅠ)		

12.65%		

14.93% 		

+2.28%p

8.82% 		11.04% 		

+2.22%p-0.51%p		TierⅠ Ratio		

Income Statement			
Net Interest Margin		

2.90%		

2.39%		

Income Before Provision		

1,963.8 		

1,559.3 		

-20.6%Net Income		

782.6		

891.7		

+13.9%

Return On Assets (ROA)		

0.83%		

0.88%		

+0.05%p

Return On Equity (ROE)		

11.90%		

12.27%		

+0.37%p

114,351.9
107,728.9

70,945.9

70,550.5

08

09

97,924.7
58,722.0

07

08

09

Total Assets (In billions of KRW)

008

07

Total Credits (In billions of KRW)			7,954.8
6,650.8

07891.7

6,663.5
782.6

08

09

Total Shareholders’ Equity (In billions of KRW)

1.09%

07

08

09

Net Income (In billions of KRW)

14.93%
0.94%
12.65%

0.61%

07

960.9

11.44%

08

09

NPL (Substandard & Below) Ratio

07

08

09

BIS Ratio (Basel I)

009

The Preferred
Global Banking
Partner
KEB operates the most extensive global network among Korean banks and maintains a market-leading
position in foreign exchange and trade finance. KEB has successfully leveraged its differentiated andspecialized capabilities to provide differentiated and customized commercial banking solutions to its
corporate customers ranging from some of the largest multinational companies in the world to small
businesses in Korea.

010

Global Corporate Bank /Corporate & Capital Markets Bank
· Large Corporate Banking· SME Banking· Investment Banking· FX & Trade Finance· Settlement & Clearing· Custody & Fund Administration

International Group· Overseas Operations

Foreign Customer Marketing Support
Department· Full Service Bank for Foreign
Customers· Retail Banking· Corporate Banking· Foreign Direct Investment

011

Global Corporate Bank /Corporate & Capital Markets Bank

KEB’s Global Corporate Bank (GCB) and Corporate & Capital Markets Bank(CCMB) work seamlessly to serve our corporate banking customers in Korea
and around the globe. GCB consists of World Corporate Group, International
Group, Global Products Department, and Foreign Customer Marketing Support
Department, while CCMB includes Corporate Group and Capital Markets
Department.

Best Trade Finance Bank in Korea
for the 9th consecutive year &Best Foreign Exchange Bank in Korea
for the 8th consecutive year

2009 Best Domestic Provider of
Foreign Exchange Services in Korea

Large Corporate Banking
The World Corporate Group (WCG) manages KEB’s relationship with Korea-based large corporate
customers. Senior relationship managers (SRMs), who are experts in traditional banking services
as well as project finance, ship finance and M&As, provide highly granular service to customers.
The World Corporate Group increased both its earning assets and deposits during 2009. Total
credits to large corporate customers under World Corporate Group increased 16.5% (KRW 832
billion) to surpass KRW 5.86 trillion, while deposits were up 17.6% (KRW 2.72 trillion) to more than
KRW 18.14 trillion at year’s end.
At the same time, the World Corporate Group continued to contribute heavily to KEB’s market
leadership in foreign exchange and trade finance. The WCG financed USD 75.9 billion worth ofexports for large corporations in 2009, representing 21% of the total in Korea, and USD 64.1 billion
worth of imports in 2009, or 20% of the total in Korea. The WCG negotiated USD 75.9 billion worthof export financing on behalf of large corporations and issued USD 8.4 billion in letters of credit.
As such, KEB played an important role in boosting the imports and exports of Korea’s largest
companies as well as those of the nation as a whole.

012

KEB’s World Corporate Group expanded the credits to vendors that serve large corporations
and strengthened financial support to them. Co-marketing efforts to attract the business of theoverseas subsidiaries of large Korean conglomerates helped to build solid relationships with ourlarge corporate customers. In addition, our global credit risk management, in-house banking, firmbanking and other electronic financial service systems were linked to the ERP systems of major
customers in order to provide unrivalled services and strengthen the relationship.

SME Banking
The Corporate Group is focused on serving the needs of small and medium-sized enterprises(SMEs). In response to the global financial and economic crisis, KEB reduced its SME exposurein 2009, with total credits to SMEs reaching KRW 23.4 trillion at the end of 2009, down from KRW
26.8 trillion the previous year. KEB focused on serving higher-quality customers and controlling its
exposure to customer segments that are more economically sensitive. KRW-denominated loans
to SMEs stood at KRW 18.8 trillion and accounted for 41.8% of the total KRW-denominated loans
outstanding at the end of 2009.
We rely on our expertise and proven advantages in the trade finance businesses to develop clear
customer segmentation strategies for our SME lending operations. Our SME customer baseconsists principally of high quality and internationally competitive export manufacturers who have
proven their resilience through unfavorable domestic economic conditions. KEB has the lowest
relative exposure among Korean banks to the economically-sensitive small offices & home offices(SOHO) that are confined to the domestic market.
KEB made a special KRW 40 billion contribution to the Korea Credit Guarantee Fund (KODIT)
as part of a program to assist SMEs suffering from liquidity shortages in the wake of the global
financial crisis and economic slowdown. We also signed a liquidity support agreement thatprovides preferential treatment to venture startups, exports, the green growth sector, new facilities
investment and other projects that serve as new growth engines. Our contribution enabled KODIT
to offer KRW 480 billion in credit guarantees to SMEs.
KEB is participating in the 2nd Win-Win Guarantee Program, which extends loans to the first to
third vendors of large Korean enterprises and gives a priority to those SMEs that lack sufficient
operating funds and collateral. We also agreed to join a program with large corporations andnationwide commercial banks to assist SME liquidity by providing “win-win” loans in linkage with
export credit guarantees from Korea Export Insurance Corporation and by making payments to
SMEs prior to delivery.
Also in 2009, we promoted our unique “corporate partner installment savings” plans, which pay a
preferential interest rate. As such, we serve as a financial partner who helps create true value forfirm customers and provides reliable funding support.

013

Global Corporate Bank /Corporate & Capital Markets Bank

Investment Banking
Despite significant turbulence across global markets in 2009, KEB’s Investment Banking produced
a robust performance by taking a selective and prudent approach to build a high quality asset
portfolio.
KEB served as a mandated lead arranger for financing an unprecedented public-privatepartnership (PPP) project, valued at KRW 899.0 billion, to build a 10,000㎡ artificial floating islandon the Han River. Upon completion it will be the biggest artificial island in the world. This projectis driven by Seoul Metropolitan Government as a part of the “Han River Renaissance Project” tocreate a special space for cultural performances, festivals and various leisure activities. KEB also
participated, as a mandated lead arranger, in USD 900 million financing to help private equity fund
KRR and Affinity acquire Oriental Brewery, one of the nation’s biggest breweries.
KEB established KEB Asia Finance (KAF), a wholly-owned subsidiary in Hong Kong, in July 2009as a part of long-term growth strategy in the investment banking business outside of Korea. KAF
received a securities business license in January 2010 and now offers investment banking services
based on securities.
In Korea, KEB plans to grow by attracting new customers synergistically with other businessgroups of KEB. Overseas, we will focus on developing new business by utilizing the overseas
network, with KAF playing a central role.

FX & Trade Finance
KEB reigns as Korea’s market leader in foreign exchange with the most extensive global networkand operations. In 2009, we held onto the top position in the domestic FX market for the 14th
consecutive year with a share of 46% of total transactions handled by the nation’s seven top
commercial banks. This success was repeated in the trade finance sector, where we recorded
industry-leading market shares of 29% each for both export financing and import financing.
In recognition of our continued strong performance in these core business areas in 2009, KEB
garnered kudos from respected international financial publications. We were named “Best
Trade Finance Bank in Korea” (9th consecutive year) and “Best Foreign Exchange Bank in Korea”(8th consecutive year) by Global Finance. Asiamoney also selected KEB as “2009 Best Foreign
Exchange Bank in Korea” (4th consecutive year). KEB is developing new services to strengthen ourleading market positions and stay ahead of the competition.
Our products and services for importers and exporters were enhanced by the adoption of a
new approach that mixes the payment methods of the shipper’s usance letter of credit withthe banker’s usance letter of credit. This provides importers and exporters with a more flexible

014

period of payment and reduces import costs. Additionally KEB became the first Korean bank toimplement a direct collection system. When foreign exporters ship goods to Korea, they no longer
have to go through their own bank. They can submit their shipping documents to KEB, and wewill process and deliver them to importers. We will also forward payments, saving both time andmoney and facilitating the transaction process.
KEB’s Trade Escrow service, launched in December 2009, represents a new way of addressing thevarious business risks imposed on importers and exporters alike. Import and export partners sign
an escrow agreement with KEB through which the importer deposits funds into a KEB account andthen inspects the received goods before instructing the bank to pay the exporter. This arrangement
is far more secure than a letter of credit and prepayment to the exporter.
KEB’s “multi FX rate reservation automatic transfer and overseas remittance service” allows
customers to designate up to three exchange rates and trade amounts of each in either Korean
Won or a foreign currency. When the designated exchange rate becomes identical to the bankposted one, deposits are transferred automatically between the KRW and foreign currency
accounts, or overseas remittance is made automatically in foreign currency. Thus customers cantransact at the exchange rate of their choosing even when exchange rates are volatile.
In December 2009, KEB also began offering a more convenient domestic investment service foroverseas Koreans (Korean nationals with permanent residency or citizenship in another nation)and non-Koreans. Customers can use internet banking from any location in the world to transfer
funds invested in domestic stocks to a securities firm or invest in a domestic fund as well as toremit funds freely from domestic investment overseas. This service not only saves Korean andforeign investors time and money but also allows them to broaden their investment portfolios.
In 2009, KEB began selling passbook-type foreign currency certificates of deposit that can betransferred before maturity. We also became Korea’s first bank to issue a card that allows theuser to withdraw funds in KRW currency from their foreign currency deposits via cash dispensing
machine or ATM. Finally, our new Hi-JUMP foreign currency money market deposit account (MMDA)
accrues high interest even on a single day’s deposit, depending on the amount deposited, and thefunds can be withdrawn on demand, just like a regular foreign currency savings account. Interestis paid whenever the customer withdraws money.

015

Global Corporate Bank /Corporate & Capital Markets Bank

Settlement & Clearing
Continuous linked settlement is the risk-free cross-border settlement of foreign exchangetransactions among global financial institutions. A key feature of CLS is simultaneous settlement
based on a real-time payment versus payment with multi-lateral netting.
KEB worked closely with the Korean government and Bank of Korea to introduce CLS to Korea andhave the Korean Won designated as one of 15 CLS eligible currencies in December 2004. Since
then, KEB has been acting as the Settlement Member of and Korean Won Liquidity Provider for
CLS Bank International.
Starting with FX trades, KEB extended CLS settlement to non-deliverable forward contracts inJuly 2008 and is now preparing to expand into new product areas such as FX option premiums.
Korean regulators are also planning to allow securities, insurance and investment companies toparticipate in CLS settlement soon, which will further increase CLS settlement volumes.
Currently, KEB settles FX deals via CLS for nine of the thirteen local banks and the Seoul branch of
one foreign bank, accounting for 65% of the country’s total CLS volume. KEB also provides the CLS
KRW Nostro Service, acting as agent bank for foreign customers settling in KRW. KEB currently
serves eight of the ten customer banks that are using the service.
Given KEB’s strong standing in the Korean CLS market, we were appointed as a CLS services
board member, representing other Korean settlement members from 2010.
Multi-currency interbank clearing is another competitive service that KEB has been providing for
local and overseas banks since its establishment in 1967. In 2009, KEB processed 3.6 million interbank transfers, accounting for about 85% of total inter-bank foreign currency transfers in Korea,
serving 60 local (including foreign banks’ Seoul branches) and 116 overseas banks.
We have been upgrading our IT platform and developing new products to meet the growing volumeof SWIFT traffic in payments, trade finance, treasury and securities each year. As a result, ourinterbank clearing service marked a record (95%) STP (straight through process) ratio in 2009. In
addition, KEB has provided the I-vostro Service, an internet-based foreign currency transfer andinquiry system (www.eFIall.com) since 2005, offering real-time online interbank clearing services
to local and foreign banks.
KEB is also offering KRW related services and regulatory advisory services to foreign banks tomeet the rising demand for the Korean Won settlement in the market and for the ongoing Won
liberalization driven by financial authorities. Our proven expertise, reliability and reputation in both
the CLS and interbank clearing arenas will provide the means for KEB to become Asia’s clearing
hub for domestic and overseas banks.

016

Custody & Fund Administration
As Korea’s leading custodian bank, KEB’s custody and fund administration services enjoy a broadcustomer base inside and outside of Korea, including institutional investors, government entities
and foreign investors. Our high quality fee-based capital market services encompass custody, SPC
trustee, paying agency and escrow agency services.
In 2009, assets under custody totaled KRW 44 trillion. KEB was recognized as the “Best Subcustodian Bank in Korea” by Global Finance for the second year in a row in 2009.
We are aggressively responding to the changes brought on by the enactment of Korea’s Financial
Investment Services and Capital Market Act. Through the complementary capabilities of ourcustody business and the fund accounting services of our subsidiary KEB Investor Services, KEB
can offer institutional customers unequalled services that better meet their needs and growing
fiduciary duties.

017

International Group

Overseas Operations
KEB’s International Group (IG) supports the needs of our customers outside of Korea. KEB
operates the most extensive international financial network among domestic banks. In 2009, we
continued to expand, as we opened the Kelapa Gading representative office in Indonesia and KEB
Asia Finance in Hong Kong. At the end of 2009, KEB’s overseas network included fifteen branches,nine subsidiaries, and five representative offices in 22 countries.
Total overseas assets were just over USD 8.7 billion at the end of 2009, down 4.3% from a year
earlier. Loans (USD 5.9 billion) increased 3.4%, and deposits (USD 3.9 billion) grew 9.1% from ayear earlier.
During 2010, KEB established a new full-banking subsidiary in China and seeks to upgrade
representative offices in New Delhi, Ho Chi Minh City and Dubai to branch status. We also plan
to diversify the business portfolio by widening target customers from Korean enterprises to local
companies having business relations with Korean companies as well as local retail customers inselect regions.

018

Foreign Customer Marketing Support Department

Full Service Bank for Foreign Customers
Foreigners and foreign businesses in Korea present a nascent market opportunity for KEB. There
are about 1.3 million registered foreigners living in Korea and about 18,000 Foreign invested
enterprises (FIEs) with one or more strategic foreign investors. The Foreign Customer Marketing
Support Department (FCMSD) was established in July 2008 to tap into this market and to increase
overall marketing efficiency.

Retail Banking
FCMSD is dedicated to developing banking services tailored for foreign expatriates living in Korea
and operates three Foreign VIP Centers and 15 Global Desks for retail customers that are staffedwith fully-trained English speakers. Moreover, consulting desks are run at the Seoul Global Center, KOTRA and Seoul Immigration Office. KEB periodically participates and sponsors cultural
well-being events to enrich the lives of foreigners and make their stay in Korea more pleasant.

Corporate Banking
We have leveraged our expertise as Korea’s foremost FX and trade finance handler, as well as anadvanced e-banking platform that includes “Business Online Services” to become the primarybank for many FIEs operating in Korea. Many foreign MNCs are classified as SMEs in Korea
because of their limited operations in the country. KEB, however, recognizes the size and statusof the parent companies when evaluating such FIEs. Even for start-up FIEs, we provide credit
flexibly by considering the credit rating of their mother companies proven by Moody’s, S&P andother international credit rating agencies. FCMSD currently operates fourteen strategic branches
in various regions across Korea for managing our FIE customers. FCMSD is also planning to use
KEB’s extensive overseas network to offer the parent or sister companies of our FIE customers in
Korea seamless and comprehensive banking services.

Foreign Direct Investment
A highly-trained group of foreign direct investment (FDI) consultants at KEB assists foreigncompanies investing in Korea. The FDI team also supports FIEs in performing FDI reporting,establishing new businesses and setting up financial management systems. Furthermore, the
FDI Team assists newly established companies through cooperative ties with many FDI-related
institutions such as law firms, accountants, foreign chambers of commerce in Korea, foreignembassies, international trade & investment bodies and the Korea Trade-Investment Promotion
Agency (KOTRA).
KEB maintained its dominant market share (39.8%) for FDI notification processing and offeredconsulting services to 6,924 of the 17,962 FIEs nationwide at the end of 2009.

019

Responding
Efficiently to
Diversified
Individual Needs
In 2009, KEB returned to the basics to bolster profitability and asset quality, and theeffort paid off with a solid performance and sound financial structure. We remain
focused on developing diverse products and services to accommodate customer needs,
maintain market leadership and be the most trusted partner for our customers.

020

Retail Bank
· Customers· Deposits· Household Lending· Private Banking· Bancassurance· Investment Products

Card Bank· Credit Card021

Retail Bank

From our traditional deposit and loan products to our advanced private banking,bancassurance, investment product and wealth management services, KEB’s RetailBank demonstrates the wisdom of a quality-over-quantity approach to banking.
To “get closer” to our retail customers and better grasp and serve their needs, KEB
has refined relationship management and segment marketing strategies to produce
high quality growth.

First Prize in “2009 Asia PB Grandprix”

2009 Award for Excellence

category

Best Bank in Korea

Customers
Since 2007, KEB has implemented marketing based on customer segmentation as a tool tomaintain and deepen relationships with our best customers. Consequently, we have retained
profitable customers, promoted cross-selling for main segment customers, and attracted
professionals as customers. The total number of retail customers increased by 279 thousand (4.5%)
to 6.5 million in 2009 over the previous year.
KEB launched a package product called “Wingo” for customers in their 20s in November 2009.
Wingo offers a debit card, savings account and internet banking service, and 23,624 young
customers signed up by year’s end. KEB will focus on customers in their 20s & 30s in 2010, a
segment with strong growth potential that includes newly-hired employees, college students andsalary transfer customers. Also, KEB will attract more pensioners and push cross-selling for highreturns to deepen the relationship with customers in their 40s and above.

022

Deposits
Our efforts to attract more deposits and provide our customers options to avoid volatile financial
products amid global economic uncertainty were successful in 2009.
Total retail deposits rose KRW 2.2 trillion (8.8%) to KRW 27.7 trillion at the end of 2009 from a year
earlier. Time deposits were up KRW 0.7 trillion totaling KRW 10.2 trillion, while demand deposits
grew by KRW 0.9 trillion. Deposits in foreign currency and the trust account also increased by KRW
0.7 trillion to KRW 10.0 trillion.
In 2010, we plan to concentrate on securing time deposits and other long-term accounts, while
reducing our marketable deposits, to improve our loan-to-deposit ratio. We plan to enhance ourability to retain core deposits through appropriate segmentation of our customers and intensive
marketing activities.

Household Lending
KEB’s household lending portfolio increased 10.8% (KRW 1.7 trillion) in 2009, reaching KRW 17.6
trillion from the KRW 15.9 trillion at the end of 2008. During the same period, mortgage loans rose
27.0%, from KRW 8.2 trillion to KRW 10.4 trillion. Meanwhile, unsecured loans decreased slightly
in 2009, principally because KEB maintained conservative underwriting standards.
Looking forward, KEB remains focused on improving the underlying asset quality of its Retail Bank
through a combination of prudent underwriting and mix shift towards secured loans. Marketing
will target creditworthy customers with solid collaterals as well as premium unsecured loans,while unsecured loans and foreign currency loans at the branch level will be tightly controlled.
Moreover, KEB plans to adopt a reasonable pricing approach, taking into consideration thecontribution to the Bank, credit ratings, market trends and RAROC.

023

Retail Bank

Private Banking
KEB is developing a variety of sophisticated services to help VIP customers invest and manage
their assets more profitably and efficiently. With our Private Banking (PB) products & services,
we broaden our customers’ asset portfolios with innovative stock, insurance and FX-related
investment instruments. In line with Korea’s Financial Investment Services and Capital Market
Act, we offer tax consultation, real-estate management and disposal services, wills & inheritanceconsultation, specialized financial planning and medical services, overseas education & emigration
services, and others.
Our objective is to make KEB the first choice in Korea’s competitive PB market by constantly
expanding the scope and elevating the quality of our comprehensive and professional PB services.
We enlarged our PB network in 2009, adding three new Wealth Management Centers (for a total of
twelve) in addition to the 76 specially designated PB Branches.
KEB provides an unparalleled level of personalized services and benefits to select “VVIP”
individuals to maintain their exclusivity. We cultivate customer loyalty through special advisory
services, and invitation-only events such as our exclusive investment conference held overseas.
Moreover, we are making maximum use of KEB’s strengths in the FX field and our overseas branch
network to market our asset management services to Koreans residing abroad.

Bancassurance
KEB started selling bancassurance in September 2003, after the Korean bancassurance market
was opened to international competition. This business has grown steadily thanks to our strategic
partnership agreements with Korea’s leading insurance companies and our ongoing training of
bancassurance specialists. We have developed various annuity and endowment insurance plansfeaturing low premium rates as a way to offer more benefits to retail customers.
The global economic downturn that began in 2008 persisted into 2009. However, various indicatorsfor financial institutions began to recover in the second half as a result of their self-rescue efforts
and aggressive measures to overcome the crisis. The bancassurance market also saw a steadyrise in sales, particularly for endowment insurance plans.
In 2009, KEB achieved bancassurance sales of KRW 25 billion despite the lowering of
bancassurance fees after the Financial Supervisory Service (FSS) tightened regulations onsales margin for bancassurance products and imposed restrictions to prevent mis-selling. Our
performance in bancassurance and other fee-based product areas, despite a relatively small
number of branches, demonstrates the appeal of our product offerings and the quality of the KEB
customer base.

024

Investment Products
KEB’s investment product sales and management philosophy embraces an “Open Architecture”
strategy, which allows our customers to build the optimal portfolios to suit their preferences
and needs. As of the end of 2009, KEB offered a total of around 210 onshore and 150 offshore
investment funds.
The environment for selling investment products was difficult in 2009, following the slowdown
in the global real economy the previous year. Key issues in the marketplace were whether the
economy would turn around in the first half and whether government would implement their exit
strategies in the second half. Meanwhile, the global securities market bottomed out in the firsthalf and subsequently showed a rising trend. However, at year’s end, the markets became highly
volatile as the government deficits worsened in some countries.
Our assets under management (AUM) declined 7.5% from more than KRW 7.2 trillion at the endof 2008 to just under KRW 6.7 trillion at the end of 2009, while income from sales of investment
products fell significantly in 2009.
KEB overhauled the systems for selling investment products in 2009. We established new sales
processes to comply with the Financial Investment Services and Capital Market Act and to improve
our customer services. For example, we began to issue periodic fund evaluation reports as well as
to email fund transfer, conversion transaction and settlement statements directly to customers.
In addition, our Fund Management System, a customer advisory support service, was upgraded
to offer diverse market data and high-quality fund information to assist our customers in theirinvestment decisions. In the future, KEB will continue to improve investment advisory services tocustomers to act in their best interests and establish solid partnerships with them.

025

Card Bank

Credit Card
KEB’s Card Bank has been a pioneer in the credit card business in Korea, introducing the country’s
first Visa card in 1978. In 2009, Card Bank navigated through the dual challenges of uneveneconomic environment and intense competition and delivered robust financial results. Both total
sales and average balances increased modestly in 2009, while from the previous year, credit quality
was mostly stable.
We remain committed to improving sales and customer retention through various client careprograms and are continuously developing various more-sophisticated customer management
tools to strengthen our marketing capabilities. For example, the “Customer Long Term Value”(CLTV) model was devised to evaluate the current and predict future customer value. Coupled withexisting segment models, the CLTV approach has helped us formulate and operate marketingstrategies more efficiently. In addition, we are consolidating the KEB reward system to offer a “single
view of the customer,” increase customer loyalty, and promote the cross-selling of products.
We established a card product hierarchy to satisfy different customer segments better. Thus,
the Signature Card and NoN Nobles were introduced for VIPs, while Wingo Check Card was foryoung users with the potential to become VIP customers. For customer convenience, we began
to provide an automated recharging service for T-money cards (a rechargeable smart card for
public transportation) and post-paid transportation card service. Moreover, we have implemented
systems and processes to analyze the competitiveness and profitability of our products inthe development stage, and to monitor and improve them after launch. As a result, we havemaintained optimal efficiency for our credit card portfolio.
We created the Synergy Council with the Retail Bank to maximize the synergy effect between ourcredit card business and retail banking by promoting bank product sales through the card sales
network and card products through the retail branch network. Our efforts have resulted in various
new products such as affinity card packages, exclusive lineup for women, and products for expats
living in Korea. Moreover, KEB branches and credit card units work together on various activities
to increase credit card transactions bank account balances at the same time. Conducting sales
promotion activities in collaboration with local branches, encouraging merchants to designate
KEB as the merchant account, and marketing to attract customers for KEB check cards are a few
examples. In addition, we are running Regional Service Centers to support our branches effectively,
while the Card Bank cooperates with overseas business units to grow overseas operations.
Our branches, affinity channels and credit card counselors are working to attract cardholders
who can become main customers, and ultimately even VIP customers. Moreover, we support
branches by offering training programs and building community channels. Other means include
the adoption of the Affinity Card Management System, diversified channels for promoting affinity
cards, strengthened standards for customer evaluation, a usage-based commission structure, andimproved card issuance processes.

026

KEB already holds the largest market share of foreign credit card purchases in Korea and we aim
to increase the volume further. We are strengthening management of our merchant relationshipwith the development of the Merchant Relationship Management system.
Our pricing policy based on the risk-adjusted return on capital (RAROC) method has been
upgraded since initial launch and is now applied extensively, helping to improve profitability.
Managing risk-weighted assets more efficiently should improve RAROC and raise net profit. In
addition, we will concentrate our resources on core customers to maximize the effectiveness ofmarketing activities. Meanwhile, we will devise and consistently implement a resource allocation
strategy optimized for developing new products and, thereby, attracting new customers. This willserve as an engine for sustainable growth and maximize capital efficiency.

027

Quality Service& Advanced Risk
Management
KEB has enhanced its service capabilities through continuous innovation of its work
process, leveraging our sophisticated support infrastructure and Six Sigma program. In
addition, our prudent and systematic risk management is critical to sustaining profitable
growth at KEB amid rapidly evolving market conditions.

028

Quality Service Provider· Enhanced Service Quality throughBusiness Innovation· e-BusinessInformation & Technology· IT Infrastructure

Risk Management· Capital Adequacy Framework· Credit Risk
· Market Risk
· Operational Risk
· Interest Risk
· Liquidity Risk
· Strategic Risk
· Business Continuity Planning029

Quality Service Provider

Customers today expect not only competitive deposit and lending rates, but they
demand fast and reliable answers to their questions, simple and clear transactions,and attentive responsiveness to solve their problems. We strive to minimize theadministrative burden on our front-line staff so that they can devote their attention
to understanding customer needs and deepening our business relationships withthem.
KEB has made efficient operational systems and processes a priority for several
years, and was the first among Korean banks to implement a Process Management
System (PMS) and Six Sigma approaches in the key areas of our customer service
operations to fulfill these objectives.

KEB website won four prizes at

First prize in 2009 Korean Service“Web Award Korea 2009”

Quality Index for 3rd consecutive year

Enhanced Service Quality through Business Innovation
We adopted the Six Sigma program in 2005 to improve service quality from the customers’
viewpoint, to strengthen the overall competitiveness of KEB, and to maximize efficiency. Today,
all our process innovation initiatives are integrated and performed according to Six Sigma
methodologies.
Importantly, the KEB Six Sigma program is an integral part of our overall strategy. All Six Sigma
projects as well as everyday activities are being conducted in line with the four fundamentals ofmaintaining asset quality and managing risk, achieving profitable growth, raising productivity andefficiency, and satisfying customers. In 2010, every department in KEB is performing Six Sigma
activities under the strategies of “Sustainable & Profitable Growth,” “Competitive & DifferentiatedFranchise,” and “Compliant & Controlled Operation.”

030

Our Six Sigma program has been most successful in improving service quality. In 2008, welaunched our unique “KEB Service Quality Guarantee” program after concentrating our branches’
basic administrative processes at central processing centers and implementing a robust process
innovation program. This program is a promise to our customers that they will receive the best
services. If not, we are willing to compensate in some way such as by lowering interest rates. Thisguarantee reflects the effectiveness of our ongoing innovation effort and the complete confidence
we have in the unrivalled quality of our services.
The Process Management System (PMS) is an indispensible part of our Six Sigma program. We
have indentified the essential processes among the countless tasks that we perform every day,and have automated the generation of status reports and indices pertaining to these key processes
so that the data are accessible in real time without the need for reports by the staff. This allows
our top management and department chiefs to manage key processes most efficiently and makeinformed decisions swiftly.
Our Six Sigma program has also helped to foster an organizational culture that thrives on constantimprovement. Without having to outsource, we have built an elite team of 25 Six Sigma inhouse consultants (Master Black Belts and Black Belts) who oversee program implementation
organization-wide. In addition, around 100 of our employees are certified Six Sigma professionals(Green Belts) who are tasked with implementing methodologies at our operations around thecountry. These certified employees also receive promotion points. To date, we have implemented
more than 80 Six Sigma projects, which have resulted in a total savings of about KRW 20 billion. Six
Sigma training courses are even available online, and approximately 2,000 of our employees havecompleted the basic course.
KEB launched the “Zero Waste Campaign” to strengthen competitiveness by eliminating factorsthat contribute to waste throughout the organization under the banner of “Survival” in 2009. We
began by collecting some 400 suggestions from employees and then pinpointed the 10 most urgent
tasks. Task forces were formed to work on adopting the International Financial Reporting Standard(IFRS) and on improving our global customer relationship management. We also implemented
improvement activities through an ongoing suggestion program and regular visits to branches.
In 2010, our Six Sigma activities will focus on enhancing KEB’s competitiveness in line with KEB’s
vision of becoming “not the biggest, but the best” bank. Large-scale projects that are currently ongoing include improving the credit review process, streamlining the credit card issuance process,upgrading the overseas IT network, and enhancing service at the integrated help desks. We arealso in the process of creating our own “KEB Easy Sigma” to facilitate the application of the six
sigma program at the branch level.

031

Quality Service Provider

e-Business
KEB remains committed to improving electronic banking services so that customers can havemore convenient and affordable access to banking transactions. By doing so, we acquired lowcost delivery channels while locking in customers. These efforts will allow us to secure a customer
base that can serve as a platform for sustained growth over the long term.
An increasing number of banking transactions is now conducted outside the branch, through ourdiverse electronic banking services, from internet banking and tele-banking to mobile banking
and firm banking. As of the end of 2009, about 1.56 million retail customers and around 140
thousand corporate customers are using these services, accounting for 52% and 50% of all active
customers, respectively. Moreover, over 60% of transactions are handled via electronic channels, atestimony to their growing importance as delivery channels.
In 2009, we significantly upgraded our electronic delivery channels, resulting in an increasein customer transactions, by integrating the internet banking, internet credit card and foreignexchange systems and services at our retail banking unit.
Moreover, our aggressive promotion of In-House Banking, an electronic banking channel
customized for corporate customers, has seen many tangible results as well. As of the end of
2009, more than 300 high-quality corporations are using the service, and our transaction volume
with those companies has soared accordingly. Meanwhile, we have laid the groundwork for parallel
growth over the long term by helping our corporate customers to increase their operational
efficiency.
In 2010, we will continue to develop and provide exceptional banking services, including mobileinternet banking services to accommodate the rapid growth in mobile internet users. We will also
introduce tailor-made banking services that support our global growth strategies.

032

Information & Technology

IT Infrastructure
KEB remains committed to building banking systems that are highly responsive to customer
needs, stabilizing them and, thereby, improving the quality of IT-based services. Today, ourfocus is on establishing a more-efficient IT infrastructure. The strategic objective of the IT unit
in 2009 was to support priority bank-wide action plans such as expanding overseas operations
and strengthening the investment finance segment in line with the enactment of the Financial
Investment Services and Capital Market Act. Projects for the year included installing a system at
our Chinese offices, expanding support for investment finance operations and revising the system
for securities and fund services.
We have built and operated systems to help our Business units secure unrivaled competitivenessby providing support for their strategic projects at the right time. For example, in December 2009,
we completed systems that accommodate the International Financial Reporting Standards (IFRS),
reinforcing our financial infrastructure and confirming our conformity to international standards.
Other important projects were completed during the year while some are still under way. These
include the revision of the retail internet banking system, the modification of retail SME models &the building of related systems, and the establishment of global tailor-made firm banking services.
We continue to improve the quality of our IT-based services so that we can maintain ourcompetitiveness in the future financial environment, increase the operational efficiency of ourunits, and help top management make rapid business decisions. The projects we launched in 2009
include integrating banking and credit card data, stabilizing the comprehensive data verification
system, establishing an internal auditing system for overseas regional operations centers andimproving the integrity of Risk Data Warehouse (RDW) data. In addition, we reinforced online
banking security, received audits from the FSS and the Board of Audit and Inspection, established
an electronic auditing system for the IT Group and conducted simulation drills in cooperation withexternal organizations. These efforts have strengthened audit activities inside and outside theorganization as well as internal oversight.
We remain committed to raising the reliability of our IT infrastructure and developing moreadvanced systems to increase customer satisfaction as well as to help meet our performancetargets. These efforts will allow us to provide our customers with globally competitive IT-based
financial services.

033

Risk Management

KEB’s strict and advanced risk management played a significant role in insulating
KEB from the numerous risks that arose after the onset of the 2008 financial crisis.

Capital Adequacy Framework
In 2008, the Korean Financial Supervisory Service (FSS) granted us permission to apply theadvanced BaselⅡapproaches to our risk measurement program. These include the foundationinternal ratings based approach (F-IRB) for credit risk measurement, an internal model formarket risk measurement, and the advanced measurement approach (AMA) for operational risk
measurement. Since the end of 2008, these approaches have been reflected in our regulatory
capital measurement. Further, we have successfully implemented RWA reduction targets, bothbank-wide and by business unit, for managing credit risk.
These efforts have helped us to overcome the effects of the financial crisis that broke out in 2008
and to establish effective measures to accommodate new capital regulations (so called BaselⅢ)
that will be introduced by the Basel Committee in the future.
Since January 2007, KEB has used the advanced approaches of the BaselⅡCapital Accord to
calculate economic capital (internal capital), and a new capital adequacy framework has been
established. The key feature of the framework is that banks separate quantifiable risks from nonquantifiable risks, and select and manage material risk. Credit, market, operational, interest rate,credit concentration, and strategic risks are all quantifiable, while liquidity risk is non-quantifiable
but classified as a material risk. At the beginning of the year, the Risk Management Committee, asubcommittee of the Board of Directors, sets the limits for quantifiable risks, and the Risk Steering
Committee reviews capital adequacy every month and submits quarterly status reports to the Risk
Management Committee.
The BaselⅡadvanced approach calls for the advanced internal ratings based (A-IRB) approach indetermining credit risk, the internal model to measure market risk, and the AMA for calculating
operational risk, and sets the confidence level at 99.9%. A capital buffer of at least 8% of riskvolume has also been set, and a correlation matrix for integrating various risk volumes has been
introduced.

Credit Risk
Since 2007, KEB has measured credit risk according to the A-IRB approach in BaselⅡ, while themeasured credit risk volume is used in setting and managing risk limits. Credit risk assessments
cover rating systems, probability of default (PD) and loss given default (LGD) estimates, and theretail credit scoring system (CSS) is used for calculating calibrated credit risk. We have also034

established and operate a risk based pricing system, which uses risk data to reflect expected loss(EL) and unexpected loss (UL) in loan pricing.
KEB has implemented risk-adjusted performance measurement (RAPM) in each business unit byadopting risk-adjusted return on capital (RAROC) as an index starting in the first half of 2007. We
began reflecting RAPM in setting business unit targets and evaluating their performance in thefirst half of 2008, and reflecting RAPM in branch targets and evaluations in 2009.
For regulatory capital (BIS ratio), KEB has measured credit risk using the FSS-approved F-IRB
approach from September 2008. We set bank-wide and business unit RWA targets and examinedthem weekly starting from early 2009. Our RWA management enabled us to maintain asset quality
and capital adequacy during the banking crisis.
In addition, our internal model method was completed in December 2009 to measure the EAD of
OTC derivatives with precision.

Market Risk
In 2008, we acquired FSS approval to use our internal model (750 days historical simulation
method) and have since used the model for calculating and managing regulatory capital. We
manage market risk by monitoring the 10-day value at risk (VaR) limit by business unit using
the internal model and each day perform stress-testing, which measures possible losses undervarious scenarios, to be better prepared for some possible crises not reflected in recent market
trends.
KEB assesses model validity every day by back-testing the P/L and 1-day VaR of the previous day.
In 2009, the market risk internal model measured the risk embedded in OTC derivatives more
precisely as the coverage of risk measuring module was enhanced. The risk volume measured
by the model is reflected in setting our risk-limit. Since 2007, it has been reflected in our RAROC
target and business unit performance assessments.

Operational Risk
KEB has implemented operational risk limits based on AMA methodologies since 2007. BaselⅡ
AMA-based control self-assessment was initiated at our Headquarters, domestic and oversea
branches and subsidiaries in 2008 for internal control and risk volume measurement ofoperational risk. The AMA-based operational risk volume is then calculated after the AMA-based
loss data is collected and scenarios are assessed.
Starting in 2008, the AMA-based operational risk volume was measured for each business unit,
and 2% of the operational risk volume is reflected in the business units’ RAROC. The FSS approved035

Risk Management

KEB’s AMA on November 4, 2008 and KEB began adjusting AMA to calculate regulation capitalfrom the end of March 2009.
The Internal Control Council is established under the Compliance Department to strengtheninternal control. Council members are the heads of the Operational Risk, Compliance, Audit &Examination and Finance Departments.
KEB also has developed with the FSS 31 common Key Operational Risk Indicators to monitor therisk status of the bank.

Interest Risk
Since implementing the new asset-liability management (ALM) system in 2007, KEB has been
calculating interest rate risk with an advanced deterministic scenario method in terms of economic
value and earnings. For the economic value perspective, KEB measures VaR, which represents
the maximum expected loss of KEB’s net present value from changes in the interest rates. For
the earnings perspective, KEB measures earnings at risk (EaR), which represents the maximum
expected loss of KEB’s net interest income from changes in interest rates. Besides these two
metrics, KEB monitors the repricing and duration gaps to review the interest rate risk profile, andconducts stress testing assuming severe market interest rate changes.

Liquidity Risk
KEB maintains the daily liquidity risk monitoring system by applying the customer behavior model
to forecast the actual maturity of assets and liabilities. The current liquidity risk measurement
metrics are the liquidity gap ratios and liquidity ratios. In addition, KEB is preparing new metrics,
processes and management framework of liquidity risk to meet the requirements for liquidity risk
management guidelines announced by the FSS in September 2009. After completing preparations
by June 2010, KEB will be equipped to practice very sound liquidity risk management.

Strategic Risk
Strategic risk is actually hard to measure, but KEB has defined it as a business risk and started
to calculate it in 2007. We have also established and manage a strategic risk limit. Strategicrisk volume is measured by the volatility of actual operating income deviation against expected
operating income estimates.

036

Business Continuity Planning
KEB maintains a Business Continuity plan to ensure that operations can continue with minimal
losses to the bank in the event of an accident (fire for example), manmade or natural disaster (suchas a typhoon or terrorist attack) or system failure. Meanwhile, the Crisis Management Committee,
which consists of the CEO and the executives in charge of Personnel, Finance, Systems &Technology, and Business Continuity Planning, is ready to respond quickly to any possible businessdisruption caused by a disaster or accident.
An alternative office has been established outside Seoul, 30 kilometers south of the Head Office.
This contingency location is ready to assume the functions of the Head Office and other key
facilities should they become inoperable for any reason. The Disaster Recovery (DR) Center isalso located over 30 kilometers away from the IT Data Center as a backup for IT system failures,
ensuring the system remains in service around the clock.
Every branch and sub-branch-the units tasked with performing customer services-has two
designated alternative locations that can be used should their operation be disrupted at any time.
One is the branch (or sub-branch) closest to it (Contingency LocationⅠ) and the other is one
located at least 10 kilometers away (Contingency LocationⅡ). This scheme allows us to respondin the event of a fire, power failure or other problem at a single location as well as to cope with awidespread disaster such as a flood or earthquake.
KEB has been conducting emergency simulation exercises at least once a year since 2007. Thesedrills are designed to increase the emergency responsiveness and recovery capabilities of all
employees, including the CEO. The date for the exercise is not announced in advance, thereby
adding to the realism and increasing employees’ ability to actually respond. For example, the April
2009 drill simulated a concurrent power failure at the Head Office and IT Data Center, and ourpeople practiced connecting the IT system at the contingency location with that of the DR Center.
Various other disaster scenarios have also been designed.
Moreover, KEB began to check the temperatures of all visitors to the Head Office in June 2009 in
the wake of the WHO declaration of influenza A (H1N1) as a pandemic and placed temperaturecheckers and hand sanitizer dispensers at all branches. These efforts helped to ensure business
continuity amid the H1N1 flu outbreak.
We are committed to ensuring that our services are never interrupted should any kind of accident
or disaster occur. In the process, we are earning a reputation as a bank where customers canreceive the very best financial services at any time.

037

Transparent
Corporate Culture& Foundation for
Sharing
KEB fosters a clean organizational culture, stressing that employees must remain committed
to transparent, ethical business practices and strict legal compliance at all times. In addition,
we are a Corporate Social Responsibility leader in the Korean financial industry. Our “winwin” approach to business is manifested by our engagement in public service projects,
scholarship programs and relief efforts inside and outside of the country. We are fulfilling agreat responsibility to achieve sustainability out of harmony and balance.

038

Corporate Ethics

KEB Foundation· Support for Needy Children· Support for Low-Income Families
and Underprivileged People· Support for Multi-Cultural Families· Community Services· Scholarship Programs· International Relief Programs039

Corporate Ethics

KEB has a responsibility to its employees, customers and shareholders. We honor
this commitment through internal controls to ensure the highest standards of
ethical and transparent management. We have implemented an ombudsman
system, an extensive cadre of compliance officers, and other programs that help toinstill corporate pride, earn public trust and enhance our reputation.
Through the KEB Foundation, the Korean financial industry’s flagship charitableorganization, KEB volunteers perform a wide range of activities to assist society’s
most needy and neglected members, build homes for the homeless, support thearts, and provide relief to those struck by disaster in communities where we operate,
both at home and overseas.

Commendation from the Minister of
Health, Welfare & Family Affairs at the
1st Republic of Korea Humanitarian Prize

Corporate Ethics
KEB people understand that the reputation of our bank depends on the integrity of our operations.
Our staff conforms to the highest standards for ethical behavior and mindset. KEB pursues
transparency in business management through a comprehensive internal oversight system toprotect the bank and our customers, employees, and shareholders.
KEB has reinforced internal control and stepped up the organization-wide activities to prevent
financial misconduct. Training is provided on regulatory compliance and business ethics as well,helping to ensure ethical conduct at all times.
Domestically, we introduced the compliance manager program to all regional headquarters tostrengthen internal oversight and regulatory compliance monitoring in 2009. Overseas offices
also implemented an overseas compliance officer system to emphasize transparent, ethicalmanagement and legal compliance. Additional measures were implemented to enhance internal040

KEB Foundation

oversight overseas as well. These included reinforcing the independence of overseas complianceofficers and improving the compliance reporting system.
KEB implemented the independent Ombudsman system in 2005 for the first time among
Korean banks and applied it globally in 2009 to facilitate and broaden internal reporting. Now
domestic branch employees as well as those at all overseas branches and subsidiaries can more
readily raise concerns about any ethical problems they may identify. The Ombudsman is totally
independent, protecting the confidentiality of whistleblowers.
In 2008, KEB became the first Korean bank to install the advanced Anti-Money Laundering (AML)
monitoring system and Enhanced Customer Due Diligence (EDD) scheme. By doing so, we are
better able to block illegal money transactions and have acquired an AML system that conforms tointernational standards. We continue to improve the AML system, for example, by expanding it toall overseas operations, to minimize AML risk.
Our commitment to ethical management and legal compliance was once again recognized at the
3rd Annual Anti-Money Laundering (AML) Day held in November 2009 with our Chairman Richard F.
Wacker honored by the Financial Services Commission. In the previous year, KEB was designatedas an “Outstanding Organization in Preventing Money Laundering” at the 2nd Annual AML Day.

KEB Foundation
KEB is fulfilling its role and responsibilities as a corporate citizen while maximizing customer
benefits and wealth through its clean corporate culture as well as its outstanding expertise in
the international finance and foreign exchange segments. The KEB Foundation (KEBF) wasestablished in December 2005 as the first non-profit charity organization by a Korean bank,laying the groundwork for charity and voluntary activities over the long term while meeting our
responsibilities both social and economic.
KEBF encourages people throughout society to get involved in helping others. The charity work of
KEBF is carried out systematically and continuously in six areas, all funded by KEB as well as bydonations from customers and employees. These areas are support for needy children, support for
low-income families and underprivileged people, support for multi-cultural families, community
services, scholarship programs and international relief programs.
A total of 2,156 employees donated KRW 598 million, and KEB contributed KRW 2.3 billion to
the KEBF in 2009. Fifteen top executives pledged to donate the gains from exercising their stock
options (142,000 shares), while KEBF received another KRW 1.13 billion in returned executive
salaries during the year. Finally, KEBF raised an additional KRW 1 billion in capital with KRW 500
million coming from employee donations and the other KRW 500 million from a matching donationby KEB.

041

KEB Foundation

KEBF has provided about KRW 10 billion to fund charity projects since its establishment five years
ago and has engaged in professional charity work as part of the ongoing effort to encourage thespirit of sharing inside and outside of Korea. These efforts resulted in our being honored with acommendation from the Minister of Health, Welfare & Family Affairs at the 1st Republic of Korea
Humanitarian Prize, held in December 2009. The activities of KEBF have been recognized forhelping domestic financial institutions spark a new awareness of Corporate Social Responsibility(CSR) and broaden their scope of involvement.

(1) Support for Needy Children
KEBF remains committed to improving children’s welfare, supporting needy children and,
thereby, contributing to building up social security. Among many activities in this area, the One
to One Sponsorship Program is noteworthy. KEBF has helped KEB employees to forge ties with
underprivileged children inside and outside of Korea in cooperation with World Vision, Korea Foodfor the Hungry International, Leftovers Love Sharing Community and other renowned Korean
NPOs. Today, 736 children are receiving about KRW 21 million a month (KRW 258 million a year) in
financial assistance.
KEBF has supported children in need, for example, orphans and children from single-parent
families, and sponsored education and welfare projects for them. KEBF sponsored hiking tours
for disabled children in collaboration with Holt Children’s Services and other welfare facilities forhandicapped children. Other activities include sponsoring an essay contest for orphans, running
English language camps with native English speakers as teachers, holding hiking and nature
tours on Mt. Halla (Jeju Island) for children from low-income families, and financing Seoul andtheme park tour programs for children living outside the metropolitan area. These programs help
children from low-income families adapt to society.
Starting from 2007, KEBF has held economics classes for after-school teachers in rural areas
so that they can teach children from low-income and underprivileged families to be better atmanaging money. In 2009, KEB also allowed its HR Development Center and Auditorium to be
used for community service purposes, an unprecedented practice in Korea.

(2) Support for Low-Income Families and Underprivileged People
One of the main working areas of KEBF is supporting government aid recipients, minority
groups as well as migrant workers, migrant wives married to Korean spouses and North Korean
defectors, who are currently gaining social attention. KEBF is financing and volunteering at kitchen
soup programs for the homeless while sponsoring employment programs for the homeless andunemployed. Other areas KEBF has engaged in include providing vehicles to welfare organizations
and fund raising for the establishment of a rehabilitation hospital for the disabled. KEBF held
its third annual KEB Bazaar of Love, a charity bazaar to help needy neighbors, in June and KEB

042

employees also participate in various charity events to support the underprivileged at the end of
the year.
KEBF has been financing the Foreign Laborer Hospital, a free medical service organization for
migrant workers, while supporting translation centers and assisting events for migrant workers
across the country. KEBF has also supported mentoring programs for young North Korean
defectors and made regular donations to Community Chest of Korea to help low-income families
of independence patriots.

(3) Support for Multi-Cultural Families
The increasing number of multicultural families in Korea represents a transformation of Koreansociety. KEBF has responded by launching the KEB Global Family Award in 2009, helping to raisesocial awareness of the issue and supporting the livelihood of these families as well. The nationwide initiative is designed to select 18 exemplary non-Korean wives and bicultural children andprovide them with a chance to visit their home countries as well as prize money of up to KRW 10
million for the grand prize winner. This program is helping these families to become establishedmore quickly in Korean society, while raising public interest in their needs and promoting a moreopen society where all people live harmoniously.
Since 2008, KEBF has run a home visit project for migrant wives in collaboration with the Ministryfor Health, Welfare and Family Affairs. KEBF selected model migrant wives working as volunteer
interpreters at local health care centers and paid for trips to their home countries (Vietnam,
Indonesia, Philippines, Mongolia, and China). In 2009, this program allowed 19 non-Korean wives
to visit their native lands.
In addition, KEBF continued to support a native language essay contest on the lives of migrant
wives in Korea and to assist cultural events for the teenaged children of multicultural families.
Other projects KEBF is backing include preschool programs for children from Korean-Vietnamesefamilies, children’s painting contests, and free legal consultation services.

(4) Community Services
The “KEB Love Sharer,” a volunteer group consisting of over 1,000 KEB employees and theirfamilies, provides opportunities to volunteer for community service activities. For example, a bankwide voluntary work program invites all employees to visit local welfare centers every Lunar New
Year’s Day, Harvest Moon Day and at the end of the calendar year. In late 2008 and early 2009, KEB
branches in Jung-gu, where the Head Office is located, delivered rice, kimchi and other necessities
to 87 needy families in the ward. KEBF has also expanded into building homes for low-income
families in cooperation with Korea Habitat for Humanity.

043

KEB Foundation“KEB Nanum (Sharing) Deposit” is a special bank account that serves the public goodby contributing a portion of the savings to charitable causes inside and outside of Korea.
Twenty holders of this bank account visited Batam, Indonesia, to help build homes for local
underprivileged people. This voluntary campaign was subsequent to the 2008 event in Vietnam.

(5) Scholarship Programs
The KEB Scholarship program, launched in 1989, is now operated under KEBF. KEBF has provided
a total of KRW 680 million in grants to 687 middle school, high school and university students
from low-income families between 2006 and 2009. KEBF has also paid the expenses for 11 KEB
Scholarship recipients to attend eight-week English language programs in the US and Canada
each year since 2007. In 2009, we became the first in Korea’s private sector to donate funds (KRW
300 million) to the Korea Student Aid Foundation, which provides students in low-income families
with opportunities to receive a college education and offers long-term financial aid programs.
KEB is the first Korean bank to found a scholarship program that covers both domestic andforeign students. The KEB Global Scholarship program was established to promote global HR
development and to facilitate Korea’s international exchanges. Under the program, a total of
KRW 30 million was given to 10 students from developing countries who are enrolled at Korean
universities. Meanwhile, KEB international scholarship was given to 821 underprivileged university
students in developing nations in Southeast Asia, including Vietnam (627), Indonesia (144), and thePhilippines (50), since the launch of the program in 2006.

(6) International Relief Programs
KEB has the most extensive global network among Korean banks. Capitalizing on this feature,
KEBF has conducted prominent international relief activities. KEBF has supported several
international emergency programs in the wake of the 2004 tsunami in Indonesia, and floods andnatural disasters in Taiwan, the Philippines and other countries.
In 2009, KEBF also helped establish the 3rd “Happy Home School,” a children welfare center andrelated facilities in poor districts in the Philippines in collaboration with the Korea Food for the
Hungry International, following the 2nd HHS that was established in Vietnam in 2008. KEBF also
provided scholarships for students at the 1st HHS at Pancasari, Indonesia, which opened in 2007.
As for medical assistance, KEBF donated to the Free Eye Camp program, which provides freeeyesight recovery operations, to free operations for Vietnamese children with facial deformities,
and to a vaccine development project for poor children through the International Vaccine Institute.
KEBF also helped to finance the Asan Medical Center’s medical volunteer work in Cambodia, andsent KEB employees as volunteers. These global contributions are a testimony to KEB’s concern
for international relief and the wellbeing of people worldwide.

044

Financial
Statements
p46

Management Discussion & Analysisp54

Non-Consolidated Financial Statements- Independent Auditors’ Reportp55

Non-Consolidated Statements of Financial Position

p56

Non-Consolidated Statements of Income

p58	Non-Consolidated Statements of Appropriations of Retained Earnings
p59

Non-Consolidated Statements of Changes in Shareholders’ Equity

p60

Non-Consolidated Statements of Cash Flows

p62

Notes to Non-Consolidated Financial Statements

p120	Independent Accountants’ Review Report on Internal Accounting Control
System (“IACS”)
p121	Evaluation Report on the Effectiveness of Internal Accounting Management
System by the Internal Accounting Manager
p122

Consolidated Financial Statements- Independent Auditors’ Report

p123

Consolidated Statements of Financial Position

p124

Consolidated Statements of Income

p126

Consolidated Statements of Changes in Shareholders’ Equity

p127

Consolidated Statements of Cash Flowsp129

Notes to Consolidated Financial Statements

Management Discussion & Analysis

1. Key Financial
Data			(In billions of KRW)			2009		
2008			Operating Results				Total Income		
2,540.8		
3,018.6		
		
Net Interest Income		
1,917.9		
2,238.1		
		Fees & Commissions		
463.2		562.8				Non Interest Income		
159.7		217.6		Total Expenses (G&A)		
1,223.7		
1,145.3		
Operating Income		
1,317.2		
1,873.2		
Net Income		
891.7		782.6		Profitability Indices				Net Interest Margin (NIM)		
2.39%		2.90%		Return on Assets 		
0.88%		0.83%		Return on Equity		
12.27%		
11.90%		
Balance Sheet Data at Year-End (including Trust Account)			
Total Assets		
107,728.9		
114,351.9		
Total Credits		
70,550.5		
70,945.7		
Total Deposits		
67,371.3		
67,933.1		
Asset Quality				
NPL Ratio 		
0.94%		1.09%				NPL Coverage Ratio		
152.5%		
141.5%		
Precautionary & Below Ratio		
2.27%		2.10%				Pre & Bel. Coverage Ratio		
63.3%		73.6%		Delinquency Ratio		
0.50%		0.92%Capital Adequacy				BIS Ratio		
14.93%		
12.65%				Tier I Ratio		
11.04%		
8.82%				Tier II Ratio		
3.89 %		
3.82%		

YoY
-15.8%-14.3%-17.7%-26.6%+6.8%-29.7%+13.9%-0.51%p+0.05%p+0.37%p
-5.8%
-0.6%
-0.8%
-14.0%+7.8%+8.1%-14.0%-45.9%+2.28%p+2.22%p+0.07%p

2. Overview
At the start of 2009, the outlook for KEB and the rest of the banking sector was uncertain due to anticipated aftershocks from the unprecedented
global financial crisis of 2008. However, the bank showed strong sequential recovery from the second quarter and ended the year with strong results,
with top performance among the domestic banks in terms of profitability, capital adequacy, and asset quality.
KEB posted net income of KRW 891.7 billion in 2009, up 13.9% from the previous year. KEB strengthened its capital level with its BIS ratio topping
14.93% at the end of 2009, up 2.28 percentage points from 12.65 at the end of 2008. Despite the difficult economic environment, KEB saw its NPL ratio
fall to 0.94% and its delinquency ratio to 0.50% because of its prudent risk management. After considering the financial performance and growth plan,
the Board of Directors declared a cash dividend payment of KRW 510 per share.

046

Management Discussion & Analysis

3. Income			Statement
1) Summary of Profitability(In billions of KRW)					2009								
1Q
2Q1		 Net Interest Income
1,917.9455.0
435.2
2		 Fees & Commissions		
463.2
116.8
115.2
3		 Non Interest Income		
159.7
39.7
34.2
4
Total Income [1+2+3]		
2,540.8
611.5
584.6
5
Total Expenses 		
1,223.7
373.2
250.9
6
Operating Income [4-5]		
1,317.2
238.3
333.7
7
Investment Stock Impairment Loss, etc.		
-242.1-4.9-202.2
8
Income Before Provisions [6-7]		
1,559.3
243.2
535.9
9
Provisions & Others		
776.2
373.3
232.1
10		 Loan Loss Provisioning		
666.3
325.2
187.0
11
Income before Tax [8-9]		
783.1-130.1
303.8
12Income Tax Expense 		-108.6
-55.3
65.7
13
Net Income [11-12]		
891.7
-74.8
238.2
14
Earnings per Share (KRW)		
1,383
-116
369

		
3Q
484.3 		109.1 		64.6 		658.0 		312.3 		345.7 		-2.5 		348.2 		85.0 		83.7 		263.2 		-158.9 		
422.1 		
654		

4Q
543.4
122.1
21.2
686.7
287.2
399.5
-32.5
432.0
85.7
70.3
346.3
39.9
306.4
475

YoY

2008
2,238.1562.8
217.6
3,018.6
1,145.3
1,873.2-90.7
1,963.8
796.4
726.9
1,167.5
384.9
782.6
1,213

-14.3%-17.7%-26.6%-15.8%+6.8%-29.7%
F-20.6%-2.5%-8.3%-32.9%
F+13.9%+13.9%

Note: F = Favorable

Operating income declined in 2009 from the prior year, primarily because of the decline in assets and net interest margin. Net income, however, rose
13.9% to KRW 891.7 billion in 2009 due to a reduction in provision expenses, gains from the sale of Hyundai Engineering & Construction shares (KRW
136.8 billion after-tax), and a non-recurring tax benefit (KRW 229.6 billion).
The bank’s profitability indicators, ROA and ROE, came to 0.88% and 12.27%, respectively, despite the difficult operating environment.

(In billions of KRW)

Quarterly Trend of Net Income

NormalNon-recurring items

Refund from the
National Tax Service

Gains from sale ofHyundai E&C shares

238.2

422.1

229.6

136.8

306.4
192.5

101.4
-74.8

1Q09

2Q09

3Q09

4Q09

047

Management Discussion & Analysis

			2) Net Interest Income (NII) & Net Interest Margin (NIM)
Net interest income (NII) was KRW 1,917.9 billion in 2009, down KRW 320.2 billion or 14.3% from KRW 2,238.1 billion in the previous year. The lower net
interest margin (NIM) was the primary driver.
NIM declined in the first quarter of 2009 following the reduction in the policy rate by the Bank of Korea in the fourth quarter of 2008 and the firstquarter of 2009. The NIM decline was mainly due to the negative duration gap, where the effects of interest rate cuts are more slowly reflected inliabilities than assets. However, KEB has shown strong NIM recovery since the third quarter, reflecting large-scale re-pricing of KRW deposits. Despite
rapid recovery in the second half, KEB’s average NIM for 2009 recorded 2.39%, down 51 basis points from the previous year.
(In billions of KRW)		2009								
1Q
2QNet Interest Income
1,917.9
455.0
435.2
Average Earning Assets
79,513.9
83,084.2
79,234.3
Net Interest Margin (NIM)*
2.39%
2.18%
2.17%
		
KRW
2.74%
2.56%
2.41%
		
Foreign currency
1.42%
1.28%
1.49%

		
3Q
484.3
76,640.2
2.49%
2.85%
1.43%

2008
4Q		
543.4
2,238.1
79,264.1
73,959.8
2.72%
2.90%
3.11%
3.64%
1.51%
1.07%

YoY
-14.3%+7.5%-0.51%p-0.90%p+0.35%p* Net interest margin is calculated from net interest income adjusted for certain items.

3) Fees & Commissions and Non Interest Income
Sum of total fees & commissions and non interest income totaled KRW 622.9 billion in 2009, down KRW 157.5 billion or 20.2% from KRW 780.4 billion
in the previous year.
Total fees & commissions were KRW 463.2 billion, compared to KRW 562.8 billion in the previous year, a decline of KRW 99.6 billion or 17.7%, due to
weak FX transactions and trade volume, which were affected by the contraction of the global economy. However, fees & commissions began to benefit
from stronger trade volume in the fourth quarter. Non interest income of KRW 159.7 billion in 2009 decreased by KRW 57.9 billion from the previous
year.
(In billions of KRW)		2009				
		
2008
				
1Q
2Q
3Q
4Q		
Total Fees & Commissions
463.2
116.8
115.2
109.1
122.1
562.8
Gains from FX transactions
273.3
76.4
66.3
63.8
66.7
303.3
Fees & Commissions
189.9
40.4
48.9
45.3
55.4
259.6
		
KRW currency related
138.3
30.8
35.2
35.9
36.4
179.3
		
Foreign currency related
141.1
33.9
33.8
31.6
41.8
163.9
		
Card
-178.8
-44.6
-43.7
-43.7
-46.8
-159.5		
Others
89.3
20.3
23.5
21.5
24.0
75.9
Non Interest Income
159.7
39.7
34.2
64.6
21.2
217.6
% of Total Income							Total Fees & Commissions
18.2%
19.1%
19.7%
16.6%
17.8%
18.6%
Non Interest Income
6.3%
6.5%
5.9%
9.8%
3.1%
7.2%
Sum		
24.5%
25.6%
25.6%
26.4%
20.9%
25.8%
Note: U = Unfavorable

048

YoY
-17.7%-9.9%-26.9%-22.9%-13.9%
U+17.7%-26.6%-0.4%p
-0.9%p
-1.3%pManagement Discussion & Analysis

			

KEB’s market-leading position in FX and trade finance business remained strong, with estimated market shares of 46% for FX and 29% for both export
and import financing during 2009.

(Annual average for 2009)Market Leadership in FX and Trade Finance
KEB
Others

KEB 46%FX Market Share (%)
OthersKEB 29%
Export Market Share (%)

KEB 29%
Import Market Share (%)

OthersOthers* Market share in FX is based on 7 large domestic banks’ transactions, exports/imports are based on national trade volume.

4) Total Expenses
Total expenses in 2009 were KRW 1,223.7 billion, up KRW 78.4 billion or 6.8% from KRW 1,145.3 billion in 2008. The underlying trend was flat when
adjusted for the non-recurring restructuring charge incurred in the first quarter. The cost/income ratio (total expenses to total income ratio) rose to
48.2% in 2009, a 10.3%p increase from the previous year. This deterioration was primarily due to reduced revenues.
(In billions of KRW)		2009								
1Q
2QTotal Expenses
1,223.7373.2
250.9
Salaries & Benefits
702.0
208.1
145.6
Operating Expenses
368.2
129.9
68.3
Depreciation
115.2
26.9
28.9
Tax & Dues
38.3
8.3
8.1
% of Total Income
Total Expenses
48.2%
61.0%
42.9%
Salaries & Benefits
27.6%
34.0%
24.9%
Operating Expenses
14.5%
21.2%
11.7%

YoY

		
3Q
312.3
199.4
72.2
28.4
12.3

2008
4Q		
287.2
1,145.3
148.9
661.1
97.8
317.7
31.0
119.4
9.6
47.1

+6.8%
+6.2%
+15.9%-3.2%-19.0%

47.5%
30.3%
11.0%

41.8%
21.7%
14.2%

+10.3%p+5.7%p
+4.0%p

37.9%
21.9%
10.5%

049

Management Discussion & Analysis			5) Provisions & Others
Total provisions & others was KRW 776.2 billion in 2009, down KRW 20.2 billion or 2.5% from 2008. Loan loss provision (LLP) was KRW 666.3 billion
in 2009, down KRW 60.6 billion or 8.3% from 2008. As the shocks from the global economic crisis began to moderate, loan loss provisioning showeda sharp decline starting in the second quarter. KEB was also only modestly impacted by the government-led restructurings due to prudent credit
risk management.
(In billions of KRW)		2009						
				
1Q
2Q
3Q
Total Provisions & Others
776.2
373.3
232.1
85.0
Loan Loss Provisioning
666.3
325.2
187.0
83.7
Corporate
548.0
300.5
145.6
51.8
Household
49.3
6.7
18.4
14.7
Card
68.9
18.0
23.0
17.2
Other Provisioning
50.1
18.3
36.5
-8.3
Retirement Allowance
59.8
29.8
8.6
9.6

2008
4Q		
85.7
796.4
70.3
726.9
50.1
647.3
9.5
47.9
10.7
31.7
3.6
22.6
11.8
47.0

YoY
-2.5%
-8.3%
-15.3%+2.9%+117.4%+122.1%+27.3%

4. Asset Quality and Balance Sheet (Bank Account)1) Asset Quality
Asset quality generally improved during 2009 after a substantial deterioration at the beginning of the year. Non-performing loans (NPL) totaled KRW
665.0 billion at the end of the year, compared to KRW 775.2 billion at the end of 2008, declining by KRW 110.2 billion or 14.2%. The ratio of NPL to total
credit (NPL ratio) improved to 0.94% from 1.09% at the end of 2008. Reserve coverage increased to 152.5% at the end of 2009 from 141.5% at the endof 2008.
(End of period / In billions of KRW)			
4Q08		 1Q09		 2Q09		 3Q09		 4Q09			
Total Credits 		
70,945.9		
69,370.5		
68,902.9		
68,134.5		
70,550.5		
Normal 		
69,454.7		
67,689.4		
67,197.8		
66,433.7		
68,948.1		
Precautionary		
716.0		657.2		764.7		847.3		937.3		NPL 			775.2		1,023.9		
940.4		853.5		665.0Substandard		
422.7		626.4		591		543.3		448.4		Doubtful		
92.2		
159.1		193.5		203.9		162.8		Estimated Loss		
260.3		238.4		155.9		106.3		53.8% of Total Credit		Precautionary		
1.01%		0.95%		1.11%		1.24%		1.33%		NPL			
1.09%		1.48%		1.36%		1.25%		0.94%		Reserves for Loan Loss		
1,097.1		
1,125.5		
1,083.4		
1,042.8		
1,014.4		
NPL Coverage Ratio		
141.5%		
109.9%		
115.2%		
122.2%		
152.5%		

YoY
-0.6%
-0.7%
+30.9%-14.2%+6.1%+76.6%-79.3%+0.32%p-0.15%p-7.5%+11.0%p2) Assets
Total assets at the end of 2009 were KRW 96.3 trillion, compared to KRW 103.7 trillion at the end of 2008, a decrease of KRW 7.4 trillion or 7.1%. The
largest contributor to this decrease was the reduction in cash & dues from banks, followed by the reduction in loans.
Loans totaled KRW 62.6 trillion, down KRW 1.8 trillion or 2.8% from KRW 64.4 trillion at the end of 2008, primarily due to a decrease of foreign currency
loans.
(End of period / In billions of KRW)			
4Q08		 1Q09		 2Q09		 3Q09		 4Q09			
Cash & Due from Banks		
10,107.7		
8,993.5		
6,858.8		
6,047.8		
5,902.7		
Securities		
12,112.6		
13,957.7		
14,949.0		
15,447.5		
13,829.2		
Loans		64,412.3		
62,741.5		
62,041.6		
60,228.0		
62,627.0		
Credit Card Receivables		2,552.6		
2,444.0		
2,408.2		
2,392.0		
2,422.9		
Other Assets		
13,712.6		
17,659.9		
15,470.2		
17,537.6		
12,097.7		
Merchant Banking Assets		
3,363.1		
3,005.7		
2,259.9		
2,157.7		
1,851.5		
Total Assets		
103,708.3		
106,358.3		
101,579.5		
101,418.6		
96,308.1		

050

YoY
-41.6%+14.2%-2.8%-5.1%-11.8%-44.9%-7.1%

Management Discussion & Analysis

			3) Liabilities & Shareholders’ Equity
The overall funding mix improved in 2009. Total deposits increased to KRW 57.0 trillion at the end of 2009, up KRW 0.6 trillion or 1.0% from KRW 56.4
trillion at the end of 2008. Total borrowings declined to KRW 9.2 trillion at the end of 2009, compared to KRW 12.0 trillion at the end of 2008, a decreaseof KRW 2.8 trillion or 23.2%. Debentures also decreased to KRW 7.9 trillion, down KRW 2.9 trillion or 27.2%, from KRW 10.8 trillion at the end of 2008.
Most of these changes reflect actions taken by KEB to improve its funding mix, including early redemption of hybrid and subordinate bonds, and theselective redemption of foreign currency funding.
Total shareholders’ equity increased to KRW 7.95 trillion at the end of 2009, up KRW 1.29 trillion or 19.4% from KRW 6.66 trillion at the end of 2008.
(End of period / In billions of KRW)			
4Q08		 1Q09		 2Q09		 3Q09		 4Q09			
Deposits		
56,397.4		
52,786.0		
53,882.4		
53,777.3		
56,951.9		
Borrowings		
11,958.8		
12,844.4		
11,565.8		
10,023.6		
9,183.8		
Debentures		
10,790.6		
10,665.7		
9,834.4		
9,235.4		
7,855.9		
Other Liabilities		
14,402.5		
20,879.4		
18,217.5		
19,677.2		
13,062.1		
Merchant Banking Liabilities		
3,495.6		
2,471.4		
1,214.3		
1,165.0		
1,299.6		
Shareholders’ Equity		
6,663.5		
6,711.4		
6,865.1		
7,540.1		
7,954.8		
Liabilities & Shareholders’ Equity		
103,708.3		
106,358.3		
101,579.5		
101,418.6		
96,308.1		

YoY
+1.0%
-23.2%-27.2%-9.3%-62.8%+19.4%-7.1%

5. Capital Adequacy
KEB maintained strong capital position with BIS capital ratio of 14.93% at the end of 2009, up 2.28%p from 12.65% at the end of 2008. This
improvement reflects robust earnings performance and disciplined management of risk weighted assets.
TierⅠcapital ratio was 11.04% at the end of 2009, up 2.22%p from 8.82% at the end of 2008. TierⅠcapital was achieved after deducting 2009 dividendsof KRW 510 per share, or KRW 328.9 billion, which KEB’s Board of Directors declared after carefully considering KEB’s current capital position andgrowth plan. TierⅡcapital ratio also increased to 3.89% at the end of 2009 from 3.82% at the end of 2008.
(In percent)

BIS Capital Ratio

TierⅠ
TierⅡ

15.62
14.29

14.93

14.64
4.10

12.64
4.31

4.02

3.89

3.82

8.82

4Q08

9.98

1Q09

10.62

2Q09

11.52

11.04

3Q09

4Q09

051

Management Discussion & Analysis

			Appendix 1. Historical Annual Financial Statements - Balance Sheet(End of period / In billions of KRW)

2007
1
2
3
4
5
6
7
8
9
10
11
12
13
14

052

Cash & Due from Banks
Securities
Loans
Credit Card Receivables
Other Assets
Merchant Banking Assets
Total Assets
Deposits
Borrowings
Debentures
Other Liabilities
Merchant Banking Liabilities
Shareholders’ Equity
Liabilities & Shareholders’ Equity

2008
5,118.4
9,773.4
54,055.4
2,440.6
9,724.0
3,353.8
82,024.9
44,431.0
8,858.1
8,547.9
11,390.2
2,147.0
6,650.8
82,024.9

2009
10,107.7
12,112.6
64,412.3
2,552.6
13,712.6
3,363.1
103,708.3
56,397.4
11,958.8
10,790.6
14,402.5
3,495.6
6,663.5
103,708.3

5,902.7
13,829.2
62,627.0
2,422.9
12,097.7
1,851.5
96,308.1
56,951.9
9,183.8
7,855.9
13,062.1
1,299.6
7,954.8
96,308.1

2008 YoY (%)+97.5%+23.9%+19.2%+4.6%+41.0%+0.3%+26.4%+26.9%+35.0%+26.2%+26.4%+62.8%+0.2%+26.4%

2009 YoY (%)-41.6%+14.2%-2.8%-5.1%-11.8%-44.9%-7.1%+1.0%-23.2%-27.2%-9.3%-62.8%+19.4%-7.1%

Management Discussion & Analysis

			Appendix 2. Historical Annual Financial Statements - Income Statement(In billions of KRW)

2007
1
2
3
4
5
6
7
8
9
10
11
12
13
14

Net Interest Income
Fees & Commissions
Non Interest Income
Total Income [1+2+3]
Total Expenses
Operating Income [4-5]Investment Stock Impairment Loss, etc.
Income Before Provisions [6-7]
Provisions & Others
Loan Loss Provisioning
Income before Tax [8-9]
Income Tax Expense
Net Income [11-12]
Earnings per Share (KRW)

2008
1,886.6581.2
252.8
2,720.6
1,092.2
1,628.4-207.6
1,836.0
319.4
318.7
1,516.6
555.6
960.9
1,490

2009
2,238.1562.8
217.6
3,018.6
1,145.3
1,873.2-90.7
1,963.8
796.4
726.9
1,167.5
384.9
782.6
1,213

1,917.9463.2
159.7
2,540.8
1,223.7
1,317.2-242.1
1,559.3
776.2
666.3
783.1
-108.6891.7
1,3832008 YoY (%)+18.6%-3.2%-13.9%+11.0%
4.9%+15.0%
U+7.0%+149.3%+128.0%-23.0%-30.7%-18.6%-18.6%

2009 YoY (%)-14.3%-17.7%-26.6%-15.8%+6.8%-29.7%
F-20.6%-2.5%-8.3%-32.9%
F+13.9%+13.9%

Notes: U = Unfavorable
F = Favorable053

Non-Consolidated Financial Statements			Independent
Auditors’ Report
English Translation of a Report Originally Issued in Korean

To the Shareholders and Board of Directors of
Korea Exchange Bank:
We have audited the accompanying non-consolidated statements of financial position of Korea Exchange Bank (the “Bank”) as of December 31,
2009 and 2008, and the related non-consolidated statements of income, appropriations of retained earnings, changes in shareholders’ equity andcash flows for the years then ended, all expressed in Korean Won. These financial statements are the responsibility of the Bank’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that weplan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Bank as of December
31, 2009 and 2008, and the results of its operations, changes in its retained earnings and its shareholders’ equity, and its cash flows for the years
then ended, in conformity with accounting principles generally accepted in the Republic of Korea.
Accounting principles and auditing standards and their application in practice vary among countries. The accompanying financial statements are
not intended to present the financial position, results of operations, changes in shareholders’ equity and cash flows in accordance with accounting
principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in
the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries. Accordingly,
this report and the accompanying financial statements are for use by those knowledgeable about Korean accounting procedures and auditing
standards and their application in practice.

Deloitte Anjin LLC
Seoul, Korea
March 3, 2010

Notice to ReadersThis report is effective as of March 3, 2010, the auditors’ report date. Certain subsequent events or circumstances may have occurred between theauditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the accompanying financial
statements and may result in modifications to the auditors’ report.

054

Non-Consolidated Statements of Financial Position
KOREA EXCHANGE BANK (BANKING ACCOUNT) as of December 31, 2009 and 2008

			(In millions of KRW)2009
ASSETSCash and due from banks (Notes 3, 18, 19, 24 and 29)
Securities (Notes 4, 17, 18, 19, 23 and 24)
Loans (Notes 5, 6, 7, 17, 18, 19, 23 and 24)
Tangible assets (Note 8)
Other assets (Notes 2, 9, 17, 21 and 24)
Merchant banking account assets (Note 10)₩₩
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits (Notes 11, 18, 19 and 24)
Borrowings (Notes 12, 18, 19 and 24)
Other liabilities (Notes 2, 13, 16, 17, 18, 21 and 24)
Merchant banking account liabilities (Note 14)₩

SHAREHOLDERS’ EQUITY (Notes 4, 5, 8, 15, 17 and 21):
Common stock
Capital surplus
Capital adjustments
Accumulated other comprehensive income
Retained earnings₩

2008
5,902,708
13,829,175
62,627,014
1,380,418
10,717,280
1,851,510
96,308,105

56,951,887
17,039,671
13,062,152
1,299,568
88,353,278

3,224,534
940
1,233,556
3,495,797
7,954,827
96,308,105

₩

₩

₩

₩

10,107,706
12,112,577
64,412,277
1,427,218
12,285,386
3,363,112
103,708,276

56,397,357
22,749,312
14,402,472
3,495,617
97,044,758

3,224,534
940(4,425)749,201
2,693,268
6,663,518
103,708,276

See accompanying notes to non-consolidated financial statements.

055

Non-Consolidated Statements of Income
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			(In millions of KRW, except per share amounts)

2009
OPERATING REVENUES:Interest income (Notes 19 and 24):
Interest on due from banks
Interest on trading securities
Interest on available-for-sale securities
Interest on held-to-maturity securities
Interest on loans
Other interest income

Gain on valuation and disposal of securities (Note 4):
Gain on valuation of trading securities
Gain on disposal of trading securities
Reversal of impairment loss on available-for-sale securities
Gain on disposal of available-for-sale securities
Gain on redemption of held-to-maturity securities

₩

2008

87,31132,014257,967
186,317
3,896,372
15,297
4,475,278₩

145,086
29,482
287,410
142,952
4,517,574
25,945
5,148,449

15,44346,094
18,686
250,810108
331,141

12,46642,21032,75893,555
180,989

16,76011,5513,720,056
7,221,653
467,435
14,203
141,716

2,567,115
13,986,684
500,11275,179260,411

16,388,242

22,730,490

Interest on deposits

1,545,130

1,780,589

Interest on borrowings

848,822

1,018,046

Gain on valuation and disposal of loans:
Gain on disposal of loans
Foreign exchange trading income
Gain on trading and valuation of derivatives (Notes 12, 17 and 19)
Commission income (Notes 19 and 24)
Dividends income (Note 19)
Other operating revenue (Notes 10, 19 and 25)
Total operating revenues
OPERATING EXPENSES:Interest expenses (Notes 19 and 24):

Other interest expenses

32,93156,032

2,426,883

2,854,667

Loss on valuation and disposal of securities (Note 4):
Loss on valuation of trading securities

906

6,892

Loss on disposal of trading securities

14,624

44,598

Impairment loss on available-for-sale securities

20,89632,734

Loss on disposal of available-for-sale securities

3,742

1,270

Loss on redemption of held-to-maturity securities

7-

40,17585,494648,470

719,840

Loss on valuation and disposal of loans (Notes 5, 7 and 17):
Provision for possible loan losses
Loss on disposal of loans

See accompanying notes to non-consolidated financial statements.

056

33,501

26,034

681,971745,874

Non-Consolidated Statements of Income (Continued)
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			
Foreign exchange trading losses
Loss on trading and valuation of derivatives (Notes 17 and 19)
Commission expenses (Notes 19 and 24)
General and administrative expenses (Notes 19 and 24)
Other operating expenses (Notes 14 and 19)
Total operating expenses(In millions of KRW, except per share amounts)

2009₩

2,812,085
7,869,356
278,602
1,283,401
280,534
15,673,007

2008₩

2,470,846
13,645,121
240,984
1,192,242
341,432
21,576,660

OPERATING INCOME

715,235

1,153,830

NON-OPERATING INCOME (Notes 4 and 20)

103,379

124,550

NON-OPERATING EXPENSES (Notes 4, 8 and 20)

35,483110,890

INCOME BEFORE INCOME TAX

783,131

1,167,490

INCOME TAX EXPENSE (BENEFITS) (Note 21)(108,606)

384,872

NET INCOME (Note 23)₩

891,737₩

782,618BASIC NET INCOME PER SHARE (In currency units) (Note 22)

₩

1,383

₩

1,214

DILUTED NET INCOME PER SHARE (In currency units) (Note 22)

₩

1,383

₩

1,214

See accompanying notes to non-consolidated financial statements.

057

Non-Consolidated Statements of Appropriations of Retained Earnings
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			(In millions of KRW, except per share amounts)

2009
RETAINED EARNINGS BEFORE APPROPRIATIONS:
Beginning of the year
Adjustments using the equity method
Net income₩

TRANSFER FROM VOLUNTARY RESERVES:Other reserve
APPROPRIATIONS:
Legal reserve (Note 16)
Other reserve
Capital adjustments (Valuation of securities using the equity method ofoverseas subsidiaries below zero)
Dividends[Cash dividends (Note 28)
Dividends per share (rate):₩510 (10.2%) at 2009₩125 (2.5%) at 2008]

UNAPPROPRIATED RETAINED EARNINGS TO BE
CARRIED FORWARD TO SUBSEQUENT YEAR
See accompanying notes to non-consolidated financial statements.

058

₩

2008
2,179,869
891,737
3,071,606₩

1,557,599
1,233
782,618
2,341,450

3,981

-

89,200206

78,3001,100

328,902

4,425
80,613418,308

164,438

2,657,279₩

2,179,869

Non-Consolidated Statements of Changes in Shareholders’ Equity
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			

As of January 1, 2008
Cumulative effect of accounting changes
Balance after adjustments
Dividend
Balance after appropriations
Net income
Effect of exchange rate fluctuations foroverseas branches
Adjustments by valuation using the equity
methodValuation of available-for-sale securities
Valuation of held-to-maturity securities
Valuation of securities using the equity method
Valuation (negative changes) of securities
using the equity method
Valuation of tangible assets
As of December 31, 2008
As of January 1, 2009
Dividend
Negative capital adjustments
Balance after appropriations
Net income
Effect of exchange rate fluctuations foroverseas branches
Valuation of available-for-sale securities
Valuation of held-to-maturity securities
Valuation of securities using the equity method(In millions of KRW)

Total

CapitalsurplusCapitaladjustments₩  3,224,534
3,224,534
3,224,534-₩        940
940
940
-

₩           - ₩  1,107,113 ₩  2,318,212 ₩  6,650,799(5,722)(17,098)
22,820(5,722)
1,090,015
2,341,032
6,650,799(451,435)(451,435)(5,722)
1,090,015
1,889,597
6,199,364
782,618
782,618

-

-

-

-

19,82019,820

-

-

1,297

-

1,233

2,530

-

-

-

(779,834)
44
3,689

-

(779,834)
44
3,689

-

-

-

(50)

-

(50)

₩  3,224,534

435,337
435,337₩        940 ₩     (4,425) ₩    749,201 ₩  2,693,268 ₩  6,663,518₩  3,224,534
3,224,534-₩        940 ₩     (4,425) ₩    749,201 ₩  2,693,268 ₩  6,663,518(80,613)(80,613)
4,425(4,425)940
749,201
2,608,230
6,582,905
891,737
891,737

-

-

-

-

(4,170)(4,170)---486,095
303
906-

486,095
303
906

-

-

-

280

-

280

₩  3,224,534₩        940

Valuation (negative changes) of securities
using the equity method
Valuation of tangible assets
As of December 31, 2009

Retained
Accumulated
otherearnings
comprehensive
incomeCapital stock(3,229)(3,229)₩           - ₩  1,233,556 ₩  3,495,797 ₩  7,954,827

See accompanying notes to non-consolidated financial statements.

059

Non-Consolidated Statements of Cash Flows
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			(In millions of KRW)2009
CASH FLOWS FROM OPERATING ACTIVITIES:Net income₩

2008
891,737₩

   782,618

Adjustments to reconcile net income to net cash provided by (used in)operating activities:
Gain on valuation of trading securities, net
Impairment loss (Reversal of impairment loss) on available-for-sale securities, net
Gain on valuation of securities using the equity method, net
Provision for possible loan losses
Loss (gain) on disposal of tangible assets, net
Depreciation and amortization
Loss on impairment of tangible assets
Gain on valuation of financial derivatives, net
Provision for severance benefits
Long-term compensation expense for performance bonus
Loss (gain) on liability reserve for unused credit limit, net
Stock option compensation costs, net
Loss (gain) on foreign exchange trading, net
Others, net
Changes in assets and liabilities resulting from operations:
Net decrease (increase) in trading securities
Net decrease (increase) in available-for-sale securities
Net increase in held-to-maturity securities
Net decrease (increase) in call loans
Net decrease (increase) in domestic import usance bill
Net decrease (increase) credit card receivables
Net decrease (increase) in bills bought in foreign currencies
Net decrease (increase) in bills bought in Won
Net decrease (increase) in bonds purchased under repurchase agreements
Net increase in loans in Won
Net decrease (increase) in loans in foreign currencies
Net decrease (increase) in factoring receivables
Net decrease (increase) in advances for customers
Net decrease in privately placed bonds
Net increase in deferred loan origination fees and costs
Net decrease (increase) in accrued income
Net increase in prepaid expenses
Net decrease (increase) in financial derivatives assets
Net increase (decrease) in accrued expenses
Net increase (decrease) in unearned revenues
Payment of severance benefits
Net increase in assets under management of pension benefits
Decrease in transfer to National Pension Fund
Increase in deposit of insurance for severance benefits
Net increase (decrease) in financial derivatives liabilities
Net decrease in allowance for other liabilities
Net increase (decrease) in deferred income tax liabilities
Net cash provided by (used in) operating activities
See accompanying notes to non-consolidated financial statements.

060(14,537)
2,210(49,416)
648,470(2,166)115,229(206,975)
59,7269,748
6,046
12,798(114,962)
29,962496,133(5,574)(24)(30,349)
719,840
1,685
119,421
25,346(127,782)
46,901
4,728(17,220)(11,862)
286,075
619
1,011,804

102,656
44,328(1,084,811)(17,374)
130,745
56,311
452,786(12,119)554,000(1,235,884)
1,154,882(35,836)
22,12974,667
4,075
138,758(15,838)
3,276,627(354,581)(25,800)(34,429)(508)
87(22,103)(3,055,056)(30,771)(23,441)
63,500₩              1,451,370(644,878)(1,347,773)(1,776,052)
1,061,158(1,004,275)(138,181)(1,005,237)
391,733(2,340,000)(4,795,553)(3,617,665)
180,097(24,409)
186,169
19,058(83,468)(4,014)(3,755,077)
254,224
16,267(18,036)(324)
56(44,459)
3,756,655(15,532)
115,553(14,633,963)₩           (12,839,541)

Non-Consolidated Statements of Cash Flows (Continued)
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			(In millions of KRW)2009
CASH FLOWS FROM INVESTING ACTIVITIES:Net increase in securities using the equity method
Disposal of tangible assets
Purchase of tangible assets
Purchase of intangible assets
Net decrease (increase) in accounts receivable
Net increase in guarantee deposits paid
Net decrease (increase) in other assets
Net decrease (increase) in merchant banking account assets
Net decrease (increase) in due from banks
Net cash used in investing activities₩

CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
Net increase (decrease) in borrowings
Net increase (decrease) in debentures
Net increase (decrease) in other liabilities
Dividend
Net cash provided by (used in) financing activities
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKSCASH AND DUE FROM BANKS, BEGINNING OF YEAR
CASH AND DUE FROM BANKS, END OF YEAR (Note 29)₩2008   (90,108)
7,529(51,240)(27,156)(155,573)(6,982)
41,5181,542,016
4,370,085
5,630,089₩

   (1,061)
338(102,502)(16,583)
721,816(33,395)(1,048,137)(239)(4,920,803)(5,400,566)

567,716(2,774,965)(2,834,383)(1,794,127)(80,613)(6,916,372)

11,978,492
3,100,650
1,904,259
1,318,484(451,435)
17,850,450

165,087(389,657)

3,299,904

3,689,561

    3,464,991₩

   3,299,904

See accompanying notes to non-consolidated financial statements.

061

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			
1. GENERAL:
Korea Exchange Bank (the “Bank”) was established on January 30, 1967 as a government-invested bank to engage in foreign exchange and thetrade finance business under the Korea Exchange Bank Act. On December 30, 1989, the Korea Exchange Bank Act was repealed and the Bank
was converted into a corporation under the Commercial Code of the Republic of Korea. On April 4, 1994, the Bank was listed on the Korean Stock
Exchange. The merger between the Bank and Korea Exchange Bank Credit Service Co., Ltd. (“KEBCS”) was finalized on February 28, 2004.
The Bank primarily provides commercial banking services, trust banking services, foreign exchange, merchant banking business through themerger with Korea International Merchant Bank, a domestic subsidiary of the Bank, and other related operations as permitted under the Bank Act
and other relevant laws and regulations in the Republic of Korea. The Bank operates through 352 branches (including 27 depositary offices) and 3
subsidiaries in Korea and 25 branches (including 5 depositary offices and 5 offices) and 9 subsidiaries in overseas as of December 31, 2009.
The Bank’s shareholders as of December 31, 2009 are as follows:
Shareholders
LSF-KEB Holdings, SCA
Export-Import Bank of Korea
Bank of Korea
OthersNumber ofshares owned (*)
329,042,672
40,314,387
39,500,000
236,049,767
644,906,826

Ownership (%)
51.02
6.25
6.12
36.61
100.00(*) As of December 31, 2009, the date of closing a shareholders’ list.

The Bank entered into a Memorandum of Understanding regarding the Share Subscription Agreement with Lone Star Fund IV on August 27, 2003. On
October 30, 2003, the Bank issued 268,750,000 shares of common stock to LSF-KEB Holdings, SCA at ₩4,000 per share (at less than its par value)in accordance with a resolution during an extraordinary shareholders’ meeting on September 16, 2003. The balance below the par value wasrecognized as a discount on stock issued.
As of December 31, 2009, the total number of authorized shares of the Bank is 1,000 million (par value ₩5,000) while the paid-in capital amounts
to ₩3,224,534 million (with 644,906,826 shares of common stock outstanding).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Non-Consolidated Financial Statements Presentation
The Bank maintains its official accounting records in Korean Won and prepares statutory non-consolidated financial statements in the Korean
language (Hangul) in conformity with the accounting principles and banking accounting standards generally accepted in the Republic of Korea.
Certain accounting principles and banking accounting standards applied by the Bank that conform with financial accounting standards andaccounting principles in the Republic of Korea may not conform with generally accepted accounting principles and banking accounting practices
in other countries. Accordingly, these financial statements are intended for use by those who are informed about Korean accounting principles
and practices. The accompanying financial statements have been condensed, restructured and translated into English (with certain expanded
descriptions) from the Korean language financial statements. Certain information included in the Korean language financial statements, but
not required for a fair presentation of the Bank’s financial position, results of operations, changes in shareholders’ equity or cash flows, is notpresented in the accompanying financial statements.
The significant accounting policies followed by the Bank in preparing the accompanying non-consolidated financial statements are summarized below.
Interest Income Recognition
The Bank applies the accrual basis in recognizing interest income related to due from banks, loans and securities. Whereas, interest on loans, whose
principal or interest is past due at the date of the statement of financial position or defaulted loans, not secured by guarantees from financial
institutions or collateral deposits, is recognized on a cash basis. As of December 31, 2009 and 2008, accrued interest income not recognized due tosuch criteria amounted to ₩127,958 million and ₩122,334 million, respectively.
Classification of Securities
At acquisition, the Bank classifies securities into one of the following categories: trading, available-for-sale, held-to-maturity and securities accounted
for using the equity method, depending on marketability, purpose of acquisition and ability to hold. Debt and equity securities that are bought
and held for the purpose of selling them in the near term and actively traded are classified as trading securities. Debt securities with fixed anddeterminable payments and fixed maturity that the Bank has the positive intent and ability to hold to maturity are classified as held-to-maturity
securities. Securities that should be accounted for under the equity method are classified as securities accounted for using the equity method.
Debt and equity securities not classified as the above are categorized as available-for-sale securities.

062

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			If the objective
and ability to hold securities of the Bank change, available-for-sale securities can be reclassified to held-to-maturity securities andheld-to-maturity securities can be reclassified to available-for-sale securities. Whereas, if the Bank sells held-to-maturity securities or exercises
early redemption right of securities to issuer in the current year or the proceeding two years, and if it reclassifies held-to-maturity securities toavailable-for-sale securities, all debt securities that are owned or purchased cannot be classified as held-to-maturity securities. On the other
hand, trading securities cannot be recategorized to available-for-sale securities or held-to-maturity securities and vice versa. Nevertheless, inrare case, trading securities can be reclassified to available-for-sale securities only when the trading securities lose their marketability or whenthe Bank holds them not to earn gains on trading in short period.
Valuation of Securities(1) Valuation of Trading Securities
Trading equity and debt securities are initially recognized at acquisition cost plus incidental expenses determined by the individual moving
average method (the specified identification method for debt securities). When the face value of trading debt securities differs from theiracquisition cost, the effective interest method is applied to amortize the difference over the remaining term of the securities. After initialrecognition, if the fair value of trading securities differs from the book value, trading securities are stated at fair value and the resulting
valuation gain or loss is included in current operations.
(2) Valuation of Available-for-sale Securities
Available-for-sale securities are initially recognized at acquisition cost plus incidental expenses, determined by the individual moving averagemethod (the specified identification method for debt securities). The effective interest method is applied to amortize the difference between theface value and the acquisition cost over the remaining term of the debt security. After initial recognition, available-for-sale securities are stated
at fair value, with the net unrealized gain or loss presented as gain or loss on valuation of available-for-sale securities in accumulated othercomprehensive income (loss), which is charged to current operations in a lump sum at the time of disposal or impairment recognition. Nonmarketable equity securities are stated at acquisition cost in the financial statements if the fair value of the securities is not reliably determinable.
If the fair value of equity securities (net asset fair value in case of non-marketable equity securities stated at acquisition cost) is below the acquisition
cost and the pervasive evidence of impairment exists, the carrying value is adjusted to fair value and the resulting valuation loss is charged to current
operations. If the collectible value of debt securities is below the amortized cost and the pervasive evidence of impairment exists, the carrying value
is adjusted to collectible value and the resulting valuation loss is charged to current operations. With respect to impaired securities, any unrealized
valuation gain or loss of securities previously included in accumulated other comprehensive income (loss) is reversed.
(3) Valuation of Held-to-maturity Securities
Held-to-maturity securities are stated at acquisition cost plus incidental expenses, determined by the specific identification method. Whenthe face value of held-to-maturity securities differs from its acquisition cost, the effective interest method is applied to amortize the difference
over the remaining term of the securities. If collectible value is below the amortized cost and the pervasive evidence of impairment exists, thecarrying value is adjusted to collectible value and the resulting valuation loss is charged to current operations.
(4) Valuation of Securities using the Equity Method
Equity securities held for investment in companies in which the Bank is able to exercise significant influence over the investees (inaccordance with the Banking Act, if the Bank holds more than 15 percent of the total issued shares, the Bank is considered being able toexercise significant influence) are accounted for using the equity method. The Bank’s share in net income or net loss of investees is includedin current operations. Changes in the retained earnings of investee are reflected in the retained earnings. Changes in the capital surplus,
capital adjustments or accumulated other comprehensive income (loss) of investee are reflected as gain or loss on valuation of securities
using the equity method in accumulated other comprehensive income (loss).
When the book value of equity securities using the equity method is less than zero due to the cumulative losses of the investees, the Bank
discontinues applying the equity method and does not provide for additional losses. If the investee subsequently reports net income, the Bank
resumes applying the equity method only after its share of that net income equals the share of net losses not recognized during the periodthat the equity method was suspended.
In addition, when ownership rate is increased by increase or decrease in capital stock, the fluctuation of equity is accounted as difference
in investment. On the other hand, when ownership rate is decreased, the fluctuation of equity is accounted as loss on disposal of equity
securities. Any gain or loss on the disposal of equity securities of certain consolidated subsidiaries is accounted for as accumulated othercomprehensive income (loss) resulting from applying the equity method in the statement of financial position if the subsidiaries are stillconsolidated even after the Bank disposes of a portion of equity securities.
(5) Reversal of Impairment Loss on Available-for-sale Securities and Held-to-maturity Securities
If the reasons for impairment loss on available-for-sale securities no longer exist, the recovery is recorded in current operations under nonoperating income up to amount of the previously recognized impairment loss as reversal of impairment loss on available-for-sale securities
and any excess is included in accumulated other comprehensive income as gain on valuation of available-for-sale securities. However, if
the increases in the fair value of the impaired securities are not regarded as the recovery of the impairment, the increases in the fair value
are recorded as gain on valuation of available-for-sale securities in accumulated other comprehensive income. For non-marketable equity
securities, which were impaired based on the net asset fair value, the recovery is recorded up to their acquisition cost.

063

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			For held-to-maturity
securities, the recovery is recorded in current operations under non-operating income within the amount of amortizedcost that would have been recorded according to the original schedule if the impairment losses had not been recognized as reversal of
impairment loss on held-to-maturity securities.
(6) Reclassification of Securities
When held-to-maturity securities are reclassified to available-for-sale securities, those securities are accounted for at fair value on thereclassification date and the difference between the fair value and book value is reported in accumulated other comprehensive income(loss) as gain or loss on valuation of available-for-sale securities. When available-for-sale securities are reclassified to held-to-maturity
securities, gain or loss on valuation of available-for-sale securities, which had been recorded until the reclassification date, continue tobe included in accumulated other comprehensive income (loss) and amortized using the effective interest rate method and the amortizedamount is charged to interest income until maturity. The difference between the fair value at the reclassification date and face value of thereclassified securities to held-to-maturity securities is amortized using effective interest rate method and the amortized amount is charged
to interest income. In addition, when certain trading securities are reclassified as available-for-sale securities, the fair market value as ofreclassification date is accounted as acquisition cost and the unrealized gains or losses are recognized as income or loss.
Transfer of Securities
When the realization, expiration or sale of the right to obtain the economic benefits arises and the control of securities is lost from the sale of the
securities, the unrealized valuation gain or loss of securities included in accumulated other comprehensive income (loss) is added to or deductedfrom the gain or loss on disposal of securities. The gain or loss is the difference between the net proceeds receivable or received and its carrying
value. When securities are transferred without losing control of the securities, the transaction is recorded as secured borrowing transaction.
Allowance for Possible Losses on Credits
According to the Korea Financial Accounting Standard Article 57 (Valuation of Receivables), allowance for bad debts shall be provided for estimateduncollectible accounts on a reasonable and objective basis. Presently, the historical loss rate (based on mitigation or roll-rate analysis) is one ofthe permitted reasonable and objective methods to estimate allowance for financial institutions. However, the Bank provides loan loss provision
pursuant to the Supervisory Regulation of the Banking Business, which requires providing more than minimum rate of loss provision for each
asset classification category.
The Bank applies the Forward Looking Criteria (“FLC”) for its loan classification for large corporate based on the credit rating to determine
allowance for loan losses. Under this method, the borrowers’ future debt repayment capacity as well as their overall financial health andmanagement soundness are considered in developing the credit rating and the reserve for possible loan losses related to large corporate
customers. However, loan classification for the smaller corporate, household loans and credit card receivables is classified based on thedelinquency period, value of collateral and bankruptcy status only. Using such loan classification, the Bank classifies all credits into five categories
as normal, precautionary, substandard, doubtful, or estimated loss and provides the minimum rate of loss provision for each category balanceusing the prescribed minimum percentages of 0.85 percent (construction, real estate, wholesale & retail, hotel and restaurant industries are 0.9%)
or more, 7 percent or more, 20 percent or more, 50 percent or more and 100 percent, respectively. Households’ loans categorized as normal,
precautionary, substandard and doubtful are 1 percent or more, 10 percent or more, 20 percent or more and 55 percent or more, respectively. Card
receivables as those categories are 1.5 percent or more, 15 percent or more, 20 percent or more and 60 percent or more, respectively.
The Bank provides allowance for possible losses on confirmed acceptances and guarantees, unconfirmed acceptances and guarantees, andendorsed notes based on the credit conversion factor and minimum rate of loss provision prescribed by the Financial Supervisory Service (FSS).
In addition, the Bank provides other allowances for the unused limit of credit card (including unused limit of credit card that have not been used atleast once in recent one year) and unused loan commitments for corporate and retail loan customers considering the credit conversion factor andminimum rate of loss provision prescribed by the FSS.
Restructuring of Loans
The equity interest in the debtors, net of real estates and/or other assets received as full or partial satisfaction of the Bank’s loans, collected
through reorganization proceedings, court mediation or debt restructuring agreements of parties concerned, is recorded at fair value at the time of
the restructuring. In cases where the fair value of the assets received are less than the book value of the loan (book value before allowances), theBank offsets first the book value against allowances for loan losses and then recognizes provisions for loan losses. Impairment losses for loansthat were restructured in a troubled debt restructuring involving a modification of terms are computed by the difference between the present valueof future cash flows under debt restructuring agreements discounted at effective interest rates at the time when loans are originated and the bookvalue before allowances for loan losses. If the amount of allowances already established is less than the impairment losses, the Bank establishes
additional allowances for the difference. Otherwise, the Bank reverses the allowances for loan losses.
Deferred Loan Origination Fees and Costs
The Bank defers loan origination fees associated with originating loans and loan origination costs that have future economic benefits. Loanbalances are reported net of these loan origination fees and costs. The deferred loan origination fees and costs are amortized using the effective
interest method with the amortization recognized as adjustments to other interest income.

064

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

Valuation of			Receivables and Payables at Present Value
Receivables and payables incurred through long-term installment transactions, long-term borrowing and lending transactions, and other similartransactions are stated at the present value of expected future cash flows, and the gain or loss on valuation of related receivables and payables isreflected in current operations, unless the difference between nominal value and present value is immaterial. Present value discount or premiumis amortized using the effective interest rate method and credited or charged to interest income or interest expense.
Tangible Assets and Related Depreciation
Tangible assets are recorded at cost or production cost including incidental expenses. Routine maintenance and repairs are expensed as incurred.
Expenditures that result in the enhancement of the value or the extension of the useful lives of the facilities involved are capitalized as additions
to tangible assets. The Bank adopted the amendment to the Statements of Korea Accounting Standards (“SKAS”) No. 5 “Property, Plant andEquipment,” which permits certain items of its land to be revalued after acquisition date, applying the revaluation models permitted under SKAS
No. 5. As a result of this adoption, gain (loss) on revaluation of tangible assets is accounted as accumulated other comprehensive income and nonoperating expenses, respectively.
Depreciation is computed by using the declining-balance method (Straight-line method for building and leasehold improvements) based on theestimated useful lives of the assets as follows:
Tangible assets
Buildings
Leasehold improvements
Equipment

Estimated useful life
40 years
5 years
4 years

Depreciation method
Straight-line
Straight-line
Declining balance

Intangible Assets and Related Amortization
Intangible assets included in other assets are recorded at the production costs or purchase costs plus incidental expenses less discount if any.
Expenditures incurred in conjunction with the development of new products or technology and others, in which the elements of costs can be
individually identified and future benefits expected, are capitalized as development costs. Intangible assets are amortized using the straight-line
method over 5 years and presented after deducting amortized amount.
Valuation Allowance for Non-Business Use Property
Non-business use property included in fixed assets is recorded when the Bank acquires collateral by foreclosure on the mortgage for loans. Suchassets are not depreciated. After foreclosure, the asset is carried at the lower of its carrying amount or fair value determined by its estimatedpublic auction price. As of December 31, 2009, the Bank does not have non-business use property.
Recognition of Impairment of Assets
When the book value of assets (other than securities and assets valued at present value) exceeds the collective value of the assets due toobsolescence, physical damage or a sharp decrease in market value and the difference is material, the book value are adjusted to collective
value in the statement of financial position and the resulting impairment loss is charged to current operations. If the collective value of the assets
increases in subsequent years, the increase in value is credited to operations as gain until the collective value equals the book value of assets thatwould have been determined had no impairment loss been recognized. The Bank assessed the collective value based on expected selling price orappraisal value.
Amortization of Discounts (Premiums) on Debentures
Discounts or premiums on debentures issued are amortized over the period from issuance to maturity using the effective interest rate method.
Amortization of discounts or premiums is recognized as interest expense on the debentures.
Securities under Resale or Repurchase Agreements
Securities purchased under resale agreements are recorded as loans, and securities sold under repurchase agreements are recorded as
borrowings when the Bank purchases or sells securities under such agreements.
Other Liability Reserve
A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one ormore uncertain future events not wholly within the control of the Bank is recognized as contingent liabilities when it is probable that an outflow ofresources embodying economic benefits required and the amount of the obligation can be measured with sufficient reliability. Where the effect of thetime value of money is material, the amount of the liabilities is the present value of the expenditures expected to be required to settle the obligation.
Accrued Severance Benefits
The accrued severance benefits that would be payable to assuming all eligible employees and directors were to resign are included in otherliabilities. The Bank has purchased severance benefits insurance, which meets the funding requirement for tax purposes, and made deposits with
Samsung Life Insurance Co., Ltd. and others. The deposit for severance benefit is presented as a deduction from accrued severance benefits.

065

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			The estimatedaccrued severance benefits, which would be payable assuming all eligible employees and executives were to terminate theiremployment, amounted to ₩316,251 million and ₩291,933 million as of December 31, 2009 and 2008, respectively.
The Bank runs the defined benefit retirement pension plan (DB plan), whose investment manager is Merrill Lynch Trust Company, for retirees
of closed branches in U.S. The Bank accounted the present value of estimated pension benefits as of December 31, 2009 as pension benefits
payable. The assets invested in the DB plan is accounted as assets under management of pension benefits and pension benefits payable arededucted from it in accordance with KAI opinion 05-2.
Accounting for Derivative Instruments
The Bank accounts for derivative instruments pursuant to the Interpretations on Financial Accounting Standards 53-70 on accounting for derivative
instruments. Derivative instruments are classified as used for trading activities or for hedging activities according to their transaction purpose. All
derivative instruments are accounted for at fair value with the valuation gain or loss recorded as an asset or liability. If the derivative instrument is
not part of a transaction qualifying as a hedge, the adjustment to fair value is reflected in current operations.
The accounting for derivative transactions that are part of a qualified hedge based both on the purpose of the transaction and on meeting thespecified criteria for hedge accounting differs depending on whether the transaction is a fair value hedge or a cash flow hedge. Fair value hedge
accounting is applied to a derivative instrument designated as hedging the exposure to changes in the fair value of an asset or a liability or a firm
commitment (hedged item) that is attributable to a particular risk. The gain or loss both on the hedging derivative instruments and on the hedged
item attributable to the hedged risk is reflected in current operations. Cash flow hedge accounting is applied to a derivative instrument designatedas hedging the exposure to variability in expected future cash flows of an asset or a liability or a forecasted transaction that is attributable toa particular risk. The effective portion of gain or loss on a derivative instrument designated as a cash flow hedge is recorded as accumulated
other comprehensive income (loss) and the ineffective portion is recorded in current operations. The effective portion of gain or loss recorded
as accumulated other comprehensive income (loss) is reclassified to current earnings in the same period during which the hedged forecasted
transaction affects earnings. If the hedged transaction results in the acquisition of an asset or the incurrence of a liability, the gain or loss inaccumulated other comprehensive income (loss) is added to or deducted from the asset or the liability.
Accounting for Share-based Payment
In accordance with the Statements of Korea Accounting Standards No. 22 – Share-based Payment and the Interpretations on Financial AccountingStandards 39-35 – Accounting for Stock Options ., in case of equity-settled share-based payment transactions, compensation expense for stock
option and stock option (capital adjustment) are recorded at fair value at the grant date through an agreement service period, whereas in caseof cash-settled share-based payment transactions, compensation expense for stock option and accrued expenses are recorded at fair value atthe grant date through an agreement service period. In case of cash-settled share-based payment transactions, the other liabilities (accrued
expenses) are assessed at fair value at the date of the statement of financial position or the final settlement. The changes in the fair value of
accrued expenses after the grant date are reflected as compensation expense for stock option. In addition, for share-based payment transactions
in which the terms of the arrangement provide a choice for the Bank whether the Bank settles the transaction in cash or by issuing equity
instruments, the Bank is required to account for that transaction as a cash-settled share-based payment transaction if the Bank has a present
obligation to settle in cash, or as an equity-settled share-based payment transaction if no such obligation exists. In case of a cash-settled sharebased payment, compensation cost is recorded as capital adjustment (stock option), and in case of an equity-settled share-based payment,compensation cost is recorded as other liabilities (accrued expenses).
Accounting for Trust Accounts
The Bank separately maintains the books of accounts and financial statements in connection with the trust operations (the trust accounts) fromthose of the bank accounts in accordance with the Financial Investment Services and Capital Markets Act (FSCMA). When surplus funds are
generated through the management of trust assets, such funds are deposited with the Bank and are recorded as due to trust accounts of the bankaccounts. Also, the borrowings from the bank account are recorded as due from trust accounts of the bank accounts. The Bank receives fees for
operation and management of the trust business and accounts for them as fees and commissions from trust accounts.
With respect to certain trust account products, the Bank guarantees the repayment of the principal of the trust accounts and, in certain cases,
a fixed rate of return. If income from such trust accounts is insufficient to pay the guaranteed amount, such a deficiency is satisfied by using
special reserves maintained in the trust accounts, offsetting trust fee payable to the bank accounts and receiving compensation contributions
from the bank accounts of the Bank. If the Bank pays compensating contributions to the guaranteed return trusts to cover such deficiencies,
these contributions are reflected as operating expense of the bank accounts and as other income of the trust accounts. There is no compensating
contribution of the Bank for the year ended December 31, 2009.
Merchant Banking Accounts
As permitted by the Restructuring of Financial Institutions Act, the Bank may continue its merchant banking operations, including leasing
business, until the existing contracts acquired from Korea International Merchant Bank upon merger are terminated. Significant accounting
policies applied to the Bank’s merchant banking operations are summarized as follows:

066

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			(1) Revenue
Recognition on Discounted Notes
Interest income on discounted notes is accrued over the term of the notes. Income from the sale of discounted notes is recognized at the dateof sale based on the difference between the purchase and sales prices of the notes, adjusted for interest earned during the holding period.
(2) Cash Management Accounts (“CMA”)
The Bank recognizes interest income from CMA investments and interest expense from CMA deposits as other income and other expenses,
respectively.
(3) Lease Transactions
The Bank accounts for lease transactions as operating or financing leases, depending on the terms of the lease contracts. In general, noncancelable leases are recognized as financing leases when ownership transfers at expiration of the lease term, when a bargain purchase
option exists, or when the lease term exceeds the estimated economic life of the related asset.
Under the financing lease method, aggregate lease rentals are recorded as financing leases receivable, net of unearned interest, based on
the excess of rental revenue over the cost of the related assets. Unearned interest is recognized as interest income on financing leases using
the effective interest method over the lease term.
Income Tax Expense
Income tax expense is the amount currently payable for the period, additional income tax or tax refunds for prior years (except for retroactive
adjustments of tax effect directly added or deducted to shareholders’ equity) added to or deducted from the changes in deferred income taxes.
However, deferred income tax assets are recognized only if the future tax benefits from accumulated temporary differences and any tax loss
carryforwards are realizable. The difference between the amount currently payable for the period and income tax expense is accounted for asdeferred income tax assets or liabilities, which will be charged or credited to income tax expense in the period the related temporary difference
reverses in the future. Deferred income tax assets or liabilities are calculated based on the expected tax rate to be applied at the reversal period of
the related assets or liabilities. Tax payable and deferred income tax assets or liabilities regarding to certain items are charged or credited directly
to related components of shareholders’ equity.
Accounting for Foreign Currency Transactions and Translation
The Bank maintains its accounts in Korean Won. Transactions in foreign currencies are recorded in Korean Won based on the basic rate ofexchange on the transaction date. The Korean Won equivalent of assets and liabilities denominated in foreign currencies are translated in thesefinancial statements based on the basic rate (₩1,167.60 and ₩1,257.50 to US$1.00 at December 31, 2009 and 2008, respectively) announced bySeoul Money Brokerage Service, Ltd. or cross rates for other currencies other than U.S. Dollars at the date of the statement of financial position.
Translation gains and losses are credited or charged to operations. Financial statements of overseas branches are translated based on the basic
rate at the date of the statement of financial position.
Application of the Statements of Korea Accounting Standards (“SKAS”)
The Korea Accounting Standard Board (KASB) under the Korea Accounting Institute (KAI) issued the SKAS for achieving a set of Korean accounting
standards that should be internationally acceptable and comparable based on SKAS Act 92. The Bank has adopted SKAS No.1 (Accounting
Changes and Error Corrections) through SKAS No. 25 (Consolidated Financial Statements) (excluding No. 14) as of or before December 31, 2008.
In addition, in this fiscal year, the balance sheet is renamed to statement of financial position based on the revision of the Act on External Audit for
Stock Companies in the Republic of Korea.
Disclosure in Relation with Adoption of K-IFRS(1) Preparation and progress of adopting K-IFRS
Korea has decided that, from 2011, application of K-IFRS becomes mandatory for all listed companies including banks. Based on thisregulation, the Bank set up the task force team for adoption of K-IFRS to make steady progress in the preliminary analysis of the impact
on adoption of K-IFRS, establishment of master plan, decision on alternatives in accounting treatment, design and development of its
accounting system, implementation of its system and on-going maintenance. This process is still in progress. The Bank had already analyzed
the impact on adoption of K-IFRS in April 2008, and has completed the design and development of its accounting system by the end of
2009. In addition, the Bank has implemented its system and on-going maintenance from 2010. In order to have an efficient transition andapplication of K-IFRS, the Bank provides on-the-job-training for employees and team managers.
(2) Expected significant differences between K-IFRS and K-GAAP
If the Bank prepares the financial statements adopting K-IFRS, there would be differences in consolidated scope, provision for bad debts,
revenue recognition, derecognition of financial instruments, measurement of financial instruments, employee benefits and others. All
differences are not included and can be changed by additional analysis. In addition, specific influence of significant differences cannot beanalyzed at working-level in several cases.

067

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			
3. CASH AND
DUE FROM BANKS:(1) Cash and due from banks as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

2009
₩

Cash
Foreign currencies on handDue from banks in Won
Due from banks in foreign currencies

809,276
384,555
3,039,185
1,669,692
5,902,708

₩

2008
₩

876,432
433,3934,684,353
4,113,528
10,107,706₩(2) Due from banks in Won as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

Financial institution

Reserve deposit
Due from banks on time deposits
Other due from banks
Other due from banks

The Bank of Korea
Other banks
Other banks
Other financial institutions

Interest rate (%)
Dec. 31, 2009
3.51~4.23
0.10~1.00
0.02~2.45

2009

2008

₩     1,420,823
576,469
18,016
1,023,877₩     3,039,185₩     3,752,160
921,3833,312
7,498₩     4,684,353(3) Due from banks in foreign currencies as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

Financial institution

Reserve deposit
Due from banks on time deposits
Other due from banks
Other due from banks

The Bank of Korea
Overseas financial institutions
Overseas financial institutions
Overseas financial institutions

Interest rate (%)
Dec. 31, 2009
0.00~12.00
0.00~0.97
0.01~0.25

Due from banks in other bank
- foreign currencies

Overseas financial institutions

0.00~1.00

2009

2008

₩       752,316
214,114522,7412,748₩     2,802,781
526,093432,530
9,444

177,773

342,680₩     1,669,692₩     4,113,528(4) Restricted due from banks in Won and foreign currencies as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification
Due from banks in Won:
The Bank of Korea
Woori Bank and others
KB Futures and others
KEB Trust

2009

2008
3,752,160
560
158
3,752,878

Required under Banking Act and others
Escrow account
Subscription related to derivatives
Required under FSCMA

752,316

2,802,781

Others (Bank of China)

190,165-

Others (UBS and others)

46,841
989,322

252,1433,054,924

Required under Banking Act and others
Capital stock paid-up for establishingbranch in china
Subscription related to derivatives₩

Due from banks in foreign currencies:
The Bank of Korea₩

1,420,823
490
12,456
14,626
1,448,395

Reason for restriction

2,437,717₩₩

6,807,802(5) Term structure of due from banks in Won and foreign currencies as of December 31, 2009 was as follows (Unit: In millions):
Classification

Due from banks
in WonDue from banks
in foreign
currencies

Total

Due in less than one year
Due from one to two years
Due from two to three years
Due from three to five years
Due more than five years₩     3,039,185₩     3,039,185₩     1,668,030
1,662₩     1,669,692₩     4,707,215
1,662₩     4,708,877068

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			
4. SECURITIES:(1) Securities as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification

2009₩

Trading securities
Available-for-sale securities
Held-to-maturity securities
Securities using the equity method

2008₩

959,052
7,704,275
4,472,087
693,761
13,829,175₩

1,049,999
7,126,882
3,391,566
544,130
12,112,577₩(2) Securities excluding securities using the equity method as of December 31, 2009 consisted of (Unit: In millions):
Classification

Face value

Acquisition
cost (*1)

Adjusted byeffective
interest rate
method (*2)

Book value₩              15,000
1
868,172
38,531
921,704₩        22,884
15,0001
870,456
38,140946,481₩              15,000
1869,722
36,908921,631₩        24,883
15,0141880,944
38,210959,052

Equity securities-

726,989-

1,657,627

Equity investments-

69,059-64,118Beneficiary certificates

197,718

198,117

198,117205,176

Government and public bonds

329,925

339,188339,188335,155

Finance bonds

4,476,805

4,465,486

4,431,752

4,474,568

Corporate bonds

736,398

739,635

719,424

729,315

Asset-backed securities

191,542

275,723

217,567

208,517

Trading securities:
Equity securities
Beneficiary certificates
Government and public bonds
Finance bonds
Corporate bonds
Available-for-sale securities:

Other debt securities

87,636

87,63651,857

29,7996,020,024

6,901,833

5,957,905

7,704,275

Government and public bonds

1,130,007

1,136,017

1,135,246

1,135,246

Finance bonds

3,157,777

3,159,817

3,156,073

3,156,073

Foreign government bonds

24,07923,70823,82523,825

Asset-backed securities

156,393

156,286

156,355

156,355

Held-to-maturity securities:

Other debt securities

591

588

588

588

4,468,847₩    11,410,575

4,476,416₩    12,324,730

4,472,087₩    11,351,623

4,472,087₩    13,135,414(*1) Acquisition costs of trading securities are the book value before valuation.
(*2) Beneficiary certificates are the book value because they are not subjects by the adjusted cost using the effective interest rate method.

069

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			Securities
excluding securities using the equity method as of December 31, 2008 consisted of (Unit: In millions):
Classification

Face value

Acquisition
cost (*1)

Adjusted byeffective
interest rate
method (*2)

Book value₩              5,000
221,001
758,803
41,4981,026,302₩        15,182
5,000
226,553755,419
41,076
1,043,230₩              5,000
226,520756,457
41,266
1,029,243₩        10,662
4,841
228,430
766,424
39,642
1,049,999

Equity securities-

781,150-

1,139,676

Equity investments-

66,821-65,300197,718

197,718

197,718

198,117

Trading securities:
Equity securities
Beneficiary certificates
Government and public bonds
Finance bonds
Corporate bonds
Available-for-sale securities:

Beneficiary certificates
Government and public bonds
Finance bonds

665,219

663,920651,657

674,632

4,104,556

4,079,528

4,057,242

4,033,880

Corporate bonds

826,738

828,759

815,148802,084

Asset-backed securities

150,588

238,262

182,921

161,336

Other debt securities

87,636

87,636

66,15351,857

6,032,455

6,943,794

5,970,839

7,126,882

Held-to-maturity securities:
Government and public bonds
Finance bonds

894,498

881,280

887,680

887,680

2,260,478

2,259,273

2,258,221

2,258,221

Foreign government bonds

28,43527,682

25,72725,727

Asset-backed securities

219,031219,877

218,988

218,988

957

950

950

950

3,403,399₩    10,462,156

3,389,062₩    11,376,086

3,391,566₩    10,391,648

3,391,566₩    11,568,447

Other debt securities(*1) Acquisition costs of trading securities are the book value before valuation.
(*2) Beneficiary certificates are the book value because they are not subjects by the adjusted cost using the effective interest rate method.

The difference of trading securities between the fair value and the adjusted cost using the effective interest rate method (acquisition cost for
stocks) was recorded as gain on valuation of trading securities amounting to ₩15,443 million and ₩12,466 million, and loss on valuation of trading
securities amounting to ₩906 million and ₩6,892 million for the years ended December 31, 2009 and 2008, respectively.
The fair values of trading and available-for-sale debt securities were assessed by applying the average of base prices as of December 31, 2009,
provided by Korea Bond Pricing & KR Co. (KBP), KIS Pricing Inc. and National Information & Credit Evaluation Inc. (NICE).
The fair value of available-for-sale non-marketable equity securities such as Vogo Fund and 20 others, and the restricted available-for-salemarketable equity securities such as Hynix Semiconductor Inc. and 4 others was reliably measured by an independent appraisal instituteusing reasonable judgment. The fair value was determined based on more than one valuation models such as Discounted Cash Flow (DCF)
Model, Imputed Market Value (IMV) Model, Discounted Free Cash Flow to Equity (FCFE) Model, Dividend Discount (DD) Model and Risk Adjusted
Discounted Cash Flow (RADCF) Model depending on the equity securities. In order to assess the fair value of stocks, the financial statements for
5 years are estimated based on past operating result. Also, assuming the same operation is continued during the estimated period, the model isapplied using the estimated financial statements from 2009 to 2013. Operating income and expenses are reasonably estimated based on the past
result, the future plan and the expected market condition, and for non-operating income and expenses, gain or loss from irregular transactions
such as gain or loss on disposal of tangible assets are excluded. For the equity investment of association, net assets are calculated deducting total
liabilities from the present value of assets of each equity investment.

070

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			(3) Discretionary
investing contract assets included in beneficiary certificates of trading securities as of December 31, 2009 and 2008 consistedof (Unit: In millions):
Classification

2009₩

Short-term financial instruments
StocksOthersTotal assets
Total liabilities
Net assets value

₩

1,147
13,325
2,301
16,773
1,759
15,014

2008
₩

4,275
573
4,848
7
4,841

₩

(4) The book value of non-marketable stocks and equity investments among available-for-sale securities, which were not valuated at fair value
as of December 31, 2009 and 2008, was as follows (Unit: In millions):<2009>
Company

Amounts

Stocks:Credit Recovery Fund
Samsung Life Insurance
Alpha Dome City
KAMCO (Korea Asset Management Corporation)
M Cieta Development
Hallyu-Wood
BLADEXOthers62,46632,939
8,850
6,330
1,275
1,200
1,146
1,594
115,800₩

Equity investments:
Consolidated Fund for Impaired Loans

29,877

Others100
29,977
145,777₩<2008>
Company

Amounts

Stocks:Samsung Life Insurance
Alpha Dome City
KAMCO (Korea Asset Management Corporation)
M Cieta Development
BLADEX
Hallyu-Wood
Others₩32,939
8,850
6,330
1,275
1,234
1,200
1,446
53,274Equity investments:
Consolidated Fund for Impaired Loans

36,680₩89,954(5) The impairment loss and the reversal of impairment loss on available-for-sale securities for the years ended December 31, 2009 and 2008
were as follows (Unit: In millions):
Classification

2009

Equity securities
Corporate bonds
Asset-backed securities
Other securities

Impairment₩          1,237
9,085
10,574₩        20,896

2008
Reversal₩          7,879
205
10,602₩        18,686

Impairment₩        16,861
15,873₩        32,734

Reversal₩         1,364
31,092302₩        32,758071

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			(6) Securities
provided as collateral as of December 31, 2009 were as follows (Unit: In millions):
Provided to
Customers
BOK
BOK
BOK
Bank
SPC

Collateral amount₩
675,000
540,000
110,000
920,000
330,000
490,000

Other financial institutes

Book value₩

1,064,200₩

4,129,200

Provided forSale of RP to customer
Settlement of difference
RP from BOK
Borrowings from BOKREPOBorrowings

686,132
544,336
110,374
920,126
330,502
501,934

Borrowings in foreign currencies/
Derivatives settlement

1,065,999
4,159,403₩

In addition, securities that are possible to be discounted by BOK amounted to ₩4,180,296 million as of December 31, 2009.
(7) Securities using the equity method
1) Securities using the equity method as of December 31, 2009 and 2008 were summarized as follows (Unit: shares in thousand, in millions):<2009>
Company
Domestic stocks:
KEB Capital Inc. (KEBC)KEB Futures Co., Ltd. (KEBF)KEB Fund Services Co., Ltd. (*1)
Lippo Incheon Development Co., Ltd. (*2)
Realty Advisors Korea, Ltd. (*2)
Ilsan Project Co., Ltd. (*2)
Soul Flora Co., Ltd. (*2)

No. of shares

Ownership (%)

Acquisition
cost

Net asset
valueBook value

14,976
3,000
510
388
200
288
165

99.31
100.00100.00
2.70
14.29
4.80
5.00

₩       74,881
15,000
2,550
1,939
1,000
2,880
825
99,075₩      114,430
52,808
8,006
1,697
1,038
2,602
748
181,329₩      115,295
52,808
2,550
1,697
1,038
2,602
748
176,738

K.E.B. of Canada (KEBOC)

334

100.0036,973111,055

111,055

KEB Australia Ltd. (KEBA)

55,000100.0057,47848,792

48,792

K.E.B Deutschland A.G. (KEBDAG)

20

100.0029,96273,69873,698PT. Bank KEB Indonesia (KEBI)

1

99.00

28,651

130,399

131,454

Banco KEB do Brasil S.A. (KEBB)

33,726100.0020,804

23,147

23,147KEB NY Financial Corp. (NYFinco)

0.1

100.0023,352

36,16936,169KEB LA Financial Corp. (LAFinco)

0.2

100.0046,70432,03732,037KEB USA International Corp. (USAI)

0.1

100.00

2,919

6,459

6,459

50,000100.0064,235

4,212

54,212311,078₩      410,153

515,968₩      697,297

517,023₩      693,761

Foreign stocks:

KEB Asia Finance Limited (KAF)(*1) The investment securities were excluded from the application of equity method because the assets areless than ₩10,000 million as of the end of prior year andthe change in investment arising from this company was considered insignificant.
(*2) The Bank has important influence over the company through designation of a director and others, although the ownership is less than 15%.

072

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

<2008>

			Company

No. of shares

Ownership (%)

Acquisition
cost

Net asset
valueBook value

Domestic stocks:
KEB Capital Inc. (KEBC)KEB Futures Co., Ltd. (KEBF)KEB Fund Services Co., Ltd. (*1)
Lippo Incheon Development Co., Ltd. (*2)
Realty Advisors Korea, Ltd. (*2)
Ilsan Project Co., Ltd. (*2)
Soul Flora Co., Ltd. (*2)

14,976
3,000
510
388
200
288
20

99.31
100.00100.00
2.70
14.29
4.80
5.00

₩       74,881
15,000
2,550
1,939
1,000
2,880
100
98,350₩      106,210
40,764
5,943
1,863
2,955
2,775
88
160,598₩      107,696
41,105
2,550
1,863
2,955
2,775
88
159,032

Foreign stocks:
K.E.B. of Canada (KEBOC)KEB Australia Ltd. (KEBA)
K.E.B Deutschland A.G. (KEBDAG)
PT. Bank KEB Indonesia (KEBI)
Banco KEB do Brasil S.A. (KEBB)KEB NY Financial Corp. (NYFinco)
KEB LA Financial Corp. (LAFinco)
KEB USA International Corp. (USAI)

334
55,00020
133,7260.1
0.1
0.1

100.00100.00100.0099.00
100.00100.00100.00100.0034,68047,85031,786
26,56816,72625,15025,1503,144
211,054₩      309,404

105,456
33,332
72,993
106,865
17,43236,422
6,076
6,399
384,975₩      545,573

105,456
33,332
72,993106,953
17,43236,422
6,111
6,399
385,098₩      544,130(*1) The investment securities were excluded from the application of equity method because the assets are less than ₩7,000 million as of the end of prior year andthe change in investment arising from this company was considered insignificant.
(*2) The Bank has important influence over the company through designation of a director and others, although the ownership is less than 15%.

2) The valuation of securities using the equity method for the years ended December 31, 2009 and 2008 was as follows (Unit: In millions):<2009>
Company

Acquisition
cost

Book value
beforevaluation

Increase(Decrease)
dividend

Foreignexchange
trading
income(loss)

Equity inearnings

Valuationofsecurities
using theequitymethodBook value
after
valuation

KEBC
KEBF
KEBFS (KEB Fund Service) (*1)
Lippo Incheon Development Co., Ltd. (*2)
Realty Advisors Korea, Ltd. (*2)
Ilsan Project Co., Ltd. (*2)
Soul Flora Co., Ltd. (*2)
KEBOC
KEBA
KEBDAGKEBIKEBBNYFinCoLAFinCo
USAI
KAF₩   74,881
15,000
2,550
1,939
1,000
2,880
825
36,97357,47829,96228,65120,80423,352
46,704
2,919
64,235₩ 410,153₩ 107,696
41,105
2,550
1,863
2,955
2,775
88
105,456
33,332
72,993106,953
17,43236,422
6,111
6,399₩ 544,130₩         (1,550)
725
(845)
27,54264,235₩   90,107₩         6,975
6,706(4,188)8,385
4,251(2,604)(4,626)(458)(5,854)₩    8,587₩    6,763
11,006
(166)
(367)
(173)
(53)
(1,376)
8,754
5,738
16,116
1,464
2,351
3,010
518
(4,169)₩   49,416₩      836697
(12)₩    1,521₩ 115,295
52,808
2,550
1,697
1,038
2,602
748
111,055
48,79273,698131,454
23,14736,16932,037
6,459
54,212₩ 693,761(*1) The investment securities were excluded from the application of equity method because the assets were less than ₩10,000 million as of the end of prior year andthe change in investment arising from this company was considered insignificant.
(*2) The Bank has important influence over the company through designation of a director and others, although the ownership is less than 15%.

073

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

<2008>

			Company

Acquisition
cost

Book value
beforevaluation

Increase(Decrease)
dividend

Foreignexchange
trading
income(loss)

Equity inearnings

Valuationofsecurities
using theequitymethodKEBC
KEBF
KEBFS (*1)
Lippo Incheon Development Co., Ltd. (*2)
Realty Advisors Korea, Ltd. (*2)
Ilsan Project Co., Ltd. (*2)
Soul Flora Co., Ltd. (*2)
KEBOC
KEBA
KEBDAGKEBIKEBBNYFinCoLAFinCo
USAI₩   74,881 ₩   98,439
15,00028,115
2,550
2,550
1,939
1,830
1,000
1,000
2,880
100
34,68088,14247,85031,50531,78651,49026,56879,756
16,726
16,26925,15024,78025,15025,2573,144
4,236₩  309,404 ₩  453,369(1,200)
2,880
100
(719)
₩   1,061

7,497
1,805
14,722
11,896
271
8,434
8,595
1,443
₩   54,663₩   9,298
8,261
33
3,155
(105)
(12)
9,817
22
7,500
15,301
892
3,208(27,741)720₩   30,349

₩  

₩  

₩  

Book value
after
valuation(41) ₩  107,696
4,729
41,105
2,550
1,863
2,955
2,775
88
105,456
33,332
72,993106,953
17,43236,422
6,111
6,399₩   4,688 ₩  544,130(*1) The investment securities were excluded from the application of equity method because the assets were less than ₩7,000 million as of the end of prior year andthe change in investment arising from this company was considered insignificant.
(*2) The Bank has important influence over the company through designation of a director and others, although the ownership is less than 15%.

3) Elimination of Unrealized Profit from Inter-company Transactions
Material unrealized profit from inter-company transactions is eliminated when equity investments were valued. Unrealized gain from leasetransaction of inter-company transaction amounted to ₩152 million and ₩445 million as of December 31, 2009 and 2008, respectively.
4) Summary of Financial Information of Affiliates
The summary of financial information of affiliates using the equity method as of and for the year ended December 31, 2009 was as follows(Unit: In millions):
Classification
Total assets
Total liabilities
Operation revenue
Net income (loss)

KEBC
KEBOC
KEBA
KEBDAGKEBI
OthersTotal₩1,070,997 ₩1,089,236 ₩  435,026 ₩  529,740 ₩  455,109 ₩1,890,888 ₩5,470,996
955,774
978,181386,234
456,042
323,392
1,546,773
4,646,396
139,404
48,69143,05026,92432,62599,757
390,451
7,435(1,376)
8,754
5,738
15,3101,165
37,026

Unaudited financial statements as of December 31, 2009 were used for the application of the equity method. The significant events from theclosing dates of the investees to that of the Bank were properly reflected in applying the equity method. The material transactions or eventsfrom setting day of each subsidiary to December 31, 2009 were considered in the valuation using the equity method. The Bank has performed
procedures to verify reliability of unaudited financial statements which include securing and confirming the signatures of their representatives andinternal auditors.

074Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			(8) The portfolioof securities excluding securities using the equity method, by industry, as of December 31, 2009 and 2008 was as follows(Unit: In millions):
By industry type2009
AmountTrading securities:
Government and government-invested public companies
Financial institutions
Manufacturing
OthersAvailable-for-sale securities:
Government and government-invested public companies
Financial institutions
Manufacturing
Others
Held-to-maturity securities:
Government and government-invested public companies
Financial institutions
Manufacturing
Others2008
Percentage (%)

AmountPercentage (%)₩        227,549
692,507
16,79522,201₩        959,052        23.73
72.21
1.75
2.31
         100.00₩        759,204
275,292
9,683
5,820₩      1,049,999         72.31
26.22
0.92
0.55
100.00₩      3,037,711
2,418,632
1,254,415
993,517₩      7,704,275          39.43
31.39
16.28
12.90
         100.00₩      2,211,891
2,918,899
840,085
1,156,007₩      7,126,882

31.04
40.96
11.79
16.21
100.00₩      3,803,365
608,543
34,98925,190₩      4,472,087

85.05
13.61
0.78
0.56
         100.00₩      2,278,525
1,038,336
38,88435,821₩      3,391,566

67.18
30.62
1.15
1.05
100.00(9) The portfolio of securities excluding securities using the equity method, by security type, as of December 31, 2009 and 2008 was as follows(Unit: In millions):
By Security type2009
AmountTrading securities:
StocksFixed rate bonds
Floating rate bonds
Subordinated bonds
Beneficiary certificates
Available-for-sale securities:
StocksFixed rate bonds
Floating rate bonds
Subordinated bonds
Beneficiary certificates
Others
Held-to-maturity securities:
Fixed rate bonds
Floating rate bonds
Subordinated bonds
Others2008
Percentage (%)

AmountPercentage (%)₩         24,883
751,216
46,141
121,798
15,014₩        959,052

2.59
78.33
4.81
12.70
1.57
100.00₩         10,662
986,663
47,8334,841₩      1,049,999

1.01
93.97
4.56
0.46
100.00₩      1,657,627
3,815,427
1,263,947
668,181205,176
93,917₩      7,704,275

21.52
49.52
16.41
8.67
2.66
1.22
100.00₩      1,139,676
3,258,688
1,576,526
836,718
198,117
117,157₩      7,126,882

15.99
45.72
22.12
11.74
2.78
1.65
100.00₩      4,113,209
39,686318,604
588₩      4,472,087

91.98
0.89
7.12
0.01
100.00₩      2,816,695
44,568529,353950₩      3,391,566

83.05
1.31
15.61
0.03
100.00075

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			(10) The portfolioof securities excluding securities using the equity method, by country, as of December 31, 2009 and 2008 was as follows(Unit: In millions):
By Country type

2009

2008

AmountTrading securities:
Korea
OthersAvailable-for-sale securities:
Korea
Cayman Islands
USA
Hong Kong (China)
UK
Others
Held-to-maturity securities:
Korea
Singapore
Philippines
Hong Kong (China)

Percentage (%)

AmountPercentage (%)₩        958,541
511₩        959,052

99.95
0.05
100.00₩      1,049,999₩      1,049,999

100.00100.00₩      7,640,527
41,166
6,214
4,839
3,140
8,389
₩      7,704,275

99.18
0.53
0.08
0.06
0.04
0.11
100.00₩      7,055,396
45,019
6,533
4,244
2,560
13,130₩      7,126,882

98.99
0.64
0.09
0.06
0.04
0.18
100.00₩      4,446,897
19,1286,062₩      4,472,087

99.43
0.43
0.14
100.00₩      3,365,791
20,043
5,683
49₩   3,391,566

99.24
0.59
0.17
0.00
100.00(11) Term structure of securities except for stocks and equity investments as of December 31, 2009 was as follows (Unit: In millions):
Classification

Due in 1 year
or less

Due after
1 year through5 years

Due after
5 years through10 yearsMore than
10 years

Total

Government and public bonds
Finance bonds
Foreign government bonds
Corporate bonds
Beneficiary certificates
Asset-backed securities
Others₩      594,374
5,557,421
19,128462,275
15,014
65,105588₩    6,713,905₩      876,028
2,737,039
1,558
461,605
119,033₩    4,195,263₩             217,125
3,139
24,37929,799₩      274,442₩             205,176₩      205,176₩    1,470,402
8,511,585
23,825
923,880
220,190
208,51730,387₩   11,388,786(12) Structured securities relating to stock and interest rate and credit risk as of December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>Classification
Structured notes relating to stock:
Convertible bonds (loans)
Bonds with warrant (loans)
Structured notes relating to interest rate:Long-term government bond floating rates notes(CMT) (available-for-sale securities)
Structured notes relating to credit risk:
Synthetic CDO

076

Won

Foreigncurrencies

Total₩         49,490
19,00068,490₩               -₩         49,490
19,00068,49020,25920,259-20,25920,355₩         88,749

16,788₩         16,788

16,788₩        105,537

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

<2008>

			Classification
Structured notes relating to stock:
Convertible bonds (loans)
Bonds with warrant (loans)

Won

Foreigncurrencies

Total₩         45,070
101,500
146,570₩               -₩         45,070
101,500
146,570

20,079-20,07919,82239,901-

19,82239,901₩        186,471

18,362₩         18,362

18,362₩        204,833

Structured notes relating to interest rate:Long-term government bond floating rates notes(CMT) (available-for-sale securities)
Range (accrual) bond (available-for-sale securities)
Structured notes relating to credit risk:
Synthetic CDO (available-for-sale securities)(13) Changes in accumulated other comprehensive income (loss) of available-for-sale securities for the year ended December 31, 2009 were as
follows (Unit: In millions):
Classification

Beginning

Equity securities
Debt securities₩      373,314(62,530)₩      310,784

Increase
Disposal
Deferred(decrease)income tax₩      712,173 ₩     (158,065) ₩     (121,904)
51,917
16,863(14,889)₩      764,090 ₩     (141,202) ₩     (136,793)

Ending₩      805,518(8,639)₩      796,879(14) Changes in accumulated other comprehensive loss of held-to-maturity securities for the year ended December 31, 2009 were as follows(Unit: In millions):
Classification

Beginning

Debt securities₩         (319)

Increase(decrease)₩           220

Disposal₩           168

Deferredincome tax₩          (85)Ending₩          (16)(15) Changes in accumulated other comprehensive income of securities using the equity method for the year ended December 31, 2009 wereas follows (Unit: In millions):
Classification

Beginning₩         3,689

Increase(decrease)₩         1,162

Changes in securities using the equity method
Negative changes in securities using the equity
method(290)359

Disposal₩             -Deferredincome tax₩         (256)Ending₩         4,595

-

(79)

(10)

077

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

5. LOANS: 			
(1) Loans as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification
Call loans
Domestic import usance bill
Credit card receivables
Bills bought in foreign currencies
Bills bought in Won
Bonds purchased under repurchase agreements
Loans in Won
Loans in foreign currencies
Factoring receivables
Advances for customers
Privately placed bonds

2009₩

Less: Allowance for possible loan losses (see Notes 6 and 7)
Deferred loan origination fees and costs₩

1,604,443
2,616,184
2,422,944
3,996,289
435,413
1,786,000
42,187,445
7,883,346
166,525
8,998
537,777
63,645,364(963,425)(54,925)
62,627,014

2008
₩

₩

1,587,069
2,746,929
2,552,608
4,449,075
423,294
2,340,000
41,612,045
9,042,746
130,689
31,127
612,444
65,528,026(1,064,899)(50,850)
64,412,277(2) Loans in Won and loans in foreign currencies as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Loans in Won:
Commercial

2009
Financial loans:
Working capital loans
Facilities loans
Loans with government funds:
Working capital loans
Facilities loans

Households

General purpose loans
Housing loans

Public sector and others

Working capital loans
Facilities loans
General purpose loans

Total loans in Won
Loans in foreign currencies:₩

Working capital loans
Facilities loans
OthersInter-bank loans

Total loans in foreign currencies
₩

078

2008

21,246,420
2,838,010
48,734447,939
24,581,103
13,403,212
4,096,168
17,499,380
82,898
11,544
12,520106,962
42,187,445
799,646
2,571,530
4,408,295
103,875
7,883,346
50,070,791₩₩

22,460,138
2,680,833
72,339506,575
25,719,885
13,564,000
2,198,526
15,762,526
95,97825,1868,470
129,634
41,612,045
1,119,121
3,683,900
4,088,502
151,223
9,042,746
50,654,791

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

(3) Loans			
in Won, loans in foreign currencies and domestic import usance bill, classified by borrower type, as of December 31, 2009 and 2008
were as follows (Unit: In millions):<2009>
By borrower type

Loans in Won

Loans in

Domestic

Total

Percentage (%)

foreign(3) Loans in Won, loans in foreign currencies and domestic import usancebill, classifiedimportby borrower type, as of December 31, 2009 and 2008
currencies
usance bill
were as follows (Unit: In millions):
Large corporations<2009>
Small and medium corporations (*)
Households
Public sector and others₩    6,092,798
18,488,305
17,499,380
106,962₩   42,187,445₩    5,718,257
2,165,089₩    7,883,346₩    2,089,530
526,654₩    2,616,184₩   13,900,585
21,180,048
17,499,380
106,962₩   52,686,975

26.38
40.21
33.21
0.20
100.00(*) Small and medium corporations are prescribed in Article 2 of the Small and Medium-sized Enterprise Basic Act.

<2008>
By borrower type

Loans in Won

Loans inforeigncurrencies

Domestic
importusance bill

Total

Large corporations
Small and medium corporations (*)
Households
Public sector and others₩    5,337,329
20,382,556
15,762,526
129,634₩   41,612,045₩    6,295,430
2,747,316₩    9,042,746₩    1,924,276
822,653₩    2,746,929₩   13,557,035
23,952,525
15,762,526
129,634₩   53,401,720

Percentage (%)

25.39
44.85
29.52
0.24
100.00(*) Small and medium corporations are prescribed in Article 2 of the Small and Medium-sized Enterprise Basic Act.

(4) Loans in foreign currencies and domestic import usance bill, classified by borrower’s country, as of December 31, 2009 and 2008 were as
follows (Unit: In thousands of U.S. Dollars & in millions of Won):<2009>Classification

Korea
Canada
USA
Japan
China
OthersLoans in foreign currencies
Loans in U.S.
Dollars (*)

Translation
into Won$₩    5,353,973
818,248
443,154377,744
149,812740,415₩    7,883,346$

4,585,451
700,795
379,543
323,522
128,308
634,134
6,751,753

Domestic import usance bill

Total

Loans in U.S.
Translation
Dollars (*)
into Won$
2,240,651 ₩    2,616,184$
2,240,651 ₩    2,616,184₩    7,970,157
818,248
443,154377,744
149,812740,415₩   10,499,530

Percentage (%)

75.91
7.79
4.22
3.60
1.43
7.05
100.00(*) Foreign currencies other than U.S. Dollars are converted into U.S. Dollars at the rate at the date of the statement of financial position.

<2008>Classification

Korea
Canada
Japan
USA
China
OthersLoans in foreign currencies
Loans in U.S.
Dollars (*)

Translation
into Won$₩    5,959,567
840,250
565,968
461,964
202,917
1,012,080₩    9,042,746$

4,739,219
668,191
450,074
367,367
161,365
804,835
7,191,051

Domestic import usance bill

Total

Loans in U.S.
Translation
Dollars (*)
into Won$
2,184,437 ₩    2,746,929$
2,184,437 ₩    2,746,929₩    8,706,496
840,250
565,968
461,964
202,917
1,012,080₩   11,789,675

Percentage (%)

73.85
7.13
4.80
3.92
1.72
8.58
100.00(*) Foreign currencies other than U.S. Dollars are converted into U.S. Dollars at the rate at the date of the statement of financial position.

079

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

(5) Loans			
on Won, loans in foreign currencies and domestic import usance bill, classified by industry, as of December 31, 2009 and 2008 wereas follows (Unit: In millions):<2009>
By borrower type

Loans in Won

Corporations:
Manufacturing
Wholesale & retail
Real estate and renting and leasing
Construction
Transportation business
OthersHouseholds
Public sector and others₩   24,581,103 ₩    3,148,189 ₩    2,616,184
10,242,501
1,512,454
2,283,776
2,830,196
373,316
302,645
3,541,366
131,4142,588,927
16,397
12,414
1,219,932
547,212201
4,158,181
567,396
17,14817,499,380
106,962
42,187,445
3,148,189
2,616,184
4,735,157₩   42,187,445 ₩   7,883,346 ₩   2,616,184₩   30,345,476
14,038,731
3,506,157
3,672,780
2,617,738
1,767,345
4,742,725
17,499,380
106,962
47,951,818
4,735,157₩ 52,686,975

By borrower type

Loans in Won

Loans inforeigncurrencies

Domestic
importusance bill

Total

Corporations:
Manufacturing
Wholesale & retail
Real estate and renting and leasing
Construction
Transportation business
OthersHouseholds
Public sector and others₩   25,719,885
9,642,619
3,437,085
3,892,542
2,877,962
1,312,335
4,557,342
15,762,526
129,634
41,612,045₩   41,612,045₩    4,084,865
1,937,876
477,436
153,048
26,991
759,017730,497
4,084,865
4,957,881₩    9,042,746₩    2,746,929
2,325,019
381,23962
10,614
4,355
25,6402,746,929₩    2,746,929₩   32,551,679
13,905,514
4,295,760
4,045,652
2,915,567
2,075,707
5,313,479
15,762,526
129,634
48,443,839
4,957,881₩   53,401,720

Loans of overseas branches

Loans inforeigncurrencies

Domestic
importusance bill

Total

Percentage (%)

63.28
29.27
7.31
7.66
5.46
3.69
9.89
36.50
0.22
100.00<2008>

Loans of overseas branches

Percentage (%)

67.19
28.70
8.87
8.35
6.02
4.28
10.97
32.54
0.27
100.00(6) Loans to financial institutions as of December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>Classification

Loans in Won

Loans inforeigncurrencies

Call loans

Total

Bank
Other financial institutions
Overseas financial institutions₩       50,152
858,782₩      908,934₩             47,147
103,875₩      151,022₩    1,289,261
315,182₩    1,604,443₩    1,339,413
905,929
419,057₩    2,664,399

Classification

Loans in Won

Loans inforeigncurrencies

Call loans

Total

Bank
Other financial institutions
Overseas financial institutions₩       54,792
913,976₩      968,768₩             101,760
151,223₩      252,983₩    1,061,449
525,620₩    1,587,069₩    1,116,241
1,015,736
676,843₩    2,808,820

Percentage (%)

50.27
34.00
15.73
100.00<2008>

080

Percentage (%)

39.74
36.16
24.10
100.00Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			(7) The term
structure of loans in Won, loans in foreign currencies and domestic import usance bill as of December 31, 2009 was as follows(Unit: In millions):
Classification
Due in less than one year
Due from one to two years
Due from two to three years
Due from three to five years
Due after five years

Loans in Won

Loans in foreign₩   32,244,855
2,520,640
1,704,315
1,738,178
3,979,457₩   42,187,445

currencies
usance bill₩   5,228,831 ₩   2,615,001
746,48290
489,2211,093
505,169
913,643₩   7,883,346 ₩   2,616,184

Domestic importTotal₩   40,088,687
3,267,212
2,194,629
2,243,347
4,893,100₩   52,686,975(8) The changes in deferred loan origination fees and costs for the year ended December 31, 2009 were as follows (Unit: In millions):
Beginning

Increasebalance₩        50,850 ₩  

Deferred loan origination fees and costs

Decrease
44,680₩  Ending balance(40,605)₩  

54,925(9) The disposed loans for the year ended December 31, 2009 were as follows (Unit: In millions):
Purchaser

Nominal amountGyeonggi Mutual Savings Bank
Fine Partners Corporation and others
Hyundai Swiss Savings Bank (*)
KEB 17th Securitization Specialty Co., Ltd.

₩  

157,444
188,632
25,381
110,402

Allowance of possible
loan losses at disposal

Gain (Loss) on
disposal of loans₩  (2,705)(1,166)
2,758(21,779)

12,91433,9178,303₩  

(*) Gains on disposal of bad debts

6. RESTRUCTURED LOANS:(1) The loans that were restructured because of workouts plan and others for the year ended December 31, 2009 were as follows(Unit: In millions):
Classification

Restructuring loans

Workout plan
Corporate reorganization
Rationalization of industry₩  

1,092,768
137,135
275,760
1,505,663₩  

Present value (*)
₩  

₩  

Ending balance ofpresent value discounts
₩  
4,188
1,795
29,350₩  
35,333

1,088,580
135,340
246,410
1,470,330(*) As the present value is calculated with fair value at the restructuring date, if there is no fair value, the present value of total future cash receipts under the
restructuring plans is discounted using interest rates of 3.41 percent to 13.46 percent. Also, the present value discount is calculated using effective interest rate
method.

(2) Changes in the present value discounts relating to the outstanding restructured loans for the year ended December 31, 2009 were as
follows (Unit: In millions):
Classification

Amount (*1)

Present value discounts
Beginningbalance

Loans:
Court receivership
Others₩  

Accounts receivable:
Court receivership
Others₩  

2,235
183,047
185,282₩  

517
33,09733,614

16,34816,348201,630 ₩  

4,427
4,427
38,041

Increase₩  ₩  

Decrease

Endingbalance (*2)

- ₩  
5,516
5,516

(336)
(7,767)(8,103)₩  

181
30,84631,0271,027
1,027
6,543 ₩  

(1,148)(1,148)(9,251) ₩  

4,306
4,306
35,333(*1) These only include restructured loans discounted at present value.
(*2) The present value discount is presented as allowance of possible loan losses.

081

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			
7. ALLOWANCE
FOR POSSIBLE LOAN LOSSES:(1) The allowance for possible loan losses as of December 31, 2009 and 2008 was summarized as follows (Unit: In millions):<2009>Classification
Loans:
Call loans
Allowance
Allowance percentage
Credit card loans
Allowance
Allowance percentage
Bills bought in foreign currencies (*1)
Allowance
Allowance percentage
Bonds bought under resale agreements
Allowance
Allowance percentage
Loans in Won (*2)
Allowance
Allowance percentage
Loans in foreign currencies (*3)
Allowance
Allowance percentage
Inter-bank loans
Allowance
Allowance percentage
Factoring receivables
Allowance
Allowance percentage
Advances for customers (*4)
Allowance
Allowance percentage
Privately placed bonds
Allowance
Allowance percentage
Other accounts (*5)
Allowance
Allowance percentage
Sum:
Loans and other accounts
Allowance
Allowance percentage
Present value discounts
Allowance for possible loan losseson the statement of financial position

NormalPrecautionary Substandard

Doubtful

Estimated
loss

Total

₩  1,604,443 ₩            - ₩            - ₩            - ₩            - ₩  1,604,443
2,359,511
28,889468
27,3596,717
2,422,944
35,393
4,676
215
18,6796,717
65,6801.50%
16.19%
45.94%
68.27%
100.00%2.71%
4,053,965
5,196
25,8562,070
4,087,087
34,459
984
5,171
1,035
41,6490.85%
18.94%
20.00%
50.00%
1.02%
1,786,000
1,786,000
41,434,876
683,508
272,754
73,71036,66442,501,512
401,448
68,87465,403
41,42436,664
613,8130.97%
10.08%
23.98%
56.20%
100.00%1.44%
10,096,158
143,673
122,288
27,4295,985
10,395,533
94,903
17,371
48,50015,126
5,985
181,885
0.94%
12.09%
39.66%
55.15%
100.00%1.75%
103,875
103,875
166,525
166,525
1,416
1,416
0.85%
0.85%
276
6,134
134
2,454
8,998
19
1,227
67
2,454
3,767
7.00%
20.00%
50.00%
100.00%41.86%
529,741
2,000
2,024
3,532
123
537,420
4,503
140
405
1,766
123
6,937
0.85%
7.00%
20.00%
50.00%
100.00%
1.29%
2,854
2,720
4,149
22,162796
32,68124
194
830
11,101796
12,9450.85%
7.00%
20.00%
50.09%
100.00%39.61%
62,137,948
572,146
0.92%
29,350866,262
92,25810.65%
1,868

433,673
121,751
28.07%
2,955

156,396
89,19857.03%
1,160

52,73952,739100.00%-63,647,018
928,092
1.46%
35,333₩    601,496 ₩      94,126 ₩    124,706 ₩      90,358 ₩      52,739 ₩    963,425(*1) Local L/C bills bought in Won amounting to ₩22,035 million, Local L/C bills bought in foreign currencies amounting to ₩63,950 million among bills bought in
Won and Bills of exchange in Won at sight amounting to ₩4,813 million are included in bills bought in foreign currencies.
(*2) Commercial bills purchased amounting to ₩344,615 million among bills bought in Won are included in bills bought in foreign currencies, and present value
discount amounting to ₩30,548 million is deducted.
(*3) Domestic import usance bill is included in foreign currencies. Interbank loans in foreign currencies of ₩103,875 million and present value discount amounting to₩122 million is deducted.
(*4) Present value discount amounting to ₩357 million is deducted on privately placed bonds.
(*5) Other accounts consisted of accounts receivable (transfer-in bills bought in foreign currencies) amounting to ₩46 million, suspense payments in relation withloans amounting to ₩32,047 million and securities (commercial paper) amounting to ₩588 million.

082

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			<2008>Classification
Loans:
Call loans
Allowance
Allowance percentage
Credit card loans
Allowance
Allowance percentage
Bills bought in foreign currencies (*1)
Allowance
Allowance percentage
Bonds bought under resale agreements
Allowance
Allowance percentage
Loans in Won (*2)
Allowance
Allowance percentage
Loans in foreign currencies (*3)
Allowance
Allowance percentage
Inter-bank loans
Allowance
Allowance percentage
Factoring receivables
Allowance
Allowance percentage
Advances for customers (*4)
Allowance
Allowance percentage
Privately placed bonds (*5)
Allowance
Allowance percentage
Other accounts (*6)
Allowance
Allowance percentage
Sum:
Loans and other accounts
Allowance
Allowance percentage
Present value discounts
Allowance for possible loan losseson the statement of financial position

NormalPrecautionary Substandard

Doubtful

Estimated
loss

Total

₩  1,587,069 ₩            - ₩            - ₩            - ₩            - ₩  1,587,069
2,477,046
40,633
210
25,984
8,735
2,552,608
37,1568,157
42
15,9308,735
70,0201.50%
20.07%
20.00%
61.31%
100.00%2.74%
4,504,307
578
10,676
4,515,561
38,28740
5,231
43,5580.85%
7.00%
49.00%
0.96%
2,340,000
2,340,000
40,782,246
545,431374,40247,397
186,360
41,935,836
376,689
45,69576,145
26,776
186,360
711,665
0.92%
8.38%
20.34%
56.49%
100.00%1.70%
11,490,445
97,09026,854
10,30813,755
11,638,452
104,240
6,855
6,130
7,166
13,755
138,146
0.91%
7.06%
22.83%
69.51%
100.00%1.19%
151,223
151,223
130,689
130,689
1,111
1,111
0.85%
0.85%
3,016
8,180
3,165
46
16,18230,589
26
898
633
23
16,182
17,7620.85%
10.98%
20.00%
50.00%
100.00%58.07%
607,534
2,200
2,360
291
612,385
5,164
154
472
291
6,081
0.85%
7.00%
20.00%
100.00%
0.99%
4,751
6,074
4,015
5,987
34,22255,049
40
425
803
3,025
34,22238,5150.85%
7.00%
20.00%
50.53%
100.00%69.96%
64,078,326
562,7130.88%
34,802

700,186
62,224
8.89%
1,194

421,682
89,45621.21%
2,045

89,722
52,92058.98%-

259,545
259,545100.00%-65,549,461
1,026,858
1.57%
38,041₩    597,515 ₩      63,418 ₩      91,501 ₩      52,920 ₩    259,545 ₩  1,064,899(*1) Local L/C bills bought in Won amounting to ₩17,731 million and Local L/C bills bought in foreign currencies amounting to ₩48,755 million among bills bought in
Won are included in bills bought in foreign currencies.
(*2) Commercial bills purchased amounting to ₩356,808 million among bills bought in Won are included in bills bought in foreign currencies, and present value
discount amounting to ₩33,017 million is deducted.
(*3) Domestic import usance bill is included in foreign currencies. Interbank loans in foreign currencies of ₩151,223 million is deducted.
(*4) Present value discount amounting to ₩538 million is deducted on advances for customers.
(*5) Present value discount amounting to ₩59 million is deducted on privately placed bonds.
(*6) Other accounts consisted of accounts receivable (transfer-in bills bought in foreign currencies) amounting to ₩5,099 million, suspense payments in relation withloans amounting to ₩49,000 million and securities (commercial paper) amounting to ₩950 million.

083

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			(2) The changes
in allowance for possible loan losses for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification

2009₩

Beginning balance
Provision for possible loan losses
Loans written-off
Repurchase of loan and others
Translation adjustments of overseas
Changes in present value discounts
Ending balance₩  

1,064,899
648,470(906,480)
168,125(4,443)(7,146)
  963,425

2008
₩

₩

719,365
719,840(568,411)
183,818
18,334(8,047)
1,064,899(3) The allowance for possible loan losses compared to total loans, net of present value discount, as of December 31, 2009, 2008 and 2007 wassummarized as follows (Unit: In millions):
Classification
(*1)

Loans
Allowance for possible loan losses (*2)
Percentage (%)

2009
₩  

60,152,700
928,092
1.54

2008
₩  

61,471,169
1,026,858
1.67

2007
₩  

51,944,440
669,743
1.29(*1) Call loans, bonds purchased under repurchase agreements and interbank loans in foreign currencies are excluded.
(*2) Present value discounts are excluded.

8. TANGIBLE ASSETS:(1) Tangible assets as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification
Tangible assets
Less:
Accumulated depreciation
Accumulated impairment loss

2009
₩  

2,186,679₩  (800,320)(5,941)
1,380,418

2008
₩  

2,200,006₩  (772,788)
1,427,218(2) Tangible assets as of December 31, 2009 and 2008 consisted of (Unit: In millions):<2009>Classification

Acquisition cost

Accumulated
depreciation

Accumulated
impairment
loss (*)

Book value

Land
Buildings
Leasehold improvements
Equipment and vehicles
Construction in progress₩       933,891
542,691
120,025589,928144₩     2,186,679₩              (192,790)(90,981)(516,549)₩      (800,320)₩        (2,376)(3,565)₩        (5,941)₩       931,515
346,336
29,04473,379144₩     1,380,418(*) The difference between the impairment loss for the year ended December 31, 2009 and the accumulated impairment loss as of December 31, 2009 amounting to₩1,942 million was recognized as loss on revaluation of tangible asset until the prior fiscal year.

<2008>Classification

Acquisition cost

Accumulated
depreciation

Accumulated
impairment
loss

Book value

Land
Buildings
Leasehold improvements
Equipment and vehicles₩       938,810
541,098
114,334
605,764₩     2,200,006₩              (182,609)(79,273)(510,906)₩      (772,788)₩              ₩              -₩       938,810
358,489
35,061
94,858₩     1,427,218084

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			(3) The changes
in book value of tangible assets for the year ended December 31, 2009 were as follows (Unit: In millions):
Classification

Beginning

Acquisition

Disposal

Depreciation Impairment
loss (*2)

Revaluation
loss (*1)

Change inforeigncurrencies

Ending₩   938,810 ₩          - ₩    (4,330) ₩          - ₩      (215) ₩    (2,576) ₩      (174) ₩   931,515
Land
Buildings
358,489
7,630(2,166)(12,960)(3,784)(873)
346,336
Leasehold improvements
35,061
6,458(10)(12,149)(316)
29,044Equipment and vehicles
94,85837,008(421)(57,803)(263)
73,379Construction in progress144
144₩ 1,427,218 ₩    51,240 ₩    (6,927) ₩   (82,912) ₩    (3,999) ₩    (2,576) ₩    (1,626) ₩ 1,380,418(*1) Gain on revaluation of tangible asset recognized in the prior fiscal year in relation to land was reversed up to the amount of impairment loss incurred for the year
ended December 31, 2009.
(*2) The impairment loss amounting to ₩3,853 million was recognized as loss on prior period error correction because the cause of impairment occurred in the priorfiscal year.

(4) The published value of the land was ₩877,787 million and ₩755,083 million as of December 31, 2009 and 2008, respectively, based on theLaws on Disclosure of Land Price and Valuation of Land.
(5) Tangible assets, which have been insured as of December 31, 2009 were as follows (Unit: In millions):
Type of insurance

Asset insured

Property composite

Buildings
Leasehold improvements
Equipment and vehicles

Insured balance₩                346,575
30,91077,912₩               455,397

Insurance company
Hyundai Marine & Fire
Insurance Co., Ltd.
and others(6) The change in the gain on revaluation of tangible assets for the year ended December 31, 2009 was as follows (Unit: In millions):
Classification

BeginningLand₩        435,337

Revaluation

Disposal or
Tax
Endingreclassification (*) adjustment₩               - ₩         (4,140) ₩            911 ₩        432,108(*) Gain on revaluation of tangible asset of ₩1,564 million recognized in the prior fiscal year in relation to land was reversed up to the amount of impairment loss
incurred for the year ended December 31, 2009.

9. OTHER ASSETS:(1) Other assets as of December 31, 2009 and December 31, 2008 consisted of (Unit: In millions):
Classification
Guarantee deposits paid
Accounts receivable
Accrued income
Prepaid expenses
Derivatives instruments assets (see Note 17)
Intangible assets
Sundry assets

2009₩                661,628

2008₩                654,646

6,874,097
239,920
28,764
1,599,988
60,696
1,252,187
10,717,280

5,205,352
378,678
12,926
4,674,174
65,905
1,293,705₩             12,285,386₩(2) Intangible assets as of December 31, 2009 and 2008 consisted of (Unit: In millions):<2009>Classification

Acquisition cost

Development expenditures
Others (*)

₩  
₩  

Accumulated
amortization
222,269
2,239
224,508₩  ₩  Book value(161,938)(1,874)(163,812)₩  ₩  

60,331365
60,696(*) The effect of exchange rate fluctuation is included.

085

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			<2008>

			Classification

Acquisition cost

Development expenditures
Others (*)

₩  
₩  

Accumulated
amortization
195,150
2,331
197,481Book value(129,977)(1,599)(131,576)₩  ₩  65,173732
65,905₩  ₩  (*) The effect of exchange rate fluctuation is included.

(3) The changes in intangible assets for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>Classification

Beginning

Acquisition

Amortization

Change inforeigncurrencies

Development expenditures
Others₩          65,173 ₩          27,119 ₩        (31,961)
732
37
(356)
₩          65,905 ₩          27,156 ₩        (32,317)₩        ₩        Ending(48)(48)₩         60,331365₩         60,696<2008>Classification

Beginning

Acquisition

Amortization

Development expenditures
Others₩          79,497 ₩          16,298 ₩        (30,622)
654
285
(422)
₩          80,151 ₩          16,583 ₩        (31,044)

Change inforeigncurrencies

Ending(215)₩           (215)₩         65,173732₩         65,905₩        (4) Sundry assets as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification
Domestic exchange settlement debits
Suspense payments in Won
Suspense payments in foreign currencies
Bills unsettled
Articles of consumption
Deposited money
Money transfer receivable
Others2009₩              1,134,803

2008₩              1,153,061

79,597
6,945
9,999
6,477
13,455150761₩              1,252,187

94,743
2,518
17,124
5,051
20,147200
861₩              1,293,705

10. MERCHANT BANKING ACCOUNT ASSETS:(1) Merchant banking accounts assets as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Loans
Cash management accounts
Trading securities
Allowance for possible loan losses

2009₩                583,100

2008₩              1,761,880

184,900
1,094,673(11,163)₩              1,851,510

174,000
1,444,380(17,148)₩              3,363,112

2009₩                583,100

2008₩              1,761,880

1.71~10.50

3.49~10.25(2) Loans as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Bills discounted
Discount interest rate of short-term bill (%)

086

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

(3) Cash 			management accounts as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Cash management accounts (“CMA”) comprise of customers’ deposits maturing in 180 days or less which are invested in securities
approximating the value of such deposits. The income from the investments, less management fees, is distributed to the accounts on thecontract maturity date. If the deposit is withdrawn before maturity, distribution is based on a rate computed daily.
CMA assets as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification2009₩                184,900

Bills discounted

2008₩                174,000(4) Trading securities as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification
Face value
Adjusted value (*)
Fair value (Book value)

2009₩              1,097,600

2008₩              1,453,500

1,094,574
1,094,673

1,443,156
1,444,380(*) Accrued interest is reflected.

(5) Asset quality classification and related allowance for loan losses
The asset quality classification and allowance for possible loan losses of the accounts in the merchant banking division of the Bank as ofDecember 31, 2009 and 2008 were as follows (Unit: In millions):<2009>Classification

NormalLoans (*)

₩  713,000

Precautionary Substandard₩     55,000₩         -Doubtful₩         -Estimated
loss

Total

₩         -₩  768,000

Allowance forpossible loan
losses₩   11,163(*) Including bills discounted in CMA account<2008>Classification

NormalLoans (*)

₩1,926,880

Precautionary Substandard₩      9,000₩         -Doubtful₩         -Estimated
loss

Total

₩         -₩1,935,880

Allowance forpossible loan
losses₩   17,148(*) Including bills discounted in CMA account(6) Operating income of merchant banking accounts for the years ended December 31, 2009 and 2008 was as follows (Unit: In millions):
Classification
Interest revenues
Commission revenues
Reversal of allowance of unused credit limit
Other revenues

2009₩                 80,314

2008₩                193,112

352
5,985
24,429₩                111,080

286
14,435₩                207,833

2009₩             19,658,363

2008₩             18,893,827

28,244,599
9,048,925₩             56,951,887

30,081,512
7,422,018₩             56,397,357

11. DEPOSITS:(1) Deposits as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification
Demand deposits
Time deposits
Negotiable certificates of deposits087

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			(2) Detailsof deposits as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification
Demand deposits in Won:
Checking deposits
Passbook deposits
Temporary deposits
Public fund deposits
General savings deposits

2009

2008

₩                224,694
1,453,713
785,326
25,561
12,102,452
14,591,746₩                244,153
1,163,813
820,61227,812
11,988,076
14,244,466

1,024,154
4,011,693
30,7705,066,617

969,997
3,663,760
15,6044,649,361

18,186,940
973,592
547,570
19,708,102

20,441,411
893,182602,639
21,937,232

8,423,049
62,812
4,429
8,490,290
46,207
9,048,925₩             56,951,887

8,042,187
32,0406,188
8,080,415
63,865
7,422,018₩             56,397,357

Demand deposits in foreign currencies:
Checking deposits
Passbook deposits
Temporary deposits
Time deposits in Won:
Time deposits
Installment savings deposits
Long-term savings for households
Time deposits in foreign currencies:
Time deposits
Notice deposits
OthersMutual installment savings
Negotiable certificates of deposits(3) Deposits with financial institutions as of December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>Classification

Demand deposits:
Demand deposits in Won
Demand deposits in foreign currencies
Time deposits:
Savings deposits in Won
Savings deposits in foreign currencies
Negotiable certificates of deposits

Bank

Other financial
institution

Foreignfinancial
institution

Total₩          5,968
122,183₩       184,804
22,342₩         6,171
188,361₩       196,943
332,886

1,144,463
8,000₩     1,280,614

1,746,073
844,480
651,805₩     3,449,504

107,717₩       302,249

2,998,253
844,480
659,805₩     5,032,367

Bank

Other financial
institution

Foreignfinancial
institution

Total₩         6,647
133,085₩       175,557
15,651₩         7,759
225,230₩       189,963
373,966

913,968
322,765
51,000₩     1,427,465

2,811,364
537,968
2,581,994₩     6,122,534

22,012₩       255,001

3,747,344
860,733
2,632,994₩     7,805,000<2008>Classification

Demand deposits:
Demand deposits in Won
Demand deposits in foreign currencies
Time deposits:
Savings deposits in Won
Savings deposits in foreign currencies
Negotiable certificates of deposits088

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

(4) Term			
structure of deposits as of December 31, 2009 was as follows (Unit: In millions):
Classification

Depositsin WonDeposits
in foreign
currencies

Negotiablecertificates ofdeposits

Total

Due in less than one year
Due from one to two years
Due from two to three years
Due from three to five years
Due after five years₩    33,182,614
607,995
298,911
122,474
134,061₩    34,346,055₩     8,416,732
18,45529,661552
5,091,507₩    13,556,907₩     8,786,417
262,508₩     9,048,925₩    50,385,763
888,958
328,572
123,026
5,225,568₩    56,951,887

12. BORROWINGS:(1) Borrowings as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification
Call money
Bills soldBonds sold under repurchase agreements
Borrowings
Debentures2009₩              1,388,605

2008₩              2,739,101

30,943
140,415
7,623,823
7,855,885₩             17,039,671

31,491
432,383
8,755,776
10,790,561₩             22,749,312(2) Call money as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

LenderCall money in foreign currencies

Local & foreign financial
institution and others

Annual interest
rate (%)
Dec. 31, 2009
0.20 ~ 1.46

2009

2008

₩         1,388,605₩

2,739,101(3) Bills sold and bonds sold under repurchase agreements as of December 31, 2009 and 2008 consisted of the followings (Unit: In millions):
Account

LenderBills soldBonds sold under
repurchase agreements

General customer
General customer and others

Annual interest
rate (%)
Dec. 31, 2009

2009

2008

1.50 ~ 4.00₩            30,943₩            31,491

3.04 ~ 8.00

140,415432,383

171,358₩           463,874₩089

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			(4) Borrowings
as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

LenderBorrowings in Won:
Borrowings from the BOK
Borrowings from the Korean
government

BOK
Ministry of Finance andEconomy and others

Annual interest
rate (%)
Dec. 31, 2009

2009

2008

₩           704,953₩           837,166

0.25 ~ 4.27

308,988309,342

1.25

Borrowings from banking
institutions

Industrial Bank of Korea andothers1.54 ~ 6.00

101,875

128,409

Other borrowings

Small Business Corporationand others

0.00 ~ 3.94

1,025,606

484,264        2,141,422         1,759,181

Borrowings in foreign currencies:
Refinance
Short-term borrowing inforeign currencies
Middle and long-termborrowing in foreign
currencies
Borrowings from banks for
sub-loan
Other borrowings

Wachovia Bank and others

1.73 ~ 2.81           256,872        1,235,760

Bank of New York and others

1.12 ~ 3.27

2,021,322

2,753,970

Bank of communications andothers1.31 ~ 7.03

987,705

608,557

Korea Exim Bank and others--

176,050

Foreign financial institution

0.26 ~ 6.45

2,216,502
5,482,401₩         7,623,823

2,222,258
6,996,595₩         8,755,776(5) In the normal course of funding activities, the Bank provided securities as collateral for borrowings from the Bank of Korea and otherfinancial institutions as of December 31, 2009 [see Note 4(7)].
(6) Debentures
1) Debentures as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

Debentures in Won:
Finance debentures
Subordinated financing debentures
Hybrid debentures

Annual interest
rate (%)
Dec. 31, 2009

2009

2008

3.06 ~ 7.73
6.11 ~ 7.80
7.30₩         5,370,000
1,101,146
250,000
6,721,146(20,186)
6,700,960₩         8,191,000
1,367,109
250,000
9,808,109(39,979)
9,768,130

0.61 ~ 5.74
5.00

803,490355,735
1,159,225(4,300)1,154,925₩         7,855,885

637,114390,059
1,027,173(4,742)
1,022,431₩        10,790,561

Discounts on debentures
Debentures in foreign currencies:
Finance debentures
Subordinated financing debentures
Discounts on debentures090

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

2) As 			of December 31, 2009 and 2008, all finance debentures issued in Won were general debentures and consisted of (Unit: In millions):
Issued date

Expiration dateNov. 17, 2006
Dec. 6, 2006
Dec. 11, 2006
Jan. 9, 2007
Jan. 10, 2007
Jan. 11, 2007
Jan. 17, 2007
Jan. 18, 2007
Jan. 18, 2007
Jan. 19, 2007
Jan. 25, 2007
Jan. 25, 2007
Feb. 5, 2007
Feb. 9, 2007
Feb. 28, 2007
Mar. 15, 2007
Mar. 16, 2007
Mar. 27, 2007
Apr. 3, 2007
May 2, 2007
May 8, 2007
May 9, 2007
May 14, 2007
May 15, 2007
May 16, 2007
May 17, 2007
May 21, 2007
May 21, 2007
May 23, 2007
May 30, 2007
Jun. 1, 2007
Jun. 5, 2007
Jun. 13, 2007
Jun. 18, 2007
Jun. 26, 2007
Jun. 28, 2007
Jul. 10, 2007
Jul. 11, 2007
Jul. 16, 2007
Jul. 19, 2007
Jul. 24, 2007
Jul. 24, 2007
Jul. 25, 2007
Jul. 26, 2007
Jul. 26, 2007
Jul. 30, 2007
Jul. 31, 2007
Jul. 31, 2007
Aug. 1, 2007
Aug. 3, 2007
Aug. 3, 2007

Nov. 17, 2009
Dec. 6, 2009
Dec. 11, 2009
Jan. 9, 2009
Jan. 10, 2010
Jan. 11, 2010
Jan. 17, 2009
Jan. 18, 2009
Jan. 18, 2010
Jan. 19, 2009
Jan. 25, 2009
Jan. 25, 2010
Feb. 5, 2010
Feb. 9, 2010
Feb. 28, 2010
Mar. 15, 2009
Mar. 16, 2009
Mar. 27, 2009
Apr. 3, 2009
May 2, 2009
May 8, 2009
May 9, 2009
May 14, 2010
May 15, 2009
May 16, 2010
May 17, 2010
May 21, 2009
May 21, 2010
May 23, 2010
May 30, 2010
Jun. 1, 2010
Jun. 5, 2009
Jun. 13, 2010
Jun. 18, 2009
Jun. 26, 2009
Jun. 28, 2010
Jul. 10, 2009
Jul. 11, 2009
Jan. 16, 2009
Jan. 19, 2009
Jan. 24, 2009
Jul. 24, 2010
Jul. 25, 2010
Jan. 26, 2009
Jul. 26, 2009
Jul. 30, 2010
Jul. 31, 2009
Jul. 31, 2010
Aug. 1, 2009
Aug. 3, 2009
Aug. 3, 2010

Annualinterest rate (%)
Dec. 31, 2009
5.10
5.09
5.20
5.23
5.23
5.14
5.05
5.32
5.35
5.36
5.39
5.38
5.36
5.37
5.49
5.44
5.60
5.61
5.53
5.53
5.48

2009

2008

₩                  50,000
50,00030,00030,00050,00050,00030,00040,00050,00050,00030,000100,000
50,00050,00050,00050,00020,00050,00030,00030,00010,000₩            50,000
40,00050,00050,00050,00050,00050,00020,00030,00050,00020,00030,00050,00050,00030,00020,00050,00030,00050,00050,00010,00020,00040,00020,00050,00050,00020,00030,000100,000
50,00050,00050,00050,00030,00050,00050,00050,00050,00010,00050,00030,00020,00050,00040,00010,00030,00020,00030,00020,00040,00010,000091

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

Issued date			Expiration dateAug. 8, 2007
Aug. 9, 2007
Aug. 14, 2007
Aug. 23, 2007
Aug. 24, 2007
Sep. 10, 2007
Oct. 2, 2007
Oct. 9, 2007
Oct. 10, 2007
Oct. 11, 2007
Oct. 12, 2007
Oct. 16, 2007
Oct. 17, 2007
Oct. 18, 2007
Oct. 18, 2007
Oct. 23, 2007
Oct. 24, 2007
Oct. 26, 2007
Oct. 29, 2007
Oct. 30, 2007
Nov. 2, 2007
Nov. 8, 2007
Nov. 14, 2007
Nov. 23, 2007
Nov. 26, 2007
Nov. 30, 2007
Dec. 5, 2007
Jan. 10, 2008
Jan. 11, 2008
Jan. 15, 2008
Jan. 23, 2008
Jan. 29, 2008
Jan. 30, 2008
Jan. 31, 2008
Feb. 15, 2008
Mar. 28, 2008
Apr. 1, 2008
Apr. 2, 2008
Apr. 4, 2008
Apr. 7, 2008
Apr. 7, 2008
Apr. 10, 2008
Apr. 11, 2008
Apr. 14, 2008
Apr. 15, 2008
Apr. 16, 2008
Apr. 17, 2008
Apr. 18, 2008
Apr. 21, 2008
Apr. 24, 2008
Apr. 24, 2008
Apr. 29, 2008
Apr. 30, 2008

Feb. 8, 2009
Aug. 9, 2009
Aug. 14, 2010
Aug. 23, 2010
Aug. 24, 2010
Sep. 10, 2010
Apr. 2, 2009
Apr. 9, 2009
Oct. 10, 2010
Apr. 11, 2009
Apr. 12, 2009
Apr. 16, 2009
Apr. 17, 2009
Oct. 18, 2009
Oct. 18, 2010
Oct. 23, 2010
Oct. 24, 2009
Apr. 26, 2009
Apr. 29, 2009
Apr. 30, 2009
Nov. 2, 2009
Nov. 8, 2010
Nov. 14, 2010
Nov. 23, 2010
Nov. 26, 2010
Nov. 30, 2010
Dec. 5, 2010
Jul. 10, 2009
Jul. 11, 2009
Jan. 15, 2010
Jul. 23, 2009
Jul. 29, 2009
Jul. 30, 2009
Jan. 31, 2009
Feb. 15, 2010
Sep. 28, 2009
Oct. 1, 2009
Oct. 2, 2009
Oct. 4, 2009
Apr. 7, 2009
Oct. 7, 2009
Apr. 10, 2010
Apr. 11, 2009
Oct. 14, 2009
Apr. 15, 2010
Apr. 16, 2010
Apr. 17, 2010
Apr. 18, 2010
Apr. 21, 2009
Oct. 24, 2009
Apr. 24, 2010
Apr. 29, 2010
Apr. 30, 2010092

Annualinterest rate (%)
Dec. 31, 2009
5.58
5.65
5.67
5.77
5.93
5.91
5.84
5.88
5.94
6.22
6.25
6.63
6.70
6.39
5.30
5.71
5.58
5.54
5.52
5.50
5.47
5.42
5.39

2009

2008

₩                  10,000
30,00050,000200,000
200,000
70,00010,000200,000
50,00070,000260,000
170,000
140,000
50,00030,000200,000
50,00050,00050,00050,00040,00010,00050,000₩            10,000
40,00010,00030,00050,000200,000
50,00020,000200,000
26,00050,000140,000
50,00030,00070,00010,00040,00020,00030,00030,00040,000200,000
50,00070,000260,000
170,000
140,000
50,00050,00050,00050,00020,00050,00030,00030,00050,00050,000100,000
50,00020,00030,000200,000
100,000
50,00050,00050,00050,00050,00050,00010,00040,00010,00050,000Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

Issued date			Expiration date

May 8, 2008
May 14, 2008
May 15, 2008
May 16, 2008
May 22, 2008
May 23, 2008
May 26, 2008
May 26, 2008
May 27, 2008
May 27, 2008
May 28, 2008
May 29, 2008
May 30, 2008
May 30, 2008
Jun. 3, 2008
Jun. 5, 2008
Jun. 5, 2008
Jun. 12, 2008
Jun. 12, 2008
Jun. 16, 2008
Jun. 16, 2008
Jun. 18, 2008
Jun. 18, 2008
Jun. 19, 2008
Jun. 19, 2008
Jun. 24, 2008
Jun. 24, 2008
Jun. 26, 2008
Jun. 26, 2008
Jul. 1, 2008
Jul. 3, 2008
Jul. 4, 2008
Jul. 4, 2008
Jul. 16, 2008
Jul. 17, 2008
Jul. 17, 2008
Jul. 18, 2008
Aug. 19, 2008
Aug. 21, 2008
Sep. 1, 2008
Sep. 4, 2008
Sep. 11, 2008
Sep. 12, 2008
Sep. 26, 2008
Sep. 29, 2008
Oct. 20, 2008
Oct. 29, 2008
Dec. 15, 2008
Jul. 9, 2009
Jul. 13, 2009
Jul. 15, 2009
Jul. 24, 2009
Jul. 28, 2009

May 8, 2010
Nov. 14, 2009
May 15, 2010
May 16, 2011
May 22, 2011
May 23, 2011
May 26, 2010
Nov. 26, 2010
Nov. 27, 2009
May 27, 2010
May 28, 2010
May 29, 2010
May 30, 2009
Nov. 30, 2009
Jun. 3, 2010
Jun. 5, 2009
Jun. 5, 2010
Jun. 12, 2009
Jun. 12, 2010
Jun. 16, 2009
Jun. 16, 2010
Jun. 18, 2009
Dec. 18, 2009
Dec. 19, 2009
Jun. 19, 2010
Jun. 24, 2009
Dec. 24, 2009
Dec. 26, 2009
Jun. 26, 2010
Jul.
1, 2009
Jul.
3, 2009
Jul.
4, 2009
Jul.
4, 2010Jan. 16, 2010
Jul. 17, 2009
Jul. 17, 2010
Jan. 18, 2010
Aug. 19, 2009
Aug. 21, 2010
Sep. 1, 2010
Sep. 4, 2010
Sep. 11, 2009
Sep. 12, 2009
Sep. 26, 2009
Sep. 29, 2009
Oct. 20, 2009
Oct. 29, 2011
Dec. 15, 2009Jul.
9, 2010
Jul. 13, 2010
Jul. 15, 2010
Jul. 24, 2010
Jul. 28, 2010

Annualinterest rate (%)
Dec. 31, 2009
5.56
5.80
5.87
5.93
5.92
5.87
5.92
5.85
5.82
5.90
5.98
5.98
6.17
6.20
6.17
6.31
6.60
6.87
6.92
6.80
7.17
7.05
7.20
7.73
3.13
3.19
3.06
3.09
3.07

2009

2008

₩            10,000
20,000100,000
100,000
30,00010,00010,00020,00010,00050,00020,00060,00070,00040,00010,00030,00010,00040,00010,000200,000
180,000
130,000
120,000
200,000
100,000
100,000
100,000
100,000
50,000₩            10,000
50,00020,000100,000
100,000
30,00010,00010,000200,000
20,00010,00050,00020,00070,00020,00040,00060,00020,00070,00010,00040,00020,00040,00040,00010,00030,00020,00020,00030,00010,00010,00010,00010,00040,000110,000
10,000200,000
120,000
180,000
130,000
120,000
70,00050,00080,000100,000
45,000200,000
200,000-

093

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

Issued date			Expiration dateNov. 24, 2009
Dec. 2, 2009
Dec. 10, 2009
Dec. 16, 2009
Dec. 18, 2009

Nov. 24, 2010
Dec. 2, 2010
Dec. 10, 2010
Dec. 16, 2010
Dec. 18, 2010

Annualinterest rate (%)
Dec. 31, 2009
3.76
3.71
3.78
3.89
3.93

2009

2008

₩           100,000
100,000
100,000
100,000
100,000₩        5,370,000₩                  ₩        8,191,000

3) Finance debentures issued in foreign currencies as of December 31, 2009 and 2008 consisted of (Unit: In thousands of U.S. Dollars,in millions of Won):
First underwriter

Issued date

Expiration date

Annualinterest rate (%)
Dec. 31, 2009

CalyonJul. 20, 2007

Jul. 20, 2012

0.61

NAB (*1)

Oct. 15, 2007

Oct. 15, 2009-

MIZUHO

Oct. 29, 2007

Oct. 29, 2009-

MIZUHO

Oct. 30, 2007

Oct. 30, 2009-

SMBC, Tokyo (*2)

Sep. 12, 2009

Sep. 07, 2011

0.66

Morgan Stanley

May 26, 2009

May 29, 2012

5.68

UBS

Jun. 1, 2009Jun.

1, 2012

5.74

Morgan StanleyJun. 1, 2009Jun.

1, 2012

5.68

BNP PARIBAS

Jun. 05, 2009

Jun. 07, 2011

5.49

Woori Investment & Securities

Jul. 23, 2009

Jul. 15, 2011

3.68

HSBC

Aug. 27, 2009

Aug. 24, 2012

3.66(*1) Issued in Hong Kong Dollar (HKD) amounting to HKD 200 million(*2) Issued in Yen (JPY) amounting to JPY 10,000 million

094

2009

2008

₩        350,280 ₩        377,250(US$300,000)(US$300,000)
32,450(US$25,800)
62,875(US$50,000)
25,150(US$20,000)
126,282
139,389(US$108,155)(US$110,850)
58,380(US$50,000)
58,380(US$50,000)
58,380(US$50,000)
58,380(US$50,000)
58,380(US$50,000)
35,028(US$30,000)₩        803,490 ₩        637,114(US$688,155)(US$506,650)

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			4) Subordinateddebentures as of December 31, 2009 and 2008 were as follows (Unit: In thousands of U.S. Dollars, in millions of Won):
Classification

Issued date

Expiration date

Annual interest
rate (%)
Dec. 31, 2009

2009

2008

Debentures in Won:
General sale (*1)
General sale (*1)
General sale (*1)
Underwriting sale
General sale
Underwriting sale (*2)
General sale (*2)
General sale
General sale
General sale
General sale
General sale
General sale
General sale
General sale
General sale
General sale
General sale
General sale
General sale
General sale

May 28, 2001
Oct. 28, 2002
Mar. 28, 2003
Oct. 21, 2004
Nov. 28, 2004
Mar. 13, 2008
Mar. 28, 2008
Nov. 21, 2008
Nov. 24, 2008
Nov. 25, 2008
Nov. 26, 2008
Nov. 27, 2008
Nov. 28, 2008
Dec. 1, 2008
Dec. 19, 2008
Dec. 22, 2008
Dec. 23, 2008
Dec. 24, 2008
Dec. 26, 2008
Dec. 29, 2008
Dec. 30, 2008

Feb. 28, 2007
Jan. 28, 2008
Dec. 28, 2008
Oct. 21, 2014
Nov. 28, 2014
Mar. 13, 2018
Mar. 28, 2018
May 21, 2014
May 24, 2014
May 25, 2014
May 26, 2014
May 27, 2014
May 28, 2014
Jun. 1, 2014
Jun. 19, 2014
Jun. 22, 2014
Jun. 23, 2014
Jun. 24, 2014
Jun. 26, 2014
Jun. 29, 2014
Jun. 30, 2014

6.11
6.20
7.70
7.70
7.70
7.70
7.70
7.70
7.70
7.80
7.30
7.30
7.30
7.30
7.30
7.80

₩            223160763250,000
50,00060,86032,06027,57040,88037,651
78,92622,053250,000
34,06018,69023,94832,97993,487
46,836
1,101,146₩            38729016,432
170,000
80,000250,000
50,00060,86032,06027,57040,88037,651
78,92622,053250,000
34,06018,69023,94832,97993,487
46,836
1,367,109

Debentures in foreign currencies:
CITI group & HSBC (*2, *3)

Jun. 10, 2005

Jun. 10, 2015

5.00

355,735(US$304,672)₩      1,456,881

390,059(US$310,186)₩      1,757,168(*1) The balance amount was not redeemed at the maturity date, and after the maturity date, interest is not paid.
(*2) After 5 years from issuance date, the optional early redemption right can be exercised by the Bank.
(*3) The first underwriters

In addition, certain subordinated debentures are under swap contracts in order to hedge risks from changes in interest rates and exchange
rates. Gain on foreign currency transactions amounting to ₩6,438 million was accounted for in connection to such contracts for the year ended
December 31, 2009 [Note 17(1)].
5) As of December 31, 2009, Hybrid Tier 1 bond was as follows (Unit: In millions):
Classification (*1)
Hybrid debentures 2nd

Issued period (*2)(*3)

Mar. 31, 2009 ~ Mar. 31, 2039

Annual interest rate (%)
7.30

Balance₩                250,000(*1) After 5 years from issuance date, call option can be exercised under the authorization of the Governor of the Financial Supervisory Service.
(*2) After expiration, the bond can be extended under the same terms.
(*3) After 10 years from issuance date, the interest rate increases to 8.3 percent.

095

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

(7) Term			
structure of borrowings as of December 31, 2009 was as follows (Unit: In millions):
Classification

Borrowingin WonBorrowingin foreign
currencies

Debentures
in WonDue in less than one year
Due from one to two years
Due from two to three years
Due from three to five years
Due after five years₩     1,051,259
272,834
182,141
248,320
386,868₩     2,141,422₩     5,155,509
91,603
235,289₩     5,482,401₩     4,941,146
430,000
800,000
550,000₩     6,721,146

Debenturesin foreign
currencies₩               243,042
560,448355,735₩     1,159,225

Total₩    11,147,914
1,037,479
742,589
1,283,609
1,292,603₩    15,504,194

13. OTHER LIABILITIES:(1) Other liabilities as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification
Accounts payable
Accrued expenses
Unearned revenues
Guarantee money received
Accrued payable foreign exchange
Deferred income tax liabilities (see Note 21)
Derivatives instruments liabilities (see Note 17)
Due to trust accounts
Accrued severance benefits
Pension benefits payables
Less: Asset under management of pension benefits
Less: Funds converted to National Pension
Less: Due to retirement insurance
Liability reserve for acceptances and guarantees
Liability reserve for unused credit limit
Allowance for other liabilities
Sundry liabilities

2009₩              7,136,074

2008₩              5,341,267

633,018
74,279147,466
265,464
202,383
1,506,624
902,952
316,251
4,580(3,238)(597)(250,733)
81,115
168,950
143,630
1,733,934₩             13,062,152

965,113100,079
161,468
204,441
89,5224,561,680
965,746
291,933
4,524(2,925)(684)(228,630)
57,601
163,194
130,537
1,597,606₩             14,402,472(2) Accrued severance benefits
The changes in accrued severance benefits for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Beginning
Provision (*1)
Payment (*2)
Foreign currencies translation
Pension benefits payables
Assets under management of pension benefits
Funds converted to National Pension
Due to retirement insurance

2009₩                291,933

2008₩                263,806

59,347(34,537)(492)
316,251
4,580(3,238)(597)(250,733)₩                 66,263

44,978(18,179)
1,328
291,933
4,524(2,925)(684)(228,630)₩                 64,218(*1) The difference from severance benefits in the statements of income amounting to ₩379 million and ₩1,923 million for the years ended December 31, 2009 and2008, respectively, was provision on accounts payable of severance pension.
(*2) The payment of severance benefits amounting to ₩108 million and ₩143 million as of December 31, 2009 and 2008, respectively, was accounted as accounts
payable.

As of December 31, 2009, parts of severance benefits were contributed to pension funds of Samsung Life Insurance Co., Ltd.

096

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			
As of December
31, 2009, the assets under management of pension benefits were as follows (Unit: In millions):
Classification

Percentage (%)

Cash and due from banks
Securities

28.09
71.91
100.00(3) Liability reserve for acceptances and guarantee
1) Acceptances and guarantees as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Confirmed acceptances and guarantees in Won:
Payment guarantee for issuance of debentures
Payment guarantee for loans
Others20092008₩                  6,630
63,425
1,715,378
1,785,433₩                  4,478
93,214
741,618
839,310697,245
102,366
6,972,633
7,772,244

391,055
52,841
6,151,523
6,595,419

3,853,599
317,495
4,171,094
55,992₩             13,784,763

3,781,918
314,203
4,096,121
63,533₩             11,594,383

Confirmed acceptances and guarantees in foreign currencies:
Acceptances on letters of credit
Acceptances for letters of guarantee for importers
OthersUnconfirmed acceptances and guarantees:
Letters of credit
OthersBills endorsed (see Note 17)2) The classification of asset quality for acceptances and guarantees and liability reserve for acceptances and guarantees as of December 31,
2009 and 2008 were as follows (Unit: In millions):<2009>Classification

NormalPrecautionary Substandard Doubtful

Confirmed acceptances
Unconfirmed acceptances
Bills endorsed₩  9,519,396 ₩      16,132
4,153,686
12,172
55,992₩ 13,729,074 ₩      28,304

Estimated
loss

Total

Liability
reserve for
acceptancesandguarantees₩    14,682 ₩    6,420 ₩    1,047 ₩  9,557,677 ₩    71,677
2,906
2,208
122
4,171,094
8,962
55,992476₩    17,588 ₩    8,628 ₩    1,169 ₩ 13,784,763 ₩    81,115<2008>Classification

NormalPrecautionary Substandard Doubtful

Estimated
loss

Total

Liability
reserve for
acceptancesandguarantees

Confirmed acceptances
Unconfirmed acceptances
Bills endorsed₩  7,423,853 ₩       6,763 ₩        940 ₩    2,465 ₩      708 ₩  7,434,729 ₩    48,698
4,078,889
17,1362070
64,096,121
8,363
63,53363,533540₩ 11,566,275 ₩      23,899 ₩        960 ₩    2,535 ₩      714 ₩ 11,594,383 ₩    57,601

097

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			3) Acceptancesand guarantees, by industry, except for the portion of overseas branches as of December 31, 2009 and 2008 were as follows(Unit: In millions):<2009>
By industry

Amount₩              5,458,193

Manufacturing
Construction
Wholesale/retail
Science and technology service
Electricity, gas and water supply
OthersPercentage (%)
60.69
17.53
7.51
3.86
2.72
7.69
100.001,577,322
675,814347,609244,686
691,856
8,995,480
562,197₩              9,557,677

Confirmed acceptance and guarantees in overseas branches<2008>
By industry

Amount₩              3,855,445

Manufacturing
Construction
Wholesale/retail
Finance and insuranceElectricity, gas and water supply
OthersPercentage (%)
56.28
18.66
6.79
5.29
4.27
8.71
100.001,278,689
465,165
362,640
292,578596,281
6,850,798
583,931₩              7,434,729

Confirmed acceptance and guarantees in overseas branches

4) Confirmed acceptances and guarantees in foreign currencies, by country, as of December 31, 2009 and 2008 were as follows(Unit: In thousands of U.S. Dollars, in millions of Won):<2009>
By country

Confirmed acceptancesand guarantees
in foreign currencies (*)

Translation into Won

Korea
USA
FranceTaiwanUnited Kingdom
Others$₩              7,318,531$

6,268,012
94,952
79,37145,27945,274
123,7096,656,597

Percentage (%)

94.16
1.43
1.19
0.68
0.68
1.86
100.00110,866
92,67452,86852,862
144,443₩              7,772,244(*) Foreign currencies other than U.S. Dollars were converted into U.S. Dollars at the basic rates of exchange at the date of the statement of financial position.

<2008>
By country

Confirmed acceptancesand guarantees
in foreign currencies (*)

Translation into Won

Korea
USA
FranceUnited Kingdom
Germany
Others$₩              5,979,771$

4,755,284
106,869
75,12251,55346,559209,479
5,244,866

134,387
94,46664,82858,548263,419₩              6,595,419

Percentage (%)

90.67
2.04
1.43
0.98
0.89
3.99
100.00(*) Foreign currencies other than U.S. Dollars were converted into U.S. Dollars at the basic rates of exchange at the date of the statement of financial position.

098

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 20085) The 			percentage of liability reserve for acceptances and guarantees as of December 31, 2009, 2008 and 2007 was as follows(Unit: In millions):
Classification

2009

2008

2007

Acceptances and guarantees
Liability reserve
Percentage (%)₩            13,784,763₩             11,594,383₩             10,066,666

81,1150.59

57,6010.50

55,1790.55(4) Liability reserve for unused credit limit
The calculation of liability reserve for unused credit limit as of December 31, 2009 and 2008 was as follows (Unit: In millions):<2009>Classification

Limit (a)Balance (b)Allowance (c) =(a-b) x credit
conversion factor

Liability
reserve forunused credit limit (d)The percentage of liability reserve for acceptances andguarantees as of December
31, 2009, 2008
and 2007 was as follows₩        89,194₩    13,678,773₩     1,961,693₩     5,858,405
Card5)loans(*1)
In millions):
77,680,701
43,461,439
8,980,356
94,578Loans (Unit:
to enterprise
Loans to household
3,482,773
1,421,990
415,635
4,156
Loans to public and others
10,638
2,374
1,653
14
₩    94,852,885₩    46,847,496₩    15,256,049
187,942
Merchant Banking Account (*2)(18,992)₩       168,950

Liability reserve for unused credit limit(*1) Unused credit limit of merchant banking account was included.
(*2) It was included in other liabilities of merchant banking account [see Note 14(3)].

<2008>Classification

Limit (a)Balance (b)Card loans
Loans to enterprise (*1)
Loans to household
Loans to public and others₩    14,211,031
76,503,742
3,634,249
11,740₩    94,360,762₩     2,081,747
42,880,868
1,595,976
3,463₩    46,562,054

Allowance (c) =(a-b) x credit
conversion factor

Liability
reserve forunused credit limit (d)₩     6,064,418
9,544,473
410,0841,865₩    16,020,840₩        93,162
84,8074,101
16
182,086

Merchant Banking Account (*2)

(18,892)₩       163,194

Liability reserve for unused credit limit(*1) Unused credit limit of merchant banking account was included.
(*2) It was included in other liabilities of merchant banking account [see Note 14(3)].

(5) Allowance for other liabilities
Allowance for other liabilities as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification
Reserve for money-back point & yes-point
Reserve for litigation (see Note 17)
Reserve for employees’ accident (*1)
Compensation to customers related to Won & Yen swap (*2)
Provision for severance and early retirement benefits (*3)
Reserve for derivatives assets and others (*4, *5)
Others2009₩                 27,704

2008₩                 25,129

14,2681,700
12,894
82,865
4,199₩                143,630

9,017
2,047
15,962
16,46456,1535,765₩                130,537(*1) Provision was made for 6 suspense payments, which occurred in connection with employees’ illegal act such as embezzlement.
(*2) The Bank reversed the allowance that was reserved at the end of prior year because the Bank won administrative litigation at the first trial in June 2009.
(*3) The Bank reserved the provision for severance and early retirement benefits that is expected to be paid for voluntary retirees who have worked for more than 15
years and are more than 40 years old.
(*4) The Bank reserved the allowance for possible derivatives losses for currency options and others.
(*5) The Bank additionally reserved ₩8,348 million for the receivables of bond sold under repurchase agreements and others.

099

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			(6) Sundry
liabilities
Sundry liabilities as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification
Suspense receipt
Withholding taxes
Agency business accounts
AgencyCredit control deposits
Guarantee deposits for securities subscription
Domestic exchange settlements credits
Domestic remittance payable
Others2009₩                 22,468

2008₩                 32,955

28,433
92,940856,635
942
16,921
713,2561,817
522₩              1,733,934

36,921
90,848
798,615577
16,481
607,928
12,655626₩              1,597,606

14. MERCHANT BANKING ACCOUNT LIABILITIES:(1) Merchant banking accounts liabilities as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Deposits
Other liabilities

2009₩              1,277,149

2008₩              3,464,502

22,419₩              1,299,568

31,115₩              3,495,617

2009

2008

₩              1,069,234₩              3,265,838

207,915₩              1,277,149

198,664₩              3,464,502(2) Deposits as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification

Notes payable (*)
Due to CMA

Annualinterest rate (%)
Dec. 31, 2009
2.00~2.70
1.90~2.10(*) Notes payable matures within a maximum of one year from the date of issue and bears interest at variable rates according to market conditions and note terms.

(3) Other liabilities as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Accrued expenses
Unearned income
Liability reserve for unused credit limit [see Note 13(4)]2009₩                    695

2008₩                  1,716

2,732
18,992₩                 22,419

10,507
18,892₩                 31,115(4) Operating expenses of merchant banking accounts for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Interest expenses
Provision for possible loan losses
Transfer to reserve for unused credit limit

100

2009
₩                 45,594

2008₩                152,626

100₩                 45,694

5,323
2,051
₩                160,000Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			
15. SHAREHOLDERS’
EQUITY:(1) Capital stock
Capital stock as of December 31, 2009 and 2008 was as follows (Unit: in Won, shares):Classification

2009

2008

Shares authorized
Per share
Shares issued
Common stocks

1,000,000,000₩                   5,000
644,906,826₩      3,224,534 million

1,000,000,000₩                   5,000
644,906,826₩      3,224,534 million(2) Capital surplus
The amount of capital surplus as of December 31, 2009 and 2008 was transferred from stock option (accounted for as capital adjustment)
since it lapsed as it was not exercised.
(3) Capital adjustments
Changes in capital adjustments for the year ended December 31, 2009 were as follows (Unit: In millions):
Other capital adjustments

Beginning

Increase

Decrease (*)

Ending₩        (4,425)₩              -₩          4,425₩              -

(*) The Bank derecognized the negative capital adjustments through its retained earnings.

(4) Accumulated other comprehensive income
The changes in accumulated other comprehensive income for the year ended December 31, 2009 were as follows (Unit: In millions):
Classification

Beginning

Changes

Disposal

Deferredincome tax

EndingGain (loss) on valuation ofavailable-for-sale securities₩       310,784₩       764,090₩      (141,202)₩      (136,793)₩       796,879

Gain (loss) on valuation ofheld-to-maturity securities

(319)

220

168

(85)

(16)

Gain (loss) on valuation of
securities using the equity method

3,689

1,162

-

(256)

4,595

Gain (loss) on valuation of negative
securities using the equity method

(290)

359

-

(79)

(10)

435,337₩       749,201₩       765,831(4,140)₩      (145,174)911₩      (136,302)

432,108₩     1,233,556

Gain on revaluation of tangible assets(5) Statements of comprehensive income
Comprehensive income consists of all changes in equity during a period from transactions and other events except those resulting frominvestments by owners and distributions to owners. Comprehensive income for the years ended December 31, 2009 and 2008 was as follows(Unit: In millions):
Classification
Net income
Effect of exchange rate fluctuation and others
Effect of equity in earnings and others
Other comprehensive income (loss):
Gain (loss) on valuation of available-for-sale securities
Gain on valuation of held-to-maturity securities, net
Gain on valuation of securities using the equity method, net
Gain (loss) on valuation of negative securities using the equity method
Gain (loss) on revaluation of tangible assets
Less: Effect of income tax
Comprehensive income

2009₩              891,737

2008₩                782,618(4,170)-19,8201,233

622,888
388
1,162
359
(4,140)(136,302)₩             1,371,922(1,105,621)
92
4,729
(41)
558,124
201,903₩                462,857

101

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			(6) Appropriatedretained earnings
Appropriated retained earnings as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Legal reserve (*1)
Other reserves (*2)

2009₩                370,900

2008₩                292,600

53,291₩                424,191

59,218₩                351,818(*1) The Korean Banking Law requires a bank to appropriate at least 10 percent of net income after income tax to legal reserve, until such reserve equals 100 percent
of its paid-in capital. This reserve is not available for payment of cash dividends; however, it can be used to reduce deficit or be transferred to capital.
(*2) Relevant Japanese regulations require the Bank’s overseas branches located in Japan to appropriate a minimum of 10 percent of annual income after income tax
as a legal reserve, until such reserve equals ¥2,000 million. This reserve is not available for the payment of cash dividends and may be utilized upon liquidation of
the Japanese branches. In addition, Singapore and Hanoi branches’ statutory reserves are included in other statutory reserves.

16. SHARE-BASED PAYMENT:(1) Stock options
The details of the stock options as of December 31, 2009 were as follows (Unit: share, in Won):
Grant dateMar. 31, 2003 (*1)
Sep. 4, 2003 (*1)
Feb. 13, 2004
Mar. 7, 2005
Jun. 29, 2005
Mar. 7, 2006
Aug. 1, 2006
Mar. 8, 2007
Mar. 29, 2007
Aug. 10, 2007
Mar. 11, 2008
Aug. 1, 2008
Mar. 12, 2009
Mar. 31, 2009 (*3)
Mar. 31, 2009
Aug. 4, 2009

Stock option
grantedStock option
expiredto date (*2)

Stock option
exercised

Stock option
outstanding

101,401
53,3692,390,000
1,355,000
200,000
400,000
200,000
1,090,000
630,000
380,000
510,000
180,000
490,000
900,000
85,000470,000
9,434,770(21,348)(53,369)(962,490)(344,895)(63,230)(112,690)(42,000)(543,900)(340,390)(175,990)(300,130)(105,486)(28,666)(60,000)(8,500)(32,833)(3,195,917)(80,053)(1,427,510)(748,805)(92,480)(31,600)(2,380,448)

261,300
44,290287,310
126,400
546,100
289,610204,010
209,870
74,514
461,334
840,000
76,500437,167
3,858,405

Exerciseprice₩     13,266
15,533
7,000
8,800
9,000
13,30011,90013,90014,50013,90013,00013,500
5,800
7,300
6,300
10,900Exercise period

Apr. 1, 2006 ~ Mar. 31, 2009
Sep. 5, 2006 ~ Sep. 4, 2009
Feb. 14, 2006 ~ Feb. 13, 2009
Mar. 8, 2007 ~ Mar. 7, 2010
Jun. 30, 2007 ~ Jun. 29, 2010
Mar. 8, 2008 ~ Mar. 7, 2011
Aug. 2, 2008 ~ Aug. 1, 2011
Mar. 9, 2009 ~ Mar. 8, 2012
Mar. 30, 2009 ~ Mar. 29, 2012
Aug. 11, 2009 ~ Aug. 10, 2012
Mar. 12, 2010 ~ Mar. 11, 2013
Aug. 2, 2010 ~ Aug. 1, 2013
Mar. 13, 2011 ~ Mar. 12, 2016
Apr. 1, 2011 ~ Mar. 31, 2016
Apr. 1, 2011 ~ Mar. 31, 2016
Aug. 5, 2011 ~ Aug. 4, 2016(*1) Granted from KEBCS prior to the merger with the Bank. Exercise price per share and the shares outstanding were adjusted based on the merger ratio.
(*2) Actual number of stock options that have expired as a result of retirement or business performance.
The expected number of stock options that will expire as a result of business performance and others is considered together with the actual number of expired
stock options when calculating the stock compensation cost.
(*3) The exercise price was adjusted from ₩6,300 to ₩7,300 in accordance with the resolution of the board of directors.

When the stock options are exercised, the Bank has the option to settle either through issuance of new shares or treasury stock, or throughpayment of cash equivalent to the difference between the market price and the exercise price. The number of exercisable stock option isdetermined in accordance with the management performance and the calculation criteria of the number of exercisable shares.
The intrinsic value of compensation cost granted before December 31, 2006 is the difference between the market price and the exercise pricepursuant to Interpretations on SKAS No. 39-35 - Accounting for Stock Options , and the fair value of compensation cost granted after January 1,
2007, is estimated by option pricing models pursuant to SKAS No. 22 - Share-Based Payment . As a result, the pricing models of stock option of
the Bank are categorized as the intrinsic value pricing model and the fair value pricing model. The details of these models as of December 31,
2009 were as follows (Unit: In Won):

102

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			
pricing model><Intrinsic value
Grant dateMarket price (*)

Exercise price

Intrinsic value

Mar. 7, 2005
Jun. 29, 2005
Mar. 7, 2006
Aug. 1, 2006₩                 14,222₩                 8,800
9,000
13,30011,900₩                 5,422
5,222
922
2,322

14,222
14,222
14,222(*) Compensation price is measured as average price among the averages for two months, for a month and for a week’s stock prices in accordance with the Bank’s
pricing method.

<Fair value pricing model: Black-Scholes Model>
Grant date

Risk freerate (%)

Mar. 8, 2007
Mar. 29, 2007
Aug. 10, 2007
Mar. 11, 2008
Aug. 1, 2008
Mar. 12, 2009
Mar. 31, 2009
Mar. 31, 2009
Aug. 4, 2009

Expected
exerciseperiod(year) (*1)
3.60
3.63
3.80
4.07
4.26
4.95
4.95
4.95
4.98

Volatility oftheunderlying
stock price(%) (*2)
4.09
4.09
4.09
4.09
4.09
6.09
6.09
6.09
6.09

Expected
dividend
rate (%) (*3)

68.22
66.71
63.89
56.72
53.00
43.68
41.77
41.77
42.43

Exercised
price

Fair value

4.86 ₩      13,900
4.86
14,5004.86
13,9004.86
13,0004.86
13,500
4.86
5,800
4.86
7,300
4.86
6,300
4.86
10,900₩      4,205
3,989
4,416
4,703
4,503
7,391
6,577
7,054
5,252

(*1) The expected exercise period is measured based on the possibility of exercise of the right in the past.
(*2) The volatility of the underlying stock price is measured based on the data in the past.
(*3) The expected dividend rate is measured based on the average in 2006, 2007 and 2008.

The changes in long-term accrued expenses recognized for stock option for the year ended December 31, 2009 were as follows (Unit: In millions):
Beginningbalance₩           319

Long-term accrued expenses

Increase

Decrease (*)

Ending balance₩        12,798₩        (2,091)₩        11,026(*) The decrease amounting to ₩60 million was recognized for accounts payable.

(2) The equity linked special incentive (Rose bonus)
The Bank granted the equity linked special incentive to employees for the purpose of motivation to improve long-term performance. The
equity linked special incentive as of December 31, 2009 was as follows (Unit: share, in Won):
Grant dateJul. 15, 2005
Dec. 21, 2006
Dec. 12, 2007
Dec. 11, 2009

Stock option
grantedStock option
expired todate

Stock option
exercised (*)

Stock option
outstanding

3,024,400
1,496,510
614,800
1,353,240
6,488,950(55,206)(32,048)(21,304)(1,941)(110,499)(2,895,694)(1,156,432)(25,136)(69)(4,077,331)

73,500308,030
568,360
1,351,230
2,301,120

Exerciseprice₩            -Exercise period

Jul. 15, 2007 ~ Jul. 14, 2010
Dec. 21, 2008 ~ Dec. 20, 2011
Dec. 12, 2009 ~ Dec. 11, 2012
Dec. 11, 2009 ~ Dec. 10, 2014(*) It can be exercised if an employee resigned within two years except for death, retirement age, position change and other cases imputable to an employee.

The equity linked special incentive is cash settlement transaction. It can be exercised from two years after grant date for three years.
The intrinsic value of “Rose bonus” granted before December 31, 2006 is the difference between the market price and the exercise price pursuant
to Interpretations on SKAS No. 39-35 - Accounting for Stock Options , and the fair value of “Rose bonus” granted after January 1, 2007, is estimatedby option pricing models pursuant to SKAS No. 22 - Share-Based Payment . As a result, the pricing models of stock option of the Bank are
categorized as the intrinsic value pricing model and the fair value pricing model. The details of these models as of December 31, 2009 were as
follows (Unit: In Won):

103

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			
pricing model><Intrinsic value
Grant date

Rose price (*)

Exercise price

Intrinsic value

Jul. 15, 2005
Dec. 21, 2006₩                 15,800₩                      -₩                15,800
15,80015,800(*) The Rose price is measured as weighted average price (7:5) of the average stock price for previous five days and net asset value of most recent quarterly settlement
as of the last day of the previous month of December 31, 2009.

<Fair value pricing model – Binomial Model>
Grant date

Risk freerate (%)

Dec. 12, 2007 (*4)
Dec. 11, 2009

Expected
exerciseperiod (year)

3.92

Volatility oftheunderlying
stock
price (%) (*1)

22Expected
dividend rate(%) (*2)

57.61

Fair value (*3)

Exercisedprice- ₩            - ₩      15,800
16,000(*1) The volatility of the underlying stock price is measured based on the volatility in the past.
(*2) The expected dividend rate is zero, since a grantee of “Rose bonus” has the right to be provided with dividends from grant date to excise date.
(*3) If the option price was “zero” without any other condition, the fair value and the intrinsic value should be the same. However, since Rose Price is calculated using
the upper and lowest limit, they are not consistent.
(*4) Risk free rate and estimated stock price variability would be “zero” with expiration. Therefore, the Bank estimated the intrinsic value as the fair value.

The changes in long-term accrued expenses recognized for “Rose bonus” for the year ended December 31, 2009 were as follows(Unit: In millions):
Beginningbalance₩        19,153

Long-term accrued expenses

Increase

Decrease

Ending balance₩          9,748₩       (13,300)₩        15,601

17. CONTINGENCIES AND MAJOR CONTRACTS:(1) Derivative Instruments
The notional amounts outstanding for derivative contracts as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Type (*)

2009
Trading

Currency:
Currency forwards

2008

Hedge

Total

Trading

Hedge

Total

₩ 38,504,715 ₩            - ₩ 38,504,715 ₩ 36,046,100 ₩            - ₩ 36,046,100

Currency futures

1,612,152-

1,612,152

1,197,281-

1,197,281

Currency swaps
Currency options purchased
Currency options sold

8,323,470
2,372,032
2,054,884
52,867,253-

8,323,470
2,372,032
2,054,884
52,867,253

10,447,110
5,598,417
5,931,865
59,220,773-

10,447,110
5,598,417
5,931,865
59,220,773

1,437,266
50,652,501
52,089,767

433,180
433,180

1,437,266
51,085,681
52,522,947

3,232,411
36,980,167
40,212,578

578,450
578,450

3,232,411
37,558,617
40,791,028

6,898
2,450
33,741
43,089

-

6,898
2,450
33,741
43,0893,893
48,15552,048-

3,893
48,15552,048Interest rate:
Interest rate futures
Interest rate swaps
Index:
Stock index futures
Stock index option purchased
Stock index option sold
Credit:Credit derivatives purchased
Credit derivatives sold

35,00035,00033,48433,48433,48433,48435,00035,000₩105,033,593 ₩    433,180 ₩105,466,773 ₩ 99,520,399 ₩    578,450 ₩100,098,849(*) For transaction between Won and foreign currencies, unsettled amount of transaction is presented using the basic foreign exchange rate based on the contract
amount in foreign currencies. For transaction between foreign currencies and foreign currencies, unsettled amount is presented using the basic foreign exchange
rate based on foreign currencies purchased at the date of the statement of financial position.

104

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			The detailsof derivatives as of December 31, 2009 and the valuation of derivatives for the year ended December 31, 2009 were as follows(Unit: In millions):
Type

Statement of income
Trading

Currency:
Currency forwards
Currency swaps
Currency options
purchased
Currency options
soldInterest:
Interest rate swaps
Index:
Stock index option
purchased
Stock index optionsoldCredit:Credit derivatives
soldHedging

Statement of financial
position
AssetsLiabilities

Total

Gain onvaluation

Loss onvaluation

Gain onvaluation

Loss onvaluation₩ 415,888
349,525₩   445,320 ₩          - ₩          162,319-

Gain onvaluation

Loss onvaluation₩  415,888
349,525₩  445,320 ₩   868,186 ₩   362,642
162,319
327,192
638,964

11,75344,624--

11,75344,624

98,345-27,051

4,757

-

-

27,051

4,757-

56,226804,217657,020--804,217657,020

1,293,723

1,057,832

369,147

305,586

2,299

7,246

371,446

312,832

305,452

433,280

660

-

-

-

660

-

788

-

176

4,231

-

-

176

4,231

-

15,512

836

4,231

-

-

836

4,231

788

15,512

25

-

-

-

25

-

25

-

₩1,174,225₩   966,837₩     2,299₩     7,246 ₩ 1,176,524 ₩   974,083 ₩ 1,599,988 ₩ 1,506,624

The Bank uses various derivative instruments for its trading activities, including interest rate and foreign exchange swaps, futures, forwards andoptions, to manage the interest rate characteristics of certain assets or liabilities and to economically hedge against the effects of fluctuations ininterest rates or foreign exchange rates.
The Bank holds derivative instruments accounted for as fair value hedges applied to securities and debentures. The Bank recognized ₩1,904
million of losses on valuation of derivatives of securities and ₩6,438 million of gains on valuation of derivatives of debentures [see Note 12(6)]for the year ended December 31, 2009. In addition, the interest rate swap covers the fair value changes of the hedged items resulted from thefluctuation in interest rate.

105

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			The detailsof derivatives as of December 31, 2008 and the valuation of derivatives for the year ended December 31, 2008 were as follows (Unit: In millions):
Type

Statement of income
Trading

Currency:
Currency forwards
Currency swaps

Hedging

Statement of financial
position
AssetsLiabilities

Total

Gain onvaluation

Loss onvaluation

Gain onvaluation

Loss onvaluation

Gain onvaluation

Loss onvaluation₩2,751,439
539,639₩ 1,747,945 ₩          - ₩          - ₩ 2,751,439 ₩ 1,747,945 ₩ 2,775,886 ₩ 1,755,534
1,420,104
539,639
1,420,104522,685
1,367,230

Currency options
purchased

648,772

22,393--648,772

22,393

761,153-

Currency options
sold25,071

484,396--

25,071

484,396-624,508

3,964,921

3,674,838--

3,964,921

3,674,838

4,059,724

3,747,272

Interest:
Interest rate swaps
Index:

646,709816,619

12,3287,818

659,037

824,437

612,650

802,683

Stock index option
purchased

-

-

-

-

-

-

-

-

Stock index option
sold

7,999

1,980

-

-

7,999

1,980

-

11,725

7,999

1,980

-

-

7,999

1,980

-

11,725

1,556

-

-

-

1,556

-

1,800

-

Credit:Credit derivatives
sold

1,556
₩4,621,185₩ 4,493,437 ₩    12,328

1,556
1,800
₩     7,818 ₩ 4,633,513 ₩ 4,501,255 ₩ 4,674,174 ₩ 4,561,680

The Bank holds derivative instruments accounted for as fair value hedges applied to securities and debentures. The Bank recognized ₩7,852
million of gains on valuation of derivatives of securities and ₩12,328 million of losses on valuation of derivatives of debentures for the year ended
December 31, 2008. In addition, the interest rate swap covers the fair value changes of the hedged items resulted from the fluctuation in interest
rate and foreign exchange rate.
(2) The Bank holds written-off loans, of which the claim for borrowers and guarantors have not been terminated, amounting to ₩1,683,663
million and ₩1,416,543 million as of December 31, 2009 and 2008, respectively.
(3) Endorsed notes with collateral amounted to ₩55,992 million and ₩63,533 million as of December 31, 2009 and 2008, respectively. Endorsed
notes without collateral held at the merchant banking account amount to ₩7,467,939 million and ₩9,450,454 million as of December 31,
2009 and 2008, respectively.
(4) The Bank is obliged to repurchase some of the loans previously sold to the Korea Asset Management Corporation (“KAMCO”) under certain
conditions including the following:- When it is considered impossible to collect the loans and interest due to delay in repayment of loans and interest over six months.
- When it is considered impossible to collect the loans and interest due to the abrogation of court-receivership process and the cancellation ofmediation.
As of December 31, 2009, KAMCO and other loan purchasers may exercise the resale option for loans amounting to ₩1,459 million. An additionalloss or profit may occur, depending on the loan classification on valuation of loans or final arrangement on loans when KAMCO and other loanpurchasers exercise their repurchase agreement.
(5) Loans sold to asset backed securitization (ABS) (Unit: In millions)Classification
KEB 16th Securitization Specialty Co., Ltd.
KEB 17th Securitization Specialty Co., Ltd.

(*2)

Date

Value of loans

Sale priceJun. 24, 2008₩       105,206₩        77,000

Subordinateddebentures (*1)₩              -Dec. 28, 2009

110,402

79,00027,915(*1) The subordinated debentures are included in sale price.
(*2) The loss on disposal of loan of ₩21,779 million was recognized (see Note 5).

106Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			(6) The Bank
has pending litigation as plaintiff or defendant in various legal actions arising from the normal course of operation. The aggregate
amounts of these claims brought by and against the Bank were approximately ₩283,601 million (1,844 cases) and ₩453,604 million (144cases), respectively, as of December 31, 2009. The Bank recognized ₩14,268 million of provisions related to these lawsuits [see Note 13(5)].
The list of major cases of on-going litigation related to contingency was as follows:
Type

Plaintiff/defendant

Sued

Saehan Merchant Banking
Corporation and others

Sued

Lim Asia Multi-Strategy
fund Inc.

Amount₩         10,679
7,996

Content

Progress

Indemnity

Winning the case in the first andreceivables claim
Money collectedclaim

second trial, pending in the third trial
Losing the case in the first trial,
pending in the second trial

In addition, Olympus Capital KEB Cards Ltd. and others (“the applicants”) ask for arbitration of compensation of US$300 million against the Bankand 5 companies related to Lone Star (“the Banks”) through the Court of International Arbitration. The applicants argue that the Banks violated theobligation of shareholders’ contract (on December 1, 1999) so the contract of shares transference (on November 20, 2003) is invalid. The result of
the arbitration is presently unpredictable.
The Bank believes that the outcome of these matters will not have a material impact to the Bank’s financial position or operations.
(7) Loans to companies under workout program
The loans to companies under court receivership or workout program amounted to ₩2,585,693 million as of December 31, 2009. Actual loss
on these loans can be different from the Bank’s estimation.
(8) Debt to equity swap of Hynix Semiconductor Inc.
The Bank’s outstanding loans (including acceptances and guarantees) and available-for-sale securities convertible to equity securities withrespect to Hynix Semiconductor Inc. (“Hynix”) as of December 31, 2009 amounted to ₩465,945 million and ₩789,147 million, respectively.
As of December 31, 2009, the Bank’s loans for Hynix are classified as normal. Joint control procedure for Hynix Semiconductor Inc. wascompleted on July 12, 2005. Also, the Bank’s 37,742 thousand shares of Hynix are restricted for sale until completion of M&A and the gain on
valuation of available-for-sale securities amounting to ₩423,836 million is accounted as other comprehensive income as of December 31,
2009.
(9) Debt to equity swap of Hyundai Engineering & Construction Co., Ltd.
As of December 31, 2009, the Bank has loans (including acceptances and guarantees) of ₩611,499 million and available-for-sale securitiesof ₩633,010 million with respect to Hyundai Engineering & Construction Co., Ltd. and the Bank’s loans for Hyundai Engineering &Construction Co., Ltd. are classified as normal. The Bank has 9,715 thousand shares of Hyundai Engineering & Construction Co., Ltd., which
are restricted for sale until completion of M&A of Hyundai Engineering & Construction Co., Ltd. With regards to these securities, the gain on
valuation of available-for-sale securities amounting to ₩355,078 million is accounted as other comprehensive income as of December 31,
2009.
(10) Commitments related to credit card business
The Bank has entered into trademark license (membership) agreements with VISA Worldwide Pte. Limited in 2008, of which the rights havebeen transferred from VISA International Service Association and Master Card International Incorporated in 1993, and JCB International
Service Association in 1997. The Bank pays and receives certain amounts of fees and commissions in connection to the income and expense
incurred pertaining to these agreements.
The Bank has entered into credit card affinity agreements with KDB Capital, and the Bank allocates the fee income related to the credit cardaffinities at a fixed rate.
(11) Indemnification obligations regarding the share subscription agreement by and between the Bank and the LSF-KEB Holdings, SCA
The Bank shall indemnify LSF-KEB Holdings, SCA for all purchaser losses (*1) and pay for damages resulting from any breach by the Bank of
any of the Bank’s covenants (*2) in the Share Subscription Agreement. The Bank’s indemnification obligations are as follows:
Duration of indemnification obligations are as follows:- Purchaser losses, excluding those mentioned below, may be indemnified until 18 months from the Closing Date (*3).
- Purchaser losses arising as a result of fraud or intentional misrepresentation by the Bank may be indemnified at the Closing Date andcontinue to be in full force and effective until three years from the Closing Date.
- Purchaser losses related to tax matters may be indemnified at the Closing Date and continue to be in full force effective until five years fromthe Closing Date.

107

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

The Bank’s			
indemnification obligations expire after the duration periods stated above. However, if the Bank receives written claims from Lone Star
before the expiration of the durations, regardless of the durations stated above, the Bank’s indemnification obligations continue to be in force andeffective until the related matter are brought to satisfactory settlement.
The Bank has no indemnification obligation for claims less than ₩100 million. The Bank’s indemnification obligation applies to claims exceeding₩15,000 million cumulative, and only losses exceeding ₩10,000 million may be indemnified.
The total amount of indemnification obligations cannot exceed the LSF-KEB Holdings, SCA’s investments in the Bank.
(*1) Purchase losses means the amount of any and all losses, costs, liabilities, damages, judgments, settlements and expenses that arise out of any breach by
the Bank of any of the Bank’s representations and warranties contained in the Share Subscription Agreement or any breach by the Bank of any of the Bank’s
covenants or agreements in the Share Subscription Agreement.
(*2) Covenant means the conditions set forth in the Share Subscription Agreement that the Bank shall comply with the share subscription until the Closing Date.
(*3) Closing Date means the date that the new shares come into effect, and falls on October 31, 2003.

18. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES:
Major monetary assets and liabilities denominated in foreign currencies as of December 31, 2009 and 2008 were as follows(Unit: In thousands of U.S. Dollars, in millions of Won):
Classification

2009
USD
equivalent (*)

Translation
into Won

2008
USD
equivalent (*)

Translation
into Won$

329,355₩       384,555$

344,647₩       433,393

1,430,021

1,669,692

3,271,195

4,113,528

Assets:Cash and due from bank:Foreign currencies
Due from banks in foreign currencies
Securities:
Trading securities

39,95546,65038,03947,834

Available-for-sale securities

709,147

828,000

991,087

1,246,292

Held-to-maturity securities

170,205

198,731

402,114505,659

Securities using the equity method

442,809517,023

306,240

385,098

Call loans

1,374,137

1,604,443

1,262,083

1,587,069

Domestic import usance bill

2,240,651

2,616,184

2,184,437

2,746,929

Loans:

Credit card receivables
Bills bought in foreign currencies
Bills bought in Won
Loans in foreign currencies

3,623

4,230

3,134

3,941

3,422,652

3,996,289

3,538,032

4,449,075

54,77063,95038,772

48,755

6,751,752

7,883,346

7,191,051

9,042,746
40,692

Factoring receivables

41,79648,80032,359

Private placed bonds

87,000101,581

8,559

10,764(Reserve for bad debts)(69,507)(46,210)

17,028,366(81,156)₩    19,882,318$

19,565,539(58,109)₩    24,603,666$$
Liabilities:
Deposits:
Demand deposits in foreign currencies$

4,339,343₩     5,066,617

3,697,305₩     4,649,361

7,271,574

8,490,290

6,425,777

8,080,415

Borrowings in foreign currencies

4,695,444

5,482,401

5,563,893

6,996,595

Call money in foreign currencies

1,189,282

1,388,605

2,178,212

2,739,101

Debentures in foreign currencies

992,827

1,159,225

816,837

1,027,173

227,358

265,464

162,578

204,441

3,923

4,580

3,598

4,524

(2,773)(3,238)₩    21,853,944(2,326)(2,925)₩    23,698,685

Savings deposits in foreign currencies
Borrowings:

Other liabilities:
Accrued expenses in foreign currencies
Pension benefit payable
Asset under management of pension benefits$

18,716,978$18,845,874(*) Foreign currencies other than U.S. Dollars were converted into U.S. Dollars at the basic rates of exchange at the date of the statement of financial position.

108

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			
19. OPERATINGREVENUE AND EXPENSES:(1) Interest revenue and expenses
The average balance of the interest bearing assets and liabilities, and the related interest revenue and expenses as of and for the years ended
December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>Classification
Interest revenue:
Due from banks (*1)
Securities (*2)
LoansInterest expense:
Deposits
Borrowings

Average balance

Interest
revenue/expense

Rate ofinterest (%)₩             4,070,307
11,882,350
64,263,057₩            80,215,714₩                 87,311
476,298
3,896,372₩              4,459,981

2.15
4.01
6.06
5.56

₩            53,620,633
21,462,963₩            75,083,596₩              1,545,130
848,822₩              2,393,952

2.88
3.95
3.19

(*1) Excluding the average balance of reserve deposits with BOK(*2) Excluding the average balance of stocks and beneficiary certificates<2008>Classification
Interest revenue:
Due from banks (*1)
Securities (*2)
LoansInterest expense:
Deposits
Borrowings

Average balance

Interest
revenue/expense

Rate ofinterest (%)₩             3,093,929
8,295,368
63,095,756₩            74,485,053₩                121,688
459,844
4,517,574₩              5,099,106

3.93
5.54
7.16
6.85

₩            47,328,888
22,985,511₩            70,314,399₩              1,780,589
1,018,046₩              2,798,635

3.76
4.43
3.98

(*1) Excluding the average balance of reserve deposits with BOK(*2) Excluding the average balance of stocks and beneficiary certificates(2) Gain and loss on trading and valuation of derivatives
Details of gain and loss on trading and valuation of derivatives for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Gain:
Gain on trading of derivatives
Gain on valuation of derivatives
Loss:
Loss on trading of derivatives
Loss on valuation of derivatives

2009

2008

₩              6,038,691
1,182,962₩              7,221,653₩              9,345,319
4,641,365₩             13,986,684₩              6,893,369
975,987₩              7,869,356₩              9,131,538
4,513,583₩             13,645,121(3) Commission income and expenses
Details of commission income and expenses for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Commission income:Commission received
Guarantee fees received
Other commission received
Commission expenses:
Commission paid
Other commission paid

2009

2008

₩                421,096
45,425914₩                467,435₩                467,504
32,52286₩                500,112

81,421
197,181₩                278,602

69,989170,995₩                240,984109Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			(4) Dividend
incomeDetails of dividend income for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Dividend income from trading securities
Dividend income from available-for-sale securities

2009₩                      9314,110₩                 14,203

2008₩                   1,111
74,068₩                  75,179(5) Other operating revenue and expenses
Details of other operating revenue and expenses for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Other operating revenue:
Profit on operating trust accountReversal of unused credit limit
Operating income of merchant banking accounts
OthersOther operating expenses:
Fund contributions
Provision for reserve for guarantees
Provision for unused credit limit
Provision for other liabilities
Operating expenses of merchant banking accounts

2009

2008

₩                 30,636
111,080₩                141,716₩₩                161,026
23,793
6,046
43,97545,694₩                280,534₩                 141,956
1,698
37,778160,000₩                 341,432

    35,299
17,220207,83359₩                 260,411(6) General and administrative expenses
General and administrative expenses for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Salaries (see Note 16)
Expenses for fringe benefits
Retirement allowances (see Note 13)
Honorary retirement
Operating expense
Depreciation (see Note 8)
Amortization (see Note 9)
Taxes
RentalEntertainment
Advertising2009₩                538,986
163,005
59,726
66,882
193,20982,91232,317
38,23177,015
8,888
22,230₩              1,283,401

2008₩                511,979
148,993
46,901
3,534
190,004
88,37731,044
47,12472,926
12,83038,530₩              1,192,242

20. NON-OPERATING INCOME AND EXPENSES:
Non-operating income and expenses for the years ended December 31, 2009 and 2008 consisted of (In millions):
Classification
Non-operating income:Gain on disposal of tangible assets
Rental income
Gain on securities using the equity method
Others2009₩₩
Non-operating expenses:
Loss on disposal of tangible assets
Loss on securities using the equity method
Loss on impairment of tangible assets
Others

₩

₩

110

2008
    2,662
2,336
55,72042,661
    103,379
496
6,304
28,683
    35,483
   

₩

₩
₩

₩

    198
2,367
58,207
63,778
    124,550
    1,883
27,85825,34655,803
    110,890

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			
21. INCOME
TAX EXPENSE (BENEFITS):(1) The components of income tax expense (benefits) for the years ended December 31, 2009 and 2008 were summarized as follows(Unit: In millions):
Classification
Income tax currently payable
Change in deferred taxes due to temporary differences (*)
Income taxes directly applied to shareholders’ equity
Income tax expense in overseas branch

2009
₩

₩
(*)The ending balance of deferred income tax liabilities due totemporary differences
The beginning balance of deferred income tax liabilities due totemporary differences
Change in defferred taxes due to temporary differences₩

    (110,341)
112,861(136,302)
25,176
    (108,606)

2008
₩

₩

    228,994(75,430)
202,853
28,455
    384,872

202,383

89,522

89,522

164,952

    112,861₩

    (75,430)(2) The income tax on income before income tax and reconciling items for the years ended December 31, 2009 and 2008 were as follows(Units: In millions):
Classification
Income before income tax (①)
Burden of taxation (Current applicable rate: 24.2%, previous applicable rate: 27.5%)
Reconciliation items:
Non-taxable income (₩8,126 million in 2009 and ₩43,919 million in 2008)
Non deducted expense (₩10,559 million in 2009 and ₩28,616 million in 2008)
Tax deduction
Additional payment (refund) of income tax
Difference due to tax rate
Income tax expense in overseas branch
Sum of reconciliation items
Income tax expense (benefits) (②)
Effective tax rate (②÷①) (*)

2009
₩

₩

    783,131
189,494(1,966)
2,555(17,827)(298,392)(7,646)25,176(298,100)
    (108,606)
-

2008
₩

₩

    1,167,490
321,047(12,077)
7,869(8,840)(4,299)52,71728,45563,825
    384,872
32.97%(*) Effective tax rate for the year ended December 31, 2009 is not calculated since the Bank incurred income tax benefits.

111

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			(3) Changes
in temporary differences for the year ended December 31, 2009, and deferred income tax assets (liabilities) as of December 31,
2009 were as follows (Unit: In millions):
Deferred income tax assets (liabilities) (*2)
Beginning Decrease
Increase
Endingbalance (*1)
balance

Taxable (deductible) temporary differences
Beginning Decrease
Increase
Endingbalancebalance (*5)
(Deductible temporary
differences)
Accrued income
Gains or losses related toderivatives
Dividend receivables from SPC
Gains or losses on valuationof trading securities
Gains or losses on valuation ofheld- to-maturity Securities
Allowance for other liability (*3)
Liability reserve forguarantees
Deferred loan organization
fees and costs
Compensation expense forstock option
Long term accrued
expenses
Loss on revaluation of
tangible assets
Others₩  (82,047) ₩  (82,047) ₩   (7,194) ₩   (7,194) ₩  (19,855) ₩  (19,855) ₩   (1,741) ₩   (1,741)(116,840)(116,840)(123,690)(123,690)(41,138)(28,275)(16,665)(29,528)(1,283)(1,283)

-

-

(310)

(310)

-

-

(8,353)(11,342)(72,004)(69,015)(1,978)(2,745)(16,224)(15,457)(15,417)(15,108)

(501)

(810)

(3,515)(3,656)

(351)

(210)

312,623

312,622331,572

331,572

68,34868,34872,51772,51757,601

57,601

81,115

81,115

12,672

12,672

17,845

17,84544,27825,840-18,438

9,741

6,253

974

4,462

319

319

11,026

11,026

70

70

2,426

2,426

19,152

19,152

15,601

15,601

4,213

4,213

3,432

3,432

25,346

178

71

25,239

5,576

43

20

5,553

425,707

25,017

12,135412,825

94,526

6,054

3,236

91,708661,086

214,110248,131

695,107

128,350

42,812

65,469151,007(398,680)(398,680)(1,021,568)(1,021,568)(87,896)(87,896)(224,690)(224,690)

Loss on valuation of heldto-maturity securities

409

409

21

21

90

90

5

5

Gain on valuation of
securities using the equity
method(4,728)(4,728)(5,891)(5,891)(1,041)(1,041)(1,296)(1,296)

Loss on valuation of
securities using the equity
method

371

371

12

12

82

82

3

3

(558,124)(558,124)(553,984)(553,984)(122,787)(122,787)(121,876)(121,876)(960,752)(960,752)(1,581,410)(1,581,410)(211,552)(211,552)(347,854)(347,854)(Accumulated othercomprehensive income) (*4)
Gain on valuation ofavailable-for-salesecurities

Gain on revaluation of
tangible assets(Capital surplus due to using
equity method) (*4)
Other capital surplus(25,163)(25,163)(5,536)(5,536)₩ (324,829) ₩ (746,642) ₩ (1,333,279) ₩ (911,466) ₩  (88,738) ₩ (168,740) ₩ (282,385) ₩ (202,383)(*1) The difference of retention amounting to ₩3,565 million (₩784 million of the effect of deferred income tax) in the final income tax return for December 31, 2008
was adjusted.
(*2) T he tax rate used for calculating deferred income tax assets and liabilities is expected tax rate applied to the period for which temporary differences are reversed
based on settled tax rate at the date of the statement of financial position (24.2% in 2009 and 22% in or after 2010).
(*3) T he allowance for other liabilities recognized due to collusion on foreign exchange commission amounting to ₩1,949 million was excluded from expense and will
not be able to be deducted from future’s taxable income because it was reported as permanent difference. The Bank didn’t recognize it as deferred income tax
assets as it fails to meet requirement of deferred tax assets recognition.
(*4) The deferred income tax assets and liabilities based on accumulated other comprehensive income are added or deducted directly from accumulated othercomprehensive income.
(*5) The estimated period on realization of the temporary differences are as follows (Unit: In millions):112Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			(Deductible temporary differences)
Accrued income
Gains or losses related to derivatives
Dividend receivable from SPC
Gains or losses on valuation of trading securities
Gains or losses on valuation of held-to-maturity securities
Allowance for other liability
Liability reserve for guarantees
Deferred loan organization fees and costs
Compensation expense for stock option
Long term accrued expenses
Loss on revaluation of tangible assets
Others(Accumulated other comprehensive income)Gain on valuation of available-for-sale securities
Loss on valuation of held-to-maturity securities
Gain on valuation of securities using the equity method
Loss on valuation of securities using the equity method
Gain on revaluation of tangible assets(Capital surplus due to using equity method)
Other capital surplus

Ending Balance

20092010 or after₩            (7,194)(123,690)(69,015)(810)
331,572
81,115
18,43811,026
15,601
25,239412,825
695,107₩            (7,194)(105,271)(12,443)(1,452)
18,43840,322(67,600)₩                   (18,419)(56,572)642
331,572
81,115
11,026
15,601
25,239372,503762,707(1,021,568)
21(5,891)
12(553,984)(1,581,410)

2,513
19
2,532

(1,024,081)
2(5,891)
12(553,984)(1,583,942)(25,163)₩         (911,466)₩           (65,068)(25,163)₩          (846,398)(4) There was no temporary difference due to deferred income tax liabilities as of December 31, 2009.
(5) Accrued income tax and receivables of prior year’s income tax before offset as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Refund of prior year’s income tax before offset
Accrued income tax before offset
Refund of prior year’s income tax (overseas) after offset
Accrued income tax after offset

2009₩                 27,827
194,218
1,185₩                167,576

2008₩                 88,538
179,530207₩                 91,199

22. EARNINGS PER SHARE:(1) Basic net income per share
Basic income per share is calculated for common stock by dividing net income available to common shareholders by the weighted average
number of outstanding common stock. The basic net income per share for the years ended December 31, 2009 and 2008 was as follows(Unit: In millions except per share amounts):
Classification
Net income
Weighted average number of common shares
Basic net income per share (In currency units)2009₩               891,737
644,906,826₩                  1,383

2008₩                782,618
644,906,826₩                  1,214

Both the weighted average number of outstanding common stock and the number of outstanding common stock are the same because there is
no change in the number of outstanding common stock for the years ended December 31, 2009 and 2008.
(2) Diluted net income per share
Diluted net income per share represent diluted net income divided by the number of common shares and diluted securities. There is no
diluted security for recent two years. The diluted net income per share; therefore, is the same as net income per share.

113

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			
23. SEGMENT
INFORMATION:(1) Operating segments
1) General information of operating segments
The Bank’s operating segments were as follows:
Classification
Consumer
Corporate
Foreign
Credit card
OthersOperation
Consumer banking
Corporate banking
International financial business
Credit card operation
Treasury operation of investment in securities (including derivatives), management and others

2) As of and for the years ended December 31, 2009 and 2008, financial information on the Bank’s operating segments was as follows(Unit: In millions):
Classification

Consumer
Corporate
Foreign
Credit card
Others2009

2008

Securities (*2) Income
Loans (*1)
Securities (*2)
IncomeLoans (*1)
beforebeforeprovision
provision₩    682,777 ₩ 22,617,581 ₩           - ₩    822,469 ₩ 21,938,704 ₩            1,022,394
30,345,667
1,170,762
806,864
32,881,037
1,463,152
104,495
5,276,500
818,079
97,082
5,689,717
546,100
280,688
2,423,245
4,372
222,140
2,441,329
2,652(531,098)
3,565,471
12,930,635
15,306
4,339,119
11,545,053₩  1,559,256 ₩ 64,228,464 ₩ 14,923,848 ₩  1,963,861 ₩ 67,289,906 ₩ 13,556,957(*1) Allowance for possible loan losses and deferred loan organization fees and costs are not deducted, and loans of merchant banking accounts are included.
(*2) Trading securities of merchant banking accounts are included.

3) Adjustment of income before liabilities reserve
Details of adjustment of income before liabilities reserve for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification
Income before provision
Provision for allowance and reserve (*)
Accrued severance benefits
Income tax expense
Net income

2009₩              1,559,256
716,399
59,726(108,606)₩                891,737

2008₩              1,963,861(749,470)(46,901)(384,872)₩                782,618(*) Liability reserves for (provision of) acceptances and guarantees, unused credit limit and allowance for other liabilities (including merchant banking accounts) are
included.

(2) Geographical segments
1) General information of geographical segments
The Bank operates domestic bank for local residents and overseas bank for Korean residents abroad and overseas companies.
2) As of and for the years ended December 31, 2009 and 2008, financial information on the Bank’s geographical segments was as follows(Unit: In millions):
Classification

2009

Operating revenue
Operating income
Loans (*1)
Securities (*2)

Domestic
Overseas
Total
Domestic
Overseas
Total₩ 15,855,572 ₩    532,670 ₩ 16,388,242 ₩ 22,068,153 ₩    662,337 ₩ 22,730,490
582,616
132,619715,235
1,047,019
106,811
1,153,830
58,951,964
5,276,500
64,228,464
61,600,189
5,689,717
67,289,906
  389,060
14,534,788
14,923,848
13,010,858
546,099
13,556,957

2008(*1) Allowance for possible loan losses and deferred loan organization fees and costs are not deducted, and loans of merchant banking accounts are included.
(*2) Trading securities of merchant banking accounts are included.

114

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

			
24. RELATEDPARTY TRANSACTIONS:(1) The parent company and subsidiaries of the Bank as of December 31, 2009 were as follows:
Company

Relation

LSF-KEB Holdings, SCA
KEBC
KEBF
KEBIS
KEBOC
KEBA
KEBDAGKEBIKEBBNYFinCoLAFinCo
USAI
KAF

Parent company
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary(2) Significant balances made in the normal course of business with related parties as of December 31, 2009 and 2008 were summarized asfollows (Unit: In millions):<2009>Classification

KEBC

KEBF

KEBOC

KEBA

KEBDAG

KEBI

Trust

Other
Total
subsidiaries

Assets:Due from banks in Won₩        - ₩     326 ₩        - ₩        - ₩        - ₩        - ₩        - ₩        - ₩     326

Due from banks inforeign currencies

-

2,977

1,196

693

22,281308--

27,455

Trading securities (*1)
Loan in Won

40,00036,900

-

-

-

-

-

-

-

40,00036,900Loans in foreign
currencies (*2)

31,658--204,89085,883--472,180

794,611

(583)

-

-

-

-

-

-

-

(583)

Allowance forpossible loan losses
Other assets
Liabilities:
Deposits in Won
Deposits in foreign
currencies
Borrowings in foreign
currencies
Other liabilities

61
1
927
99
1,766
2,854
₩ 108,036 ₩    3,304 ₩    1,196 ₩ 206,510 ₩ 108,263 ₩     308 ₩        - ₩ 473,946 ₩ 901,563₩     124 ₩      22 ₩   5,291 ₩        4 ₩        - ₩        - ₩        - ₩        - ₩   5,441
28,723

7,704-

29,26228,960

331

-

2,105

97,085---36,675

129,705

106,540--

272,920

3,350
1,560
312
222
133,332
138,776₩  32,197 ₩   7,726 ₩   5,291 ₩  67,501 ₩ 158,977 ₩ 107,093 ₩ 133,332 ₩   2,105 ₩ 514,222(*1) Trading securities of merchant accounts(*2) Call loans in foreign currencies were included.

115

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

<2008>

			Classification

KEBC

KEBF

KEBOC

KEBA

KEBDAG

KEBI

Trust

Other
Total
subsidiaries

Assets:Due from banks inforeign currencies₩        - ₩   3,588 ₩   1,341 ₩  17,138 ₩  16,545 ₩     388 ₩        - ₩        - ₩  39,000

Loan in Won

169,300

-

-

-

-

-

-

-

169,300

Loans in foreign
currencies (*)

40,125--274,546

65,331

25,150-650,142

1,055,294

Allowance forpossible loan losses(1,780)

-

-

-

-

-

-

-

(1,780)

Other assets
Liabilities:
Deposits in Won

207
2
3,172
694
685
4,020
8,780
₩ 207,852 ₩   3,590 ₩   1,341 ₩ 294,856 ₩  82,570 ₩  26,223 ₩        - ₩ 654,162 ₩1,270,594₩     153₩      33 ₩        - ₩        - ₩        - ₩        - ₩        - ₩        - ₩     186

Deposits in foreign
currencies

51

4,494

4,483

4

12,945

330

-

955

23,262

Borrowings in foreign
currencies--

12,647

17,663

108,904

98,085-

11,855249,154

Other liabilities

3,894
344
798
910
999
79,151
176
86,272₩   4,098 ₩   4,871 ₩  17,130 ₩  18,465 ₩ 122,759 ₩  99,414 ₩  79,151 ₩  12,986 ₩ 358,874(*) Call loans in foreign currencies were included.

(3) Significant transactions with related parties for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>Classification

KEBC

Revenue:
Interest revenues in Won₩   5,766 ₩        - ₩        - ₩        - ₩        - ₩        - ₩        - ₩        - ₩   5,766Interest revenues inforeign currencies

KEBF

KEBOC

KEBA

KEBDAG

KEBI

Trust

Other
Total
subsidiaries

1,956

-

2

5,404

1,735

121

-

10,91020,128Commission income in Won

-

181

-

-

-

-

-

-

181

Commission income inforeign currencies

-

-

-

584

130

-

-

-

714

Other revenue

4,106
340
2,508
41
9,176
16,171₩  11,828 ₩     521 ₩        2 ₩   8,496 ₩   1,906 ₩     121 ₩   9,176 ₩  10,910 ₩  42,960

Expenses:
Interest expenses in Won ₩        -₩      41 ₩        - ₩        - ₩        - ₩        - ₩     973 ₩        - ₩   1,014

Interest expenses inforeign currencies

5

7

152

1,531

3,667

1,451

-

135

6,948

Commission expensein Won

-

345

-

-

-

-

-

-

345

Commission expense
in foreign currencies

-

109

-

104

-

-

-

112

325

Provision for possible
loan losses(1,197)

-

-

-

-

-

-

-

(1,197)

Other expenses

116

5,910
2,258
8,168
₩   4,718 ₩     502 ₩     152 ₩   3,893 ₩   3,667 ₩   1,451 ₩     973 ₩     247 ₩  15,603

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

<2008>

			Classification

KEBC

Revenue:
Interest revenues in Won₩   7,805 ₩        - ₩        - ₩        - ₩        - ₩        - ₩        - ₩        - ₩   7,805

Interest revenues inforeign currencies

KEBF

KEBOC

KEBA

KEBDAG

KEBI

Trust

Other
Total
subsidiaries

2,240

4

15

12,384

3,773

512

-

23,28742,215

Commission income in Won

-

169

-

-

-

-

-

-

169

Commission income inforeign currencies

-

-

-

418

4,172

-

-

-

4,590

Other revenue

11,809₩  21,854 ₩     173

Expenses:
Interest expenses in Won ₩        -

35
2,448
10,99225,284₩      50 ₩  15,250 ₩   7,945 ₩     512 ₩  10,992 ₩  23,287 ₩  80,063₩      48 ₩        - ₩        - ₩        - ₩        - ₩   1,512 ₩        - ₩   1,560

Interest expenses inforeign currencies

58

114

105

2,065

7,865

641

-

606

11,454

Commission expensein Won

-

564

-

-

-

-

-

-

564

Commission expense
in foreign currencies

-

160

-

-

915

-

-

-

1,075

Provision for possible
loan losses

1,060

-

-

-

-

-

-

-

1,060

Other expenses

697
287
984
₩   1,815 ₩     886 ₩     105 ₩   2,352 ₩   8,780 ₩     641 ₩   1,512 ₩     606 ₩  16,697(4) The key management compensations for the year ended December 31, 2009 were as follows (Unit: In millions):
Classification

Compensations₩                 5,415
666
7,505
₩               13,586

Short-term employee benefits
Employee benefits after resignation
Stock option

The key management includes the directors, the executives and the officers who have authorities and responsibilities for decision-making of thebusiness plan, operations and control over the Bank.
25. OPERATION PERFORMANCE OF TRUST ACCOUNTS:(1) The significant financial information relating to trust accounts for the years ended December 31, 2009 and 2008 was as follows(Unit: In millions):
Classification
Revenue:
Trust fees and commissions received from trust accounts
Commission from pre-payment
Expense:Interest on borrowings from trust accounts

2009

2008

₩                 30,636
5₩                 30,641₩                 35,299
44₩                 35,343₩                 29,904₩                 50,309117Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008

(2) As of			
December 31, 2009, the Bank is not obligated to pay difference between book value and fair value of trust account, and the trust
accounts for which the Bank provided the guarantees for a fixed rate of return and/or the repayment of principal consisted of following(Unit: In millions):
Classification
Trust accounts guaranteeing the repayment of principal:
Installment trust
Household trust
Old age pension trust
Corporate trust
Personal pension trust
Retirement trust
New personal pension trust
New old age pension trust
Pension trust
Trust accounts guaranteeing a fixed rate of return and the repayment of principal:
Unspecified monetary trust
Development money trustBook Value₩                    160
2,203
3,713
42
223,646
812,466
57,292
4,762
172,056
1,276,340

Fair Value₩                    155
2,179
3,607
42
222,261
811,520
57,182
4,651
171,880
1,273,477

70
141
211
₩              1,276,551

69
19
88
₩              1,273,565

26. COMPUTATION OF VALUE ADDED:
Accounts required for computation of value added for the years ended December 31, 2009 and 2008 consisted of the following (Unit: In millions):
Accounts
Salaries
Expenses for fringe benefits
Retirement allowances
Rent
Depreciation
Amortization
Taxes and dues

2009₩                538,986
163,005
59,72677,01582,91232,317
38,231₩                992,192

2008₩                511,979
148,993
46,901
72,92688,37731,044
47,124₩                947,344

27. FINANCIAL INFORMATION OF THE FOURTH QUARTER (UNAUDITED):The Bank is required to report interim financial statement but it doesn’t report the financial statement of last quarter. The Bank’s summary offinancial information for the last quarter ended December 31, 2009 and 2008 was as follows (Unit: In millions except per share amounts):
Classification
Operating revenue
Operating income
Net income
Net income per share (In currency units)

4th Quater in 2009₩              2,948,848
347,688306,360
475

4th Quater in 2008₩              9,205,972
292,942
117,903183

28. DIVIDENDS:(1) The calculation of dividends for the years ended December 31, 2009 and 2008 was as follows (Unit: shares, In millions except per shareamounts):
Classification
Dividends per share (rate) (In currency units)
Shares issued
Dividends

118

2009
₩            510 (10.2%)
644,906,826
328,9022008₩              125 (2.5%)
644,906,826
80,613

Notes to Non-Consolidated Financial Statements
KOREA EXCHANGE BANK (BANKING ACCOUNT) for the years ended December 31, 2009 and 2008			(2) The calculationof dividend payout ratio for the years ended December 31, 2009 and 2008 was as follows (Unit: In millions):
Classification
Dividends
Net income
Dividend payout ratio (%)

2009₩                328,902
891,73736.88

2008₩                  80,613
782,618
10.30(3) The calculation of dividend yield ratio for the years ended December 31, 2009 and 2008 was as follows (Unit: In currency units):
Classification
Dividends per share
Closing price
Dividend yield ratio (%)

2009₩                     51014,5003.52

2008₩                     125
6,330
1.97

29. CASH FLOWS:(1) Cash in statements of cash flows consists of cash, due from bank (excluding restricted due from bank). Cash flows from operating activities
are presented by the indirect method.
(2) The cash and due from banks in the statements of cash flows for the years ended December 31, 2009 and 2008 were as follows(Unit: In millions):
Classification
Cash and due from banks
Foreign currencies
Deposit in Won
Deposit in foreign currencies
Less: restricted due from bank2009₩                809,276
384,555
3,039,185
1,669,692
5,902,708(2,437,717)₩              3,464,991

2008₩                876,432
433,3934,684,353
4,113,528
10,107,706(6,807,802)₩              3,299,904(3) Significant transactions not involving cash inflows and outflows for the years ended December 31, 2009 and 2008 were as follows(Unit: In millions):
Classification
Decrease of loans from write-offs of loans
Increase (decrease) of gain on valuation of available-for-sale securities
Change on unsettled spot transactions

2009₩                906,480
486,095
1,513,1722008₩                793,961(779,834)
881,988119			
Independent
Accountants’ Review Reporton Internal Accounting Control System (“IACS”)
English Translation of a Report Originally Issued in Korean

To the Representative Director of
Korea Exchange Bank:
We have reviewed the accompanying report on the management’s assessment of IACS (the “Management’s Report”) of Korea Exchange Bank (the“Bank”) as of December 31, 2009. The Management’s Report, and design and operation of IACS are the responsibility of the Bank’s management.
Our responsibility is to review the Management’s Report and issue a review report based on our procedures. The Bank’s management stated theaccompanying Management’s Report that “based on the assessment of the IACS as of December 31, 2009, the Bank’s IACS has been appropriately
designed and is operating effectively as of December 31, 2009, in all material respects, in accordance with the IACS framework established by the
Korean Listed Companies Association.”
We conducted our review in accordance with the IACS Review Standards established by the Korean Institute of Certified Public Accountants.
Those standards require that we plan and perform a review, the objective of which is to obtain a lower level of assurance than an audit, of theManagement’s Report in all material respects. A review includes obtaining an understanding of the Bank’s IACS and making inquiries regarding
the Management’s Report and, when deemed necessary, performing a limited inspection of underlying documents and other limited procedures.
The Bank’s IACS represents internal accounting policies and a system to manage and operate such policies to provide reasonable assurance
regarding the reliability of financial statements prepared, in accordance with accounting principles generally accepted in the Republic of Korea,
for the purpose of preparing and disclosing reliable accounting information. Because of its inherent limitations, IACS may not prevent or detect amaterial misstatement of the financial statements. Also, projections of any evaluation of effectiveness of IACS to future periods are subject to therisk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Based on our review, nothing has come to our attention that causes us to believe that the Management’s Report referred to above is not fairly
stated, in all material respects, in accordance with of the IACS Framework established by the Korean Listed Companies Association.
Our review is based on the Bank’s IACS as of December 31, 2009, and we did not review its IACS subsequent to December 31, 2009. This reporthas been prepared pursuant to the Acts on External Audit for Stock Companies in the Republic of Korea and may not be appropriate for otherpurposes or for other users.

Deloitte Anjin LLC
Seoul, Korea
March 3, 2010

120

			
Evaluation
Report on the Effectiveness ofInternal Accounting Management System by
the Internal Accounting Manager
English Translation of a Report Originally Issued in Korean

Dear Board of Directors & Audit Committee of
Korea Exchange Bank:I, the Internal Accounting Manager, evaluated the design and operation effectiveness of the KEB’s Internal Accounting Management System forthe fiscal year 2009.
I understand that the management of KEB, including me, the Internal Accounting Manager, share the responsibility for the design and operationof the Internal Accounting Management System. For reliable financial statements and public disclosures, I conducted the evaluation as to whether
our bank’s Internal Accounting Management System has been effectively designed and operated to prevent and find out frauds or material
errors that can cause misstatement of financial statements. The evaluation has been conducted in accordance with the “Guidelines for Internal
Accounting Management System.”
Based on the above evaluation, I express my opinion that KEB’s Internal Accounting Management System is, in material respects, effectively
designed and operated as designed as of December 31, 2009.

February 2, 2010

Larry A. Klane
President & CEO

Jee Won Kim
Internal Accounting Manager

121Consolidated Financial Statements

Independent Auditors’ Report
English Translation of a Report Originally Issued in Korean

To the Shareholders and Board of Directors of
Korea Exchange Bank:
We have audited the accompanying consolidated statements of financial position of Korea Exchange Bank (the “Bank”) and its subsidiaries as ofDecember 31, 2009 and 2008, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years
then ended, all expressed in Korean Won. These financial statements are the responsibility of the Bank’s management. Our responsibility is toexpress an opinion on these financial statements based on our audits. We have not audited the financial statements of KEB Australia Ltd., Korea
Exchange Bank of Canada, PT. Bank KEB Indonesia, Korea Exchange Bank (Deutschland) A.G., Banco KEB do Brasil S.A., KEB NY Financial Corp.,
KEB LA Financial Corp. and KEB Asia Finance Limited. whose statements reflect total assets constituting 3.32 percent of consolidated total assets
as of December 31, 2009 and total revenues constituting 1.26 percent of consolidated total revenues for the year then ended. Those statements
were audited by other auditors whose reports have been furnished to us, and our opinion, in so far as it relates to the amounts included for thoseentities, is based solely on the reports of such other auditors.
We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits and other auditors’ reports provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material
respects, the financial position of the Bank and its subsidiaries as of December 31, 2009 and 2008, and the results of their operations, the changes
in its shareholders’ equity and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the
Republic of Korea.
Accounting principles and auditing standards and their application in practice vary among countries. The accompanying financial statements are
not intended to present the financial position, results of operations, changes in shareholders’ equity and cash flows in accordance with accounting
principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in
the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries. Accordingly,
this report and the accompanying financial statements are for use by those knowledgeable about Korean accounting procedures and auditing
standards and their application in practice.

Deloitte Anjin LLC
Seoul, Korea
March 10, 2010

Notice to ReadersThis report is effective as of March 10, 2010, the auditors’ report date. Certain subsequent events or circumstances may have occurred between theauditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the accompanying financial
statements and may result in modifications to the auditors’ report.

122

Consolidated Statements of Financial Position
KOREA EXCHANGE BANK AND SUBSIDIARIES as of December 31, 2009 and 2008

(In millions of KRW)

2009

2008

ASSETSCash and due from banks (Notes 5, 18, 24, 25 and 28)₩

6,346,257₩

10,764,255

Securities (Notes 6, 17, 18 and 24)

15,243,895

13,950,068

Loans (Notes 7, 8, 9, 17, 18, 24 and 25)

66,236,846

68,762,502

Tangible assets (Notes 10 and 24)

1,393,110

1,450,580

Other assets (Notes 4, 11, 17, 22, 24 and 25)
				10,801,209

12,391,283₩

100,021,317₩

107,318,688₩

60,865,856₩

62,563,590

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits (Notes 12, 18, 24 and 25)
Borrowings (Notes 13, 18, 24 and 25)

18,090,474

Other liabilities (Notes 4, 14, 17, 18, 24 and 25)

13,088,380

14,514,667

92,044,710

100,634,858

3,224,534

3,224,534

940

940

				

23,556,601

SHAREHOLDERS’ EQUITY (Notes 4, 6, 10, 15, 17 and 24):
Common stock		 Other capital surplus
		 Capital adjustments-(4,425)

		 Accumulated other comprehensive income

1,233,556

749,200

		 Retained earnings

3,515,456

2,711,764

		 Minority interests

2,121

1,817

				

7,976,607₩

100,021,317

6,683,830₩

107,318,688

See accompanying notes to consolidated financial statements.

123Consolidated Statements of Income
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(In millions of KRW, except per share amounts)

2009

2008

OPERATING REVENUES (Note 24):
Interest income (Notes 20 and 25):
Interest on due from banks₩

110,454₩

177,780

Interest on trading securities

108,977

174,742Interest on available-for-sale securities

258,007287,617

Interest on held-to-maturity securities
Interest on loans
Other interest income

197,745

157,143

4,109,322

4,769,031

15,92034,4934,800,425

5,600,806

Gain on valuation of trading securities

17,59823,893Gain on disposal of trading securities

60,21854,704

Reversal of impairment loss on available-for-sale securities

18,72732,876

Gain on disposal of available-for-sale securities

254,815

93,761Gain on retirement of held-to-maturity securities

108-

351,466

205,234

38,971

21,901				Gain on valuation and disposal of securities (Note 6):				Gain on valuation and disposal of loans:
Gain on disposal of loans (Notes 7 and 17)
Foreign exchange trading income

3,793,782

2,639,900

Gain on trading and valuation of derivatives (Notes 17 and 19)

7,222,898

13,994,493

Commission income (Notes 19 and 25)

528,219568,763

Dividends income (Note 19)

15,41079,064

Other operating revenue (Notes 19 and 25)

22,342

41,631

16,773,513

23,151,792

Interest on deposits

1,670,825

2,032,919

Interest on borrowings

901,039

1,072,460

Total operating revenues
OPERATING EXPENSES (Note 24):
Interest expenses (Notes 20 and 25):

Other interest expenses

31,95654,492

2,603,820

3,159,871

Loss on valuation of trading securities

2,258

9,665

Loss on disposal of trading securities

22,68055,080

Impairment loss on available-for-sale securities

22,08438,802

Loss on disposal of available-for-sale securities

4,057

1,271

Loss on retirement of held-to-maturity securities

7-

51,086

104,818

677,349

778,445

				
Loss on valuation and disposal of securities (Note 6):				Loss on valuation and disposal of loans:
Provision for possible loan losses (Notes 9 and 25)
Loss on disposal of loans (Note 7)
				
See accompanying notes to consolidated financial statements.

124

33,50026,302710,849804,747

Consolidated Statements of Income (Continued)
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(In millions of KRW, except per share amounts)

2009
Foreign exchange trading losses₩

2008
2,877,640₩

2,538,579

Loss on trading and valuation of derivatives (Notes 13, 17 and 19)		

7,872,221		

13,654,039

Commission expenses (Notes 19 and 25)		

285,227		

247,967

General and administrative expenses (Notes 19 and 26)		

1,348,453		

1,256,071

Other operating expenses (Note 19)		

235,718		

191,671

Total operating expenses

15,985,014

21,957,763

OPERATING INCOME (Note 24)

788,499

1,194,029

NON-OPERATING INCOME (Notes 6, 21 and 24)

51,156

71,850NON-OPERATING EXPENSES (Notes 6, 21 and 24)

37,026

86,164

INCOME BEFORE INCOME TAX (Note 24)

802,629

1,179,715

INCOME TAX EXPENSE (BENEFITS) (Notes 22 and 24)(89,322)397,133

NET INCOME (Notes 23 and 24)
Controlling company interest, gain₩

Minority interests, gain		

891,737₩214		

782,373
209

				

₩

891,951₩

782,582

BASIC NET INCOME PER SHARE (In currency units) (Note 23)

₩

1,383

₩

1,213

DILUTED NET INCOME PER SHARE (In currency units) (Note 23)

₩

1,383

₩

1,213

See accompanying notes to consolidated financial statements.

125Consolidated Statements of Changes in Shareholders’ Equity
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(In millions of KRW)

January 1, 2008

Minority
interests

Total

CapitalsurplusCapitaladjustments₩ 3,224,534₩        -₩         - ₩  1,094,064 ₩ 2,355,777 ₩    1,488 ₩ 6,675,863-

940(5,722)(4,049)3,881-(4,950)3,224,534

940(5,722)

1,090,015

2,359,658

1,488

6,670,913

Cumulative effect of accounting changes
Balance after adjustments

Retained
Accumulated
otherearnings
comprehensive
incomeCapital stock

Dividend

-

-

-

-

(451,435)-(451,435)

3,224,534

940(5,722)

1,090,015

1,908,223

1,488

6,219,478

Net income

-

-

-

-

782,373209

782,582

Gain on foreign exchange trading

-

-

-

-

21,052

120

21,172

Valuation of available-for-sale securities

-

-

-

(776,196)--(776,196)

Valuation of held-to-maturity securities

-

-

-

44

-

-

44

Effect on change of income tax rate

-

-

1,297

-

-

-

1,297

Valuation of tangible assets

-

-

-

435,337--

435,337

Trust reserved
December 31, 2008
January 1, 2009
Dividend
Negative capital adjustments
Balance after appropriations
Net income
Gain on foreign exchange trading
Valuation of available-for-sale securities
Valuation of held-to-maturity securities₩ 3,224,534₩ 3,224,534
3,224,534-₩     940₩     940
940-

Valuation (negative changes) of securities
using the equity method--₩ 3,224,534₩     940

Balance after appropriations

Valuation of tangible assets
Trust reserved
December 31, 2009

See accompanying notes to consolidated financial statements.

126

116
116
₩   (4,425) ₩    749,200 ₩ 2,711,764 ₩    1,817 ₩ 6,683,830₩   (4,425) ₩    749,200 ₩ 2,711,764 ₩    1,817 ₩ 6,683,830(80,613)(80,613)
4,425(4,425)749,200
2,626,726
1,817
6,603,217
891,737214
891,951(4,170)84(4,086)487,2926
487,298
303
303
-

(10)

-

-

(10)

(3,229)(3,229)1,163
1,163₩         - ₩  1,233,556 ₩ 3,515,456 ₩    2,121 ₩ 7,976,607

Consolidated Statements of Cash Flows
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(In millions of KRW)

2009

2008

CASH FLOWS FROM OPERATING ACTIVITIES:Net income₩

891,951₩

782,582

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Gain on valuation of trading securities, net
Impairment loss on available-for-sale securities, net
Loss (gain) on valuation of securities using the equity method, net
Provision for possible loan losses(15,340)(14,228)

3,357

5,926

324

(3,766)677,349

778,445

Loss (gain) on disposal of tangible assets, net(1,121)

1,699

Depreciation and amortization

121,952

129,373

Loss on revaluation of tangible assets
Provision for severance benefits
Gain on valuation of financial derivatives, net-

25,346

61,34548,514(208,013)(128,554)

Long-term compensation expense for performance bonus

9,748

4,728

Provision for allowance for other liabilities

41,02244,085

Stock option compensation costs, net

12,798(11,862)(109,535)

355,992

Loss (gain) on foreign exchange trading, net
Others, net				22,146(39,268)

616,032

1,196,430

Changes in assets and liabilities resulting from operations:
Net decrease (increase) in trading securities

436,997(91,498)

Net decrease (increase) in available-for-sale securities

17,067(1,823,848)

Net increase in held-to-maturity securities(1,116,842)(1,417,129)

Net decrease (increase) in call loans(196,732)

1,546,814

Net decrease (increase) in domestic import usance bill

130,744(1,004,275)

Net decrease (increase) credit card receivables

56,311(138,180)

Net decrease (increase) in bills bought in foreign currencies

424,888(954,859)

Net decrease (increase) in bills bought

956,697(152,389)

Net decrease (increase) in bonds purchased under repurchase agreements

556,717(2,342,717)

Net increase in loans in Won(1,352,092)(4,804,150)

Net decrease (increase) in loans in foreign currencies

1,221,058(4,692,014)

Net decrease (increase) in factoring receivables(35,836)

180,097

Net decrease (increase) in advances for customers

22,129(24,408)

Net decrease in privately placed bonds

71,983

154,991

Net increase in deferred loan origination fees and costs

4,858

21,387

Net decrease (increase) in accrued income

150,112(92,252)

Net increase in prepaid expenses(18,870)(10,953)

Net decrease (increase) in deferred income tax assets

7,658(18,392)

Net decrease (increase) in financial derivatives assets

3,277,100(3,753,863)

Net increase (decrease) in accrued expenses(353,300)

274,926

Net increase (decrease) in unearned revenues(34,091)

18,433

Payment of severance benefits(36,405)(18,381)

Decrease in transfer to National Pension Fund
Increase in deposit of insurance for severance benefits
Increase in assets under management of pension benefits

87

57(22,105)(44,461)

(930)

(324)

See accompanying notes to consolidated financial statements.

127Consolidated Statements of Cash Flows (Continued)
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(In millions of KRW)2009
Net increase (decrease) in financial derivatives liabilities₩

2008(3,055,056)₩

3,756,179

Net decrease in allowance for other liabilities(31,712)(15,532)

Net increase (decrease) in deferred income tax liabilities(23,393)

115,462

1,057,042(15,331,279)

2,565,025(13,352,267)

Dividends of securities using the equity method

1,550

1,200

Disposal of tangible assets

12,6753,863

				
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:Acquisition of securities using the equity method(725)(2,980)Purchase of tangible assets(53,185)(106,444)

Net increase in foreclosed and other properties(1,259)-Net increase in guarantee deposits paid

(4,811)(35,115)

Purchase of intangible assets(27,708)(16,603)

Net decrease (increase) in accounts receivable(153,078)

713,644

43,783(1,055,380)

Net decrease (increase) in restricted due from banks

4,372,121(4,922,342)

Net cash provided by (used in) investing activities

4,189,363(5,420,157)

Net increase (decrease) in deposits(1,684,548)

13,904,362

Net increase (decrease) in borrowings(2,757,665)

3,048,427

Net increase (decrease) in debentures(2,606,508)

2,007,168

329,069(2,829)Net decrease (increase) in other assets

CASH FLOWS FROM FINANCING ACTIVITIES:Net increase (decrease) in other liabilities
Dividend (Note 27)(80,613)(451,435)

Net cash provided by (used in) financing activities(6,800,265)

18,505,693

NET DECREASE IN CASH AND DUE FROM BANKS(45,877)(266,731)

CASH AND DUE FROM BANKS, BEGINNING OF YEAR

3,950,057

4,216,788

CASH AND DUE FROM BANKS, END OF YEAR (Note 28)
See accompanying notes to consolidated financial statements.

128₩

3,904,180₩

3,950,057

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

1. GENERAL:
Korea Exchange Bank (the “Bank”) was established on January 30, 1967 as a government-invested bank to engage in foreign exchange and thetrade finance business under the Korea Exchange Bank Act. On December 30, 1989, the Korea Exchange Bank Act was repealed and the Bank
was converted into a corporation under the Commercial Code of the Republic of Korea. On April 4, 1994, the Bank was listed on the Korean Stock
Exchange. The merger between the Bank and Korea Exchange Bank Credit Service Co., Ltd. (“KEBCS”) was finalized on February 28, 2004.
The Bank primarily provides commercial banking services, trust banking services, foreign exchange, merchant banking business through themerger with Korea International Merchant Bank, a domestic subsidiary of the Bank, and other related operations as permitted under the Bank Act
and other relevant laws and regulations in the Republic of Korea. The Bank operates through 352 branches (including 27 depositary offices) and 3
subsidiaries in Korea and 25 branches (including 5 depositary offices and 5 offices) and 9 subsidiaries in overseas as of December 31, 2009.
The Bank’s shareholders as of December 31, 2009 are as follows:
Shareholders

Number ofshares owned

Ownership (%)(*)

LSF-KEB Holdings, SCA

329,042,672

51.02

Export-Import Bank of Korea

40,314,387

6.25

Bank of Korea

39,500,000

6.12

Others236,049,767

36.61

		

644,906,826

100.00(*) As of December 31, 2009, the date of closing a shareholders’ list

The Bank entered into a Memorandum of Understanding regarding the Share Subscription Agreement with Lone Star Fund IV on August 27, 2003.
On October 30, 2003, the Bank issued 268,750,000 shares of common stock to LSF-KEB Holdings, SCA at ₩4,000 per share (at less than its parvalue) in accordance with a resolution during an extraordinary shareholders’ meeting on September 16, 2003. The balance below the par value wasrecognized as a discount on stock issued.
As of December 31, 2009, the total number of authorized shares of the Bank is 1,000 million (par value ₩5,000) while the paid-in capital amounts
to ₩3,224,534 million (with 644,906,826 shares of common stock outstanding with par value of ₩5,000).

129

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

2. SCOPE OF CONSOLIDATION AND EQUITY METHOD ACCOUNTING:
The consolidated financial statements are based on the financial statements of the Bank (including merchant banking accounts), its trust accounts
and subsidiaries.
Subsidiaries included in the consolidation and accounted for using the equity method as of December 31, 2009 and 2008 were as follows:<2009>
Subsidiaries

Closing date				

No. of shares		

Percentage of		 Business(Unit: thousands)		

ownership (%)

Consolidated (Domestic):
KEB Capital Inc. (“KEBC”)

March 31		

14,976		

99.31

Leasing and installment financing

KEB Futures Co., Ltd. (“KEBF”)

March 31		

3,000		

100.00Brokerage services for futures transactions

December 31		

334		

100.00Banking service

Consolidated (Oversea):
Korea Exchange Bank of Canada (“KEBOC”)

Commercial banking business and
KEB Australia Ltd. (“KEBA”)
December 31		
55,000		
100.00							 foreign exchange operation
Korea Exchange Bank
(Deutschland) A.G. (“KEBDAG”)

December 31		

20		

100.00Banking service

PT. Bank KEB Indonesia (“KEBI”)

December 31		

1		

99.00

Banking service

Banco KEB do Brasil S.A. (“KEBB”)

December 31		

33,726		

100.00Banking service

Commercial banking business and
KEB NY Financial Corp. (“KEBNYFINCO”)
December 31		0.1		100.00							 foreign exchange operation
Commercial banking business and
KEB LA Financial Corp. (“KEBLAFINCO”)
December 31		0.2		
100.00							 foreign exchange operation
KEB Asia Finance Limited (“KAF”)

December 31		

50,000		

100.00December 31		

388		

2.70

Investment financing

Accounted for using the equity method:
Lippo Incheon Development Co., Ltd.

Developing Woonbook Leisure Complex

Maintenance service on non-residence
Realty Advisors Korea, Ltd.
June 30		
200		
14.29
							 real-estate investments
Ilsan Project Co., Ltd.

December 31		

288		

4.80

Real-estate brokerage service

Soul Flora Co., Ltd.

December 31		

165		

5.00

Real-estate rental service

December 31		

510		

100.00December 31		0.1		100.00Remitting US Dollars of the bankDecember 31		

0.04		

20.00

Corporate restructuring

KEB Fund Services Co., Ltd.
KEB USA Int’l Corp.

(*)

(*)

HTIC2 Corporate Restructuring Association

General office service(*) The investment securities were excluded from the application of equity method because the assets are less than ₩10,000 million as of the end of prior year andthe change in investment arising from this company was considered insignificant.

130

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<2008>
Subsidiaries

Closing date				

No. of shares			 Percentage of		 Business(Unit: thousands)		 ownership (%)

Consolidated (Domestic):
KEB Capital Inc. (“KEBC”)

March 31		

14,976			

99.31		 Leasing and installment financing

KEB Futures Co., Ltd. (“KEBF”)

March 31		

3,000			100.00		 Brokerage services for futures transactions

December 31		

334			

Consolidated (Oversea):
Korea Exchange Bank of Canada (“KEBOC”)

100.00		 Banking service

		 Commercial banking business and
KEB Australia Ltd. (“KEBA”)
December 31		
55,000			
100.00								foreign exchange operation
Korea Exchange Bank
(Deutschland) A.G. (“KEBDAG”)

December 31		

20			

100.00		 Banking service

PT. Bank KEB Indonesia (“KEBI”)

December 31		1			

99.00		 Banking service

Banco KEB do Brasil S.A. (“KEBB”)

December 31		

33,726			

100.00		 Banking service

KEB NY Financial Corp. (“KEBNYFINCO”)
December 31		
0.1			
100.00								KEB LA Financial Corp. (“KEBLAFINCO”)
December 31		
0.1			
100.00								Commercial banking business andforeign exchange operation
Commercial banking business andforeign exchange operation

Accounted for using the equity method:
Lippo Incheon Development Co., Ltd.

December 31		

388			

2.70		 Developing Woonbook Leisure Complex

Realty Advisors Korea, Ltd.

June 30		

200			

14.29		 Maintenance service on non-residence								288			

real-estate investments

Ilsan Project Co., Ltd.

December 31		

4.80		 Real-estate brokerage service

Soul Flora Co., Ltd.

December 31		

20			

KEB Fund Services Co., Ltd. (*)

December 31		

510			

100.00		 General office service

KEB USA Int’l Corp. (*)

December 31		

0.1			

100.00		 Remitting US Dollars of the bank

HTIC2 Corporate Restructuring Association

December 31		

0.04			

20.00		 Corporate restructuring5.00		 Real-estate rental service(*) The investment securities were excluded from the application of equity method because the assets are less than ₩7,000 million as of the end of prior year and the change
in investment arising from this company was considered insignificant.

SUBSIDIARIES
TRUST ACCOUNTS
Certain trust accounts whose principal or fixed rate of return is guaranteed by the Bank are included in the consolidated financial statements inaccordance with the accounting guidelines of the Financial Supervisory Commission in the Republic of Korea. The trust accounts as of December
31, 2009 and 2008 were as follows (Unit: In millions):
2009

2008

Total assets
		Consolidated₩

Not consolidated		₩OperatingTotal assets

revenue		
1,273,565₩

73,983₩Operatingrevenue

1,234,889₩

96,62010,782,053		

213,278		

9,897,224		

736,170

12,055,618

287,261

11,132,113

832,790

₩

₩

₩

131

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

KEB Capital Co., Ltd. (“KEBC”)
KEBC was incorporated on September 11, 1989 to engage in leasing industrial equipment and registered in Korea Securities Dealers AutomatedQuotation (“KOSDAQ”) on January 15, 1995. As KEBC continued to experience negative capital until March 31, 2001, its registration with KOSDAQ
was canceled by KOSDAQ Committee on July 11, 2001 and withdrawn from KOSDAQ market on August 24, 2001. As of December 31, 2009, 99.3%of the total shares of KEBC are owned by the Bank.
KEBC implemented a 14-to-1 capital reduction on the shares owned by the Bank and reduced its capital by means of a 7-to-1 capital reduction,
or execution of stock selling option at ₩800 per share on the shares owned by other individual shareholders and the employee stock ownershipassociation as of November 9, 2001, for the purpose of debt restructuring due to the work-out process, based on the resolution at theshareholders’ meeting on October 13, 2001. This capital reduction resulted in a gain on capital reduction of ₩34,725 million which was used torecover negative capital.
In addition, on November 9, 2001, KEBC issued 14,805 thousand shares of common stock for cash at par value to the Bank, in accordance withthe resolution of the board of directors on October 26, 2001. The proceeds of the new stock issuance were used for the repayment of borrowings
amounting to ₩74,024 million from the Bank. As of December 31, 2009, the total paid-in-capital amounts to ₩75,400 million.
KEB Futures Co., Ltd. (“KEBF”)
KEBF was incorporated on September 24, 1997 as an integrated futures brokerage of the Bank. In 1998, KEBF was granted a futures trading
license for overseas markets and domestic operations from the Ministry of Economy and Finance. The Bank retains 100% equity ownership as ofDecember 31, 2009, and the total paid-in-capital amounts to ₩15,000 million.
Korea Exchange Bank of Canada (“KEBOC”)
KEBOC was established in Toronto, Canada on October 6, 1981 to provide financial services to Korean companies and residents in Toronto andthe surrounding area. The Bank retains 100% equity ownership as of December 31, 2009 and the total paid-in-capital of KEBOC amounts to CAD
33,400 thousand.
KEB Australia Ltd. (“KEBA”)
KEBA was established in Sydney, Australia on July 6, 1986 to provide financial services to Korean companies and residents in Sydney and thesurrounding area. The Bank retains 100% equity ownership as of December 31, 2009, and the total paid-in-capital of KEBA amounts to AUD 55,000
thousand.
PT. Bank KEB Indonesia (“KEBI”)
KEBI was established in Jakarta, Indonesia on November 5, 1990 to provide financial services to Korean companies and residents in Jakarta
and the surrounding area. KEBI changed the firm name from PT. Korea Exchange Bank Danamon to PT. Bank KEB Indonesia in 2007. The Bank
retains 99% equity ownership as of December 31, 2009, and the total paid-in-capital of KEBI amounts to IDR 150,000,000 thousand.
Korea Exchange Bank of Deutschland AG (“KEBDAG”)
KEBDAG was established in Frankfurt, Germany on December 29, 1992 to provide financial services to Korean companies and residents in
Frankfurt and the surrounding area. The Bank retains 100% equity ownership as of December 31, 2009 and the total paid-in-capital of KEBDAG
amounts to EUR 15,339 thousand.
KEB NY Financial Corp. (“KEBNYFINCO”)
KEBNYF was established in New York, USA on April 8, 2004 to provide financial services to Korean companies and residents in New York and thesurrounding area. The Bank retains 100% equity ownership as of December 31, 2009, and the total paid-in-capital of KEBNYFINCO amounts to
USD 1.00.
KEB LA Financial Corp. (“KEBLAFINCO”)
KEBLAF was established in Los Angeles, USA on April 8, 2004 to provide financial services to Korean companies and residents in Los Angeles andthe surrounding area. The Bank retains 100% equity ownership as of December 31, 2009, and the total-in-capital of KEBLAFINCO amounts to USD
2.00.
KEB Asia Finance Limited (“KAF”)
KEB Asia Finance Limited (“KAF”) was established on July 2, 2009 to provide advisory services, financial organization and securities businessservices for foreign investment of domestic companies and investment for foreign corporations. The Bank retains 100% equity ownership as ofDecember 31, 2009, and the total-in-capital of KAF amounts to USD 50,000 thousand.

132

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

A summary of significant financial data of the Bank’s subsidiaries, included in the consolidated statements of financial position as of December
31, 2009 and 2008, and consolidated statements of income for the years ended December 31, 2009 and 2008 is as follows (Unit: In millions):<2009>
Subsidiaries

Total assets

Capital stock			

Operating

Net income

equityrevenue(loss)

Trust accounts₩ 1,273,565

KEB Capital Inc.

1,070,997

75,400115,223

139,404

7,435

137,320

15,00052,80836,232

11,345KEB Futures Co., Ltd.
Korea Exchange Bank of Canada₩-

Shareholders’₩

19,659₩73,983-₩

1,089,236

36,973111,055

48,691(1,376)KEB Australia Ltd.

435,026

57,47848,792

43,0508,754

Korea Exchange Bank (Deutschland) A.G.

529,740

25,68173,69826,924

5,738

PT. Bank KEB Indonesia

455,10918,570131,716

32,625

15,310Banco KEB do Brasil S.A.

97,606

22,63323,147

22,942

1,465

KEB NY Financial Corp.

382,372-

36,16920,2792,352

KEB LA Financial Corp.

265,923-

32,037

15,212

3,043

KEB Asia Finance Limited

66,02758,38054,212

2,393(4,168)

Total assets

Capital stock

Shareholders’

Operating

Net income

equityrevenue(loss)<2008>
Subsidiaries

			
Trust accounts₩ 1,234,889

KEB Capital Inc.

978,20275,400KEB Futures Co., Ltd.

₩

-

₩

18,496₩

96,620₩-106,947

145,881

7,994

161,205

15,00040,76438,9108,236

1,100,226

34,680105,456

60,046

9,817

KEB Australia Ltd.

401,704

47,85033,331

34,50822

Korea Exchange Bank (Deutschland) A.G.

582,905

27,24572,993

43,582

7,500

PT. Bank KEB Indonesia

427,164

17,220107,944

33,601

15,366

Banco KEB do Brasil S.A.

79,654

18,196

17,432

20,547892

KEB NY Financial Corp.

429,729-

36,422

28,941

3,208

KEB LA Financial Corp.

366,813-

6,076

22,022(27,777)

Korea Exchange Bank of Canada

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidated Financial Statement Presentation
The Bank and its subsidiaries maintain their official accounting records in Korean Won (only domestic subsidiaries) and prepare statutory
consolidated financial statements in the Korean language (Hangul) in conformity with the accounting principles and banking accounting standards
generally accepted in the Republic of Korea. Certain accounting principles and banking accounting standards applied by the Bank and its
subsidiaries that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally
accepted accounting principles and banking accounting practices in other countries. Accordingly, these consolidated financial statements
are intended for use by those who are informed about Korean accounting principles and practices. The accompanying consolidated financial
statements have been condensed, restructured and translated into English (with certain expanded descriptions) from the Korean language
consolidated financial statements. Certain information included in the Korean language consolidated financial statements, but not required fora fair presentation of the Bank and its subsidiaries’ financial position, results of operations, changes in shareholders’ equity or cash flows, is notpresented in the accompanying consolidated financial statements.
The significant accounting policies followed by the Bank and its subsidiaries in preparing the accompanying consolidated financial statements are
summarized below.
Basis of Consolidated Financial Statements Preparation(1) Offset of Investments and Equity Accounts of Subsidiaries
Investments in subsidiaries and equity accounts of subsidiaries were eliminated at the date when the Bank obtained control over thesubsidiaries. The differences between the amounts of investment and the equity accounts are recorded as goodwill or negative goodwill,133

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

which is amortized or reversed using the straight-line method over five years. If additional shares are purchased after acquiring control,
the difference between the additional acquisition cost and the portion of net assets acquired is credited or charged to capital surplus. If
the acquisition date does not agree with the year-end reporting period of the subsidiary, the closest closing date to the acquisition date isregarded as acquisition date.
(2) Inter-company Transactions and Balances
All inter-company transactions are eliminated in the consolidated financial statements.
(3) Additional acquisition of subsidiary company’s equity securities
If additional shares are purchased after acquiring control, the difference between the additional acquisition cost and the portion of net assets
acquired is credited or charged to capital surplus.
(4) Disposition of Subsidiaries’ Shares
If a subsidiary of the Bank is still subject to the scope of consolidation even after certain portions of shares are disposed to minority interests,
gain/loss on disposal of investment securities is recognized as capital surplus. If a subsidiary of the Bank is subject to the equity method dueto the disposition of securities, the investment account is recorded at net assets of subsidiaries at the time of disposition, net of unamortized
goodwill or negative goodwill in the consolidated financial statements. Any gain or loss is recognized in profit or loss.
(5) Equity Method
For investments in affiliates accounted for using the equity method, the difference between acquisition cost and net assets acquired at theacquisition date is added to or deducted from the carrying amount of investments and is amortized in equal annual amounts for five years
from the year incurred. Changes in the Bank’s portion of net assets of affiliates accounted for using the equity method are added to or
deducted from the carrying amount of investments.
(6) The End of the Reporting Period for the Consolidated Financial Statements
The end of the reporting period for the consolidated financial statements is the closing date of the Bank, the parent company. The accountsof consolidated subsidiaries whose fiscal years are different from that of the Bank have been adjusted to reflect balances as of the closing
date of the Bank.
(7) Special Reserve in Trust Accounts
A special reserve provided for possible future losses on certain trust accounts under the arrangement of guaranteed fixed rate of return and/or repayment of the principal each year is included in retained earnings in the consolidated financial statements.
(8) Minority Interests
Non-controlling interests in a subsidiary’s shareholders’ equity are presented as minority interests. Gain (loss) attributable to non-controllinginterests is disclosed on the face of the statement of income.
4. ACCOUNTING POLICIES OF THE CONSOLIDATED ENTITIES:The relevant laws and regulations applied to the consolidated entities are as follows:
EntityRelevant laws and regulations

The Bank

Accounting standards of the banking industry & the General Banking act

Trust accounts

Required under the Financial Investment Services and Capital Markets Act (FSCMA)KEB Capital Inc.

Regulation on Supervision of Specialized Credit Financial Business Law

KEB Futures Co., Ltd.

Supervisory guidelines on futures trading

Korea Exchange Bank of Canada

Financial accounting standards in Canada

KEB Australia Ltd.

Financial accounting standards in Australia

Korea Exchange Bank (Deutschland) A.G.

Financial accounting standards in Deutschland

PT. Bank KEB Indonesia

Financial accounting standards in Indonesia

Banco KEB do Brasil S.A.

Financial accounting standards in Brazil

KEB NY Financial Corp.

Financial accounting standards in U.S.A.

KEB LA Financial Corp.

Financial accounting standards in U.S.A.

134

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

Interest Income Recognition
The Bank and its subsidiaries apply the accrual basis in recognizing interest income related to due from banks, loans and securities. Whereas,interest on loans, whose principal or interest is past due at the end of the reporting period or defaulted loans, not secured by guarantees fromfinancial institutions or collateral deposits, is recognized on a cash basis. As of December 31, 2009 and 2008, accrued interest income notrecognized due to such criteria amounted to ₩128,439 million and ₩122,665 million, respectively.
Classification of Securities
At acquisition, the Bank and its subsidiaries classify securities into one of the following categories: trading, available-for-sale, held-to-maturity
and securities accounted for using the equity method, depending on marketability, purpose of acquisition and ability to hold. Debt and equity
securities that are bought and held for the purpose of selling them in the near term and actively traded are classified as trading securities. Debt
securities with fixed and determinable payments and fixed maturity that the Bank and its subsidiaries have the positive intent and ability to hold tomaturity are classified as held-to-maturity securities. Securities that should be accounted for under the equity method are classified as securities
accounted for using the equity method. Debt and equity securities not classified as the above are categorized as available-for-sale securities.
If the objective and ability to hold securities of the Bank and its subsidiaries change, available-for-sale securities can be reclassified to held-tomaturity securities and held-to-maturity securities can be reclassified to available-for-sale securities. Whereas, if the Bank and its subsidiaries
sell held-to-maturity securities or exercise early redemption right of securities to issuer in the current year or the proceeding two years, and if it
reclassifies held-to-maturity securities to available-for-sale securities, all debt securities that are owned or purchased cannot be classified as
held-to-maturity securities. On the other hand, trading securities cannot be recategorized to available-for-sale securities or held-to-maturity
securities and vice versa. Nevertheless, trading securities are reclassified to available-for-sale securities only when the trading securities lose
their marketability or when the Bank and its subsidiaries hold them not to earn gains on trading in short period.
Valuation of Securities(1) Valuation of Trading Securities
Trading equity and debt securities are initially recognized at acquisition cost plus incidental expenses determined by the individual moving
average method (the specified identification method for debt securities). When the face value of trading debt securities differs from theiracquisition cost, the effective interest method is applied to amortize the difference over the remaining term of the securities. After initialrecognition, if the fair value of trading securities differs from the book value, trading securities are stated at fair value and the resulting
valuation gain or loss is included in current operations.
(2) Valuation of Available-for-sale Securities
Available-for-sale securities are initially recognized at acquisition cost plus incidental expenses, determined by the individual moving averagemethod (the specified identification method for debt securities). The effective interest method is applied to amortize the difference between theface value and the acquisition cost over the remaining term of the debt security. After initial recognition, available-for-sale securities are stated
at fair value, with the net unrealized gain or loss presented as gain or loss on valuation of available-for-sale securities in accumulated othercomprehensive income (loss), which is charged to current operations in a lump sum at the time of disposal or impairment recognition. Nonmarketable equity securities are stated at acquisition cost on the financial statements if the fair value of the securities is not reliably determinable.
If the fair value of equity securities (net asset fair value in case of non-marketable equity securities stated at acquisition cost) is below theacquisition cost and the pervasive evidence of impairment exists, the carrying value is adjusted to fair value and the resulting valuation loss ischarged to current operations. If the collectible value of debt securities is below the amortized cost and the pervasive evidence of impairment
exists, the carrying value is adjusted to collectible value and the resulting valuation loss is charged to current operations. With respect to impaired
securities, any unrealized valuation gain or loss of securities previously included in accumulated other comprehensive income (loss) is reversed.
(3) Valuation of Held-to-maturity Securities
Held-to-maturity securities are stated at acquisition cost plus incidental expenses, determined by the specific identification method.
When the face value of held-to-maturity securities differs from its acquisition cost, the effective interest method is applied to amortize thedifference over the remaining term of the securities. If collectible value is below the amortized cost and the pervasive evidence of impairment
exists, the carrying value is adjusted to collectible value and the resulting valuation loss is charged to current operations.
(4) Valuation of Securities using the Equity Method
Equity securities held for investment in companies in which the Bank and its subsidiaries are able to exercise significant influence over theinvestees (in accordance with the Banking Act, if the Bank holds more than 15 percent of the total issued shares, the Bank is consideredbeing able to exercise significant influence) are accounted for using the equity method. The Bank’s share in net income or net loss ofinvestees is included in current operations. Changes in the retained earnings of investee are reflected in the retained earnings. Changes
in the capital surplus, capital adjustments or accumulated other comprehensive income (loss) of investee are reflected as gain or loss on
valuation of securities using the equity method in accumulated other comprehensive income (loss).

135

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

When the book value of equity securities using the equity method is less than zero due to the cumulative losses of the investees, the Bankand its subsidiaries discontinue applying the equity method and does not provide for additional losses. If the investee subsequently reports
net income, the Bank and its subsidiaries resume applying the equity method only after their share of that net income equals the share of
net losses not recognized during the period that the equity method was suspended.
In addition, any gain or loss from the disposal of equity securities of certain consolidated subsidiaries is accounted for as accumulated othercomprehensive income (loss) resulting from applying the equity method in the statements of financial position if the subsidiaries are stillconsolidated even after the Bank disposes of a portion of equity securities.
(5) Reversal of Impairment Loss on Available-for-sale Securities and Held-to-maturity Securities
If the reasons for impairment loss on available-for-sale securities no longer exist, the recovery is recorded in current operations under nonoperating income up to amount of the previously recognized impairment loss as reversal of impairment loss on available-for-sale securities
and any excess is included in accumulated other comprehensive income as gain on valuation of available-for-sale securities. However, if
the increases in the fair value of the impaired securities are not regarded as the recovery of the impairment, the increases in the fair value
are recorded as gain on valuation of available-for-sale securities in accumulated other comprehensive income. For non-marketable equity
securities, which were impaired based on the net asset fair value, the recovery is recorded up to their acquisition cost.
For held-to-maturity securities, the recovery is recorded in current operations under non-operating income within the amount of amortizedcost that would have been recorded according to the original schedule if the impairment losses had not been recognized as reversal of
impairment loss on held-to-maturity securities.
(6) Reclassification of Securities
When held-to-maturity securities are reclassified to available-for-sale securities, those securities are accounted for at fair value on thereclassification date and the difference between the fair value and book value is reported in accumulated other comprehensive income (loss)
as gain or loss on valuation of available-for-sale securities. When available-for-sale securities are reclassified to held-to-maturity securities,
gain or loss on valuation of available-for-sale securities, which had been recorded until the reclassification date, continue to be included inaccumulated other comprehensive income (loss) and amortized using the effective interest rate method and the amortized amount is charged
to interest income until maturity. The difference between the fair value at the reclassification date and face value of the reclassified securities
to held-to-maturity securities is amortized using effective interest rate method and the amortized amount is charged to interest income. In
addition, when certain trading securities lose their marketability, such securities are reclassified as available-for-sale securities at fair market
value as of reclassification date.
Transfer of Securities
When the realization, expiration or sale of the right to obtain the economic benefits arises and the control of securities is lost from the sale of the
securities, the unrealized valuation gain or loss of securities included in accumulated other comprehensive income (loss) is added to or deductedfrom the gain or loss on disposal of securities. The gain or loss is the difference between the net proceeds receivable or received and its carrying
value. When securities are transferred without losing control of the securities, the transaction is recorded as secured borrowing transaction.
Allowance for Possible Losses on Credits
According to the Korea Financial Accounting Standard Article 57 (Valuation of Receivables), allowance for bad debts shall be provided for estimateduncollectible accounts on a reasonable and objective basis. Presently, the historical loss rate (based on mitigation or roll-rate analysis) is one ofthe permitted reasonable and objective methods to estimate allowance for financial institutions. However, the Bank and its subsidiaries provide
loan loss provision pursuant to the Supervisory Regulation of the Banking Business, which requires providing more than minimum rate of loss
provision for each asset classification category.
The Bank and its subsidiaries apply the Forward Looking Criteria (“FLC”) for their loan classification for large corporate based on the credit rating todetermine allowance for loan losses. Under this method, the borrowers’ future debt repayment capacity as well as their overall financial health andmanagement soundness are considered in developing the credit rating and the reserve for possible loan losses related to large corporate customers.
However, loan classification for the smaller corporate, household loans and credit card receivables is classified based on the delinquency period,
value of collateral and bankruptcy status only. Using such loan classification, the Bank and its subsidiaries classify all credits into five categories
as normal, precautionary, substandard, doubtful, or estimated loss and provides the minimum rate of loss provision for each category balanceusing the prescribed minimum percentages of 0.85 percent (construction, real estate, wholesale & retail, hotel and restaurant industries are 0.9%)
or more, 7 percent or more, 20 percent or more, 50 percent or more and 100 percent, respectively. Households’ loans categorized as normal,
precautionary, substandard and doubtful are 1 percent or more, 10 percent or more, 20 percent or more and 55 percent or more, respectively. Card
receivables as those categories are 1.5 percent or more, 15 percent or more, 20 percent or more and 60 percent or more, respectively.
The Bank and its subsidiaries provide allowance for possible losses on confirmed acceptances and guarantees, unconfirmed acceptances andguarantees, and endorsed notes based on the credit classification, minimum rate of loss provision prescribed by the Financial Supervisory Service

136Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

and the credit conversion factor based on the new standard of Bank for International Settlements Accord.
In addition, the Bank and its subsidiaries provide other allowances for the unused limit of credit card (including unused limit of credit card thathave not been used at least once in recent one year) and unused loan commitments for corporate and retail loan customers considering the credit
conversion factor based on the new standard of Bank for International Settlements Accord and minimum rate of loss provision prescribed by the
Financial Supervisory Service.
Restructuring of Loans
The equity interest in the debtors, net of real estates and/or other assets received as full or partial satisfaction of the Bank’s and subsidiaries’
loans, collected through reorganization proceedings, court mediation or debt restructuring agreements of parties concerned, is recorded at fairvalue at the time of the restructuring. In cases where the fair value of the assets received is less than the book value of the loan (book value before
allowances), the Bank and its subsidiaries offset first the book value against allowances for loan losses and then recognizes provisions for loan
losses. Impairment losses for loans that were restructured in a troubled debt restructuring involving a modification of terms are computed by
the difference between the present value of future cash flows under debt restructuring agreements discounted at effective interest rates at thetime when loans are originated and the book value before allowances for loan losses. If the amount of allowances already established is less than
the impairment losses, the Bank and its subsidiaries establish additional allowances for the difference. Otherwise, the Bank and its subsidiaries
reverse the allowances for loan losses.
Deferred Loan Origination Fees and Costs
The Bank and its subsidiaries defer loan origination fees associated with originating loans and loan origination costs that have future economic
benefits. Loan balances are reported net of these loan origination fees and costs. The deferred loan origination fees and costs are amortized using
the effective interest method with the amortization recognized as adjustments to other interest income.
Valuation of Receivables and Payables at Present Value
Receivables and payables incurred through long-term installment transactions, long-term borrowing and lending transactions, and other similartransactions are stated at the present value of expected future cash flows, and the gain or loss on valuation of related receivables and payables isreflected in current operations, unless the difference between nominal value and present value is immaterial. Present value discount or premiumis amortized using the effective interest rate method and credited or charged to interest income or interest expense.
Tangible Assets and Related Depreciation
Tangible assets are recorded at cost or production cost including incidental expenses. Routine maintenance and repairs are expensed as incurred.
Expenditures that result in the enhancement of the value or the extension of the useful lives of the facilities involved are capitalized as additions
to tangible assets. The Bank adopted the amendment to the Statements of Korea Accounting Standards (“SKAS”) No. 5 “Property, Plant andEquipment,” which permits certain items of its land to be revalued after acquisition date, applying the revaluation models permitted under SKAS
No. 5. As a result of this adoption, gain (loss) on revaluation of tangible assets is accounted as accumulated other comprehensive income and nonoperating expenses, respectively.
Depreciation is computed by using the declining-balance method (straight-line method for building and leasehold improvements) based on theestimated useful lives of the assets as follows:
Tangible assets
Construction

Estimated useful life

Depreciation method

40 years

Straight-line

Leasehold improvements

3~10 years

Straight-line

Equipment

3~20 years

Declining balance

Intangible Assets and Related Amortization
Intangible assets included in other assets are recorded at the production costs or purchase costs plus incidental expenses less discount if any.
Expenditures incurred in conjunction with the development of new products or technology and others, in which the elements of costs can be
individually identified and future benefits expected, are capitalized as development costs. Intangible assets are amortized using the straight-line
method over 5 years and presented after deducting amortized amount.
Valuation Allowance for Non-Business Use Property
Non-business use property included in fixed assets is recorded when the Bank and its subsidiaries acquire collateral by foreclosure on themortgage for loans. Such assets are not depreciated. After foreclosure, the asset is carried at the lower of its carrying amount or fair value
determined by its estimated public auction price. As of December 31, 2009, the Bank and its subsidiaries do not have non-business use property.

137

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

Recognition of Impairment of Assets
When the book value of assets (other than securities and assets valued at present value) exceeds the collective value of the assets due toobsolescence, physical damage or a sharp decrease in market value and the difference is material, the book value are adjusted to collective value
in the statements of financial position and the resulting impairment loss is charged to current operations. If the collective value of the assets
increases in subsequent years, the increase in value is credited to operations as gain until the collective value equals the book value of assetsthat would have been determined had no impairment loss been recognized. The Bank and its subsidiaries assess the collective value based on
expected selling price or appraisal value.
Amortization of Discounts (Premiums) on Debentures
Discounts or premiums on debentures issued are amortized over the period from issuance to maturity using the effective interest rate method.
Amortization of discounts or premiums is recognized as interest expense on the debentures.
Securities under Resale or Repurchase Agreements
Securities purchased under resale agreements are recorded as loans, and securities sold under repurchase agreements are recorded as
borrowings when the Bank and its subsidiaries purchase or sell securities under such agreements.
Other Liability Reserve
A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the Bank and its subsidiaries are recognized as contingent liabilities when it is probablethat an outflow of resources embodying economic benefits required and the amount of the obligation can be measured with sufficient reliability.
Where the effect of the time value of money is material, the amount of the liabilities is the present value of the expenditures expected to berequired to settle the obligation.
Accrued Severance Benefits
The accrued severance benefits that would be payable to assuming all eligible employees and directors were to resign are included in otherliabilities. The Bank and its domestic subsidiaries has purchased severance benefits insurance, which meets the funding requirement for tax
purposes, and made deposits with Samsung Life Insurance Co., Ltd. and others. The deposit for severance benefit is presented as a deduction
from accrued severance benefits.
The estimated accrued severance benefits, which would be payable assuming all eligible employees and executives were to terminate theiremployment, amounted to ₩318,697 million and ₩294,797 million as of December 31, 2009 and 2008, respectively.
The Bank runs the defined benefit retirement pension plan (DB plan), whose investment manager is Merrill Lynch Trust Company, for retirees
of closed branches in U.S. The Bank accounted the present value of estimated pension benefits as of December 31, 2009 as pension benefits
payable. The assets invested in the DB plan is accounted as assets under management of pension benefits and pension benefits payable arededucted from it in accordance with KAI opinion 05-2.
Accounting for Derivative Instruments
The Bank and its subsidiaries account for derivative instruments pursuant to the Interpretations on Financial Accounting Standards 53-70 on
accounting for derivative instruments. Derivative instruments are classified as used for trading activities or for hedging activities according to theirtransaction purpose. All derivative instruments are accounted for at fair value with the valuation gain or loss recorded as an asset or liability. If thederivative instrument is not part of a transaction qualifying as a hedge, the adjustment to fair value is reflected in current operations.
The accounting for derivative transactions that are part of a qualified hedge based both on the purpose of the transaction and on meeting thespecified criteria for hedge accounting differs depending on whether the transaction is a fair value hedge or a cash flow hedge. Fair value hedge
accounting is applied to a derivative instrument designated as hedging the exposure to changes in the fair value of an asset or a liability or a firm
commitment (hedged item) that is attributable to a particular risk. The gain or loss both on the hedging derivative instruments and on the hedged
item attributable to the hedged risk is reflected in current operations. Cash flow hedge accounting is applied to a derivative instrument designatedas hedging the exposure to variability in expected future cash flows of an asset or a liability or a forecasted transaction that is attributable toa particular risk. The effective portion of gain or loss on a derivative instrument designated as a cash flow hedge is recorded as accumulated
other comprehensive income (loss) and the ineffective portion is recorded in current operations. The effective portion of gain or loss recorded
as accumulated other comprehensive income (loss) is reclassified to current earnings in the same period during which the hedged forecasted
transaction affects earnings. If the hedged transaction results in the acquisition of an asset or the incurrence of a liability, the gain or loss inaccumulated other comprehensive income (loss) is added to or deducted from the asset or the liability.
Accounting for Share-based Payment
In accordance with the Statement of Korea Accounting Standards No. 22 - Share-based Payment . and the Interpretations on Financial AccountingStandards 39-35 - Accounting for Stock Options ., in case of equity-settled share-based payment transactions, compensation expense for stock
option and stock option (capital adjustment) are recorded at fair value at the grant date through an agreement service period, whereas in case of138

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

cash-settled share-based payment transactions, compensation expense for stock option and accrued expenses are recorded at fair value at the
grant date through an agreement service period. The other liabilities (accrued expenses) by cash-settled share-based payment transactions areassessed at fair value at the closing day or the final settlement day (assessed at intrinsic value for the portion occurred before December 31, 2009).
The changes in the fair value of accrued expenses after the grant date are reflected as compensation expense for stock option. In addition, forshare-based payment transactions in which the terms of the arrangement provide a choice for the Bank whether the Bank settles the transaction
in cash or by issuing equity instruments, the Bank is required to account for that transaction as a cash-settled share-based payment transaction if
the Bank has a present obligation to settle in cash, or as an equity-settled share-based payment transaction if no such obligation exists. In case ofa cash-settled share-based payment, compensation cost is recorded as capital adjustment (stock option), and in case of an equity-settled sharebased payment, compensation cost is recorded as other liabilities (accrued expenses).
Accounting for Trust Accounts
The Bank separately maintains the books of accounts and financial statements in connection with the trust operations (the trust accounts) fromthose of the bank accounts in accordance with the Financial Investment Services and Capital Markets Act (FSCMA). When surplus funds are
generated through the management of trust assets, such funds are deposited with the Bank and are recorded as due to trust accounts of the bankaccounts. Also, the borrowings from the bank account are recorded as due from trust accounts of the bank accounts. The Bank receives fees for
operation and management of the trust business and accounts for them as fees and commissions from trust accounts.
With respect to certain trust account products, the Bank guarantees the repayment of the principal of the trust accounts and, in certain cases,
a fixed rate of return. If income from such trust accounts is insufficient to pay the guaranteed amount, such a deficiency is satisfied by using
special reserves maintained in the trust accounts, offsetting trust fee payable to the bank accounts and receiving compensation contributions fromthe bank accounts of the Bank. If the Bank pays compensating contributions to the guaranteed return trusts to cover such deficiencies, thesecontributions are reflected as operating expense of the bank accounts and as other income of the trust accounts. There are no compensating
contributions of the Bank for the year ended December 31, 2009.
Merchant Banking Accounts
As permitted by the Restructuring of Financial Institutions Act, the Bank may continue its merchant banking operations, including leasing
business, until the existing contracts acquired from Korea International Merchant Bank upon merger are terminated. Significant accounting
policies applied to the Bank’s merchant banking operations are summarized as follows:(1) Revenue Recognition on Discounted Notes
Interest income on discounted notes is accrued over the term of the notes. Income from the sale of discounted notes is recognized at thedate of sale based on the difference between the purchase and sales prices of the notes, adjusted for interest earned during the holding
period.
(2) Cash Management Accounts (“CMA”)
The Bank recognizes interest income from CMA investments and interest expense from CMA deposits as other income and other expenses,
respectively.
(3) Lease Transactions
The Bank accounts for lease transactions as operating or financing leases, depending on the terms of the lease contracts. In general, noncancelable leases are recognized as financing leases when ownership transfers at expiration of the lease term, when a bargain purchase
option exists, or when the lease term exceeds the estimated economic life of the related asset.
Under the financing lease method, aggregate lease rentals are recorded as financing leases receivable, net of unearned interest, based on
the excess of rental revenue over the cost of the related assets. Unearned interest is recognized as interest income on financing leases using
the effective interest method over the lease term.
Income Tax Expense
Income tax expense is the amount currently payable for the period, additional income taxes or tax refunds for prior years (except for retroactive
adjustments of tax effect directly added or deducted to shareholders’ equity) added to or deducted from the changes in deferred income taxes.
However, deferred income tax assets are recognized only if the future tax benefits from accumulated temporary differences and any tax loss
carryforwards are realizable. The difference between the amount currently payable for the period and income tax expense is accounted for asdeferred income tax assets or liabilities, which will be charged or credited to income tax expense in the period the related temporary difference
reverses in the future. Deferred income tax assets or liabilities are calculated based on the expected tax rate to be applied at the reversal period of
the related assets or liabilities. Tax payable and deferred income tax assets or liabilities regarding to certain items are charged or credited directly
to related components of shareholders’ equity.

139Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

Accounting for Foreign Currency Transactions and Translation
The Bank and its domestic subsidiaries maintain its accounts in Korean Won. Transactions in foreign currencies are recorded in Korean Won
based on the basic rate of exchange on the transaction date. The Korean Won equivalent of assets and liabilities denominated in foreign currencies
are translated in these financial statements based on the basic rate (₩1,167.60 and ₩1,257.50 to US$1.00 at December 31, 2009 and 2008,
respectively) announced by Seoul Money Brokerage Service, Ltd. or cross rates for other currencies other than U.S. Dollars at the end of thereporting period. Translation gains and losses are credited or charged to operations. Financial statements of overseas branches are translated
based on the basic rate at the end of the reporting period.
Application of the Statements of Korea Accounting Standards (“SKAS”)
The Korea Accounting Standard Board (KASB) under the Korea Accounting Institute (KAI) issued the SKAS for achieving a set of Korean accounting
standards that should be internationally acceptable and comparable based on SKAS Act 92. The Bank has adopted SKAS No. 1 (Accounting
Changes and Error Corrections) through SKAS No. 25 (Consolidated Financial Statements) (excluding No. 14) as of or before December 31, 2008.
In addition, in this fiscal year, the balance sheet is renamed to statements of financial position in accordance with the revised Acts on External
Audit for Stock Companies in the Republic of Korea.
Disclosure in Relation with Adoption of K-IFRS(1) Preparation and progress of adopting K-IFRS
Korea has decided that, from 2011, application of K-IFRS becomes mandatory for all listed companies including banks. Based on thisregulation, the Bank set up the task force team for adoption of K-IFRS to make steady progress in the preliminary analysis of the impact
on adoption of K-IFRS, establishment of master plan, decision on alternatives in accounting treatment, design and development of its
accounting system, implementation of its system and on-going maintenance. This process is still in progress. The Bank had already analyzed
the impact on adoption of K-IFRS in April 2008, and has completed to design and develop its accounting system by the end of 2009. In
addition, the bank has implemented its system and on-going maintenance from 2010. In order to have an efficient transition and applicationof K-IFRS, the Bank provides on-the-job-training for employees and team managers.
(2) Expected significant differences between K-IFRS and K-GAAP
If the bank prepares the financial statements adopting K-IFRS, there would be differences in consolidated scope, provision for bad debts,
revenue recognition, derecognition of financial instruments, measurement of financial instruments, employee benefits and others. All
differences are not included and can be changed by additional analysis. In addition, specific influence of significant differences cannot beanalyzed at working-level in several cases.
5. CASH AND DUE FROM BANKS:(1) Cash and due from banks as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

2009

Cash

₩

2008
809,276

876,432₩

Foreign currencies on hand		

389,873		

437,446

Due from banks in Won		

3,283,060		

5,106,517

Due from banks in foreign currencies		

1,864,048		

4,343,860

6,346,257

10,764,255₩₩(2) Due from banks in Won as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

Financial institution		Interest rate (%)

2009

2008

Dec. 31, 2009

Reserve deposit

The Bank of Korea-		

Current deposit

Other banks

0.10 ~ 0.20			

-		

40

Due from banks on time deposits

Other banks

2.85 ~ 5.82			

757,228		

1,234,418

Other due from banks

Other banks

0.10 ~ 1.00			

18,016		

5,338

Other due from banks

Other financial institutions

0.02 ~ 3.34			

1,086,993		

114,561

				

140

₩

₩

1,420,823

3,283,060₩₩

3,752,160

5,106,517

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(3) Due from banks in foreign currencies as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

Financial institution

Interest rate (%)

		

2009

2008

Dec. 31, 2009

Reserve deposit

The Bank of Korea		-		

Due from banks on time deposits

Domestic financial institutions		

0.79 ~ 3.34			

90,411		

145,490

Due from banks on time deposits

Overseas financial institutions		 0.00 ~ 12.00			

237,383		

583,243

Other due from banks

Domestic financial institutions		

0.01 ~ 0.25			

2,748		

9,444

Other due from banks

Overseas financial institutions		 0.00 ~ 10.50			

603,417		

487,436

Overseas financial institutions		

177,773		

315,466

Due from banks in other bank–foreign currencies

752,316₩0.00 ~ 1.00			

			

₩

₩

1,864,048₩

2,802,781

4,343,860(4) Restricted due from banks in Won and foreign currencies as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification

2009

2008

Reason for restriction

Due from banks in Won:
The Bank of Korea₩

1,420,823

490		

KB Futures and others		
Kookmin Bank		
KEB Trust		
		3,752,160₩

Woori Bank and others		

Required under the BOK Act

560

Escrow account12,456		

158

Subscription related to derivatives

-		

2,022

Pledged asset related to borrowings

14,626		

-1,448,395

Required under FSCMA

3,754,900

Due from banks in foreign currencies:
The Bank of Korea		

752,316		

2,802,781

The Bank of China		

190,165		

-UBS and others		

46,841		

252,143

The Bank of Indonesia		

4,161		

4,094

The Bank of Brazil and others		
		

199		

280

993,682		

₩2,442,077

Required under the BOK Act and other
Capital stock paid-up for establishing branch in china
Subscription related to derivatives
Reserve deposits
Deposits related Microcredito Act

3,059,298
6,814,198₩(5) Term structure of due from banks in Won and foreign currencies as of December 31, 2009 was as follows (Unit: In millions):
Classification
Due in less than one year

Due from banks		

Due from banks 		

in Won		in foreign currencies₩

3,277,060₩

1,862,386

Total₩

5,139,446

Due from one to two years		

6,000		

-		

6,000

Due from two to three years		

-		

-		

-

Due from three to five years		-		

1,662		

1,662

Due more than five years		

-		

-		

-

₩

3,283,060₩

1,864,048₩

5,147,108141

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

6. SECURITIES:(1) Securities as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification

2009

Trading securities₩

2008
2,794,096

3,215,885₩

Available-for-sale securities

7,768,016

7,163,333

Held-to-maturity securities

4,662,798

3,550,246

Securities using the equity method

18,985₩20,604

15,243,895

13,950,068₩(2) Securities excluding securities using the equity method as of December 31, 2009 and 2008 consisted of (Unit: In millions):<2009>Classification

Face value		Acquisition

Adjusted bycost (*1)

effective			interest rate			method (*2)

Book value

Trading securities:
Equity securities₩

Beneficiary certificates-₩

15,000Government and public bonds
Finance bonds

39,006-₩15,000₩15,00042,12615,014

125,504

127,308

126,749

126,340

1,462,677

1,469,087

1,466,022

1,477,135

Corporate bonds

78,53178,79577,40678,808Commercial papers

1,057,600

1,051,878

1,054,573

1,054,673

2,739,312

2,781,074

2,739,750

2,794,096

Equity securities-

734,499-

1,661,970

Equity investments-

101,849-

103,865

202,718

203,117203,117

209,852		Available-for-sale securities:

Beneficiary certificates
Government and public bonds

329,925

339,188339,188335,156

Finance bonds

4,476,805

4,465,485

4,431,752

4,474,566

Corporate bonds

752,243755,480735,269

744,283

Asset-backed securities

191,542

275,723

217,567

208,517

Other debt securities

87,644

87,64451,86529,8076,040,877

6,962,985

5,978,758

7,768,016

Government and public bonds

1,160,207

1,164,936

1,164,717

1,164,717

Finance bonds		Held-to-maturity securities:

3,292,678

3,291,793

2,390,691

3,288,544

Foreign government bonds

29,34528,97429,32529,325

Corporate bonds

179,662

179,555

179,624

179,624

Other debt securities
		
		

₩

591

588

588

588

4,662,483

4,665,846

3,764,945

4,662,798

13,442,672₩

14,409,905₩

12,483,453(*1) Acquisition costs of trading securities are the book value before valuation.
(*2) Beneficiary certificates are the book value because they are not subjects by the adjusted cost using the effective interest rate method.

142₩

15,224,910

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<2008>Classification

Face value		Acquisition

Adjusted bycost (*1)

effective			interest rate			method (*2)

Book value

Trading securities:
Equity securities₩

Beneficiary certificates
Government and public bonds
Finance bonds-₩

21,842-₩₩

14,789

5,000

5,000

5,000

4,841

366,505

371,978

372,516

376,938

1,242,477

1,236,691

1,238,052

1,254,816

Corporate bonds

121,498

120,506

121,091

120,121Commercial papers

1,453,500

1,433,921

1,443,156

1,444,380

3,188,980

3,189,938

3,179,815

3,215,885

Equity securities-

796,418-

1,144,056

Equity investments-

82,821-87,821

Beneficiary certificates

199,518

199,518

199,518

199,459

Government and public bonds

665,219

663,920651,657

674,632

Finance bonds

4,104,556

4,079,528

4,057,242

4,033,880

Corporate bonds

834,938

836,959

823,348810,284

Asset-backed securities

150,588

238,262

182,921

161,336		Available-for-sale securities:

Other debt securities		

87,644

87,644

66,161

51,865

6,042,463

6,985,070

5,980,847

7,163,333

911,915

897,780

904,584

904,584

Held-to-maturity securities:
Government and public bonds
Finance bonds

2,368,100

2,366,272

2,365,660

2,365,660

Foreign government bonds

37,60735,927

34,771

34,771

Corporate bonds

244,324

245,171244,281244,281

957

950

950

950

Other debt securities				

3,562,903₩

12,794,346

3,546,100₩

13,721,108

3,550,246₩

12,710,908

3,550,246₩

13,929,464(*1) Acquisition costs of trading securities are the book value before valuation.
(*2) Beneficiary certificates are the book value because they are not subjects by the adjusted cost using the effective interest rate method.

The difference of trading securities between the fair value and the adjusted cost using the effective interest rate method (acquisition cost for
stocks) was recorded as gain on valuation of trading securities amounting to ₩17,598 million and ₩23,893 million, and loss on valuation of trading
securities amounting to ₩2,258 million and ₩9,665 million for the years ended December 31, 2009 and 2008, respectively.
The fair values of trading and available-for-sale debt securities were assessed by applying the average of base prices as of December 31, 2009,
provided by Korea Bond Pricing & KR Co. (KBP), KIS Pricing Inc. and National Information & Credit Evaluation Inc. (NICE).
The fair value of available-for-sale non-marketable equity securities such as Vogo Fund and 20 others, and the restricted available-for-salemarketable equity securities such as Hynix Semiconductor Inc. and 4 others was reliably measured by an independent appraisal instituteusing reasonable judgment. The fair value was determined based on more than one valuation models such as Discounted Cash Flow (DCF)
Model, Imputed Market Value (IMV) Model, Discounted Free Cash Flow to Equity (FCFE) Model, Dividend Discount (DD) Model and Risk Adjusted
Discounted Cash Flow (RADCF) Model depending on the equity securities. In order to assess the fair value of stocks, the financial statements for
5 years are estimated based on past operating result. Also, assuming the same operation is continued during the estimated period, the model isapplied using the estimated financial statements from 2009 to 2013. Operating income and expenses are reasonably estimated based on the past
result, the future plan and the expected market condition, and for non-operating income and expenses, gain or loss from irregular transactions
such as gain or loss on disposal of tangible assets are excluded. For the equity investment of association, net assets are calculated deducting total
liabilities from the present value of assets of each equity investment.

143

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008(3) D iscretionary investing contract assets included in beneficiary certificate of trading securities as of December 31, 2009 and 2008 consistedof (Unit: In millions):
Classification

2009

Short-term financial instruments

₩

2008
1,147

₩

4,275

Stocks13,325573

Others2,301-

Total assets

16,773

4,848

Total liabilities

1,759

7

Net assets value₩

15,014

₩

4,841

(4) T
 he book value of non-marketable stocks and equity investments among available-for-sale securities, which were not valuated at fair value
as of December 31, 2009 and 2008, was as follows (Unit: In millions):<2009>
Company

Amounts

Stocks:Credit Recovery Fund₩

62,466

Samsung Life

32,939Alpha Dome City

8,850

KAMCO

6,330

PDHD

2,000

M Cieta Development

1,275

Hallyu-Wood

1,200

BLADEX

1,146

Others1,594

		117,800

Equity investments:
Consolidated Fund for Impaired Loans

29,877

SHCF Private Equity Fund

5,000

Westend Corporate Restructuring Corporate

5,000

QCP PEF (Private Equity Fund) No. 1

4,000

Petra PEF

4,000

Golden Bridge Green PEF No. 1

4,000

Value Up PEF

3,000

QCP PEF No. 3

2,000

SHC-Aju

2,000

Others890

		59,767₩

144

177,567

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<2008>
Company

Amounts

Stocks:Samsung Life

32,939₩Alpha Dome City

8,850

KAMCO

6,330

PDHD

2,000

M Cieta Development

1,275

BLADEX

1,234

Hallyu-Wood

1,200

Others1,446

		55,274Equity investments:
Consolidated Fund for Impaired Loans

36,680SHCF Private Equity Fund

5,000

Westend Corporate Restructuring Corporate

5,000

HTIC 6th Corporate Restructuring Corporate

3,000

		

49,680		

104,954₩(5) The impairment loss and the reversal of impairment loss on available-for-sale securities for the years ended December 31, 2009 and 2008
were as follows (Unit: In millions):
Classification

2009

2008

Impairment
Equity securities

Reversal

1,547₩

Corporate bonds

Impairment
7,920

₩

₩

Reversal

22,929

₩

1,482

878

205

-

-

Asset-backed securities

9,085

10,602

15,87331,092

Beneficiary certificates

10,574--302

22,084₩

18,727₩₩38,802₩32,876(6) Securities provided as collateral as of December 31, 2009 were as follows (Unit: In millions):
Provided toCollateral amount

Customers₩

Provided for
686,132

Sale of RP to customer

BOK

540,000

544,336

Settlement of difference

BOK

920,000

920,126

Borrowings from BOK

BOK110,000

110,374

RP soldBank

330,000

330,502

REPO
Borrowings

SPC

675,000

Book value₩

490,000

501,934

1,064,200

1,065,999

KRX

29,472

29,472

Settlement

Brazilian money brokerage service

2,750

2,750

Collateral

Other financial institutes

Deutsche Bundes Bank

837₩

4,162,259

824₩

Derivatives settlement and others

Borrowings from Deutsche Bundes Bank

4,192,449

In addition, securities that are possible to be discounted by BOK amounted to ₩4,180,296 million as of December 31, 2009.

145

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(7) Securities using the equity method
1) Securities using the equity method as of December 31, 2009 and 2008 were summarized as follows (Unit: shares in thousand, in millions):<2009>
Company

No. of shares Ownership

		

(%)

KEB Fund Services Co., Ltd. (KEBFS) (*1)
Lippo Incheon Development Co., Ltd.

510

(*2)

100.00Acquisition

Net asset

Book

cost

value

value

2,550

₩

8,006

₩

2,550

₩

388

2.70

1,939

1,697

1,697

Realty Advisors Korea, Ltd. (*2)

200

14.29

1,000

1,038

1,038

Ilsan Project Co., Ltd. (*2)

288

4.80

2,880

2,602

2,602

Soul Flora Co., Ltd. (*2)

165

5.00

825

748

748

KEB USA International Corp. (USAI)

0.1

100.00

2,919

6,459

6,459

HTIC2 Corporate Restructuring Association

0.04

20.00

4,000

3,891

3,891

			

₩

16,11324,441₩₩

18,985(*1) The investment securities were excluded from the application of equity method because the assets are less than ₩10,000 million as of the end of prior year andthe change in investment arising from this company was considered insignificant.
(*2) The Bank has important influence over the company through designation of a director and others, although the ownership is less than 15%.

<2008>
Company

No. of shares Ownership

		

(%)

KEB Fund Services Co., Ltd. (KEBFS) (*1)
Realty Advisors Korea, Ltd.

510

(*2)

Lippo Incheon Development Co., Ltd. (*2)
Ilsan Project Co., Ltd.

(*2)

100.00Acquisition

Net asset

Book

cost

value

value

2,550

₩

5,943

₩

2,550

₩

388

2.70

1,939

1,863

1,863

200

14.29

1,000

2,955

2,955

288

4.80

2,880

2,775

2,775

Soul Flora Co., Ltd. (*2)

20

5.00

100

88

88

KEB USA International Corp. (USAI)

0.1

100.00

3,144

6,399

6,399

HTIC2 Corporate Restructuring Association

0.04

20.00

4,000

			

₩

15,613

3,974

3,974

23,997₩₩

20,604(*1) The investment securities were excluded from the application of equity method because the assets are less than ₩7,000 million as of the end of prior year andthe change in investment arising from this company was considered insignificant.
(*2) The Bank has important influence over the company through designation of a director and others, although the ownership is less than 15%.

2) The valuation of securities using the equity method for the years ended December 31, 2009 and 2008 was as follows (Unit: In millions):<2009>
Company

Acquisition

Book

Increase

Foreign

Equity inBook value

cost

earnings

after

value

(Decrease)exchange		

beforedividend

trading				valuation		

income

				
KEBFS

(*1)

Realty Advisors Korea, Ltd.

₩
(*2)

2,550

₩

2,550

₩

valuation(loss)
-

₩

-

₩

-

₩

2,550

1,000

2,955

(1,550)

-

(367)

1,038

Lippo Incheon Development Co., Ltd. (*2)

1,939

1,863

-

-

(166)

1,697

Ilsan Project Co., Ltd. (*2)

2,880

2,775

-

-

(173)

2,602

Soul Flora Co., Ltd. (*2)

825

88

725

-

(65)

748

KEB USA International Corp. (USAI)

2,919

6,399

-

(458)

518

6,459

HTIC2 Corporate restructuring association

4,000

3,974

-

-

(83)

3,891

₩ 16,113₩ 20,604(336)₩ 18,985

₩

(825)

₩

(458)

₩

(*1) The investment securities were excluded from the application of equity method because the assets are less than ₩10,000 million as of the end of prior year andthe change in investment arising from this company was considered insignificant.
(*2) The Bank has important influence over the company through designation of a director and others, although the ownership is less than 15%.

146

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<2008>
Company

Acquisition

Book

Increase

Foreign

Equity inBook value

cost

earnings

after

value

(Decrease)exchange		

beforedividend

trading				valuation		

income				
KEBFS (*1)
Realty Advisors Korea, Ltd.

2,550

₩
(*2)

₩

2,550

valuation(loss)
-

₩

-

₩

-

₩

2,550

₩

1,000

1,000

(1,200)

-

3,155

2,955

Lippo Incheon Development Co., Ltd. (*2)

1,939

1,830

-

-

33

1,863

Ilsan Project Co., Ltd. (*2)

2,880

-

2,880

-

(105)

2,775

Soul Flora Co., Ltd. (*2)

100

-

100

-

(12)

88

KEB USA International Corp. (USAI)

3,144

4,236

-

1,442

721

6,399

HTIC2 Corporate restructuring association

4,000

4,000

-

-

(26)

3,974

₩ 15,613₩ 13,616

3,766₩ 20,604

1,939

1,830

-

33

1,863

1,000

₩ (1,200)

1,000

₩

₩

₩

1,780

₩

1,442

₩

-

₩

₩

3,155

2,955

₩

(*1) The investment securities were excluded from the application of equity method because the assets are less than ₩7,000 million as of the end of prior year andthe change in investment arising from this company was considered insignificant.
(*2) The Bank has important influence over the company through designation of a director and others, although the ownership is less than 15%.

3) Summary of Financial Information of Affiliates
The summary of financial information in affiliates using the equity method as of and for the year ended December 31, 2009 was as follows(Unit: In millions):
Classification

Lippo

Ilsan

RealtyTotal liabilities

KEB FundOthers

Total

Serevices

9,307₩ 61,601₩ 971,219
816,654

IncheonProject Co.,

Advisors

Corporate

Development

Ltd.

Korea, Ltd.

Restructuring Co., Ltd.

Co., Ltd.			
Total assets

HTIC2₩ 634,017₩ 238,544

571,163

184,343₩

Association
7,478₩ 20,272208

19,455

1,301

40,184₩

Operation revenue

-

-

-

101

10,3202,699

13,120Net income (loss)(6,149)(3,620)(2,569)

(206)

1,538

(533)

(11,539)

Unaudited financial statements as of December 31, 2009 were used for the application of the equity method. The significant events from theclosing dates of the investees to that of the Bank were properly reflected in applying the equity method. The material transactions or events fromsetting day of each subsidiary to December 31, 2009 were considered in valuation using the equity method. The Bank has performed proceduresto verify reliability of unaudited financial statements which include securing and confirming the signatures of their representatives and internal
auditors.

147

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008(8) The portfolio of securities excluding securities using the equity method, by industry, as of December 31, 2009 and 2008 was as follows(Unit: In millions):
By industry type

2009

2008

AmountPercentage (%)

AmountPercentage (%)

Trading securities:
Government and government-invested public companies₩

643,767

23.04₩

1,101,259

34.25

Financial and insurance institutions		

1,871,582

66.98		

1,694,576

52.69

Manufacturing		

52,423

1.88		

31,644

0.98

Others		

388,406

12.08₩

2,794,096

100.00₩3,215,885

100.00₩3,047,668

39.23

₩

2,221,412

31.01

Financial and insurance institutions		

2,453,098

31.58		

2,933,240

40.95

Manufacturing		

1,267,385

16.32		

845,475

11.80

Others		

999,865

12.87		

1,163,206

16.24

7,163,333

100.00		

226,324

8.10		

Available-for-sale securities:
Government and government-invested public companies		

₩7,768,016

100.00₩₩3,832,836

82.20

₩

Held-to-maturity securities:
2,295,429

64.65

Financial and insurance institutions		

Government and government-invested public companies

746,51316.01		

1,154,819

32.53

Manufacturing		

58,2591.25		

64,178

1.81

Others		

25,1900.54		

35,8201.01

3,550,246

100.00		

148₩

4,662,798

100.00₩Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008(9) The portfolio of securities excluding securities using the equity method, by security type, as of December 31, 2009 and 2008 was as follows(Unit: In millions):
By security type

2009

2008

AmountPercentage (%)

AmountPercentage (%)

Trading securities:
Stocks42,126

1.51

Fixed rate bonds		

1,514,345

Floating rate bonds		

46,140Subordinated bonds		

121,798

4.36		--

Beneficiary certificates		

15,0140.54		

4,841

0.15

₩

Commercial paper		

14,7890.46

54.20		

3,148,422

97.90

1.65		

47,833

1.49₩

1,054,673

37.74		--₩

2,794,096

100.00₩3,215,885

100.00₩1,661,970

21.40

₩

1,144,056

15.97

Fixed rate bonds		

3,820,426

49.18		

3,266,888

45.61

Floating rate bonds		

1,263,947

16.27		

1,576,525

22.01

Subordinated bonds		

668,1818.60		

836,717

11.68

Convertible bonds		

9,721

0.13		--

Bond with stock warrants		

247

0.01		--

Beneficiary certificates		

209,852

2.70		

199,459

2.78

Others		133,672

1.71		

139,688

1.95

		
Available-for-sale securities:
Stocks		₩7,768,016

100.00₩7,163,333

100.00₩4,275,151

91.69

₩

Held-to-maturity securities:
2,950,082

83.10

Floating rate bonds		

Fixed rate bonds

68,4551.47		

69,861

1.97

Subordinated bonds		

318,604

6.83		

529,353

14.91

Others				₩

588
4,662,798

0.01		
100.00

₩

950

0.02

3,550,246

100.00149

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008(10) T he portfolio of securities excluding securities using the equity method, by country, as of December 31, 2009 and 2008 was as follows(Unit: In millions):
By country type

2009

2008

AmountPercentage (%)

AmountPercentage (%)

Trading securities:
Korea

2,793,585₩

Others		
		

99.98

511

3,215,885₩

0.02		

100.00--₩2,794,096

100.00₩3,215,885

100.00₩7,704,267

99.18

₩

7,091,847

99.00

Available-for-sale securities:
Korea

Cayman Islands		

41,1670.53		

45,019

0.63

USA		

6,214

0.08		

6,532

0.09

Hong Kong (China)		

4,840

0.06		

4,244

0.06

UK		

3,140

0.04		

2,560

0.04

Others		

8,388

0.11		₩

7,768,016₩

4,533,112

13,1310.18

100.00₩7,163,333

100.0097.22₩

Held-to-maturity securities:
Korea

3,445,715

97.06

2.08		

68,474

1.93

19,1280.41		

20,044

0.56

6,718

0.14		

9,407

0.26

Philippines		

6,062

0.13		

5,683

0.16

Others		824

0.02		

923

0.03

3,550,246

100.00Indonesia		

96,954Singapore		Brazil		

4,662,798₩

100.00₩(11) T erm structure of securities except for stocks and equity investments in available-for-sale and held-to-maturity securities as of December
31, 2009 was as follows (Unit: In millions):
Classification

Due in 1 year

Due after

Due after

More thanor less

1 year

5 years

10 years		

throughthrough		

5 years

10 years

597,800₩ 1,018,429₩

Government and public bonds
Finance bonds

₩

9,984

₩

Total

-

₩ 1,626,213

5,961,790

3,044,204

234,251-

9,240,245

Foreign government bonds

19,128

7,058

3,139

-

29,325

Corporate bonds

482,727

519,988

--

1,002,715

Beneficiary certificates

15,014

4,676-

205,176

224,866

65,105

119,033

24,379-208,517

1,054,673---

1,054,673

Asset-backed securities
Commercial paper
Others

150

588

8

₩ 8,196,825₩ 4,713,396

29,799₩301,552₩-

30,395205,176₩13,416,949

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008(12) Structured securities relating to stock and interest rate and credit risk as of December 31, 2009 and 2008 were as follows 		
(Unit: In millions):<2009>Classification

Won

Foreign currencies

Total

Structured notes relating to stock:
Convertible bonds (available-for-sale securities)

247

₩

-

₩

247

₩

Convertible bonds (loans)

49,490-49,490Bonds with stock warrants (available-for-sale securities)

9,721

-

9,721

Bonds with stock warrants (loans)

19,000-19,000Equity Linked Warrants

8

-

8

78,466-78,466

20,259-20,25920,259-20,259Structured notes relating to interest rate:Long-term government bond floating rates notes (CMT) (available-for-sale securities)		Structured notes relating to credit risk:
Synthetic CDO-

		98,725₩

16,788

16,788

16,788₩

115,513₩<2008>Classification

Won

Foreign currencies

Total

Structured notes relating to stock:
Convertible bonds (available-for-sale securities)

1,500

₩

-

₩

1,500

₩

Convertible bonds (loans)

45,070-45,070Bonds with stock warrants (available-for-sale securities)

6,700

-

6,700

101,500-

101,5008-

8

154,778-

154,778

Long-term government bond floating rates notes (CMT) (available-for-sale securities)

20,079-20,079Range (accrual) bond (available-for-sale securities)

19,822-

19,82239,901-

39,901-

18,362

18,362

Bonds with stock warrants (loans)
Equity Linked Warrants		
Structured notes relating to interest rate:		
Structured notes relating to credit risk:
Synthetic CDO		194,679₩

18,362₩

213,041₩(13) Changes in accumulated other comprehensive income (loss) of available-for-sale securities for the year ended December 31, 2009 wereas follows (Unit: In millions):
Classification

Beginning

Decrease

Disposal

Deferred				

income tax

Equity securities₩ (121,883)₩

Debt securities		
₩376,712₩713,079₩ (157,795)(62,530)		

51,917		

314,182

764,996₩

16,863		

₩ (140,932)

Ending₩(14,889)		

₩ (136,772)₩

810,113(8,639)801,474(14) Changes in accumulated other comprehensive loss of held-to-maturity securities for the year ended December 31, 2009 were as follows(Unit: In millions):
Classification

Beginning

Decrease

Disposal

Deferred				Debt securities

₩

(319)

₩

220

₩

Endingincome tax
168

₩

(85)

₩

(16)

151

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008(15) Changes in accumulated other comprehensive loss of negative changes of securities using the equity method for the year ended
December 31, 2009 were as follows (Unit: In millions):
Classification

Beginning

Decrease

Disposal

Deferred				
Negative changes in securities using the equity method

₩

-

₩

(12)

₩

Endingincome tax
-

2

₩

₩

(10)

7. LOANS:(1) Loans as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification2009

Call loans₩

2008
1,037,809₩

841,077

Domestic import usance bill

2,616,185

2,746,929

Credit card receivables

2,422,943

2,552,607

Bills bought in foreign currencies

4,055,089

4,479,977

Bills bought in Won

1,306,573

2,263,270

Bonds purchased under repurchase agreements

1,786,000

2,342,717

Loans in Won

43,016,804

42,325,196

Loans in foreign currencies

10,250,284

11,495,741

166,525

130,689

Factoring receivables
Advances for customers

8,998

31,127

Privately placed bonds

666,220738,203		

67,333,430

69,947,533

Less: Allowance for possible loan losses (see Note 19)(1,038,547)(1,131,852)

Deferred loan origination fees and costs(58,037)(53,179)

		

₩66,236,846₩

68,762,502(2) Loans in Won and loans in foreign currencies as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification		

2009

2008

Loans in Won:
Commercial

Financial loans:

			 Working capital loans₩

			 Facilities loans		21,209,519₩

3,621,818

22,390,838
3,343,602

Loans with government funds:

			 Working capital loans

48,73472,339

			 Facilities loans

447,939

506,575

				Households
		25,328,010

26,313,354

General purpose loans

13,411,891

13,574,160

Housing loans

4,157,226

2,288,830

				

17,569,117

15,862,990

Working capital loans

82,89895,978		

Facilities loans

24,25944,404

		General purpose loans

12,520

8,470

				

119,677

148,852

Total loans in Won			Public sector and others

43,016,804

42,325,196

Loans in foreign currencies:

Working capital loans

1,539,051

1,930,606

		Facilities loans

3,132,988

4,157,987

		Others

5,501,380

5,380,589

		Inter-bank loans

76,86526,559Total loans in foreign currencies			
				

152

10,250,284₩

53,267,088

11,495,741₩

53,820,937

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008(3) Loans in Won, loans in foreign currencies and domestic import usance bill, classified by borrower type, as of December 31, 2009 and 2008
were as follows (Unit: In millions):<2009>
By borrower type

Loans in Won

Loans inforeigncurrencies

Domestic
importusance bill

Total

Large corporations
Small and medium corporations (*)
Households
Public sector and others₩    6,099,711
19,228,299
17,569,117
119,677₩   43,016,804₩    6,220,600
3,283,187
536,535
209,962₩   10,250,284₩    2,089,531
526,654₩    2,616,185₩   14,409,842
23,038,140
18,105,652
329,639₩   55,883,273

Percentage
(%)
25.79
41.22
32.40
0.59
100.00(*) Small and medium corporations are prescribed in Article 2 of the Small and Medium-sized Enterprise Basic Act.

<2008>
By borrower type

Loans in Won

Loans inforeigncurrencies

Domestic
importusance bill

Total

Large corporations
Small and medium corporations (*)
Households
Public sector and others₩    5,283,208
21,030,146
15,862,990
148,852₩   42,325,196₩    6,859,179
3,900,862
524,362
211,338₩   11,495,741₩    1,924,276
822,653₩    2,746,929₩   14,066,663
25,753,661
16,387,352
360,190₩   56,567,866

Percentage
(%)
24.87
45.53
28.97
0.63
100.00(*) Small and medium corporations are prescribed in Article 2 of the Small and Medium-sized Enterprise Basic Act.

(4) Loans in foreign currencies and domestic import usance bill, classified by borrower’s country, as of December 31, 2009 and 2008 were as
follows (Unit: In thousands of U.S. Dollars, in millions of Won):<2009>Classification

Korea
Canada
USA
Japan
China
OthersLoans in foreign currencies
Loans in U.S.
Dollars (*)

Translation
into Won$₩    5,910,533
1,695,300
1,049,829
377,744
158,616
1,058,262₩   10,250,284$

5,062,121
1,451,952
899,134
323,522
135,848906,357
8,778,934

Domestic import usance bill
Loans in U.S.
Translation
Dollars (*)
into Won$
2,240,651 ₩    2,616,185$
2,240,651 ₩    2,616,185

Total

Percentage(%)₩    8,526,718
1,695,300
1,049,829
377,744
158,616
1,058,262₩   12,866,469

66.27
13.18
8.16
2.94
1.23
8.22
100.00(*) Foreign currencies other than U.S. Dollars are converted into U.S. Dollars at the rate at the date of the statement of financial position.

153

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<2008>Classification

Loans in foreign currencies		

Domestic import usance bill		 Total		 Percentage

Loans in U.S.		

Loans in U.S.

DollarsKorea(*)$ 5,416,437

Translation		

Translation				 (%)(*)

into Won		

Dollars 		 into Won				₩ 6,811,169$ 2,184,437₩ 2,746,929₩ 9,558,098		

67.12

Canada		

1,360,041		 1,710,252		

-		

-		

1,710,252		

12.01

USA		

910,855		 1,145,401		

-		

-		

1,145,401		

8.04

Japan		

450,074		

565,968		

-		

-		

565,968		

3.97

Singapore		

161,365		

202,917		

-		

-		

202,917		

1.42

Others		

842,970		 1,060,034		

-		

-		

1,060,034		

7.44₩14,242,670		

100.00$ 9,141,742₩11,495,741$ 2,184,437₩ 2,746,929(*) Foreign currencies other than U.S. Dollars are converted into U.S. Dollars at the rate at the date of the statement of financial position.

(5) L oans on Won, loans in foreign currencies and domestic import usance bill, classified by industry, as of December 31, 2009 and 2008 wereas follows (Unit: In millions):<2009>
By borrower type

Corporations:

Loans in Won

Loans in

Domestic

Total

foreignimportcurrencies

usance bill

Percentage(%)₩   25,328,010₩    4,768,630₩    2,616,185₩   32,712,825

63.96

Manufacturing

10,799,051

2,234,736

2,283,777

15,317,564

29.95

Wholesale & retail2,853,120

1,126,411

302,645

4,282,176

8.37

Real estate and renting and leasing

3,541,366

131,414-

3,672,780

7.18

Construction

2,716,933

58,233

12,414

2,787,580

5.45Transportation business

1,219,932

547,212201

1,767,345

3.46

Others4,197,608

670,624

17,1484,885,380

9.55

Households

17,569,117

536,535-

18,105,652

35.40

119,677

209,962-

329,6390.64

43,016,804

5,515,127

2,616,185

51,148,116

100.00-4,735,157-

4,735,157₩   43,016,804₩   10,250,284₩    2,616,185₩   55,883,273

Loans in Won

Loans in

Domestic

Total

foreignimportcurrencies

usance bill₩    5,802,160₩    2,746,929₩   34,862,443

Public sector and others
Loans of overseas branches<2008>
By borrower type

Corporations:₩   26,313,354

Percentage
(%)
67.55

Manufacturing

10,146,952

2,724,646

2,325,019

15,196,617

29.45

Service

3,446,780

1,432,851

381,2395,260,870

10.19

Real estate and renting and leasing

3,892,542

153,04862

4,045,652

7.84

Construction

2,980,393

41,384

10,614

3,032,391

5.88

Transportation business

1,312,335

759,017

4,355

2,075,707

4.02

Others4,534,352

691,214

25,6405,251,206

10.17

Households

15,862,990

524,362-

16,387,352

31.75

Public sector and others
Loans of overseas branches

154

148,852

211,338-

360,1900.70

42,325,196

6,537,860

2,746,929

51,609,985

100.00-4,957,881-

4,957,881₩   42,325,196₩   11,495,741₩    2,746,929₩   56,567,866

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(6) Loans to financial institutions as of December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>Classification

Loans in Won Loans in

Call loans		

foreign		currencies

Bank

₩

Other financial institutions
Overseas financial institutions₩

50,152

40,216

₩

₩

Total

608,953₩

Percentage (%)

699,32135.09

821,882

21,365-843,247

42.31-

21,605428,856

450,461

22.60

83,186₩ 1,037,809₩ 1,993,029

100.00Call loans

Total

872,034₩<2008>Classification

Loans in Won Loans in		foreign		currencies (*)

Bank

₩

Other financial institutions
Overseas financial institutions₩

54,792-₩₩201,913₩

Percentage (%)

256,705

14.14

844,676

47,860-892,536

49.18-

26,559639,164

665,72336.68

841,077₩ 1,814,964

100.00899,468

74,419₩₩(*) Domestic import usance bill is included in loans in foreign currencies.

(7) The term structure of loans as of December 31, 2009 was as follows (Unit: In millions):
Classification

Loans in Won

		
Due in less than one year₩

Loans in foreign
currencies

32,534,106₩

6,332,819

Domestic importTotal

usance bill₩

2,615,002₩

41,481,927

Due from one to two years

2,723,886

1,171,407

90

3,895,383

Due from two to three years

1,915,776

768,132

1,093

2,685,001

Due from three to five years

1,792,614

932,819-

2,725,433

Due after five years

4,050,422₩

43,016,804

1,045,107₩

10,250,284₩

2,616,185

5,095,529₩

55,883,273(8) The changes in deferred loan origination fees and costs for the year ended December 31, 2009 were as follows (Unit: In millions):
Beginning balance
Deferred loan origination fees and costs₩

53,179Addition₩

Deduction
47,392₩Ending balance(42,534)₩

58,037(9) The disposed loans for the year ended December 31, 2009 were as follows (Unit: In millions):
Purchaser

Nominal amount				
Gyeonggi Mutual Savings Bank₩

Fine Partners Co., Ltd. and others
Hyundai Asset Resolution Co., Ltd.

KEB 17th Securitization Specialty Co., Ltd.

Gain (Loss) on

possible loan

disposal of loans

losses at disposal
157,444
188,632(*)

Allowance of₩

12,91433,917₩(2,705)(1,166)25,381-

2,758

110,4028,303(21,779)(*) Gain on disposal of bad debts

155

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

8. RESTRUCTURED LOANS:(1) The loans that were restructured because of workouts plan and others for the year ended December 31, 2009 were as follows(Unit: In millions):
Restructuring loans Present value (*)

Classification

Ending balance of			

present value			discounts

Workout plan

1,092,768₩

1,088,580

₩

4,188

₩

Corporate reorganization		

137,135		

135,340		

1,795

Rationalization of industry		

275,760		

246,410		

29,3501,505,663₩

1,470,330₩

35,333₩(*) As the present value is calculated with fair value at the restructuring date, if there is no fair value, the present value of total future cash receipts under the
restructuring plans is discounted using interest rates of 3.41 percent to 13.46 percent. Also, the present value discount is calculated using effective interest rate
method.

(2) Changes in the present value discounts relating to the outstanding restructured loans for the year ended December 31, 2009 were as
follows (Unit: In millions):
Classification

Amount (*1)

Present value discounts

		

Beginning		balance			

Addition

Deduction

Endingbalance (*2)

Loans:
Court receivership

₩

2,235

₩

517

₩

-

₩

336

₩

181

Others		

183,047		

33,097		

5,516		

7,767		

30,846

			

185,282		

33,614		

5,516		

8,103		

31,027

Accounts receivable:
Court receivership		

-		

-		

-		

-		

-

Others		

16,348		

4,427		

1,027		

1,148		

4,306

4,427

1,027

1,148

		

16,348₩(*1) These only include restructured loans discounted at present value.
(*2) The present value discount is presented as allowance of possible loan losses.

156

201,630₩

38,041

₩

6,543

₩

9,251

4,306
₩

35,333

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

9. ALLOWANCE FOR POSSIBLE LOAN LOSSES:(1) The allowance for possible loan losses as of December 31, 2009 and 2008 was summarized as follows (Unit: In millions):<2009>Classification
Loans:
Call loans
Allowance
Allowance percentage
Credit card loans
Allowance
Allowance percentage
Bills bought in foreign currencies (*1)
Allowance
Allowance percentage
Bonds bought under resale agreements
Allowance
Allowance percentage
Loans in Won (*2)
Allowance
Allowance percentage
Loans in foreign currencies (*3)
Allowance
Allowance percentage
Inter-bank loans
Allowance
Allowance percentage
Factoring receivables
Allowance
Allowance percentage
Advances for customers
Allowance
Allowance percentage
Privately placed bonds (*4)
Allowance
Allowance percentage
Other accounts (*5)
Allowance
Allowance percentage
Sum:
Loans and other accounts
Allowance
Allowance percentage
Present value discounts
Allowance for possible loan losseson the statement of financial position

NormalPrecautionary Substandard

Doubtful

Estimated
loss

Total

₩  1,037,809 ₩            - ₩            - ₩            - ₩            - ₩  1,037,809
62
62
0.01%
0.01%
2,359,510
28,889468
27,3596,717
2,422,943
35,393
4,676
215
18,6796,717
65,6801.50%
16.19%
45.94%
68.27%
100.00%2.71%
4,112,765
5,196
25,8562,070
4,145,887
34,824
984
5,171
1,035
42,0140.85%
18.94%
20.00%
50.00%
1.01%
1,786,000
1,786,000
42,978,298
804,658
297,296
78,71343,06644,202,031
413,557
77,641
70,31145,17643,066
649,751
0.96%
9.65%
23.65%
57.39%
100.00%1.47%
12,401,085
200,777
148,990
32,288
6,342
12,789,482
114,896
20,431
58,814
18,434
6,342
218,917
0.93%
10.18%
39.48%
57.09%
100.00%1.71%
76,86576,865
166,525
166,525
1,416
1,416
0.85%
0.85%
276
6,134
134
2,454
8,998
19
1,227
67
2,454
3,767
7.00%
20.00%
50.00%
100.00%41.86%
658,184
2,000
2,024
3,532
123
665,863
5,595
140
405
1,766
123
8,029
0.85%
7.00%
20.00%
50.00%
100.00%
1.21%
9,685
3,544
4,558
22,222
1,230
41,23958
232
912
11,146
1,230
13,5780.60%
6.55%
20.00%
50.16%
100.00%32.93%
65,586,726
605,801
0.92%
29,3501,045,340
104,123
9.96%
1,868

485,326
137,055
28.24%
2,955

166,318
96,30357.90%
1,160

59,93259,932100.00%-67,343,642
1,003,214
1.49%
35,333₩    635,151 ₩    105,991 ₩    140,010 ₩      97,463 ₩      59,932 ₩  1,038,547(*1) Local L/C bills bought in Won amounting to ₩22,035 million, Local L/C bills bought in foreign currencies amounting to ₩63,950 million among bills bought in
Won and Bills of exchange in Won at sight amounting to ₩4,813 million are included in bills bought in foreign currencies.
(*2) Commercial bills purchased amounting to ₩1,215,775 million among bills bought in Won are included in bills bought in foreign currencies, and present value
discount amounting to ₩30,548 million is deducted.
(*3) Domestic import usance bill is included in foreign currencies. Interbank loans in foreign currencies of ₩76,865 million and present value discount amounting to₩122 million is deducted.
(*4) Present value discount amounting to ₩357 million is deducted on privately placed bonds.
(*5) Other accounts consisted of accounts receivable (transfer-in bills bought in foreign currencies) amounting to ₩2,037 million, suspense payments in relation withloans amounting to ₩38,614 million and securities (commercial paper) amounting to ₩588 million.

157

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<2008>Classification
Loans:
Call loans
Allowance
Allowance percentage
Credit card loans
Allowance
Allowance percentage
Bills bought in foreign currencies (*1)
Allowance
Allowance percentage
Bonds bought under resale agreements
Allowance
Allowance percentage
Loans in Won (*2)
Allowance
Allowance percentage
Loans in foreign currencies (*3)
Allowance
Allowance percentage
Inter-bank loans
Allowance
Allowance percentage
Factoring receivables
Allowance
Allowance percentage
Advances for customers (*4)
Allowance
Allowance percentage
Privately placed bonds (*5)
Allowance
Allowance percentage
Other accounts (*6)
Allowance
Allowance percentage
Sum:
Loans and other accounts
Allowance
Allowance percentage
Present value discounts
Allowance for possible loan losseson the statement of financial position

NormalPrecautionary Substandard

Doubtful

Estimated
loss

Total

₩    841,077 ₩            - ₩            - ₩            - ₩            - ₩    841,077
2,477,045
40,633
210
25,984
8,735
2,552,607
37,1568,157
42
15,9308,735
70,0201.50%
20.07%
20.00%
61.31%
100.00%2.74%
4,535,209
578
10,676
4,546,463
38,55540
5,231
43,8260.85%
7.00%
49.00%
0.96%
2,342,717
2,342,717
43,303,426
565,627
385,029
48,521
186,360
44,488,963
398,941
46,44578,262
27,619186,360
737,627
0.92%
8.21%
20.33%
56.92%
100.00%1.66%
13,992,855
148,492
37,84815,061
21,855
14,216,111
119,879
11,976
11,746
11,91921,855
177,375
0.86%
8.07%
31.03%
79.13%
100.00%1.25%
26,55926,559130,689
130,689
1,111
1,111
0.85%
0.85%
3,016
8,180
3,165
46
16,18230,589
26
898
633
23
16,182
17,7620.85%
10.98%
20.00%
50.00%
100.00%58.07%
733,293
2,200
2,360
291
738,144
5,353
154
472
291
6,270
0.73%
7.00%
20.00%
100.00%0.85%
12,291
6,548
4,259
6,020
35,41164,529
78
430
852
3,049
35,411
39,8200.64%
6.57%
20.00%
50.65%
100.00%61.71%
68,398,177
601,099
0.88%
34,802772,258
68,1008.82%
1,194₩    635,901₩     69,294

443,547
97,23821.92%
2,045

95,63258,54061.21%-

268,834
268,834
100.00%-69,978,448
1,093,811
1.56%
38,041₩    99,283 ₩      58,540 ₩    268,834 ₩  1,131,852(*1) Local L/C bills bought in Won amounting to ₩17,731 million and Local L/C bills bought in foreign currencies amounting to ₩48,755 million among bills bought in
Won are included in bills bought in foreign currencies.
(*2) Commercial bills purchased amounting to ₩2,196,784 million among bills bought in Won are included in bills bought in foreign currencies, and present value
discount amounting to ₩33,017 million is deducted.
(*3) Domestic import usance bill is included in foreign currencies. Interbank loans in foreign currencies of ₩26,559 million is deducted.
(*4) Present value discount amounting to ₩538 million is deducted on advances for customers.
(*5) Present value discount amounting to ₩59 million is deducted on privately placed bonds.
(*6) Other accounts consisted of account receivable (transfer-in bills bought in foreign currencies) amounting to ₩5,099 million, suspense payments in relation withloans amounting to ₩58,480 million and securities (commercial paper) amounting to ₩950 million.

158

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(2) The changes in allowance for possible loan losses for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification

2009

Beginning balance₩

2008
1,131,852

753,696₩

Provision for possible loan losses

677,349

778,445

Loans written-off(926,361)(597,106)

Repurchase of loan and others

168,125

183,783

Translation adjustments of overseas(5,272)

21,081

Changes in present value discounts(7,146)(8,047)

Ending balance

1,038,547₩

1,131,852₩(3) The allowance for possible loan losses compared to total loans, net of present value discount, was summarized as follows (Unit: In millions):
Classification

2009

Loans (*1)₩

Allowance for possible loan losses

(*2)

2008
64,506,822₩

2007
66,768,095₩

55,705,353

		

1,003,214		

1,093,811		

704,074

Percentage (%)		

1.55		

1.64		

1.26(*1) Call loans, bonds purchased under repurchase agreements and interbank loans that are credits not qualified for bad debt allowances are excluded.
(*2) Present value discounts are excluded.

10. TANGIBLE ASSETS:(1) Tangible assets as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification

2009

Tangible assets₩

2008
2,221,531

Less: accumulated depreciation		

2,252,934₩(828,421)		

(802,354)₩

1,393,110

1,450,580

Accumulated

Accumulated₩(2) Tangible assets as of December 31, 2009 and 2008 consisted of (Unit: In millions):<2009>Classification

Acquisition cost

		
Land

₩

depreciation
933,891

impairment loss-₩₩

Book value(*)(2,376)₩

931,515

Buildings

542,691(192,790)(3,565)346,336

Leasehold improvements

128,076(95,179)-

32,897Equipment and vehicles

616,729(534,511)-

82,218Construction in progress

144

-

-

144

₩

2,221,531₩(822,480)₩(5,941)₩

1,393,110(*) The difference between the impairment loss for the year ended December 31, 2009 and the accumulated impairment loss as of December 31, 2009 amounting to₩1,942 million was recognized as loss on revaluation of tangible asset in the prior fiscal year.

<2008>Classification

Acquisition cost

		
Land

₩

Buildings

938,810

Accumulated

Accumulated

depreciation

impairment loss₩

541,098-₩

Book value-(182,609)-₩

938,810358,489

Leasehold improvements

121,908(82,565)-

39,343Equipment and vehicles

651,096(537,180)-

113,916

Construction in progress

22₩

2,252,934₩(802,354)

₩

-

22
₩

1,450,580

159

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(3) The changes in book value of tangible assets for the year ended December 31, 2009 were as follows (Unit: In millions):
Classification

Beginning

Acquisition

Disposal

Depreciation Impairment Revaluation Change inloss (*2)

loss (*1)

Endingforeigncurrencies

Land₩   938,810 ₩          - ₩    (4,330) ₩          - ₩      (215) ₩    (2,576) ₩      (174) ₩   931,515

Buildings

358,489

7,630(2,166)(12,960)(3,784)-(873)

346,336

Leasehold improvements

39,343

6,812

(10)

(13,110)

-

-

(138)

32,897Equipment and vehicles

113,916

38,599(6,588)(63,308)

-

-

(401)

82,218

22

144

(24)

-

-

-

2

144

Construction in progress₩ 1,450,580 ₩    53,185₩  (13,118) ₩   (89,378) ₩    (3,999) ₩    (2,576) ₩    (1,584) ₩ 1,393,110(*1) Gain on revaluation of tangible asset recognized in the prior fiscal year in relation to land was reversed up to the amount of impairment loss incurred for the year
ended December 31, 2009.
(*2) The impairment loss amounting to ₩3,853 million was recognized as loss on prior period error correction because the cause of impairment occurred in the priorfiscal year.

(4) T he published value of the land was ₩877,787 million and ₩755,083 million as of December 31, 2009 and 2008, respectively, based on theLaws on Disclosure of Land Price and Valuation of Land.
(5) Tangible assets, which have been insured as of December 31, 2009 were as follows (Unit: In millions):
Type of insurance

Asset insured

Insured balance

Property composite

Buildings₩

Insurance company

346,575

Hyundai Marine & Fire Insurance Co., Ltd.

Leasehold improvements		

38,031Hyundai Marine & Fire Insurance Co., Ltd., ING and others

Equipment and vehicles		120,276

Hyundai Marine & Fire Insurance Co., Ltd., ING and others		₩504,882(6) The change in the gain on revaluation of tangible assets for the year ended December 31, 2009 was as follows (Unit: In millions):
Classification

Beginning

Revaluation

Disposal or

Tax

Ending			

reclassification adjustment

			

(*)

Land

₩

435,337₩-₩(4,140)₩911₩

432,108(*) Due to the disposal of revaluated lands, gain on revaluation of tangible assets decreased by ₩1,564 million.

11. OTHER ASSETS:(1) Other assets as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification2009

Non-business use properties₩

Guarantee deposits paid
Accounts receivable

2008
1,259

₩

-

664,694

659,883

6,883,634

5,217,384

Accrued income

262,722412,834

Prepaid expenses

40,642

21,772

Deferred income tax assets (see Note 22)

21,682

29,3401,599,842

4,673,463

61,606

66,522Derivatives instruments assets (see Note 17)
Intangible assets
Sundry assets

1,265,128₩

160

10,801,209

1,310,085₩

12,391,283

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(2) Intangible assets as of December 31, 2009 and 2008 consisted of (Unit: In millions):<2009>Classification

Acquisition cost

Accumulated		
Development expenditures

Book value

amortization
224,447₩(*)

Others 		₩(163,348)

2,755		227,202₩₩

61,099₩(2,248)		
(165,596)

507
61,606₩(*) The effect of exchange rate fluctuation is included.

<2008>Classification

Acquisition cost

Accumulated		
Development expenditures

Book value

amortization
196,887₩(*)

Others 		₩(131,182)

2,754		199,641₩₩

65,705₩(1,937)		
(133,119)817
66,522₩(*) The effect of exchange rate fluctuation is included.

(3) The changes in intangible assets for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>Classification

Beginning

Acquisition

DisposalAmortization

Change in					foreign					currencies

Development expenditures₩₩ 65,705

Others		₩ 27,560

817		

₩

148		

₩ 66,522₩ 27,708₩

Beginning

Acquisition

Disposal-₩ (32,166)

-		
-

-

(408)		

Ending₩ 61,099(50)		₩ (32,574)

₩

(50)

Amortization

Change in507₩ 61,606<2008>Classification					

foreign					currencies

Development expenditures₩₩ 80,271

Others		₩ 16,299788		

₩ 81,059₩304		

₩ 16,603₩-₩ (30,865)-		-(484)		₩ (31,349)₩-

Ending₩ 65,705(209)		
(209)

817

₩ 66,522(4) Sundry assets as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification

2009

Bills unsettled₩

2008
1,134,803₩

1,153,061

Suspense payments in Won

79,597

94,743

Suspense payments in foreign currencies

9,607

8,949

Unsettled inter-office transaction

9,999

18,611

Deposited money

6,477

5,051

Cash sending to other banks

13,484

20,147

Domestic exchange settlement debits
Others₩150

200

11,011

9,323

1,265,128₩

1,310,085

161

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

12. DEPOSITS:(1) Deposits as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification

2009

Demand deposits₩

2008
22,576,340

24,110,040₩

Time deposits		

29,240,591		

31,031,532

Negotiable certificates of deposits		

9,048,925		

7,422,018

60,865,856

62,563,590₩₩(2) Details of deposits as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification

2009

2008

Demand deposits:
Demand deposits in Won₩

17,142,486

Demand deposits in foreign currencies

18,992,722₩

5,433,854

5,117,318

22,576,340

24,110,040

Time deposits in Won

19,708,102

21,937,233

Time deposits in foreign currencies

9,486,282

9,030,434

46,20763,865

		

29,240,591

31,031,532

Negotiable certificates of deposits

9,048,925

7,422,018

		Time deposits:

Mutual installment savings		₩60,865,856

62,563,590₩(3) Deposits with financial institutions as of December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>Classification

Bank

		

Other financial

Foreign financial

institution

institution

Total

Demand deposits:
Demand deposits in Won₩

Demand deposits in foreign currencies

7,981

₩

202,004₩

27,482₩

237,467

122,582

14,861

168,831306,274

1,144,463

1,746,073

107,717

2,998,253-

786,495

1,224

787,719

8,000

651,805-

659,805

Time deposits:
Savings deposits in Won
Savings deposits in foreign currencies
Negotiable certificates of deposits
		₩

1,283,026₩

3,401,238₩

305,254₩

4,989,518<2008>Classification

Bank

		

Other financial

Foreign financial

institution

institution

Total

Demand deposits:
Demand deposits in Won₩

Demand deposits in foreign currencies

6,647

₩

197,718₩

67,048₩271,413

133,737

11,330208,204

353,271

Savings deposits in Won

913,968

2,811,364

22,012

3,747,344

Savings deposits in foreign currencies

322,765

537,9174,165

864,847

51,0002,581,994-

2,632,994

Time deposits:

Negotiable certificates of deposits
		

162

₩

1,428,117₩

6,140,323₩

301,429₩

7,869,869

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(4) Term structure of deposits as of December 31, 2009 was as follows (Unit: In millions):
Classification

Deposits in Won

		

Deposits in

Negotiable

foreign currencies			
Due in less than one year₩

34,556,831

₩

Total

certificates ofdeposits

9,574,498

8,786,417₩₩

52,917,746

Due from one to two years

642,170

133,636

262,508

1,038,314

Due from two to three years

323,542

107,953-

431,495

Due from three to five years

175,209

12,542-

187,751

Due after five years

1,199,043₩

36,896,795

5,091,507₩

14,920,136

9,048,925₩

6,290,550₩

60,865,856

13. BORROWINGS:(1) Borrowings as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification2009

Call money₩

2008
1,387,330

Bills sold2,664,341₩

30,943

Bonds sold under repurchase agreements

31,491

140,415432,384

Borrowings

8,064,338

9,252,475

Debentures

8,493,078

11,221,427(25,630)(45,517)

Less: Discount on debentures

18,090,474₩

23,556,601₩(2) Call money as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

LenderAnnual interest		rate (%)

		Dec. 31, 2009

Local and foreign financial institution
Call money in foreign currencies
			 and others

0.20 ~ 1.46

2009

₩

2008

1,387,330₩

2,664,341(3) Bills sold, bonds sold under repurchase agreements and due to BOK in foreign currencies as of December 31, 2009 and 2008 consisted of
the following (Unit: In millions):
Account

LenderAnnual interest			rate (%)

			Dec. 31, 2009

Bills soldBonds sold under
repurchase agreements

2009		

General customer

1.50 ~ 4.40

General customer and others

3.04 ~ 8.00		

				

₩

₩

30,943

2008₩

31,491

140,415		

432,384

171,358

463,875₩163

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(4) Borrowings as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

LenderAnnual interest			rate (%)

			Dec. 31, 20092009		

2008

Borrowings in Won:
Borrowings from the BOK

BOK

1.25

Borrowings from the Korean government Ministry of Finance and Economy and others₩

0.25 ~ 4.27

704,953₩

308,988

837,166
309,342

Borrowings from banking institutions

Industrial Bank of Korea and others

1.54 ~ 6.00

101,875

128,409

Other borrowings

Small Business Corporation and others

0.00 ~ 3.94

1,182,456

551,564

2,298,272

1,826,481

					Borrowings in foreign currencies:
Refinance

Korea Exim Bank and others

1.73 ~ 2.81

256,872

1,235,760

Short term borrowing in foreign currencies

Foreign financial institution

0.38 ~ 6.21

2,290,811

3,340,359

SMBC and others

1.31 ~ 7.03

1,096,321

725,753

Foreign financial institution

0.26 ~ 6.45

2,122,062

2,124,122

Middle and long term borrowing
in foreign currencies
Other borrowings

					
					

5,766,066₩

8,064,338

7,425,994₩

9,252,475(5) In the normal course of funding activities, the Bank provided securities as collateral for borrowings from the Bank of Korea and otherfinancial institutions as of December 31, 2009 [see Note 6(6)].
(6) Debentures
1) Debentures as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Account

Annual interest		rate (%)

		Dec. 31, 20092009		

2008

Debentures in Won:
Finance debentures

3.06 ~ 7.90

Subordinated financing debentures

6.11 ~ 7.80

1,101,146

1,367,109

7.30

250,000

250,000		Hybrid debentures₩

5,840,000₩

8,511,000

7,191,146

10,128,109

Discounts on debentures		(21,278)(40,620)

			

7,169,868

10,087,489

0.61 ~ 5.74

946,197703,259

5.00

355,735

390,059			

1,301,932

1,093,318

Discounts on debentures		(4,352)(4,897)

Debentures in foreign currencies:
Finance debentures
Subordinated financing debentures			

1,297,580₩

164

8,467,448

1,088,421₩

11,175,910

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

2) As of December 31, 2009, all finance debentures issued in Won were general debentures and consisted of (Unit: In millions):
Issued date		

Expiration date						

Annual interest rate (%)		

2009		

2008

Dec. 31, 2009

Nov. 13, 2006

Nov. 13, 2009		

-Nov. 17, 2006

Nov. 17, 2009		

-		

-		

50,000Dec. 6, 2006

Dec. 6, 2009		

-		

-		

40,000Dec. 11, 2006

Dec. 11, 2009		

-		

-		

50,000Jan. 9, 2007

Jan. 9, 2009		

-		

-		

50,000Jan. 10, 2007

Jan. 10, 2010		

5.10		

50,000		

50,000Jan. 11, 2007

Jan. 11, 2010		

5.09		

50,000		

50,000Jan. 17, 2007

Jan. 17, 2009		

-		

-		

50,000Jan. 18, 2007

Jan. 18, 2009		

-		

-		

20,000Jan. 18, 2007

Jan. 18, 2010		

5.20		

30,000		

30,000Jan. 19, 2007

Jan. 19, 2009		

-		

-		

50,000Jan. 25, 2007

Jan. 25, 2009		

-		

-		

20,000Jan. 25, 2007

Jan. 25, 2010		

5.23		

30,000		

30,000Jan. 26, 2007

Jan. 26, 2010		

5.47		

30,000		

30,000Feb. 5, 2007

Feb. 5, 2010		

5.23		

50,000		

50,000Feb. 9, 2007

Feb. 9, 2010		

5.14		

50,000		

50,000Feb. 28, 2007

Feb. 28, 2010		

5.05		

30,000		

30,000Mar. 15, 2007

Mar. 15, 2009		

-		

-		

20,000Mar. 16, 2007

Mar. 16, 2009		

-		

-		

50,000Mar. 27, 2007

Mar. 27, 2009		

-		

-		

30,000Mar. 27, 2007

Mar. 27, 2009		

-		

-		

40,000Mar. 27, 2007

Mar. 27, 2010		

5.26		

10,000		

10,000

Apr. 3, 2007

Apr. 3, 2009		

-		

-		

50,000

May 2, 2007

May 2, 2009		

-		

-		

50,000

May 8, 2007

May 8, 2009		

-		

-		

10,000

May 9, 2007

May 9, 2009		

-		

-		

20,000

May 14, 2007

May 14, 2010		

5.32		

40,000		

40,000

May 15, 2007

May 15, 2009		

-		

-		

20,000

May 16, 2007

May 16, 2010		

5.35		

50,000		

50,000

May 17, 2007

May 17, 2010		

5.36		

50,000		

50,000

May 21, 2007

May 21, 2009		

-		

-		

20,000

May 21, 2007

May 21, 2010		

5.39		

30,000		

30,000

May 23, 2007

May 23, 2010		

5.38		

100,000		

100,000

May 25, 2007

May 25, 2010		

5.67		

40,000		

40,000

May 30, 2007

May 30, 2010		

5.36		

50,000		

50,000Jun. 1, 2007

Jun. 1, 2010		

5.37		

50,000		

50,000Jun. 5, 2007

Jun. 5, 2009		

-		

-		

50,000Jun. 13, 2007

Jun. 13, 2010		

5.49		

50,000		

50,000Jun. 18, 2007

Jun. 18, 2009		

-		

-		

30,000Jun. 26, 2007

Jun. 26, 2009		

-		

-		

50,000Jun. 28, 2007

Jun. 28, 2010		

5.44		

50,000		

50,000Jul. 10, 2007

Jul. 10, 2009		

-		

-		

50,000Jul. 11, 2007

Jul. 11, 2009		

-		

-		

50,000Jul. 16, 2007

Jan. 16, 2009		

-		

-		

10,000Jul. 19, 2007

Jan. 19, 2009		

-			

-		

50,000₩-₩50,000165

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

Issued date		

Expiration date						

Annual interest rate (%)

2009		

2008

Dec. 31, 2009

Jul. 24, 2007

Jan. 24, 2009			 -Jul. 24, 2007

Jul. 24, 2010			5.60		

20,000		

20,000Jul. 25, 2007

Jul. 25, 2010			5.61		

50,000		

50,000Jul. 26, 2007

Jan. 26, 2009			 -		-		

40,000Jul. 26, 2007

Jul. 26, 2009			 -		-		

10,000Jul. 30, 2007

Jul. 30, 2010			5.53		

30,000		

30,000Jul. 31, 2007

Jul. 31, 2009			 -		-		

20,000Jul. 31, 2007

Jul. 31, 2010			5.53		

30,000		

30,000Aug. 1, 2007

Aug. 1, 2009			 -		-		

20,000Aug. 3, 2007

Aug. 3, 2009			 -		-		

40,000Aug. 3, 2007

Aug. 3, 2010			5.48		

10,000		

10,000Aug. 8, 2007

Feb. 8, 2009			 -		-		

10,000Aug. 9, 2007

Aug. 9, 2009			 -		-		

40,000Aug. 14, 2007

Aug. 14, 2010			5.58		

10,000		

10,000Aug. 23, 2007

Aug. 23, 2010			5.65		

30,000		

30,000Aug. 24, 2007

Aug. 24, 2010			5.67		

50,000		

50,000Sep. 10, 2007

Sep. 10, 2010			5.77		

200,000		

200,000

Sep. 17, 2007

Sep. 17, 2009			 -		-		

20,000Sep. 17, 2007

Sep. 17, 2010			6.06		

20,000		

20,000Oct. 2, 2007

Apr. 2, 2009			 -		-		

50,000Oct. 9, 2007

Apr. 9, 2009			 -		-		

20,000Oct. 10, 2007

Oct. 10, 2010			5.93		

200,000		

200,000

Oct. 11, 2007

Apr. 11, 2009			 -		-		

26,000Oct. 12, 2007

Apr. 12, 2009			 -		-		

50,000Oct. 16, 2007

Apr. 16, 2009			 -		-		

140,000

Oct. 17, 2007

Apr. 17, 2009			 -		-		

50,000Oct. 18, 2007

Oct. 18, 2009			 -		-		

30,000Oct. 18, 2007

Oct. 18, 2010			5.91		

70,000		

70,000Oct. 23, 2007

Oct. 23, 2010			5.84		

10,000		

10,000Oct. 24, 2007

Oct. 24, 2009			 -		-		

40,000Oct. 26, 2007

Apr. 26, 2009			 -		-		

20,000Oct. 29, 2007

Apr. 29, 2009			 -		-		

30,000Oct. 30, 2007

Apr. 30, 2009			 -		-		

30,000Nov. 2, 2007

Nov. 2, 2009			 -		-		

40,000Nov. 8, 2007

Nov. 8, 2010			5.88		

200,000		

200,000

Nov. 14, 2007

Nov. 14, 2010			5.94		

50,000		

50,000Nov. 23, 2007

Nov. 23, 2010			6.22		

70,000		

70,000Nov. 26, 2007

Nov. 26, 2010			6.25		

260,000		

260,000

Nov. 30, 2007

Nov. 30, 2010			6.63		

170,000		

170,000

Dec. 5, 2007

Dec. 5, 2010			6.70		

140,000		

140,000

Jan. 10, 2008

Jul. 10, 2009			 -		-		

50,000Jan. 11, 2008

Jul. 11, 2009			 -		-		

50,000Jan. 15, 2008

Jan. 15, 2010			6.39		

50,000		

50,000Jan. 23, 2008

Jul. 23, 2009			 -		-		

50,000Jan. 29, 2008

Jul. 29, 2009			 -		-		

20,000

166

₩

-

₩

30,000Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

Issued date		

Expiration date						

Annual interest rate (%)		

2009		

2008

Dec. 31, 2009

Jan. 30, 2008

Jul. 30, 2009		

-Jan. 31, 2008

Jan. 31, 2009		

-		

-		

30,000Feb. 15, 2008

Feb. 15, 2010		

5.30		

30,000		

30,000₩-₩50,000Mar. 4, 2008

Sep. 4, 2009		

-		

-		

30,000Mar. 4, 2008

Mar. 4, 2011		

6.32		

20,000		

20,000Mar. 28, 2008

Sep. 28, 2009		

-		

-		

50,000

Apr. 1, 2008

Oct. 1, 2009		

-		

-		

50,000

Apr. 2, 2008

Oct. 2, 2009		

-		

-		

100,000

Apr. 4, 2008

Oct. 4, 2009		

-		

-		

50,000

Apr. 7, 2008

Apr. 7, 2009		

-		

-		

20,000

Apr. 7, 2008

Oct. 7, 2009		

-		

-		

30,000

Apr. 10, 2008

Apr. 10, 2010		

5.71		

200,000		

200,000

Apr. 11, 2008

Apr. 11, 2009		

-		

-		

100,000

Apr. 14, 2008

Oct. 14, 2009		

-		

-		

50,000

Apr. 15, 2008

Apr. 15, 2010		

5.58		

50,000		

50,000

Apr. 16, 2008

Apr. 16, 2010		

5.54		

50,000		

50,000

Apr. 17, 2008

Apr. 17, 2010		

5.52		

50,000		

50,000

Apr. 18, 2008

Apr. 18, 2010		

5.50		

50,000		

50,000

Apr. 21, 2008

Apr. 21, 2009		

-		

-		

50,000

Apr. 24, 2008

Oct. 24, 2009		

-		

-		

10,000

Apr. 24, 2008

Apr. 24, 2010		

5.47		

40,000		

40,000

Apr. 29, 2008

Apr. 29, 2010		

5.42		

10,000		

10,000

Apr. 30, 2008

Apr. 30, 2010		

5.39		

50,000		

50,000

May 8, 2008

May 8, 2010		

5.56		

10,000		

10,000

May 14, 2008

Nov. 14, 2009		

-		

-		

50,000

May 15, 2008

May 15, 2010		

5.80		

20,000		

20,000

May 16, 2008

May 16, 2011		

5.87		

100,000		

100,000

May 22, 2008

May 22, 2011		

5.93		

100,000		

100,000

May 23, 2008

May 23, 2011		

5.92		

30,000		

30,000

May 26, 2008

May 26, 2010		

5.87		

10,000		

10,000

May 26, 2008

Nov. 26, 2010		

5.92		

10,000		

10,000

May 27, 2008

Nov. 27, 2009		

-		

-		

200,000

May 27, 2008

May 27, 2010		

5.85		

20,000		

20,000

May 28, 2008

May 28, 2010		

5.82		

10,000		

10,000

May 29, 2008

May 29, 2010		

5.90		

50,000		

50,000

May 30, 2008

May 30, 2009		

-		

-		

20,000

May 30, 2008

Nov. 30, 2009		

-		

-		

70,000Jun. 3, 2008

Jun. 3, 2010		

5.98		

20,000		

20,000Jun. 5, 2008

Jun. 5, 2009		

-		

-		

40,000Jun. 5, 2008

Jun. 5, 2010		

5.98		

60,000		

60,000Jun. 12, 2008

Jun. 12, 2009		

-		

-		

20,000Jun. 12, 2008

Jun. 12, 2010		

6.17		

70,000		

70,000Jun. 16, 2008

Jun. 16, 2009		

-		

-		

10,000Jun. 16, 2008

Jun. 16, 2010		

6.20		

40,000		

40,000Jun. 18, 2008

Jun. 18, 2009		

-		

-		

20,000167

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

Issued date		

Expiration date						

Annual interest rate (%)

2009		

2008

Dec. 31, 2009

Jun. 18, 2008

Dec. 18, 2009			

-Jun. 19, 2008

Dec. 19, 2009			

-		

-		

Jun. 19, 2008

Jun. 19, 2010			6.17		

10,000		

10,000Jun. 24, 2008

Jun. 24, 2009			

-		

-		

30,000Jun. 24, 2008

Dec. 24, 2009			

-		

-		

20,000Jun. 24, 2008

Jun. 24, 2010			7.32		

30,000		

30,000Jun. 24, 2008

Jun. 24, 2010			7.37		

Jun. 26, 2008

Dec. 26, 2009			

₩

-

₩

40,00040,00010,000		

10,000-		-		

20,000Jun. 26, 2008

Jun. 26, 2010			6.31		

30,000		

30,000Jul.

1, 2008

Jul.

1, 2009			

-		

-		

10,000Jul.

3, 2008

Jul.

3, 2009			

-		

-		

10,000Jul.

4, 2008

Jul.

4, 2009			

-		

-		

10,000Jul.

4, 2008

Jul.

4, 2010			6.60		

10,000		

10,000Jul. 16, 2008

Jan. 16, 2010			6.87		

40,000		

40,000Jul. 17, 2008

Jul. 17, 2009			

-		

-		

110,000

Jul. 17, 2008

Jul. 17, 2010			6.92		

10,000		

10,000Jul. 18, 2008

Jan. 18, 2010			6.80		

200,000		

200,000

Aug. 19, 2008

Aug. 19, 2009			-		

120,000-		Aug. 21, 2008

Aug. 21, 2010			7.17		

180,000		

180,000

Sep. 1, 2008

Sep. 1, 2010			7.05		

130,000		

130,000

Sep. 4, 2008

Sep. 4, 2010			7.20		

120,000		

120,000

Sep. 11, 2008

Sep. 11, 2009			

-		

-		

70,000Sep. 12, 2008

Sep. 12, 2009			

-		

-		

50,000Sep. 26, 2008

Sep. 26, 2009			

-		

-		

80,000Sep. 29, 2008

Sep. 29, 2009			

-		

-		

100,000

Oct. 20, 2008

Oct. 20, 2009			

-		

-		

45,000Oct. 29, 2008

Oct. 29, 2011			7.73		

200,000		

200,000

Nov. 6, 2008

Nov. 6, 2009			

-		

-		

20,000Dec. 15, 2008

Dec. 15, 2009			

-		

-		

200,000

Feb. 10, 2009

Feb. 10, 2011			7.90		

40,000		

-

Jul.

Jul.

9, 2010			3.13		

100,000		

-Jul. 13, 2010			3.19		

100,000		

-

9, 2009

Jul. 13, 2009
Jul. 15, 2009

Jul. 15, 2010			3.06		

100,000		

-Jul. 24, 2009

Jul. 24, 2010			3.09		

100,000		

-Jul. 28, 2009

Jul. 28, 2010			3.07		

50,000		-

Aug. 21, 2009

Feb. 21, 2011			5.90		

30,000		-

Aug. 21, 2009

Aug. 21, 2011			6.30		

80,000		-

Sep. 29, 2009

Jun. 29, 2011			5.95		

20,000		-

Sep. 29, 2009

Mar. 29, 2012			6.50		

50,000		-Nov. 24, 2009

Nov. 24, 2010			3.76		

100,000		

-Dec. 2, 2009

Dec. 2, 2010			3.71		

100,000		

-Dec. 4, 2009

Dec. 4, 2011			5.85		

20,000		-

Dec. 4, 2009

Dec. 4, 2012			6.20		

70,000		-

Dec. 10, 2009

Dec. 10, 2010			3.78		

100,000		

-Dec. 16, 2009

Dec. 16, 2010			3.89		

100,000		

-Dec. 18, 2009

Dec. 18, 2010			3.93		
₩									168100,000		
₩

5,840,000

8,511,000

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

3) Finance debentures issued in foreign currencies as of December 31, 2009 and 2008 consisted of (Unit: In thousands of U.S. Dollars,in millions of Won):
First underwriter

Issued date

Expiration date					Annual interest rate (%) 2009		

2008

Dec. 31, 2009₩
46,704 ₩50,300NH Investment & Securities
Jul. 13, 2007
Jul. 13, 2010		
5.48									(US$40,000)		
(US$40,000)
Calyon and others
Jul. 20, 2007
Jul. 20, 2012		
0.61									350,280		

377,250(US$300,000)		

(US$300,000)

NAB (*1)
Oct. 15, 2007
Oct. 15, 2009		
									-		32,450-		(US$25,800)

		MIZUHO
Oct. 29, 2007
Oct. 29, 2009		
									-		62,875-		(US$50,000)		MIZUHO
Oct. 30, 2007
Oct. 30, 2009		
									-		25,150-		(US$20,000)

		
SMBC, Tokyo (*2)
Sep. 12, 2008
Sep. 7, 2011		
0.66									126,282		

139,389(US$108,155)		

(US$110,850)

		Morgan Stanley
May 26, 2009
May 29, 2012		
5.68									58,380		

-(US$50,000)		

-

		

UBS
Jun. 1, 2009
Jun. 1, 2012		
5.74									58,380		

-(US$50,000)		

-		

Morgan StanleyJun. 1, 2009
Jun. 1, 2012		
5.68									58,380		

-(US$50,000)		

-		

BNP PARIBAS
Jun. 5, 2009
Jun. 7, 2011		
5.49									58,380		

-(US$50,000)		

-		

Woori Investment & Securities
Jul. 23, 2009
Jul. 15, 2011		
3.68									58,380		

-(US$50,000)		

-

		
HSBC
Aug. 27, 2009
Aug. 24, 2012		
3.66									35,028		

-(US$30,000)		

-		
Others		-		-											96,003		

15,845(US$82,223)		

(US$12,600)

								

₩									946,197₩(US$810,378)		

703,259(US$559,250)(*1) Issued in Hong Kong Dollar (HKD) amounting to HKD 200 million(*2) Issued in Japan Yen (JPY) amounting to JPY 10,000 million

169

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

4) Subordinated debentures as of December 31, 2009 and 2008 were as follows (Unit: In thousands of U.S. Dollars, in millions of Won):
Classification

Issued date

Expiration date				Annual interest rate (%) 2009		

2008

Dec. 31, 2009

Debentures in Won:
General sale (*1)

May 28, 2001

Feb. 28, 2007		-General sale (*1)

Oct. 28, 2002

Jan. 28, 2008		

-		

160		

General sale

(*1)

223

₩

387

₩

290

Mar. 28, 2003

Dec. 28, 2008		

-		

763		

16,432

Underwriting sale

Oct. 21, 2004

Oct. 21, 2014		

-		

-		

170,000

General saleNov. 28, 2004

Nov. 28, 2014		

-		

-		

80,000Underwriting sale (*2)

Mar. 13, 2008

Mar. 13, 2018		

6.11		

250,000		

250,000

General sale (*2)

Mar. 28, 2008

Mar. 28, 2018		

6.20		

50,000		

50,000General saleNov. 21, 2008

May 21, 2014		

7.70		

60,860		

60,860General saleNov. 24, 2008

May 24, 2014		

7.70		

32,060		

32,060General saleNov. 25, 2008

May 25, 2014		

7.70		

27,570		

27,570General saleNov. 26, 2008

May 26, 2014		

7.70		

40,880		

40,880General saleNov. 27, 2008

May 27, 2014		

7.70		

37,651		

37,651

General saleNov. 28, 2008

May 28, 2014		

7.70		

78,926		

78,926

General sale

Dec. 01, 2008

Jun. 01, 2014		

7.70		

22,053		

22,053General sale

Dec. 19, 2008

Jun. 19, 2014		

7.80		

250,000		

250,000

General sale

Dec. 22, 2008

Jun. 22, 2014		

7.30		

34,060		

34,060General sale

Dec. 23, 2008

Jun. 23, 2014		

7.30		

18,690		

18,690General sale

Dec. 24, 2008

Jun. 24, 2014		

7.30		

23,948		

23,948General sale

Dec. 26, 2008

Jun. 26, 2014		

7.30		

32,979		

32,979General sale

Dec. 29, 2008

Jun. 29, 2014		

7.30		

93,487		

93,487

General sale

Dec. 30, 2008

Jun. 30, 2014		

7.80		

46,836		

46,836

Underwriting sale						1,101,146		

1,367,109

5.00		

355,735		

390,059							

(US$304,672)		

(US$310,186)

Debentures in foreign currencies:
CITI group & HSBC (*2, *3)

Jun. 10, 2005

Jun. 10, 2015								₩

1,456,881₩

1,757,168(*1) The balance amount was not redeemed at the maturity date, and after the maturity date, interest is not paid.
(*2) After 5 years from issuance date, the optional early redemption right can be exercised by the Bank.
(*3) The first underwriters

In addition, certain subordinated debentures are under swap contracts in order to hedge risks from changes in interest rates and exchange rates.
The Bank recognized ₩6,438 million of gains on valuation of derivatives of securities and ₩12,328 million of losses on valuation of derivatives ofdebentures for the year ended December 31, 2009 [Note 17(1)].
5) As of December 31, 2009 and 2008, Hybrid Tier 1 bond was as follows (Unit: In millions):<2009>Classification (*1)

Issued period (*2)

			Hybrid debentures 2nd

Mar. 31, 2009 ~ Mar. 31, 2039

Annual interest
7.30(*1) After 5 years from issuance date, call option can be exercised under the authorization of the Governor of the Financial Supervisory Service.
(*2) After expiration, the bond can be extended under the same terms.
(*3) After 10 years from issuance date, the interest rate increases to 8.3 percent.

170

2009

rate (%) (*3)₩

250,000

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<2008>Classification (*1)

Issued period (*2)

Annual interest

Hybrid debentures 1st

2008

rate (%) (*3)

			

8.50

May 28, 2003 ~ May 28, 2033₩

250,000(*1) After 5 years from issuance date, call option can be exercised under the authorization of the Governor of the Financial Supervisory Service.
(*2) After expiration, the bond can be extended under the same terms.
(*3) After 10 years from issuance date, the interest rate increases to 10.0%.

(7) Term structure of borrowings as of December 31, 2009 was as follows (Unit: In millions):
Classification

Borrowing

Borrowing

Debentures

Debentures

in Wonin foreignin Wonin foreign		currencies		

currencies

Due in less than one year

₩ 1,208,109₩ 5,433,464₩ 5,081,146₩

Due from one to two years

272,834

97,313Due from two to three years

182,141-

Due from three to five years

248,320

235,289

Due after five years

Total

142,707₩11,865,426

640,000

243,042

1,253,189

120,000

560,448862,589

800,000-

1,283,609

386,868-

550,000

355,735

1,292,603₩ 2,298,272₩ 5,766,066₩ 7,191,146₩ 1,301,932₩16,557,416

14. OTHER LIABILITIES:(1) Other liabilities as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification

2009

Accounts payable₩2008
7,147,521₩

5,356,833

Accrued expenses

680,029

1,010,843

Unearned revenues

77,839111,930

Guarantee money received

208,254

235,367

Accrued payable foreign exchange

267,033

208,461

Deferred income tax liabilities

203,976

91,425Derivatives instruments liabilities (see Note 17)

1,506,624

4,561,680

Due to trust accounts

769,620886,595

Accrued severance benefits (see Note 3)

318,697294,797

Pension benefit

4,580

4,524

Less: Asset under management of pension benefits(3,660)(2,925)

(599)

(686)

Less: Funds transferred to National Pension
Less: Due to retirement insurance(250,764)(228,659)

Liability reserve for acceptances and guarantees

82,23659,283Liability reserve for unused credit limit

189,481

183,272

Allowance for other liabilities
Sundry liabilities₩

146,370

137,341

1,741,143

1,604,586

13,088,380₩

14,514,667

171

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(2) Accrued severance benefits
1) The changes in accrued severance benefits for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification

2009

Beginning₩2008
294,797

265,369₩(*1)

60,966

46,591

Payment (*2)

(36,678)(18,524)

Provision

Foreign currencies translation

(388)

1,361

318,697294,797

Pension benefits payables

4,580

4,524

Assets under management of pension benefits(3,660)(2,925)

Funds transferred to National Pension
Due to Retirement Insurance
₩

(599)

(686)

(250,764)(228,659)

68,25467,051₩(*1) The difference from severance benefits in the statements of income (see Note 19) amounting to ₩379 million and ₩1,923 million for the years December 31, 2009 and2008 is provision on accounts payable of severance pension.
(*2) The payment of severance benefits amounting to ₩273 million and ₩143 million as of December 31, 2009 and 2008, respectively, is accounted as accounts payable.

As of December 31, 2009, parts of severance benefits were contributed to pension funds of Samsung Life Insurance Co., Ltd. and others.
The assets under management of pension benefits as of December 31, 2009 are as follows (Unit: In millions):
Classification

Percentage (%)

Cash and due from banks

24.47

Securities

75.53
100.00(3) Liability reserve for acceptances and guarantees
1) Acceptances and guarantees as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification

2009

2008

₩              6,630₩              4,478

Confirmed acceptances and guarantees in Won:
Payment guarantee for issuance of debentures
Payment guarantee for loans

63,425

93,214

1,715,378

701,618

1,785,433

799,310

Acceptances on letters of credit

703,464

395,664

Acceptances for letters of guarantee for importers

102,366

52,841OthersConfirmed acceptances and guarantees in foreign currencies:

Others7,074,385

6,222,561

7,880,215

6,671,066

3,877,111

3,820,754

318,521348,040

4,195,632

4,168,794

55,992

63,533

Unconfirmed acceptances and guarantees:
Letters of credit
Others		
Bills endorsed
		

172

₩

13,917,272₩

11,702,703

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 20082) The classification of asset quality for acceptances and guarantees and liability reserve for acceptances and guarantees as of December 31,
2009 and 2008 was as follows (Unit: In millions):<2009>Classification

NormalPrecautionary Substandard Doubtful

Estimated
loss

Total

Liability
reserve for
acceptancesandguarantees

Confirmed acceptances
Unconfirmed acceptances
Bills endorsed₩ 9,627,345 ₩      16,154 ₩    14,682 ₩     6,420 ₩    1,047
4,178,224
12,172
2,906
2,208
122
55,992₩ 13,861,561 ₩      28,326 ₩    17,588 ₩     8,628 ₩    1,169₩ 9,665,648 ₩    72,752
4,195,632
9,008
55,992476₩13,917,272 ₩    82,236

Classification

Normal

Total

Confirmed acceptances
Unconfirmed acceptances
Bills endorsed₩ 7,450,697 ₩      15,566 ₩        940 ₩     2,465 ₩      708 ₩  7,470,376 ₩    50,152
4,151,562
17,1362070
64,168,794
8,591
63,53363,533540₩ 11,665,792 ₩      32,702 ₩        960 ₩     2,535 ₩      714 ₩ 11,702,703 ₩    59,283<2008>
Precautionary Substandard Doubtful

Estimatedloss

Liability
reserve for
acceptancesandguarantees3) Acceptances and guarantees, by industry, except for the portion of overseas branches as of December 31, 2009 and 2008 were as follows(Unit: In millions):<2009>
By industry

Balance

Manufacturing₩

Percentage (%)
5,477,653

60.18

1,579,737

17.35

Wholesale/retail695,031

7.63

Science and technology service

347,609

3.82

Electricity, gas and water supply

244,686

2.69

Others758,735

8.33

9,103,451

100.00Construction

Confirmed acceptance and guarantees in overseas branches

562,197₩

9,665,648<2008>
By industry

Balance

Manufacturing₩

Wholesale/retail

Percentage (%)
3,862,439

56.09

508,9397.39

1,278,760

18.57

Finance and insurance

313,842

4.56

Electricity, gas and water supply

292,578

4.25

Construction

OthersConfirmed acceptance and guarantees in overseas branches

629,8879.14

6,886,445

100.00583,931₩7,470,376

173

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 20084) Confirmed acceptances and guarantees in foreign currencies, by country, as of December 31, 2009 and 2008 were as follows 		
(Unit: In thousands of U.S. Dollars, in millions of Won):<2009>
By country

Confirmed

Translation		

acceptances

into Won		and guarantees

		in foreign		currencies (*)

Korea

$

7,319,531

92.88

USA

104,436

121,939

1.55

France79,371

92,674

1.18

Taiwan45,27952,8680.67

UK45,27452,862

0.67

Others		

6,268,869

Percentage (%)₩

205,842$

6,749,071₩

240,3413.05

7,880,215

100.00(*) Foreign currencies other than U.S. Dollars were converted into U.S. Dollars at the basic rates of exchange at the end of the reporting period.

<2008>
By country

Confirmed

Translation		

acceptances

into Won		and guarantees

		in foreign		currencies (*)

Korea

$

4,763,952

Percentage (%)

5,990,670

89.80

USA

128,273

161,303

2.42

France75,122

94,466

1.42

UK51,55364,8280.96₩

Germany

47,602

59,8600.90

Others

238,520299,939

4.50

6,671,066

100.00		

$

5,305,022₩(*) Foreign currencies other than U.S. Dollars were converted into U.S. Dollars at the basic rates of exchange at the end of the reporting period.

5) The percentage of liability reserve for acceptances and guarantees as of December 31, 2009, 2008 and 2007 was as follows (Unit: In millions):
Classification

2009

Acceptances and guarantees₩

2008
13,917,272₩

2007
11,702,703₩

10,257,970

Liability reserve

82,23659,28356,085Percentage (%)

0.59

0.51

0.55

174

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(4) Liability reserve for unused credit limit
The calculation of liability reserve for unused credit limit as of December 31, 2009 and 2008 was as follows (Unit: In millions):<2009>Classification

Limit (a)Balance (b)Allowance (c) =Liability			(a-b) x credit

reserve for			conversion factor

unused credit				
Card loans₩

13,678,773₩

1,961,693₩

limit (d)5,858,405₩

89,194Loans to enterprise

77,680,701

43,461,439

8,980,356

94,578Loans to household

3,482,773

1,421,990

415,635

4,156

1,653

14

Loans to public and others

10,638

		

94,852,885

2,374

15,256,049		

187,942

Subsidiaries								1,539Liability reserve for unused credit limit							189,481₩₩

46,847,496₩₩<2008>
Allowance (c) =Liability

			Classification

Limit (a)Balance (b)(a-b) x credit

reserve for			conversion factor				
Card loans₩

14,211,031₩

2,081,747₩

unused credit
limit (d)6,064,418₩

93,162Loans to enterprise

76,503,744

42,880,867

9,544,472

84,807Loans to household

3,634,249

1,595,976

410,085

4,101

11,740

3,463

1,865

16

Loans to public and others

16,020,840		

182,086

Subsidiaries								

		

1,186

Liability reserve for unused credit limit							183,272₩

94,360,764₩

46,562,053₩₩(5) Allowance for other liabilities
Allowance for other liabilities as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification

2009

Reserve for money-back point & yes-point₩

2008
27,704₩25,129Reserve for litigation (see Note 17)

14,324

9,348

Reserve for employees’ accident (*1)

4,149

8,061

Compensation to customers related to Won & Yen swap (*2)
Provision for severance and early retirement benefits (*3)
Reserve for derivatives assets and others(*4, *5)

Others₩-15,962

12,894

16,464

82,86556,153

4,434

6,224

146,370₩

137,341(*1) Provision was made for 7 suspense payments, which occurred in connection with employees’ illegal act such as embezzlement.
(*2) The Bank reversed the allowance that was reserved at the end of prior year because the Bank won administrative litigation at the first trial in June 2009.
(*3) T he Bank reserved the provision for severance and early retirement benefits that is expected to be paid for voluntary retirees who have worked for more than 15 years andare more than 40 years old.
(*4) The Bank reserved the allowance for possible derivatives losses for currency options and others.
(*5) The Bank additionally reserved ₩8,348 million for the receivables of bond sold under repurchase agreements and others.

175

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008(6) Sundry liabilities
Sundry liabilities as of December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification2009

Suspense receipt₩

2008
24,622

Withholding taxes

34,112₩29,36837,648Agency business accounts

92,94090,848Agency856,635

798,615942

577

Credit control deposits
Guarantee deposits for securities subscription

16,921

16,481

Domestic exchange settlements credits

713,256

607,928

Domestic remittance payable

1,817

12,655

Others

4,642

5,722

1,741,143₩

1,604,586₩

15. SHAREHOLDERS’ EQUITY:(1) Capital stock
Capital stock as of December 31, 2009 and 2008 was as follows (Unit: In Won, share):Classification

2009

Shares authorized		Par value (In currency units)

2008
1,000,000,000		
5,000

₩

Shares issued		Common stock

1,000,000,000
5,000

₩

644,906,826		

₩ 3,224,534 million

644,906,826₩ 3,224,534 million(2) Capital surplus
The amount of capital surplus as of December 31, 2009 and 2008 was transferred from stock option (accounted for as capital adjustment)
since it lapsed as it was not exercised.
(3) Capital adjustments
Changes in capital adjustments for the year ended December 31, 2009 were as follows (Unit: In millions):
Beginning
Other capital adjustments(4,425)₩Decrease (*)

Increase-₩

Ending

4,425

₩

-

₩

(*) The Bank derecognized the negative capital adjustments through its retained earnings.

(4) Accumulated other comprehensive income
The changes in accumulated other comprehensive income for the year ended December 31, 2009 were as follows (Unit: In millions):
Classification

Beginning

Changes

Disposal

Deferred				Gain (loss) on valuation of available-for-sale securities₩

Gain (loss) on valuation of held-to-maturity securities
Loss of negative changes of securities using the equity method
Gain on revaluation of tangible assets₩

176

314,182

Endingincome tax

764,996₩ (140,932)₩ (136,772)

(319)

220

168

(85)

-

(12)

-

2

(10)

435,337-(4,140)911

432,108765,204₩ (144,904)₩ (135,944)₩ 1,233,556

749,200₩₩₩

801,474(16)

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(5) Statements of comprehensive income
Comprehensive income consisted of all changes in equity during a period from transactions and other events except those resulting frominvestments by owners and distributions to owners. Comprehensive income for the year ended December 31, 2009 was as follows (Unit: In
millions):
Classification2009

Net income₩

2008
891,951₩

782,582

Effect of exchange rate fluctuation(4,086)

21,172Retained earnings on trust accounts

1,163

116

Other comprehensive income:Gain (loss) on valuation of available-for-sale securities

624,071(1,100,935)

Gain on valuation of held-to-maturity securities

388

92

Loss of negative changes of securities using the equity method

(12)

-

(4,140)558,124(135,945)

201,904

Gain on revaluation of tangible assets
Less: Effect of income tax
Comprehensive income:₩

1,373,390₩

463,055

Controlling company’s comprehensive income₩

1,373,086₩

462,726

Minority interests’ comprehensive income

₩

304

₩

329

370,900₩(6) Appropriated retained earnings
Appropriated retained earnings as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification2009

Legal reserve (*1)₩

Other reserves

(*2)

		

		

₩

2008
292,600

91,289		

92,998462,189385,598₩(*1) T he Korean Banking Law requires a bank to appropriate at least 10 percent of net income after income tax to legal reserve, until such reserve equals 100 percent of its
paid-in capital. This reserve is not available for payment of cash dividends; however, it can be used to reduce deficit or be transferred to capital.
(*2) R elevant Japanese regulations require the Bank’s overseas branches located in Japan to appropriate a minimum of 10 percent of annual income after income tax as alegal reserve, until such reserve equals ¥2,000 million. This reserve is not available for the payment of cash dividends and may be utilized upon liquidation of the Japanesebranches. Singapore, Hanoi and KEBDAG’s branches’ statutory reserves are included in other statutory reserves.

177

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

16. SHARE-BASED PAYMENT:(1) Stock options
The details of the stock options as of December 31, 2009 were as follows (Unit: share, in Won):
Grant date

Stock option

Stock option

Stock option

Stock option

grantedexpiredexercised

outstanding price

Exercise period

to date (*2)

		Mar. 31, 2003 (*1)

101,401(21,348)(80,053)(*1)

53,369(53,369)-

Feb. 13, 2004

2,390,000(962,490)

Mar. 07, 2005

1,355,000(344,895)

Jun. 29, 2005

200,000(63,230)(92,480)

Mar. 07, 2006

400,000(112,690)-

Sep. 04, 2003

Exercise-₩ 13,266

Apr. 01, 2006 ~ Mar. 31, 2009-		

15,533

Sep. 05, 2006 ~ Sep. 04, 2009

(1,427,510)

-		

7,000

Feb. 14, 2006 ~ Feb. 13, 2009

(748,805)

261,300		

8,800

Mar. 08, 2007 ~ Mar. 07, 2010

44,290		

9,000

Jun. 30, 2007 ~ Jun. 29, 2010

287,310		

13,300Mar. 08, 2008 ~ Mar. 07, 2011

Aug. 01, 2006

200,000(42,000)(31,600)

126,400		

11,900Aug. 02, 2008 ~ Aug. 01, 2011

Mar. 08, 2007

1,090,000(543,900)-

546,100		

13,900Mar. 09, 2009 ~ Mar. 08, 2012

Mar. 29, 2007

630,000(340,390)-

289,610		

14,500Mar. 30, 2009 ~ Mar. 29, 2012

Aug. 10, 2007

380,000(175,990)-

204,010		

13,900Aug. 11, 2009 ~ Aug. 10, 2012

Mar. 11, 2008

510,000(300,130)-

209,870		

13,000Mar. 12, 2010 ~ Mar. 11, 2013

Aug. 01, 2008

180,000(105,486)-

74,514		

13,500Aug. 02, 2010 ~ Aug. 01, 2013

Mar. 12, 2009

490,000(28,666)-

461,334		

5,800

Mar. 13, 2011 ~ Mar. 12, 2016

900,000(60,000)-

840,000		

7,300

Apr. 01, 2011 ~ Mar. 31, 2016

85,000(8,500)-76,500		

6,300

Apr. 01, 2011 ~ Mar. 31, 2016

437,167		

10,900Aug. 05, 2011 ~ Aug. 04, 2016

Mar. 31, 2009
Mar. 31, 2009
Aug. 04, 2009(*3)

470,000(32,833)-

9,434,770(3,195,917)(2,380,448)

3,858,405(*1) Granted from KEBCS prior to the merger with the Bank. Exercise price per share and the shares outstanding were adjusted based on the merger ratio.
(*2) Actual number of stock options that have expired as a result of retirement or business performance. The expected number of stock options that will expire as a result of
business performance and others is considered together with the actual number of expired stock options when calculating the stock compensation cost.
(*3) The exercise price was adjusted from ₩6,300 to ₩7,300 in accordance with the resolution of the board of directors.

When the stock options are exercised, the Bank has the option to settle either through issuance of new shares or treasury stock, or throughpayment of cash equivalent to the difference between the market price and the exercise price. The number of exercisable stock option isdetermined in accordance with the management performance and the calculation criteria of the number of exercisable shares.
The intrinsic value of compensation cost granted before December 31, 2006 is the difference between the market price and the exercise pricepursuant to Interpretations on SKAS 39-35 - Accounting for Stock Options , and the fair value of compensation cost granted after January 1, 2007,
is estimated by option pricing models pursuant to SKAS No. 22 - Share-Based Payment. As a result, the pricing models of stock option of the Bankare categorized as the intrinsic value pricing model and the fair value pricing model. The details of these models as of December 31, 2009 were as
follows (Unit: In Won):<Intrinsic value pricing model>
Grant dateMarket price (*)

Mar. 07, 2005₩

14,222

Exercise price
₩

8,800

Intrinsic value
₩

5,422

Jun. 29, 2005		

14,222		

9,000		

5,222

Mar. 07, 2006		

14,222		

13,300		

922

Aug. 01, 2006		

14,222		

11,900		

2,322(*) Compensation price is measured as average price among the averages for two months, for a month and for a week’s stock prices in accordance with the Bank’s pricing
method.

178

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<Fair value pricing model: Black-Scholes Model>
Grant date

Risk free

Expected

Volatility of

Expected

Exercised

rate (%)

price

exercisethedividend		

periodunderlying

rate (%) (*3)

		

(year) (*1)

stock price

Fair value(%) (*2)			Mar. 08, 2007

3.60

4.09

68.22

4.86

₩ 13,900

Mar. 29, 2007

3.63

4.09

66.71

4.86

14,5003,989

Aug. 10, 2007

3.80

4.09

63.89

4.86

13,9004,416Mar. 11, 2008

4.07

4.09

56.72

4.86

13,0004,703

Aug. 01, 2008

4.26

4.09

53.00

4.86

13,5004,503Mar. 12, 2009

4.95

6.09

43.68

4.86

5,800

7,391

Mar. 31, 2009

4.95

6.09

41.77

4.86

7,300

6,577

Mar. 31, 2009

4.95

6.09

41.77

4.86

6,300

7,054

Aug. 04, 2009

4.98

6.09

42.43

4.86

10,900

5,252

₩

4,205

(*1) The expected exercise period is measured based on the possibility of exercise of the right in the past.
(*2) The volatility of the underlying stock price is measured based on the data in the past.
(*3) The expected dividend rate is measured based on the average in 2006, 2007 and 2008.

The changes in long-term accrued expenses recognized for stock option for the years ended December 31, 2009 were as follows (Unit: In millions):
Beginning balanceLong-term accrued expenses

319₩

Decrease (*)

Increase
12,798₩₩Ending balance(2,091)₩

11,026(*) The decrease amounting to ₩60 million was recognized for accounts payable.

(2) The equity linked special incentive (Rose bonus)
The Bank granted the equity linked special incentive to employees for the purpose of motivation to improve long-term performance. The
equity linked special incentive as of December 31, 2009 was as follows (Unit: share, in Won):
Grant date

Stock option

Stock option

Stock option

Stock option

grantedexpiredexercised (*)

outstanding price		

Exercise

Exercise period

to dateJul. 15, 2005

3,024,400(55,206)(2,895,694)

73,500-Jul. 15, 2007 ~ Jul. 14, 2010

Dec. 21, 2006

1,496,510(32,048)(1,156,432)

Dec. 12, 2007

614,800(21,304)(25,136)

308,030		

-Dec. 21, 2008 ~ Dec. 20, 2011

568,360		

-Dec. 12, 2009 ~ Dec. 11, 2012

Dec. 11, 2009

1,353,240(1,941)(69)

1,351,230		

-Dec. 11, 2009 ~Dec. 10, 2014

6,488,950(110,499)(4,077,331)₩

2,301,120(*) It can be exercised if an employee resigned within two years except for death, retirement age, position change and other cases imputable to an employee.

The equity linked special incentive is cash settlement transaction. It can be exercised from two years after grant date for three years.
The intrinsic value of “Rose bonus” granted before December 31, 2006 is the difference between the market price and the exercise price pursuant toInterpretations on SKAS 39-35 - Accounting for Stock Options, and the fair value of “Rose bonus” granted after January 1, 2007, is estimated by option
pricing models pursuant to SKAS No. 22 - Share-Based Payment . As a result, the pricing models of stock option of the Bank are categorized as theintrinsic value pricing model and the fair value pricing model. The details of these models as of December 31, 2009 were as follows (Unit: In Won):<Intrinsic value pricing model>
Grant date

Rose price (*)

Jul. 15, 2005₩

Dec. 21, 2006		

15,800Exercise price₩

15,800		

Intrinsic value
-

₩

-		

15,80015,800(*) The Rose price is measured as weighted average price (7: 5) of the average stock price for previous five days and net asset value of most recent quarterly settlement as ofthe last day of the previous month of December 31, 2009.

179

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<Fair value pricing model: Binomial Model>
Grant date

Risk free

Expected

Volatility of

Expected

Exercised

rate (%)

price

exercisethedividend		

periodunderlying

rate (%) (*2)

		

(year)

stock price

Fair value (*3)(%) (*1)

			Dec. 12, 2007 (*4)

-

2

-

Dec. 11, 2009

3.92

2

57.61

-

-

₩

-		

₩ 15,800-		

16,000(*1) The volatility of the underlying stock price is measured based on the volatility in the past.
(*2) The expected dividend rate is zero, since a grantee of “Rose bonus” has the right to be provided with dividends from grant date to excise date.
(*3) If the option price was “zero” without any other condition, the fair value and the intrinsic value should be the same. However, since Rose Price is calculated using the upperand lowest limit, they are not consistent.
(*4) Risk free rate and estimated stock price variability would be “zero” with expiration. Therefore the Bank estimated the intrinsic value as the fair value.

The changes in long -term accrued expenses recognized for “Rose bonus” for year ended December 31, 2009 were as follows (Unit: In millions):
Beginning balanceLong-term accrued expenses

19,153₩

Increase

Decrease
9,748₩

Ending balance(13,300)₩

15,601₩

17. CONTINGENCIES AND COMMITMENTS:(1) Derivatives
The notional amounts outstanding for derivative contracts as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Type (*)

2009
Trading

2008

Hedge

Total

Trading

Hedge

Total

Currency:
Currency forwards
Currency futures₩ 38,487,419 ₩            1,612,152-₩ 38,487,419₩ 36,046,100 ₩            -1,612,152

1,197,281₩ 36,046,100-

1,197,281

Currency swaps

8,323,470-

8,323,470

10,457,110-

10,457,110

Currency options purchased

2,372,032-

2,372,032

5,598,417-

5,598,417

Currency options sold2,054,885-

2,054,885

5,931,865-

5,931,865

52,849,958-

52,849,958

59,220,773-

59,230,773

Interest rate futures

1,437,266-

1,437,266

3,232,411-

3,232,411

Interest rate swaps

50,652,501

433,180

51,085,681

36,942,439

578,450

37,520,889

52,089,767

433,180

52,522,947

40,174,850

578,450

40,753,300

Interest rate:

Index:
Stock index futures

6,898

-

6,898

3,893

-

3,893

Stock index purchased

2,450

-

2,450

-

-

-

Stock index sold33,741-

33,741

48,155-

48,15543,089-43,08952,048-52,048---35,000-35,000Credit:Credit derivatives purchased

-

-

-

35,000-35,000₩104,982,814₩    433,180₩105,415,994₩ 99,492,671₩    578,450₩100,071,121(*) For transaction between Won and foreign currencies, unsettled amount of transaction is presented using the basic foreign exchange rate based on the contract amountin foreign currencies. For transaction between foreign currencies and foreign currencies, unsettled amount is presented using the basic foreign exchange rate based on
foreign currencies purchased at the end of the reporting period.

180Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

The details of derivatives as of December 31, 2009, and the valuation of derivatives for the year ended December 31, 2009 were as follows(Unit: In millions):
Type

Statement of Income

Statement of financial position		Trading				 Hedging					 Total				

Assets			 Liabilities

		

Gain on		 Loss on		 Gain on			 Loss on		 Gain on		

Loss on		

valuation		 valuation		 valuation			 valuation		 valuation		valuation₩ 415,767₩ 445,320

Currency swaps

350,708

162,319

Currency options purchased

11,75344,624Currency:
Currency forwards

Currency options sold
		

-

₩

-

₩ 415,767₩ 445,320₩ 868,065₩ 362,642--

350,708

162,319

327,192

638,964--

11,75344,624

98,345-₩27,051

4,757

-

-

27,051

4,757-

56,226805,279

657,020--805,279

657,020

1,293,602

1,057,832

369,147

305,586

2,299

7,246

371,446

312,832

305,452

433,280

Interest:
Interest rate swaps
Index:
Stock index purchased

660

-

-

-

660

-

788

-

Stock index sold

176

4,230

-

-

176

4,230

-

15,512

		

836

4,230

		

₩1,175,262₩ 966,836

2,299

₩

₩

-

836

4,230

788

15,512

7,246₩1,177,561₩ 974,082₩1,599,842₩1,506,624

The Bank uses various derivative instruments for its trading activities, including interest rate and foreign exchange swaps, futures, forwards andoptions, to manage the interest rate characteristics of certain assets or liabilities and to economically hedge against the effects of fluctuations ininterest rates or foreign exchange rates.
The Bank holds derivative instruments accounted for as fair value hedges applied to securities and debentures. The Bank recognized ₩1,904
million of losses on valuation of derivatives of securities and ₩6,438 million of gains on valuation of derivatives of debentures for the year ended
December 31, 2009. In addition, the interest rate swap covers the fair value changes of the hedged items resulted from the fluctuation in interest
rate and foreign exchange rate.
The details of derivatives as of December 31, 2008, and the valuation of derivatives for the year ended December 31, 2008 were as follows(Unit: In millions):
Type

Currency:
Currency forwards
Currency swaps
Currency options
purchased
Currency options
soldInterest:
Interest rate swaps
Index:
Stock index
purchased
Stock index sold
Credit:Credit derivatives purchased

Statement of income
Trading

HedgingGain onvaluation

Gain onvaluation

Loss onvaluation

Statement of financial position
AssetsLiabilities

Total
Loss onvaluation

Gain onvaluation

Loss onvaluation₩ 2,751,438 ₩ 1,747,945 ₩          - ₩          - ₩ 2,751,438 ₩ 1,747,945 ₩ 2,775,886 ₩ 1,755,534
542,2211,420,103
542,2211,420,103
524,035
1,367,230
648,772

22,393--648,772

22,393

761,152-

25,071

484,396--

25,071

484,396-624,508

3,967,502

3,674,837--

3,967,502

3,674,837

4,061,073

3,747,272

645,033

816,753

12,328

7,818

657,361824,571

610,590

802,683

-

-

-

-

-

-

-

-

7,999

1,980

-

-

7,999

1,980

-

11,725

1,556₩ 4,622,090 ₩ 4,493,570 ₩    12,328

1,556
1,800
₩     7,818 ₩ 4,634,418 ₩ 4,501,388 ₩ 4,673,463 ₩ 4,561,680

181

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

The Bank holds derivative instruments accounted for as fair value hedges applied to securities and debentures. The Bank recognized ₩7,852
million of losses on valuation of derivatives of securities and ₩12,328 million of gains on valuation of derivatives of debentures for the year ended
December 31, 2008. In addition, the interest rate swap covers the fair value changes of the hedged items resulted from the fluctuation in interest
rate and foreign exchange rate.
(2) The Bank holds written-off loans, of which the claim for borrowers and guarantors have not been terminated, amounting to ₩1,683,663 million and₩1,416,543 million as of December 31, 2009 and 2008, respectively.
(3) Endorsed notes with collateral amounted to ₩55,992 million and ₩63,533 million as of December 31, 2009 and 2008, respectively. Endorsed notes
without collateral held at the merchant banking accounted amount to ₩7,467,939 million and ₩9,450,454 million as of December 31, 2009 and 2008,
respectively.
(4) T he Bank is obliged to repurchase some of the loans previously sold to the Korea Asset Management Corporation (“KAMCO”) under certain conditions
including the following:- When it is considered impossible to collect the loans and interest due to delay in repayment of loans and interest over six months.
- When it is considered impossible to collect the loans and interest due to the abrogation of court-receivership process and the cancellationof mediation.
As of December 31, 2009, KAMCO and other loan purchasers may exercise the resale option for loans amounting to ₩1,459 million. An
additional loss or profit may occur, depending on the loan classification on valuation of loans or final arrangement on loans when KAMCO
and other loan purchasers exercise their repurchase agreement.
(5) Loans sold to asset backed securitization (ABS) (Unit: In millions)Classification

Date

Value of loans

Sale price

KEB 16th Securitization Specialty Co., Ltd.

Jun. 24, 2008

KEB 17th Securitization Specialty Co., Ltd. (*2)

Dec. 28, 2009		

₩105,206₩

110,402		

Subordinateddebentures (*1)

				
77,000₩79,000		

27,915(*1) The subordinated debentures are included in sale price.
(*2) The loss on disposal of loan of ₩21,779 million was recognized (see Note 8).

(6) The Bank has pending litigation as plaintiff or defendant in various legal actions arising from the normal course of operation. The aggregate amountsof these claims brought by and against the Bank were approximately ₩357,393 million (1,849 cases) and ₩453,660 million (146 cases), respectively,
as of December 31, 2009. The Bank recognized ₩14,324 million of provisions related to these lawsuits (see Note 14).
The list of major case of on-going litigation related to contingency were as follows:
Type
Sued

Plaintiff/defendant

AmountContent

Progress

Saehan Merchant Banking

Winning the case in the first and second trial,₩
10,679 Indemnity receivables claim
Corporation and others					 pending in the third trial

Lim Asia Multi-Strategy		Losing the case in the first trial,
Sued7,996 Money collected claim
		 fund Inc.					 pending in the second trial
In addition, Olympus Capital KEB Cards Ltd. and others (“the applicants”) ask for arbitration of compensation of USD 300 million against the Bankand 5 companies related to Lone Star (“the Banks”) through the Court of International Arbitration. The applicants argue that the Banks violated theobligation of shareholders’ contract (on December 1, 1999) so the contract of shares transference (on November 20, 2003) is invalid. The result of
the arbitration is presently unpredictable.
The Bank believes that the outcome of these matters will not have a material impact to the Bank’s financial position or operations.

182

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(7) Loans to companies under workout program
The loans to companies under court receivership or workout program amounted to ₩2,585,693 million as of December 31, 2009. Actual loss
on these loans can be different from the Bank’s estimation.
(8) Debt to equity swap of Hynix Semiconductor Inc.
The Bank’s outstanding loans (including acceptances and guarantees) and available-for-sale securities convertible to equity securities withrespect to Hynix Semiconductor Inc. (“Hynix”) as of December 31, 2009 amounted to ₩465,945 million and ₩789,147 million, respectively.
As of December 31, 2009, the Bank’s loans for Hynix are classified as normal. Joint control procedure for Hynix Semiconductor Inc. wascompleted on July 12, 2005. Also, the Bank’s 37,742 thousand shares of Hynix are restricted for sale until completion of M&A and the gain on
valuation of available-for-sale securities amounting to ₩423,836 million is accounted as other comprehensive income as of December 31,
2009.
(9) Debt to equity swap of Hyundai Engineering & Construction Co., Ltd.
As of December 31, 2009, the Bank has loans (including acceptances and guarantees) of ₩611,499 million and available-for-sale securitiesof ₩633,010 million with respect to Hyundai Engineering & Construction Co., Ltd. and the Bank’s loans for Hyundai Engineering &Construction Co., Ltd. are classified as normal. The Bank has 9,715 thousand shares of Hyundai Engineering & Construction Co., Ltd., which
are restricted for sale until completion of M&A of Hyundai Engineering & Construction Co., Ltd. With regards to these securities, the gain on
valuation of available-for-sale securities amounting to ₩355,078 million is accounted as other comprehensive income as of December 31,
2009.
(10) Commitments related to credit card business
The Bank has entered into trademark license (membership) agreements with VISA Worldwide Pte. Limited in 2008, of which the rights havebeen transferred from VISA International Service Association and Master Card International Incorporated in 1993, and JCB International
Service Association in 1997. The Bank pays and receives certain amounts of fees and commissions in connection to the income and expense
incurred pertaining to these agreements.
The Bank has entered into credit card affinity agreements with KDB Capital, and the Bank allocates the fee income related to the credit cardaffinities at a fixed rate.
(11) Indemnification obligations regarding the share subscription agreement by and between the Bank and the LSF-KEB Holdings, SCA
The Bank shall indemnify LSF-KEB Holdings, SCA for all purchaser losses (*1) and pay for damages resulting from any breach by the Bank of
any of the Bank’s covenants (*2) in the Share Subscription Agreement. The Bank’s indemnification obligations are as follows:
Duration of indemnification obligations are as follows:- Purchaser losses, excluding those mentioned below, may be indemnified until 18 months from the Closing Date (*3).
- Purchaser losses arising as a result of fraud or intentional misrepresentation by the Bank may be indemnified at the Closing Date andcontinue to be in full force and effective until three years from the Closing Date.
- Purchaser losses related to tax matters may be indemnified at the Closing Date and continue to be in full force effective until five years fromthe Closing Date.
The Bank’s indemnification obligations expire after the duration periods stated above. However, if the Bank receives written claims fromLone Star before the expiration of the durations, regardless of the durations stated above, the Bank’s indemnification obligations continue tobe in force and effective until the related matter are brought to satisfactory settlement.
The Bank has no indemnification obligation for claims less than ₩100 million. The Bank’s indemnification obligation applies to claims
exceeding ₩15,000 million cumulative, and only losses exceeding ₩10,000 million may be indemnified.
The total amount of indemnification obligations cannot exceed the LSF-KEB Holdings, SCA’s investments in the Bank.
(*1) P urchase losses means the amount of any and all losses, costs, liabilities, damages, judgments, settlements and expenses that arise out of any breach by the Bank of anyof the Bank’s representations and warranties contained in the Share Subscription Agreement or any breach by the Bank of any of the Bank’s covenants or agreements in
the Share Subscription Agreement.
(*2) Covenant means the conditions set forth in the Share Subscription Agreement that the Bank shall comply with the share subscription until the Closing Date.
(*3) Closing Date means the date that the new shares come into effect, and falls on October 31, 2003.

183

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

18. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES:
Significant assets and liabilities denominated in foreign currencies as of December 31, 2009 and 2008 were as follows (Unit: In thousands of U.S.
Dollars, in millions of Won):
Classification

2009
USD

2008

Translationequivalent(*)

into Won

USD

Translationequivalent(*)

into Won				
Assets:Cash and due from bank:Foreign currencies
Due from banks in foreign currencies$

333,910₩

389,873$

347,870₩

437,446

1,596,478

1,864,048

3,454,362

4,343,860

Trading securities

39,95546,651

38,03947,834

Available-for-sale securities

709,147

828,000

991,087

1,246,292

Held-to-maturity securities

308,299359,970

514,859

647,435

5,532

6,459

5,089

6,399

888,839

1,037,809

668,849

841,077

2,240,652

2,616,185

2,184,437

2,746,929

3,623

4,230

3,134

3,941

3,473,012

4,055,089

3,562,606

4,479,977

54,77063,95038,771

48,755

8,778,935

10,250,284

9,141,742

11,495,741

41,79548,80032,35940,692

Securities:

Securities using the equity method
Loans:
Call loans
Domestic import usance bill
Credit card receivables
Bills bought in foreign currencies
Bills bought in Won
Loans in foreign currencies
Factoring receivables
Private placed bonds

197,006

230,024

108,566

136,522(Reserve for bad debts)(102,601)(119,797)(78,143)(98,265)

Demand deposits in foreign currencies

4,653,866

5,433,854

4,069,438

5,117,318

Savings deposits in foreign currencies

8,124,599

9,486,282

7,181,260

9,030,434

Borrowings in foreign currencies

4,938,392

5,766,066

5,905,363

7,425,994

Call money in foreign currencies

1,188,189

1,387,330

2,118,760

2,664,341

Bonds in foreign currencies

1,115,050

1,301,932

869,438

1,093,318

Liabilities:
Deposits:

Borrowings:

Other liabilities:
Accrued expenses in foreign currencies

228,702

267,033

165,774

208,461

Pension benefit

3,923

4,580

3,598

4,524

Asset under management of pension benefits(3,135)(3,660)(2,326)(2,925)(*) Foreign currencies other than U.S. Dollars were converted into U.S. Dollars at the basic rates of exchange at the end of the reporting period.

184

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

19. OPERATING REVENUE AND EXPENSES:(1) Gain and loss on trading and valuation of derivatives
Details of gain and loss on trading and valuation of derivatives for the years ended December 31, 2009 and 2008 were as follows 		
(Unit: In millions):
Classification

2009

2008

Gain:
Gain on trading of derivatives₩

Gain on valuation of derivatives				6,038,899₩

9,352,223

1,183,999		

4,642,270₩

7,222,898₩

13,994,493₩

6,896,235₩

9,140,323

Loss:
Loss on trading of derivatives

Loss on valuation of derivatives				₩975,986		
7,872,221₩

4,513,716
13,654,039(2) Commission income and expenses
Details of commission income and expenses for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification

2009

2008

Commission income:Commission received₩

Guarantee fees received		

480,945

Other commission received				₩46,362		
912		

535,493
33,18684₩528,219₩568,763₩284,227₩

76,822

Commission expenses:
Commission paid

Other commission paid				₩

1,000		285,227₩

171,145247,967(3) Dividend income
Details of dividend income for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification

2009

Dividend income from trading securities

₩

2008
612

₩

4,391

Dividend income from available-for-sale securities		

14,798		

74,673

		15,41079,064₩₩185

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(4) Other operating revenue and expenses
Details of other operating revenue and expenses for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification

2009

2008

Other operating revenue:
Profit on operating trust account₩21,461

Reversal of provision for unused credit limit		

-		

Others		
		

₩

881		

24,30815,0232,300₩

22,342₩

41,631₩

163,545₩

144,254

Other operating expenses:
Fund contributions

Provision for allowance for acceptances and guarantees		

23,401		

2,215

Provision for unused credit limit		

6,561		-

Provision for other liabilities		

41,022		

44,085

Others		

1,189		

1,117

		

₩

235,718₩

191,671(5) General and administrative expenses
General and administrative expenses for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification

2009

Salaries₩

2008
566,239₩

541,452

Expenses for fringe benefits

168,146

153,171Retirement allowances

61,34548,514

Honorary retirement

66,882

3,534

Operating expense

206,082

198,885

Depreciation

89,37898,024

Amortization

32,574

31,349Taxes

40,24548,538

Rental

84,74878,879Entertainment

9,826

13,525Advertising

22,988₩

1,348,453

40,200₩1,256,071

20. OTHER INTEREST INCOME AND EXPENSES:
Other interest income and expenses for the years ended December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification

2009

2008

Other interest income:Interest on domestic transaction

₩

7,709

₩

15,659Miscellaneous interest revenues		

5,991		

15,860Interest on cashier’s check reimbursement		

1,538		

1,538

Others		
		

682		

1,436

₩

15,920₩34,493

₩

2,945

₩

5,527

Other interest expenses:
Interest paid on domestic transaction

Interest on borrowings from trust account		
Others		
		

186

₩

28,931		
80		
31,956₩

48,796
169
54,492

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

21. NON-OPERATING INCOME AND EXPENSES:
Non-operating income and expenses for the years ended December 31, 2009 and 2008 consisted of (Unit: In millions):
Classification

2009

2008

Non-operating income:Gain on disposal of tangible assets₩

Rental income		

2,805

₩

2,618		

3212,569

Gain on securities using the equity method		

518		

3,909

Others		45,215		

65,051₩

51,156₩

71,850

₩

1,684

₩

2,020

		
Non-operating expenses:
Loss on disposal of tangible assets

Loss on securities using the equity method		

842		

143

Loss on revaluation of tangible assets		-		25,346

Others		

34,500		

58,65537,026

86,164

		₩₩

22. INCOME TAX EXPENSE (BENEFITS):(1) Components of income tax expense (benefits)
The components of income tax expense (benefits) for the years ended December 31, 2009 and 2008 were summarized as follows(Unit: In millions):
Classification

2009

2008

Bank:
Income tax currently payable (receivable)₩(110,341)₩

228,994

Change in deferred taxes due to temporary differences

112,861(75,430)

Income tax directly applied to shareholders’ equity(136,302)

202,853

25,17628,455(108,606)

384,872

Income tax expense of overseas branch
Income tax expense (benefit)
Subsidiaries:
Income tax currently payable

12,37032,066

Change in deferred taxes due to temporary differences

7,348(18,483)(434)(1,322)

19,284

12,261

Income tax directly applied to shareholders’ equity
Income tax expense		

₩(89,322)₩397,133(2) Deferred income tax assets in the consolidated financial statements as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification

2009

KEBC

₩

2008
1,892

₩

4,064

KEBOC

2,388

1,996

KEBA

4,344

2,185

KEBI

400

403

KEB NY FINCO

3,748

3,348

KEB LA FINCO

8,910

17,344₩

21,682₩

29,340187

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(3) Deferred income tax liabilities in the consolidated financial statements as of December 31, 2009 and 2008 were as follows (Unit: In millions):
Classification

2009

KEB

₩

KEBF		₩

2008
202,383₩

1,593		203,976₩

89,522
1,903
91,425(4) The statutory income tax rate applicable to the Bank and its subsidiaries, including resident tax surcharges, is 24.2 percent and 27.5 percent for theyears ended December 31, 2009 and 2008, respectively. However, due to tax adjustments, the effective tax rates for the year ended December 31, 2008is 33.66 percent. Effective tax rate for the year ended December 31, 2009 is not calculated since the Bank incurred income tax benefits.

23. EARNINGS PER SHARE:(1) Basic net income per share
Basic income per share is calculated for common stock by dividing controlling company’s net income available to common shareholders by
the weighted average number of outstanding common stock. The basic net income per share for the years ended December 31, 2009 and2008 was as follows (Unit: In Won):
Classification

2009

2008

Controlling company’s net income₩ 891,737,774,814₩ 782,372,580,444

Weighted average number of common shares		
Basic net income per share₩

644,906,826		
1,383

₩

644,906,826
1,213

Both the weighted average number of outstanding common stock and the number of outstanding common stock are the same because
there is no change on the number of outstanding common stock for years ended December 31, 2009 and 2008.
(2) Diluted net income per share
Diluted net income per share represent diluted net income divided by the number of common shares and diluted securities. There is no
diluted security for recent two years. The diluted net income per share; therefore, is the same as net income per share.

188

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

24. SEGMENT INFORMATION:(1) Statements of financial position per business segment as of December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>
Financial &Consolidation

insurance businessadjustment

Total

Assets:Cash and due from banks₩

6,525,904₩(179,647)₩

6,346,257

Securities

15,962,562(718,667)

15,243,895

Loans

67,423,552(1,186,706)

66,236,846

Tangible assets

1,394,716(1,606)

1,393,110

Other assets
		

10,804,292(3,083)

10,801,209₩

102,111,026₩(2,089,709)₩

100,021,317₩

60,996,701₩(130,845)₩

60,865,856

Liabilities:
Deposits
Borrowings

19,234,905(1,144,431)

18,090,474

Other liabilities

13,226,077(137,697)

13,088,380

93,457,683(1,412,973)

92,044,710

Common stock

3,534,651(310,117)

3,224,534

Capital surplus

75,277(74,337)

940

-

-

-

		
Shareholders’ equity:

Capital adjustment
Accumulated other comprehensive income

1,239,450(5,894)

1,233,556

Retained earnings

3,803,967(288,511)

3,515,456

Non-controlling interest
		
		

₩

-

2,121

2,121

8,653,345(676,738)

7,976,607

102,111,028₩(2,089,711)₩

100,021,317

189

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<2008>
Financial &Consolidation

insurance businessadjustment

Total

Asset:Cash and due from banks₩

10,827,081₩(62,826)

10,764,255₩

Securities

14,477,568(527,500)

13,950,068

Loans

70,313,006(1,550,504)

68,762,502

Tangible assets

1,452,808(2,228)1,450,580

Other assets
		

12,400,304(9,021)

12,391,283₩

109,470,767₩(2,152,079)₩

107,318,688₩

62,610,388₩(46,798)₩

62,563,590

Liability:
Deposits
Borrowings

25,030,348

Other liabilities(1,473,747)

23,556,601

14,620,651(105,984)

14,514,667

102,261,387(1,626,529)

100,634,858

3,460,125(235,591)

3,224,534

Capital surplus

55,781(54,841)940

Capital adjustment(4,425)-(4,425)

		Shareholders’ equity:
Common stock

Accumulated other comprehensive income
Retained earnings
Non-controlling interest
		
		

₩

753,554(4,354)749,200

2,944,345(232,581)

2,711,764

-

1,817

1,817

7,209,380(525,550)

6,683,830

109,470,767₩(2,152,079)₩

107,318,688(2) Statements of income per business segment for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>
		

Financial & 		Consolidation					insurance businessadjustment

Operating revenue₩₩

Operating expenses		

16,832,353

16,043,829		

(58,840)

Total₩

16,773,513(58,815)		

15,985,014

Operating income		

788,524		(25)		

788,499

Non-operating income		

106,359		

(55,203)		

51,156

Non-operating expenses		

42,570		

(5,544)		

37,026

Income before income tax		

852,313		

(49,684)		

802,629

Income tax benefits		

(89,322)		

-		

(89,322)

Net income₩

941,635₩

941,635		

Controlling company interests

Minority interests		

190

₩

-		

(49,684)₩

891,951(49,898)₩

891,737

214		

214

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<2008>

Operating revenue

Financial &Consolidation

insurance businessadjustment

23,246,345

₩

Total

(94,553)₩

23,151,792₩

Operating expenses

22,049,404(91,641)

21,957,763

Operating income

1,196,941(2,912)

1,194,029

Non-operating income

126,148(54,298)

71,850Non-operating expenses

118,078(31,914)

86,164

Income before income tax

1,205,011(25,296)

1,179,715

397,133-

397,133

Income tax expense
Net income
Controlling company interests₩

807,878₩

807,878		

Minority interests		₩-		(25,296)₩782,582(25,505)₩

782,373

209		

209

(3) Financial information per business segment as of and for years ended December 31, 2009 and 2008 was as follows (Unit: In millions):<2009>
Banking		Trust account		

Others		Consolidation									

adjustment

Operating revenue₩₩ 16,511,875₩

72,474₩

248,004

Total(58,840)₩ 16,773,513

Less: inter-company transaction		

(47,247)		

(974)		

(10,619)		

58,840		-

Net operating revenue		-		16,773,513

16,464,628		

71,500		

237,385		

Operating income₩

750,861₩-₩

Cash and due from banks₩

6,163,327₩

180,759₩

37,663₩(25)

181,818₩(179,647)

788,499₩₩ 6,346,257

Securities		

15,051,614		

780,371		

130,577		(718,667)		

15,243,895

Loans		

65,143,432		

301,993		

1,978,127		

(1,186,706)		

66,236,846

Tangible assets		

1,384,295		-		

10,421		

(1,606)		

1,393,110

Other assets		

10,737,128		

10,442		

56,722		

(3,083)		

10,801,209₩ 98,479,796₩

1,273,565

Banking		Trust account		

2,357,665₩ (2,089,709)₩100,021,317

Others		Consolidation		

Total

₩

<2008>

							

adjustment

Operating revenue₩₩ 22,884,431₩

94,204₩

267,710(94,553)₩ 23,151,792

Less: inter-company transaction		

(88,492)		

(1,512)		

(4,549)		

94,553		

-Net operating revenue		

22,795,939		

92,692		

263,161		-		

23,151,792

Operating income (loss)₩ 1,206,268

₩

-

₩

(9,327)₩(2,912)₩

Cash and due from banks₩ 10,380,398₩

313,039₩

133,644₩(62,826)₩ 10,764,255

1,194,029

Securities		

13,661,006		

721,506		

95,056		

(527,500)		

13,950,068

Loans		

68,114,558		

181,487		

2,016,961		

(1,550,504)		

68,762,502

Tangible assets		

1,431,302		

-		

21,506		

(2,228)		

1,450,580

Other assets		

12,310,960		

18,857		

70,487		

(9,021)		

12,391,283₩105,898,224₩

1,234,889₩ 2,337,654₩ (2,152,079)₩ 107,318,688

191

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(4) Financial information per geographical area as of and for the years ended December 31, 2009 and 2008 was as follows (Unit: In millions):<2009>
Domestic

Overseas

Consolidation

			
Operating revenue₩

16,630,152₩

202,201₩

Less: inter-company transaction		

(49,201)		

(9,639)		

Net operating revenue		

16,580,951		

192,562		

740,846₩

47,678₩6,201,600₩

324,304₩

Operating income₩

Cash and due from banks

₩

Total

adjustment(58,840)

16,773,513₩

58,840		--		

16,773,513

(25)

₩

(179,647)₩

788,499
6,346,257

Securities

15,801,323

161,239(718,667)

15,243,895

Loans

64,643,549

2,780,003(1,186,706)

66,236,846

Tangible assets

1,388,844

5,872(1,606)

1,393,110

Other assets

10,754,671

49,621(3,083)

10,801,209₩

98,789,987₩

3,321,039₩(2,089,709)₩

100,021,317<2008>
Domestic

Overseas

Consolidation

			
Operating revenue₩

23,007,434

₩

Total

adjustment
238,911₩

Less: inter-company transaction		

(82,040)		

(12,513)		

Net operating revenue		

22,925,394		

226,398		

Operating income₩

1,181,127₩

15,814₩

Cash and due from banks₩

10,550,813₩

276,268₩(94,553)₩

23,151,792

94,553		

--		

23,151,792(2,912)₩

1,194,029(62,826)₩

10,764,255

Securities

14,335,792

141,776(527,500)

13,950,068

Loans

67,415,048

2,897,958(1,550,504)

68,762,502

Tangible assets

1,446,887

5,921(2,228)1,450,580

Other assets

12,334,031₩

192

106,082,571

66,273₩

3,388,196(9,021)₩(2,152,079)

12,391,283₩

107,318,688

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

25. SIGNIFICANT TRANSACTIONS BETWEEN THE BANK AND SUBSIDIARIES:(1) Significant balances made in the normal course of business with subsidiaries as of December 31, 2009 and 2008 are summarized as follows(Unit: In millions):<2009>Classification

KEBC

KEBF

KEBOC

KEBA

				

KEBDAG

KEBI

Trust

Other

				

Total

subsidia-								riesAssets:Due from banks in Won- ₩₩Due from banks in

- ₩

- ₩

- ₩

- ₩

- ₩

- ₩

326

-

2,977

1,196

693

22,281308--

27,45540,000

-

-

-

-

-

-

-

40,000

foreign currencies
Trading securities

326 ₩Loans in Won

36,900

-

-

-

-

-

-

-

36,900Loans in foreign currencies (*)

31,658--204,89085,883--472,180

794,611

(583)

-

-

-

-

-

-

-

(583)

-

927

99

-

-

1,766

2,854

Allowance for possible
loan losses
Other assets
			

61

1

₩ 108,036 ₩3,304 ₩

124 ₩

22 ₩

1,196 ₩ 206,510 ₩ 108,263 ₩308 ₩- ₩ 473,946 ₩ 901,563

Liabilities:
Deposits in Won
Deposits in Foreign
currencies

₩

- ₩

- ₩

- ₩

- ₩

5,441

7,704

-

29,26228,960

331

-

2,105

97,085---36,675

129,705

106,540--

272,920

3,350

-

-

1,560

312

222

133,332-

138,776₩ 32,197 ₩7,726 ₩

currencies
			

4 ₩

28,723

Borrowings in foreign
Other liabilities

5,291 ₩

5,291 ₩ 67,501 ₩ 158,977 ₩ 107,093 ₩ 133,332 ₩

2,105 ₩ 514,222(*) Call loans in foreign currencies are included.

193

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<2008>Classification

KEBC

KEBF

KEBOC

KEBA

				

KEBDAG

KEBI

Trust

Other

				

Total

subsidia-								riesAssets:Due from banks in foreign
currencies- ₩₩3,588 ₩

1,341 ₩ 17,138 ₩ 16,545 ₩

388 ₩

- ₩

- ₩ 39,000

Loans in Won

169,300

-

-

-

-

-

-

-

169,300

Loans in foreign currencies (*)

40,125--274,546

65,331

25,150-650,142

1,055,294(1,780)

-

-

-

-

-

-

-

(1,780)

-

3,172

694

685

-

4,020

8,780

Allowance for possible
loan losses
Other assets
			

207

2

₩ 207,852 ₩

3,590 ₩

153 ₩

33 ₩

1,341 ₩ 294,856 ₩ 82,570 ₩ 26,223 ₩- ₩ 654,162 ₩1,270,594

Liabilities:
Deposits in Won₩

Deposits in Foreign

- ₩

- ₩

- ₩

186

4,483

4

12,945

330

-

955

23,262--

12,647

17,663

108,904

98,085-

11,855249,154

3,894

344

-

798

910

999

79,151

176

86,272currencies
₩

- ₩

4,494

Borrowings in foreign

			

- ₩

51

currencies

Other liabilities- ₩4,098 ₩

4,871 ₩ 17,130 ₩ 18,465 ₩ 122,759 ₩ 99,414 ₩ 79,151 ₩ 12,986 ₩ 358,874(*) Call loans in foreign currencies are included.

(2) Significant transactions with subsidiaries for the years ended December 31, 2009 and 2008 were as follows (Unit: In millions):<2009>Classification

KEBC

KEBF

KEBOC

KEBA

				

KEBDAG

KEBI

Trust

Other

				

Total

subsidia-								riesRevenue:
Interest revenues in Won ₩5,766 ₩

- ₩

- ₩

1,956

-

2

5,404

1,735

121

-

10,91020,128

-

181

-

-

-

-

-

-

181

-

-

-

584

130

-

-

-

714

4,106

340

-

2,508

41

-

9,176

-

16,171521 ₩

2 ₩8,496 ₩

1,906 ₩

121 ₩

- ₩

41 ₩

- ₩

- ₩

- ₩

- ₩

5

7

152

1,531

3,667

1,451

-

135

6,948

-

345

-

-

-

-

-

-

345

-

109

-

104

-

-

-

112

325

Written-off of bad debts(1,197)

-

-

-

-

-

-

-

(1,197)

Other expenses

5,910

-

-

2,258

-

-

-

-

8,168

502 ₩

152 ₩

3,667 ₩

1,451 ₩

973 ₩Interest revenues inforeign currencies
Commission income in Won
Commission income inforeign currencies
Other revenue			₩ 11,828 ₩

- ₩

- ₩

- ₩

- ₩

- ₩

5,766

9,176 ₩ 10,910 ₩ 42,960

Expenses:
Interest expenses in Won ₩Interest expenses inforeign currencies
Commission expense in Won
Commission expense inforeign currencies

			

194

₩

4,718 ₩

3,893 ₩

973 ₩

- ₩

1,014

247 ₩ 15,603

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

<2008>Classification

KEBC

KEBF

KEBOC

KEBA

				

KEBDAG

KEBI

Trust

Other

				

Total

subsidia-								riesRevenue:
Interest revenues in Won ₩7,805 ₩

- ₩

- ₩

2,240

4

15

12,384

3,773

512

-

23,28742,215

-

169

-

-

-

-

-

-

169

-

-

-

418

4,172

-

-

-

4,590

11,809

-

35

2,448

-

-

10,992-25,284₩ 21,854 ₩173 ₩50 ₩ 15,250 ₩

- ₩

48 ₩

- ₩

58

114

105

2,065

7,865

641

-

606

11,454

-

564

-

-

-

-

-

-

564

-

160

-

-

915

-

-

-

1,075

1,060

-

-

-

-

-

-

-

1,060

-

984

Interest revenues inforeign currencies
Commission income in Won
Commission income inforeign currencies
Other revenue
			

- ₩

- ₩

7,945 ₩

- ₩

- ₩

- ₩

7,805

512 ₩ 10,992 ₩ 23,287 ₩ 80,063

Expenses:
Interest expenses in Won ₩Interest expenses inforeign currencies
Commission expense in Won
Commission expense inforeign currencies
Written-off of bad debts
Other expenses
			

₩

- ₩

- ₩

- ₩

1,512 ₩

697

-

-

287

-

-

-

1,815 ₩

886 ₩

105 ₩

2,352 ₩

8,780 ₩

641 ₩

1,512 ₩

- ₩

1,560

606 ₩ 16,697(3) Details of significant receivables and payables among subsidiaries as of December 31, 2009 were as follows (Unit: In millions):
Subsidiaries

Classification

Counterparty

Classification

AmountKEBF

Due from Retirement Insurance ₩

866

Trust

Time deposits in Won₩

Due from Retirement Insurance		

14

Trust

Accrued expenses		

KEBF

AmountDue from banks in foreign 		Demand deposits in foreign		

866
14

KEB NYFINCO
161 KEBOC
		 currencies					 currencies

161

Due from banks in foreign		
Demand deposits in foreign		
KEBDAG
54 KEBOC
		 currencies					 currencies

54

Due from banks in foreign		
Demand deposits in foreign 		
KEBI
138 KEBDAG
		 currencies					 currencies

138(4) Details of significant transactions among subsidiaries for the year ended December 31, 2009 were as follows (Unit: In millions):
Subsidiaries

Classification

AmountCounterparty

Classification

Interest on borrowing inInterest on call loan in₩
KEB NYFINCO
163 KEBOC		 foreign currencies					 foreign currencies
KEB LAFINCO

Amount₩Interest on borrowing in		

Interest on call loan in
51 KEBOC
		
foreign currencies					 foreign currencies

163
51

Trust

Interest on deposits in Won		

43

KEBF

Interest on due from banks in Won		

43

Trust

Interest on deposits in Won		

18

KEBC

Interest on due from banks in Won

18

195

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(5) Guarantees and acceptances with subsidiaries as of December 31, 2009 were as follows (Unit: In millions):
Subsidiaries

Classification

AmountBANK

Guarantees and acceptances in foreign currencies

₩

KEBA

Guarantees and acceptances in foreign currencies		

Counterparty
7,745

KEBC

4,377

BANK

(6) The key management compensations for the year ended December 31, 2009 were as follows (Unit: In millions):
Classification

Compensations

Short-term employee benefits

₩

5,415

Employee benefits after resignation		

666

Stock option		

7,505
13,586₩The key management includes the directors, the executives and the officers who have authorities and responsibilities for decision-making of
the business plan, operations and control over the Bank.
26. COMPUTATION OF VALUE ADDED:
Accounts required for computation of value added for the years ended December 31, 2009 and 2008 consisted of the following (Unit: In millions):
Accounts

2009

Salaries₩

2008
566,239₩

541,452

Expenses for fringe benefit

168,146

153,171Retirement allowances

61,34548,514

Rent

84,74878,878Depreciation

89,37898,024

Amortization

32,574

31,349Taxes and dues

40,24548,538₩1,042,675₩

999,926

27. DIVIDENDS:(1) The calculation of dividends for the years ended December 31, 2009 and 2008 was as follows (Unit: shares, In millions except per share amounts):
Classification

2009

Dividends per share (rate) (In currency units)₩

Shares issued
Dividends

2008
510 (10.2 %)₩644,906,826₩

328,902125 (2.5%)
644,906,826₩

80,613(2) The calculation of dividend payout ratio for the years ended December 31, 2009 and 2008 was as follows (Unit: In millions):
Classification

2009

Dividends₩

2008
328,902₩80,613

Net income		

891,737		

782,618

Dividend payout ratio (%)		

36.88		

10.30

196

Notes to Consolidated Financial Statements
KOREA EXCHANGE BANK AND SUBSIDIARIES for the years ended December 31, 2009 and 2008

(3) The calculation of dividend yield for the years ended December 31, 2009 and 2008 was as follows (Unit: In currency units):
Classification

2009

Dividends

₩

2008
510

125

₩

Closing price		

14,500		

6,330

Dividend yield ratio (%)		

3.52		

1.97

28. CASH FLOWS:(1) Cash in statements of cash flows consists of cash, due from bank (excluding restricted due from bank). Cash flows from operating activities
are presented by the indirect method.
(2) The cash and due from banks in the statements of cash flows for the years ended December 31, 2009 and 2008 were as follows(Unit: In millions):
Classification

2009

Cash and due from banks₩

Foreign currencies

2008
809,276

876,432₩

389,873437,446

Deposit in Won

3,283,060

5,106,517

Deposit in foreign currencies

1,864,048

4,343,860

6,346,257

10,764,255

Less: restricted due from bank

(2,442,077)₩

3,904,180(6,814,198)₩

3,950,057(3) Significant transactions not involving cash inflows and outflows for the years ended December 31, 2009 and 2008 were as follows(Unit: In millions):
Classification

2009

Decrease of loans from write-offs of loans₩

2008
926,361₩

597,106

Increase (decrease) of gain on valuation of available-for-sale securities		

487,292		

(776,196)

Change on unsettled spot transactions		

1,513,172		

881,988197

Organization Chart
February 1, 2010

General Meetingof Shareholders
			Board of Directors

Channel Development Committee

President & CEO

Compensation Committee

4
9
27
44
121

Banks
GroupsDepartments
Divisions
Teams

Risk Management Committee
Audit Committee

Audit & Examination Division

Outside Director Candidate
Recommendation Committee
Compliance Dept.
Global Products Dept.
Global Corporate BankWorld Corporate Group

Large Corporate Support Dept.

International Group
Foreign Customer
Marketing Support Dept.
Business
Units

Corporate & Capital Markets
Bank

Corporate Group
Capital Markets Dept.

Retail BankPB Marketing Support Dept.

Card Bank

Operations
GroupsCredit Management

Special Credit Management Dept.

Service Delivery

Service Delivery Dept.

Information & Technology
Finance

SupportFunctions

Risk Management

Risk Management Dept.

Human Resources
Brand Management &Communication Dept.

198

Board of Directors & Managing Directors
As of March 31, 2010

			Board of Directors

Standing Directors
Richard F. Wacker
Larry A. Klane
Jang, Myoung-Kee

ChairmanPresident & CEO
Deputy President

Outside Directors-

Managing Directors

Ellis Short
Michael D. Thomson
Paul Yoo
Larry S. Owen
Park, Chin-Keun
Kim, Chung-Soo
Lee, Jae-Ouk
Kim, Jin-Ho

Ex-Vice President, Lone Star
General Counsel-Asia, Lone Star
Ex-President, Lone Star Advisors Korea
Ex-Managing Director, Stanford Management Company
Ex-Dean of Department of Business and Economics, Yonsei University
Ex-Director of Economic Research at JoongAng Daily
Ex-Deputy Governor, Bank of Korea
Ex-Deputy President, Korea Eximbank

Lee, Jong-Kyu
Suh, Choong-Suk
Yoon, Jong-Ho
Choi, Myung-Hee
Lee, Sang-Don
Jhun, Joong-Gyu
Alexander S. Kim
Jang, Chan-Woong
Chang, Kab-Soon
Kim, Jee-Won
Chung, Soo-Cheon
Park, Yong-Duck
Byeon, Dong-Hee

AuditorSenior Managing Director, CRO
Senior Managing Director, Global Corporate Bank / World Corporate Group
Global Ombudsman
Senior Managing Director, Corporate & Capital Markets Bank / Corporate GroupManaging Director, CCO
Managing Director, Service Delivery Dept.
Managing Director, Information & Technology
Managing Director, Human Resources
Managing Director, CFOManaging Director, Card BankManaging Director, Retail BankManaging Director, International Group199

Global Directory
As of March 31, 2010

			Financial Institutions Division

Foreign Customer Division

Global Head of Financial Institutions
Cho, In-Gyun
Tel: 82-2-729-0432 Fax: 82-2-775-2565
Clearing Services (CLS)
Senior Area Manager: Lee, Suk-Kyung
Tel: 82-2-729-0457 Fax: 82-2-775-2565

Foreign Customer Marketing Team
Team Head: Cho, Jin-Je			
Tel: 82-2-729-0533			
			
USA, Asia			
RM: Lee, Sun-Ki			
Tel: 82-2-729-0288

Asia, Oceania
Senior Area Manager: Yi, Sung-Mun
Tel: 82-2-729-8916 Fax: 82-2-775-2565

China, Japan			
RM: Heo, Hyun-Hoe			
Tel: 82-2-3671-1882

Korean, Community Banks
Senior Area Manager: Kim, Kwang-Hoon
Tel: 82-2-729-8470 Fax: 82-2-775-2565

EuropeRM: Lee, Min-Ho
Tel: 82-2-729-0304

West Europe, Africa		
Senior Area Manager: Choi, Sui
Tel: 82-2-729-0448 Fax: 82-2-775-2565

Other Area & VIP Expat.		
RM: Kim, Hyong-Seock
Tel: 82-2-3671-1153

Middle East, Turkey, Russia, CIS, Central
and FI London Desk
Senior Area Manager: Choi, Sung-Ho
E-mail: csh3193@keb.co.kr

FDI Consulting Desk
FDI Marketer: Yoon, Sang-Won
Tel: 82-2-729-0919

Middle East, Turkey, Russia, CIS, Central
and FI Korean Desk
Senior Area Manager: Kim, Hyun-Sik
Tel: 82-2-729-0464 Fax: 82-2-775-2565
Americas		
Area Manager: Joh, Nam-Gyong
Tel: 82-2-729-0465 Fax: 82-2-775-2565

FDI Marketer: Nam, Seoung-Il
Tel: 82-2-3671-1364
FDI Consultant: Shon, Suk-Yeong
Tel: 82-2-729-0281

Medium & Long-Term Financing
Head of Foreign Currency Treasury Team: Park, Jun-Sik
Tel: 82-2-729-0365
Senior Manager: Kim, Beom-Rae
Tel: 82-2-729-0520

200- Structured Finance
Chief Manager of Structured Finance
Team: Lee, Hoa-Sun
Tel: 82-2-729-0547
C/F, SOC, R/E
Head of Corporate Finance/ SOC/
Real Estate: Choi, Yun-Hyun
Tel: 82-2-729-0546- Corporate Finance
Chief Manager of Corporate Finance
Team: Kim, Jae-Ho
Tel: 82-2-729-8882- SOC
Chief Manager of SOC Team: Park, Seong-Soo
Tel: 82-2-729-8436- Real Estate
Chief Manager of Real Estate Team: Kang, Seong-Mun
Tel: 82-2-729-0940

FDI Consultant: Yoo, Sin-Young
Tel: 82-2-729-0285

Asset Management
Head of Asset Management Team: Park, Hyung-Kook
Tel: 82-2-729-0556

FDI Consultant: Park, So-Young
Tel: 82-2-729-0280

FX Trading

Treasury Division
General Manager
Lee, Hyung-Soo
Tel: 82-2-729-0531- Project Finance
Chief Manager of Project Finance
Team: Jeon, Ho-Jin
Tel: 82-2-729-0542

Investment Banking Division
Head of Investment Banking Division
Lee, Jae-Hak
Tel: 82-2-729-0292
P/F, S/F
Head of Project/ Structured
Finance Team: Jeong, Jong-Min
Tel: 82-2-729-0943

Head of FX Dealing Team
Lee, Sang-Bae
Tel: 82-2-729-0472
Chief Dealer: Lee, Hang-Joon
Tel: 82-2-729-0519
Chief Dealer: Moon, Young-Sun
Tel: 82-2-729-0498
Chief Dealer: Yun, Jeong-A
Tel: 82-2-729-0483

Overseas Network
As of April 5, 2010

			Branches & Representative Offices
AMERICAS• Panama Branch
General Manager: Lim, Young-No
	Calle 50, Urbanizacion Obarrio Edificio Torre Global Bank No. 19
Oficina No. 1902, Panama, Republica de Panama
Tel: 507-340-3360 Fax: 507-340-3359• Santiago Representative Office
General Manager: Lee, Jae-Sung	Av. Nueva Tajamar 481, Office 304, Torre Norte, WTC, Las Condes
Santiago, Chile
Tel: 56-2-246-9105 Fax: 56-2-946-0171

EUROPE• London Branch
General Manager: Kim, Dae-Hwan
30 Old Jewry, London EC2R 8EB, U.K.
Tel: 44-20-7606-0191 Fax: 44-20-7606-9968• Paris Branch
General Manager: Lee, Dong-Seob
17-19 Avenue Montaigne, 75008 Paris, France
Tel: 33-1-5367-1200 Fax: 33-1-5367-1234

SOUTHEAST ASIA
• Singapore Branch
General Manager: Moon, Seung-Chan
30 Cecil St., #24-03/08 Prudential Tower Singapore 049712
Tel: 65-6536-1633 Fax: 65-6536-9249/ 6538-2522• Manila Branch
General Manager: Park, Jeong-Sik
33rd Floor, Citi Bank Tower 8741 Paseo de Roxas St.
Makati City Metro Manila, Philippines
Tel: 63-2-848-1988 Fax: 63-2-848-1776/ 1778
• Hanoi Branch
General Manager: Lee, Don-Keun
14th Floor, Daeha Business Center 360 Kim Ma St., Ba Dinh Dist.
Hanoi, Vietnam
Tel: 84-4-3771-6800 Fax: 84-4-3771-6784/ 8171
• Ho Chi Minh City Representative Office
Chief Representative: Jeong, Han-Kyu
	Unit 502, 5th Floor, Diamond Plaza, 34 Le Duan St., Dist.1
Ho Chi Minh City, Vietnam
Tel: 84-8-3827-4273 Fax: 84-8-3827-4281

CHINA• Amsterdam Branch
General Manager: Park, Chul-Mong
Dr. Willem Dreesweg 2, 1185VB, Amstelveen, The Netherlands
Tel: 31-20-546-9377 Fax: 31-20-546-9399• Hong Kong Branch
General Manager: Shin, Hyun-Seung
Branch 32nd Floor, Far East Finance Centre, 16 Harcourt Road
Hong Kong, China
Tel: 852-3578-5000 Fax: 852-2861-2379/ 2866-8103• Moscow Representative Office
General Manager: Han, Sang-Gwa
	World Trade Center, Ent. 3, Office Building 1308A 			Krasnopresnenskaya nab. 12, Moscow 123610, Russia
Tel: 7-495-258-2405 Fax: 7-495-258-2407-Kowloon (Hong Kong Sub Branch)
Senior Manager: Chang, Sok-Hyun	Room 1205, Energy Plaza, 92 Grandville Road, Tsim Sha Tsui
East Kowloon, Hong Kong, China
Tel: 852-2369-2131 Fax: 852-2311-0390

MIDDLE EAST ASIA
• Bahrain Branch
General Manager: Woo, Gi-Hyun
5th Floor, Yateem Center Bldg., P.O. Box 5767, Manama, Bahrain
Tel: 973-17-229333 Fax: 973-17-225327• KEB Bank (China) Co., Ltd. Establishment Task Force
General Manager: Jeong, Sang-Hyeon	5th Floor, Huaqiao Building No. 92-1 Nanjing Road, Heping District
Tianjin 300042, China
Tel: 86-22-2330-7800 Fax: 86-22-2330-7103/ 2331-6051• Dubai Representative Office
Chief Representative: Choi, Min-Gyu
P.O. Box 14353, Office No. 202 (Block A) 2nd Floor 		Condorde Complex Bldg., Dubai, U.A.E.
Tel: 971-4-2281133 Fax: 971-4-2281132• Beijing Branch
General Manager: Kim, Jeong-Lae	#510, Henderson Center, Office Tower 2, 18 Jianguomennei Ave.
Beijing 100005, China
Tel: 86-10-6518-3101 Fax: 86-10-6518-3106• New Delhi Representative Office
General Manager: Kim, Doe-Gyun	Flat No. 511, Ansal Bhawan, 16 Kasturba Gandhi MargNew Delhi 110001, India
Tel: 91-11-4354-8960 Fax: 91-11-4354-8964-Wangjing (Beijing Sub Branch)
Senior Manager: Lee, Bum-Hwan	Room A212-213, Wangjing International Business Center
No. 9 Wangjing St. Chaoyang District, Beijing 100102, China
Tel: 8610-5920-3780~6 Fax: 8610-5920-3787

201

Overseas Network (Continued)
As of April 5, 2010			

-Wudaokou (Beijing Sub Branch)
Senior Manager: Chang, Suk-Ho	U-center C #101, 28 Chengfulu Road, Haidian District
Beijing 100083, China
Tel: 86-10-6266-6710~4 Fax: 86-10-6266-6715• Tianjin Branch
General Manager: Lee, Kwang-Hyun	1st Floor, Huaqiao Building No. 92-1, Nanjing Road, Heping District
Tianjin 300042, China
Tel: 86-22-2319-2595/ 8 Fax: 86-22-2319-2594-Binhai (Tianjin Sub Branch)
Senior Manager: Kim, Bong-Bae
	No. E-7B-108, Binhai Financial Service Zone, No. 20
Guangchang dong Road, TEDA, Tianjin 300457, China
Tel: 86-22-5981-1155 Fax: 86-22-5981-1154• Dalian Branch
General Manager: Han, Sa-Kwon
25th Floor, World Trade Center, No. 25 Tongxing Road
Zhongshan District, Dalian, China
Tel: 86411-8253-1988 Fax: 86411-8281-6150• Shanghai Branch
General Manager: Kang, Yong-Deug
17f Pufa Tower, No. 588 Pudong South Road, Pudong New District
Shanghai 200120, China
Tel: 86-21-5882-5998/ 9654 Fax: 86-21-5882-8743/ 5877-3228

JAPAN• Tokyo Branch
General Manager: Joo, Jae-Jung
The Shinkokusai Bldg., 4-1, Marunouchi, 3-Chome, Chiyoda-ku
Tokyo, Japan
Tel: 81-3-3216-3561 Fax: 81-3-3214-4491-Shinjuku (Tokyo Sub Branch)
Manager: Chung, Song-Dong	Senzaki Bldg., 1F., 1-1-2, Hyakuninchou, Shinjuku-ku
Tokyo, Japan
Tel: 81-3-3208-5211 Fax: 81-3-3208-5260• Osaka Branch
General Manager: Han, Yong-Gab
	Yodoyabashi Mitsui Bldg., 4F, 1-1, Imabashi 4-Chome, Chuo-ku
Osaka, 541-0042, Japan
Tel: 81-06-6201-2600 Fax: 81-06-6201-2616

202

Subsidiaries• KEB NY Financial Corp.
President: Jeong, Yeon-Hak
460 Park Ave. 14th Floor
New York, NY 10022, USA
Tel: 1-212-838-4949 Fax: 1-212-371-5290• KEB USA International Corp.
President: Yang, Jin-Young
460 Park Ave. 15th Floor
New York, NY 10022, USA
Tel: 1-212-838-4949 Fax: 1-212-752-8551• KEB LA Financial Corp.
President: Hwang, Hyo-Sang
777 South Figueroa Street, Suite 3000 				Los Angeles, CA 90017, USA
Tel: 1-213-683-0830 Fax: 1-213-622-5378• Korea Exchange Bank of Canada (H.O.)
President: Kang, Tae-Jong
4950 Yonge Street, Suite 1101, Toronto, Ontario 			Canada M2N 6K1, Canada
Tel: 1-416-222-5200 Fax: 1-416-222-5822• KEB Australia Ltd.
Managing Director: Park, Seung-Kil
Suite 902, Level 9, Chifley Tower, 2 Chifley Square
Sydney NSW 2000, Australia(P.O. Box N595 Grosvenor Pl. Nsw 1220 Australia)
Tel: 61-2-9231-6333 Fax: 61-2-9233-3566• Korea Exchange Bank (Deutschland) A.G.
Managing Director: Kahng, Sung-Ki
Bockenheimer Landstrasse 51-53, 60325 			Frankfurt/M Germany
Tel: 49-69-7129-0 Fax: 49-69-7129-122• PT Bank KEB Indonesia
President: Cho, Yong-Woo
Wisma GKBI 20th Floor, Suite 2002 Jalan Jenderal
Sudirman No. 28, P.O. Box 2317, Jakarta 10210, Indonesia
Tel: 6221-574-1030 Fax: 6221-574-1031• Banco KEB do Brasil S.A.
President: Lee, Seong-Cheon
Av. Doutor Chucri Zaidan 940, Torre II, 18 Andar
Cj. 181 Vila Cordeiro CEP: 04583-110
Sao Paulo, SP., Brasil
Tel: 55-11-5188-1122 Fax: 55-11-5188-1120• KEB Asia Finance Limited
President & CEO: Sohn, Chang-Sup
Suites 1001-04, Level 10, One Pacific Place
88 Queensway, Hong Kong
Tel: 852-3589-7500 Fax: 852-2865-4746, 852-2865-1886

Domestic Network
As of April 5, 2010			
Head Office• 181, Euljiro 2-ga, Jung-gu, C.P.O. Box 2924, Seoul 100-793, Korea
Tel: 82-1544-3000 Tlx: K23141

Branches• 353

Subsidiaries• KEB Capital Inc. 10F Hanwi Building, 70 Da-dong, Jung-gu, Seoul 100-180, Korea
Tel: 82-2-3708-2114 Fax: 82-2-756-5269• KEB Futures Co., Ltd. 11F Yuhwa Building, 23-7 Yeouido-dong, Yeongdeungpo-gu, Seoul 150-738, Korea
Tel: 82-2-3770-4100 Fax: 82-2-3770-4147• KEB Investor Services Company 9F Hanwi Building, 70 Da-dong, Jung-gu, Seoul 100-180, Korea
Tel: 82-2-6714-4615 Fax: 82-2-6714-4800

203

SMART & PROFITABLE GROWTH
2 0 0 9 Annual Report

181, Euljiro 2-ga, Jung-gu, C.P.O. Box 2924, Seoul 100-793, Korea
Tel. 82-1544-3000 SWIFT. KOEXKRSE Telex. K23141

KOREA EXCHANGE BANK