(2) | Includes ₩7,546 billion, ₩7,670 and ₩7,791 billion of the most extensive in Korea, provides a solid foundation for our business and is a major source of our competitive strength. This network provides us with a large, stable and cost effective funding source, enables us to provide our customers convenient access and gives us the ability to provide the customer attention and service essential to conducting our business, particularly in an increasingly competitive environment. Our branch network is further enhanced by automated banking machines and fixed-line, mobile telephone and Internet banking. Asoverdraft loans as of December 31, 2014, we had a customer base of approximately 29.2 million retail customers, which represented over one-half of the Korean population.The following table sets forth the principal components of our lending business as of the dates indicated. As of December 31, 2014, retail loans2015, 2016 and credit card loans and receivables accounted for 56.0% of our total loan portfolio:
| | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2012 | | | 2013 | | | 2014 | | | | (in billions of Won, except percentages) | | Retail | | | | | | | | | | | | | | | | | | | | | | | | | Mortgage and home equity (1) | | ₩ | 74,463 | | | | 34.3 | % | | ₩ | 77,969 | | | | 35.1 | % | | ₩ | 86,994 | | | | 37.2 | % | Other consumer (2) | | | 28,969 | | | | 13.4 | | | | 29,675 | | | | 13.4 | | | | 32,255 | | | | 13.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total retail | | | 103,432 | | | | 47.7 | | | | 107,644 | | | | 48.5 | | | | 119,249 | | | | 51.0 | | | | | | | | | | | | | | | | | | | | | | | | | | | Credit card | | | 11,874 | | | | 5.5 | | | | 11,784 | | | | 5.3 | | | | 11,632 | | | | 5.0 | | Corporate | | | 99,683 | | | | 45.9 | | | | 100,534 | | | | 45.3 | | | | 100,878 | | | | 43.1 | | Foreign | | | 1,925 | | | | 0.9 | | | | 1,900 | | | | 0.9 | | | | 2,143 | | | | 0.9 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total loans | | ₩ | 216,914 | | | | 100.0 | % | | ₩ | 221,862 | | | | 100.0 | % | | ₩ | 233,902 | | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes ₩942 billion, ₩945 billion and ₩1,035 billion of overdraft loans secured by real estate in connection with home equity loans as of December 31, 2012, 2013 and 2014,2017, respectively.
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(2) | Includes ₩7,978 billion, ₩7,181 billion and ₩6,941 billion of overdraft loans as of December 31, 2012, 2013 and 2014, respectively.
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We provide a full range of personal lending products and retail banking services to individual customers, including mortgage loans. We are the largest private sector mortgage lender in Korea. Lending to small- and medium-sized enterprises is the single largest component of our non-retail credit portfolio and represents a widely diversified exposure to a broad spectrum of the Korean corporate community, both by type of lending and type of customer, with one of the categories being collateralized loans to SOHO customers that are among the smallest of the small- and medium-sized enterprises. The volume of our loans to small- and medium-sized enterprises requires a customer-oriented approach that is facilitated by our large and geographically diverse branch network.
With respect to large corporate customers, we continue to seek to maintain and expand quality relationships by providing them with an increasing range of fee-related services.
Since the former Kookmin Bank initiated the issuance of domestic credit cards in 1980, we have seen our credit card business grow rapidly over the past decade as the nationwide trend towards credit card use accelerated. In March 2011, we effected a horizontal spin-off of the credit card business from Kookmin Bank. As a result, our credit card business is operated by a separate wholly-owned subsidiary, KB Kookmin Card Co., Ltd. As of December 31, 2014, we had approximately 18.2 million holders of check cards or credit cards issued by KB Kookmin Card.
Strategy
Our strategic focus is to become a full range of personal lending products and retail banking services to individual customers, including mortgage loans. We are the largest private sector mortgage lender in Korea.
Lending tosmall- andmedium-sized enterprises is the single largest component of ournon-retail credit portfolio and represents a widely diversified exposure to a broad spectrum of the Korean corporate community, both by type of lending and type of customer, with one of the categories being collateralized loans to SOHO customers that are among the smallest of thesmall- andmedium-sized enterprises. The volume of our loans tosmall- andmedium-sized enterprises requires acustomer-oriented approach that is facilitated by our large and geographically diverse branch network. With respect to large corporate customers, we continue to seek to maintain and expand quality relationships by providing them with an increasing range offee-related services. Strategy Our strategic focus is to become aworld-class financial group that ranks among the leaders of the financial industry in Asia and globally. We plan to continue to solidify our market position as Korea’s leading financial group, that ranks among the leaders of the financial industry in Asia and globally. We plan to continue to solidify our market position as Korea’s leading bank, enhance our ability to provide comprehensive financial services to our retail and corporate customers and strengthen our overseas operating platform and network. We believe our strong market position in the commercial banking area in Korea is an important competitive advantage, which will enable us to compete more effectively based on convenient delivery, product breadth and differentiation, and service quality while focusing on our profitability. The key elements of our strategy are as follows: Providing comprehensive financial services and maximizing synergies among our subsidiaries through our financial holding company structure We believe the Korean financial services market has been undergoing and will continue to undergo significant change, resulting from, among other things, fluctuations in the Korean and global economy and the evolving social landscape in Korea, including the acceleration of population aging in Korea, the prevalence of smartphone usage, developments in digital and mobile technologies and the ensuing trend towardhigh-tech “smart banking” in the banking sector. In the context of such changes, we plan to become a comprehensive financial services provider capable of offering a full range of products and services to our large existing base of retail and corporate customers, as well as a global firm that can effectively compete with leading international financial institutions. To that end, we are continuing to implement specific initiatives including the enhancement of ourgroup-wide integrated customer relationship management system to facilitate the sharing of customer information in accordance with applicable laws and the integration of various customer loyalty programs among our subsidiaries. We believe our financial holding company structure gives us a competitive advantage over commercial banks and unaffiliated financial services providers by: allowing us to offer a more extensive range of financial products and services; enabling us to share customer information, which is not permitted outside a financial holding company structure, thereby enhancing our risk management capabilities; enhancing our ability to reduce costs in areas such asback-office processing and procurement; and enabling us to raise and manage capital on a centralized basis. Identifying, targeting and marketing to attractive customer segments and providing superior customer value and service to such segments In recent years, rather than focusing on developing products and services to satisfy the overall needs of the general population, we have increasingly targeted specific market segments in Korea that we expect to generate superior growth and profitability. We will continue to implement a targeted marketing approach that seeks to identify the most attractive customer segments and to develop strategies to build market share in those segments. In particular, we intend to increase our “wallet share” of superior existing customers by using our advanced customer relationship management technology to better identify and meet the needs of our most creditworthy and high net worth customers, on whom we intend to concentrate our marketing efforts. For example, as part of this strategy, we operate a “priority customer” program called KB Star Club through five of our subsidiaries, Kookmin Bank, KB Securities, KB Life Insurance, KB Kookmin Card and KB Insurance. We select and classify KB Star Club customers based on their transaction history with the five entities and provide such customers with preferential treatment in various areas, including interest rates and transaction fees, depending upon how they are classified. We also provide private banking services, including personal wealth management services through our exclusive brand “Gold & Wise,” to increase our share of the priority customer market and in turn increase our profitability and strengthen our position in retail banking. We are also focusing on attracting and retaining creditworthy customers by offering more differentiatedfee-based products and services that are tailored to meet their specific needs. The development and marketing of our products and services are, in part, driven by customer segmentation to ensure that we meet the needs of each customer segment. For instance, we continue to develop hybrid financial products with enhanced features, including various deposit products and investment products, for which consumer demand has increased in recent years.We are also focusing on addressing the needs of our customers by providing thehighest-quality products and services and developing anopen-architecture strategy, which allows us to sell such products through one of the largest branch networks in Korea. In short, we aim to offer our customers a convenientone-stop financial services destination where they can meet their traditional retail and corporate banking requirements, as well as find a broad array offee-based products and services tailored to address more specific financial needs, including in investment banking, securities brokerage, insurance and wealth management. We believe such differentiated, comprehensive services andcross-selling will not only enhance customer loyalty but also increase profitability. One of our keycustomer-related strategies continues to be creating greater value and better service for our customers. We intend to continue improving our customer service, including through: | • | | Improved customer relationship management technology. Management has devoted substantial resources toward development of our customer relationship management system, which is designed to provide our employees with the information needed to continually improve the level of service and incentives offered to our preferred customers. Our integrated customer relationship system allows for better customer management and streamlines our customer reward system. We have also developedstate-of-the-art call centers, smartphone applications and online Internet capabilities to provide shorter response times to customers seeking information or to execute transactions. Our goals are to continually focus on improving customer service to satisfy our customers’ needs through continuing efforts to deliver new and improved services and to upgrade our customer relationship management system to provide the best possible service to our customers in the future. |
| • | | Enhanced distribution channels. We also believe we can improve customer retention and usage rates by increasing the range of products and services we offer and by developing a differentiated,multi-channel distribution network, including branches, ATMs, call centers, smartphone banking and Internet banking. We believe that our leading market position in the commercial banking area in Korea is an important competitive advantage, which will enable us to compete more effectively based on convenient delivery, product breadth and differentiation, and service quality while focusing on our profitability.The key elements of our strategy are as follows:
Providing comprehensive financial services and maximizing synergies among our subsidiaries through our financial holding company structure
We believe the Korean financial services market has been undergoing and will continue to undergo significant change, resulting from, among other things, fluctuations in the Korean and global economy and the evolving social landscape in Korea, including the acceleration of population aging in Korea, the prevalence of smartphone usage, developments in digital and mobile technologies and the ensuing trend toward high-tech “smart banking” in the banking sector. In the context of such changes, we plan to become a comprehensive financial services provider capable of offering a full range of products and services to our large existing base of retail and corporate banking customers, as well as a global firm that can effectively compete with leading international financial institutions. To that end, we are continuing to implement specific initiatives including the enhancement of our group-wide integrated customer relationship management system to facilitate the sharing of customer information and the integration of various customer loyalty programs among our subsidiaries.
We believe our financial holding company structure gives us a competitive advantage over commercial banksin developing and unaffiliated financial services providers by:enhancing our distribution capabilities.
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Focusing on expanding and improving credit quality in our corporate lending business and increasing market share in the corporate financial services market We plan to focus on corporate lending as one of our core businesses through attractingtop-tier corporate customers and providing customized and distinctive products and services to build our position as a leading service provider in the Korean corporate financial market. To increase our market share in providing financial services to the corporate market, we intend to: promote a more balanced and strengthened portfolio with respect to our corporate business by developing our large corporate customer base and utilizing our improved credit management operations to better evaluate new large corporate andsmall- andmedium-sized enterprise customers; develop and sell more varied corporate financial products, consisting of transactional banking products which provide higher margin and less risk; generate more fee income from large corporate customers throughbusiness-to-business transactions, foreign exchange transactions and derivative and other investment products, as well as investment banking services; strengthen our marketing system based on our accumulated expertise in order to attracttop-tier corporate customers; focus on enhancing our channel network in order to provide the best service by strengthening our corporate customer management; and further develop and train our core professionals with respect to this market, including through programs such as the “Career Development Path.” Strengthening internal risk management capabilities We believe that ensuring strong asset quality through effective credit risk management is critical to maintaining stable growth and profitability and risk management will continue to be one of our key focus areas. One of our highest priorities is to improve our asset quality and more effectively price our lending products to take into account inherent credit risk in our portfolio. Our goal is to maintain the soundness of our credit portfolio, profitability and capital base. To this end, we intend to continue to strengthen our internal risk management capabilities by tightening our underwriting and management policies and improving our internal compliance policies. To accomplish this objective, we have undertaken the following initiatives: allowing us
| • | | Strengthening underwriting procedures with advanced credit scoring techniques. We have centralized our credit management operations into our Credit Group. Through such centralization, we aim to offerenhance our credit management expertise and improve our system ofchecks-and-balances with respect to our credit portfolio. We have also improved our ability to evaluate the credit of oursmall- andmedium-sized enterprise customers through assigning experienced credit officers to our regional credit offices. We also require the same officer to evaluate, review and monitor the outstanding loans and other credits with respect to a more extensive rangecustomer, which we believe enhances the expertise and improves the efficiency and accountability of financial products and services;such officer, while enabling us to share customer information,maintain a consistent credit policy. We have also, as a general matter, implemented enhanced credit analysis and scoring techniques, which is not permitted outside a financial holding company structure, thereby enhancing our risk management capabilities; enhancingwe believe will enable us to makebetter-informed decisions about the credit we extend and improve our ability to reduce costs in areas such as back-office processing and procurement; and
enabling usrespond more quickly to raise and manage capital on a centralized basis.
Identifying, targeting and marketing to attractive customer segments and providing superior customer value and service to such segments
In recent years, rather than focusing on developing products and services to satisfy the overall needs of the general population, we have increasingly targeted specific market segments in Korea that we expect to generate superior growth and profitability. We will continue to implement a targeted marketing approach that seeks to identify the most attractive customer segments and to develop strategies to build market share in those segments. In particular, we intend to increase our “wallet share” of superior existing customers by using our advanced customer relationship management technology to better identify and meet the needs of our most creditworthy and high net worth customers, on whom we intend to concentrate our marketing efforts. For example, as part of this strategy, we operate a “priority customer” program called KB Star Club through four of our subsidiaries: Kookmin Bank, KB Investment & Securities, KB Life Insurance and KB Kookmin Card. We select and classify KB Star Club customers based on their transaction history with the four subsidiaries and provide such customers with preferential treatment in various areas, including interest rates and transaction fees, depending upon how they are classified. We also provide private banking services, including personal wealth management services through our exclusive brand “Gold & Wise,” to increase our share of the priority customer market and in turn increase our profitability and strengthen our position in retail banking.
incipient credit problems. We are also focusing on attracting and retaining creditworthy customers by offering more differentiated fee-based products and services that are tailored to meet their specific needs. The development and marketingenhancing our asset quality through improvement of our productsearly monitoring systems and collection procedures. |
| • | | Improving our internal compliance policy and ensuring strict application in our daily operations. We have improved our monitoring capabilities with respect to our internal compliance by providing training and educational programs to our management and employees. We have also implemented strict compliance policies to maintain the integrity of our risk management system. |
Cultivating aperformance-based,customer-oriented culture that emphasizes market best practices We believe a strong and dedicated workforce is critical to our ability to offer our customers the highest quality financial services and is integral to our goal of maintaining our position as one of Korea’s leading financial services providers. In the past, we have dedicated significant resources to develop and train our core professionals, and we intend to continue to enhance the productivity of our employees, including by regularly sponsoringin-house training and educational programs. We have also been seeking to cultivate aperformance-based culture to create a work environment where members of our staff are incentivized to maximize their potential and in which our employees are directly rewarded for superior performance. We intend to maintain a professional workforce whose high quality of customer service reflects our goal to achieve and maintain global best practice standards in all areas of operations. Retail Banking Due to Kookmin Bank’s history and development as a retail bank and theknow-how and expertise we have acquired from our activities in that market, retail banking has been and will continue to remain one of our core businesses. Our retail banking activities consist primarily of lending anddeposit-taking. Lending Activities We offer various loan products that target different segments of the population, with features tailored to each segment’s financial profile and other characteristics. The following table sets forth the balances and the percentage of our total retail lending represented by the categories of our retail loans as of the dates indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won, except percentages) | | Retail: | | | | | | | | | | | | | | | | | | | | | | | | | Mortgage and home equity loans | | ₩ | 87,882 | | | | 70.8 | % | | ₩ | 93,327 | | | | 69.2 | % | | ₩ | 97,253 | | | | 66.5 | % | Other consumer loans(1) | | | 36,312 | | | | 29.2 | | | | 41,629 | | | | 30.8 | | | | 48,897 | | | | 33.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 124,194 | | | | 100.0 | % | | ₩ | 134,956 | | | | 100.0 | % | | ₩ | 146,150 | | | | 100.00 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Excludes credit card loans, but includes overdraft loans. |
Our retail loans consist of: | • | | Mortgage loans, which are in part, drivenloans made to customers to finance home purchases, construction, improvements or rentals; and home equity loans, which are loans made to our customers secured by customer segmentationtheir homes to ensure we meet the needs of each customer segment. For instance, we continue to develop hybrid financial productsloan repayment. We also provide overdraft loans in connection with enhanced features, including various deposit products and investment products, for which consumer demand has increased in recent years. We are also focusing on addressing the needs of our customers by providing the highest-quality products and services and developing an open-architecture strategy, which allows us to sell such products through one of the largest branch networks in Korea. In short, we aim to offer our customers a convenient one-stop financial services destination where they can meet their traditional retail and corporate banking requirements, as well asfind a broad array of fee-based products and services tailored to address more specific financial needs, including in investment banking, insurance and wealth management. We believe such differentiated, comprehensive services and cross-selling will not only enhance customer loyalty but also increase profitability.
One of our key customer-related strategies continues to be creating greater value and better service for our customers. We intend to continue improving our customer service, including through:
| • | | Improved customer relationship management technology. Management has devoted substantial resources toward development of our customer relationship management system, which is designed to provide our employees with the needed information to continually improve the level of service and incentives offered to our preferred customers. Our system is based on an integrated customer database, which allows for better customer management and streamlines our customer reward system. We have also developed state-of-the-art call centers and online Internet capabilities to provide shorter response times to customers seeking information or to execute transactions. Our goals are to continually focus on improving customer service to satisfy our customer’s needs through continuing efforts to deliver new and improved services and to upgrade our customer relationship management system to provide the best possible service to our customers in the future. home equity loans. |
| • | | Enhanced distribution channels. We also believe we can improve customer retention and usage rates by increasing the range of products and services we offer and by developing a differentiated, multi-channel distribution network, including branches, ATMs, call centers, mobile-banking and Internet banking. We believe that our leading market position in the commercial banking area in Korea gives us a competitive advantage in developing and enhancing our distribution capabilities.
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Focusing on expanding and improving credit quality in our corporate lending business and increasing market share in the corporate financial services market
We plan to focus on corporate lending as one of our core businesses through attracting top-tier corporate customers and providing customized and distinctive products and services to build our position as a leading service provider in the Korean corporate financial market. To increase our market share in providing financial services to the corporate market, we intend to:
promote a more balanced and strengthened portfolio with respect to our corporate business by developing our large corporate customer base and utilizing our improved credit management operations to better evaluate new large corporate and small- and medium-sized enterprise customers;
develop and sell more varied corporate financial products, consisting of transactional banking products which provide higher margin and less risk;
generate more fee income from large corporate customers through business-to-business transactions, foreign exchange transactions and derivative and other investment products, as well as investment banking services;
strengthen our marketing system based on our accumulated expertise in order to attract top-tier corporate customers;
focus on enhancing our channel network in order to provide the best service by strengthening our corporate customer management; and
further develop and train our core professionals with respect to this market, including through programs such as the “Career Development Path.”
Strengthening internal risk management capabilities
We believe that ensuring strong asset quality through effective credit risk management is critical to maintaining stable growth and profitability and risk management will continue to be one of our key focus areas. One of our highest priorities is to improve our asset quality and more effectively price our lending products to
take into account inherent credit risk in our portfolio. Our goal is to maintain the soundness of our credit portfolio, profitability and capital base. To this end, we intend to continue to strengthen our internal risk management capabilities by tightening our underwriting and management policies and improving our internal compliance policies. To accomplish this objective, we have undertaken the following initiatives:
| • | | Strengthening underwriting procedures with advanced credit scoring techniques. We have centralized our credit management operations into our Credit Management & Analysis Group. Through such centralization, we aim to enhance our credit management expertise and improve our system of checks-and-balances with respect to our credit portfolio. We have also improved our ability to evaluate the credit of our small- and medium-sized enterprise customers through assigning experienced credit officers to our regional credit offices. We also require the same officer to evaluate, review and monitor the outstanding loans and other credits with respect to a customer, which we believe enhances the expertise and improves the efficiency and accountability of such officer, while enabling us to maintain a consistent credit policy. We have also, as a general matter, implemented enhanced credit analysis and scoring techniques, which we believe will enable us to make better-informed decisions about the credit we extend and improve our ability to respond more quickly to incipient credit problems. We are also focusing on enhancing our asset quality through improvement of our early monitoring systems and collection procedures.
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| • | | Improving our internal compliance policy and ensuring strict application in our daily operations. We have improved our monitoring capabilities with respect to our internal compliance by providing training and educational programs to our management and employees. We have also implemented strict compliance policies to maintain the integrity of our risk management system.
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Cultivating a performance-based, customer-oriented culture that emphasizes market best practices
We believe a strong and dedicated workforce is critical to our ability to offer our customers the highest quality financial services and is integral to our goal of maintaining our position as one of Korea’s leading financial services providers. In the past, we have dedicated significant resources to develop and train our core professionals, and we intend to continue to enhance the productivity of our employees, including by regularly sponsoring in-house training and educational programs. We have also been seeking to cultivate a performance-based culture to create a work environment where members of our staff are incentivized to maximize their potential and in which our employees are directly rewarded for superior performance. We intend to maintain a professional workforce whose high quality of customer service reflects our goal to achieve and maintain global best practice standards in all areas of operations.
Retail Banking
Due to Kookmin Bank’s history and development as a retail bank and the know-how and expertise we have acquired from our activities in that market, retail banking has been and will continue to remain one of our core businesses. Our retail banking activities consist primarily of lending and deposit-taking.
Lending Activities
We offer various loan products that target different segments of the population, with features tailored to each segment’s financial profile and other characteristics. The following table sets forth the balances and the percentage of our total retail lending represented by the categories of our retail loans as of the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2012 | | | 2013 | | | 2014 | | | | (in billions of Won, except percentages) | | Retail: | | | | | | | | | | | | | | | | | | | | | | | | | Mortgage and home equity loans | | ₩ | 74,463 | | | | 72.0 | % | | ₩ | 77,969 | | | | 72.4 | % | | ₩ | 86,994 | | | | 73.0 | % | Other consumer loans (1) | | | 28,969 | | | | 28.0 | | | | 29,675 | | | | 27.6 | | | | 32,255 | | | | 27.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 103,432 | | | | 100.0 | % | | ₩ | 107,644 | | | | 100.0 | % | | ₩ | 119,249 | | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Excludes credit card loans, but includes overdraft loans.
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Our retail loans consist of:
| • | | Mortgage loans, which are loans made to customers to finance home purchases, construction, improvements or rentals; andhome equity loans, which are loans made to our customers secured by their homes to ensure loan repayment. We also provide overdraft loans in connection with our home equity loans.
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| • | | Other consumer loans, which are loans made to customers for any purpose (other than mortgage and home equity loans). These include overdraft loans, which are loans extended to customers to cover insufficient funds when they withdraw funds from their demand deposit accounts with us in excess of the amount in such accounts up to a limit established by us. |
For secured loans, including mortgage and home equity loans, our policy is to lend up to 100% of the adjusted collateral value (except in areas of high speculation designated by the government where we generally limit our lending to between 40% to 60% of the appraised value of collateral) minus the value of any lien or other security interests that are prior to our security interest. In calculating the adjusted collateral value for real estate, we use the appraisal value of the collateral multiplied by a factor, generally between 40% to 80% (40% to 70% in the case of mortgage and home equity loans). This factor varies depending upon the location and useThese include overdraft loans, which are loans extended to customers to cover insufficient funds when they withdraw funds from their demand deposit accounts with us in excess of the real estate and isamount in such accounts up to a limit established in part by taking into account us.
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For secured loans, including mortgage and home equity loans, our policy is to lend up to 100% of the adjusted collateral value (except in areas of high speculation designated by the government where we generally limit our lending to between 40% to 60% of the appraised value of collateral) minus the value of any lien or other security interests that are prior to our security interest. In calculating the adjusted collateral value for real estate, we use the appraisal value of the collateral multiplied by a factor, generally between 40% to 80% (40% to 70% in the case of mortgage and home equity loans). This factor varies depending upon the location and use of the real estate and is established in part by taking into accountcourt-supervised auction prices for nearby properties. A borrower’s eligibility for our mortgage loans depends on the value of the mortgage property, the appropriateness of the use of proceeds and the borrower’s creditworthiness. A borrower’s eligibility for home equity loans is determined by the borrower’s credit and the value of the property, while the borrower’s eligibility for other consumer loans is primarily determined by the borrower’s credit. If the borrower’s credit deteriorates, it may be difficult for us to recover the loan. As a result, we review the borrower’s creditworthiness, collateral value, credit scoring and third party guarantees when evaluating a borrower. In addition, to reduce the interest rate of a loan or to qualify for a loan, a borrower may provide collateral, deposits or guarantees from third parties. Mortgage and Home Equity Lending The housing finance market in Korea is divided into public sector and private sector lending. In the public sector, two government entities, the National Housing Urban Fund and the National Agricultural Cooperative Federation, are responsible for most of the mortgage lending. Private sector mortgage and home equity lending in Korea has expanded substantially in recent years. We provide customers with a number of mortgage and home equity loan products that have flexible features, including terms, repayment schedules, amounts and eligibility for loans, and we offer interest rates on a commercial basis. The maximum term of mortgage loans is 35 years and the majority of our mortgage loans havelong-term maturities, which may be renewed.Non-amortizing home equity loans have an initiala maturity of one year, which may be extended on an annual basis for a maximum ofto five years. Homeyears and home equity loans subject to amortization of principal may have a maximum term of up to 35 years. As of December 31, 2014,2017, we had ₩29,384₩30,502 billion of amortizing home equity loans, representing 85.3%92.1% of our total home equity loans, and ₩5,079₩2,611 billion ofnon-amortizing home equity loans, representing 14.7%7.9% of our total home equity loans. Any customer is eligible for a mortgage or an individual home equity loan regardless of whether it participates in one of our housing related savings programs and so long as that customer is not barred by regulation from obtaining a loan because of bad credit history. However, customers with whom we frequently transact business and provide us with significant revenue receive preferential interest rates on loans. As of December 31, 2014, 71.1%2017, 59.7% of our mortgage loans were secured by residential property which is the subject of the loan, 17.8%22.6% of our mortgage loans were guaranteed by the Housing Finance Credit Guarantee Fund, a governmenthousing-related entity, and the remaining 11.1%17.7% of our mortgage loans, contrary to general practices in the United States, were unsecured (although the use of proceeds from these loans areis restricted for the purposeto financing of financing home purchases and some of these loans wereare guaranteed by a third party). One reason that a relatively high percentage of our mortgage loans are unsecured is that we, along with other Korean banks, provide advance loans to borrowers for the down payment of new housing (particularly apartments) that is in the process of being built. Once construction is completed, which may take several years, these mortgage loans become secured by the new housing purchased by these borrowers. For the year ended December 31, 2014,2017, the average initialloan-to-value ratio of our mortgage loans, which is a measure of the amount of loan exposure to the appraised value of the security collateralizing the loan, was approximately 50.8%52.4%. There are three reasons that ourloan-to-value ratio is relatively lower (as is the case with other Korean banks) compared to similar ratios in other countries, such as the United States. The first reason is that housing prices are high in Korea relative to average income, so most people cannot afford to borrow an amount equal to the entire value of their collateral and make interest payments on such an amount. The second reason relates to the “jeonsae” system, through which people provide a key money deposit while residing in the property prior to its purchase. At the time of purchase, most people use the key money deposit as part of their payment and borrow the remaining amount from Korean banks, which results in a loan that will be for an amount smaller than the appraised value of the property for collateral and assessment purposes. The third reason is that Korean banks discount the appraised value of the borrower’s property for collateral and assessment purposes so that a portion of the appraised value is reserved in order to provide recourse to a renter who lives at the borrower’s property. This is in the event that the borrower’s property is seized by a creditor, and the renter is no longer able to reside at that property. See “Item 3.D. Risk Factors—Other risks relating to our business—A decline in the value of the collateral securing our loans and our inability to realize full collateral value may adversely affect our credit portfolio.” The following table sets forth our unsecured and secured mortgage loans and home equity loans as of December 31, 2012, 20132015, 2016 and 2014,2017, based on their loan classification categories under IFRS and our internal credit ratings for loans (which are described in Note 4.2.4 of the notes to our consolidated financial statements): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2012 | | | | Non-impaired | | | Impaired | | | Total | | | | Not Past Due | | | Past Due | | | | | | | | | | | | | | | | Grade 1 | | | Grade 2 | | | Grade 3 | | | Grade 4 | | | Grade 5 | | | | | | Past Due Up to 89 Days | | | Past Due 90 Days to 179 Days | | | Past Due 180 Days or More | | | | | | | | | | | | | | | | | | | | | | (in billions of Won) | | | | | | | | | | | Mortgage: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Secured (1) | | ₩ | 33,783 | | | ₩ | 4,271 | | | ₩ | 478 | | | ₩ | 141 | | | ₩ | 98 | | | ₩ | 665 | | | ₩ | 45 | | | ₩ | 70 | | | ₩ | 55 | | | ₩ | 39,606 | | Unsecured | | | 3,441 | | | | 989 | | | | 135 | | | | 72 | | | | 95 | | | | 94 | | | | 5 | | | | 53 | | | | 387 | | | | 5,271 | | Home Equity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Secured | | | 25,081 | | | | 3,269 | | | | 472 | | | | 106 | | | | 102 | | | | 452 | | | | 44 | | | | 30 | | | | 30 | | | | 29,586 | | Unsecured | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 62,305 | | | ₩ | 8,529 | | | ₩ | 1,085 | | | ₩ | 319 | | | ₩ | 295 | | | ₩ | 1,211 | | | ₩ | 94 | | | ₩ | 153 | | | ₩ | 472 | | | ₩ | 74,463 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2013 | | | | Non-impaired | | | Impaired | | | Total | | | | Not Past Due | | | Past Due | | | | | | | | | | Grade 1 | | | Grade 2 | | | Grade 3 | | | Grade 4 | | | Grade 5 | | | | | | Past Due Up to 89 Days | | | Past Due 90 Days to 179 Days | | | Past Due 180 Days or More | | | | | | | | | | | | | | | | | | | | | | (in billions of Won) | | | | | | | | | | | Mortgage: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Secured (1) | | ₩ | 37,642 | | | ₩ | 4,171 | | | ₩ | 361 | | | ₩ | 116 | | | ₩ | 78 | | | ₩ | 808 | | | ₩ | 74 | | | ₩ | 44 | | | ₩ | 76 | | | ₩ | 43,370 | | Unsecured | | | 2,131 | | | | 531 | | | | 74 | | | | 24 | | | | 11 | | | | 119 | | | | 9 | | | | 28 | | | | 188 | | | | 3,115 | | Home Equity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Secured | | | 27,512 | | | | 2,767 | | | | 356 | | | | 98 | | | | 89 | | | | 541 | | | | 63 | | | | 26 | | | | 32 | | | | 31,484 | | Unsecured | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 67,285 | | | ₩ | 7,469 | | | ₩ | 791 | | | ₩ | 238 | | | ₩ | 178 | | | ₩ | 1,468 | | | ₩ | 146 | | | ₩ | 98 | | | ₩ | 296 | | | ₩ | 77,969 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, 2014 | | | As of December 31, 2015 | | | | Non-impaired | | Impaired | | Total | | | Non-impaired | | Impaired | | Total | | | | Not Past Due | | Past Due | | | | | | | | | | | Not Past Due | | Past Due | | | | | | | | Grade 1 | | Grade 2 | | Grade 3 | | Grade 4 | | Grade 5 | | | | Past Due Up to 89 Days | | Past Due 90 Days to 179 Days | | Past Due 180 Days or More | | | | | Grade 1 | | Grade 2 | | Grade 3 | | Grade 4 | | Grade 5 | | | | Past Due Up to 89 Days | | Past Due 90 Days to 179 Days | | Past Due 180 Days or More | | | | | | | | | | | | | | | | (in billions of Won) | | | | | | | | | | | | | | | | | | | (in billions of Won) | | | | | | | | Mortgage: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Secured(1) | | ₩ | 44,315 | | | ₩ | 3,979 | | | ₩ | 309 | | | ₩ | 94 | | | ₩ | 74 | | | ₩ | 688 | | | ₩ | 61 | | | ₩ | 53 | | | ₩ | 62 | | | ₩ | 49,635 | | | ₩ | 45,284 | | | ₩ | 4,935 | | | ₩ | 498 | | | ₩ | 123 | | | ₩ | 91 | | | ₩ | 519 | | | ₩ | 50 | | | ₩ | 43 | | | ₩ | 64 | | | ₩ | 51,607 | | Unsecured | | | 2,338 | | | | 478 | | | | 16 | | | | 7 | | | | 3 | | | | 26 | | | | 4 | | | | 2 | | | | 22 | | | | 2,896 | | | 1,719 | | | 370 | | | 37 | | | 3 | | | 3 | | | 31 | | | 1 | | | 1 | | | 8 | | | 2,173 | | Home Equity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Secured | | | 31,088 | | | | 2,412 | | | | 244 | | | | 80 | | | | 77 | | | | 434 | | | | 58 | | | | 34 | | | | 36 | | | | 34,463 | | | 30,882 | | | 2,255 | | | 387 | | | 90 | | | 70 | | | 317 | | | 45 | | | 26 | | | 30 | | | 34,102 | | Unsecured | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 77,741 | | | ₩ | 6,869 | | | ₩ | 569 | | | ₩ | 181 | | | ₩ | 154 | | | ₩ | 1,148 | | | ₩ | 123 | | | ₩ | 89 | | | ₩ | 120 | | | ₩ | 86,994 | | | ₩ | 77,885 | | | ₩ | 7,560 | | | ₩ | 922 | | | ₩ | 216 | | | ₩ | 164 | | | ₩ | 867 | | | ₩ | 96 | | | ₩ | 70 | | | ₩ | 102 | | | ₩ | 87,882 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2016 | | | | | Non-impaired | | Impaired | | Total | | | | | Not Past Due | | Past Due | | | | | | | | | | | | | Grade 1 | | Grade 2 | | Grade 3 | | Grade 4 | | Grade 5 | | | | Past Due Up to 89 Days | | Past Due 90 Days to 179 Days | | Past Due 180 Days or More | | | | | | | | | | | | | | | | | (in billions of Won) | | | | | | | | Mortgage: | | | | | | | | | | | | | | | | | | | | | | Secured(1) | | | ₩ | 49,284 | | | ₩ | 7,055 | | | ₩ | 562 | | | ₩ | 121 | | | ₩ | 76 | | | ₩ | 360 | | | ₩ | 59 | | | ₩ | 27 | | | ₩ | 48 | | | ₩ | 57,592 | | Unsecured | | | 1,040 | | | 310 | | | 55 | | | 2 | | | 1 | | | 5 | | | 1 | | | 1 | | | 8 | | | 1,423 | | Home Equity: | | | | | | | | | | | | | | | | | | | | | | Secured | | | 30,722 | | | 2,654 | | | 430 | | | 100 | | | 68 | | | 251 | | | 47 | | | 14 | | | 26 | | | 34,312 | | Unsecured | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | ₩ | 81,046 | | | ₩ | 10,019 | | | ₩ | 1,047 | | | ₩ | 223 | | | ₩ | 145 | | | ₩ | 616 | | | ₩ | 107 | | | ₩ | 42 | | | ₩ | 82 | | | ₩ | 93,327 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2017 | | | | | Non-impaired | | Impaired | | Total | | | | | Not Past Due | | Past Due | | | | | | | | | | | | | Grade 1 | | Grade 2 | | Grade 3 | | Grade 4 | | Grade 5 | | | | Past Due Up to 89 Days | | Past Due 90 Days to 179 Days | | Past Due 180 Days or More | | | | | | | | | | | | | | | | | (in billions of Won) | | | | | | | | Mortgage: | | | | | | | | | | | | | | | | | | | | | | Secured(1) | | | ₩ | 54,547 | | | ₩ | 6,645 | | | ₩ | 336 | | | ₩ | 76 | | | ₩ | 75 | | | ₩ | 426 | | | ₩ | 67 | | | ₩ | 23 | | | ₩ | 42 | | | ₩ | 62,237 | | Unsecured | | | 1,800 | | | 88 | | | 2 | | | 2 | | | 1 | | | 5 | | | 1 | | | 1 | | | 3 | | | 1,903 | | Home Equity: | | | | | | | | | | | | | | | | | | | | | | Secured | | | 30,039 | | | 2,358 | | | 259 | | | 56 | | | 57 | | | 260 | | | 44 | | | 15 | | | 25 | | | 33,113 | | Unsecured | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | ₩ | 86,386 | | | ₩ | 9,091 | | | ₩ | 597 | | | ₩ | 134 | | | ₩ | 133 | | | ₩ | 691 | | | ₩ | 112 | | | ₩ | 39 | | | ₩ | 70 | | | ₩ | 97,253 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes advance loans guaranteed by the Housing Finance Credit Guarantee Fund to borrowers for the down payment of new housing that is in the process of being built. |
Our home equity loan portfolio includes loans that are in a second lien position. In addition to the underwriting procedures we perform when we issue home equity loans in general, we perform additional underwriting procedures with respect to home equity loans secured by a second lien to assess and confirm the value and status of any loans secured by security interests on the collateral which would be prior to our security interest under the second lien home equity loan. Under regulations implemented by the Financial Supervisory Service, our home equity loans are subject to maximumloan-to-value ratios (i.e., the ratio of the aggregate principal amount of loans, including first and second lien loans, secured by a particular item of collateral to the appraised value of such collateral) of between 40% and 70%. As such, for home equity loans, we do not lend more than an amount equal to the adjusted collateral value (i.e., the collateral value as discounted by the requiredloan-to-value ratio) minus the value of any loans secured by security interests on the collateral that are prior to our security interest. Accordingly, in order to ascertain the value of loans secured by security interests on the collateral which would be prior to our security interest and to confirm the status of such loans, we perform additional underwriting procedures including a review of the relevant title and security interest registration documents and bank documents and certificates regarding such loans. In addition, for purposes of calculatingdebt-to-income ratios applicable to loans secured by certain types of housing under regulations implemented by the Financial Supervisory Service (see “—Supervision and Regulation—Principal Regulations Applicable to Banks—Regulations Relating to Retail Household Loans”), which we apply on a nationwide basis for our home equity loans, we perform additional adjustments in ourdebt-to-income ratio calculations with respect to second lien home equity loans to account for the value of loans secured by security interests on the collateral that are prior to our security interest. Following the issuance of a home equity loan, we make use of the Korea Federation of Bank’s database of delinquent borrowers to generally monitor the compliance of our borrowers with their other loan obligations, including the compliance of our second lien borrowers with their first lien loans. If a borrower in Korea is past due on payments of interest or principal for more than three months on any of its outstanding loans to Korean financial institutions (including mortgage, home equity, other consumer and credit card loans), such borrower is registered on the Korea Federation of Banks’ database of delinquent borrowers, which we monitor on a daily basis. The information disclosed by such database, which includes the outstanding loan amount which is past due, the identity of the delinquent borrower and the name of the applicable lending institution for such loan, provides an early warning about such borrower to our loan officers at the branch level, who then closely monitor our outstanding loans to such delinquent borrower and take appropriate preventive and remedial measures (including requiring such borrower to provide additional collateral) as necessary. Upon the occurrence of a default in the first lien position, we treat the second lien home equity loan as part of our potential problem loans ornon-performing loans. More specifically, upon learning of the occurrence of a default in the first lien position, we examine our second lien home equity loan to determine whether the loan should bere-classified as “precautionary,” “substandard” or “doubtful” according to the asset classification guidelines of the Financial Services Commission. Assuming that such second lien home equity loan is not delinquent, if the outstanding principal amount of the relevant first lien loan is less than ₩15 million, we classify the entire amount of the second lien home equity loan as “precautionary” and closely monitor it as a loan that may potentially become problematic. If the outstanding principal amount of the relevant first lien loan is ₩15 million or above or the borrower is undergoing, or preparing to undergo, foreclosure proceedings with respect to the underlying collateral, we classify the estimated recoverable amount of the second lien home equity loan as “substandard” and the rest of such loan amount as “doubtful.” Pricing. The interest rates on our retail mortgage loans are generally based on a periodic floating rate (which is based on a base rate determined forthree-month,six-month ortwelve-month periods using our Market Opportunity Rate system, which reflects our internal cost of funding, further adjusted to account for our expenses related to lending). Our interest rates also incorporate a margin based among other things on the type of security, the credit score of the borrower and the estimated loss on the security. We can adjust the price to reflect the borrower’s current and/or expected future contribution to us. The applicable interest rate is determined at the time of the loan. If a loan is terminated prior to its maturity, the borrower is obligated to pay us an early termination fee of approximately 0.7%0.9% to 1.4%1.5% of the loan amount in addition to the accrued interest. The interest rates on our home equity loans are determined on the same basis as our retail mortgage loans. As of December 31, 2014,2017, ourthree-month,six-month andtwelve-month base rates were 2.13%1.66%, 2.17%1.80% and 2.18%1.96%, respectively. As of December 31, 2014, 75.7%2017, 66.3% of our outstanding mortgage and home equity loans were priced based on a floating rate. Other Consumer Loans
Other consumer loans are primarily unsecured. However, such loans may be secured by real estate, deposits or securities. As of December 31, 2014,2017, approximately ₩16,035₩26,724 billion, or 49.7%54.7% of our consumer loans (other than mortgage and home equity loans) were unsecured loans (although some of these loans were guaranteed by a third party). Overdraft loans are also classified as other consumer loans, are primarily unsecured and generally have an initial maturity of one year, which is typically extended automatically on an annual basis and may be extended up to a maximum of five years. The amount of overdraft loans as of December 31, 20142017 was approximately ₩6,941₩7,791 billion. Pricing. The interest rates on our other consumer loans (including overdraft loans) are determined on the same basis as on our mortgage and home equity loans, except that, for unsecured loans, the borrower’s credit score as determined during our loan approval process is also taken into account. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk Management.” As of December 31, 2014, 97.9%2017, 54.7% of our other consumer loans had interest rates that were not fixed but were variable in reference to our base rate, which is based on the Market Opportunity Rate. Deposit-taking Activities Due to our extensive nationwide network of branches, together with our long history of development and our resultingknow-how and expertise, as of December 31, 2014,2017, we had the largest number of retail customers and retail deposits among Korean commercial banks. The balance of our deposits from retail customers was ₩126,581₩146,630 billion, ₩132,733 billion₩161,232 and ₩138,246₩169,246 billion as of December 31, 2012, 20132015, 2016 and 2014,2017, respectively, which constituted 64.1%65.4%, 66.1%67.3% and 65.3%66.2%, respectively, of the balance of our total deposits. We offer many deposit products that target different segments of our retail customer base, with features tailored to each segment’s financial profile, characteristics and needs, including: | • | | Demand deposits, which either do not accrue interest or accrue interest at a lower rate than time deposits. Demand deposits allow the customer to deposit and withdraw funds at any time and, if they |
| are interest bearing, accrue interest at a variable rate depending on the amount of deposit. Retail and corporate demand deposits constituted 34.5%43.7% of our total deposits as of December 31, 20142017 and paid average interest of 0.42%0.26% for 2014. 2017. |
| • | | Time deposits, which generally require the customer to maintain a deposit for a fixed term, during which the deposit accrues interest at a fixed rate or a variable rate based on the KOSPI, or to deposit specified amounts on an installment basis. If the amount of the deposit is withdrawn prior to the end of the fixed term, the customer will be paid a lower interest rate than that originally offered. The term for time deposits typically ranges from one month to fivethree years, and the term for installment savings deposits ranges from six months to tenfive years. Retail and corporate time deposits constituted 58.9%48.8% of our total deposits as of December 31, 20142017 and paid average interest of 2.7%1.58% for 2014.2017. Most installment savings deposits offer fixed interest rates. |
| • | | Certificates of deposit, the maturities of which typically range from 30 days to 730 days with a required minimum deposit of ₩10 million. Interest rates on certificates of deposit are determined based on the length of the deposit and prevailing market rates. Our certificates of deposit are sold at a discount to their face value, reflecting the interest payable on the certificates of deposit. |
| • | | Foreign currency deposits, which are available to Korean and foreign residents,non-residents and overseas immigrants. We offer foreign currency demand deposits and time deposits as well as checking accounts in eleven11 currencies.Foreign currency demand deposits, which accrue interest at a variable rate, allow customers to deposit and withdraw funds at any time.Foreign currency demand deposits accrue interest at a lower rate thanforeign currency time deposits, which generally require customers to maintain the deposit for a fixed term, during which itthe deposit accrues interest at a fixed rate. If the funds in a foreign currency time deposit are withdrawn prior to the end of the fixed term, the customer will be paid a lower interest rate than that originally offered. |
We offer varying interest rates on our deposit products depending upon average funding costs, the rate of return on our interest earning assets and the interest rates offered by other commercial banks. We also offer comprehensive savings deposits for housing subscription, which are monthly installment savings deposits that provide the holder with preferential rights to subscribe for both public and private housing subscriptionsunder the Housing Act. This law is the basic law setting forth various measures supporting the purchase of houses and eligibilitythe supply of such houses by construction companies. These deposits require monthly installments of ₩20,000 to ₩500,000 and accrue interest at variable rates depending on the term. An eligible account holder with ₩70 million or less in annual salary income may also claim a tax deduction for mortgage loans. These products include:40% of its annual installment amounts, subject to a maximum deductible amount, in its income tax return for the year under the Special Tax Treatment Control Law. | • | | Housing subscription time deposits, which are special purpose time deposit accounts providing the holder with a preferential right to subscribe for new private apartment units under the Housing Law. This law is the basic law setting forth various measures supporting the purchase of houses and the supply of such houses by construction companies. These products accrue interest at a fixed rate for one year, and at an adjustable rate after one year. Deposit amounts per account range from ₩2 million to ₩15 million depending on the location of the holder’s current residence and the size of the desired apartment unit. These deposit products target high and middle income households.
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| • | | Housing subscription installment savings deposits, which are monthly installment savings programs providing the holder with a preferential subscription right for new private apartment units under the Housing Law. Account holders are also eligible for our mortgage loans. These deposits require monthly installments of ₩50,000 to ₩500,000, have maturities of between two and five years and accrue interest at fixed or variable rates depending on the term. These deposit products target low- and middle-income households.
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In 2002, after significant research and planning, we launched private banking operations at Kookmin Bank’s headquarters. Shortly thereafter, we launched a comprehensive strategy with respect to customers with higher net worth, which included staffing appropriate representatives, marketing aggressively, establishing IT systems, selecting appropriate branch locations and readying such branches with the necessary facilities to service such customers. As of December 31, 2014,2017, we operated 2321 private banking centers through Kookmin Bank. The Monetary Policy Committee of the Bank of Korea, (the “Monetaryor the Monetary Policy Committee”)Committee, imposes a reserve requirement on Won currency deposits of commercial banks based generally on the type of deposit instrument. The reserve requirement is currently up to 7%. See “—Supervision and Regulation—Principal Regulations Applicable to Banks—Liquidity.” The Depositor Protection Act provides for a deposit insurance system where the Korea Deposit Insurance Corporation guarantees to depositors the repayment of their eligible bank deposits. The deposit insurance system insures up to a total of ₩50 million per depositor per bank. See “—Supervision and Regulation—Principal Regulations Applicable to Banks—Deposit Insurance System.” We paid ₩330₩385 billion of premium for 2014.2017. Credit Cards Credit cards are another of our core retail products. We issue most of our credit cards under the “KB Kookmin Card” brand. In March 2011, we effected a horizontal spin-off of the credit card business from Kookmin Bank. As a result, ourOur credit card business is operated by a separate wholly-ownedour subsidiary, KB Kookmin Card Co., Ltd. The following table sets forth certain data relating to our credit card operations, on anon-consolidated basis, as of the dates and for the periods indicated: | | | As of and for the Year Ended December 31, | | | As of and for the Year Ended December 31, | | | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | | | (in billions of Won, except number of holders, accounts and percentages) | | | (in billions of Won, except number of holders, accounts and percentages) | | Number of credit cardholders (at year end) (thousands) | | | | | | | | | | | | | General accounts | | | 10,112 | | | | 8,987 | | | | 8,487 | | | | 8,797 | | | 8,896 | | | 9,217 | | Corporate accounts | | | 424 | | | | 435 | | | | 416 | | | | 436 | | | 484 | | | 502 | | | | | | | | | | | | | | | | | | | | | Total | | | 10,536 | | | | 9,422 | | | | 8,903 | | | | 9,233 | | | 9,380 | | | 9,719 | | | | | | | | | | | | | | | | | | | | | Number of merchants (at year end) (thousands) | | | 2,024 | | | | 2,058 | | | | 2,178 | | | | 2,279 | | | 2,414 | | | 2,499 | | Active ratio (at year end) (1) | | | 81.0 | % | | | 88.6 | % | | | 87.7 | % | | | 87.2 | % | | 88.4 | % | | 90.0 | % | Credit card fees | | | | | | | | | | | | | Merchant fees (2) | | ₩ | 1,484 | | | ₩ | 1,480 | | | ₩ | 1,503 | | | ₩ | 1,589 | | | ₩ | 1,633 | | | ₩ | 1,816 | | Installment and cash advance fees | | | 683 | | | | 578 | | | | 475 | | | | 405 | | | 380 | | | 406 | | Annual membership fees | | | 66 | | | | 68 | | | | 63 | | | | 86 | | | 105 | | | 127 | | Other fees | | | 542 | | | | 539 | | | | 493 | | | | 604 | | | 664 | | | 807 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 2,775 | | | ₩ | 2,665 | | | ₩ | 2,534 | | | ₩ | 2,684 | | | ₩ | 2,782 | | | ₩ | 3,156 | | | | | | | | | | | | | | | | | | | | | Charge volume (3) | | | | | | | | | | | | | General purchase | | ₩ | 45,768 | | | ₩ | 46,735 | | | ₩ | 45,295 | | | ₩ | 47,894 | | | ₩ | 51,876 | | | ₩ | 60,657 | | Installment purchase | | | 12,153 | | | | 10,852 | | | | 10,861 | | | | 11,778 | | | 13,134 | | | 15,553 | | Cash advance | | | 11,606 | | | | 10,516 | | | | 9,535 | | | | 8,777 | | | 8,619 | | | 8,885 | | Card loan (4) | | | 3,800 | | | | 4,688 | | | | 4,227 | | | | 5,201 | | | 6,060 | | | 5,736 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 73,327 | | | ₩ | 72,791 | | | ₩ | 69,918 | | | ₩ | 73,650 | | | ₩ | 79,689 | | | ₩ | 90,831 | | | | | | | | | | | | | | | | | | | | | Outstanding balance (at year end) | | | | | | | | | | | | | General purchase | | ₩ | 4,533 | | | ₩ | 4,716 | | | ₩ | 4,496 | | | ₩ | 4,556 | | | ₩ | 4,747 | | | ₩ | 5,356 | | Installment purchase | | | 2,679 | | | | 2,600 | | | | 2,786 | | | | 2,865 | | | 3,349 | | | 4,090 | | Cash advance | | | 2,032 | | | | 1,525 | | | | 1,323 | | | | 1,210 | | | 1,178 | | | 1,240 | | Card loan (4) | | | 2,647 | | | | 2,959 | | | | 3,046 | | | | 3,528 | | | 4,287 | | | 4,552 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 11,891 | | | ₩ | 11,800 | | | ₩ | 11,651 | | | ₩ | 12,159 | | | ₩ | 13,561 | | | ₩ | 15,238 | | | | | | | | | | | | | | | | | | | | | Average outstanding balances | | | | | | | | | | | | | General purchase | | ₩ | 4,461 | | | ₩ | 4,601 | | | ₩ | 4,533 | | | ₩ | 4,565 | | | ₩ | 4,749 | | | ₩ | 5,373 | | Installment purchase | | | 2,728 | | | | 2,474 | | | | 2,528 | | | | 2,802 | | | 3,060 | | | 3,777 | | Cash advance | | | 2,134 | | | | 1,717 | | | | 1,390 | | | | 1,226 | | | 1,177 | | | 1,186 | | Card loan (4) | | | 2,759 | | | | 2,829 | | | | 2,869 | | | | 3,323 | | | 3,855 | | | 4,560 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 12,082 | | | ₩ | 11,621 | | | ₩ | 11,320 | | | ₩ | 11,916 | | | ₩ | 12,841 | | | ₩ | 14,896 | | | | | | | | | | | | | | | | | | | | | Delinquency ratios (at year end) (5) | | | | | | | | | | | | | From 1 month to 3 months | | | 0.94 | % | | | 0.81 | % | | | 0.64 | % | | | 0.61 | % | | 0.60 | % | | 0.62 | % | From 3 months to 6 months | | | 0.25 | | | | 0.83 | | | | 0.77 | | | | 0.47 | | | 0.57 | | | 0.63 | | Over 6 months | | | 0.13 | | | | 0.07 | | | | 0.08 | | | | 0.07 | | | 0.04 | | | 0.04 | | | | | | | | | | | | | | | | | | | | | Total | | | 1.32 | % | | | 1.71 | % | | | 1.48 | % | | | 1.15 | % | | 1.21 | % | | 1.29 | % | | | | | | | | | | | | | | | | | | | | Non-performing loan ratio | | | 0.40 | % | | | 0.91 | % | | | 0.85 | % | | | 0.58 | % | | 0.60 | % | | 0.66 | % | Write-offs (gross) | | ₩ | 541 | | | ₩ | 404 | | | ₩ | 427 | | | �� | 377 | | | ₩ | 357 | | | ₩ | 401 | | Recoveries (6) | | | 185 | | | | 141 | | | | 131 | | | | 138 | | | 134 | | | 133 | | | | | | | | | | | | | | | | | | | | | Net write-offs | | ₩ | 356 | | | ₩ | 263 | | | ₩ | 296 | | | ₩ | 239 | | | ₩ | 223 | | | ₩ | 268 | | | | | | | | | | | | | | | | | | | | | Gross write-off ratio (7) | | | 4.48 | % | | | 2.93 | % | | | 3.77 | % | | | 3.16 | % | | 2.78 | % | | 2.69 | % | Net write-off ratio (8) | | | 2.95 | % | | | 1.91 | % | | | 2.61 | % | | | 2.00 | % | | 1.74 | % | | 1.80 | % |
(1) | The active ratio represents the ratio of accounts used at least once within the last six months to total accounts as of year end. year-end. |
(2) | Merchant fees consist of maintenance fees and costs associated with prepayment by us (on behalf of customers) of sales proceeds to merchants, processing fees relating to sales and membership applications, costs relating to the management of delinquencies and |
| recoveries, provision for loan losses, general variable expenses and other fixed costs that are charged to our member merchants. We typically charge our member merchants fees that range from 1.5%0.8% to 2.7%.2.5%.We offer discounts for member merchants that are small- andmedium-sized enterprises pursuant to applicable laws. |
(3) | Represents the aggregate cumulative amount charged during the year. |
(4) | Card loans consist of loans that are provided on an unsecured basis to cardholders upon prior agreement. Payment on such a loan can be due either in one payment or in installments after a fixed period, in the case of principal payments, and will be due in installments, in the case of interest payments. |
(5) | Represents ratio of credit card balances overdue by one month or more to outstanding balance. In line with industry practice, we have restructured a portion of delinquent credit card account balances as loans. As of December 31, 2014,2015, 2016 and 2017, these restructured loans amounted to ₩45 billion.₩36 billion, ₩43 billion and ₩55 billion, respectively. Because these restructured loans are not treated as being delinquent at the time of conversion or for a period of time thereafter, our delinquency ratios may not fully reflect all delinquent amounts relating to our outstanding balances. |
(6) | Does not include proceeds that we received from sales of ournon-performing loans that were written off. |
(7) | Represents the ratio of grosswrite-offs for the year to average outstanding balance for the year. Ourcharge-off policy is generally to write off balances which have been overdue for four payment cycles or more or which have been classified as expected loss. |
(8) | Represents the ratio of netwrite-offs for the year to average outstanding balances for the year. Ourcharge-off policy is generally to write off balances which have been overdue for four payment cycles or more or which have been classified as expected loss. |
In contrast to the system in the United States and many other countries, where most credit cards are revolving cards that allow outstanding amounts to be rolled over from month to month so long as a required minimum percentage is repaid, credit cardholders in Korea are generally required to pay for their purchases within approximately 14 to 44 days of purchase depending on their payment cycle. However, we also offer revolving payment plans to individuals that allow outstanding amounts to be rolled over to subsequent payment periods. Delinquent accounts (defined as amounts overdue for one day or more) are charged penalty interest and closely monitored. For installment purchases, we charge interest on unpaid installments at rates that vary according to the individual cardholder’s membership level, which is based on, among others, transaction history, the length of the cardholder’s relationship with us and contribution to our profitability. We are committed to continuing to enhance our credit card business by strengthening our risk management and maximizing our operational efficiency. In addition, we believe that our extensive branch network, brand recognition and overall size will enable us tocross-sell products such as credit cards to our existing and new customers. To promote our credit card business, we offer services targeted to various financial profiles and customer requirements and are concentrating on:on: strengtheningcross-sales to existing customers and offering integrated financial services; offering cards that provide additional benefits such as frequent flyer miles and reward program points that can be redeemed by the customer for complementary services, prizes and cash; offering platinum cards, VVIP cards and other prime members’ cards, which have a higher credit limit and provide additional services in return for a higher fee; acquiring new customers through strategic alliances andcross-marketing with retailers; encouraging increased use of credit cards by existing customers through special offers for frequent users; introducing new features such as travel services and insurance through alliance partners; and developing fraud detection and security systems to prevent the misuse of credit cards. As of December 31, 2014,2017, we had approximately 8.99.7 million credit cardholders. Of the credit cards outstanding, approximately 87.7%90.0% were active, meaning that they had been used at least once during the previous six months. Our card revenues consist principally of cash advance fees, merchant fees, credit card installment fees, interest income from credit card loans, annual fees paid by cardholders, interest and fees on late payments and, with respect to revolving payment plans we offer, interest and fees relating to revolving balances. Cardholders are generally required to pay for their purchases within 14 to 44 days after the date of purchase, depending on their payment cycle. Except in the case of installment purchases, accounts which remain unpaid after this period are deemed to be delinquent.
We generate other fees through a processing charge on merchants, which ranges from 1.5% to 2.7%.
Undernon-exclusive license agreements with overseas financial services corporations, we also issue MasterCard, Visa, American Express, JCB and China UnionPay credit cards. We issue debit cards and charge merchants commissions that range from 1.0% to 2.0% of the amounts purchased using a debit card. Wecard.We also issue “check cards,” which are similar to debit cards except that “check cards” are accepted by all merchants that accept credit cards, and charge merchants commissions that typically range from 1.0%0.5% to 1.7%2.5%. Much like debit cards, check card purchases are also debited directly from customers’ accounts with us. In the second half of 2012, we (through KB Kookmin Card) commenced accounts receivable factoring activities in partnership with SK Telecom Co., Ltd., a leading Korean mobile telecommunications company, pursuant to which we purchase accounts receivable arising from SK Telecom’s installment sale of mobile handsets to its customers. The outstanding balance of factored receivables amounted to ₩2,806 billion as of December 31, 2014.
In February 2014, the Financial Services Commission suspended the new credit card issuance and other related activities of KB Kookmin Card for three months from February to May 2014, in response to an incident involving the misappropriation of the personal information of a large number of its customers by an employee of an external credit information company in the first half of 2013. See “Item 8A. Consolidated Statements and Other Financial Information—Legal Proceedings.”
Corporate Banking We lend to and take deposits fromsmall- andmedium-sized enterprises and, to a lesser extent, large corporate customers. We had over 230,000 287,686small- andmedium-sized enterprise borrowers and medium-sized enterprise1,812 large corporate borrowers forWon-currency loans as of December 31, 2012, over 220,000 small- and medium-sized enterprise borrowers as of December 31, 2013 and over 220,000 small- and medium-sized enterprise borrowers as of December 31, 2014, for Won-currency loans. As of December 31, 2012, 2013 and 2014, we had 1,486, 1,654 and 1,784 large corporate borrowers, respectively, for Won-currency loans.2017. For 2012, 2013 and 2014,2017, we received fee revenue from cash management services offered to corporate customers, which include “firm-banking”“firm-banking” services such asinter-account transfers, transfers of funds from various branches and agencies of a company (such as insurance premium payments) to the account of the headquarters of such company and transfers of funds from various customers of a company to the main account of such company, in the amount of ₩115 billion, ₩117 billion and ₩119 billion, respectively.₩145 billion. Of our branch network as of December 31, 2014,2017, we had eightthree branches that primarily handled large corporate banking. The following table sets forth the balances and the percentage of our total corporate lending represented by oursmall- andmedium-sized enterprise business loans and our large corporate business loans as of the dates indicated, estimated based on our internal classifications of corporate borrowers: | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2012 | | | 2013 | | | 2014 | | | | (in billions of Won, except percentages) | | Corporate: | | | | | | | | | | | | | | | | | | | | | | | | | Small- and medium-sized enterprise loans | | ₩ | 70,471 | | | | 70.7 | % | | ₩ | 71,045 | | | | 70.7 | % | | ₩ | 71,960 | | | | 71.3 | % | Large corporate loans | | | 29,212 | | | | 29.3 | | | | 29,489 | | | | 29.3 | | | | 28,918 | | | | 28.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 99,683 | | | | 100.0 | % | | ₩ | 100,534 | | | | 100.0 | % | | ₩ | 100,878 | | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won, except percentages) | | Corporate: | | | | | | | | | | | | | | | | | | | | | | | | | Small- andmedium-sized enterprise loans | | ₩ | 78,665 | | | | 72.3 | % | | ₩ | 86,065 | | | | 74.0 | % | | ₩ | 97,379 | | | | 76.4 | % | Large corporate loans | | | 30,182 | | | | 27.7 | | | | 30,206 | | | | 26.0 | | | | 30,002 | | | | 23.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 108,847 | | | | 100.0 | % | | ₩ | 116,271 | | | | 100.0 | % | | ₩ | 127,381 | | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
On thedeposit-taking side, we currently offer our corporate customers several types of corporate deposits. Our corporate deposit products can be divided into two general categories: (1) demand deposits that have no restrictions on deposits or withdrawals, but which offer a relatively low interest rate; and (2) deposits from which withdrawals are restricted for a period of time, but offer higher interest rates. We also offer installment savings deposits, certificates of deposit and repurchase instruments. We offer varying interest rates on deposit products depending upon the rate of return on ourincome-earning assets, average funding costs and interest rates offered by other nationwide commercial banks. The total amount of deposits from our corporate customers amounted to ₩66,389₩81,473 billion as of December 31, 2014,2017, or 31.4%31.9% of our total deposits. Small- andMedium-sized Enterprise Banking Oursmall- andmedium-sized enterprise banking business has traditionally been and will remain one of our core businesses because of both our historical development and our accumulated expertise. We believe that we possess the necessary elements to succeed in thesmall- andmedium-sized enterprise market, including our extensive branch network, our credit rating system for credit approval, our marketing capabilities (which we believe have provided us with significant brand loyalty) and our ability to take advantage of economies of scale. We use the term “small-“small- andmedium-sized enterprises” as defined in the Framework Act on Small and Medium Industry Basic ActEnterprises and related regulations. Under the amended Framework Act on Small and Medium Industry Basic Act,Enterprises, which became effective on February 3, 2015,April 27, 2016, and related regulations, an enterprise must meet each of the following criteria in order to meet the definition of asmall- andmedium-sized enterprise: (i) total assets at the end of the immediately preceding fiscal year must be less than ₩500 billion, (ii) the average or annual sales revenue standards as prescribed by the Enforcement Decree of the Framework Act on Small and Medium Industry Basic ActEnterprises that are applicable to the enterprise’s primary business must be met and (iii) the standards of management independence as prescribed by the Enforcement Decree of the Framework Act on Small and Medium Industry Basic ActEnterprises must be met. However, even if an enterprise that qualified as asmall- andmedium-sized enterprise under the Framework Act on Small and Medium Industry Basic ActEnterprises prior to the amendment thereof no longer meetsmet the definition due to such amendments, such enterprise will continuecontinued to be deemed asmall- andmedium-sized enterprise until March 31, 2018. Further, certified social enterprises (as defined in the Social Enterprise Promotion Act of Korea), as well as cooperatives or federations of cooperatives (as defined in the Framework Act on Cooperatives) that satisfy the requirements prescribed by the Framework Act on Small and Medium Industry Basic Act,Enterprises, may also qualify assmall- andmedium-sized enterprises. Industry-wide delinquency ratios for Won-denominated loans to small- and medium-sized enterprises decreased from 2012 to 2014. However, our delinquency ratio for loans to small- and medium-sized enterprises may increase in the future as a result of, among other things, adverse economic conditions in Korea and globally. See “Item 3.D. Risk Factors—Other risks relating to our business—Difficult conditions in the global financial markets could adversely affect our results of operations and financial condition.” In addition, in light of the deteriorating financial condition and liquidity position of small- and medium-sized enterprises in Korea, the Korean government has in recent years introduced measures intended to encourage Korean banks to provide financial support to small- and medium-sized enterprise borrowers. See “Item 3.D. Risk Factors—Risks relating to our small- and medium-sized enterprise loan portfolio—We have significant exposure to small- and medium-sized enterprises, and any financial difficulties experienced by these customers may result in a deterioration of our asset quality and have an adverse impact on us.”
Lending Activities Our principal loan products for oursmall- andmedium-sized enterprise customers are working capital loans and facilities loans. Working capital loans are provided to finance working capital requirements and include notes discounted and trade financing. Facilities loans are provided to finance the purchase of equipment and the establishment of manufacturing assembly plants. As of December 31, 2014,2017, working capital loans and facilities loans accounted for 56.7%50.7% and 43.3%49.3%, respectively, of our totalsmall- andmedium-sized enterprise loans. As of December 31, 2014,2017, we had over 220,000 287,686small- andmedium-sized enterprise customers on the lending side. Loans tosmall- andmedium-sized enterprises may be secured by real estate or deposits or may be unsecured. As of December 31, 2014,2017, secured loans and guaranteed loans accounted for, in the aggregate, 86.6%85.1% of oursmall- andmedium-sized enterprise loans. Among the secured loans, 95.9%96.3% were secured by real estate and 4.1%3.7% were secured by deposits or securities. Working capital loans generally have a maturity of one year, but may be extended for additional terms of up to one year in length for an aggregate term of five years. Facilities loans have a maximum maturity of 15 years. When evaluating the extension of working capital loans, we review the corporate customer’s creditworthiness and capability to generate cash. Furthermore, we take credit guaranty letters from other financial institutions and use time deposits that the borrower has with us as collateral, and may require additional collateral. The value of any collateral is defined using a formula that takes into account the appraised value of the property, any prior liens or other claims against the property and an adjustment factor based on a number of considerations including, with respect to property, the value of any nearby property sold in acourt-supervised auction during the previous five years. We revalue any collateral on a periodic basis (generally every year) or if a trigger event occurs with respect to the loan in question. We also offer mortgage loans to home builders or developers who build or sellsingle- ormulti-family housing units, principally apartment buildings. Many of these builders and developers are categorized assmall- andmedium-sized enterprises. We offer a variety of such mortgage loans, including loans to purchase property or finance the construction of housing units and loans to contractors used for working capital purposes. Such mortgage loans subject us to the risk that the housing units will not be sold. As a result, we review the probability of the sale of the housing unit when evaluating the extension of a loan. We also review the borrower’s creditworthiness and the adequacy of the intended use of proceeds. Furthermore, we take a lien on the land on which the housing unit is to be constructed as collateral. If the collateral is not sufficient to cover the loan, we also take a guarantee from the Housing Finance Credit Guarantee Fund as security. A substantial number of oursmall- andmedium-sized enterprise customers are SOHOs, which we currently define to include sole proprietorships and individual business interests. With respect to SOHOs, we apply credit risk evaluation models, which not only use quantitative analysis related to a customer’s accounts, personal credit and financial information and due amounts but also require our credit officers to perform a qualitative analysis of each potential SOHO customer. With respect to SOHO loans in excess of ₩1 billion, our credit risk evaluation model also includes a quantitative analysis of the financial statements of the underlying business. We generally lend to SOHOs on a secured basis, although a small portion of our SOHO exposures are unsecured. Pricing We establish the price for our corporate loan products based principally on transaction risk, our cost of funding and market considerations. Transaction risk is measured by such factors as the credit rating assigned to a particular borrower, the size of the borrower and the value and type of collateral. Our loans are priced based on the Market Opportunity Rate system, which is a periodic floating rate system that takes into account the current market interest rate. As of December 31, 2014,2017, the Market Opportunity Rate was 2.13%1.66% for three months, 2.17%1.80% for six months and 2.18%1.96% for one year. While we generally utilize the Market Opportunity Rate system, depending on the price and other terms set by competing banks for similar borrowers, we may adjust the interest rate we charge to compete more effectively with other banks. Large Corporate Banking Large corporate customers include all companies that are notsmall- andmedium-sized enterprise customers. Kookmin Bank’s articles of incorporation provide that financial services to large corporate customers must be no more than 40% of the total amount of ourWon-denominated loans. Our business focus with respect to large corporate banking is to selectively increase the proportion of high quality large corporate customers. Specifically, we are carrying out various initiatives to improve our customer relationship with large corporate customers and have been seeking to expand our service offerings to this segment. Lending Activities Our principal loan products for our large corporate customers are working capital loans and facilities loans. As of December 31, 2014,2017, working capital loans and facilities loans accounted for 79.6%74.6% and 20.4%25.4%, respectively, of our total large corporate loans. We also offer mortgage loans to large corporate clients who build or sellsingle- ormulti-family housing units, as described above under “—“—Small- andMedium-sized Enterprise Banking—Lending Activities.” As of December 31, 2014,2017, secured loans and guaranteed loans accounted for, in the aggregate, 18.2%23.3% of our large corporate loans. Among the secured loans, 80.4%81.5% were secured by real estate and 19.6%18.5% were secured by deposits or securities. Working capital loans generally have a maturity of one year, but may be extended for additional terms ranging from three months to one year in length for an aggregate term of five years. Facilities loans have a maximum maturity of 15 years. In our unsecured lending to large corporate customers, a critical consideration in our policy regarding the extension of such unsecured loans is the borrower’s creditworthiness. We assign each borrower a credit rating based on the judgment of our experts or scores calculated using the appropriate credit rating system, taking into account both financial factors andnon-financial factors (such as our perception of a borrower’s reliability, management and operational risk and risk relating to the borrower’s industry). The credit ratings, along with such factors, are key determinants that informin our lending to large corporate customers. Large corporate customers generally have higher credit ratings due to their higher repayment capability compared to other types of borrowers, such assmall- andmedium-sized enterprise borrowers. In addition, large corporate borrowers generally are affected to a lesser extent thansmall- andmedium-sized enterprise borrowers by fluctuations in the Korean economy and also maintain more sophisticated financial records. As of December 31, 2014, 85.4%2017, 84.9% of our large corporate customers had credit ratings orBBB- or above according to the internal credit rating system of Kookmin Bank, compared to 48.4%70.2% of oursmall- andmedium-sized enterprise customers. A credit rating ofBBB- is assigned to customers whose ability to repay the principal and interest on their outstanding loans is determined by us to be generally satisfactory but nonetheless subject to adverse effects under unfavorable economic conditions or during downturns in the business environment. Based on our internal analysis of historical data, we believe that the probability of default for loans extended to large corporate customers with a credit rating ofBBB- or above is between 0.00% and 2.26%. We monitor the credit status of large corporate borrowers and collect information to adjust our ratings appropriately. We also manage and monitor our large corporate customers through a dedicated Corporate Banking Branch and Kookmin Bank’s Large Corporate Business Department. In addition, Kookmin Bank’s Credit Risk Department manages the exposures to each large corporate customer and conductsin-depth analysis of various economic andindustry-related risks that are relevant to large corporate customers. As of December 31, 2014,2017, in terms of our outstanding loan balance, 32.5%36.6% was extended to borrowers in the manufacturing industry, 27.6%26.0% of our large corporate loans was extended to borrowers in the financial institutions industry, and 21.2%20.9% was extended to borrowers in the service industry. Pricing We determine pricing of our large corporate loans in the same way as we determine the pricing of oursmall- andmedium-sized enterprise loans. See “—“—Small- andMedium-sized Enterprise Banking—Pricing” above. As of December 31, 2014,2017, the Market Opportunity Rate, which is utilized in pricing loans offered by us, was the same for our large corporate loans as for oursmall- andmedium-sized enterprise loans. Capital Markets Activities and International BankingBanking/Finance Through our capital markets operations, we invest and trade in debt and equity securities and, to a lesser extent, engage in derivatives and asset securitization transactions and make call loans. We also provide investment banking services to corporate customers.and securities brokerage services. Securities Investment and Trading We invest in and trade securities for our own account in order to maintain adequate sources of liquidity and to generate interest and dividend income and capital gains. As of December 31, 2012, 20132015, 2016 and 2014,2017, our investment portfolio, which consists primarily ofheld-to-maturity financial assets andavailable-for-sale financial assets, and our trading portfolio had a combined total carrying amount of ₩46,962₩52,049 billion, ₩44,933₩74,777 billion and ₩46,389₩99,171 billion (including the investment and trading portfolios of our insurance operations) and represented 16.4%15.8%, 15.4%19.9% and 15.0% 22.7%of our total assets, respectively. Our trading and investment portfolios consist primarily of Korean treasury securities and debt securities issued by Korean government agencies, local governments or certaingovernment-invested enterprises and debt securities issued by financial institutions. As of December 31, 2012, 20132015, 2016 and 2014,2017, we held debt securities with a total carrying amount of ₩42,285₩45,230 billion, ₩39,776₩61,942 billion and ₩41,642₩82,989 billion, respectively, of which: held-to-maturity debt securities accounted for ₩12,256₩14,150 billion, ₩13,017₩11,178 billion and ₩12,569₩18,492 billion, or 29.0%31.3%, 32.7%18.0% and 30.2%22.3%, respectively; available-for-sale debt securities accounted for ₩21,737₩21,611 billion, ₩18,933₩27,445 billion and ₩19,360₩38,959 billion, or 51.4%47.8%, 47.6%44.4% and 46.5%46.9%, respectively; and debt securities at fair value through profit or loss accounted for ₩8,292₩9,469 billion, ₩7,826₩23,319 billion and ₩9,713₩25,538 billion, or 19.6%20.9%, 19.7%37.6% and 23.3%30.8%, respectively. Of these amounts, debt securities issued by the Korean government and government agencies as of December 31, 2012, 20132015, 2016 and 20142017 amounted to: ₩4,4492,592 billion, ₩4,357₩2,218 billion and ₩3,557₩5,448 billion, or 36.3%18.3%, 33.5%19.8% and 28.3%29.5%, respectively, of ourheld-to-maturity debt securities; ₩6,2563,757 billion, ₩6,926₩7,111 billion and ₩4,702₩3,629 billion, or 28.8%17.4%, 36.6%25.9% and 24.3%9.3%, respectively, of ouravailable-for-sale debt securities; and ₩2,3762,510 billion, ₩2,085₩5,390 billion and ₩3,067₩6,233 billion, or 28.7%26.5%, 26.6%23.1% and 31.6%24.4%, respectively, of our debt securities at fair value through profit or loss. From time to time we also purchase equity securities for our securities portfolios. Our equity securities consist primarily of marketable beneficiary certificates and equities listed on the KRX KOSPI Market, the KRX KOSDAQ Market or the KRX KOSDAQKONEX Market. As of December 31, 2012, 20132015, 2016 and 2014:2017: equity securities in ouravailable-for-sale portfolio had a carrying amount of ₩2,474₩3,377 billion, ₩2,899₩6,525 billion and ₩3,032₩9,157 billion, or 10.2%13.5%, 13.3%19.2% and 13.5%19.0%, respectively, of ouravailable-for-sale portfolio, respectively; portfolio; and equity securities in our trading portfolio had a carrying amount of ₩1,035₩838 billion, ₩1,217₩3,107 billion and ₩492₩5,003 billion, or 10.8%7.5%, 13.0%11.1% and 4.6%15.5%, respectively, of our debt and equity trading portfolio, respectively. portfolio.Our trading portfolio also includes derivative instruments.derivative-linked securities, the underlying assets of which were linked to, among other things, interest rates, exchange rates, stock price indices or credit risks. As of December 31, 2015, 2016 and 2017, derivative-linked securities in our trading portfolio had a carrying amount of ₩798 billion, ₩1,362 billion and ₩1,613 billion, or 7.1%, 4.9% and 5.0% of our trading portfolio, respectively. See “—Derivatives Trading.” The following tables show, as of the dates indicated, the gross unrealized gains and losses onavailable-for-sale andheld-to-maturity financial assets within our investment portfolio, and the amortized cost and fair value of the portfolio by type of financial asset: | | | As of December 31, 2012 | | | As of December 31, 2015 | | | | Amortized Cost | | | Gross Unrealized Gain | | | Gross Unrealized Loss | | | Fair Value | | | Amortized Cost | | | Gross Unrealized Gain | | | Gross Unrealized Loss | | | Fair Value | | | | (in billions of Won) | | | (in billions of Won) | | Available-for-sale financial assets: | | | | | | | | | | | | | | | | | Debt securities | | | | | | | | | | | | | | | | | Korean treasury securities and government agencies | | ₩ | 6,171 | | | ₩ | 87 | | | ₩ | 2 | | | ₩ | 6,256 | | | ₩ | 3,728 | | | ₩ | 34 | | | ₩ | 5 | | | ₩ | 3,757 | | Financial institutions(1) | | | 7,436 | | | | 40 | | | | — | | | | 7,476 | | | | 7,211 | | | | 34 | | | | 4 | | | | 7,241 | | Corporate(2) | | | 6,470 | | | | 139 | | | | 3 | | | | 6,606 | | | | 4,918 | | | | 65 | | | | 3 | | | | 4,980 | | Asset-backed securities | | | 1,396 | | | | 4 | | | | 1 | | | | 1,399 | | | Asset-backed securities(3) | | | | 5,201 | | | | 21 | | | | 6 | | | | 5,216 | | Others | | | — | | | | — | | | | — | | | | — | | | | 416 | | | | 2 | | | | 1 | | | | 417 | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | | 21,473 | | | | 270 | | | | 6 | | | | 21,737 | | | | 21,474 | | | | 156 | | | | 19 | | | | 21,611 | | Equity securities | | | 1,825 | | | | 659 | | | | 10 | | | | 2,474 | | | | 1,992 | | | | 1,401 | | | | 16 | | | | 3,377 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total available-for-sale financial assets | | ₩ | 23,298 | | | ₩ | 929 | | | ₩ | 16 | | | ₩ | 24,211 | | | ₩ | 23,466 | | | ₩ | 1,557 | | | ₩ | 35 | | | ₩ | 24,988 | | | | | | | | | | | | | | | | | | | | | | | | | | | Held-to-maturity financial assets: | | | | | | | | | | | | | | | | | Korean treasury securities and government agencies | | ₩ | 4,449 | | | ₩ | 272 | | | ₩ | 1 | | | ₩ | 4,720 | | | ₩ | 2,592 | | | ₩ | 115 | | | ₩ | — | | | ₩ | 2,707 | | Financial institutions(3)(4) | | | 1,316 | | | | 22 | | | | — | | | | 1,338 | | | | 1,864 | | | | 21 | | | | — | | | | 1,885 | | Corporate(4)(5) | | | 6,213 | | | | 285 | | | | — | | | | 6,498 | | | | 5,530 | | | | 176 | | | | — | | | | 5,706 | | Asset-backed securities | | | 278 | | | | 3 | | | | — | | | | 281 | | | Asset-backed securities(6) | | | | 4,164 | | | | 44 | | | | — | | | | 4,208 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total held-to-maturity financial assets | | ₩ | 12,256 | | | ₩ | 582 | | | ₩ | 1 | | | ₩ | 12,837 | | | ₩ | 14,150 | | | ₩ | 356 | | | ₩ | — | | | ₩ | 14,506 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | As of December 31, 2016 | | | | Amortized Cost | | | Gross Unrealized Gain | | | Gross Unrealized Loss | | | Fair Value | | | | (in billions of Won) | | Available-for-sale financial assets: | | | | | | | | | | | | | | | | | Debt securities | | | | | | | | | | | | | | | | | Korean treasury securities and government agencies | | ₩ | 7,213 | | | ₩ | 10 | | | ₩ | 112 | | | ₩ | 7,111 | | Financial institutions(1) | | | 11,189 | | | | 10 | | | | 27 | | | | 11,172 | | Corporate(2) | | | 5,891 | | | | 38 | | | | 25 | | | | 5,904 | | Asset-backed securities(3) | | | 2,717 | | | | 18 | | | | 5 | | | | 2,730 | | Others | | | 558 | | | | 5 | | | | 35 | | | | 528 | | | | | | | | | | | | | | | | | | | Subtotal | | | 27,568 | | | | 81 | | | | 204 | | | | 27,445 | | Equity securities | | | 5,343 | | | | 1,223 | | | | 41 | | | | 6,525 | | | | | | | | | | | | | | | | | | | Totalavailable-for-sale financial assets | | ₩ | 32,911 | | | ₩ | 1,304 | | | ₩ | 245 | | | ₩ | 33,970 | | | | | | | | | | | | | | | | | | | Held-to-maturity financial assets: | | | | | | | | | | | | | | | | | Korean treasury securities and government agencies | | ₩ | 2,218 | | | ₩ | 113 | | | ₩ | — | | | ₩ | 2,331 | | Financial institutions(4) | | | 1,869 | | | | — | | | | 44 | | | | 1,825 | | Corporate(5) | | | 3,488 | | | | 114 | | | | — | | | | 3,602 | | Asset-backed securities(6) | | | 3,603 | | | | 40 | | | | — | | | | 3,643 | | | | | | | | | | | | | | | | | | | Totalheld-to-maturity financial assets | | ₩ | 11,178 | | | ₩ | 267 | | | ₩ | 44 | | | ₩ | 11,401 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | As of December 31, 2013 | | | | Amortized Cost | | | Gross Unrealized Gain | | | Gross Unrealized Loss | | | Fair Value | | | | (in billions of Won) | | Available-for-sale financial assets: | | | | | | | | | | | | | | | | | Debt securities | | | | | | | | | | | | | | | | | Korean treasury securities and government agencies | | ₩ | 6,910 | | | ₩ | 30 | | | ₩ | 14 | | | ₩ | 6,926 | | Financial institutions(1) | | | 5,771 | | | | 15 | | | | 4 | | | | 5,782 | | Corporate(2) | | | 4,948 | | | | 57 | | | | 7 | | | | 4,998 | | Asset-backed securities | | | 1,208 | | | | 2 | | | | 2 | | | | 1,208 | | Others | | | 19 | | | | — | | | | — | | | | 19 | | | | | | | | | | | | | | | | | | | Subtotal | | | 18,856 | | | | 104 | | | | 27 | | | | 18,933 | | Equity securities | | | 2,092 | | | | 823 | | | | 16 | | | | 2,899 | | | | | | | | | | | | | | | | | | | Total available-for-sale financial assets | | ₩ | 20,948 | | | ₩ | 927 | | | ₩ | 43 | | | ₩ | 21,832 | | | | | | | | | | | | | | | | | | | Held-to-maturity financial assets: | | | | | | | | | | | | | | | | | Korean treasury securities and government agencies | | ₩ | 4,357 | | | ₩ | 180 | | | ₩ | — | | | ₩ | 4,537 | | Financial institutions(3) | | | 893 | | | | 9 | | | | — | | | | 902 | | Corporate(4) | | | 7,400 | | | | 180 | | | | — | | | | 7,580 | | Asset-backed securities | | | 367 | | | | 1 | | | | — | | | | 368 | | | | | | | | | | | | | | | | | | | Total held-to-maturity financial assets | | ₩ | 13,017 | | | ₩ | 370 | | | ₩ | — | | | ₩ | 13,387 | | | | | | | | | | | | | | | | | | |
| | | As of December 31, 2014 | | | As of December 31, 2017 | | | | Amortized Cost | | | Gross Unrealized Gain | | | Gross Unrealized Loss | | | Fair Value | | | Amortized Cost | | | Gross Unrealized Gain | | | Gross Unrealized Loss | | | Fair Value | | | | (in billions of Won) | | | (in billions of Won) | | Available-for-sale financial assets: | | | | | | | | | | | | | | | | | Debt securities | | | | | | | | | | | | | | | | | Korean treasury securities and government agencies | | ₩ | 4,651 | | | ₩ | 54 | | | ₩ | 3 | | | ₩ | 4,702 | | | ₩ | 3,640 | | | ₩ | 7 | | | ₩ | 18 | | | ₩ | 3,629 | | Financial institutions(1) | | | 6,944 | | | | 38 | | | | 1 | | | | 6,981 | | | | 21,001 | | | | 13 | | | | 68 | | | | 20,946 | | Corporate(2) | | | 6,031 | | | | 90 | | | | 1 | | | | 6,120 | | | | 10,593 | | | | 36 | | | | 58 | | | | 10,571 | | Asset-backed securities | | | 1,210 | | | | 4 | | | | 3 | | | | 1,211 | | | Asset-backed securities(3) | | | | 2,408 | | | | 2 | | | | 8 | | | | 2,402 | | Others | | | 342 | | | | 4 | | | | — | | | | 346 | | | | 1,446 | | | | 2 | | | | 37 | | | | 1,411 | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | | 19,178 | | | | 190 | | | | 8 | | | | 19,360 | | | | 39,088 | | | | 60 | | | | 189 | | | | 38,959 | | Equity securities | | | 1,561 | | | | 1,471 | | | | — | | | | 3,032 | | | | 7,775 | | | | 1,477 | | | | 95 | | | | 9,157 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total available-for-sale financial assets | | ₩ | 20,739 | | | ₩ | 1,661 | | | ₩ | 8 | | | ₩ | 22,392 | | | ₩ | 46,863 | | | ₩ | 1,537 | | | ₩ | 284 | | | ₩ | 48,116 | | | | | | | | | | | | | | | | | | | | | | | | | | | Held-to-maturity financial assets: | | | | | | | | | | | | | | | | | Korean treasury securities and government agencies | | ₩ | 3,557 | | | ₩ | 215 | | | ₩ | — | | | ₩ | 3,772 | | | ₩ | 5,448 | | | ₩ | — | | | ₩ | 16 | | | ₩ | 5,432 | | Financial institutions(3)(4) | | | 1,262 | | | | 18 | | | | — | | | | 1,280 | | | | 2,475 | | | | 15 | | | | — | | | | 2,490 | | Corporate(4)(5) | | | 7,278 | | | | 247 | | | | — | | | | 7,525 | | | | 6,219 | | | | — | | | | 4 | | | | 6,215 | | Asset-backed securities | | | 472 | | | | 2 | | | | — | | | | 474 | | | Asset-backed securities(6) | | | | 4,306 | | | | — | | | | 3 | | | | 4,303 | | Others | | | | 44 | | | | — | | | | 1 | | | | 43 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total held-to-maturity financial assets | | ₩ | 12,569 | | | ₩ | 482 | | | ₩ | — | | | ₩ | 13,051 | | | ₩ | 18,492 | | | ₩ | 15 | | | ₩ | 24 | | | ₩ | 18,483 | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes debt securities issued by the Bank of Korea, Korea Housing Finance Corporation, Korea Development Bank, Industrial Bank of Korea Finance Corporation and Industrialthe Export-Import Bank of Korea in the aggregate amount of ₩5,702₩4,516 billion as of December 31, 2012, ₩4,4632015, ₩6,749 billion as of December 31, 20132016 and ₩5,025₩15,834 billion as of December 31, 2014.2017. These financial institutions are owned or controlled by the Korean government. |
(2) | Includes debt securities issued by Korea Electric PowerHousing Finance Corporation, Korea Deposit Insurance Corporation and Korea Land & Housing Corporation in the aggregate amount of ₩1,208 billion as of December 31, 2015, ₩1,490 billion as of December 31, 2016 and ₩2,254 billion as of December 31, 2017.These entities are owned or controlled by the Korean government. |
(3) | Includes mortgage-backed securities issued by Korea Housing Finance Corporation, which have residential mortgage loans as underlying assets, in the amount of ₩5,181 billion as of December 31, 2015, ₩2,730 billion as of December 31, 2016 and ₩2,277 billion as of December 31, 2017. Korea Housing Finance Corporation is controlled by the Korean government, in the amount of ₩393 billion as of December 31, 2012, ₩143 billion as of December 31, 2013 and ₩114 billion as of December 31, 2014.government. |
(3)(4) | Includes debt securities issued by theKorea Development Bank, Industrial Bank of Korea Korea Development Bank, Korea Finance Corporation and Industrialthe Export-Import Bank of Korea in the aggregate amount of ₩986₩1,057 billion as of December 31, 2012, ₩5192015, ₩328 billion as of December 31, 20132016 and ₩1,103₩1,055 billion as of December 31, 2014.2017. These financial institutions are owned or controlled by the Korean government. |
(4)(5) | Includes debt securities issued by Korea Electric PowerHousing Finance Corporation, Korea Deposit Insurance Corporation and Korea Land & Housing Corporation in the aggregate amount of ₩1,770 billion as of December 31, 2015, ₩1,169 billion as of December 31, 2016 and ₩1,616 billion as of December 31, 2017. These entities are owned or controlled by the Korean government. |
(6) | Includes mortgage-backed securities issued by Korea Housing Finance Corporation, which have residential mortgage loans as underlying assets, in the amount of ₩4,144 billion as of December 31, 2015, ₩3,583 billion as of December 31, 2016 and ₩4,205 billion as of December 31, 2017. Korea Housing Finance Corporation is controlled by the Korean government, in the amount of ₩432 billion as of December 31, 2012, ₩545 billion as of December 31, 2013 and ₩553 billion as of December 31, 2014.government. |
Derivatives Trading Until the full-scale launch of our derivatives operationsWe engage in mid-1999, we had been engaged in limited volumes of derivatives trading, mostlyincluding on behalf of our customers. Since then, ourOur trading volume significantly increased to ₩195,879from ₩163,030 billion in 2012 but decreased2015 to ₩194,307₩264,110 billion in 20132016 and ₩154,872₩324,786 billion in 2014.2017. Our net trading revenue (expense) from derivatives for the year ended December 31, 2012, 20132015, 2016 and 20142017 was ₩456₩(11) billion, ₩544₩173 billion and ₩98₩906 billion, respectively.
We provide and trade a range of derivatives products, including: Won interest rate swaps, relating to Won interest rate risks; cross-currency swaps, forwards and options relating to foreign exchange risks; and stock price index options linked to the KOSPI index. Our derivatives operations focus on addressing the needs of our corporate clients to hedge their risk exposure and the need to hedge our risk exposure that results from such client contracts. We also engage in derivatives trading activities to hedge the interest rate and foreign currency risk exposures that arise from our own assets and liabilities. In addition, we engage in proprietary trading of derivatives within our regulated open position limits. The following shows the estimated fair value of our derivatives as of December 31, 2012, 20132015, 2016 and 2014:2017: | | | As of December 31, | | | As of December 31, | | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | Estimated Fair Value Assets | | | Estimated Fair Value Liabilities | | | Estimated Fair Value Assets | | | Estimated Fair Value Liabilities | | | Estimated Fair Value Assets | | | Estimated Fair Value Liabilities | | | Estimated Fair Value Assets | | | Estimated Fair Value Liabilities | | | Estimated Fair Value Assets | | | Estimated Fair Value Liabilities | | | Estimated Fair Value Assets | | | Estimated Fair Value Liabilities | | | | (in billions of Won) | | | (in billions of Won) | | Foreign exchange derivatives(1) | | ₩ | 846 | | | ₩ | 943 | | | ₩ | 938 | | | ₩ | 996 | | | ₩ | 762 | | | ₩ | 668 | | | ₩ | 1,131 | | | ₩ | 1,103 | | | ₩ | 2,139 | | | ₩ | 2,148 | | | ₩ | 2,361 | | | ₩ | 2,036 | | Interest rate derivatives (1) | | | 1,100 | | | | 1,040 | | | | 766 | | | | 731 | | | | 1,120 | | | | 1,103 | | | | 1,076 | | | | 1,061 | | | | 793 | | | | 911 | | | | 641 | | | | 689 | | Equity derivatives | | | 74 | | | | 68 | | | | 47 | | | | 50 | | | | 62 | | | | 15 | | | | 46 | | | | 140 | | | | 375 | | | | 687 | | | | 233 | | | | 373 | | Credit derivatives | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 13 | | | | 13 | | | | 55 | | | | 50 | | | | 42 | | | | 37 | | Commodity derivatives | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1 | | | | — | | | | 1 | | | | 5 | | | | 4 | | | | — | | Others(1) | | | 71 | | | | 4 | | | | 68 | | | | 18 | | | | 24 | | | | 11 | | | | 11 | | | | 9 | | | | 18 | | | | 6 | | | | 29 | | | | 8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 2,091 | | | ₩ | 2,055 | | | ₩ | 1,819 | | | ₩ | 1,795 | | | ₩ | 1,968 | | | ₩ | 1,797 | | | ₩ | 2,278 | | | ₩ | 2,326 | | | ₩ | 3,381 | | | ₩ | 3,807 | | | ₩ | 3,310 | | | ₩ | 3,143 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes those for trading purposes and hedging purposes. |
The following table shows certain information related to our derivatives designated as fair value hedges for the years ended December 31, 2012, 20132015, 2016 and 2014:2017: | | | Year Ended December 31, | | | Year Ended December 31, | | | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | | | Derivatives | | Hedged Items | | Hedge Ineffectiveness | | Derivatives | | Hedged Items | | Hedge Ineffectiveness | | Derivatives | | Hedged Items | | Hedge Ineffectiveness | | | Derivatives | | Hedged Items | | Hedge Ineffectiveness | | Derivatives | | Hedged Items | | Hedge Ineffectiveness | | Derivatives | | Hedged Items | | Hedge Ineffectiveness | | | | (in billions of Won) | | | (in billions of Won) | | Foreign exchange derivatives(1) | | ₩ | (58 | ) | | ₩ | 74 | | | ₩ | 16 | | | ₩ | (11 | ) | | ₩ | 36 | | | ₩ | 25 | | | ₩ | (29 | ) | | ₩ | 46 | | | ₩ | 17 | | | ₩ | (8 | ) | | ₩ | 8 | | | ₩ | — | | | ₩ | (27 | ) | | ₩ | 28 | | | ₩ | 1 | | | ₩ | 78 | | | ₩ | (41 | ) | | ₩ | 37 | | Interest rate derivatives | | | 32 | | | | (25 | ) | | | 7 | | | | (29 | ) | | | 37 | | | | 8 | | | | (4 | ) | | | 13 | | | | 9 | | | (42 | ) | | 43 | | | 1 | | | (63 | ) | | 64 | | | 1 | | | 15 | | | (15 | ) | | | — | | Other derivatives | | | 11 | | | | (11 | ) | | | — | | | | (8 | ) | | | 8 | | | | — | | | | 7 | | | | (7 | ) | | | — | | | 3 | | | (3 | ) | | | — | | | 1 | | | (1 | ) | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | (15 | ) | | ₩ | 38 | | | ₩ | 23 | | | ₩ | (48 | ) | | ₩ | 81 | | | ₩ | 33 | | | ₩ | (26 | ) | | ₩ | 52 | | | ₩ | 26 | | | ₩ | (47 | ) | | ₩ | 48 | | | ₩ | 1 | | | ₩ | (89 | ) | | ₩ | 91 | | | ₩ | 2 | | | ₩ | 93 | | | ₩ | (56 | ) | | ₩ | 37 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Amounts for 2016 include ₩19 billion of offsetting profit and loss relating tonon-derivative financial instruments designated as hedging instruments, which did not result in hedge ineffectiveness. |
The following table shows certain information related to our derivatives designated as cash flow hedges for the years ended December 31, 2012, 20132015, 2016 and 2014:2017: | | | Year Ended December 31, | | | Year Ended December 31, | | | | 2012 | | 2013 | | | 2014 | | | 2015 | | 2016 | | 2017 | | | | Derivatives | | Effective Portion | | Ineffective Portion | | Derivatives | | Effective Portion | | Ineffective Portion | | | Derivatives | | Effective Portion | | Ineffective Portion | | | Derivatives | | Effective Portion | | Ineffective Portion | | Derivatives | | Effective Portion | | Ineffective Portion | | Derivatives | | Effective Portion | | Ineffective Portion | | | | (in billions of Won) | | | (in billions of Won) | | Foreign exchange derivatives | | ₩ | (22 | ) | | ₩ | (22 | ) | | ₩ | — | | | ₩ | (5 | ) | | ₩ | (5 | ) | | ₩ | — | | | ₩ | 3 | | | ₩ | 4 | | | ₩ | (1 | ) | | ₩ | 21 | | | ₩ | 21 | | | ₩ | — | | | ₩ | 9 | | | ₩ | 9 | | | ₩ | — | | | ₩ | (133 | ) | | ₩ | (121 | ) | | ₩ | (12 | ) | Interest rate derivatives | | | (5 | ) | | | (5 | ) | | | — | | | | 2 | | | | 2 | | | | — | | | | (11 | ) | | | (11 | ) | | | — | | | 3 | | | 2 | | | 1 | | | 8 | | | 7 | | | 1 | | | 20 | | | 20 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | (27 | ) | | ₩ | (27 | ) | | ₩ | — | | | ₩ | (3 | ) | | ₩ | (3 | ) | | ₩ | — | | | ₩ | (8 | ) | | ₩ | (7 | ) | | ₩ | (1 | ) | | ₩ | 24 | | | ₩ | 23 | | | ₩ | 1 | | | ₩ | 17 | | | ₩ | 16 | | | ₩ | 1 | | | ₩ | (113 | ) | | ₩ | (101 | ) | | ₩ | (12 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Asset Securitization Transactions We are active in the Koreanasset-backed securities market. Based on our diverse experience with respect to product development and management capabilities relating to asset securitization, we offer customers a wide range of financial products and participate in various asset securitization transactions, including through our subsidiary KB Investment & Securities, to reinforce our position as a leading financial services provider with respect to the asset securitization market. We were involved in asset securitization transactions with an initial aggregate issue amount of ₩5,040₩10,711 billion in 2012, ₩7,2962015, ₩8,867 billion in 20132016 (excluding such amount of Hyundai Securities for the period before it became our consolidated subsidiary) and ₩5,524₩9,724 billion in 2014, all2017, a significant portion of which were public offerings ofasset-backed securities. Most of these securities were sold to institutional investors through Korean securities houses. Call Loans We make call loans and borrow call money in theshort-term money market. Call loans are defined asshort-term lending among banks and financial institutions either in Won or in foreign currencies with maturities of 90 days or less. Typically, call loans have maturities of one day. As of December 31, 2014,2017, we had made call loans of ₩2,032₩3,579 billion and borrowed call money of ₩2,882₩1,299 billion, compared to ₩3,206₩2,052 billion and ₩2,648₩2,940 billion, respectively, as of December 31, 20132016 and ₩2,534₩2,620 billion and ₩2,597₩2,091 billion, respectively, as of December 31, 2012.2015. Investment Banking
We have focused on selectively expanding our investment banking activities in order to increase our fee income and diversify our revenue base. The main focus of ourWe provide investment banking operations is project financeservices primarily through KB Securities and financial advisory services.Kookmin Bank. Our principal investment banking services include: securities underwriting; financing and financial advisory services for mergers and acquisitions; project finance and financial advisory services for social overhead capital projects such as highway, port, power, water and sewage projects; financing and financial advisory services for real estate development projects; and financing for mergers and acquisitions. finance.In 2014,May 2016, we acquired 22.56% of the outstanding shares of Hyundai Securities Co., Ltd., a publicly listed Korean securities firm, and further increased our shareholding in Hyundai Securities to 29.62% in June 2016 by acquiring treasury shares of Hyundai Securities. In October 2016, we effected a comprehensive stock swap of the outstanding shares of Hyundai Securities for newly issued shares of our company, as a result of which Hyundai Securities became a wholly-owned subsidiary. Following such transaction, we merged our existing subsidiary, KB Investment & Securities, with and into Hyundai Securities in December 2016 and changed the name of the surviving entity to KB Securities. Through the acquisition of Hyundai Securities and the creation of an integrated securities firm, we sought to strengthen our investment banking and securities brokerage capabilities, as well as to achieve economies of scale. In 2017, we generated investment banking revenuerevenues of ₩203₩488 billion, consisting of ₩32₩91 billion of interest income, and ₩171₩347 billion of fee income and ₩50 billion of other income. Securities Brokerage We provide securities brokerage services through KB Securities. Our activities include provision of brokerage services to our retail and corporate customers relating to a wide range of investment products, including stocks, investment company products, futures, options, equity- and derivative-linked securities and debt instruments, as well as provision of prime brokerage services to hedge funds. In addition, we offer self-directed brokerage services through KB Securities’ online and smartphone brokerage platforms. As of December 31, 2017, KB Securities operated a brokerage network consisting of 120 branches in Korea. In 2017, KB Securities generated commission income of ₩266 billion through its securities brokerage activities. International Banking and Finance We engage in various international banking and finance activities, including foreign exchange services and derivatives dealing, import andexport-related services, offshore lending, syndicated loans, and foreign currency securities investment.investment andnon-life insurance. These services are provided primarily to our domestic customers and overseas subsidiaries and affiliates of Korean corporations.corporations and, to a limited extent, to local companies and individuals. We also raise foreign currency funds through our international banking and finance operations. The table below sets forth certain information regarding our foreign currency assets and borrowings: | | | | | | | | | | | | | | | As of December 31, | | | | 2012 | | | 2013 | | | 2014 | | | | (in millions of US$) | | Total foreign currency assets | | US$ | 14,459 | | | US$ | 14,989 | | | US$ | 15,171 | | Foreign currency borrowings: | | | | | | | | | | | | | Debts | | | 7,087 | | | | 6,637 | | | | 6,531 | | Debentures | | | 2,974 | | | | 3,123 | | | | 2,949 | | | | | | | | | | | | | | | Total borrowings | | US$ | 10,061 | | | US$ | 9,760 | | | US$ | 9,480 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | As of December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | (in millions of US$) | | Total foreign currency assets | | US$ | 18,249 | | | US$ | 20,256 | | | US$ | 31,847 | | Foreign currency borrowings: | | | | | | | | | | | | | Debts | | | 6,101 | | | | 6,355 | | | | 7,254 | | Debentures | | | 3,535 | | | | 3,182 | | | | 3,459 | | | | | | | | | | | | | | | Total borrowings | | US$ | 9,636 | | | US$ | 9,537 | | | US$ | 10,713 | | | | | | | | | | | | | | |
The table below sets forth our overseas subsidiaries, branches and representative offices currently in operation as of December 31, 2014:2017: | | | | | Business Unit(1) | | Location | | Subsidiaries | | | | | Kookmin Bank Cambodia PLC | | | Cambodia | | Kookmin Bank (China) Ltd. | | | China | Kookmin Bank Hong Kong Ltd.
| | Hong Kong | Kookmin Bank International Ltd. | | | United Kingdom | | BranchesKBFG Securities America Inc.
| | | United States | | KB Securities Hong Kong Ltd. | | | Hong Kong | | KB Securities Vietnam Joint Stock Company | | | Vietnam | | KB Asset Management Singapore Pte. Ltd. | | | Singapore | | KB Microfinance Myanmar Co., Ltd. | | | Myanmar | | Leading Insurance Services, Inc. | | | United States | | LIG Insurance (China) Co., Ltd. | | | China | | PT. KB Insurance Indonesia | | | Indonesia | | KB KOLAO Leasing Co., Ltd. | | | Laos | | Branches | | | | | Kookmin Bank (China) Ltd., Beijing Branch | | | China | | Kookmin Bank (China) Ltd., Guangzhou Branch | | | China | | Kookmin Bank (China) Ltd., Harbin Branch | | | China | | Kookmin Bank (China) Ltd., Shanghai Branch | | | China | | Kookmin Bank (China) Ltd., Suzhou Branch | | | China | Kookmin Bank, Osaka Branch
| | Japan | Kookmin Bank, Tokyo Branch | | | Japan | | Kookmin Bank, Auckland Branch | | | New Zealand | | Kookmin Bank, New York Branch | | | United States | | Kookmin Bank, Ho Chi Minh City Branch | | | Vietnam | | Kookmin Bank, Hong Kong Branch | | | Hong Kong | | Kookmin Bank Cambodia PLC, Toul Kork Branch | | | Cambodia | | Representative OfficeKookmin Bank Cambodia PLC, Toul Tom Pounh Branch
| | | Cambodia | | Kookmin Bank Cambodia PLC, Tuek Thla Branch | | | Cambodia | | KB Microfinance Myanmar Co., Ltd., Hlaingtharya Branch | | | Myanmar | | Representative Offices | | | | | Kookmin Bank, MumbaiGurgaon Representative Office | | | India | | Kookmin Bank, Yangon Representative Office | | | Myanmar | | Kookmin Bank, Hanoi Representative Office | | | Vietnam | | KB Securities Shanghai Representative Office | | | China | | KB Kookmin Card, Yangon Representative Office | | | Myanmar | |
(1) | Does not include subsidiaries and branches in liquidation or dissolution. |
Our overseas branches and subsidiaries principally provide Korean companies and nationals in overseas markets with trade financing, local currency funding and foreign exchange services, in conjunction with the operations of our headquarters.
In March 2008, we entered into agreements to acquire shares of JSC Bank CenterCredit, a Kazakhstan bank, and acquired an initial equity stake of 29,972,840 common shares (equal to 23.0% of the then-outstanding voting shares) for approximately ₩528 billion in August 2008. Pursuant to the terms of such agreements, we acquired an aggregate of 14,163,836 additional common shares of JSC Bank CenterCredit in November and December 2008. In addition, in September 2009, we entered into agreements with International Finance Corporation and certain shareholders of JSC Bank CenterCredit pursuant to which we acquired 3,886,574 additional common shares and 36,561,465 non-voting convertible preferred shares of JSC Bank CenterCredit in January and February 2010. As of December 31, 2014, we held 29.6% of the outstanding common shares of JSC Bank CenterCredit. Our investment in JSC Bank CenterCredit is accounted for under the equity method from the initial acquisition date and we applied the purchase method to account for each acquisition.
In May 2009, we acquired 132,600 common shares of Khmer Union Bank, a Cambodian bank, for approximately ₩10 billion. As a result, we acquired 51% of the voting rights in Khmer Union Bank, which was renamed Kookmin Bank Cambodia PLC. In December 2010, July 2012 and June 2013, we acquired additional 37,602 common shares, 125,592 common shares and 24,206 common shares of Kookmin Bank Cambodia PLC, respectively. As of December 31, 2014, we held 100.0% of the outstanding common shares of Kookmin Bank Cambodia PLC. We applied the purchase method to account for the initial acquisition of Kookmin Bank Cambodia PLC in May 2009. The subsequent acquisitions in December 2010, July 2012 and June 2013 were accounted for as equity transactions.
Trustee and Custodian Services Relating to Investment Trusts and Other Functions We act as a trustee for 6684 financial investment companies with a collective investment license, which invest in investment assets using funds raised by the sale of beneficiary certificates of investment trusts to investors. We also act as custodian for 141164 financial institutions and as fund administrator for 4455 financial institutions with respect to various investments, as well as acting as settlement agent in connection with such services. We receive a fee for acting in these capacities and generally perform the following functions: holding assets for the benefit of the investment trusts or institutional investors; receiving and making payments in respect of such investments; acting as settlement agent in respect of such investments on behalf of the investment trust or institutional investors, in the domestic and overseas markets; providing reports on assets held in custody; providing certain foreign exchange services for overseas investment and foreign investors; and providingfund-related administration and accounting services. For the year ended December 31, 2014,2017, our fee income from our trustee and custodian services was ₩24₩27 billion and revenue collected as a result of administration of the underlying investments was ₩6₩8 billion. Other Businesses Trust Account Management Services Money Trust Management Services We provide trust account management services for both specified money trusts and unspecified money trusts. We receive fees for our trust account management services consisting of basic fees that are based upon a percentage of either the net asset value of the assets or the principal under management and, for certain types of trust account operations, performance fees that are based upon the performance of the trust account operations. In 2014,2017, our basic fees ranged from 0.1% to 2.0% of total assets under management depending on the type of trust account. We also charge performance fees with respect to certain types of trust account products. We receive penalty payments when customers terminate their trust accounts prior to the original contract maturity. We currently provide trust account management services for 20 types of money trusts. The money trusts we manage are generally trusts with a fixed maturity. Approximately 7.4%4.7% of our money trusts also provide periodic payments of dividends which are added to the assets held in such trusts and not distributed. Under Korean law, the assets of our trust accounts are segregated from our banking account assets and are not available to satisfy the claims of any of our potential creditors. We are, however, permitted to deposit surplus funds generated by trust assets into our banking accounts in certain circumstances as set forth under the TrustFinancial Investment Services and Capital Markets Act of Korea.and the regulations thereunder. As of December 31, 2014,2017, the total balance of our money trusts was ₩29,041₩38,754 billion (as calculated in accordance with Statement of Korea Accounting Standard No. 5004,Trust Accounts, and the Enforcement Regulations of Financial Investment Services under the Financial Investment Services and Capital Markets Act, which we refer to as an “SKAS basis”). As.As for unspecified money trust accounts, we have investment discretion over all money trusts, which are pooled and managed jointly for each type of trust account. Specified money trust accounts are established on behalf of individual customers who direct our investment of trust assets. The following table shows the balances of our money trusts by type as of the dates indicated. Under IFRS, commencing in 2013, we consolidate trust accounts for which we guarantee both the repayment of the principal amount and a fixed rate of interest as well as trust accounts for which we guarantee only the repayment of the principal amount. | | | | | | | | | | | | | | | As of December 31, | | | | 2012 | | | 2013 | | | 2014 | | | | (in billions of Won) | | Principal and interest guaranteed trusts (1) | | ₩ | 0.2 | | | ₩ | 0.2 | | | ₩ | 0.2 | | Principal guaranteed trusts (1) | | | 2,919 | | | | 3,070 | | | | 3,187 | | Performance trusts (1)(2) | | | 18,066 | | | | 20,842 | | | | 25,854 | | | | | | | | | | | | | | | Total | | ₩ | 20,985 | | | ₩ | 23,912 | | | ₩ | 29,041 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | As of December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won) | | Principal and interest guaranteed trusts(1) | | ₩ | 0.2 | | | ₩ | 0.2 | | | ₩ | 0.1 | | Principal guaranteed trusts(1) | | | 3,324 | | | | 3,532 | | | | 3,694 | | Performance trusts(1)(2) | | | 31,499 | | | | 36,375 | | | | 35,060 | | | | | | | | | | | | | | | Total | | ₩ | 34,823 | | | ₩ | 39,907 | | | ₩ | 38,754 | | | | | | | | | | | | | | |
(1) | Calculated on an SKAS basis. |
(2) | Trusts which are primarilynon-guaranteed. |
The balance of our money trusts increased 38.4%11.3% between December 31, 20122015 and December 31, 2014.2017. As of December 31, 2014,2017, the trust assets we managed consisted principally of securities investments and loans from the trust accounts. As of December 31, 2014,2017, on an SKAS basis, our trust accounts had invested in securities in the aggregate amount of ₩15,906₩19,000 billion, of which ₩13,972₩15,179 billion was debt securities andderivative-linked securities. Securities investments consist ofgovernment-related debt securities, corporate debt securities, including bonds and commercial paper, equity securities,derivative-linked securities and other securities. Loans made by our trust account operations are similar in type to the loans made by our bank account operations. As of December 31, 2014,2017, on an SKAS basis, our trust accounts had made loans in the principal amount of ₩152₩167 billion (excluding loans from the trust accounts to our banking accounts of ₩948₩1,257 billion), which accounted for 0.52%0.4% of our money trust assets. Loans by our money trusts are subject to the same credit approval process as loans from our banking accounts. As of December 31, 2014,2017, substantially all loans from our money trust accounts were collateralized or guaranteed. Our money trust accounts also invest, to a lesser extent, in equity securities, including beneficiary certificates issued by financial investment companies with a collective investment license. On an SKAS basis, as of December 31, 2014,2017, equity securities in our money trust accounts amounted to ₩1,934₩3,822 billion, which accounted for 6.6%9.6% of our total money trust assets. Of this amount, ₩1,883₩3,752 billion was from specified money trusts and ₩51₩70 billion was from unspecified money trusts. We continue to offerpension-type money trusts that provide a guarantee of the principal amount of the investment. On an SKAS basis, as of December 31, 2014,2017, the balance of the money trusts for which we guaranteed the principal was ₩3,187₩3,683 billion. If the income from a money trust for which we provide a guarantee is less than the amount of the payments we have guaranteed, we will need to pay the amount of the shortfall with funds from special reserves maintained with respect to trust accounts followed by basic fees from that money trust and funds from our general banking operations. In 2012, 20132015, 2016 and 2014,2017, we made no payment from our banking accounts to cover shortfalls in our guaranteed trusts. On an SKAS basis, we derived trust fees with regard to trust account management services (including those fees related to property trust management services) of ₩136₩235 billion in 2012, ₩1312015, ₩174 billion in 20132016 and ₩198₩293 billion in 2014.2017. Property Trust Management Services We also offer property trust management services, where we managenon-cash assets in return for a fee.Non-cash assets include mostly securities, but can also include other liquid receivables and real estate. Under these arrangements, we render custodial services for the property in question and collect fee income in return. In 2014,2017, our property trust fees ranged from 0.001% to 0.3% of total assets under management depending on the type of trust accounts. On an SKAS basis, as of December 31, 2014,2017, the aggregate balance of our property trusts increased to ₩1,879₩7,769 billion, compared to ₩1,377₩6,862 billion as of December 31, 20132016 and ₩1,171₩2,344 billion as of December 2012.31, 2015. Under IFRS, the property trusts are not consolidated within our financial statements. Investment Trust Management Through KB Asset Management and KB Securities, we offer investment trust products to customers and manage the funds invested by them in investment trusts. As of December 31, 2014,2017, KB Asset Management and KB Securities had ₩27,780an aggregate of ₩45,305 billion of investment trust assets under management. ManagementInsurance
Non-Life Insurance In June 2015, we acquired a 19.47% stake in KB Insurance Co., Ltd. (formerly named LIG Insurance Co., Ltd.), a publicly listed Koreannon-life insurance company. In November 2015 and December 2016, we increased our shareholding in KB Insurance to 33.29% and 39.81%, respectively. Through a tender offer conducted in May 2017, we acquired 36,237,649 shares of KB Insurance at ₩33,000 per share, increasing our shareholding to 94.30%. We subsequently effected a comprehensive stock swap in July 2017 to acquire the remaining shares of KB Insurance in exchange for 2,170,943 shares of common stock of our company, as a result of which KB Insurance became a wholly-owned subsidiary. KB Insurance offers a variety ofnon-life insurance products, including principally the following: | • | | Long-term insurance products. Long-term insurance products are sold to retail customers and provide protection against various types of losses, with specified coverage periods of at least three years and ranging up to 30 years or ending at specified ages. Unlike general property and casualty insurance products, which usually have a coverage period of one year or less and only have pure protection features, substantially all long-term insurance policies in Korea also have an integrated savings feature. KB Insurance offers a broad range of long-term insurance products covering the policyholder’s injuries, illnesses, long-term care, disabilities, accidents, property losses or other events. |
| • | | Automobile insurance products. Automobile insurance products are sold to both retail and institutional customers and generally provide coverage for the following types of losses resulting from the policyholder’s ownership or use of an insured automobile: (i) liability to third parties for bodily injuries or death as well as damage to automobiles or other personal property; and (ii) the policyholder’s own bodily injuries and automobile damage or theft. KB Insurance’s automobile insurance policies typically have a coverage period of one year or less. |
| • | | General property and casualty insurance products. General property and casualty insurance products are sold to institutional customers and include the following: (i) fire and allied lines insurance policies, providing protective coverage for damage to buildings and facilities and their contents against fire, flood, storm, lightening, explosion, theft and other risks; (ii) marine insurance policies, providing protective coverage for damage to marine vessels and their cargo; and (iii) specialty insurance policies, which cover various other types of specified risks faced by businesses, including liabilities and business interruption. |
The following table sets forth certain information regarding the operations of KB Insurance, on a standalone basis, as of the National Housing Funddates or for the periods indicated: The National Housing Fund is
| | | | | | | | | | | | | | | As of or for the Year Ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won, except as otherwise indicated) | | Total policies in force (in thousands) | | | 13,015 | | | | 13,692 | | | | 14,427 | | Number of new policies sold (in thousands) | | | 8,481 | | | | 8,617 | | | | 8,965 | | Gross direct written premiums(1) | | ₩ | 9,119 | | | ₩ | 9,425 | | | ₩ | 9,724 | | Long-term insurance | | | 6,006 | | | | 6,073 | | | | 6,298 | | Automobile insurance | | | 1,832 | | | | 2,031 | | | | 2,098 | | General property and casualty insurance | | | 814 | | | | 883 | | | | 917 | | Other | | | 467 | | | | 438 | | | | 411 | | Net earned premiums(2) | | ₩ | 8,141 | | | ₩ | 8,427 | | | ₩ | 8,795 | | Loss ratio(3) | | | 86.59 | % | | | 84.15 | % | | | 82.15 | % | Risk-based capital adequacy ratio(4) | | | 170.18 | % | | | 168.69 | % | | | 190.31 | % |
(1) | The amount of direct written premiums recognized in a specified period in respect of policies in force during such period, on a standalone basis. |
(2) | The sum of (i) gross direct written premiums for the specified period, (ii) reinsurance premium income for such period, (iii) return of surrender refunds for such period and (iv) total unearned premiums deferred from the previous period, less the sum of (x) reinsurance expenses for the specified period, (y) surrender refunds for such period and (z) total unearned premiums deferred to the next period, on a standalone basis. |
(3) | The ratio of (i) total claims paid for the specified period to (ii) net earned premiums for such period, on a standalone basis. |
(4) | Calculated in accordance with the applicable requirements of the Financial Supervisory Service. See “—Regulation and Supervision—Principal Regulations Applicable to Insurance Companies—Capital Adequacy.” |
KB Insurance operates a government fund that provides financial support to low-income householdsmulti-channel distribution platform in Korea, by providing mortgage financingcomprising agencies (which are independent insurance brokerage companies), a network of financial consultants, bancassurance arrangements with commercial banks and construction loans for projects to build small-sized housing. The operations of the National Housing Fund include providing and managing National Housing Fund loans, issuing National Housing Fund bonds and collecting subscription savings deposits. In February 2013, the Ministry of Land, Infrastructure and Transport (formerly the Ministry of Land, Transport and Maritime Affairs) designated us as one of the managers of the National Housing Fund. During the five years preceding such designation, we chose not to participate in the bidding process to become a designated manager of the National Housing Fund and only managed pre-existing Fund accounts. In return for managing such pre-existing Fund accounts, we received quarterly fund management fees, calculated based on activity levels for the relevant quarter. In 2014, we received total fees of ₩23 billion for managing the National Housing Fund, compared to ₩28 billion in each of 2013 and 2012.
Theother financial accounting for the National Housing Fund is entirely separate from our financial accounting,institutions, direct marketing channels (including home shopping television networks and the non-performingInternet) and a corporate sales force.
As of December 31, 2017, KB Insurance had ₩25,114 billion of general account investment assets on a standalone basis, of which domestic debt securities, loans, beneficiary certificates, domestic equity securities and loan losses of the National Housing Fund, in general, do not impact our financial condition. Regulationsoverseas securities accounted for 35.0%, 25.8%, 9.3%, 1.7% and guidelines for managing the National Housing Fund are issued by the Minister of Land, Infrastructure and Transport pursuant to the Housing Act.18.6%, respectively. Bancassurance
The Korean government’s liberalization of the bancassurance market in Korea has allowed us to offer insurance products of other institutions since September 2003. We currently market a wide range of bancassurance products and hope to develop additional fee-based revenues by expanding our offering of these products.
Currently, our bancassurance business has alliances with 17 life insurance companies (including our subsidiary, KB Life Insurance) and nine non-life insurance companies and offers 66 different products through our branch network. These products are composed of 43 types of life insurance policies such as annuities, savings insurance and variable life insurance, and 23 types of non-life insurance products. In 2014, our commission income from our bancassurance business amounted to ₩97 billion.
Insurance Through KB Life Insurance Co., Ltd., we offer a variety of individual and group life insurance products, including annuities, savings insurance, variable life insurance, whole life insurance and term life insurance as well as health insurance. KB Life Insurance utilizes itsmulti-channel distribution platform to market these products, which includes sales through agents,agencies, financial consultants, telemarketers and bancassurance arrangements with commercial banks and other financial institutions. In June 2014, we entered into a share purchase agreement, which was amended in March 2015, to acquire a 19.47% stake in LIG Insurance Co., Ltd., a publicly listed Korean property and casualty insurance company, and will be required under applicable Korean law to increase our shareholding in LIG Insurance to at least 30% within one year from the date of such acquisition. LIG Insurance provides non-life insurance products, including automobile insurance, property insurance, marine insurance, fire insurance, accident insurance and casualty insurance, as well as long-term care insurance. We expect to achieve synergies between KB Life Insurance generated gross premiums (not including separate account premiums) of ₩1,604 billion in 2015, ₩1,292 billion in 2016 and LIG₩1,246 billion in 2017 on a standalone basis. As of December 31, 2017, KB Life Insurance through cross-sellinghad ₩7,738 billion of general account investment assets on a standalone basis, of which domestic debt securities, beneficiary certificates, loans, domestic equity securities and overseas securities accounted for 58.9%, 12.1%, 11.9%, 0.3% and 6.2%, respectively. As of such date, KB Life Insurance’s risk-based capital adequacy ratio was 195.56%.
For further information regarding our lifeinsurance-related assets and non-lifeliabilities, see Note 37 of the notes to our consolidated financial statements included elsewhere in this annual report. Bancassurance Through the bancassurance operations of Kookmin Bank, we offer insurance products of other institutions to retail customers in Korea. We currently market a wide range of bancassurance products and seek to generate additionalfee-based revenues by expanding our customer base.offering of these products. Currently, our bancassurance business has alliances with 21 life insurance companies (including our subsidiary, KB Life Insurance) and ninenon-life insurance companies (including our subsidiary, KB Insurance) and offers 67 different products through our branch network. These products are composed of 44 types of life insurance policies, such as annuities, savings insurance and variable life insurance, and 23 types ofnon-life insurance products.In 2017, our commission income from our bancassurance business amounted to ₩56.9 billion. Consumer Finance We provide consumer finance services through KB Capital Co., Ltd. We acquired 52.02% of the outstanding shares of KB Capital (formerly known as Woori Financial Co., Ltd.) in March 2014.2014 for ₩280 billion. We conducted a tender offer in May 2017, through which we acquired 5,949,300 shares of KB Capital at ₩27,500 per share, increasing our shareholding in KB Capital to 79.70%. We subsequently acquired the remaining outstanding shares of KB Capital in exchange for 2,269,057 shares of common stock of our company through a comprehensive stock swap effected in July 2017, as a result of which KB Capital became a wholly-owned subsidiary. KB Capital provides leasing services and installment finance services for various products, including automobiles, heavy machineries and medical equipment, as well as microlending services. We expect KB Capital to continue to expand our customer base by providing a variety ofnon-banking financial services to retail customers, as well as synergies through coordinated business operations with our other subsidiaries, including Kookmin Bank. Management of the National Housing Urban Fund The National Housing Urban Fund is a government fund that provides financial support tolow-income households in Korea by providing mortgage financing and construction loans for projects to buildsmall-sized housing. The operations of the National Housing Urban Fund include providing and managing National Housing Urban Fund loans, issuing National Housing Urban Fund bonds and collecting subscription savings deposits. In February 2013, the Ministry of Land, Infrastructure and Transport (formerly the Ministry of Land, Transport and Maritime Affairs) designated us as one of the managers of the National Housing Urban Fund. In 2017, we received total fees of ₩32 billion for managing the National Housing Urban Fund, compared to ₩31 billion in 2016 and ₩29 billion in 2015. The financial accounting for the National Housing Urban Fund is entirely separate from our financial accounting, and thenon-performing loans and loan losses of the National Housing Urban Fund, in general, do not impact our financial condition. Regulations and guidelines for managing the National Housing Urban Fund are issued by the Minister of Land, Infrastructure and Transport pursuant to the Housing Act. Distribution Channels Banking Branch Network As of December 31, 2014,2017, Kookmin Bank operated a network of 1,1611,062 branches andsub-branches in Korea, which was one of the largest branch networks among Korean commercial banks. Anbanks.An extensive branch network is important to attracting and maintaining retail customers, who use branches extensively and value convenience. We believe that our extensive branch network in Korea and retail customer base provide us with a source of stable and relatively low cost funding. Approximately 37.0%35.5% of our branches andsub-branches are located in Seoul, and approximately 23.4%23.9% of our branches are located in the six next largest cities. The following table presents the geographical distribution of our branch network in Korea as of December 31, 2014:2017: | Area | | Number of Branches | | | Percentage | | | Number of Branches | | | Percentage | | Seoul | | | 429 | | | | 37.0 | % | | | 377 | | | | 35.5 | % | Six largest cities (other than Seoul) | | | 272 | | | | 23.4 | | | | 254 | | | | 23.9 | | Other | | | 460 | | | | 39.6 | | | | 431 | | | | 40.6 | | | | | | | | | | | | | | | Total | | | 1,161 | | | | 100.0 | % | | | 1,062 | | | | 100.0 | % | | | | | | | | | | | | | |
In addition, we have continued to implement the specialization of our branch functions. Of our branch network as of December 31, 2014,2017, we had eightthree branches that primarily handled large corporate banking. In order to support our branch network, we have established an extensive network of ATMs, which are located in branches and in unmanned outlets known as “autobanks.” As of December 31, 2014,2017, we had 9,2657,988 ATMs. We have actively promoted the use of these distribution outlets in order to provide convenient service to customers, as well as to maximize the marketing and sales functions at the branch level, reduce employee costs and improve profitability. The aggregate number of transactions conducted using our ATMs amounted to approximately 640548 million in 2012, 6062015, 505 million in 20132016 and 573460 million in 2014. 2017.Other DistributionBanking Channels The following table sets forth information, for the periods indicated, on the number of users and transactions of the other distributionbanking channels for our retail and corporate banking customers, which are discussed below: | | | | | | | | | | | | | | | For the Year Ended December 31, | | | | 2012 | | | 2013 | | | 2014 | | Internet banking: | | | | | | | | | | | | | Number of users (1) | | | 14,049,444 | | | | 15,634,113 | | | | 16,767,588 | | Number of transactions (thousands) (2) | | | 4,117,653 | | | | 5,024,132 | | | | 4,569,185 | | Phone banking: | | | | | | | | | | | | | Number of users (3) | | | 4,766,251 | | | | 4,870,204 | | | | 4,914,616 | | Number of transactions (thousands) (2) | | | 213,941 | | | | 183,434 | | | | 165,130 | | Smartphone banking: | | | | | | | | | | | | | Number of users (4) | | | 5,460,955 | | | | 8,002,176 | | | | 9,484,234 | | Number of transactions (thousands) (2) | | | 3,377,862 | | | | 6,554,649 | | | | 7,504,638 | |
| | | | | | | | | | | | | | | For the Year Ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | Internet banking: | | | | | | | | | | | | | Number of users(1) | | | 17,930,962 | | | | 19,095,749 | | | | 20,059,806 | | Number of transactions (thousands)(2) | | | 4,755,832 | | | | 5,094,063 | | | | 5,427,142 | | Phone banking: | | | | | | | | | | | | | Number of users(3) | | | 4,955,278 | | | | 4,989,769 | | | | 5,020,272 | | Number of transactions (thousands)(2) | | | 152,404 | | | | 147,157 | | | | 119,059 | | Smartphone banking: | | | | | | | | | | | | | Number of users(4) | | | 10,862,526 | | | | 12,301,753 | | | | 13,533,359 | | Number of transactions (thousands)(2) | | | 4,083,426 | | | | 5,169,324 | | | | 6,192,633 | |
(1) | Number of users is defined as the total cumulative number of retail and corporate customers who have registered through our branch offices to use our Internet banking services. |
(2) | Number of transactions includes balance and transaction inquiries, fund transfers and other transactions. |
(3) | Number of users is defined as the total cumulative number of retail and corporate customers who have registered through our branch offices to use our phone banking services. |
(4) | Number of users is defined as the total cumulative number of retail customers who have registered through our branch offices, or the customers’ smartphones, to use our smartphone banking services. |
Internet Banking Our goal is to consolidate our position as a market leader in on-lineonline banking. Our Internet banking services currently include: basic banking services, including fund transfers, balance and transaction inquiries,pre-set automatic transfers, product inquiries, on-lineonline bill payments and foreign exchange services; investment services, including opening deposit accounts and investing in funds; processing of loan applications; electronic certification services, which permit our Internet banking service users to authenticate transactions on a confidential basis through digital signatures; and wealth management and advisory services, including financial planning and real estate information services. Phone Banking We offer a variety of phone banking services, includinginter-account fund transfers, balance and transaction inquiries, customer service inquiries and bill payments. We also have call centers, which we primarily use to: advise clients with respect to deposits, loans and credit cards and to provide our customers a way to report any emergencies with respect to their accounts; allow our customers to conduct transactions with respect to their accounts, such as balance and transfer inquiries, transfers or payments and opening accounts; and conduct telemarketing to our customers or potential customers to advertise products or services. Smartphone Banking “KB Star Banking,” our mobile banking application for smartphones, allows our customers the flexibility to conduct a variety of financial transactions, including balance and transaction inquiries, fund transfers and asset management, anywhere at any time. Our smartphone banking services currently include: basic banking services, including fund transfers, balance and transaction inquiries, bill payments and foreign exchange services; investment services, including investing in savings deposits that are designed specifically for and offered to smartphone banking customers; and processing of loan applications and bancassurance services. We also continue to develop innovative mobile applications that cater to specific customer needs and lifestyles. For example, we offer “Liiv,” a mobile banking platform designed to make routine transactions easier for our customers, including providing easy access to banking services without the additional electronic certification process, foreign currency exchange services with lower fees and functions that allow customers to easily split bills and transfer money. We provide our customers with a number of other useful tools, such as “KB Star Alerts,” which are free text messages that contain real-time account activity information as well as security alerts, and “KB My Money,” a mobile application that allows customers to manage a wide range of assets deposited with various financial institutions. Other Channels We provide cash management services, which include automatic transfers, connection services to other financial institutions,real-time firm banking, automatic fund concentration and transmittal of trading information. Distribution Channels for Other Services Through ournon-banking subsidiaries, we operate a network of dedicated branches and other distribution channels through which our customers can access credit card, securities brokerage, insurance and consumer finance products and services. The following table sets forth information regarding the number and geographical distribution of the branches in Korea operated by KB Kookmin Card, KB Securities and KB Insurance as of December 31, 2017: | | | | | | | | | | | | | Area | | KB Kookmin Card | | | KB Securities | | | KB Insurance | | Seoul | | | 7 | | | | 45 | | | | 17 | | Six largest cities (other than Seoul) | | | 7 | | | | 27 | | | | 14 | | Other | | | 11 | | | | 48 | | | | 28 | | | | | | | | | | | | | | | Total | | | 25 | | | | 120 | | | | 59 | | | | | | | | | | | | | | |
KB Life Insurance and KB Capital also operate a number of branches in the Seoul area. We also provide credit card, securities brokerage, insurance and consumer finance services through dedicated call centers, smartphone applications and Internet websites operated by KB Kookmin Card, KB Securities, KB Insurance, KB Life Insurance and KB Capital. Competition We compete principally with other financial institutions in Korea, including other financial holding companies and nationwide commercial banks, as well as regional banks, development banks, specialized banks and branches of foreign banks operating in Korea and installment finance corporations for mortgage loan products.Korea. We also compete for customer funds with other types of financial service institutions in Korea, including savings institutions (such as mutual savings and finance companies and credit unions and credit cooperatives), investment institutions (such as merchant banking corporations), life insurance companies,non-life insurance companies, securities companies and other financial investment companies. Competition in the domestic banking industry is generally based on the types and quality of the products and services offered, including the size and location of retail networks, the level of automation and interest rates charged and paid. Competition has increased significantly in our traditional core businesses, retail banking,small- andmedium-sized enterprise banking and credit card lending, contributing to some extent to the asset quality deterioration in retail andsmall- andmedium-sized loans. As a result, our margins on lending activities may decrease in the future. Furthermore, the introduction of Internet-only banks in Korea is expected to increase competition in the Korean banking industry. Internet-only banks operate without branches and conduct most of their operations through electronic means, which enables them to minimize cost and offer customers higher interest rates on deposits or lower lending rates. In April 2017, K Bank, the first Internet-only bank in Korea, commenced operations. Kakao Bank, another Internet-only bank, in which we hold a 10% equity interest, commenced operations in July 2017. In the Korean insurance industry, competition is based on a number of factors, including brand recognition, service, product features and pricing, investment performance and perceived financial strength. There has been downward pressure in recent years on margins of insurance products as some of our competitors have sought to obtain or maintain market share by reducing margins and increasing marketing efforts. As the Koreannon-life insurance and life insurance sectors continue to mature, they may experience a slowdown in growth as well as a stagnation in market penetration. Due to these and other factors, we believe that competition in the Korean insurance industry will likely remain intense in the future. In addition, general regulatory reforms in the Korean financial industry have increased competition among banks and other financial institutions in Korea. As the reform of the financial sector continues, foreign financial institutions, some with greater resources than us, have entered, and may continue to enter, the Korean market either by themselves or in partnership with existing Korean financial institutions and compete with us in providing financial and related services. In addition,
Moreover, the Korean financial industry is undergoing significant consolidation. The number of nationwide commercial banks in Korea has decreased from 16 as of December 31, 1997, to seven banks and five financial holding companiessix as of December 31, 2014. Furthermore, a2017. A number of significant mergers and acquisitions in the financial industry have taken place in Korea over the past decade,in recent years, including the acquisition of Koram Bank by an affiliate of Citibank in 2004, Standard Chartered Bank’s acquisition of Korea First Bank in April 2005, Chohung Bank’s merger with Shinhan Bank in April 2006, Hana Financial Group’s acquisition of a controlling interest in Korea Exchange Bank in February 2012 and the proposedsubsequent merger of Hana Bank into Korea Exchange Bank in the second half of 2015. Moreover,In addition, as part of the Korean government’s plans to privatize Woori Finance Holdings Co., Ltd. (the financial holding company of Woori Bank), certain subsidiaries of Woori Finance Holdings Co., Ltd. were sold to other financial institutions and Woori Finance Holdings Co., Ltd. itself was merged into Woori Bank in 2014. In the insurance sector, China’s Anbang Insurance Group acquired controlling interests in Tong Yang Life Insurance Co., Ltd. and Allianz Life Insurance Korea Co., Ltd. in 2015 and 2016, respectively, while Mirae Asset Life Insurance Co., Ltd. acquired PCA Life Insurance Co., Ltd. in 2017. In the securities sector, in 2016, Mirae Asset Securities Co., Ltd. acquired a 43% interest in KDB Daewoo Securities Co., Ltd., which changed its name to Mirae Asset Daewoo Securities Co., Ltd., and Mirae Asset Securities merged with and into Mirae Asset Daewoo Securities to create the largest securities company in Korea in terms of capital. We expect that consolidation in the Korean financial industry will continue. The financial institutions resulting from such consolidation may, by virtue of their increased size and business scope, provide significantly greater competition for us. We intend to review potential acquisition opportunities as they arise. We cannot guarantee that we will not be involved in any future mergers or acquisitions. For additional information, you should read the section entitled “Item 3.D. Risk Factors—Risks relating to competition.”
Information Technology Pursuant to our establishment as a financial holding company, we are implementingWe regularly implement various ITsystem-related initiatives and upgrades at the group and subsidiary level. We believe that continuous improvement of our IT systems is crucial in supporting our operations and management and providinghigh-quality customer service. Accordingly, we continue to upgrade and improve our systems through various activities, including projects to develop next generation banking systems for Kookmin Bank, further strengthen system security and timely develop and implement various new IT systems and services (includinggroup-wide software) that support our business operations and risk management activities.
Ourmainframe-based banking and credit card IT systems are designed to ensure continuity of services even where there is a failure of the host data center due to a natural disaster or other accidents by utilizing backup systems in disaster recovery data centers. In addition, through the implementation of Parallel Sysplex, a “multi-CPU“multi-CPU system,” our bank and credit card systems are designed and operated to be able to process transactions without material interruption in the event of CPU failure. In 2010, we launched anext-generation banking and credit card IT system that is designed to ensure greater reliability in financial transactions and allow more efficient development of new financial products. We also launched a new disaster recovery system to ensure continuity of operations. In addition, we implemented new technologies, including Multi Channel Integration and Enterprise Application Integration systems, to standardize our IT system and better manage IT system operational risk. In 2011, we launched a mobile weblink to provide online banking services for smartphone users. In addition, we implemented virtual storage technology for our server systems to achieve a more flexible and cost-effective information storage capability.
The integrity of our IT systems, and their ability to withstand potential catastrophic events (such as natural calamities and internal system failures), are crucial to our continuing operations. We currently test our disaster recovery systems on a quarterly basis. For additional information, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Operational Risk Management.” In 2014,2017, we spent approximately ₩478₩557 billion for our IT systems,system implementation and operations, including expenses related to the construction of new IT systems, implementation of hardware and software technologies and other new systems. systems, as well as related labor costs. As of December 31, 2014,2017, we employed a total of 973 1,079full-time employees in our IT operations. Assets and Liabilities
The tables below set out selected financial highlights regarding our banking operations and individualour assets and liabilities. Except as otherwise indicated, amounts as of and for the years ended December 31, 2010, 2011, 2012, 2013, 2014, 2015, 2016 and 20142017 are presented on a consolidated basis under IFRS. Loan Portfolio As of December 31, 2014,2017, our total loan portfolio was ₩233,902₩292,233 billion compared to ₩221,862₩267,764 billion as of December 31, 20132016 and ₩216,914₩247,587 billion as of December 31, 2012.2015. As of December 31, 2014, 94.8%2017, 95.6% of our total loans wereWon-denominated loans compared to 94.6%95.2% as of December 31, 20132016 and 94.4%94.3% as of December 31, 2012. 2015.Loan Types The following table presents loans by type as of the dates indicated. Except where we specify otherwise, all loan amounts stated below are before deduction of allowances for loan losses. Total loans reflect our loan portfolio, including past due amounts. | | | As of December 31, | | | As of December 31, | | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won) | | | (in billions of Won) | | Domestic: | | | | | | | | | | | | | | | | | | | | | Corporate | | | | | | | | | | | | | | | | | | | | | Small- and medium-sized enterprise | | ₩ | 65,132 | | | ₩ | 68,730 | | | ₩ | 70,471 | | | ₩ | 71,045 | | | ₩ | 71,960 | | | ₩ | 71,045 | | | ₩ | 71,960 | | | ₩ | 78,665 | | | ₩ | 86,065 | | | ₩ | 97,379 | | Large corporate (1) | | | 23,143 | | | | 28,509 | | | | 29,212 | | | | 29,489 | | | | 28,918 | | | | 29,489 | | | | 28,918 | | | | 30,182 | | | | 30,206 | | | | 30,002 | | Retail | | | | | | | | | | | | | | | | | | | | | Mortgage and home equity | | | 71,715 | | | | 75,580 | | | | 74,463 | | | | 77,969 | | | | 86,994 | | | | 77,969 | | | | 86,994 | | | | 87,882 | | | | 93,327 | | | | 97,253 | | Other consumer | | | 27,281 | | | | 28,275 | | | | 28,969 | | | | 29,675 | | | | 32,255 | | | | 29,675 | | | | 32,255 | | | | 36,312 | | | | 41,629 | | | | 48,897 | | Credit cards | | | 12,413 | | | | 12,421 | | | | 11,874 | | | | 11,784 | | | | 11,632 | | | | 11,784 | | | | 11,632 | | | | 12,136 | | | | 13,530 | | | | 15,205 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | | 199,684 | | | | 213,515 | | | | 214,989 | | | | 219,962 | | | | 231,759 | | | | 219,962 | | | | 231,759 | | | | 245,177 | | | | 264,757 | | | | 288,736 | | Foreign | | | 1,693 | | | | 2,040 | | | | 1,925 | | | | 1,900 | | | | 2,143 | | | | 1,900 | | | | 2,143 | | | | 2,410 | | | | 3,007 | | | | 3,497 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total gross loans | | ₩ | 201,377 | | | ₩ | 215,555 | | | ₩ | 216,914 | | | ₩ | 221,862 | | | ₩ | 233,902 | | | ₩ | 221,862 | | | ₩ | 233,902 | | | ₩ | 247,587 | | | ₩ | 267,764 | | | ₩ | 292,233 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Large corporate loans include ₩53 billion, ₩35 billion, ₩33 billion, ₩132 billion, ₩191 billion, ₩248 billion, ₩285 billion and ₩191₩222 billion of loans to the Korean government and government related agencies (including the Korea Deposit Insurance Corporation) as of December 31, 2010, 2011, 2012, 2013, 2014, 2015, 2016 and 2014,2017, respectively. |
Loan Concentrations On a consolidated basis, our exposure to any single borrower or any singlechaebol is limited by law to 20% and 25%, respectively, of our “net aggregate equity capital,” as defined under the Enforcement Decree of the Financial Holding Company Act. See “—Supervision and Regulation—Principal Regulations Applicable to Financial Holding Companies—Financial Exposure to Any Individual Customer and Major Shareholder.Investor.” In addition, Kookmin Bank’s exposure to any single borrower or any singlechaebolis limited by the Bank Act to 20% and 25%, respectively, of its total Tier I and Tier II capital. 20 Largest Exposures by Borrower As of December 31, 2014,2017, our 20 largest exposures totaled ₩11,309₩17,937 billion and accounted for 3.9%5.1% of our total exposures. The following table sets forth, as of December 31, 2014,2017, our total exposures to these top 20 borrowers or issuers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans | | | | | | | | | Guarantees and Acceptances | | | | | | Amounts Classified as Impaired Loans | | Company (1) | | Won Currency | | | Foreign Currency | | | Equity Securities | | | Debt Securities | | | | Total Exposures | | | | | (in billions of Won) | | Daewoo Shipbuilding & Marine Engineering Co., Ltd. | | ₩ | 22 | | | ₩ | 180 | | | ₩ | — | | | ₩ | — | | | ₩ | 963 | | | ₩ | 1,165 | | | ₩ | — | | Mizuho Bank, Ltd. | | | — | | | | 984 | | | | — | | | | — | | | | — | | | | 984 | | | | — | | POSCO | | | — | | | | 77 | | | | 489 | | | | 205 | | | | — | | | | 771 | | | | — | | Samsung Heavy Industries Co., Ltd. | | | — | | | | — | | | | — | | | | 10 | | | | 715 | | | | 725 | | | | — | | Korea Securities Finance Corp. | | | — | | | | 500 | | | | 154 | | | | 30 | | | | — | | | | 684 | | | | — | | Hyundai Capital Services Inc. | | | 330 | | | | — | | | | — | | | | 294 | | | | — | | | | 624 | | | | — | | Hyundai Steel Company | | | 224 | | | | 239 | | | | — | | | | 24 | | | | 136 | | | | 623 | | | | — | | National Agricultural Cooperative Federation | | | — | | | | — | | | | — | | | | 616 | | | | — | | | | 616 | | | | — | | Hyundai Heavy Industries Co., Ltd. | | | — | | | | 267 | | | | 3 | | | | — | | | | 331 | | | | 601 | | | | — | | Daewoo International Corporation | | | — | | | | 255 | | | | 1 | | | | 35 | | | | 215 | | | | 506 | | | | — | | Woori Bank | | | — | | | | 133 | | | | 3 | | | | 338 | | | | — | | | | 474 | | | | — | | Shinhan Bank | | | — | | | | 102 | | | | — | | | | 353 | | | | — | | | | 455 | | | | — | | SK C&C Co., Ltd. | | | — | | | | — | | | | 438 | | | | — | | | | — | | | | 438 | | | | — | | Seoul Metropolitan Rapid Transit Corp. | | | — | | | | — | | | | — | | | | 430 | | | | — | | | | 430 | | | | — | | NongHyup Bank | | | 30 | | | | 37 | | | | — | | | | 337 | | | | — | | | | 404 | | | | — | | LG Electronics Inc. | | | 390 | | | | — | | | | 3 | | | | 6 | | | | — | | | | 399 | | | | — | | SK Energy Co., Ltd. | | | — | | | | 111 | | | | — | | | | 91 | | | | 178 | | | | 380 | | | | — | | Hyundai Securities Co., Ltd. | | | — | | | | 100 | | | | 257 | | | | — | | | | — | | | | 357 | | | | — | | Bank of China Limited | | | — | | | | 341 | | | | — | | | | — | | | | — | | | | 341 | | | | — | | Korean Airlines Co., Ltd. | | | 1 | | | | 75 | | | | — | | | | 12 | | | | 244 | | | | 332 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 997 | | | ₩ | 3,401 | | | ₩ | 1,348 | | | ₩ | 2,781 | | | ₩ | 2,782 | | | ₩ | 11,309 | | | ₩ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans | | | | | | | | | Guarantees and Acceptances | | | | | | Amounts Classified as Impaired Loans | | Company(1) | | Won Currency | | | Foreign Currency | | | Equity Securities | | | Debt Securities | | | | Total Exposures | | | | | (in billions of Won) | | The Korea Securities Finance Corporation | | ₩ | 7 | | | ₩ | 200 | | | ₩ | 50 | | | ₩ | 1,938 | | | ₩ | — | | | ₩ | 2,195 | | | ₩ | — | | Samsung Electronics Co., Ltd | | | — | | | | 1,530 | | | | 180 | | | | — | | | | 3 | | | | 1,713 | | | | — | | KEB Hana Bank | | | 237 | | | | 302 | | | | — | | | | 1,055 | | | | — | | | | 1,594 | | | | — | | Korea Exchange | | | — | | | | — | | | | 1,301 | | | | — | | | | — | | | | 1,301 | | | | — | | Nonghyup Bank | | | 113 | | | | — | | | | — | | | | 909 | | | | — | | | | 1,022 | | | | — | | Woori Bank | | | 64 | | | | 156 | | | | 2 | | | | 755 | | | | — | | | | 977 | | | | — | | Hyundai Capital Services Inc. | | | 428 | | | | 16 | | | | — | | | | 521 | | | | — | | | | 965 | | | | — | | Shinhan Bank | | | — | | | | 96 | | | | — | | | | 768 | | | | — | | | | 864 | | | | — | | Kia Motors Corp | | | 200 | | | | 547 | | | | 3 | | | | 73 | | | | — | | | | 823 | | | | — | | SK | | | — | | | | 92 | | | | 508 | | | | 126 | | | | — | | | | 726 | | | | — | | POSCO | | | 1 | | | | 2 | | | | 579 | | | | 63 | | | | 43 | | | | 688 | | | | — | | Mirae Asset Global Investment Co., Ltd. | | | — | | | | — | | | | 672 | | | | — | | | | — | | | | 672 | | | | — | | Mirae Asset Daewoo Co., Ltd. | | | 4 | | | | 300 | | | | 7 | | | | 335 | | | | — | | | | 646 | | | | — | | Shinhan Card Co. Ltd. | | | 100 | | | | — | | | | — | | | | 497 | | | | — | | | | 597 | | | | — | | Shinhan Financial Group Co., Ltd. | | | — | | | | — | | | | 9 | | | | 562 | | | | — | | | | 571 | | | | — | | LG Electronics Inc. | | | 421 | | | | — | | | | 9 | | | | 110 | | | | — | | | | 540 | | | | — | | Agricultural Bank of China | | | — | | | | 536 | | | | — | | | | — | | | | — | | | | 536 | | | | — | | Hyundai Steel Company | | | 375 | | | | 32 | | | | 3 | | | | 67 | | | | 45 | | | | 522 | | | | — | | S-Oil Corp. | | | 81 | | | | 246 | | | | 4 | | | | 120 | | | | 43 | | | | 494 | | | | — | | Shinhan Investment Corp. | | | — | | | | 50 | | | | 51 | | | | 390 | | | | — | | | | 491 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 2,031 | | | ₩ | 4,105 | | | ₩ | 3,378 | | | ₩ | 8,289 | | | ₩ | 134 | | | ₩ | 17,937 | | | ₩ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Excludes exposures togovernment-owned or-controlled enterprises or financial institutions, including Bank of Korea, Korea Housing Finance Corporation, Korea Land & Housing Corporation, Korea Deposit Insurance Corporation and Korea Development Bank. |
As of December 31, 2014, 122017, seven of these top 20 borrowers or issuers were companies belonging to the 4236 largest highly-indebted business groups amongchaebolsin Korea designated as such by the Financial Supervisory Service based on their outstanding exposures. Exposure to Chaebols As of December 31, 2014, 7.5%2017, 7.0% of our total exposure was to the 4236 largest highly-indebted business groups amongchaebols in Korea designated as such by the Financial Supervisory Service based on their outstanding exposures. The following table shows, as of December 31, 2014,2017, our total exposures to the tenchaebolgroups to which we have the largest exposure: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans | | | Equity Securities | | | Debt Securities | | | Guarantees and Acceptances | | | Total Exposures | | | Amounts Classified as Impaired Loans | | Chaebol | | Won Currency | | | Foreign Currency | | | | | | | | | (in billions of Won) | | Hyundai Motor (1) | | ₩ | 887 | | | ₩ | 521 | | | ₩ | 11 | | | ₩ | 766 | | | ₩ | 801 | | | ₩ | 2,986 | | | ₩ | — | | Samsung (2) | | | 307 | | | | 645 | | | | 119 | | | | 581 | | | | 1,157 | | | | 2,809 | | | | — | | SK (3) | | | 237 | | | | 654 | | | | 449 | | | | 417 | | | | 498 | | | | 2,255 | | | | — | | POSCO (4) | | | 173 | | | | 331 | | | | 525 | | | | 261 | | | | 236 | | | | 1,526 | | | | — | | Daewoo Shipbuilding & Marine Engineering (5) | | | 45 | | | | 178 | | | | — | | | | — | | | | 964 | | | | 1,187 | | | | — | | Hyundai Heavy Industries (6) | | | 43 | | | | 322 | | | | 47 | | | | — | | | | 768 | | | | 1,180 | | | | — | | LG (7) | | | 631 | | | | 117 | | | | 11 | | | | 163 | | | | 28 | | | | 950 | | | | — | | Hanwha (8) | | | 595 | | | | 40 | | | | 144 | | | | 6 | | | | 111 | | | | 896 | | | | — | | GS (9) | | | 89 | | | | 128 | | | | 2 | | | | 288 | | | | 327 | | | | 834 | | | | — | | Lotte (10) | | | 255 | | | | 48 | | | | 25 | | | | 399 | | | | 84 | | | | 811 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 3,262 | | | ₩ | 2,984 | | | ₩ | 1,333 | | | ₩ | 2,881 | | | ₩ | 4,974 | | | ₩ | 15,434 | | | ₩ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans | | | | | | | | | Guarantees and Acceptances | | | | | | Amounts Classified as Impaired Loans | | Chaebol | | Won Currency | | | Foreign Currency | | | Equity Securities | | | Debt Securities | | | | Total Exposures | | | | | (in billions of Won) | | Hyundai Motor(1) | | ₩ | 1,269 | | | ₩ | 1,200 | | | ₩ | 90 | | | ₩ | 2,038 | | | ₩ | 386 | | | ₩ | 4,983 | | | ₩ | — | | Samsung(2) | | | 346 | | | | 2,000 | | | | 929 | | | | 904 | | | | 574 | | | | 4,753 | | | | — | | SK(3) | | | 129 | | | | 377 | | | | 630 | | | | 929 | | | | 168 | | | | 2,233 | | | | — | | Lotte(4) | | | 665 | | | | 138 | | | | 70 | | | | 1,239 | | | | 54 | | | | 2,166 | | | | — | | POSCO(5) | | | 131 | | | | 159 | | | | 753 | | | | 257 | | | | 384 | | | | 1,684 | | | | — | | LG(6) | | | 454 | | | | 18 | | | | 170 | | | | 412 | | | | 520 | | | | 1,574 | | | | — | | Hanwha(7) | | | 803 | | | | 100 | | | | 160 | | | | 281 | | | | 22 | | | | 1,366 | | | | — | | GS(8) | | | 288 | | | | 79 | | | | 21 | | | | 645 | | | | 102 | | | | 1,135 | | | | — | | Hyundai Heavy Industries(9) | | | 176 | | | | 64 | | | | 50 | | | | 56 | | | | 652 | | | | 998 | | | | — | | LS (10) | | | 55 | | | | 256 | | | | 9 | | | | 102 | | | | 402 | | | | 824 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 4,316 | | | ₩ | 4,391 | | | ₩ | 2,882 | | | ₩ | 6,863 | | | ₩ | 3,264 | | | ₩ | 21,716 | | | ₩ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes principally Hyundai Capital Services Inc., Hyundai Steel Company and Hyundai Engineering & Construction Co., Ltd. Motor. |
(2) | Includes principally Samsung Electronics Co., Ltd., Samsung Heavy Industries Co., Ltd., and Samsung Card and Samsung C&T Corporation. Co., Ltd. |
(3) | Includes principally SK C&CHoldings Co., Ltd., SK EnergyShipping Co., Ltd. and SK Networks Co., Ltd. Company Limited. |
(4) | Includes principally Lotte Capital Co., Ltd., Lotte Engineering & Construction Co., Ltd and Hotel Lotte Co., Ltd. |
(5) | Includes principally POSCO Daewoo International Corporation, POSCO and POSCO Energy Co., Ltd. |
(5) | Includes principally Daewoo Shipbuilding & Marine Engineering Co., Ltd., Shinhan Machinery Co., Ltd. and DSME Construction Co., Ltd.
|
(6) | Includes principally Hyundai Heavy Industries Co., Ltd., Hyundai Mipo Dockyard Co., Ltd. and Hyundai Samho Heavy Industries Co., Ltd.
|
(7) | Includes principally LG Electronics Inc., LG Chem, Ltd. and LG UplusInternational Corp. |
(8)(7) | Includes principally Hanwha Engineering & Construction Corp.Corp, Hanwha Techwin Co., Hanwha CorporationLtd and Hanwha Advanced Materials Corporation. E&C. |
(9)(8) | Includes principally GS Engineering & Construction Corporation,Co., Ltd., GS Caltex Corporation,Retail Co., Ltd and GS Holdings Corp. Energy. |
(10)(9) | Includes principally Lotte Engineering & ConstructionHyundai Heavy Industries Co., Ltd., Lotte CardLtd, Hyundai Samho Heavy Industries Co., Ltd. and Lotte CapitalHyundai Mipo Dockyard Co., Ltd. |
(10) | Includes principallyLS-Nikko Copper Inc., LS Cable & System Ltd. and Ewon Co., Ltd. |
Loan Concentration by Industry The following table presents the aggregate balance of our domestic and foreign corporate loans, by industry concentration, as of December 31, 2012, 20132015, 2016 and 2014:2017: | | | As of December 31, | | | As of December 31, | | | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | Industry | | Amount | | | % | | Amount | | | % | | Amount | | | % | | | Amount | | | % | | Amount | | | % | | Amount | | | % | | | | (in billions of Won, except percentages) | | | (in billions of Won, except percentages) | | Services | | ₩ | 38,650 | | | | 38.1 | % | | ₩ | 38,375 | | | | 37.5 | % | | ₩ | 39,385 | | | | 38.2 | % | | ₩ | 44,372 | | | | 39.9 | % | | ₩ | 48,529 | | | | 40.7 | % | | ₩ | 54,268 | | | | 41.5 | % | Manufacturing | | | 31,320 | | | | 30.8 | | | | 31,161 | | | | 30.5 | | | | 32,694 | | | | 31.7 | | | | 35,373 | | | | 31.8 | | | 36,505 | | | | 30.6 | | | 40,201 | | | | 30.7 | | Wholesale and retail | | | 15,124 | | | | 14.9 | | | | 13,874 | | | | 13.6 | | | | 13,287 | | | | 12.9 | | | | 13,704 | | | | 12.3 | | | 14,247 | | | | 12.0 | | | 15,061 | | | | 11.5 | | Financial institutions | | | 7,291 | | | | 7.2 | | | | 10,524 | | | | 10.3 | | | | 9,117 | | | | 8.9 | | | | 9,070 | | | | 8.2 | | | 10,603 | | | | 8.9 | | | 11,094 | | | | 8.5 | | Construction | | | 4,689 | | | | 4.6 | | | | 4,428 | | | | 4.3 | | | | 3,862 | | | | 3.8 | | | | 3,569 | | | | 3.2 | | | 3,381 | | | | 2.9 | | | 3,022 | | | | 2.4 | | Public sector | | | 520 | | | | 0.5 | | | | 655 | | | | 0.6 | | | | 755 | | | | 0.7 | | | | 812 | | | | 0.7 | | | 887 | | | | 0.7 | | | 1,057 | | | | 0.8 | | Others | | | 3,941 | | | | 3.9 | | | | 3,318 | | | | 3.2 | | | | 3,871 | | | | 3.8 | | | | 4,316 | | | | 3.9 | | | 5,053 | | | | 4.2 | | | 6,054 | | | | 4.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 101,535 | | | | 100.0 | % | | ₩ | 102,335 | | | | 100.0 | % | | ₩ | 102,971 | | | | 100.0 | % | | ₩ | 111,216 | | | | 100.0 | % | | ₩ | 119,205 | | | | 100.0 | % | | ₩ | 130,757 | | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Maturity Analysis We typically roll over our working capital loans and unsecured consumer loans (other than those payable in installments) after we conduct our normal loan review in accordance with our loan review procedures. Working capital loans may generally be extended on an annual basis for an aggregate term of five years and unsecured consumer loans may generally be extended for another term of up to 12 months for an aggregate term of 10 years. The following table sets out the scheduled maturities (time remaining until maturity) of our loan portfolio as of December 31, 2014.2017. The amounts disclosed are before deduction of allowances for loan losses: | | | 1 Year or Less | | | Over 1 Year But Not More Than 5 Years | | | Over 5 Years | | | Total | | | 1 Year or Less | | | Over 1 Year But Not More Than 5 Years | | | Over 5 Years | | | Total | | | | (in billions of Won) | | | (in billions of Won) | | Domestic: | | | | | | | | | | | | | | | | | Corporate | | | | | | | | | | | | | | | | | Small- and medium-sized enterprises | | ₩ | 52,276 | | | ₩ | 13,940 | | | ₩ | 5,744 | | | ₩ | 71,960 | | | ₩ | 70,301 | | | ₩ | 20,962 | | | ₩ | 6,116 | | | ₩ | 97,379 | | Large corporate | | | 20,454 | | | | 5,721 | | | | 2,743 | | | | 28,918 | | | | 19,851 | | | | 5,861 | | | | 4,290 | | | | 30,002 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total corporate | | | 72,730 | | | | 19,661 | | | | 8,487 | | | | 100,878 | | | | 90,152 | | | | 26,823 | | | | 10,406 | | | | 127,381 | | Retail | | | | | | | | | | | | | | | | | Mortgage and home equity | | | 7,547 | | | | 6,171 | | | | 73,276 | | | | 86,994 | | | | 11,390 | | | | 7,605 | | | | 78,258 | | | | 97,253 | | Other consumer | | | 18,019 | | | | 10,699 | | | | 3,537 | | | | 32,255 | | | | 27,485 | | | | 15,232 | | | | 6,180 | | | | 48,897 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total retail | | | 25,566 | | | | 16,870 | | | | 76,813 | | | | 119,249 | | | | 38,875 | | | | 22,837 | | | | 84,438 | | | | 146,150 | | Credit cards | | | 10,249 | | | | 1,181 | | | | 202 | | | | 11,632 | | | | 12,655 | | | | 2,201 | | | | 349 | | | | 15,205 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | | 108,545 | | | | 37,712 | | | | 85,502 | | | | 231,759 | | | | 141,682 | | | | 51,861 | | | | 95,193 | | | | 288,736 | | Foreign: | | | 1,789 | | | | 264 | | | | 90 | | | | 2,143 | | | | 2,735 | | | | 642 | | | | 120 | | | | 3,497 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total gross loans | | ₩ | 110,334 | | | ₩ | 37,976 | | | ₩ | 85,592 | | | ₩ | 233,902 | | | ₩ | 144,417 | | | ₩ | 52,503 | | | ₩ | 95,313 | | | ₩ | 292,233 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest Rate Sensitivity The following table shows, as of December 31, 2014,2017, the total amount of loans due after one year, which have fixed interest rates and variable or adjustable interest rates: | | | | | | | As of December 31, 20142017 | | | | (in billions of Won) | | Fixed rate(1) | | ₩ | 19,20726,000 | | Variable or adjustable rates(2) | | | 104,361121,816 | | | | | | | Total gross loans | | ₩ | 123,568147,816 | | | | | | |
(1) | Fixed rate loans are loans for which the interest rate is fixed for the entire term. |
(2) | Variable or adjustable rate loans are loans for which the interest rate is not fixed for the entire term. |
For additional information regarding our management of interest rate risk, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Market Risk Management—Market Risk Management forNon-Trading Activities.” Credit Exposures to Companies in Workout, Restructuring or Rehabilitation Workout is a voluntary procedure through which we, together with the borrower and other creditors, seek to restore the borrower’s financial stability and viability. Previously, workouts were regulated under the prior Corporatea series of Corporate Restructuring Promotion Act,Acts, which last expired on December 31, 2013.2015. In December 2013,March 2016, the National Assembly of Korea adopted another Corporate Restructuring Promotion Act, or the New Corporate Restructuring Promotion Act, which became effective on January 1, 2014. Workouts that had been initiated under the Corporate Restructuring Promotion Act are also governed by the New Corporate Restructuring Promotion Act effective from January 1, 2014. Under the Newa new Corporate Restructuring Promotion Act, which is similarscheduled to expire on June 30, 2018. Under the new Corporate Restructuring Promotion Act, all creditor financial institutionscreditors of a financially troubled borrower are required tomay participate in a creditors’ committee, which is authorized to prohibit such creditor financial institutionscreditors from exercising their rights against the borrower, commencingcommence workout procedures and approve or approvingmake revisions to a reorganization plan prepared by the borrower.lead creditor bank, the borrower and external experts. The composition of the creditors’ committee is determined at the initial meeting of the committee by the approval of creditors holding not less than 75% of the borrower’s total outstanding debt held by creditors who were notified of the initial meeting of the committee. Although creditors that are not financial institutions or hold less than 1% of the total outstanding debt of the borrower need not be notified of the initial meeting of the creditors’ committee, if such creditors wish to participate, they may not be excluded. Any decision of the creditors’ committee requires the approval of creditor financial institutionscreditors holding not less than 75% of the total outstanding debt of the borrower. However, if a single creditor holds 75% or more of the borrower’s total outstanding debt held by the creditors comprising the creditors’ committee, any decision of a borrower.the creditors’ committee requires the approval of not less than 40% of the total number of creditors (including such single creditor) comprising the committee. An additional approval of creditor financial institutionscreditors holding not less than 75% of the secured debt is required with respect to the borrower’s debt restructuring. Once approved, any decision made by the creditors’ committee is binding on all the creditor financial institutionscreditors of the borrower. Creditor financial institutionsborrower, with the exception of those creditors that were excluded by a resolution of the committee at its initial meeting and those who exercised their right to request that their claims be purchased. Creditors that voted against commencement of workout, approval or revision of the reorganization plan, debt restructuring, or granting of new credit, extension of the joint management process or other resolutions of the committee have the right to request the creditor financial institutionscreditors that voted in favor of such matters to purchase their claims at a mutually agreed price. In the event that the parties are not able to agree on the terms of purchase, a coordination committee consisting of experts would determine the terms. The creditor financial institutionscreditors that oppose a decision made by the coordination committee may request a court to change such decision. The New Corporate Restructuring Promotion Act is scheduled to expire on December 31, 2015. Upon approval of the workout plan, a credit exposure is initially classified as precautionary or lower and thereafter cannot be classified higher than precautionary with limited exceptions. If a corporate borrower is in workout, restructuring or rehabilitation, we take the status of the borrower into account in valuing our loans to and collateral from that borrower for purposes of establishing our allowances for credit losses. Korean law also provides for corporate rehabilitation proceedings, which arecourt-supervised procedures to rehabilitate an insolvent company. Under these procedures, a restructuring plan is adopted at a meeting of interested parties, including creditors of the company. Such restructuring plan is subject to court approval. A portion of our loans to and debt securities of corporate customers are currently in workout, restructuring or rehabilitation. As of December 31, 2014, ₩6832017, ₩491 billion or 0.2%0.1% of our total loans and debt securities were in workout, restructuring or rehabilitation. Thisrehabilitation.This included ₩309₩142 billion of loans to and debt securities of large corporate borrowers and ₩374₩349 billion of loans tosmall- and debt securities of small- and medium-sized enterprises. The following table shows, as of December 31, 2014,2017, our ten largest credit exposures that were in workout, restructuring or rehabilitation: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans | | | | | | | | | Guarantees and Acceptances | | | | | | Amounts Classified as Impaired Loans | | Company | | Won Currency | | | Foreign Currency | | | Equity Securities | | | Debt Securities | | | | Total Exposures | | | | | (in billions of Won) | | Orient Shipyard Co., Ltd. | | ₩ | 53 | | | ₩ | 2 | | | ₩ | — | | | ₩ | — | | | ₩ | 65 | | | ₩ | 120 | | | ₩ | 56 | | Kumho Industrial Co., Ltd. | | | 58 | | | | — | | | | 26 | | | | — | | | | 13 | | | | 97 | | | | 58 | | Dongmoon Construction Co., Ltd. | | | 65 | | | | — | | | | — | | | | — | | | | — | | | | 65 | | | | 65 | | Keangnam Enterprises, Ltd. | | | 41 | | | | — | | | | 6 | | | | — | | | | 1 | | | | 48 | | | | 41 | | Samho International Co., Ltd. | | | 31 | | | | — | | | | 12 | | | | 5 | | | | — | | | | 48 | | | | 31 | | Dongil Construction Co., Ltd. | | | 42 | | | | — | | | | — | | | | — | | | | — | | | | 42 | | | | 42 | | Hongwon Paper Mfg. Co., Ltd. | | | 9 | | | | 7 | | | | — | | | | — | | | | 1 | | | | 17 | | | | 15 | | Hyundai Cement Co., Ltd. | | | 1 | | | | — | | | | 15 | | | | — | | | | — | | | | 16 | | | | 1 | | Young Gwang Stainless Co., Ltd. | | | 1 | | | | 9 | | | | — | | | | — | | | | 3 | | | | 13 | | | | 9 | | SolarPark Korea Co., Ltd. | | | 13 | | | | — | | | | — | | | | — | | | | — | | | | 13 | | | | 13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 314 | | | ₩ | 18 | | | ₩ | 59 | | | ₩ | 5 | | | ₩ | 83 | | | ₩ | 479 | | | ₩ | 331 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Loans | | | | | | | | | Amounts Classified as Impaired Loans | | Company | | Won Currency | | | Foreign Currency | | | Guarantees and Acceptances | | | Total Exposures | | | | | (in billions of Won) | | Dongmoon Construction Co., Ltd. | | ₩ | 70 | | | ₩ | — | | | ₩ | — | | | ₩ | 70 | | | ₩ | 70 | | Orient Shipyard Co., Ltd | | | 49 | | | | 2 | | | | — | | | | 51 | | | | 51 | | Dongil Construction LTD | | | 41 | | | | — | | | | — | | | | 41 | | | | 41 | | Ubcell Co., Ltd. | | | 15 | | | | — | | | | 1 | | | | 16 | | | | 16 | | Dreample Co., Ltd. | | | — | | | | 13 | | | | 1 | | | | 14 | | | | 14 | | Trans-Pacific Resources Ltd. | | | — | | | | 10 | | | | 4 | | | | 14 | | | | 14 | | Woojeon & Handan Co., Ltd | | | — | | | | 10 | | | | — | | | | 10 | | | | 10 | | Shindongah Engineering & Construction Co., Ltd. | | | 9 | | | | — | | | | — | | | | 9 | | | | 9 | | JM Advanced Materials | | | 8 | | | | — | | | | — | | | | 8 | | | | 8 | | Echoroba Co., Ltd. | | | 8 | | | | — | | | | — | | | | 8 | | | | 8 | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 200 | | | ₩ | 35 | | | ₩ | 6 | | | ₩ | 241 | | | ₩ | 241 | | | | | | | | | | | | | | | | | | | | | | |
Provisioning Policy We establish allowances for loan losses with respect to loans to absorb such losses. WeUnder International Accounting Standard 39,Financial Instruments: Recognition and Measurement, we assess individually significant loans on acase-by-case basis and other loans on a collective basis. In addition, if we determine that no objective evidence of impairment exists for a loan, we include such loan in a group of loans with similar credit risk characteristics and assess them collectively for impairment regardless of whether such loan is significant. For individually significant loans, allowances for loan losses are recorded if objective evidence of impairment exists as a result of one or more events that occurred after initial recognition. For collectively assessed loans, we base the level of allowances for loan losses on our evaluation of the risk characteristics of such loans, taking into account such factors as historical loss experience, the financial condition of the borrowers and current economic conditions. IFRS 9Financial Instruments is effective, and replaces International Accounting Standard 39, for annual periods commencing on or after January 1, 2018. See “Item 5.B. Liquidity and Capital Resources—Recent Accounting Pronouncements.” IFRS 9 introduces a new impairment model which requires recording of allowance for credit losses based on expected losses instead of incurred losses (as is the case under International Accounting Standard 39), and recognition of any subsequent changes in expected credit losses in profit or loss. Under IFRS 9, the allowance required to be established with respect to a loan or receivable is the amount of the12-month expected credit loss or the lifetime expected credit loss for the applicable loan or receivable, according to three stages of credit risk deterioration since initial recognition. If additions or changes to the allowances for loan losses are required, then we record a provision for loan losses, which is included in impairment losses on credit loss and treated as a charge against current income. Credit exposures that we deem to be uncollectible, including actual loan losses, net of recoveries of previouslycharged-off amounts, are charged directly against the allowances for loan losses. See “Item 5.A. Operating Results—Critical Accounting Policies—Impairment of Loans and Allowances for Loan Losses.” We generally consider the following loans to be impaired loans: loans that are past due by 90 days or more; loans that are subject to legal proceedings related to collection; loans to a borrower that has received a warning from the Korea Federation of Banks indicating that such borrower has exhibited difficulties in making timely payments of principal and interest; loans to corporate borrowers that are rated C or D according to Kookmin Bank’s internal credit ratings for large companies or small-and medium-sizedsmall-andmedium-sized enterprises; loans for whichaccount-specific provisions have been made resulting from a significant perceived decline in credit quality; and loans with respect to which the amount of principal and interest payable has been materially decreased due to restructuring. The actual amount of incurred loan losses may vary from loss estimates due to changing economic conditions or changes in industry or geographic concentrations. We have procedures in place to monitor differences between estimated and actual incurred loan losses, which include detailed periodic assessments by senior management of both individual loans and loan portfolios and the use of models to estimate incurred loan losses in those portfolios. We regularly evaluate the adequacy of the overall allowances for loan losses and we believe that the allowances for loan losses reflect our best estimate of probable loan losses as of each balance sheet date. Loan Aging Schedule The following table shows our loan aging schedule (excluding accrued interest) as of the dates indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | Normal Amount | | | % | | | Amount Past Due 1-3 Months | | | % | | | Amount Past Due 3-6 Months | | | % | | | Amount Past Due 6 Months or More | | | % | | | Total Amount | | | | (in billions of Won, except percentages) | | 2010 | | ₩ | 199,013 | | | | 98.8 | % | | ₩ | 752 | | | | 0.4 | % | | ₩ | 608 | | | | 0.3 | % | | ₩ | 1,004 | | | | 0.5 | % | | ₩ | 201,377 | | 2011 | | | 213,515 | | | | 99.0 | | | | 860 | | | | 0.4 | | | | 327 | | | | 0.2 | | | | 853 | | | | 0.4 | | | | 215,555 | | 2012 | | | 214,489 | | | | 98.9 | | | | 819 | | | | 0.4 | | | | 532 | | | | 0.2 | | | | 1,074 | | | | 0.5 | | | | 216,914 | | 2013 | | | 219,777 | | | | 99.1 | | | | 664 | | | | 0.3 | | | | 426 | | | | 0.2 | | | | 995 | | | | 0.4 | | | | 221,862 | | 2014 | | | 232,159 | | | | 99.2 | | | | 675 | | | | 0.3 | | | | 385 | | | | 0.2 | | | | 683 | | | | 0.3 | | | | 233,902 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | Normal Amount | | | % | | | Amount Past Due 1-3 Months | | | % | | | Amount Past Due 3-6 Months | | | % | | | Amount Past Due 6 Months or More | | | % | | | Total Amount | | | | (in billions of Won, except percentages) | | 2013 | | ₩ | 219,777 | | | | 99.1 | % | | ₩ | 664 | | | | 0.3 | % | | ₩ | 426 | | | | 0.2 | % | | ₩ | 995 | | | | 0.4 | % | | ₩ | 221,862 | | 2014 | | | 232,159 | | | | 99.2 | | | | 675 | | | | 0.3 | | | | 385 | | | | 0.2 | | | | 683 | | | | 0.3 | | | | 233,902 | | 2015 | | | 246,116 | | | | 99.5 | | | | 549 | | | | 0.2 | | | | 359 | | | | 0.1 | | | | 563 | | | | 0.2 | | | | 247,587 | | 2016 | | | 266,381 | | | | 99.5 | | | | 460 | | | | 0.2 | | | | 295 | | | | 0.1 | | | | 628 | | | | 0.2 | | | | 267,764 | | 2017 | | | 291,074 | | | | 99.6 | | | | 401 | | | | 0.1 | | | | 267 | | | | 0.1 | | | | 491 | | | | 0.2 | | | | 292,233 | |
Non-Accrual Loans and Past Due Accruing Loans We generally consider impaired loans to benon-accrual loans. However, we exclude fromnon-accrual status and continue to accrue interest on loans that are fully secured by cash on deposit or on which there are financial guarantees from the government, Korea Deposit Insurance Corporation or certain financial institutions. We no longergenerally recognize interest income onnon-accrual loans fromusing the dateinterest rate used to discount the loan is placed on non-accrual status.future cash flows of such loans for purposes of measuring impairment loss, as well as upon receipt of cash interest payments. We reclassify loans as accruing when interest and principal payments areup-to-date and future payments of principal and interest are reasonably assured. We generally do not recognize interest income on non-accrual loans unless collected. Interest foregone is the interest due onnon-accrual loans that has not been accrued in our books of account. ForThe table below shows, for the year ended December 31, 2014,years indicated, the amount of gross interest income that we would have recorded gross interest income of ₩275 billion compared to ₩332 billion for the year ended December 31, 2013, ₩309 billion for the year ended December 31, 2012, ₩336 billion for the year ended December 31, 2011 and ₩328 billion for the year ended December 31, 2010 on loans accounted for on anon-accrual basis throughout the year, or since origination for loans held for part of the year, had we not foregone interest on those loans. Theloans, as well as the amount of interest income on those loans that was included in our profit for the years ended December 31, 2010, 2011, 2012, 2013 and 2014 was ₩194 billion, ₩192 billion, ₩187 billion, ₩206 billion and ₩175 billion, respectively.year. | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won) | | Gross interest income that would have been recorded | | ₩ | 332 | | | ₩ | 275 | | | ₩ | 220 | | | ₩ | 195 | | | ₩ | 198 | | Interest income included in profit for the year | | ₩ | 206 | | | ₩ | 175 | | | ₩ | 151 | | | ₩ | 129 | | | ₩ | 135 | |
The following table shows, as of the dates indicated, the amount of loans that were placed on anon-accrual basis and accruing loans which were past due 90 days or more. The category “accruing but past due 90 days” includes loans which are still accruing interest but on which principal or interest payments are contractually past due 90 days or more. | | | As of December 31, | | | As of December 31, | | | | 2010 | | 2011 | | 2012 | | 2013 | | 2014 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won) | | | (in billions of Won) | | Loans accounted for on a non-accrual basis | | | | | | | | | | | | | | | | | | | | | Corporate | | ₩ | 2,466 | | | ₩ | 2,021 | | | ₩ | 1,851 | | | ₩ | 2,220 | | | ₩ | 1,673 | | | ₩ | 2,220 | | | ₩ | 1,673 | | | ₩ | 1,607 | | | ₩ | 1,403 | | | ₩ | 1,108 | | Consumer | | | 1,012 | | | | 1,200 | | | | 1,290 | | | | 1,253 | | | | 1,022 | | | | 1,253 | | | | 1,022 | | | | 763 | | | | 766 | | | | 759 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 3,478 | | | | 3,221 | | | | 3,141 | | | | 3,473 | | | | 2,695 | | | | 3,473 | | | | 2,695 | | | | 2,370 | | | | 2,169 | | | | 1,867 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accruing loans which are contractually past due 90 days or more as to principal or interest | | | | | | | | | | | | | | | | | | | | | Corporate | | | 5 | | | | 4 | | | | 84 | | | | 98 | | | | 39 | | | | 98 | | | | 39 | | | | 47 | | | | 27 | | | | 66 | | Consumer | | | 28 | | | | 45 | | | | 97 | | | | 116 | | | | 72 | | | | 116 | | | | 72 | | | | 88 | | | | 79 | | | | 33 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 33 | | | | 49 | | | | 181 | | | | 214 | | | | 111 | | | | 214 | | | | 111 | | | | 135 | | | | 106 | | | | 99 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 3,511 | | | ₩ | 3,270 | | | ₩ | 3,322 | | | ₩ | 3,687 | | | ₩ | 2,806 | | | ₩ | 3,687 | | | ₩ | 2,806 | | | ₩ | 2,505 | | | ₩ | 2,275 | | | ₩ | 1,966 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructurings The following table presents, as of the dates indicated, our loans that are “troubled debt restructurings” for which we, for economic or legal reasons relating to the debtor’s financial difficulties, grant a concession to the debtor that we would not otherwise consider. These loans consist principally of corporate loans that have been restructured (through the process of workout, court receivership or composition) and which are accruing interest at rates lower than the original contractual terms as a result of a variation of terms upon restructuring. | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | | (in billions of Won) | | Loans classified as “troubled debt restructurings” | | ₩ | 573 | | | ₩ | 412 | | | ₩ | 465 | | | ₩ | 269 | | | ₩ | 256 | |
| | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won) | | Loans classified as “troubled debt restructurings” | | ₩ | 269 | | | ₩ | 256 | | | ₩ | 228 | | | ₩ | 168 | | | ₩ | 170 | |
For 2014,2017, interest income that would have been recorded under the original contract terms of restructured loans amounted to ₩30₩15 billion, out of which ₩16₩10 billion was reflected as interest income during 2014.2017. Potential Problem Loans We classify potential problem loans as loans that are designated as “early warning loans” and reported to the Financial Services Commission. “Early warning loans” are loans extended to borrowers that have been (i) identified by our early warning system as exhibiting signs of credit risk based on the relevant borrower’s financial data, credit information and/or transactions with banks and, following such identification and (ii) designated by our loan officers as potential problem borrowers based on their evaluation of known information about such borrowers’ possible credit problems. Such loans are required to be reported on a quarterly basis to the Financial Services Commission. If a borrower’s loans are designated as “early warning loans” pursuant to the process described above and included in our quarterly report to the Financial Services Commission, we consider such borrowers to have serious doubt as to their ability to comply with repayment terms in the near future. As of December 31, 2014,2017, we had ₩2,490₩843 billion of potential problem loans. Other Problematic Interest Earning Assets
We have certain other interest earning assets received in connection with troubled debt restructurings that, if they were loans, would be required to be disclosed as part of thenon-accrual, past due or restructuring or potential problem loan disclosures provided above. As of December 31, 2010, 2011, 2012, 2013, 2014, 2015, 2016 and 2014,2017, we did not have any debt securities received in connection with troubled debt restructurings on which interest was past due. Non-Performing Loans Non-performing loans are defined as loans that are past due by 90 days or more. These loans are generally classified as “substandard” or below. For further information on the classification ofnon-performing loans under Korean regulatory requirements, see “—Regulatory Reserve for Credit Losses” below. The following table shows, as of the dates indicated, certain details of our totalnon-performing loan portfolio: | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | | (in billions of Won, except percentages) | | Total non-performing loans | | ₩ | 1,612 | | | ₩ | 1,180 | | | ₩ | 1,606 | | | ₩ | 1,421 | | | ₩ | 1,068 | | As a percentage of total loans | | | 0.8 | % | | | 0.5 | % | | | 0.7 | % | | | 0.6 | % | | | 0.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won, except percentages) | | Totalnon-performing loans | | ₩ | 1,421 | | | ₩ | 1,068 | | | ₩ | 922 | | | ₩ | 923 | | | ₩ | 758 | | As a percentage of total loans | | | 0.6 | % | | | 0.5 | % | | | 0.4 | % | | | 0.3 | % | | | 0.3 | % |
Analysis ofNon-Performing Loans The following table sets forth, as of the dates indicated, our totalnon-performing loans by type of borrower: | | | As of December 31, | | | As of December 31, | | | | 2010 | | 2011 | | 2012 | | 2013 | | 2014 | | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | | | Amount | | % | | Amount | | % | | Amount | | % | | Amount | | % | | Amount | | % | | | Amount | | % | | Amount | | % | | Amount | | % | | Amount | | % | | Amount | | % | | | | (in billions of Won, except percentages) | | | (in billions of Won, except percentages) | | Domestic: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Small- and medium sized enterprise | | ₩ | 686 | | | | 42.5 | % | | ₩ | 373 | | | | 31.6 | % | | ₩ | 680 | | | | 42.4 | % | | ₩ | 568 | | | | 40.0 | % | | ₩ | 373 | | | | 34.9 | % | | ₩ | 568 | | | 40.0 | % | | ₩ | 373 | | | 34.9 | % | | ₩ | 309 | | | 33.5 | % | | ₩ | 302 | | | 32.7 | % | | ₩ | 178 | | | 23.5 | % | Large corporate | | | 241 | | | | 15.0 | | | | 84 | | | | 7.1 | | | | 97 | | | | 6.0 | | | | 158 | | | | 11.1 | | | | 137 | | | | 12.8 | | | 158 | | | 11.1 | | | 137 | | | 12.8 | | | 187 | | | 20.3 | | | 247 | | | 26.8 | | | 209 | | | 27.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total corporate | | | 927 | | | | 57.5 | | | | 457 | | | | 38.7 | | | | 777 | | | | 48.4 | | | | 726 | | | | 51.1 | | | | 510 | | | | 47.7 | | | 726 | | | 51.1 | | | 510 | | | 47.7 | | | 496 | | | 53.8 | | | 549 | | | 59.5 | | | 387 | | | 51.1 | | Retail | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mortgage and home equity | | | 478 | | | | 29.7 | | | | 510 | | | | 43.2 | | | | 625 | | | | 38.9 | | | | 394 | | | | 27.7 | | | | 209 | | | | 19.6 | | | 394 | | | 27.7 | | | 209 | | | 19.6 | | | 172 | | | 18.7 | | | 124 | | | 13.4 | | | 110 | | | 14.5 | | Other consumer | | | 163 | | | | 10.1 | | | | 132 | | | | 11.2 | | | | 137 | | | | 8.5 | | | | 152 | | | | 10.7 | | | | 186 | | | | 17.4 | | | 152 | | | 10.7 | | | 186 | | | 17.4 | | | 157 | | | 17.0 | | | 148 | | | 16.0 | | | 142 | | | 18.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total retail | | | 641 | | | | 39.8 | | | | 642 | | | | 54.4 | | | | 762 | | | | 47.4 | | | | 546 | | | | 38.4 | | | | 395 | | | | 37.0 | | | 546 | | | 38.4 | | | 395 | | | 37.0 | | | 329 | | | 35.7 | | | 272 | | | 29.4 | | | 252 | | | 33.2 | | Credit cards | | | 39 | | | | 2.4 | | | | 62 | | | | 5.3 | | | | 47 | | | | 2.9 | | | | 107 | | | | 7.5 | | | | 99 | | | | 9.3 | | | 107 | | | 7.5 | | | 99 | | | 9.3 | | | 70 | | | 7.6 | | | 81 | | | 8.8 | | | 100 | | | 13.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | | 1,607 | | | | 99.7 | | | | 1,161 | | | | 98.4 | | | | 1,586 | | | | 98.7 | | | | 1,379 | | | | 97.0 | | | | 1,004 | | | | 94.0 | | | 1,379 | | | 97.0 | | | 1,004 | | | 94.0 | | | 895 | | | 97.1 | | | 902 | | | 97.7 | | | 739 | | | 97.5 | | Foreign: | | | 5 | | | | 0.3 | | | | 19 | | | | 1.6 | | | | 20 | | | | 1.3 | | | | 42 | | | | 3.0 | | | | 64 | | | | 6.0 | | | 42 | | | 3.0 | | | 64 | | | 6.0 | | | 27 | | | 2.9 | | | 21 | | | 2.3 | | | 19 | | | 2.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total non-performing loans | | ₩ | 1,612 | | | | 100.0 | % | | ₩ | 1,180 | | | | 100.0 | % | | ₩ | 1,606 | | | | 100.0 | % | | ₩ | 1,421 | | | | 100.0 | % | | ₩ | 1,068 | | | | 100.0 | % | | ₩ | 1,421 | | | 100.0 | % | | ₩ | 1,068 | | | 100.0 | % | | ₩ | 922 | | | 100.0 | % | | ₩ | 923 | | | 100.0 | % | | ₩ | 758 | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Top 20Non-Performing Loans As of December 31, 2014,2017, our 20 largestnon-performing loans accounted for 28.5%35.9% of our totalnon-performing loan portfolio. The following table shows, as of December 31, 2014,2017, certain information regarding our 20 largestnon-performing loans: | | | Industry | | Gross Principal Outstanding | | | Allowances for Loan Losses(1) | | | Industry | | | Gross Principal Outstanding | | | Allowances for Loan Losses(1) | | | | (in billions of Won) | | | (in billions of Won) | | Borrower A | | Services | | ₩ | 63 | | | ₩ | 7 | | | | Manufacturing | | | ₩ | 51 | | | ₩ | 51 | | Borrower B | | Construction | | | 37 | | | | 23 | | | | Services | | | | 42 | | | | 42 | | Borrower C | | Services | | | 25 | | | | 2 | | | | Services | | | | 39 | | | | 17 | | Borrower D | | Services | | | 24 | | | | 8 | | | | Construction | | | | 26 | | | | 21 | | Borrower E | | Manufacturing | | | 22 | | | | 2 | | | | Construction | | | | 17 | | | | 7 | | Borrower F | | Manufacturing | | | 18 | | | | — | | | | Manufacturing | | | | 17 | | | | 3 | | Borrower G | | Construction | | | 17 | | | | 4 | | | | Construction | | | | 14 | | | | 12 | | Borrower H | | Financial institutions | | | 15 | | | | 15 | | | | Construction | | | | 10 | | | | 3 | | Borrower I | | Manufacturing | | | 10 | | | | 1 | | | | Services | | | | 9 | | | | 9 | | Borrower J | | Manufacturing | | | 9 | | | | 9 | | | | Manufacturing | | | | 8 | | | | 4 | | Borrower K | | Others | | | 9 | | | | — | | | | Manufacturing | | | | 5 | | | | 1 | | Borrower L | | Financial institutions | | | 9 | | | | 9 | | | | Construction | | | | 5 | | | | 2 | | Borrower M | | Others | | | 8 | | | | — | | | | Financial institutions | | | | 5 | | | | 5 | | Borrower N | | Services | | | 8 | | | | 1 | | | | Services | | | | 4 | | | | 4 | | Borrower O | | Others | | | 7 | | | | 1 | | | | Manufacturing | | | | 4 | | | | 1 | | Borrower P | | Construction | | | 7 | | | | — | | | | Wholesale & Retail | | | | 4 | | | | 2 | | Borrower Q | | Construction | | | 4 | | | | 4 | | | | Services | | | | 3 | | | | 2 | | Borrower R | | Manufacturing | | | 4 | | | | 4 | | | | Financial institutions | | | | 3 | | | | — | | Borrower S | | Construction | | | 4 | | | | — | | | | Manufacturing | | | | 3 | | | | — | | Borrower T | | Wholesale and retail | | | 4 | | | | — | | | | Services | | | | 3 | | | | — | | | | | | | | | | | | | | | | | | | Total | | | | ₩ | 304 | | | ₩ | 90 | | | | | ₩ | 272 | | | ₩ | 186 | | | | | | | | | | | | | | | | | | |
(1) | If the estimated recovery value of collateral for anon-performing loan is sufficient compared to the outstanding loan balance, we record no allowances for loan losses for suchnon-performing loan. |
Non-Performing Loan Strategy One of our primary objectives is to prevent our loans from becomingnon-performing. Through our corporate credit rating systems, we believe that we have reduced our risks relating to futurenon-performing loans. Our credit rating systems are designed to prevent our loan officers from extending new loans to borrowers with high credit risks based on the borrower’s credit rating. Our early warning system is designed to bring any sudden increase in a borrower’s credit risk to the attention of our loan officers, who then closely monitor such loans. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk Management—Credit Review and Monitoring.” Notwithstanding the above, if a loan becomesnon-performing, an officer at the branch level responsible for monitoringnon-performing loans will commence a due diligence review of the borrower’s assets, send a notice either demanding payment or stating that we will take legal action and prepare for legal action. At the same time, we also initiate ournon-performing loan management process, which begins with: identifying loans subject to a proposed sale by assessing the estimated losses from such sale based on the estimated recovery value of collateral, if any, for suchnon-performing loans; identifying loans subject tocharge-off based on the estimated recovery value of collateral, if any, for suchnon-performing loans and the estimated rate of recovery of unsecured loans; and on a limited basis, identifying corporate loans subject to normalization efforts based on thecash-flow situation of the borrower. Once the details of anon-performing loan are identified, we pursue early solutions for recovery. While the overall process is the responsibility of Kookmin Bank’s Credit Division, actual recovery efforts onnon-performing loans are handled at the operating branch level. In addition, we use the services of ourwholly-owned loan collection subsidiary, KB Credit Information Co., Ltd., which receives payments from recoveries made oncharged-off loans and certain loans that are overdue for over three months (28 days on average in the case of credit card loans). KB Credit Information has overapproximately 140 employees, including legal experts and management employees. The fees that it receives are based on the amounts ofnon-performing and charged off loans that are recovered. In 2012, 20132015, 2016 and 2014,2017, the amount recovered was ₩589₩395 billion, ₩473₩404 billion and ₩443₩313 billion, respectively. Methods for resolvingnon-performing loans include the following: non-performing loans are managed by the operating branches of Kookmin Bank until such loans are charged off; a demand note is dispatched by mail if payment is generally one month past due; calls and visits are made by Kookmin Bank’s operating branches to customers encouraging them to make payments; borrowers who are past due on payments of interest and principal are registered on the Korea Federation of Banks’ database ofnon-performing loans; for unsecured loans other than credit card loans, the loans are transferred to KB Credit Information for collection on acase-by-case basis; for secured loans, actions to enforce or protect the security interests (including foreclosure and auction of the collateral) are commenced within fourfive months of such loans becoming past due; and charged off loans are given to KB Credit Information for collection, except for loans where the cost of collection exceeds the possible recovery or where the statute of limitations for collection has expired. In addition, credit card loans that are in arrears for over 28 days on average are transferred to KB Credit Information for collection. If a loan becomesnon-performing, it is managed by an operating branch of Kookmin Bank until such loan is charged off. However, in order to promote speedy recovery on loans subject to foreclosures and litigation, our policy is to permit the branch responsible for handling these loans to request one of Kookmin Bank’s regional head offices for assistance with litigation proceedings and proceedings related to foreclosure and auction of the collateral. In addition to making efforts to collect on thesenon-performing loans, we also undertake measures to reduce the level of ournon-performing loans, which include: selling ournon-performing loans to third parties, including the Korea Asset Management Corporation; and entering into asset securitization transactions with respect to ournon-performing loans. We generally expect to suffer a partial loss on loans that we sell or securitize, to the extent such sales and securitizations are recognized under IFRS as sale transactions. Pursuant to a memorandum of understanding among the Financial Supervisory Service and seven banks, including Kookmin Bank, a private equity fund was established in June 2011 to acquire approximately ₩1.2 trillion of non-performing bank loans to construction companies in workout, restructuring or rehabilitation. The general partner of the fund is United Asset Management Corp. and the limited partners consist of the seven banks and other investors. The fund purchases non-performing bank loans at market price and the funds required to purchase such loans are contributed or lent by the same banks that sell such loans to the fund. In June 2011, we agreed to make a capital commitment of ₩148 billion and provide a ₩109 billion revolving loan facility to the fund. From June to December 2011, we contributed the entire amount of our capital commitment to the fund in connection with its purchase of ₩148 billion of non-performing loans from us. In September 2012, we agreed to increase our capital commitment to ₩241 billion. From September to December 2012, we contributed ₩44 billion to the fund. Our revolving loan facility to the fund was decreased to ₩55 billion in 2013 and terminated in 2014. We have made no additional capital commitments to the fund in 2013 or 2014.
Allocation and Analysis of Allowances for Loan Losses The following table presents, as of the dates indicated, the allocation of our allowances for loan losses by loan type. The ratio represents the percentage of allowances for loan losses in each category to total allowances for loan losses. | | | As of December 31, | | | As of December 31, | | | | 2010 | | 2011 | | 2012 | | 2013 | | 2014 | | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | | | Amount | | | % | | Amount | | | % | | Amount | | | % | | Amount | | | % | | Amount | | | % | | | Amount | | % | | Amount | | % | | Amount | | % | | Amount | | % | | Amount | | % | | | | (in billions of Won, except percentages) | | | (in billions of Won, except percentages) | | Domestic: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Small- and medium sized enterprise | | ₩ | 2,028 | | | | 54.0 | % | | ₩ | 1,533 | | | | 44.4 | % | | ₩ | 1,234 | | | | 37.7 | % | | ₩ | 1,023 | | | | 35.8 | % | | ₩ | 819 | | | | 33.4 | % | | ₩ | 1,023 | | | 35.8 | % | | ₩ | 819 | | | 33.4 | % | | ₩ | 775 | | | 30.0 | % | | ₩ | 644 | | | 28.3 | % | | ₩ | 522 | | | 24.7 | % | Large corporate | | | 863 | | | | 23.0 | | | | 910 | | | | 26.4 | | | | 999 | | | | 30.6 | | | | 785 | | | | 27.4 | | | | 656 | | | | 26.8 | | | 785 | | | 27.4 | | | 656 | | | 26.8 | | | 875 | | | 33.9 | | | 696 | | | 30.6 | | | 666 | | | 31.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total corporate | | | 2,891 | | | | 77.0 | | | | 2,443 | | | | 70.8 | | | | 2,233 | | | | 68.3 | | | | 1,808 | | | | 63.2 | | | | 1,475 | | | | 60.2 | % | | 1,808 | | | 63.2 | | | 1,475 | | | 60.2 | | | 1,650 | | | 63.9 | | | 1,340 | | | 58.9 | | | 1,188 | | | 56.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Retail | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mortgage and home equity | | | 88 | | | | 2.3 | | | | 111 | | | | 3.2 | | | | 123 | | | | 3.8 | | | | 93 | | | | 3.3 | | | | 48 | | | | 2.0 | | | 93 | | | 3.3 | | | 48 | | | 2.0 | | | 37 | | | 1.4 | | | 29 | | | 1.3 | | | 24 | | | 1.2 | | Other consumer | | | 432 | | | | 11.5 | | | | 524 | | | | 15.2 | | | | 565 | | | | 17.2 | | | | 486 | | | | 17.0 | | | | 488 | | | | 19.9 | | | 486 | | | 17.0 | | | 488 | | | 19.9 | | | 454 | | | 17.6 | | | 452 | | | 19.8 | | | 404 | | | 19.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total retail | | | 520 | | | | 13.8 | | | | 635 | | | | 18.4 | | | | 688 | | | | 21.0 | | | | 579 | | | | 20.3 | | | | 536 | | | | 21.9 | | | 579 | | | 20.3 | | | 536 | | | 21.9 | | | 491 | | | 19.0 | | | 481 | | | 21.1 | | | 428 | | | 20.4 | | Credit cards | | | 328 | | | | 8.7 | | | | 350 | | | | 10.2 | | | | 329 | | | | 10.1 | | | | 410 | | | | 14.3 | | | | 390 | | | | 15.9 | | | 410 | | | 14.3 | | | 390 | | | 15.9 | | | 398 | | | 15.4 | | | 414 | | | 18.1 | | | 449 | | | 21.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | | 3,739 | | | | 99.5 | | | | 3,428 | | | | 99.4 | | | | 3,250 | | | | 99.4 | | | | 2,797 | | | | 97.8 | | | | 2,401 | | | | 97.9 | | | 2,797 | | | 97.8 | | | 2,401 | | | 97.9 | | | 2,539 | | | 98.3 | | | 2,235 | | | 98.1 | | | 2,065 | | | 97.9 | | Foreign (1): | | | 17 | | | | 0.5 | | | | 20 | | | | 0.6 | | | | 19 | | | | 0.6 | | | | 64 | | | | 2.2 | | | | 51 | | | | 2.1 | | | Foreign:(1) | | | 64 | | | 2.2 | | | 51 | | | 2.1 | | | 43 | | | 1.7 | | | 43 | | | 1.9 | | | 45 | | | 2.1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total allowances for loan losses | | ₩ | 3,756 | | | | 100.0 | % | | ₩ | 3,448 | | | | 100.0 | % | | ₩ | 3,269 | | | | 100.0 | % | | ₩ | 2,861 | | | | 100.0 | % | | ₩ | 2,452 | | | | 100.0 | % | | ₩ | 2,861 | | | 100.0 | % | | ₩ | 2,452 | | | 100.0 | % | | ₩ | 2,582 | | | 100.0 | % | | ₩ | 2,278 | | | 100.0 | % | | ₩ | 2,110 | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Consists primarily of loans to corporations. |
The following table analyzes our allowances for loan losses and loan loss experience for each of the years indicated: | | | Year Ended December 31, | | | Year Ended December 31, | | | | 2010 | | 2011 | | 2012 | | 2013 | | 2014 | | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | | | (in billions of Won, except percentages) | | | (in billions of Won, except percentages) | | Balance at the beginning of the period | | ₩ | 3,269 | | | ₩ | 3,756 | | | ₩ | 3,448 | | | ₩ | 3,269 | | | ₩ | 2,861 | | | ₩ | 3,269 | | | ₩ | 2,861 | | | ₩ | 2,452 | | | ₩ | 2,582 | | | ₩ | 2,278 | | Amounts charged against income | | | 2,464 | | | | 1,645 | | | | 1,653 | | | | 1,427 | | | | 1,211 | | | | 1,427 | | | 1,211 | | | 1,100 | | | 579 | | | 583 | | Sale | | | (193 | ) | | | (240 | ) | | | (105 | ) | | | (84 | ) | | | (72 | ) | | | (84 | ) | | (72 | ) | | (50 | ) | | (78 | ) | | (66 | ) | Gross charge-offs: | | | | | | | | | | | | | | | | | | | | | Domestic: | | | | | | | | | | | | | | | | | | | | | Corporate | | | | | | | | | | | | | | | | | | | | | Small- and medium-sized enterprise | | | 1,541 | | | | 1,274 | | | | 943 | | | | 691 | | | | 746 | | | | 691 | | | 746 | | | 412 | | | 467 | | | 308 | | Large corporate | | | 55 | | | | 204 | | | | 260 | | | | 454 | | | | 326 | | | | 454 | | | 326 | | | 275 | | | 278 | | | 87 | | Retail | | | | | | | | | | | | | | | | | | | | | Mortgage and home equity | | | 37 | | | | 20 | | | | 62 | | | | 134 | | | | 149 | | | | 134 | | | 149 | | | 16 | | | 7 | | | 7 | | Other consumer | | | 237 | | | | 267 | | | | 391 | | | | 447 | | | | 425 | | | | 447 | | | 425 | | | 338 | | | 288 | | | 335 | | Credit cards | | | 389 | | | | 413 | | | | 541 | | | | 404 | | | | 427 | | | | 404 | | | 427 | | | 377 | | | 357 | | | 400 | | Foreign: | | | 20 | | | | 3 | | | | — | | | | 2 | | | | 18 | | | | 2 | | | 18 | | | 1 | | | 2 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total gross charge-offs | | | (2,279 | ) | | | (2,181 | ) | | | (2,197 | ) | | | (2,132 | ) | | | (2,091 | ) | | | (2,132 | ) | | (2,091 | ) | | (1,419 | ) | | (1,399 | ) | | (1,137 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Recoveries: | | | | | | | | | | | | Domestic: | | | | | | | | | | | | Corporate | | | | | | | | | | | | Small-and medium-sized enterprise | | | 133 | | | | 162 | | | | 149 | | | | 145 | | | | 259 | | | Large corporate | | | 1 | | | | 6 | | | | 9 | | | | — | | | | — | | | Retail | | | | | | | | | | | | Mortgage and home equity | | | 14 | | | | 13 | | | | 7 | | | | 22 | | | | 31 | | | Other consumer | | | 114 | | | | 104 | | | | 97 | | | | 105 | | | | 109 | | | Credit cards | | | 246 | | | | 204 | | | | 185 | | | | 141 | | | | 131 | | | Foreign: | | | 4 | | | | 1 | | | | 3 | | | | 2 | | | | 1 | | | | | | | | | | | | | | | | | | | | Total recoveries | | | 512 | | | | 490 | | | | 450 | | | | 415 | | | | 531 | | | | | | | | | | | | | | | | | | | | Net charge-offs | | | (1,767 | ) | | | (1,691 | ) | | | (1,747 | ) | | | (1,717 | ) | | | (1,560 | ) | | Other charges (1) | | | (17 | ) | | | (22 | ) | | | 20 | | | | (34 | ) | | | 12 | | | | | | | | | | | | | | | | | | | | Balance at the end of the period | | ₩ | 3,756 | | | ₩ | 3,448 | | | ₩ | 3,269 | | | ₩ | 2,861 | | | ₩ | 2,452 | | | | | | | | | | | | | | | | | | | | Ratio of net charge-offs during the period to average loans outstanding during the period | | | 0.9 | % | | | 0.8 | % | | | 0.8 | % | | | 0.8 | % | | | 0.7 | % | |
| | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won, except percentages) | | Recoveries: | | | | | | | | | | | | | | | | | | | | | Domestic: | | | | | | | | | | | | | | | | | | | | | Corporate | | | | | | | | | | | | | | | | | | | | | Small-andmedium-sized enterprise | | | 145 | | | | 259 | | | | 156 | | | | 214 | | | | 280 | | Large corporate | | | — | | | | — | | | | — | | | | 1 | | | | — | | Retail | | | | | | | | | | | | | | | | | | | | | Mortgage and home equity | | | 22 | | | | 31 | | | | 63 | | | | 43 | | | | 30 | | Other consumer | | | 105 | | | | 109 | | | | 132 | | | | 124 | | | | 116 | | Credit cards | | | 141 | | | | 131 | | | | 138 | | | | 133 | | | | 133 | | Foreign: | | | 2 | | | | 1 | | | | 4 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total recoveries | | | 415 | | | | 531 | | | | 493 | | | | 515 | | | | 559 | | | | | | | | | | | | | | | | | | | | | | | Netcharge-offs | | | (1,717 | ) | | | (1,560 | ) | | | (926 | ) | | | (884 | ) | | | (578 | ) | Other charges(1) | | | (34 | ) | | | 12 | | | | 6 | | | | 79 | | | | (107 | ) | | | | | | | | | | | | | | | | | | | | | | Balance at the end of the period | | ₩ | 2,861 | | | ₩ | 2,452 | | | ₩ | 2,582 | | | ₩ | 2,278 | | | ₩ | 2,110 | | | | | | | | | | | | | | | | | | | | | | | Ratio of netcharge-offs during the period to average loans outstanding during the period | | | 0.8 | % | | | 0.7 | % | | | 0.4 | % | | | 0.3 | % | | | 0.2 | % |
(1) | The amount for 2014 reflects an increase in allowances for loan losses of ₩83 billion attributable to the addition of KB Capital Co., Ltd. as a consolidated subsidiary in March 2014. The amount for 2016 reflects an increase in allowances for loan losses of ₩136 billion attributable to the addition of KB Securities as a consolidated subsidiary in October 2016. The amount for 2017 reflects an increase in allowance for loan losses of ₩60 billion attributable to the addition of KB Insurance as a consolidated subsidiary in May 2017. |
RegulatoryRegulatory Reserve for Credit Losses
If our allowances for credit losses are deemed insufficient for regulatory purposes, we are required to compensate for the difference by recording a regulatory reserve for credit losses, which is segregated within our retained earnings. Regulatory reserve for credit losses are not available for distribution to shareholders as dividends. Thedividends.The level of regulatory reserve for credit losses required to be recorded is equal to the amount by which our allowances for credit losses under IFRS are less than the greater of (x) the amount of expected loss calculated using the internalratings-based approach under Basel III and as approved by the Financial Supervisory Service and (y) the required amount of credit loss reserve calculated based on standards prescribed by the Financial Services Commission. As of December 31, 2014,2017, our regulatory reserve for credit losses was ₩2,456₩3,148 billion. The following tables set forth the Financial Services Commission’s guidelines for the classification of loans and the minimum percentages of the outstanding principal amount of the relevant loans or balances that the credit loss reserve must cover: | | | Loan Classification | | Loan Characteristics | Normal | | Loans extended to customers that, based on our consideration of their business, financial position and future cash flows, do not raise concerns regarding their ability to repay the loans. | | | Precautionary | | Loans extended to customers that (i) based on our consideration of their business, financial position and future cash flows, show potential risks with respect to their ability to repay the loans, although showing no immediate default risk or (ii) are in arrears for one month or more but less than three months. | | | Substandard | | (i) Loans extended to customers that, based on our consideration of their business, financial position and future cash flows, are judged to have incurred considerable default risks as their ability to repay has deteriorated; or |
| | | Loan Classification | | Loan Characteristics | | | (ii) the portion that we expect to collect of total loans (a) extended to customers that have been in arrears for three months or more, (b) extended to customers that have incurred serious default risks due to the occurrence of, among other things, final refusal to pay their debt instruments, entry into liquidation or bankruptcy proceedings or closure of their businesses, or (c) extended to customers who have outstanding loans that are classified as “doubtful” or “estimated loss.” | | | Doubtful | | Loans exceeding the amount that we expect to collect of total loans to customers that: (i) based on our consideration of their business, financial position and future cash flows, have incurred serious default risks due to noticeable deterioration in their ability to repay; or (ii) have been in arrears for three months or more but less than twelve months.six months (or three months or more but less than 12 months in the case of loans of Kookmin Bank). | | | Estimated loss | | Loans exceeding the amount that we expect to collect of total loans to customers that: (i) based on our consideration of their business, financial position and future cash flows, are judged to be accounted as a loss because the inability to repay became certain due to serious deterioration in their ability to repay; (ii) have been in arrears for twelvesix months or more;more (or 12 months or more in the case of loans of Kookmin Bank); or (iii) have incurred serious risks of default in repayment due to the occurrence of, among other things, final refusal to pay their debt instruments, liquidation or bankruptcy proceedings or closure of their business. |
| Loan Classifications | | Corporate (1) | | | Consumer | | | Credit Card Balances (2) | | | Credit Card Loans (3) | | | Corporate(1) | | | Consumer | | | Credit Card Balances(2) | | | Credit Card Loans(3) | | Normal | | | 0.85% or above | | | | 1% or above | | | | 1.1% or above | | | | 2.5% or above | | | | 0.85% or above | | | | 1% or above | | | | 1.1% or above | | | | 2.5% or above | | Precautionary | | | 7% or above | | | | 10% or above | | | | 40% or above | | | | 50% or above | | | | 7% or above | | | | 10% or above | | | | 40% or above | | | | 50% or above | | Substandard | | | 20% or above | | | | 20% or above | | | | 60% or above | | | | 65% or above | | | | 20% or above | | | | 20% or above | | | | 60% or above | | | | 65% or above | | Doubtful | | | 50% or above | | | | 55% or above | | | | 75% or above | | | | 75% or above | | | | 50% or above | | | | 55% or above | | | | 75% or above | | | | 75% or above | | Estimated loss | | | 100% | | | | 100% | | | | 100% | | | | 100% | | | | 100% | | | | 100% | | | | 100% | | | | 100% | |
(1) | Subject to certain exceptions pursuant to the Banking Industry Supervision Regulations of Korea. |
(2) | Applicable for credit card balances from general purchases. |
(3) | Applicable for cash advances, card loans and revolving credit card assets. |
LoanCharge-Offs Basic Principles We attempt to minimize loans to be charged off by adhering to a sound credit approval process based on credit risk analysis prior to extending loans and a systematic management of outstanding loans. However, ifcharge-offs are necessary, we charge off loans subject to ourcharge-off policy at an early stage in order to maximize accounting transparency, to minimize any waste of resources in managing loans which have a low probability of being collected and to reduce ournon-performing loan ratio. Loans To Be Charged Off Loans are charged off if they are deemed to be uncollectible by falling under any of the following categories: loans for which collection is not foreseeable due to insolvency, bankruptcy, compulsory execution, disorganization, dissolution or the shutting down of the business of the debtor; loans for which collection is not foreseeable due to the death or disappearance of the debtor; loans for which expenses of collection exceed the collectable amount; loans on which collection is not possible through legal or any other means; payments in arrears in respect of credit cards that have been overdue for a period of six months or more and have been classified as expected loss (excluding instances where there has been partial payment of the overdue balance, where a related balance is not overdue or where a charge off is not possible due to Korean regulations); and the portion of loans classified as “estimated loss,” net of any recovery from collateral, which is deemed to be uncollectible. Procedure forCharge-off Approval In order to charge off corporate loans, an application for acharge-off must be submitted to Kookmin Bank’s Credit Management Department promptly after the corporate loan is classified as estimated loss or deemed uncollectible. The Credit Management Department refers thecharge-off application to Kookmin Bank’s Branch Audit Department for their review to ensure compliance with our internal procedures forcharge-offs. Then, the Credit Management Department, after reviewing the application to confirm that it meets relevant requirements, seeks an approval from the Financial Supervisory Service for ourcharge-offs, which is typically granted. Once we receive approval from the Financial Supervisory Service, we must also obtain approval from our senior management to charge off those loans. For accounting purposes, we recognize charge-offs of corporate loans under IFRS prior to approval from the Financial Supervisory Service. With respect to credit card balances and unsecured retail loans, we follow a different process to determine which credit card balances and unsecured retail loans should be charged off, based on the length of time those loans or balances are past due. We charge off unsecured retail loans deemed to be uncollectible and credit card balances which have been overdue for a period of six months or more or which have been deemed to be uncollectible under IFRS. Treatment of Loans Charged Off Once loans are charged off, we classify them ascharged-off loans and remove them from our balance sheet. These loans are managed based on a different set of procedures. We continue our collection efforts in respect of these loans, including through our subsidiary, KB Credit Information, although loans may be charged off before we begin collection efforts in some circumstances. If a collateralized loan is overdue, we will, typically within one year from the time that such loan became overdue (or after a longer period in certain circumstances), petition a court to foreclose and sell the collateral through acourt-supervised auction. If a debtor ultimately fails to repay and the court grants its approval for foreclosure, we will sell the collateral, net of expenses incurred from the auction. Credit Rehabilitation Programs for Delinquent Consumer Borrowers
In light of the rapid increase in delinquencies in credit card and other consumer credit in recent years, and concerns regarding potential social issues posed by the growing number of individuals with bad credit, the
Korean government has implemented a number of measures intended to support the rehabilitation of the credit of delinquent consumer borrowers. These measures may affect the amount and timing of our collections and recoveries on our delinquent consumer credits.
For example, in March 2009, the Financial Services Commission requested Korean banks, including us, to establish a “pre-workout program,” including a credit counseling and recovery service, for retail borrowers with outstanding short-term debt. Under the pre-workout program, which has been in operation since April 2009, maturity extensions and/or interest reductions are provided for retail borrowers with total loans of ₩1.5 billion or less (consisting of no more than ₩500 million of unsecured loans and ₩1 billion of secured loans) who are in arrears on their payments for more than 30 days but less than 90 days or for retail borrowers with an annual income of ₩40 million or less who have been in arrears on their payments for more than 30 days on an aggregate basis for the 12 months prior to their application.
In March 2013, in order to support low income consumer borrowers experiencing difficulty in repaying their unsecured long-term debt, the Financial Services Commission announced the establishment of a “National Happiness Fund” to provide one-time relief to such borrowers by:
purchasing from creditors unsecured loans of individual borrowers not exceeding ₩100 million in principal amount in the aggregate, which loans have been in arrears for a period of six months or more as of February 28, 2013 and, if requested by the borrower, reducing the balance of such loans by up to 50% and/or extending the maturity of such loans to up to ten years based on the borrower’s expected ability to repay;
purchasing from certain creditors student loans of individual borrowers, which loans have been in arrears for a period of six months or more as of February 28, 2013 and, if requested by the borrower, restructuring the balance and/or extending the maturity of such loans based on the borrower’s expected ability to repay or extending the maturity of such loans until the borrower is employed; and
for individuals with annual income of ₩40 million or less with loans of a principal amount not exceeding ₩30 million in the aggregate and with an interest rate of 20% or higher, facilitating the refinancing of such loans at lower interest rates, provided that such loans have not been in default during the six months prior to the application for relief.
Over 4,000 Korean financial institutions and private lenders, including our subsidiaries, Kookmin Bank, KB Savings Bank and KB Kookmin Card, have signed a memorandum of understanding with the National Happiness Fund to sell eligible loans to the fund. The price and volume of such loans to be sold are subject to further negotiations between the National Happiness Fund and such financial institutions and lenders. The National Happiness Fund accepted applications from individual borrowers to participate in such relief programs until October 2013 and until January 2014 for individual borrowers of student loans from the Korea Student Aid Foundation.
Investment Portfolio Investment Policy We invest in and tradeWon-denominated and, to a lesser extent, foreigncurrency-denominated securities for our own account to: maintain the stability and diversification of our assets; maintain adequate sources ofback-up liquidity to match our funding requirements; and supplement income from our core lending activities. We also invest in and trade such securities as part of the general account investments of our insurance subsidiaries that support their insurance policy liabilities. In making securities investments, we take into account a number of factors, including macroeconomic trends, industry analysis, and credit evaluation and maturity in determining whether to make particular investments in securities. Our investments in securities are also subject to a number of guidelines, including limitations prescribed under the Financial Holding Company Act and the Bank Act. Under these regulations, a bank holding company may not own (i) more than 5% of the total issued and outstanding shares of anotherfinance-related company, (ii) any shares of its affiliates, other than its direct or indirect subsidiaries or (iii) any shares of anon-finance-related company. In addition, Kookmin Bank must limit its investments in equity securities and bonds with a maturity in excess of three years (other than monetary stabilization bonds issued by the Bank of Korea and national government bonds) to 100.0% of its total Tier I and Tier II capital amount (less any capital deductions). Generally, Kookmin Bank is also prohibited from acquiring more than 15.0% of the shares with voting rights issued by any other corporation subject to certain exceptions. Pursuant to the Bank Act, a bank and its trust accounts are prohibited from acquiring the shares of a major shareholder (for the definition of “major shareholder,” see “—Supervision and Regulation—Principal Regulations Applicable to Banks—Financial Exposure to Any Individual Customer and Major Shareholders”Shareholder”) of that bank in excess of an amount equal to 1% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions). Further information on the regulatory environment governing our investment activities is set out in “—Supervision and Regulation—Principal Regulations Applicable to Financial Holding Companies—Liquidity,” “—Supervision and Regulation—Principal Regulations Applicable to Financial Holding Companies—Restrictions on Shareholdings in Other Companies,” “—Supervision and Regulation—Principal Regulations Applicable to Banks—Liquidity” and “—Supervision and Regulation—Principal Regulations Applicable to Banks—Restrictions on Shareholdings in Other Companies.” The following table sets out the definitions of the four categories of securities we hold: | | | Category | | Classification | | | Financial assets held for trading | | Financial assets bought and held for trading. | | | Financial assets designated at fair value through profit or loss | | Financial assets which were not bought and held for trading but are otherwise designated as at fair value through profit or loss. | | | Available-for-sale financial assets | | Non-derivative financial assets not classified asheld-to-maturity, at fair value through profit or loss or loans and receivables. | | | Held-to-maturity financial assets | | Non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Bank has the positive intent and ability to hold to maturity. |
See “Item 5.A. Operating Results—Critical Accounting Policies—Valuation of Securities and Financial Instruments.” We also hold limited balances of venture capital securities,non-marketable and restricted equity securities and derivative instruments. Carrying Amount and Market Value The following table sets out the carrying amount and market value of securities in our securities portfolio as of the dates indicated: | | | As of December 31, | | | As of December 31, | | | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | | | Carrying Amount | | Market Value | | Carrying Amount | | Market Value | | Carrying Amount | | Market Value | | | Carrying Amount | | Market Value | | Carrying Amount | | Market Value | | Carrying Amount | | Market Value | | | | (in billions of Won) | | | (in billions of Won) | | Available-for-sale financial assets: | | | | | | | | | | | | | | | | | | | | | | | | | Equity securities | | ₩ | 2,474 | | | ₩ | 2,474 | | | ₩ | 2,899 | | | ₩ | 2,899 | | | ₩ | 3,032 | | | ₩ | 3,032 | | | ₩ | 3,377 | | | ₩ | 3,377 | | | ₩ | 6,525 | | | ₩ | 6,525 | | | ₩ | 9,157 | | | ₩ | 9,157 | | Debt securities | | | | | | | | | | | | | | | | | | | | | | | | | Korean treasury securities and government agency securities | | | 6,256 | | | | 6,256 | | | | 6,926 | | | | 6,926 | | | | 4,702 | | | | 4,702 | | | 3,757 | | | 3,757 | | | 7,111 | | | 7,111 | | | 3,629 | | | 3,629 | | Debt securities issued by financial institutions | | | 7,476 | | | | 7,476 | | | | 5,782 | | | | 5,782 | | | | 6,981 | | | | 6,981 | | | 7,241 | | | 7,241 | | | 11,172 | | | 11,172 | | | 20,946 | | | 20,946 | | Corporate debt securities | | | 6,606 | | | | 6,606 | | | | 4,998 | | | | 4,998 | | | | 6,120 | | | | 6,120 | | | 4,980 | | | 4,980 | | | 5,904 | | | 5,904 | | | 10,571 | | | 10,571 | | Asset-backed securities | | | 1,399 | | | | 1,399 | | | | 1,208 | | | | 1,208 | | | | 1,211 | | | | 1,211 | | | 5,216 | | | 5,216 | | | 2,730 | | | 2,730 | | | 2,402 | | | 2,402 | | Others | | | — | | | | — | | | | 19 | | | | 19 | | | | 346 | | | | 346 | | | 417 | | | 417 | | | 528 | | | 528 | | | 1,411 | | | 1,411 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total available-for-sale | | | 24,211 | | | | 24,211 | | | | 21,832 | | | | 21,832 | | | | 22,392 | | | | 22,392 | | | 24,988 | | | 24,988 | | | 33,970 | | | 33,970 | | | 48,116 | | | 48,116 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Held-to-maturity financial assets: | | | | | | | | | | | | | | | | | | | | | | | | | Debt securities | | | | | | | | | | | | | | | | | | | | | | | | | Korean treasury securities and government agency securities | | | 4,449 | | | | 4,720 | | | | 4,357 | | | | 4,537 | | | | 3,557 | | | | 3,772 | | | 2,592 | | | 2,707 | | | 2,218 | | | 2,331 | | | 5,448 | | | 5,432 | | Debt securities issued by financial institutions | | | 1,316 | | | | 1,338 | | | | 893 | | | | 902 | | | | 1,262 | | | | 1,280 | | | 1,864 | | | 1,885 | | | 1,869 | | | 1,825 | | | 2,475 | | | 2,490 | | Corporate debt securities | | | 6,213 | | | | 6,498 | | | | 7,400 | | | | 7,580 | | | | 7,278 | | | | 7,525 | | | 5,530 | | | 5,706 | | | 3,488 | | | 3,602 | | | 6,219 | | | 6,215 | | Asset-backed securities | | | 278 | | | | 281 | | | | 367 | | | | 368 | | | | 472 | | | | 474 | | | 4,164 | | | 4,208 | | | 3,603 | | | 3,643 | | | 4,306 | | | 4,303 | | Others | | | | — | | | | — | | | | — | | | | — | | | 44 | | | 43 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total held-to-maturity | | | 12,256 | | | | 12,837 | | | | 13,017 | | | | 13,387 | | | | 12,569 | | | | 13,051 | | | 14,150 | | | 14,506 | | | 11,178 | | | 11,401 | | | 18,492 | | | 18,483 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets at fair value through profit or loss: | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets held for trading | | | | | | | | | | | | | | | | | | | | | | | | | Equity securities | | | 876 | | | | 876 | | | | 1,101 | | | | 1,101 | | | | 358 | | | | 358 | | | 642 | | | 642 | | | 3,041 | | | 3,041 | | | 4,935 | | | 4,935 | | Debt securities | | | | | | | | | | | | | | | | | | | | | | | | | Korean treasury securities and government agency securities | | | 2,376 | | | | 2,376 | | | | 2,085 | | | | 2,085 | | | | 3,067 | | | | 3,067 | | | 2,510 | | | 2,510 | | | 5,390 | | | 5,390 | | | 6,233 | | | 6,233 | | Debt securities issued by financial institutions | | | 4,018 | | | | 4,018 | | | | 3,266 | | | | 3,266 | | | | 4,049 | | | | 4,049 | | | 3,973 | | | 3,973 | | | 11,186 | | | 11,186 | | | 11,324 | | | 11,324 | | Corporate debt securities | | | 1,679 | | | | 1,679 | | | | 1,760 | | | | 1,760 | | | | 1,827 | | | | 1,827 | | | 2,106 | | | 2,106 | | | 4,595 | | | 4,595 | | | 5,133 | | | 5,133 | | Asset-backed securities | | | 105 | | | | 105 | | | | 510 | | | | 510 | | | | 319 | | | | 319 | | | 316 | | | 316 | | | 222 | | | 222 | | | 162 | | | 162 | | Others | | | 114 | | | | 114 | | | | 205 | | | | 205 | | | | 451 | | | | 451 | | | 418 | | | 418 | | | 1,594 | | | 1,594 | | | 2,317 | | | 2,317 | | Others | | | 40 | | | | 40 | | | | 40 | | | | 40 | | | | 51 | | | | 51 | | | 69 | | | 69 | | | 71 | | | 71 | | | 74 | | | 74 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 9,208 | | | | 9,208 | | | | 8,967 | | | | 8,967 | | | | 10,122 | | | | 10,122 | | | 10,034 | | | 10,034 | | | 26,099 | | | 26,099 | | | 30,178 | | | 30,178 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | | | | | | | | | | | | | | | | | | | | Equity securities | | | 159 | | | | 159 | | | | 116 | | | | 116 | | | | 134 | | | | 134 | | | 196 | | | 196 | | | 66 | | | 66 | | | 68 | | | 68 | | Debt securities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 146 | | | 146 | | | 332 | | | 332 | | | 369 | | | 369 | | Derivative-linked securities | | | 193 | | | | 193 | | | | 246 | | | | 246 | | | | 502 | | | | 502 | | | 798 | | | 798 | | | 1,361 | | | 1,361 | | | 1,613 | | | 1,613 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 352 | | | | 352 | | | | 362 | | | | 362 | | | | 636 | | | | 636 | | | 1,140 | | | 1,140 | | | 1,759 | | | 1,759 | | | 2,050 | | | 2,050 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total financial assets at fair value through profit or loss | | | 9,560 | | | | 9,560 | | | | 9,329 | | | | 9,329 | | | | 10,758 | | | | 10,758 | | | 11,174 | | | 11,174 | | | 27,858 | | | 27,858 | | | 32,228 | | | 32,228 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total securities | | ₩ | 46,027 | | | ₩ | 46,608 | | | ₩ | 44,178 | | | ₩ | 44,548 | | | ₩ | 45,719 | | | ₩ | 46,201 | | | ₩ | 50,312 | | | ₩ | 50,668 | | | ₩ | 73,006 | | | ₩ | 73,229 | | | ₩ | 98,836 | | | ₩ | 98,827 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Maturity Analysis The following table categorizes our debt securities by maturity and weighted average yield as of December 31, 2014:2017: | | | Within 1 Year | | Weighted Average Yield (1) | | Over 1 But within 5 Years | | Weighted Average Yield (1) | | Over 5 But within 10 Years | | Weighted Average Yield (1) | | Over 10 Years | | Weighted Average Yield (1) | | Total | | Weighted Average Yield (1) | | | Within 1 Year | | Weighted Average Yield(1) | | Over 1 But within 5 Years | | Weighted Average Yield(1) | | Over 5 But within 10 Years | | Weighted Average Yield(1) | | Over 10 Years | | Weighted Average Yield(1) | | Total | | Weighted Average Yield(1) | | | | (in billions of Won, except percentages) | | | (in billions of Won, except percentages) | | Available-for-sale financial assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Korean treasury securities and government agencies | | ₩ | 1,076 | | | | 3.48 | % | | ₩ | 3,502 | | | | 3.26 | % | | ₩ | 114 | | | | 2.57 | % | | ₩ | 10 | | | | 4.30 | % | | ₩ | 4,702 | | | | 3.29 | % | | ₩ | 1,043 | | | 2.51 | % | | ₩ | 2,300 | | | 1.89 | % | | ₩ | 260 | | | 2.21 | % | | ₩ | 26 | | | 3.23 | % | | ₩ | 3,629 | | | 2.10 | % | Debt securities issued by financial institutions | | | 3,584 | | | | 2.44 | | | | 3,326 | | | | 2.99 | | | | 71 | | | | 3.28 | | | | — | | | | — | | | | 6,981 | | | | 2.71 | | | 9,609 | | | 1.62 | | | 9,359 | | | 2.08 | | | 1,441 | | | 3.49 | | | 537 | | | 4.13 | | | 20,946 | | | 2.02 | | Corporate debt securities | | | 1,523 | | | | 3.83 | | | | 4,444 | | | | 3.33 | | | | 140 | | | | 4.45 | | | | 13 | | | | 5.45 | | | | 6,120 | | | | 3.48 | | | 2,942 | | | 2.58 | | | 6,077 | | | 2.62 | | | 1,339 | | | 2.98 | | | 213 | | | 5.10 | | | 10,571 | | | 2.71 | | Asset-backed securities | | | 321 | | | | 2.76 | | | | 466 | | | | 2.68 | | | | — | | | | — | | | | 424 | | | | 3.21 | | | | 1,211 | | | | 2.89 | | | 1,145 | | | 1.80 | | | 622 | | | 2.30 | | | 300 | | | 2.65 | | | 335 | | | 2.62 | | | 2,402 | | | 2.13 | | Others | | | 153 | | | | 3.18 | | | | — | | | | — | | | | 62 | | | | 4.54 | | | | 131 | | | | 4.25 | | | | 346 | | | | 3.83 | | | | — | | | | — | | | | — | | | | — | | | 130 | | | 3.57 | | | 1,281 | | | 4.06 | | | 1,411 | | | 4.02 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 6,657 | | | | 2.96 | % | | ₩ | 11,738 | | | | 3.18 | % | | ₩ | 387 | | | | 3.70 | % | | ₩ | 578 | | | | 3.51 | % | | ₩ | 19,360 | | | | 3.13 | % | | ₩ | 14,739 | | | 1.89 | % | | ₩ | 18,358 | | | 2.24 | % | | ₩ | 3,470 | | | 3.13 | % | | ₩ | 2,392 | | | 3.96 | % | | ₩ | 38,959 | | | 2.29 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Held-to-maturity financial assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Korean treasury securities and government agencies | | ₩ | 989 | | | | 4.63 | % | | ₩ | 2,293 | | | | 4.39 | % | | ₩ | 163 | | | | 3.81 | % | | ₩ | 112 | | | | 5.38 | % | | ₩ | 3,557 | | | | 4.46 | % | | ₩ | 1,203 | | | 5.05 | % | | ₩ | 559 | | | 3.16 | % | | ₩ | 634 | | | 3.09 | % | | ₩ | 3,052 | | | 2.29 | % | | ₩ | 5,448 | | | 3.08 | % | Debt securities issued by financial institutions | | | 636 | | | | 2.54 | | | | 573 | | | | 3.59 | | | | 53 | | | | 3.67 | | | | — | | | | — | | | | 1,262 | | | | 3.06 | | | 722 | | | 1.96 | | | 246 | | | 3.53 | | | 286 | | | 3.49 | | | 1,221 | | | 4.61 | | | 2,475 | | | 3.60 | | Corporate debt securities | | | 2,221 | | | | 4.59 | | | | 4,337 | | | | 4.12 | | | | 581 | | | | 4.51 | | | | 139 | | | | 3.46 | | | | 7,278 | | | | 4.28 | | | 1,350 | | | 3.68 | | | 1,337 | | | 3.64 | | | 558 | | | 2.75 | | | 2,974 | | | 3.18 | | | 6,219 | | | 3.35 | | Asset-backed securities | | | 270 | | | | 2.85 | | | | 202 | | | | 2.89 | | | | — | | | | — | | | | — | | | | — | | | | 472 | | | | 2.87 | | | 623 | | | 1.73 | | | 3,572 | | | 2.29 | | | 10 | | | 3.09 | | | 101 | | | 3.09 | | | 4,306 | | | 2.23 | | Others | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 44 | | | 1.78 | | | 44 | | | 1.78 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 4,116 | | | | 4.17 | % | | ₩ | 7,405 | | | | 4.13 | % | | ₩ | 797 | | | | 4.31 | % | | ₩ | 251 | | | | 4.32 | % | | ₩ | 12,569 | | | | 4.16 | % | | ₩ | 3,898 | | | 3.47 | % | | ₩ | 5,714 | | | 2.74 | % | | ₩ | 1,488 | | | 3.04 | % | | ₩ | 7,392 | | | 3.04 | % | | ₩ | 18,492 | | | 3.04 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets at fair value through profit or loss: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets held for trading: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Korean treasury securities and government agency securities | | ₩ | 1,088 | | | | 3.35 | % | | ₩ | 927 | | | | 3.45 | % | | ₩ | 814 | | | | 3.43 | % | | ₩ | 238 | | | | 2.71 | % | | ₩ | 3,067 | | | | 3.35 | % | | ₩ | 979 | | | 3.34 | % | | ₩ | 3,247 | | | 2.22 | % | | ₩ | 951 | | | 2.38 | % | | ₩ | 1,056 | | | 2.52 | % | | ₩ | 6,233 | | | 2.47 | % | Debt securities issued by financial institutions | | | 1,671 | | | | 2.83 | | | | 2,069 | | | | 2.79 | | | | 269 | | | | 3.48 | | | | 40 | | | | 3.51 | | | | 4,049 | | | | 2.86 | | | 6,634 | | | 1.94 | | | 4,304 | | | 2.21 | | | 334 | | | 3.33 | | | 52 | | | 4.41 | | | 11,324 | | | 2.09 | | Corporate debt securities | | | 737 | | | | 3.48 | | | | 891 | | | | 3.42 | | | | 125 | | | | 3.82 | | | | 74 | | | | 4.71 | | | | 1,827 | | | | 3.52 | | | 2,445 | | | 2.39 | | | 2,227 | | | 2.66 | | | 334 | | | 3.84 | | | 127 | | | 4.49 | | | 5,133 | | | 2.65 | | Asset-backed securities | | | 144 | | | | 3.32 | | | | 165 | | | | 2.94 | | | | 10 | | | | 3.71 | | | | — | | | | — | | | | 319 | | | | 3.14 | | | 103 | | | 1.97 | | | 59 | | | 1.94 | | | | — | | | | — | | | | — | | | | — | | | 162 | | | 1.96 | | Others | | | 451 | | | | 1.75 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 451 | | | | 1.75 | | | 2,238 | | | 1.75 | | | 78 | | | 2.04 | | | 1 | | | 1.02 | | | | — | | | | — | | | 2,317 | | | 1.75 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | ₩ | 4,091 | | | | 2.98 | % | | ₩ | 4,052 | | | | 3.08 | % | | ₩ | 1,218 | | | | 3.48 | % | | ₩ | 352 | | | | 3.22 | % | | ₩ | 9,713 | | | | 3.10 | % | | ₩ | 12,399 | | | 2.10 | % | | ₩ | 9,915 | | | 2.31 | % | | ₩ | 1,620 | | | 2.88 | % | | ₩ | 1,235 | | | 2.81 | % | | ₩ | 25,169 | | | 2.27 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | ₩ | — | | | | — | | | ₩ | — | | | | — | | | ₩ | — | | | | — | | | ₩ | — | | | | — | | | ₩ | — | | | | — | | | | | | | | | | | | | | | | | | | | | | Corporate debt securities | | | ₩ | 79 | | | 3.50 | % | | ₩ | 275 | | | 2.40 | % | | ₩ | — | | | | — | | | ₩ | 15 | | | 6.48 | % | | ₩ | 369 | | | 2.80 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | ₩ | 79 | | | 3.50 | % | | ₩ | 275 | | | 2.40 | % | | ₩ | — | | | | — | | | ₩ | 15 | | | 6.48 | % | | ₩ | 369 | | | 2.80 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 4,091 | | | | 2.98 | % | | ₩ | 4,052 | | | | 3.08 | % | | ₩ | 1,218 | | | | 3.48 | % | | ₩ | 352 | | | | 3.22 | % | | ₩ | 9,713 | | | | 3.10 | % | | ₩ | 12,478 | | | 2.11 | % | | ₩ | 10,190 | | | 2.32 | % | | ₩ | 1,620 | | | 2.88 | % | | ₩ | 1,250 | | | 2.85 | % | | ₩ | 25,538 | | | 2.28 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | The weighted average yield for the portfolio represents the yield to maturity for each individual security, weighted using its carrying amount (which is the amortized cost in the case ofheld-to-maturity financial assets and the fair value in the case ofavailable-for-sale financial assets and financial assets at fair value through profit or loss). |
Concentrations of Risk As of December 31, 2014,2017, we held the following securities of individual issuers where the aggregate carrying amount of those securities exceeded 10% of our stockholders’ equity at such date. As of December 31, 2014,2017, our stockholders’ equity was ₩27,315₩34,039 billion. | | | Carrying Amount | | | Market Value | | | Carrying Amount | | | Market Value | | | | (in billions of Won) | | | (in billions of Won) | | Name of issuer: | | | | | | | | | Korean government | | ₩ | 10,192 | | | ₩ | 10,374 | | | ₩ | 13,698 | | | ₩ | 13,671 | | Bank of Korea | | | 4,006 | | | | 4,006 | | | | 9,676 | | | | 9,676 | | Korea Housing Finance Corporation | | | | 8,155 | | | | 8,141 | | Korea Development Bank | | | | 6,552 | | | | 6,568 | | | | | | | | | | | | | | | Total | | ₩ | 14,198 | | | ₩ | 14,380 | | | ₩ | 38,081 | | | ₩ | 38,056 | | | | | | | | | | | | | | |
The Korea Housing Finance Corporation is owned by the Korean government and the Bank of Korea. The Bank of Korea is controlled by the Korean government, whereas the Korea Development Bank is wholly-owned by the Korean government. Funding We obtain funding for our lending activities from a variety of sources, both domestic and foreign. Our principal source of funding is customer deposits. In addition, we acquire funding throughlong-term borrowings (comprising debentures and debts),short-term borrowings, including borrowings from the Bank of Korea, and call money. Our primary funding strategy has been to achievelow-cost funding by increasing the average balances oflow-cost retail deposits, in particular demand deposits and time deposits. We also have focused our marketing efforts on higher net worth individuals, who account for a significant portion of the assets in our retail deposit base. Customer deposits accounted for 83.1%82.1% of total funding as of December 31, 2012, 83.0%2015, 79.7% of total funding as of December 31, 20132016 and 82.4%77.6% of total funding as of December 31, 2014.2017. Our borrowings consist of issuances of debentures and debt from financial institutions, the Korean government andgovernment-affiliated funds. The majority of our debt islong-term, with maturities ranging from one year to 30 years. Deposits Although the majority of our deposits areshort-term, it has been our experience that the majority of our depositors generally roll over their deposits at maturity, providing us with a stable source of funding. The following table shows the average balances of our deposits and the average rates paid on our deposits for the periods indicated: | | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | | | Average Balance (1) | | | Average Rate Paid | | Average Balance (1) | | | Average Rate Paid | | Average Balance (1) | | | Average Rate Paid | | | Average Balance(1) | | | Average Rate Paid | | Average Balance(1) | | | Average Rate Paid | | Average Balance(1) | | | Average Rate Paid | | | | (in billions of Won, except percentages) | | | (in billions of Won, except percentages) | | Demand deposits: | | | | | | | | | | | | | | | | | | | | | | | | | Non-interest bearing | | ₩ | 3,075 | | | | — | | | ₩ | 3,252 | | | | — | | | ₩ | 3,486 | | | | — | | | ₩ | 3,836 | | | | — | | | ₩ | 4,073 | | | | — | | | ₩ | 4,114 | | | | — | | Interest bearing | | | 56,154 | | | | 0.60 | % | | | 60,894 | | | | 0.47 | % | | | 67,612 | | | | 0.42 | % | | | 82,614 | | | | 0.35 | % | | 97,858 | | | | 0.30 | % | | 110,945 | | | | 0.26 | % | Time deposits | | | 136,617 | | | | 3.69 | | | | 130,286 | | | | 3.02 | | | | 130,258 | | | | 2.70 | | | | 123,977 | | | | 2.16 | | | 125,612 | | | | 1.69 | | | 127,478 | | | | 1.58 | | Certificates of deposit | | | 1,735 | | | | 3.86 | | | | 1,780 | | | | 3.03 | | | | 1,689 | | | | 2.72 | | | | 3,645 | | | | 1.92 | | | 3,387 | | | | 1.65 | | | 2,863 | | | | 1.57 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Average total deposits | | ₩ | 197,581 | | | | 2.76 | % | | ₩ | 196,212 | | | | 2.18 | % | | ₩ | 203,045 | | | | 1.89 | % | | ₩ | 214,072 | | | | 1.42 | % | | ₩ | 230,930 | | | | 1.09 | % | | ₩ | 245,400 | | | | 0.97 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Average balances are based on daily balances for our banking, credit card and investment and securities operations and monthly or quarterly balances for our other operations. |
For a description of our retail deposit products, see “—Business—Retail Banking—Lending Activities—Mortgage and Home Equity Lending” and “—Business—RetailBanking—Deposit-Taking Activities.” Time Deposits and Certificates of Deposit The following table presents the remaining maturities of our time deposits and certificates of deposit which had a fixed maturity in excess of ₩100 million as of December 31, 2014:2017: | | | Time Deposits | | | Certificates of Deposit | | | Total | | | Time Deposits | | | Certificates of Deposit | | | Total | | | | (in billions of Won) | | | (in billions of Won) | | Maturing within three months | | ₩ | 22,410 | | | ₩ | 613 | | | ₩ | 23,023 | | | ₩ | 19,533 | | | ₩ | 921 | | | ₩ | 20,454 | | After three but within six months | | | 16,775 | | | | 363 | | | | 17,138 | | | | 16,819 | | | | 757 | | | | 17,576 | | After six but within 12 months | | | 21,971 | | | | 567 | | | | 22,538 | | | | 28,063 | | | | 1,447 | | | | 29,510 | | After 12 months | | | 2,922 | | | | — | | | | 2,922 | | | | 2,960 | | | | 55 | | | | 3,015 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 64,078 | | | ₩ | 1,543 | | | ₩ | 65,621 | | | ₩ | 67,375 | | | ₩ | 3,180 | | | ₩ | 70,555 | | | | | | | | | | | | | | | | | | | | |
Long-term borrowings The aggregate amount of contractual maturities of alllong-term borrowings (comprising debentures and debt) as of December 31, 20142017 was as follows: | | | | | | | As of December 31, 20142017 | | | | (in billions of Won) | | Due in 2015
| | ₩ | 8,781 | | Due in 2016
| | | 10,343 | | Due in 2017
| | | 5,154 | | Due in 2018 | | ₩ | 2,08012,301 | | Due in 2019 | | | 1,13312,212 | | Due in 2020 | | | 10,690 | | Due in 2021 | | | 3,880 | | Due in 2022 | | | 5,242 | | Thereafter | | | 4,6183,717 | | | | | | | Grosslong-term borrowings | | | 32,10948,042 | | Fair value adjustments | | | 54(6 | ) | Deferred financing costs | | | (2 | ) | Discount | | | (539 | ) | | | | | | Totallong-term borrowings, net | | ₩ | 32,156 47,995 | | | | | | |
Short-term borrowings The following table presents information regarding ourshort-term borrowings (borrowings with an original maturity of one year or less) for the periods indicated: | | | | | | | | | | | | | | | As of and for the Year Ended December 31, | | | | 2012 | | | 2013 | | | 2014 | | | | (in billions of Won, except percentages) | | Call money: | | | | | | | | | | | | | Year-end balance | | ₩ | 2,597 | | | ₩ | 2,648 | | | ₩ | 2,882 | | Average balance (1) | | | 4,788 | | | | 4,679 | | | | 4,164 | | Maximum balance (2) | | | 5,043 | | | | 5,835 | | | | 5,503 | | Average interest rate (3) | | | 2.38 | % | | | 2.12 | % | | | 1.87 | % | Year-end interest rate | | | 0.15-2.72 | % | | | 0.17-5.23 | % | | | 0.10-3.61 | % | Borrowings from the Bank of Korea: (4) | | | | | | | | | | | | | Year-end balance | | ₩ | 782 | | | ₩ | 558 | | | ₩ | 1,003 | | Average balance (1) | | | 745 | | | | 649 | | | | 763 | | Maximum balance (2) | | | 953 | | | | 917 | | | | 1,048 | | Average interest rate (3) | | | 1.48 | % | | | 1.08 | % | | | 0.92 | % | Year-end interest rate | | | 1.25 | % | | | 0.50-1.00 | % | | | 0.50-1.00 | % | Other short-term borrowings: (5) | | | | | | | | | | | | | Year-end balance | | ₩ | 7,382 | | | ₩ | 4,963 | | | ₩ | 9,025 | | Average balance (1) | | | 9,766 | | | | 6,166 | | | | 7,460 | | Maximum balance (2) | | | 12,340 | | | | 7,064 | | | | 9,164 | | Average interest rate (3) | | | 2.11 | % | | | 1.25 | % | | | 1.41 | % | Year-end interest rate | | | 0.24-5.47 | % | | | 0.00-4.81 | % | | | 0.00-8.62 | % |
| | | | | | | | | | | | | | | As of and for the Year Ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won, except percentages) | | Call money: | | | | | | | | | | | | | Year-end balance | | ₩ | 2,091 | | | ₩ | 2,940 | | | ₩ | 1,299 | | Average balance(1) | | | 3,016 | | | | 2,576 | | | | 3,405 | | Maximum balance(2) | | | 4,049 | | | | 3,422 | | | | 3,997 | | Average interest rate(3) | | | 1.20 | % | | | 1.06 | % | | | 1.31 | % | Year-end interest rate | | | 0.24-5.00 | % | | | 0.08-3.30 | % | | | 1.20-2.20 | % | Borrowings from the Bank of Korea:(4) | | | | | | | | | | | | | Year-end balance | | ₩ | 1,421 | | | ₩ | 1,644 | | | ₩ | 1,889 | | Average balance(1) | | | 1,323 | | | | 1,571 | | | | 1,805 | | Maximum balance(2) | | | 1,610 | | | | 1,714 | | | | 1,935 | | Average interest rate(3) | | | 0.72 | % | | | 0.68 | % | | | 0.69 | % | Year-end interest rate | | | 0.50-0.75 | % | | | 0.50-0.75 | % | | | 0.50-0.75 | % | Othershort-term borrowings:(5) | | | | | | | | | | | | | Year-end balance | | ₩ | 7,220 | | | ₩ | 17,283 | | | ₩ | 22,632 | | Average balance(1) | | | 7,989 | | | | 10,437 | | | | 20,601 | | Maximum balance(2) | | | 8,766 | | | | 13,727 | | | | 23,436 | | Average interest rate(3) | | | 1.18 | % | | | 0.98 | % | | | 1.26 | % | Year-end interest rate | | | 0.00-8.62 | % | | | 0.00-5.40 | % | | | 0.00-7.00 | % |
(1) | Average balances are based on daily balances for our banking, credit card and investment and securities operations and monthly or quarterly balances for our other operations. |
(2) | Maximum balances are based onmonth-end balances. |
(3) | Average interest rates for the year are calculated by dividing the total interest expense by the average amount borrowed. |
(4) | Borrowings from the Bank of Korea generally mature within one month for borrowings in Won and six months for borrowings in foreign currencies. Theseshort-term borrowings were secured by securities totaling ₩990₩1,978 billion as of December 31, 2014. 2017. |
(5) | Othershort-term borrowings include securities sold under repurchase agreement, bills sold, borrowings and debentures. Othershort-term borrowings have maturities of one year or less. Securities sold under repurchase agreements were secured by securities totaling ₩2,412₩10,136 billion as of December 31, 2014. 2017. |
Supervision and Regulation Principal Regulations Applicable to Financial Holding Companies General The Financial Holding Company Act, last amended on May 28, 2014,April 18, 2017, regulates Korean financial holding companies and their subsidiaries. The entities that regulate and supervise Korean financial holding companies and their subsidiaries are the Financial Services Commission and the Financial Supervisory Service. The Financial Services Commission exerts direct control over financial holding companies pursuant to the Financial Holding Company Act. Among other things, the Financial Services Commission approves the establishment of financial holding companies, issues regulations on the capital adequacy of financial holding companies and their subsidiaries, and drafts regulations relating to the supervision of financial holding companies. Following the instructions and directives of the Financial Services Commission, the Financial Supervisory Service supervises and examines financial holding companies and their subsidiaries. In particular, the Financial Supervisory Service sets requirements relating to Korean financial holding companies’ liquidity and capital adequacy ratios and establishes reporting requirements within the authority delegated under the Financial Services Commission regulations. Financial holding companies must submit quarterly reports to the Financial Supervisory Service discussing business performance, financial status and other matters identified in the Enforcement Decree of the Financial Holding Company Act. Under the Financial Holding Company Act, a financial holding company is a company which primarily engages in controlling its subsidiaries by holding equity stakes in them equal in aggregate to at least 50% of the financial holding company’s aggregate assets based on its balance sheet as of the end of the immediately preceding fiscal year. A company is required to obtain approval from the Financial Services Commission to become a financial holding company. A financial holding company may engage only in controlling the management of its subsidiaries, as well as certain ancillary activities including: financially supporting its direct and indirect subsidiaries; raising capital necessary for investment in its subsidiaries or providing financial support to its direct and indirect subsidiaries; supporting the business of its direct and indirect subsidiaries, forincluding the joint development and marketing of newfinancial products; providing data processing, legal, accounting and other resources and services that have been commissioned by its direct and indirect subsidiaries so as to support their operations; and any other businesses exempted from authorization, permission or approval under the applicable laws and regulations. The Financial Holding Company Act requires every financial holding company (other than a financial holding company that is controlled by another financial holding company) and its subsidiaries to obtain prior approval from the Financial Services Commission before acquiring control of another company or to file a report with the Financial Services Commission within 30 days thereafter in certain cases (including acquiring control of another company whose assets are less than ₩100 billion as of the end of the immediately preceding fiscal year). In addition, the Financial Services Commission must grant permission to liquidate or to merge with any other company before the liquidation or merger. A financial holding company must report to the Financial Services Commission when certain events, including the following, occur: when its officers orthe largest shareholder changes; in the case of a bank holding company, when a major shareholderinvestor changes; when the shareholding of the controlling shareholder (i.e., the “largest shareholder” or a “principal shareholder,” each as defined in the Financial Holding Company Act) or a person who has a “special relationship” with such controlling shareholder (as defined in the Enforcement Decree of the Financial Holding Company Act) changes by 1% or more of the total issued and outstanding voting shares of the financial holding company; when it changes its corporate name; when there is a cause for its dissolution; and when it or its subsidiaries cease to control any of their respective direct or indirect subsidiaries by disposing of their shares of such direct or indirect subsidiary. Capital Adequacy The Financial Holding Company Act does not provide for a minimumpaid-in capital requirement related to financial holding companies. However, all financial holding companies are required to maintain a specified level of solvency. In addition, with respect to the allocation of net profit earned in a fiscal term, a financial holding company must set aside in its legal reserve an amount equal to at least 10% of its net income after tax each time it pays dividends on its net profits earned until its legal reserve reaches at least the aggregate amount of itspaid-in capital. A bank holding company, which is a financial holding company controlling banks or other financial institutions conducting banking business as prescribed in the Financial Holding Company Act, iswas required to maintain a total minimum consolidated capital adequacy ratio of 8.0%.8.875% (including applicable additional capital buffers and requirements as described below) as of December 31, 2016. “Consolidated capital adequacy ratio” is defined as the ratio of equity capital as a percentage ofrisk-weighted assets on a consolidated basis, determined in accordance with the Financial Services Commission requirements that have been formulated based on Bank of International Settlements (“BIS”) standards. “Equity capital,” as applicable to bank holding companies, is defined as the sum of common equity Tier I capital, additional Tier I capital and Tier II capital less any deductible items, each as defined under the Regulation on the Supervision of Financial Holding Companies. “Risk-weighted“Risk-weighted assets” is defined as the sum of creditrisk-weighted assets and marketrisk-weighted assets. Pursuant to the amended regulations promulgated by the Financial Services Commission commencing in 2013 to implement Basel III, Korean bank holding companies were required to maintain a minimum ratio of common equity Tier I capital torisk-weighted assets of 3.5% and Tier I capital torisk-weighted assets of 4.5% from December 1, 2013, which minimum ratios were increased to 4.0% and 5.5%, respectively, from January 1, 2014 and increased further to 4.5% and 6.0%, respectively, from January 1, 2015. Such requirements are in addition to thepre-existing requirement for a minimum ratio of Tier I and Tier II capital (less any capital deductions) torisk-weighted assets of 8.0%, which remains unchanged. The amended regulations also contemplaterequire an additional capital conservation buffer of 0.625% starting1.25% in 2016,2017 and 1.875% in 2018, with such buffer to increase in stages to 2.5% by 2019, as well as a potential counter-cyclical capital buffer of up to 2.5%, which is determined on a quarterly basis by the Financial Services Commission. Furthermore, we were designated as one of five domestic systemically important banks for 2017 by the Financial Services Commission and were subject to an additional capital requirement of 0.50% in 2017. In June 2017, we were again designated as a domestic systemically important bank for 2018, which would subject us to an additional capital requirement of 0.75% in 2018, with such potential requirement to increase to 1.0% by 2019. Liquidity All financial holding companies are required to match the maturities of their assets and liabilities on anon-consolidated basis in accordance with the Financial Holding Company Act in order to ensure liquidity. Financial holding companies must: maintain a Won liquidity ratio (defined as Won assets due within one month, including marketable securities, divided by Won liabilities due within one month) of not less than 100% on anon-consolidated basis; maintain a foreign currency liquidity ratio (defined as foreign currency liquid assets due within three months divided by foreign currency liabilities due within three months) of not less than 80% on anon-consolidated basis (except that such requirement is not applicable to a financial holding company whose foreign currency liabilities constitute less than 1% of its total assets); maintain a ratio of foreign currency liquid assets due within seven days less foreign currency liabilities due within seven days as a percentage of total foreign currency assets of not less than 0% on anon-consolidated basis (except that such requirement is not applicable to a financial holding company whose foreign currency liabilities constitute less than 1% of its total assets); maintain a ratio of foreign currency liquid assets due within a month less foreign currency liabilities due within a month as a percentage of total foreign currency assets of not less than negative 10% on anon-consolidated basis (except that such requirement is not applicable to a financial holding company whose foreign currency liabilities constitute less than 1% of its total assets);and make quarterly reports regarding their Won liquidity and foreign currency liquidity to the Financial Supervisory Service. Financial Exposure to Any Individual Customer and Major ShareholderInvestor Subject to certain exceptions, the aggregate credit (as defined in the Financial Holding Company Act, the Bank Act, the Financial Investment Services and Capital Markets Act, the Insurance Business Act, the Mutual Savings Bank Act and the Specialized Credit Financial Business Act, respectively) of a financial holding company and its direct and indirect subsidiaries that are banks, merchant banks, financial investment companies, insurance companies, savings banks or specialized credit financial business companies (which we refer to as “Financial Holding Company Total Credit”) to a single group of companies that belong to the same conglomerate as defined in the Monopoly Regulations and Fair Trade Act will not be permitted to exceed 25% of net aggregate equity capital (as defined below). “Net aggregate equity capital” is defined under the Enforcement Decree of the Financial Holding Company Act as the sum of: (1) in case of a financial holding company, the capital amount as defined in Article 24-3(7), Item 2 of the Enforcement Decree of the Financial Holding Company Act;
| (1) | in case of a financial holding company, the capital amount as defined in Article24-3(7), Item 2 of the Enforcement Decree of the Financial Holding Company Act; |
(2) in case of a bank, the capital amount as defined in Article 2(1), Item 5 of the Bank Act;
| (2) | in case of a bank, the capital amount as defined in Article 2(1), Item 5 of the Bank Act; |
(3) in case of a merchant bank, the capital amount as defined in Article 342(1) of the Financial Investment Services and Capital Markets Act; and
| (3) | in case of a merchant bank, the capital amount as defined in Article 342(1) of the Financial Investment Services and Capital Markets Act; and |
(4) in case of a financial investment company, the capital amount as defined in Article 37(3) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act;
| (4) | in case of a financial investment company, the capital amount as defined in Article 37(3) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act; |
(5) in case of an insurance company, the capital amount as defined in Article 2, Item 15 of the Insurance Business Act;
| (5) | in case of an insurance company, the capital amount as defined in Article 2, Item 15 of the Insurance Business Act; |
(6) in case of a savings bank, the capital amount as defined in Article 2, Item 4 of the Mutual Savings Bank Act; and
| (6) | in case of a savings bank, the capital amount as defined in Article 2, Item 4 of the Mutual Savings Bank Act; and |
(7) in case of a specialized credit financial business company, the capital amount as defined in Article 2, Item 19 of the Specialized Credit Financial Business Act;
| (7) | in case of a specialized credit financial business company, the capital amount as defined in Article 2, Item 19 of the Specialized Credit Financial Business Act; |
less the sum of: (1) the amount of shares of direct and indirect subsidiaries held by the financial holding company;
| (1) | the amount of shares of direct and indirect subsidiaries held by the financial holding company; |
(2) the amount of shares that are cross-held by each direct and indirect subsidiary that is a bank, merchant bank, financial investment company, insurance company, savings bank or specialized credit financial business company; and
| (2) | the amount of shares that arecross-held by each direct and indirect subsidiary that is a bank, merchant bank, financial investment company, insurance company, savings bank or specialized credit financial business company; and |
(3) the amount of shares of a financial holding company held by such direct and indirect subsidiaries that are banks, merchant banks, financial investment companies, insurance companies, savings banks or specialized credit financial business companies.
| (3) | the amount of shares of a financial holding company held by such direct and indirect subsidiaries that are banks, merchant banks, financial investment companies, insurance companies, savings banks or specialized credit financial business companies. |
The Financial Holding Company Total Credit to a single individual or judicial person may not exceed 20% of the net aggregate equity capital. In addition, the Financial Holding Company Total Credit to a shareholder holding (together with the persons who have a “special relationship” with the shareholder, as defined in the Enforcement Decree of the Financial Holding Company Act) in aggregate more than 10% of the total issued and outstanding voting shares of a financial holding company generally may not exceed the lesser of (x) 25% of the net aggregate equity capital and (y) the amount of the equity capital of the financial holding company multiplied by the shareholding ratio of the shareholder (together with the persons who have a special relationship with the shareholder). Further, the total sum of credits (as defined in the Financial Holding Company Act, the Bank Act, the Financial Investment Services and Capital Markets Act, the Insurance Business Act, the Mutual Savings Bank Act and the Specialized Credit Financial Business Act, respectively) of a bank holding company and its direct and indirect subsidiaries that are banks, merchant banks, financial investment companies, insurance companies, savings banks or specialized credit financial business companies as applicable (“Bank Holding Company Total Credit”) extended to a “major shareholder”investor” (as defined below) (together with the persons who have a special relationship with that major shareholder)investor) will not be permitted to exceed the lesser of (x) 25% of the net aggregate equity capital and (y) the amount of the equity capital of the bank holding company multiplied by the shareholding ratio of the major shareholder,investor, except for certain cases. “Major shareholder”Investor” is defined as: a shareholder holding (together with persons who have a special relationship with that shareholder), in excess of 10% (or in the case of a bank holding company controlling regional banks only, 15%) in the aggregate of the bank holding company’s total issued and outstanding voting shares; or a shareholder holding (together with persons who have a special relationship with that shareholder), more than 4% in the aggregate of the total issued and outstanding voting shares of the bank holding company controlling nationwide banks, where the shareholder is the largest shareholder or has actual control over the major business affairs of the bank holding company through, for example, appointment and dismissal of the officers pursuant to the Enforcement Decree of the Financial Holding Company Act. In addition, the total sum of the Bank Holding Company Total Credit granted to all of a bank holding company’s major shareholdersinvestor must not exceed 25% of the bank holding company’s net aggregate equity capital. Furthermore, any bank holding company that, together with its direct and indirect subsidiaries, intends to extend credit to the bank holding company’s major shareholderinvestor in an amount equal to or exceeding the lesser of (x) the amount equivalent to 0.1% of the net aggregate equity capital and (y) ₩5 billion, in any single transaction, must obtain prior unanimous board resolutions and then, immediately after providing the credit, must file a report to the Financial Services Commission and publicly disclose the filing of the report. Restrictions on Transactions Among Direct and Indirect Subsidiaries and Financial Holding Company Generally, a direct or indirect subsidiary of a financial holding company may not extend credits (excluding the amount of corporate credit card payments issued by a direct or indirect subsidiary of a financial holding company that is engaged in the banking business) to that financial holding company. In addition, a direct or indirect subsidiary of a financial holding company may not extend credits (excluding the amount of corporate credit card payments issued by a direct or indirect subsidiary of a financial holding company that is engaged in the banking business) to other direct or indirect subsidiaries of the financial holding company in excess of 10% of its capital amount on an individual basis or to those subsidiaries in excess of 20% of its capital amount on an aggregate basis. The subsidiary extending the credit must also obtain an adequate level of collateral depending on the type of such collateral from the other subsidiaries unless the credit is otherwise approved by the Financial Services Commission. The adequate level of collateral for each type of collateral is as follows: (1)
| (1) | for deposits and installment savings, obligations of the Korean government or the Bank of Korea, obligations guaranteed by the Korean government or the Bank of Korea, obligations secured by securities issued or guaranteed by the Korean government or the Bank of Korea, 100% of the credit extended; |
| (2) | for obligations of municipal governments under the Local Autonomy Act, local public enterprise under the Local Public Enterprises Act and investment institutions and otherquasi-investment institutions under the Basic Act on the Management ofGovernment-Invested Institution or for obligations guaranteed by, or secured by the securities issued or guaranteed by, the aforementioned entities pursuant to the relevant regulations, 110% of the credit extended; and |
(2) for obligations of municipal governments under the Local Autonomy Act, local public enterprise under the Local Public Enterprises Act and investment institutions and other quasi-investment institutions under the Basic Act on the Management of Government-Invested Institution or for obligations guaranteed by, or secured by the securities issued or guaranteed by, the aforementioned entities pursuant to the relevant regulations, 110% of the credit extended; and
(3) for any property other than those set forth in paragraphs (1) and (2) above, 130% of the credit extended.
| (3) | for any property other than those set forth in paragraphs (1) and (2) above, 130% of the credit extended. |
Subject to certain exceptions, a direct or indirect subsidiary of a financial holding company is prohibited from owning the shares of any other direct or indirect subsidiaries (other than those directly controlled by that direct or indirect subsidiary) under the common control of the financial holding company. Subject to certain exceptions, a direct or indirect subsidiary of a financial holding company is also prohibited from owning the shares of the financial holding company controlling that direct or indirect subsidiary. The transfer of certain assets classified as precautionary or below between a financial holding company and its direct or indirect subsidiary or between the direct and indirect subsidiaries of a financial holding company is prohibited except for: (1) transfers to a special purpose company, or entrustment with a trust company, for an asset-backed securitization transaction under the Asset-Backed Securitization Act;
| (1) | transfers to a special purpose company, or entrustment with a trust company, for anasset-backed securitization transaction under theAsset-Backed Securitization Act; |
(2) transfers to a mortgage-backed securities issuance company for a mortgage securitization transaction;
| (2) | transfers to amortgage-backed securities issuance company for a mortgage securitization transaction; |
(3) transfers or in-kind contributions to a corporate restructuring vehicle under the Corporate Restructuring Investment Companies Act; and
| (3) | transfers orin-kind contributions to a corporate restructuring vehicle under the Corporate Restructuring Investment Companies Act; and |
(4) transfers to a corporate restructuring company under the Industry Promotion Act.
| (4) | transfers to a corporate restructuring company under the Industry Promotion Act. |
Disclosure of Management Performance For the purpose of protecting the depositors and investors in the subsidiaries of financial holding companies, the Financial Services Commission requires financial holding companies to disclose certain material matters including: (1) financial condition and profit and loss of the financial holding company and its direct and indirect subsidiaries;
| (1) | financial condition and profit and loss of the financial holding company and its direct and indirect subsidiaries; |
(2) fund-raising by the financial holding company and its direct and indirect subsidiaries and the appropriation of such funds;
| (2) | fund-raising by the financial holding company and its direct and indirect subsidiaries and the appropriation of such funds; |
(3) any sanctions levied on the financial holding company and its direct and indirect subsidiaries under the Financial Holding Company Act or any corrective measures or sanctions under the Law on Improvement of Structure of Financial Industry; and
| (3) | any sanctions levied on the financial holding company and its direct and indirect subsidiaries under the Financial Holding Company Act or any corrective measures or sanctions under the Law on Improvement of Structure of Financial Industry; and |
(4) occurrence of any non-performing assets or financial incident that may have a material adverse effect, or any other event as prescribed in the applicable regulations.
| (4) | occurrence of anynon-performing assets or financial incident that may have a material adverse effect, or any other event as prescribed in the applicable regulations. |
Restrictions on Shareholdings in Other Companies Generally, a financial holding company may not own (i) more than 5% of the total issued and outstanding shares of anotherfinance-related company, (ii) any shares of its affiliates, other than its direct or indirect subsidiaries or (iii) any shares of anon-finance-related company. Restrictions on Shareholdings by Direct and Indirect Subsidiaries Generally, a direct subsidiary of a financial holding company may not control any other company other than, as an indirect subsidiary of the financial holding company: financial institutions established in foreign jurisdictions; certain financial institutions which are engaged in any business that the direct subsidiary may conduct without any licenses or permits; certain financial institutions whose business is related to the business of the direct subsidiary as described by the Enforcement Decree of the Financial Holding Company Act (for example, a bank subsidiary may control only credit information companies, credit card companies and financial investment companies with a dealing, brokerage, collective investment, investment advice, discretionary investment management and/or trust license); certain financial institutions whose business is related to the financial business as prescribed by the regulations of the Ministry of Strategy and Finance; and certain companies which are not financial institutions but whose business is related to the financial business of the financial holding company as prescribed by the Enforcement Decree of the Financial Holding Company Act (for example, afinance-related research company or afinance-related information technology company). Acquisition of such indirect subsidiaries by direct subsidiaries of a financial holding company requires prior permission from the Financial Services Commission or the submission of a report to the Financial Services Commission, depending on the types of the indirect subsidiaries and the amount of total assets of the indirect subsidiaries. Subject to certain exceptions, an indirect subsidiary of a financial holding company may not control any other company. If an indirect subsidiary of a financial holding company had control over another company at the time it became such an indirect subsidiary, the indirect subsidiary is required to dispose of its interest in the other company within two years from such time. Restrictions on Transactions between a Bank Holding Company and its Major ShareholderInvestor A bank holding company and its direct and indirect subsidiaries may not acquire (including through their respective trust accounts) shares issued by the bank holding company’s major shareholderinvestor in excess of 1% of the net aggregate equity capital (as defined above). In addition, if those entities intend to acquire shares issued by that major shareholderinvestor in any single transaction equal to or exceeding the lesser of (x) the amount equivalent to 0.1% of the net aggregate equity capital and (y) ₩5 billion, that entity must obtain prior unanimous board resolutions and then, immediately after the acquisition, file a report to the Financial Services Commission and publicly disclose the filing of the report. Restriction on Ownership of a Financial Holding Company Under the Financial Holding Company Act, a financial institution generally may not control a financial holding company. In addition, any single shareholder and persons who have a special relationship with that shareholder may acquire beneficial ownership of up to 10% of the total issued and outstanding shares with voting rights of a bank holding company that controls nationwide banks or 15% of the total issued and outstanding shares with voting rights of a bank holding company that controls only regional banks, subject to certain exceptions. Among others, the Korean government and the Korea Deposit Insurance Corporation are not subject to this limit. “Non-financial“Non-financial business group companies” (as defined below), however, may not acquire the beneficial ownership of shares of a bank holding company controlling nationwide banks in excess of 4% of that bank holding company’s outstanding voting shares unless they obtain the approval of the Financial Services Commission and agree not to exercise voting rights in respect of shares in excess of the 4% limit, in which case they may acquire beneficial ownership of up to 10%. Any other person (whether a Korean national or a foreign investor) may acquire no more than 10% of total voting shares issued and outstanding of a bank holding company controlling nationwide banks unless they obtain approval from the Financial Services Commission in each instance where the total holding will exceed 10% (or 15% in the case of a bank holding company controlling only regional banks), 25% or 33% of the total voting shares issued and outstanding of that bank holding company controlling nationwide banks. Furthermore, in the case where a person (including Korean and foreign investors, but excluding certain persons prescribed under the Enforcement Decree of the Financial Holding Company Act) (i) acquires in excess of 4% of the total issued and outstanding voting shares of any bank holding company (other than a bank holding company controlling only regional banks), (ii) becomes the largest shareholder of such bank holding company in which such person has acquired in excess of 4% of the total issued and outstanding voting shares, (iii) changes its shareholding in such bank holding company, in which it has acquired in excess of 4% of the total issued and outstanding voting shares, by 1% or more of the total issued and outstanding voting shares of such bank holding company or (iv) is a private equity fund or an investment purpose company holding in excess of 4% of the total outstanding voting shares of a bank holding company and changes its members or shareholders, such person must file a report on such change with the Financial Services Commission (x) in case of (i) and (iii), within ten days after the end of the monthquarter in which such change occurred, or (y) in case of (ii) and (iv), within ten days after the end of the quartermonth in which such change occurred. “Non-financial business group companies” as defined under the Financial Holding Company Act include: (1) any same shareholder group where the aggregate net assets of all non-financial business companies belonging to that group equals or exceeds 25% of the aggregate net assets of all members of that group;
| (1) | any same shareholder group where the aggregate net assets of allnon-financial business companies belonging to that group equals or exceeds 25% of the aggregate net assets of all members of that group; |
(2) any same shareholder group where the aggregate assets of all non-financial business companies belonging to that group equals or exceeds ₩2 trillion;
| (2) | any same shareholder group where the aggregate assets of allnon-financial business companies belonging to that group equals or exceeds ₩2 trillion; |
(3) any mutual fund where a same shareholder group identified in (1) or (2) above beneficially owns and/or exercises the voting rights of more than 4% of the total issued and outstanding voting shares of that mutual fund;
| (3) | any mutual fund where a same shareholder group identified in (1) or (2) above beneficially owns and/or exercises the voting rights of more than 4% of the total issued and outstanding voting shares of that mutual fund; |
(4) any private equity fund (a) where a person falling under any of items (1) through (3) above is a limited partner holding not less than 10% of the total amount of contributions to the private equity fund, or (b) where a person falling under any of items (1) through (3) above is a general partner, or (c) where the total equity of the private equity fund acquired by each affiliate belonging to several enterprise groups subject to the limitation on mutual investment is 30% or more of the total amount of contributions to the private equity fund; or
| (4) | any private equity fund (a) where a person falling under any of items (1) through (3) above is a limited partner holding not less than 10% of the total amount of contributions to the private equity fund, or (b) where a person falling under any of items (1) through (3) above is a general partner, or (c) where the total equity of the private equity fund acquired by each affiliate belonging to several enterprise groups subject to the limitation on mutual investment is 30% or more of the total amount of contributions to the private equity fund; or |
(5) the investment purpose company concerned, where a private equity fund falling under item (4) above acquires or holds stocks in excess of 4% of the stock or equity of such company or exercises de facto control over significant managerial matters of such company through appointment or dismissal of executives or in any other manner.
| (5) | the investment purpose company concerned, where a private equity fund falling under item (4) above acquires or holds stocks in excess of 4% of the stock or equity of such company or exercisesde facto control over significant managerial matters of such company through appointment or dismissal of executives or in any other manner. |
Sharing of Customer Information among Financial Holding Company and its Subsidiaries Under the Act on Use and Protection of Credit Information, any individual customer’s credit information must be disclosed or otherwise used by financial institutions only to determine, establish or maintain existing commercial transactions with them and only after obtaining written consent to use that information. In addition, under the Act on Real Name Financial Transactions and Confidentiality, an individual working at a financial institution may not provide or reveal information or data concerning the contents of financial transactions to other persons unless such individual receives a request or consent in writing from the holder of a title deed, except under certain exceptions stipulated in the Act. Under the Financial Holding Company Act, a financial holding company and its direct and indirect subsidiaries, however, may share certain credit information of individual customers among themselves for internal management purposes outlined in the Enforcement Decree of the Financial Holding Company Act (such as credit risk management, internal control and customer analysis), without the customers’ written consent, subject to the methods and procedures for provision of such information set forth therein. A subsidiary financial investment company with a dealing and/or brokerage license of a financial holding company may provide that financial holding company and its other direct and indirect subsidiaries information relating to the aggregate amount of cash or securities that a customer of the financial investment company with a dealing and/or brokerage license has deposited, for internal management purposes outlined in the Enforcement Decree of the Financial Holding Company Act, subject to the methods and procedures for provision of such information set forth therein. Recent amendments to the Financial Holding Company Act, which became effective on November 29, 2014, limit the scope of credit information that may be shared without the customers’ prior consent and require certain procedures for provision of customer information as prescribed by the Financial Services Commission. Beginning in MayNovember 29, 2015,2014, notice must be given to customers at least once a year regarding (i) the provider of customer information, (ii) the recipient of customer information, (iii) the purpose of providing the information and (iv) the categories of the information provided. Principal Regulations Applicable to Banks The banking system in Korea is governed by the Bank Act of 1950, as amended (the “Bank Act”) and the Bank of Korea Act of 1950, as amended (the “Bank of Korea Act”). In addition, Korean banks are subject to the regulations and supervision of the Bank of Korea, the Monetary Policy Committee of the Bank of Korea, the Financial Services Commission and its executive body, the Financial Supervisory Service. The Bank of Korea, established in June 1950 under the Bank of Korea Act, performs the customary functions of a central bank. It seeks to contribute to the sound development of the national economy by price stabilization through establishing and implementing efficient monetary and credit policies.policies with a focus on financial stability. The Bank of Korea acts under instructions of the Monetary Policy Committee, the supremepolicy-making body of the Bank of Korea. Under the Bank of Korea Act, the Monetary Policy Committee’s primary responsibilities are to formulate monetary and credit policies and to determine the operations, management and administration of the Bank of Korea. The Financial Services Commission, established on April 1, 1998, regulates commercial banks pursuant to the Bank Act, including establishing guidelines on capital adequacy of commercial banks, and promulgates regulations relating to supervision of banks. Furthermore, pursuant to the Amendment to the Government Organization Act and the Bank Act on May 24, 1999, the Financial Services Commission, instead of the Ministry of Strategy and Finance, now regulates market entry into the banking business. The Financial Supervisory Service, was established on January 2, 1999, as a unified body of the former Bank Supervisory Authority (the successor to the Office of Bank Supervision), the Securities Supervisory Board, the Insurance Supervisory Board and the Credit Management Fund. The Financial Supervisory Service is subject to the instructions and directives of the Financial Services Commission and carries out supervision and examination of commercial banks. In particular, the Financial Supervisory Service sets requirements both for the prudent control of liquidity and for capital adequacy and establishes reporting requirements pursuant to the authority delegated to it under the Financial Services Commission regulations, pursuant to which banks are required to submit annual reports on financial performance and shareholdings, regular reports on management strategy andnon-performing loans, includingwrite-offs, and management of problem companies and plans for the settlement of bad loans. Under the Bank Act, approval to commence a commercial banking business or along-term financing business must be obtained from the Financial Services Commission. Commercial banking business is defined as the lending of funds acquired predominantly from the acceptance of demand deposits for a period not exceeding one year or subject to the limitation established by the Financial Services Commission, for a period between one year and three years.Long-term financing business is defined as the lending, for periods in excess of one year, of funds acquired predominantly frompaid-in capital, reserves or other retained earnings, the acceptance of time deposits with maturities of at least one year, or the issuance of debentures or other bonds. A bank wishing to enter into any business other than commercial banking andlong-term financing businesses, such as thea trust business, must obtain approval from the Financial Services Commission. Approval to merge with any other banking institution, to liquidate, to spin off, to close a banking business or to transfer all or a part of a business must also be obtained from the Financial Services Commission. If the Financial Services Commission deems a bank’s financial condition to be unsound or if a bank fails to meet the applicable capital adequacy ratio set forth under Korean law, the Financial Services Commission may order: admonitions warnings or reprimandswarnings with respect to its officers and employees; officers; capital increases or reductions; assignments of contractual rights and obligations relating to financial transactions; a suspension of performance by its officers of their duties and the appointment of receivers; stock cancellations or consolidations;
disposals of property holdings; holdings or closures of subsidiaries or branch offices or downsizing; stock cancelations or consolidations; mergers with other financial institutions; acquisition of such bank by a third party; or and suspensions of a part or all of its business operations. Capital Adequacy The Bank Act requires nationwide banks, such as us, to maintain a minimumpaid-in capital of ₩100 billion and regional banks to maintain a minimumpaid-in capital of ₩25 billion. All banks, including foreign bank branches in Korea, are also required to maintain a prescribed solvency position. A bank must also set aside in its legal reserve an amount equal to at least 10% of the net income after tax each time it pays dividends on net profits earned until its legal reserve reaches at least the aggregate amount of itspaid-in capital. Under the Detailed Regulation on the Supervision of the Banking Business, the capital of a bank is divided into two categories, Tier I and Tier II capital. Tier I capital (core capital) consists of (i) common equity Tier I capital, includingpaid-in capital, capital surplus and retained earnings related to common equity and accumulated other comprehensive gains and losses, and (ii) additional Tier I capital, includingpaid-in capital and capital surplus related to hybrid Tier I capital instruments that, among other things, qualify as contingent capital and are subordinated to subordinated debt. Tier II capital (supplementary capital) consists of, among other things, capital and capital surplus from the issuance of Tier II capital, allowances for loan losses on loans classified as “normal” or “precautionary,” subordinated debt and other capital securities which meet the standards prescribed by the governor of the Financial Supervisory Service under Article 26(2) of the Regulation on the Supervision of the Banking Business. All banks must meet minimum ratios of Tier I and Tier II capital (less any capital deductions) torisk-weighted assets, determined in accordance with Financial Services Commission requirements that have been formulated based on BIS standards. These requirements were adopted and became effective in 1996, and were amended effective January 1, 2008 upon the implementation by the Financial Supervisory Service of Basel II. Under such requirements, all domestic banks and foreign bank branches mustwere required to meet a minimum ratio of Tier I and Tier II capital (less any capital deductions) torisk-weighted assets of 8%. InCommencing in July and September 2013, the Financial Services Commission promulgated a series of amended regulations implementing Basel III, in Korea, pursuant to which Korean banks and bank holding companies were required to maintain a minimum ratio of common equity Tier I capital torisk-weighted assets of 3.5% and Tier I capital torisk-weighted assets of 4.5% from December 1, 2013, which minimum ratios were increased to 4.0% and 5.5%, respectively, from January 1, 2014 and increased further to 4.5% and 6.0%, respectively, from January 1, 2015. Such requirements are in addition to thepre-existing requirement for a minimum ratio of Tier I and Tier II capital (less any capital deductions) torisk-weighted assets of 8.0%, which remains unchanged. The amended regulations also contemplaterequire an additional capital conservation buffer of 0.625% starting1.25% in 2016,2017 and 1.875% in 2018, with such buffer to increase in stages to 2.5% by 2019, as well as a potential counter-cyclical capital buffer of up to 2.5%, which is determined on a quarterly basis by the Financial Services Commission. Furthermore, we were designated as one of five domestic systemically important banks for 2017 by the Financial Services Commission and were subject to an additional capital requirement of 0.50% in 2017. In June 2017, we were again designated as a domestic systemically important bank for 2018, which would subject us to an additional capital requirement of 0.75% in 2018, with such potential requirement to increase to 1.0% by 2019. Under the Detailed Regulation on the Supervision of the Banking Business, the followingrisk-weight ratios must be applied by Korean banks in respect of home mortgage loans: | (1) | for those banks which adopted a standardized approach for calculating credit risk capital requirements, arisk-weight ratio of 35% (only in the case where the loan is fully secured by a first ranking mortgage) and, with respect tohigh-risk home mortgage loans, 50% or 70%; and |
| (2) | for those banks which adopted an internalratings-based approach for calculating credit risk capital requirements, arisk-weight ratio calculated with reference to the probability of default, loss given default and exposure at default, each as defined under the Detailed Regulation on the Supervision of the Banking Business. |
Liquidity All banks are required to ensure adequate liquidity by matching the maturities of their assets and liabilities in accordance with the Regulation on the Supervision of the Banking Business. Banks may not invest an amount exceeding 100% of their Tier I and Tier II capital (less any capital deductions) in equity securities and certain other securities with a redemption period of over three years. This stipulation does not apply to Korean government bonds, Monetary Stabilization Bonds issued by the Bank of Korea or debentures and stocks referred to in items 1 and 2, respectively, of paragraph (6) of Article 11 of the Act on the Improvement of the Structure of the Financial Industry. The Financial Services Commission alsouses the liquidity coverage ratio (described below) as the principal liquidity risk management measure, and currently requires each Korean bank to: maintain a liquidity coverage ratio (defined as the ratio of highly liquid assets to total net cash outflows over a one-month30-day period) of not less than 80%95%, from January 1, 20152018 until December 31, 2015,2018, with such minimum liquidity coverage ratio to increase in increments of 5% per annum to 100% by 2019; maintain a foreign currency liquidity coverage ratio (defined as the ratio of foreign currency assets due within three months to foreign currency liabilities due within three months) of not less than 85%; 70% from January 1, 2018 until December 31, 2018, with such minimum foreign currency liquidity coverage ratio to increase to 80% in 2019; and maintain a ratio of foreign currency assets due within seven days less foreign currency liabilities due within seven days, divided by total foreign currency assets, of not less than negative 3%;
maintain a ratio of foreign currency assets due within a month less foreign currency liabilities due within a month, divided by total foreign currency assets, of not less than negative 10%; and
submit monthly reports with respect to the maintenance of these ratios. The Monetary Policy Committee of the Bank of Korea is empowered to fix and alter minimum reserve requirements that banks must maintain against their deposit liabilities. The current minimum reserve ratio is:ratios are: 7% of average balances for Won currency demand deposits outstanding; 0% of average balances for Won currency employee asset establishment savings deposits, employeelong-term savings deposits, employee house purchase savings deposits,long-term house purchase savings deposits, householdlong-term savings deposits and employee preferential savings deposits outstanding (with respect toemployee-related deposits, only if such deposits were made prior to February 28, 2013); and 2% of average balances for Won currency time deposits, installment savings deposits, mutual installments, housing installments and certificates of deposit outstanding. For foreign currency deposit liabilities, a 2% minimum reserve ratio is applied to time deposits with a maturity of one month or longer, certificates of deposit with a maturity of 30 days or longer and savings deposits with a maturity of six months or longer and a 7% minimum reserve ratio is applied to other deposits. A 1% minimum reserve ratio applies to deposits in offshore accounts, immigrant accounts and resident accounts opened by foreign exchange banks as well as foreign currency certificates of deposit held by account holders of such offshore accounts, immigrant accounts and resident accounts opened by foreign exchange banks. Furthermore, pursuant tounder the Regulation on the Supervision of the Banking Business, foreign exchange agencies, including our subsidiary, Kookmin Bank, are required to hold “foreign currency safe assets” in an aggregate amount that is not less than the lower of (i) the product of (x) its total foreign currency-denominated debt maturing in one year or less multiplied by 2/12 and (y) an amount equal to one minus the “lowest rollover ratio” and (ii) 2% of its total foreign currency-denominated assets as shown in the balance sheet for the immediately preceding quarter. The “lowest rollover ratio” of a foreign exchange agency means the ratio of (A) its total debt with a maturity of one year or less (excluding overnight money) incurred in a particular month to (B) its total debt with maturity of one year or less (excluding overnight money) payable in that particular month, and is calculated by taking the lowest three month average from a period to be designated by the governor of the Financial Supervisory Service. Under the Regulation on the Supervision of Banking Business, foreign currency-denominated debt maturing in one year or less includes financial bonds, borrowings, call monies and repurchase selling denominated in foreign currencies and such other similar debt instruments denominated in a foreign currency as designated by the governor of the Financial Supervisory Service. “Foreign currency safe assets” are defined as cash denominated in foreign currency, deposits denominated in foreign currency with a central bank or financial institutions rated A or above, bonds issued or guaranteed by a government or central bank rated A or above or corporate bonds issued or guaranteed by corporations rated A or above. Under the Regulation on the Supervision of Banking Business, Kookmin Bank is also required to maintain a minimum “mid-“mid- tolong-term foreign exchange funding ratio” of 100%. “Mid-to“Mid-to long term foreign exchange funding ratio” refers to the ratio of (1) the total outstanding amount of foreign exchange borrowing with a maturity of more than one year to (2) the total outstanding amount of foreign exchange lending with a maturity of one year or more.
Amendments Relating to Net Stable Funding Ratio and Leverage Ratio Requirements Effective January 31, 2018, the Financial Services Commission implemented amendments to the Regulation on Supervision of the Banking Business that impose certain liquidity- and leverage-related ratio requirements on banks in Korea, in accordance with Basel III. Pursuant to these amendments, each Korean bank is required to: maintain a net stable funding ratio (defined as the ratio of the available amount of stable funding to the required amount of stable funding) of not less than 100%, where (i) the available amount of stable funding generally refers to the portion of liabilities and capital expected to be reliable over aone-year time horizon and (ii) the required amount of stable funding generally refers to the portion of assets requiring stable funding over a time horizon of one year or longer, each as calculated in accordance with the Detailed Regulation on Supervision of the Banking Business; maintain a leverage ratio (defined as the ratio of core capital to total exposures) of not less than 3%, where (i) core capital includespaid-in capital, capital surplus, retained earnings and hybrid Tier I capital instruments and (ii) total exposures includeon-balance sheet exposures andoff-balance sheet exposures, each as calculated in accordance with the Detailed Regulation on Supervision of the Banking Business; and submit monthly reports with respect to the maintenance of these ratios. Financial Exposure to Any Individual Customer andor Major Shareholder Under the Bank Act, subject to certain exceptions, the sum of large exposures by a bank—in other words, the total sum of its credits to single individuals, juridical persons or business groups that exceed 10% of the sum of Tier I and Tier II capital (less any capital deductions)—generally must not exceed five times the sum of Tier I and Tier II capital (less any capital deductions). In addition, subject to certain exceptions, banks generally may not extend credit (including loans, guarantees, purchases of securities (only in the nature of a credit) and any other transactions that directly or indirectly create credit risk) in excess of 20% of the sum of Tier I and Tier II capital (less any capital deductions) to a single individual or juridical person, or grant credit in excess of 25% of the sum of Tier I and Tier II capital (less any capital deductions) to a single group of companies as defined in the Monopoly Regulations and Fair Trade Act. Amendments to theThe Bank Act which became effective on July 28, 2002 strengthenedalso provides for certain restrictions on extending credits to a major shareholder. A “major shareholder” is defined as:
a shareholder holding (together with persons who have a special relationship with that shareholder) in excess of 10%; (or 15% in the case of regional banks) in the aggregate of the bank’s total issued and outstanding voting shares; or a shareholder holding (together with persons who have a special relationship with such shareholder) in excess of 4% in the aggregate of the bank’s (excluding regional banks) total issued and outstanding voting shares of a bank (excluding shares subject to the shareholding restrictions on “non-financial“non-financial business group companies” as described below), where such shareholder is the largest shareholder or has actual control over the major business affairs of the bank through, for example, appointment and dismissal of the officers pursuant to the Enforcement Decree of the Bank Act. Non-financial business group companies primarily consist of: (i) any single shareholding group whose non-financial company assets comprise no less than 25% of its aggregate net assets; (ii) any single shareholding group whose non-financial company assets comprise no less than ₩2 trillion in aggregate; or (iii) any mutual fund of which any single shareholding group identified in (i) or (ii) above, owns more than 9% of the total issued and outstanding shares. | has actual control over the major business affairs of the bank through, for example, appointment and dismissal of the officers pursuant to the Enforcement Decree of the Bank Act.Non-financial business group companies primarily consist of: (i) any single shareholding group whosenon-financial company assets comprise no less than 25% of its aggregate net assets; (ii) any single shareholding group whosenon-financial company assets comprise no less than ₩2 trillion in aggregate; or (iii) any investment company under the Financial Investment Services and Capital Markets Act of which any single shareholding group identified in (i) or (ii) above, owns more than 4% of the total issued and outstanding shares. |
Under these amendments,restrictions, banks may not extend credits to a major shareholder (together with persons who have a special relationship with that shareholder) in an amount greater than the lesser of (x) 25% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions) and (y) the relevant major shareholders’shareholder’s shareholding ratio multiplied by the sum of the bank’s Tier I and Tier II capital (less any capital deductions). In addition, the total sum of credits granted to all major shareholders must not exceed 25% of the bank’s Tier I and Tier II capital (less any capital deductions). Interest Rates Korean banks generally depend on deposits as their primary funding source. Under the Act on Registration of Credit Business and Protection of Finance Users and the regulations thereunder, interest rates on loans made by registered banks in Korea to individuals or small corporations, as defined under the Framework Act on Small and Medium Enterprises, may not exceed 34.9%24% per annum. Historically, interest rates on deposits and lending rates were regulated by the Monetary Policy Committee. ControlsThere are no controls on deposit interest rates in Korea, have been gradually reduced and, in February 2004, the Korean government removed restrictions on all interest rates, except for the prohibition on interest payments on current account deposits. This deregulation process has increased competition for deposits based on interest rates offered and, therefore, may increase a bank’s interest expense. Lending toSmall- andMedium-sized Enterprises In order to obtain funding from the Bank of Korea at concessionary rates for theirsmall- andmedium-sized enterprise loans, banks are required to allocate a certain minimum percentage of any quarterly increase in their Won currency lending tosmall- andmedium-sized enterprises. Currently, this minimum percentage is 45% in the case of nationwide banks and 60% in the case of regional banks. If a bank does not comply with this requirement, the Bank of Korea may: require the bank to prepay all or a portion of funds provided to that bank in support of loans tosmall- andmedium-sized enterprises; or lower the bank’s credit limit. Disclosure of Management Performance For the purpose of protecting depositors and investors in commercial banks, the Financial Services Commission requires commercial banks to publicly disclose certain material matters, including: financial condition and profit and loss of the bank and its subsidiaries; fund raising by the bank and the appropriation of such funds; any sanctions levied on the bank under the Bank Act or any corrective measures or sanctions under the Law on Improvement of Structure of Financial Industry; and except as may otherwise have been disclosed by a bank or its financial holding company listed on the KRX KOSPI Market in accordance with the Financial Investment Services and Capital Markets Act, occurrence of any of the following events or any other event as prescribed by the applicable regulations: | (i) | loans bearing no profit made to a single business group in an amount exceeding 10% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions) as of the end of the previous |
| month (where the loan exposure to that borrower is calculated pursuant to the criteria under the Detailed Regulation on the Supervision of the Banking Business), unless the loan exposure to that group is not more than ₩4 billion; and |
| (ii) | the occurrence of any financial incident involving embezzlement, malfeasance or misappropriation of funds with respect to which damages are expected to exceed ₩1 billion, or any financial incident regarding which the governor of the Financial Supervisory Service has made a public announcement; and |
| (iii) | any loss due to court judgments or similar decisions in civil proceedings in an amount exceeding 1% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions) as of the end of the previous month, unless the loss is not more than ₩1 billion. |
Restrictions on Lending Pursuant to the Bank Act and itssub-regulations, commercial banks may not provide: loans directly or indirectly secured by a pledge of a bank’s own shares; loans directly or indirectly to enable a natural or juridical person to buy the bank’s own shares; | • | | loans to any of the bank’s officers or employees, other thande minimis loans of up to (i) ₩20 million in the case of a general loan, (ii) ₩50 million in the case of a general loan plus a housing loan or (iii) ₩60 million in the aggregate for general loans, housing loans and loans to pay damages arising from wrongful acts of employees in financial transactions; |
credit (including loans) secured by a pledge of shares of a subsidiary corporation of the bank or to enable a natural or juridical person to buy shares of a subsidiary corporation of the bank; or loans to any officers or employees of a subsidiary corporation of the bank, other than general loans of up to ₩20 million or general and housing loans of up to ₩50 million in the aggregate. Regulations Relating to Retail Household Loans The Financial Services Commission has implemented a number of changes in recent years to the regulations relating to retail household lending by banks. Under the currently applicable regulations: as to loans secured by a collateral of housing (including apartments) located nationwide, theloan-to-value ratio (the aggregate principal amount of loans secured by such collateral over the appraised value of the collateral) should not exceed 60%70%; as to loans secured by collateral of housing (including apartments) located in areas of excessive investment or housing (excluding(including apartments) located in areas of high speculation, in each case, as designated by the government, (i) theloan-to-value ratio for loans with a maturity of not more than three years should not exceed 40%, except that such maximumloan-to-value ratio is 50% forlow-income households that (i) have an annual income of less than ₩70 million (or ₩80 million for first-home buyers), (ii) do not currently own any housing and (ii)(iii) are using the loan-to-value ratio for loans with a maturity of moreloan to purchaselow-price housing valued at less than three years should not exceed 60%; ₩600 million; as to any new loans secured by collateral of housing to be extended to a household, any member of which has already received one or more loans secured by collateral of housing, the maximumloan-to-value ratio is 10% lower than the applicableloan-to-value ratio described above; as to loans secured by collateral of housing (including apartments) located outsidein areas of Seoul, Incheon and Gyeong-gi province, whichexcessive investment or housing was offered for sale on or before June 10, 2008 and with respect to which a sale contract is executed and earnest money deposit paid during the period between June 11, 2008 and June 30, 2009, the loan-to-value ratio should not exceed 70%; as to loans secured by apartments(including apartments) located in areas of high speculation, in each case, as designated by the government, (i) the loan-to-value ratio for loans with a maturity of not more than ten years should not exceed 40%; and (ii) the loan-to-value ratio for loans with a maturity of more than ten years should not exceed (a) 40%, if the price of such apartment is over ₩600 million, and (b) 60%, if the price of such apartment is ₩600 million or lower;
as to loans secured by collateral of housing (regardless of housing type or location) to be amortized over a period of ten years, further requirements relating to which are set forth in the Regulation on the Supervision of Banking Business, the loan-to-value ratio should not exceed 70%;
as to loans secured by apartments with appraisal value of more than ₩600 million in areas of high speculation as designated by the government or certain metropolitan areas designated as areas of excessive investment by the government, the borrower’sdebt-to-income ratio (calculated as (i)(1) the aggregate annual total payment amount of (x) the principal of and interest on loans secured by such apartment(s)housing and (y) the interest on other debts of the borrower over (ii)(2) the borrower’s annual income) should not exceed 40%;, except that such maximumdebt-to-income ratio is 50% forlow-income households that (i) have an annual income of less than ₩70 million (or ₩80 million for first-home buyers), (ii) do not currently own any housing and (iii) are using the loan to purchaselow-price housing valued at less than ₩600 million;
as to any new loans secured by collateral of housing to be extended to a household, any member of which has already received one or more loans secured by collateral of housing, the maximumdebt-to-income ratio is 10% lower than the applicabledebt-to-income ratio described above; as to apartments located in areas of high speculation as designated by the government, a borrowerhousehold is permitted to have only one new loan secured by such apartment; and where a borrowerhousehold has two or more loans secured by apartments located in areas of high speculation as designated by the government, the loan with the earliest maturity date must be repaid first and the number of loans must be eventually reduced to one; and one.in the case of a borrower (i) whose spouse already has a loan secured by housing or (ii) who is single and under 30 years old, the debt-to-income ratio of the borrower in respect of loans secured by apartment(s) located in areas of high speculation as designated by the government should not exceed 40%.
Restrictions on Investments in Property A bank may not invest in securities set forth below in excess of 100% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions): debt securities (within the meaning of paragraph (3) of Article 4 of the Financial Investment Services and Capital Markets Act) the maturity of which exceeds three years, but excluding government bonds, monetary stabilization bonds issued by the Bank of Korea and bonds within the meaning of item 2, paragraph (6) of Article 11 of the Act on the Improvement of the Structure of the Financial Industry; equity securities, but excluding securities within the meaning of item 1, paragraph (6) of Article 11 of the Act on the Improvement of the Structure of the Financial Industry; derivatives linked securities (within the meaning of paragraph (7) of Article 4 of the Financial Investment Services and Capital Markets Act) the maturity of which exceeds three years; and beneficiary certificates, investment contracts and depositary receipts (within the meaning of paragraph (2) of Article 4 of the Financial Investment Services and Capital Markets Act) the maturity of which exceeds three years. A bank may possess real estate property only to the extent necessary for the conduct of its business. The aggregate value of such property may not exceed 60% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions). Any property that a bank acquires by exercising its rights as a secured party, or which a bank is prohibited from acquiring under the Bank Act, must be disposed of within one year.three years, unless specified otherwise by the regulations thereunder. Restrictions on Shareholdings in Other Companies Under the Bank Act, a bank may not own more than 15% of shares outstanding with voting rights of another corporation, except where, among other reasons: that corporation engages in a category of financial businesses set forth by the Financial Services Commission; or the acquisition of shares by the bank is necessary for the corporate restructuring of such corporation and is approved by the Financial Services Commission. In the above exceptional cases, the total investment in corporations in which the bank owns more than 15% of the outstanding shares with voting rights may not exceed (i) 15%20% of the sum of Tier I and Tier II capital (less any capital deductions) or (ii) 30% of the sum of Tier I and Tier II capital (less any capital deductions) where the acquisition satisfies the requirements determined by the Financial Services Commission. The Bank Act provides that a bank using its bank accounts and its trust accounts is not permitted to acquire the shares issued by the major shareholder of such bank in excess of an amount equal to 1% of the sum of Tier I and Tier II capital (less any capital deductions). Restrictions on Bank Ownership
Under the Bank Act, a single shareholder and persons who have a special relationship with that shareholder generally may acquire beneficial ownership of no more than 10% of a nationwide bank’s total issued and outstanding shares with voting rights and no more than 15% of a regional bank’s total issued and outstanding shares with voting rights. The Korean government, the Korea Deposit Insurance Corporation and bank holding companies qualifying under the Financial Holding Company Act are not subject to this limit. However, pursuant to an amendment to the Bank Act which became effective on February 14, 2014,non-financial business group companies may not acquire beneficial ownership of shares of a nationwide bank in excess of 4% (or 15% in the case of a regional bank) of that bank’s outstanding voting shares, unless they satisfy certain requirements set forth by the Enforcement Decree of the Banking Act, obtain the approval of the Financial Services Commission and agree not to exercise voting rights in respect of shares in excess of the 4% limit (or the 15% limit in the case of a regional bank), in which case they may acquire beneficial ownership of up to 10% of a nationwide bank’s outstanding voting shares. Such amendment grants an exception fornon-financial business group companies which, at the time of the enactment of the amended provisions, held more than 4% of the shares of a bank. In addition, if a foreign investor, as defined in the Foreign Investment Promotion Act, owns in excess of 4% of a nationwide bank’s outstanding voting shares,non-financial business group companies may acquire beneficial ownership of up to 10% (or 15% in the case of a regional bank) of that bank’s outstanding voting shares, and in excess of 10% (or 15% in the case of a regional bank), 25% or 33% of that bank’s outstanding voting shares with the approval of the Financial Services Commission in each instance, up to the number of shares owned by the foreign investor. Any other person (whether a Korean national or a foreign investor), with the exception ofnon-financial business group companies described above, may acquire no more than 10% of a nationwide bank’s total voting shares issued and outstanding, unless they obtain approval from the Financial Services Commission in each instance where the total holding will exceed 10% (or 15% in the case of regional banks), 25% or 33% of the bank’s total voting shares issued and outstanding provided that, in addition to the foregoing threshold shareholding ratios, the Financial Services Commission may, at its discretion, designate a separate and additional threshold shareholding ratio. Deposit Insurance System The Depositor Protection Act provides insurance for certain deposits of banks in Korea through a deposit insurance system. Under the Depositor Protection Act, all banks governed by the Bank Act are required to pay an insurance premium to the Korea Deposit Insurance Corporation on a quarterly basis and the rate is determined under the Enforcement Decree to the Depositor Protection Act. If the Korea Deposit Insurance Corporation makes a payment on an insured amount, it will acquire the depositors’ claims with respect to that payment amount. The Korea Deposit Insurance Corporation insures a maximum of ₩50 million per individual for deposits and interest in a single financial institution, regardless of when the deposits were made and the size of the deposits. Restrictions on Foreign Exchange Position Under the Korean Foreign Exchange Transaction Law, each of a bank’s net overpurchased and oversold positions may not exceed 50% of its shareholder’s equity as of the end of the prior month. Laws and Regulations Governing Other Business Activities A bank must register with the Ministry of Strategy and Finance to enter the foreign exchange business, which is governed by the Foreign Exchange Transaction Act of Korea. A bank must obtain the permission of the Financial Services Commission to enter the securities business, which is governed by regulations under the Financial Investment Services and Capital Markets Act. Under these laws, a bank may engage in the foreign exchange business, securities repurchase business, governmental/public bond underwriting business and governmental bond dealing business. Trust Business
A bank must obtain approval from the Financial Services Commission to engage in trust businesses. The Trust Act and the Financial Investment Services and Capital Markets Act govern the trust activities of banks, and they are subject to various legal and accounting procedures and requirements, including the following: under the Trust Act, assets accepted in trust by a bank in Korea must be segregated from other assets in the accounts of that bank; and depositors and other general creditors cannot obtain or assert claims against the assets comprising the trust accounts in the event the bank is liquidated orwound-up. The bank must make a special reserve of 25% or more of fees from each unspecified money trust account for which a bank guarantees the principal amount and a fixed rate of interest until the total reserve for that account equals 5% of the trust amount. Since January 1999, the Korean government has prohibited Korean banks from offering new guaranteed fixed rate trust account products whose principal and interest are guaranteed. Under the Financial Investment Services and Capital Markets Act, which became effective in February 2009, a bank with a trust business license (such as Kookmin Bank) is permitted to offer both specified money trust account products and unspecified money trust account products. Previously, banks were not permitted to offer unspecified money trust account products pursuant to the Indirect Investment Asset Management Act, which is no longer in effect following the effectiveness of the Financial Investment Services and Capital Markets Act. Credit Card Business General In order to enter the credit card business, a company must register withobtain a license from the Financial Services Commission. Credit card businesses are governed by the Specialized Credit Financial Business Act, enacted on August 28, 1997 and last amended on January 20, 2015,April 18, 2017, which sets forth specific requirements with respect to the credit card business as well as generally prohibiting unsound business practices relating to the credit card business which may infringe on the rights of credit card holders or negatively affect the soundness of the credit card industry. Credit card companies, including ourwholly-owned subsidiary, KB Kookmin Card Co., Ltd., are regulated by the Financial Services Commission and the Financial Supervisory Service. Disclosure and Reports Under the Specialized Credit Financial Business Act and the regulations thereunder, a credit card company is required to disclose on a periodic andon-going basis certain material matters and events. In addition, a credit card company must submit its businessperiodic reports with respect to its results of operations to the Governor of the Financial Supervisory Service, within one month fromin accordance with the endguidelines of each quarter.the Financial Supervisory Service. Restrictions on Funding Under the Specialized Credit Financial Business Act and the regulations thereunder, a credit card company must ensure that its total assets do not exceed an amount equal to six times its equity capital.capital and that the ratio of its adjusted equity capital to its adjusted total assets is not less than 8%. However, if a credit card company is unable to comply with such limit upon the occurrence of unavoidable events, such as drastic changes in the domestic and global financial markets, such limit may be adjusted through a resolution of the Financial Services Commission. Risk of Loss Due to Lost, Stolen, Forged or Altered Credit Cards Under the Specialized Credit Financial Business Act, a credit card company is liable for any loss arising from the unauthorized use of credit cards or debit cards after it has received notice from the holder of the loss or theft of the card. A credit card company is also responsible for any losses resulting from the use of forged or altered credit cards, debit cards andpre-paid cards. A credit card company may, however, transfer all or part of this latter risk of loss to holders of credit card in the event of willful misconduct or gross negligence by holders of credit card if the terms and conditions of the agreement entered between the credit card company and members of such cards specifically provide for that transfer. For these purposes, disclosure of a customer’s password that is made intentionally or through gross negligence, or the transfer of or giving as collateral of the credit card or debit card, is considered willful misconduct or gross negligence. However, a disclosure of a cardholder’s password that is made under irresistible force or threat to cardholder or his/her relatives’ life or health will not be deemed as willful misconduct or negligence of the cardholder. Each credit card company must institute appropriate measures to fulfill these obligations, such as establishing provisions, purchasing insurance or joining a cooperative association. Pursuant to the Enforcement Decree to Specialized Credit Financial Business Act, a credit card company will be liable for any losses arising from loss or theft of a credit card (which was not from the holder’s willful misconduct or negligence) during the period beginning 60 days before the notice by the holder to the credit card company. Pursuant to the Specialized Credit Financial Business Act, the Financial Services Commission may either restrict the limit or take other necessary measures against the credit card company with respect to such matters as the maximum limits on the amount per credit card, details of credit card terms and conditions, management of credit card merchants and collection of claims, including the following: maximum limits for cash advances on credit cards; use restrictions on debit cards with respect to per day or per transaction usage; aggregate issuance limits and maximum limits on the amount per card onpre-paid cards; and other matters prescribed by the Enforcement Decree to the Specialized Credit Financial Business Act. Lending Ratio in Ancillary Business Pursuant to the Enforcement Decree to the Specialized Credit Financial Business Act, a credit card company must maintain an aggregate quarterly average outstanding lending balance to credit cardholders (including cash advances and credit card loans, but excluding restructured loans) no greater than the sum of (i) its aggregate quarterly average outstanding credit card balance arising from the purchase of goods and services and (ii) the aggregate quarterly debit card transaction volume. Issuance of New Cards and Solicitation of New Cardholders The Enforcement Decree to the Specialized Credit Financial Business Act establishes the conditions under which a credit card company may issue new cards and solicit new members. New credit cards may be issued only to the following persons: persons who are at least 19 years old when they apply for a credit card; persons whose capability to pay bills as they come due has been verified using standards established by the credit card company; and in the case of minors who are 18 years old, persons who submit documents evidencing employment as of the date of the credit card application, such as an employment certificate, or persons for whom the issuance of a credit card is necessitated by governmental policies, such as financial aid. In addition, a credit card company may not solicit credit card members by: providing economic benefits or promising to provide economic benefits in excess of 10% of the annual credit card fee (in the case of credit cards with annual fees that are less than the average of the annual fees charged by the major credit cards in Korea, the annual fee will be deemed to be equal to such average annual fee) in connection with issuing a credit card; provided, however, that providing economic benefits or promising to provide economic benefits not exceeding the amount of the annual credit card fee to an applicant that becomes a credit card member through an online platform is permissible; soliciting applicants on roads, public places or along corridors used by the general public; soliciting applicants through visits, except those visits made upon prior consent and visits to a business area; soliciting applicants through the Internet without verifying whether the applicant is who he or she purports to be, by means of a certified digital signature under the Digital Signature Act; and soliciting applicants through pyramid sales methods. Compliance Rules on Collection of Receivable Claims Pursuant to Supervisory Regulation on the Specialized Credit Financial Business, a credit card company may not: exert violence or threaten violence; inform a related party (a guarantor of the debtor, blood relative or fiancée(e) of the debtor, a person living in the same household as the debtor or a person working in the same workplace as the debtor) of the debtor’s obligations without just cause; provide false information relating to the debtor’s obligation to the debtor or his or her related parties; threaten to sue or sue the debtor for fraud despite lack of affirmative evidence to establish that the debtor has submitted forged or false documentation with respect to his/his or her capacityability to make payment; visit or telephone the debtor during late evening hours (between the hours of 9:00 p.m. and 8:00 a.m.); and utilize other uncustomary methods to collect the receivables that interfere with the privacy or the peace in the workplace of the debtor or his or her related parties. Principal Regulations Applicable to Insurance Companies General Under the Insurance Business Act, a company seeking to engage in the insurance business in Korea is required to obtain business authorizations and licenses from the Financial Services Commission, and such company is required to comply with the Insurance Business Act and the regulations thereunder. These rules and regulations cover, among other things: (i) the requirements for obtaining business authorizations and licenses to operate an insurance company; (ii) the scope of business an insurance company may undertake; (iii) the operations of an insurance company, including its asset management activities; (iv) the methods of insurance solicitation; (v) the supervision of the insurance business; and (vi) the disciplinary actions for violation of the Insurance Business Act, which may include revocation of a license, imprisonment, suspension of operations, fines, surcharges and penalties. The Financial Services Commission has the authority to oversee matters involving licenses necessary for, and supervision of, the operation of an insurance business. Pursuant to the Regulation on Supervision of Insurance Business and the Regulation on Corporate Governance of Financial Companies, the Financial Services Commission sets forth detailed criteria for obtaining the authorization necessary to engage in the insurance business, as well as various comprehensive standards required to be met by an insurance company. The Financial Services Commission entrusts the Financial Supervisory Service with certain matters pursuant to the Regulation on Supervision of Insurance Business, as specified under the Detailed Enforcement Regulations on Insurance Supervision. Since an insurance company falls within the scope of a financial institution under the Act on the Structural Improvement of the Financial Industry, special provisions thereunder apply to an insurance company in the event (i) it merges with, or converts into, another financial institution, (ii) it becomes bankrupt or insolvent or is dissolved or (iii) members of its business group acquire shares of another company in excess of a certain percentage. In addition, an insurance company that offers and sells investment-type insurance products, such as variable insurance products, and manages assets under special accounts for variable insurance policies is deemed a financial investment company under the Financial Investment Services and Capital Markets Act. Such insurance company is subject to certain provisions under the Financial Investment Services and Capital Markets Act, such as regulations on the control of conflicts of interest as well as the establishment and maintenance of firewalls for asset management of special accounts related to variable insurance policies. In addition, pursuant to the Foreign Exchange Transactions Act, an insurance company is required to obtain prior approval from the Ministry of Strategy and Finance, the Bank of Korea, the Financial Supervisory Service or a foreign exchange bank and may be required to file periodic reports if the company engages in any of the following: (a) a transaction involving a foreign currency; (b) a transaction with anon-resident involving either the Won or a foreign currency; (c) a transaction that requires an outgoing overseas payment; (d) a transaction that requires receipt of an overseas payment; and (e) any other transaction prescribed under the Foreign Exchange Transactions Act. Furthermore, an insurance company is required to comply with the Act on the Corporate Governance of Financial Companies. Scope of Business of Insurance Companies Under the Insurance Business Act, an insurance company is prohibited from concurrently operating a life insurance business and anon-life insurance business (including property, marine and cargo and liability insurance), provided that an insurance company may concurrently operate a “type three” insurance business (including casualty, disease and health care insurance) and provide reinsurance to other insurance companies. However, limitedcross-selling of life insurance andnon-life insurance products by insurance sales agents working for life insurance ornon-life insurance companies in Korea is permitted by the Financial Services Commission. Upon approval by the FSC, a life insurance company may operate (i) a life insurance business, (ii) a pension insurance (including retirement insurance) business and (iii) type three insurance businesses, while anon-life insurance company may operate (i) various types ofnon-life insurance businesses (including property, marine and cargo, automobile, guarantee, reinsurance and certain other enumeratednon-life insurance as designated under the Enforcement Decree of the Insurance Business Act as well as liability insurance) and (ii) type three insurance businesses. Both life insurance andnon-life insurance companies may also operate certain financial businesses and incidental businesses designated under the Enforcement Decree of the Insurance Business Act. Requirements Relating to Insurance Solicitation The Insurance Business Act limits entities that may engage in insurance solicitation to insurance sales agents, insurance agencies (including those of financial institutions), insurance brokers and officers and employees of an insurance company. Any person or entity wishing to act as an insurance sales agent, insurance agency (including those of financial institutions) or insurance broker must register with the Financial Services Commission and report promptly to the Financial Services Commission the occurrence of certain changes prescribed under the Insurance Business Act. Insurance brochures used for insurance solicitation must clearly specify the terms required under the Insurance Business Act in aneasy-to-understand manner. Where an insurance company or any person engaging in insurance solicitation persuades an ordinary policyholder to enter into an insurance contract, it must explain to such ordinary policyholder about certain critical matters of the insurance contract prescribed by the Enforcement Decree of the Insurance Business Act, including insurance premiums, coverage scope and restrictions on the payment of insurance proceeds, in a manner the policyholder can easily understand. Where an insurance company or any person engaging in insurance solicitation advertises an insurance product, it must include the details of such insurance product in such advertisement as prescribed under the Insurance Business Act and must not engage in any act which, among other things, may lead to a misunderstanding that such insurance product would provide a large amount of insurance proceeds by emphasizing selective terms and conditions of such product or introducing cases where a large amount of insurance proceeds were paid. In connection with the execution or solicitation of an insurance contract, any person engaging in insurance solicitation must not engage in any act prohibited under the Insurance Business Act, including acts of providing a policyholder with false information regarding an insurance product and acts intended to interrupt or prevent a policyholder from notifying an insurance company of an important matter relevant to an insurance policy. Any person engaging in insurance solicitation is prohibited from providing special benefits (including, but not limited to, cash over a certain amount and discounts on insurance premiums) in connection with the execution of an insurance contract unless such special benefits are stipulated in the underlying documents for such insurance product. In addition, an insurance company is prohibited from entrusting any person other than those who are eligible under the Insurance Business Act to engage in insurance solicitation or paying any compensation to any ineligible persons for his or her insurance solicitation. The Insurance Business Act and the Enforcement Decree of the Insurance Business Act also prescribe in detail certain practices that insurance agencies of financial institutions are restricted from engaging in, including, but not limited to: offering additional services, such as providing a loan, on condition that the individual purchase a life insurance policy; and including insurance premiums in loan transactions without the prior consent of the borrower. The Insurance Business Act permits insurance sales agents working for life insurance companies tocross-sellnon-life insurance products of onenon-life insurance company, and insurance sales agents working fornon-life insurance companies are correspondingly permitted tocross-sell the life insurance products of one life insurance company. Capital Adequacy Pursuant to the risk-based capital adequacy requirements implemented by the Financial Services Commission, insurance companies in Korea are required to maintain a statutory ratio of available regulatory capital to risk-weighted assets of not less than 100% on a consolidated basis (although a risk-based capital adequacy ratio of not less than 150% is still considered standard in the Korean insurance industry). Risk based capital adequacy requirements require insurance companies to hold adequate capital to cover their exposures to interest rate risk, market risk, credit risk and operational risk as well as insurance risk by reflecting such risks in their calculation of risk-weighted assets. The statutoryrisk-based capital adequacy ratio for insurance companies is computed by dividing available capital by required capital. Available capital of an insurance company is computed as the sum of, among other things, capital stock, reserve for policyholder dividends and bad debt allowance after deducting, among other things, deferred acquisition costs, goodwill, and prepaid expenses. Required capital is computed based on the sum of (i) the square root of the sum of the squares of (w) insurance risk amounts, (x) interest rate risk amounts, (y) credit risk amounts and (z) market risk amounts, and (ii) the operating risk amounts, with each risk amount being calculated in accordance with the detailed criteria set forth under the Regulation on Supervision of Insurance Business and the Detailed Enforcement Regulations on Insurance Supervision. The Financial Supervisory Service has announced that it plans to introduce a new regulatory solvency regime for insurance companies by 2021 based on the International Capital Standard developed by the International Association of Insurance Supervisors, which would be similar in substance to the Solvency II Directive of the European Union. The Solvency II Directive, which has been in effect in the European Union since January 1, 2016, is a comprehensive program of regulatory requirements for insurance companies, covering authorization, corporate governance, supervisory reporting, public disclosure and risk assessment and management, as well as solvency. Under the Financial Supervisory Service’s planned new solvency regime in Korea, among other things, insurance contract liabilities are expected to be measured based on market value, rather than book value, which would require a number of insurance companies in Korea with a large portfolio of high guaranteed rate of return products to obtain additional capital to meet their capital adequacy requirements. The Financial Supervisory Service has also announced its plans to implement a series of incremental changes to the calculation methodology for the risk-based capital adequacy ratio of insurance companies, as interim measures. Such changes implemented in 2017 included increasing the maximum statutory duration of insurance liabilities recognized for purposes of such calculation, as well as reducing the coefficient applied in calculating interest rate risk and adjusting the methods used to assess the risk of guaranteed benefits of variable insurance policies. The details of the new solvency regime in Korea have not yet been finalized and may be further amended in the future. Regulations on Class Actions Regarding Securities The Law on Class Actions Regarding Securities was enacted as of January 20, 2004 and last amended on May 28, 2013. The Law on Class Actions Regarding Securities governs class actions suits instituted by one or more representative plaintiff(s) on behalf of 50 or more persons who claim to have been damaged in a capital markets transaction involving securities issued by a listed company in Korea. Applicable causes of action with respect to such suits include: claims for damages caused by misleading information contained in a securities statement; claims for damages caused by the filing of a misleading business report,semi-annual report, or quarterly report; claims for damages caused by insider trading or market manipulation; and claims instituted against auditors for damages caused by accounting irregularities. Any such class action may be instituted upon approval from the presiding court and the outcome of such class action will have a binding effect on all potential plaintiffs who have not joined the action, with the exception of those who have filed an opt out notice with such court. Financial Investment Services and Capital Markets Act On July 3, 2007,The Financial Investment Services and Capital Markets Act, which became effective in February 2009, regulates and governs the National Assembly of Korea passedfinancial investment business in Korea. The entities that regulate and supervise financial investment companies are the Financial Services Commission, the Financial Supervisory Service and the Securities and Futures Commission.
Under the Financial Investment Services and Capital Markets Act, a new law consolidating six laws regulating capital markets. Thecompany must obtain a license from the Financial Services Commission to commence a financial investment business such as a brokerage business, a dealing business or an underwriting business, or register with the Financial Services Commission to commence a financial investment business such as an investment advisory business or a discretionary investment management business. A bank is permitted to engage in certain types of financial investment business as specified under the Enforcement Decree of the Bank Act. Prior to commencing a financial investment business, a bank must file a report with the Financial Services Commission and apply for a license pursuant to the Financial Investment Services and Capital Markets Act became effective in February 2009.. The following is a summary of the major changes introduced under the Financial Investment Services and Capital Markets Act.
Consolidation of CapitalMarkets-Related Laws Prior to the effectiveness of the Financial Investment Services and Capital Markets Act, there were separate laws regulating various types of financial institutions depending on the type of financial institution (for example, securities companies, futures companies, trust business companies and asset management companies) and subjecting financial institutions to different licensing and ongoing regulatory requirements (for example, the Korean Securities Exchange Act, the Futures Business Act and the Indirect Investment Asset Management Business Act). By applying one uniform set of rules to the same financial business having the same economic function, the Financial Investment Services and Capital Markets Act attempts to improve and address issues caused by the currentprevious regulatory system under which the same economic function relating to capitalmarkets-related businesses are governed by multiple regulations. To this end, the Financial Investment Services and Capital Markets Act categorizes capitalmarkets-related businesses into six different functions, as follows: dealing, (tradingtrading and underwriting of “financial investment products” (as defined below)), ; brokerage (brokerage of financial investment products), products; collective investment (establishmentestablishment of collective investment schemes and the management thereof), thereof; investment advice, advice; discretionary investment management,management; and trusts (together with the five businesses set forth above, the “Financial Investment Businesses”). Therefore,Accordingly, all financial businesses relating to financial investment products have been reclassified as one or more of the Financial Investment Businesses described above, and financial institutions are subject to the regulations applicable to their relevant Financial Investment Business(es), irrespectiveBusinesses, regardless of the type of the financial institution (forinstitution. For example, in principle,under the Financial Investment Services and Capital Markets Act, derivative businesses conducted by former securities companies and futuresfuture companies arewill be subject to the same regulations under the Financial Investment Services and Capital Markets Act).regulations.
The banking businessBanking and insurance businessbusinesses are not subject to the Financial Investment Services and Capital Markets Act and will continue to be regulated under separate laws. However, they may become subject to the Financial Investment Services and Capital Markets Act if their activities involve any financial investment businesses requiring a license pursuant to the Financial Investment Services and Capital Markets Act.
Comprehensive Definition of Financial Investment Products In an effort to encompass the various types of securities and derivative products available in the capital markets, the Financial Investment Services and Capital Markets Act sets forth a comprehensive term “financial investment products,” defined to mean all financial products with a risk of loss in the invested amount (in contrast to “deposits,” which are financial products for which the invested amount is protected or preserved). Financial investment products are classified into two major categories: (i) “securities” (relating to financial(financial investment products wherein which the risk of loss is limited to the invested amount) and (ii) “derivatives” (relating to financial(financial investment products wherein which the risk of loss may exceed the invested amount). As a result of the general and open-ended manner in which financial investment products are defined, any future financial product could potentially come within the scope of thebroad definition of financial investment products, thereby enablinga variety of financial products may be defined as a financial investment product, which would enable Financial Investment Companies (as defined(defined below) to handle a broader range of financial products. Under the Financial Investment Services and Capital Markets Act, entities formerly licensed as securities companies, asset management companies, futures companies and other entities engaging in any Financial Investment Business are classified as “Financial Investment Companies.” New License System and the Conversion of Existing Licenses
Under the Financial Investment Services and Capital Markets Act, Financial Investment Companies are able to choose whatthe type of Financial Investment Business in which to engage in (via(through a “check the box” method set forth in the relevant license application), by specifying the desired (i) Financial Investment Business, (ii) financial investment product and (iii) target customers to which financial investment products may be sold or dealt to (i.e.,distributed (that is, general investors or professional investors). Licenses will be issued under the specific businesssub-categories described in the foregoing sentence. For example, it would be possible for a Financial Investment Company to obtain a license to engage in the Financial Investment Business of (i) dealing (ii) over the counter derivatives products (iii) only with sophisticated investors. Financial institutions that engage in business activities constituting a Financial Investment Business are required to take certain steps, such as renewal of their license or registration, in order to continue engaging in such business activities. Financial institutions that are not licensed Financial Investment Companies are not permitted to engage in any Financial Investment Business, subject to the following exceptions: (i) banks and insurance companies are permitted to engage in certain categories of Financial Investment Business;Business for a period not exceeding six months commencing on the effective date of the Financial Investment Services and Capital Markets Act; and (ii) other financial institutions that engaged in any Financial Investment Business prior to the effective date of the Financial Investment Services and Capital Markets Act (whether in the form of a concurrent business or an incidental business) are permitted to continue such Financial Investment Business for a period not exceeding six months commencing on the effective date of the Financial Investment Services and Capital Markets Act. Expanded Business Scope of Financial Investment Companies Under the previous regulatory systemregime in Korea, it was difficult for a financial institution to explore a new line of business or expand upon its existing line of business. For example, previously a financial institution licensed as a securities company generally was not permitted to engage in the asset management business. In contrast, under the Financial Investment Services and Capital Markets Act, pursuant to the integration of its current businesses involving financial investment products into a single Financial Investment Business, a licensed Financial Investment Company is permitted to engage in all types of Financial Investment Businesses, subject to satisfying relevant regulations (for example, maintaining an adequate “Chinese Wall,” to the extent required). As to incidental businesses (i.e.,(that is, a financial related business which is not a Financial Investment Business), the Financial Investment Services and Capital Markets Act generally allows a Financial Investment Company to freely engage in such incidental businesses by shifting away from the previouspositive-list system towards a more comprehensive system. In addition, a Financial Investment Company is permitted to (i) outsource marketing activities by contracting “introducing brokers” that are individuals but not employees of the Financial Investment Company. Financial Investment Companies are permitted (i) toCompany, (ii) engage in foreign exchange businesses related to their Financial Investment Business and (ii) to(iii) participate in the settlement network, pursuant to an agreement among the settlement network participants. Improvement in Investor Protection Mechanism While the Financial Investment Services and Capital Markets Act widens the scope of financial businesses in which financial institutions are permitted to engage, a more rigorousinvestor-protection mechanism is also imposed upon Financial Investment Companies dealing in financial investment products. The Financial Investment Services and Capital Markets Act distinguishes general investors from sophisticated investors and provides new or enhanced protections to general investors. For instance, the Financial Investment Services and Capital Markets Act expressly provides for a strictknow-your-customer rule for general investors and imposes an obligation that Financial Investment Companies should market financial investment products suitable to each general investor, using written explanatory materials. Under the Financial Investment Services and Capital Markets Act, a Financial Investment Company could be liable if a general investor proves (i) damage or losses relating to such general investor’s investment in financial investment products solicited by such Financial Investment Company and (ii) the absence of the requisite written explanatory materials, without having to prove fault or causation. With respect to conflicts of interest between Financial Investment Companies and investors, the Financial Investment Services and Capital Markets Act expressly requires (i) disclosure of any conflict of interest to investors and (ii) mitigation of conflicts of interest to a comfortable level or abstention from the relevant transaction. Other Changes of Securities/to Securities / Fund Regulations The Financial Investment Services and Capital Markets Act also affectedchanged various securities regulations including those relating to public disclosure, insider trading and proxy contests, which were previously governed by the Korean Securities Exchange Act. For example, the 5% and 10% reporting obligations under the Korean Securities Exchange Act hashave become more stringent. The Indirect Investment and Asset Management Business Act strictly limited the kind of vehicles that could be utilized under a collective investment scheme, restricting the range of potential vehicles to trusts and corporations, and the type of funds that can be used for investments. However, under the Financial Investment Services and Capital Markets Act, these restrictions have been significantly liberalized, permitting all vehicles that may be created under Korean law, such as limited liability companies or partnerships, to be used for the purpose of collective investments and allowing investment funds to be much more flexible as to their investments. Act on the Corporate Governance of Financial Companies The Act on the Corporate Governance of Financial Companies, which became effective on August 1, 2016, was enacted to address the need for strengthened regulations on corporate governance of financial institutions and to serve as a uniform set of regulations on corporate governance matters applicable to financial institutions across a variety of industry sectors. It contains several key measures, including (i) eligibility requirements for officers of financial institutions and standards for determining whether officers of financial institutions may hold concurrent positions in other companies, (ii) standards for composition and operation of the board of directors of financial institutions, (iii) standards for establishment, composition and operation of various committees of the board of directors of financial institutions, (iv) regulations on internal control and risk management, (v) requirements and procedures for the approval of a change of major shareholders and (vi) special regulations to protect the rights of minority shareholders of financial institutions. Environment In 2015, our operations became subject to the Framework Act on Low Carbon, Green Growth, which was enacted in April 2010, and the Greenhouse Gas Emissions Trading System Act, which was enacted in May 2012. The Framework Act on Low Carbon, Green Growth and the regulations thereunder establish the greenhouse gas target management system, which requires companies to establish and achieve greenhouse gas emissions and energy consumption targets on an annual basis. The Greenhouse Gas Emissions Trading System Act and the regulations thereunder establish the Korean emissions trading scheme, under which companies are allocated a limited volume of emission allowances and are allowed to trade excess emission allowances. We actively seek to engage in environmentally responsible management of our operations. We have developed a program for our operations to achieve energy efficiency objectives and reduce our greenhouse gas emissions to lessen our impact on the environment. Item 4.C. | Organizational Structure |
The following chart provides an overview of our structure, including our significant subsidiaries and our ownership of such subsidiaries as of the date of this annual report:
Our largest subsidiary is Kookmin Bank, the assets of which represented approximately 89.3%75.5% of our total assets as of December 31, 2014.2017. The following table provides summary information for our operating subsidiaries that are consolidated in our consolidated financial statements as of and for the year ended December 31, 2014,2017, including their consolidated total assets, operating revenue, profit (loss) and total equity: | | | | | | | | | | | | | | | | | Subsidiaries | | Total Assets | | | Operating Revenue | | | Profit (Loss) | | | Total Equity | | | | (in millions of Won) | | Kookmin Bank | | ₩ | 275,453,664 | | | ₩ | 16,283,978 | | | ₩ | 1,029,041 | | | ₩ | 21,940,473 | | KB Kookmin Card Co., Ltd. . | | | 15,886,769 | | | | 2,864,957 | | | | 332,701 | | | | 3,480,455 | | KB Investment & Securities Co., Ltd. | | | 4,131,568 | | | | 578,345 | | | | 25,624 | | | | 576,740 | | KB Life Insurance Co., Ltd. . | | | 7,680,184 | | | | 1,453,057 | | | | 6,537 | | | | 583,725 | | KB Asset Management Co., Ltd. . | | | 254,481 | | | | 105,234 | | | | 49,560 | | | | 201,940 | | KB Real Estate Trust Co., Ltd. | | | 204,888 | | | | 50,283 | | | | 14,818 | | | | 183,958 | | KB Investment Co., Ltd. . | | | 225,353 | | | | 33,371 | | | | 1,382 | | | | 134,784 | | KB Credit Information Co., Ltd. | | | 28,805 | | | | 38,796 | | | | (1,605 | ) | | | 20,850 | | KB Data Systems Co., Ltd. | | | 31,397 | | | | 59,129 | | | | 367 | | | | 14,523 | | KB Savings Bank Co., Ltd. . | | | 772,676 | | | | 56,712 | | | | (15,079 | ) | | | 152,794 | | KB Capital Co., Ltd. (1) | | | 4,023,965 | | | | 250,042 | | | | 29,990 | | | | 411,815 | |
(1) | KB Capital Co., Ltd. (formerly known as Woori Financial Co., Ltd.) was added as a subsidiary in March 2014 as a result of our purchase of 52.02% of its shares.
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| | | | | | | | | | | | | | | | | Subsidiaries | | Total Assets | | | Operating Revenue | | | Profit (Loss) | | | Total Equity | | | | (in millions of Won) | | Kookmin Bank | | ₩ | 329,765,927 | | | ₩ | 19,291,294 | | | ₩ | 2,174,705 | | | ₩ | 25,323,434 | | KB Securities Co., Ltd. | | | 37,351,680 | | | | 5,974,054 | | | | 271,701 | | | | 4,415,656 | | KB Insurance Co., Ltd. | | | 32,351,778 | | | | 8,740,682 | | | | 330,286 | | | | 3,223,031 | | KB Kookmin Card Co., Ltd. | | | 17,658,310 | | | | 3,326,048 | | | | 296,831 | | | | 4,041,829 | | KB Life Insurance Co., Ltd. | | | 9,125,741 | | | | 1,331,105 | | | | 21,086 | | | | 539,413 | | KB Asset Management Co., Ltd. | | | 201,481 | | | | 117,746 | | | | 52,022 | | | | 156,621 | | KB Capital Co., Ltd. | | | 8,743,672 | | | | 588,253 | | | | 120,797 | | | | 939,752 | | KB Savings Bank Co., Ltd. | | | 1,158,829 | | | | 79,428 | | | | 21,150 | | | | 198,017 | | KB Real Estate Trust Co., Ltd. | | | 246,685 | | | | 76,700 | | | | 36,408 | | | | 199,330 | | KB Investment Co., Ltd. | | | 355,763 | | | | 41,150 | | | | (4,954 | ) | | | 137,092 | | KB Credit Information Co., Ltd. | | | 26,121 | | | | 31,737 | | | | (5,316 | ) | | | 15,142 | | KB Data Systems Co., Ltd. | | | 41,945 | | | | 117,946 | | | | 945 | | | | 14,705 | |
Further information regarding our subsidiaries is provided below: | • | | Kookmin Bank was established in Korea in 2001 as a result of the merger of the former Kookmin Bank (established in 1963) and H&CB (established in 1967). Kookmin Bank provides a wide range of banking and other financial services to individuals,small- andmedium-sized enterprises and large |
| corporations in Korea. As of December 31, 2014,2017, Kookmin Bank was one of the largest commercial banks in Korea based upon total assets (including loans) and deposits. As of December 31, 2014,2017, Kookmin Bank had approximately 28.730.6 million customers, with 1,1611,062 branches nationwide. |
| • | | KB Securities Co., Ltd., formerly known as Hyundai Securities Co., Ltd., was established in Korea in 1962 to provide various securities brokerage and investment banking services. In 2016, we acquired 100% of the outstanding shares of Hyundai Securities, merged another subsidiary, KB Investment & Securities Co., Ltd., with and into Hyundai Securities and changed the name of the surviving entity to KB Securities Co., Ltd. |
| • | | KB Insurance Co., Ltd., formerly known as LIG Insurance Co., Ltd., was established in Korea in January 1959 to providenon-life insurance products. KB Insurance became our wholly-owned subsidiary in July 2017 after a series of stock purchases, a tender offer and a comprehensive stock swap. |
| • | | KB Kookmin Card Co., Ltd. was established in March 2011 as a separate entity upon the completion of a horizontalspin-off of Kookmin Bank’s credit card business, to provide credit card services. |
| • | | KB Investment & Securities Co., Ltd. was established in Korea in 1995 to provide various investment banking services. KB Investment & Securities was formerly known as Hannuri Investment & Securities Co., Ltd. and was acquired by Kookmin Bank on March 11, 2008. In March 2011, KB Investment & Securities was merged with KB Futures Co., Ltd., with KB Investment & Securities as the surviving entity.
|
| • | | KB Life Insurance Co., Ltd. was established in Korea in April 2004 to provide life insurance and wealth management products primarily through our branch network. |
| • | | KB Asset Management Co., Ltd. was established in Korea in April 1988 as a subsidiary of Citizens Investment Trust Company to provide investment advisory services. |
| • | | KB Capital Co., Ltd., which provides leasing services and installment finance services, was formerly known as Woori Financial Co., Ltd. and was acquired by us onin March 20, 2014. KB Capital became our wholly-owned subsidiary in July 2017 after a tender offer followed by a comprehensive stock swap. |
| • | | KB Savings BankCo., Ltd. was established in Korea in January 2012 to providesmall-loan finance services. KB Savings Bank was established in connection with our purchase of assets and assumption of liabilities of Jeil Savings Bank in January 2012. We2012.We acquired Yehansoul Savings Bank, which providedsmall-loan finance services, in September 2013 and merged it with KB Savings Bank in January 2014, with KB Savings Bank as the surviving entity. |
| • | | KB Real Estate Trust Co., Ltd. was established in Korea in December 1996 to provide real estate development and brokerage services by managing trusts related to the real estate industry. |
| • | | KB Investment Co., Ltd. was established in Korea in March 1990 to invest in and financesmall- andmedium-sized enterprises. |
| • | | KB Credit Information Co., Ltd. was established in Korea in October 1999 to collect delinquent loans and to check credit history. |
| • | | KB Data Systems Co., Ltd.was established in Korea in September 1991 to provide software services to us and other financial institutions. |
Item 4.D. | Property, Plants and Equipment |
Our registered office and corporate headquarters are located at 84, Namdaemoon-ro, Jung-gu,26,Gukjegeumyung-ro8-gil,Yeongdeungpo-gu,Seoul 100-703,07331, Korea. The following table presents information regarding certain of our properties in Korea: | | | | | | | Type of facility/building | | Location | | Area (square meters) | | Registered office and corporate headquarters and Kookmin Bank headquarters | | 84, Namdaemoon-ro,
Jung-gu,26,Gukjegeumyung-ro8-gil,Yeongdeungpo-gu, Seoul 100-703
| | | 1,749 | | Kookmin Bank headquarters building
| | 26, Gukjegeumyung-ro 8-gil,
Yeongdeungpo-gu, Seoul
150-758 07331 | | | 5,354 | | KB Kookmin Card headquarters building | | Jongro-gu, Seoul | | | 3,7973,923 | | Kookmin Bank training institute | | Ilsan | | | 207,659207,560 | | Kookmin Bank training institute | | Daecheon | | | 4,158 | | Kookmin Bank training institute | | Sokcho | | | 15,58415,559 | | Kookmin Bank training institute | | Cheonan | | | 196,649 | | Kookmin Bank IT center | | Gangseo-gu, Seoul | | | 13,116 | | Kookmin Bank IT center | | Yeouido, Seoul | | | 5,928 | | Kookmin Bank IT center | | Yeouido, Seoul | | | 2,006 | | Kookmin Bank support center | | Seongbuk-gu, Seoul | | | 4,7489,939 | | KB Securities training institute | | Kiheung-gu, Yongin | | | 64,600 | |
In addition, we entered into a land purchase agreement in March 2016 to purchase a site of approximately 4,727 square meters located in Yeouido, Seoul, on which we plan to construct a new headquarters building for Kookmin Bank (with a floor space of approximately 67,683 square meters). We anticipate that our total capital expenditures for the construction of the building, which is scheduled to be completed in 2020, will amount to approximately ₩425 billion, of which an aggregate amount of ₩162 billion was incurred as of December 31, 2017. We also entered into a land purchase agreement in August 2016 to purchase a site of approximately 13,144 square meters located in Gimpo, in the outskirts of Seoul, in order to construct a new IT center for Kookmin Bank (with a floor space of approximately 40,232 square meters). We anticipate that our total capital expenditures for the construction of the IT center, which is scheduled to be completed in 2019, will amount to approximately ₩229 billion, of which an aggregate amount of ₩26 billion was incurred as of December 31, 2017. As of December 31, 2014,2017, we had a countrywide network of 1,1611,062 banking branches andsub-branches, as well as 121566 branches andsub-branches and 6sixty representative offices for our other operations including our credit card, investment bankingsecurities brokerage, insurance and insurance-relatedconsumer finance businesses. Approximatelyone-quarter of these facilities are housed in buildings owned by us, while the remaining branches are leased properties. Lease terms are generally from two to three years and seldom exceed five years. We also have subsidiaries in Cambodia, China,Singapore, Hong Kong, China, Myanmar, Vietnam, Laos, Indonesia, the United States and the United Kingdom and branches of Kookmin Bank in Osaka and Tokyo in Japan, Auckland in New Zealand, New York in the United States and Ho Chi Minh City in Vietnam and Hong Kong, as well as a branchbranches of Kookmin Bank Cambodia PLC in Phnom PenhToul Kork, Toul Tom Pounh and Tuek Thla in Cambodia, a branch of KB Microfinance Myanmar Co., Ltd. in Hlaingtharya in Myanmar and branches of Kookmin Bank (China) Ltd. in Beijing, Guangzhou, Harbin, Shanghai and Suzhou in China. Kookmin Bank Hong Kong Ltd., previously one of our operating subsidiaries, was converted to a branch as of January 4, 2017. We also have representative offices of Kookmin Bank in MumbaiGurgaon in India, Yangon in Myanmar and Hanoi in Vietnam.Vietnam, as well as a representative office of KB Securities in Shanghai in China and a representative office of KB Kookmin Card in Yangon in Myanmar. We do not own any material properties outside of Korea. The net carrying amount of all the properties owned by us at December 31, 20142017 was ₩2,826₩3,846 billion. Item 4A. | UNRESOLVED STAFF COMMENTS |
We do not have any unresolved comments from the U.S. Securities and Exchange Commission staff regarding our periodic reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Item 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
Item 5.A. | Operating Results |
Overview The following discussion is based on our consolidated financial statements, which have been prepared in accordance with IFRS as issued by the IASB. The consolidated financial statements include the accounts of subsidiaries over which substantive control is exercised through majority ownership of voting stock and/or other means. Investments in jointly controlled entities and associates (companies(which are companies over which we have the ability to exercise significant influence) are accounted for by the equity method of accounting. Trends in the Korean Economy Our financial position and results of operations have been and will continue to be significantly affected by financial and economic conditions in Korea. Substantial growth in lending in Korea to small- and medium-sized enterprises in recent years, and financial difficulties experienced by such enterprises as a result of, among other things, adverse economic conditions in Korea and globally, have generally led to increasing delinquencies and a deterioration in overall asset quality in the credit exposures of Korean banks to small- and medium-sized enterprises. In 2014, we recorded charge-offs of ₩746 billion in respect of our loans to small- and medium-sized enterprises, compared to charge-offs of ₩691 billion in 2013 and charge-offs of ₩943 billion in 2012. In light of the difficult financial condition and liquidity position of small- and medium-sized enterprises in Korea since the second half of 2008, the Korean government introduced measures intended to encourage Korean banks to provide financial support to small- and medium-sized enterprise borrowers. See “Item 3.D. Risk Factors—Risks relating to our small- and medium-sized enterprise loan portfolio—We have significant exposure to small- and medium-sized enterprises, and any financial difficulties experienced by these customers may result in a deterioration of our asset quality and have an adverse impact on us.” In recent years, commercial banks, consumer finance companies and other financial institutions in Korea have also made significant investments and engaged in aggressive marketing in retail lending (including mortgage and home equity loans), leading to substantially increased competition in this segment. Furthermore, inIn 2014 and 2015, the Korean government announcedimplemented several measures to encourage consumer spending and revive the housing market in Korea, including loosening regulations on mortgage lending, which contributed to an increase in our portfolio of retail loans. However, the Korean government introduced measures in the second half of 2016 and 2017 to tighten regulations on mortgage lending and housing subscription in response to the rapid growth in consumer debt and concerns over speculative investments in real estate in certain areas. Notwithstanding such measures, demand for residential property in certain areas, including Seoul, has continued to increase, and our portfolio of retail loans increased from ₩107,644₩124,194 billion as of December 31, 20132015 to ₩119,249₩134,956 billion as of December 31, 2014. The rapid growth2016 and ₩146,150 billion as of December 31, 2017. Nevertheless, a decrease in retail lending,housing prices as a result of the implementation of such measures, together with adversethe high level of consumer debt and rising interest rate levels, could result in declines in consumer spending and reduced economic conditions in recent years,growth, which may lead to increasing delinquencies and a deteriorationincreases in asset quality.delinquency levels of our portfolio of retail loans. In 2014,2017, we recorded charge-offs of ₩574₩342 billion and provision for loan losses of ₩340₩233 billion in respect of our retail loan portfolio, compared to charge-offs of ₩581₩295 billion and provision for loan losses of ₩361₩82 billion in 20132016 and charge-offs of ₩453₩354 billion and provision for loan losses of ₩402₩116 billion in 2012.2015. See “Item 3.D. Risk Factors—Risks relating to our retail credit portfolio.” Our loans to small- andmedium-sized enterprises increased from ₩78,665 billion as of December 31, 2015 to ₩97,379 billion as of December 31, 2017. Substantial growth in lending in Korea to small- andmedium-sized enterprises in recent years, and financial difficulties experienced by such enterprises as a result of, among other things, adverse changes in economic conditions in Korea and globally, may lead to increasing delinquencies and a deterioration in overall asset quality in the credit exposures of Korean banks to small- andmedium-sized enterprises. In 2017, we recorded charge-offs of ₩308 billion in respect of our loans to small- andmedium-sized enterprises, compared to charge-offs of ₩467 billion in 2016 and ₩412 billion in 2015. See “Item 3.D. Risk Factors—Risks relating to our small- andmedium-sized enterprise loan portfolio—We have significant exposure to small- andmedium-sized enterprises, and any financial difficulties experienced by these customers may result in a deterioration of our asset quality and have an adverse impact on us.” The Korean economy is closely tied to, and is affected by developments in, the global economy. While the rate of deterioration of the global economy since the commencement of the global financial crisis in 2008 has slowed, with some signs of stabilization and improvement, theThe overall prospects for the Korean and global economy in 2015 and beyond remain uncertain. Starting in the second half of 2011,In recent years, the global financial markets have experienced significant volatility as a result of, among other things: the financial difficulties affecting many governments worldwide, in particular in southern EuropeLatin America and Latin America; Europe; the slowdown of economic growth in China and other major emerging market economies; interest rate fluctuations amid speculation thatas well as the possibility of further increases in policy rates by the U.S. Federal Reserve would raise interest rates, as well as reductions in policy rates by an increasing number ofand other central banks, including the Bank of Korea;banks; and political and social instability in various countries in the Middle East, and Northern Africa, including Syria, Iraq Syria and Yemen, as well as the United Kingdom’s decision in June 2016 to exit from the European Union, or Brexit. In addition, the global economy faces a number of uncertainties in 2018, including due to the possibility of higher inflation pressures in the UkraineUnited States and Russia. elsewhere, which may lead to corrections in the global financial markets, and credit risks arising from yield-seeking investors increasing their exposure to lower-rated corporate and sovereign borrowers, as well as escalations in trade protectionism globally and geopolitical tensions in East Asia and the Middle East. In light of the high level of interdependence of the global economy, unfavorable changes in the global financial markets, including as a result of any of the foregoing developments, could have a material adverse effect on the Korean economy and financial markets, and in turn on our business, financial condition and results of operations. We are also exposed to adverse changes and volatility in the global and Korean financial markets as a result of our liabilities and assets denominated in foreign currencies and our holdings of trading and investment securities, including structured products. The value of the Won relative to major foreign currencies in general and the U.S. dollar in particular has fluctuated widely in recent years. See “Item 3.A. Selected Financial Data—Exchange Rates.” A depreciation of the Won will increase our cost in Won of servicing our foreigncurrency-denominated debt, while continued exchange rate volatility may also result in foreign exchange losses for us. Furthermore, as a result of adversechanges in global and Korean economic conditions, there has been significant volatility in securities prices, including the stock prices of Korean and foreign companies in which we hold an interest. Such volatility has resulted in and may lead to further trading and valuation losses on our trading and investment securities portfolio as well as impairment losses on our investments accounted for under the equity method, including our noncontrolling equity stake in JSC Bank CenterCredit, a Kazakhstan bank, the initial stake in which we acquired in 2008. See “Item 4.B. Business Overview—Capital Markets Activities and International Banking—International Banking.”method. As a result of volatileuncertain conditions and weakness in the Korean and global economies and financial markets, as well as factors such as the uncertainty surrounding the global financial markets, fluctuations in oil and commodity prices, interest and exchange rate fluctuations, higher unemployment, lower consumer confidence, increased inflationstock market volatility, potential tightening of fiscal and monetary policies and continued tensions with North Korea, the economic outlook for the financial services sector in Korea in 20152018 and for the foreseeable future remains uncertain. Acquisitions In January 2012,recent years, we established KB Savings Bankhave engaged in a number of acquisitions, which have affected, and may continue to provide small-loan finance servicesaffect, our results of operations and their comparability from period to retail customers. KB Savings Bank was established in connection with our purchase of the assets of Jeil Savings Bank and assumption of its liabilities pursuant to a purchase and assumption agreement among Jeil Savings Bank, the Korea Deposit Insurance Corporation and us. In May 2012, pursuant to the purchase and assumption agreement, we transferred to the Korea Deposit Insurance Corporation a portion of the assets we purchased and related liabilities we assumed. In connection with such purchase and assumption (and after giving effect to the transfer to the Korea Deposit Insurance Corporation), we recognized an acquisition of ₩2,546 billion of assets and an assumption of ₩2,654 billion of liabilities and also ₩108 billion of goodwill. In June 2013, we purchased ING Insurance International II B.V.’s 49% interest in KB Life Insurance Co., Ltd. for ₩167 billion, as a result of which KB Life Insurance Co., Ltd. became our wholly-owned subsidiary.
In September 2013, we purchased 100% of the shares of Yehansoul Savings Bank from the Korea Deposit Insurance Corporation for ₩38 billion. In connection with such purchase, we recognized an acquisition of ₩470 billion of assets and an assumption of ₩439 billion of liabilities and also ₩7 billion of goodwill. In January 2014, KB Savings Bank merged with Yehansoul Savings Bank, with KB Savings Bank as the surviving entity.period.
In March 2014, we acquired 52.02% of the outstanding shares of Woori Financial Co., Ltd., a publicly listed Korean consumer finance company, from Woori Finance Holdings Co., Ltd. for ₩280 billion, and subsequently renamed the entity KB Capital Co., Ltd. As a result, KB Capital became a consolidated subsidiary. We conducted a tender offer in May 2017, through which we acquired 5,949,300 shares of KB Capital at ₩27,500 per share, increasing our shareholding in KB Capital to 79.70%. We subsequently acquired the remaining outstanding shares of KB Capital in exchange for 2,269,057 shares of common stock of our company through a comprehensive stock swap effected in July 2017, as a result of which KB Capital became a wholly-owned subsidiary. As of December 31, 2017, KB Capital had total assets of ₩8,744 billion and total equity of ₩940 billion, and in 2017, its total revenues amounted to ₩588 billion and its profit for the year amounted to ₩121 billion. In addition, in June 2014,2015, we entered into a share purchase agreement, which was amended in March 2015, to acquireacquired 19.47% of the outstanding shares of LIG Insurance Co., Ltd., a publicly listed Korean property and casualtynon-life insurance company, from a group of individual shareholders for ₩645 billion. Pursuant to applicable Korean law,₩651 billion, and subsequently renamed the entity KB Insurance Co., Ltd. In November 2015, we will be required to increaseincreased our shareholding in LIGKB Insurance to at least 30% within one year from the date of such acquisition. As of December 31, 2014, LIG Insurance had total assets of ₩23,929 billion and total equity of ₩1,78533.29% by acquiring its treasury shares for ₩231 billion, and in 2014, its total revenues amountedDecember 2016, we further increased our
shareholding to ₩10,87839.81% by purchasing new shares of KB Insurance for ₩171 billion and its profitin a rights offering. Subsequently, through a tender offer conducted in May 2017, we acquired 36,237,649 shares of KB Insurance at ₩33,000 per share, increasing our shareholding to 94.30%, as a result of which KB Insurance became a consolidated subsidiary. In July 2017, we effected a comprehensive stock swap to acquire the remaining outstanding shares of KB Insurance in exchange for the year amounted to ₩139 billion. Changes in Accounting Policies
Pursuant to the adoption2,170,943 shares of IFRS 10,Consolidated Financial Statements, which is effective beginning in 2013, our consolidated financial statements as of and for the years ended December 31, 2013 and 2014 include trust accounts for which we guarantee only the repayment of principal, as well as certain other entities, which were not previously subject to consolidation, while excluding certain other entities that were previously consolidated. We included in our scope of consolidation those entities with respect to which (i) we had existing rights that gave us the current ability to direct the relevant activities of such entities, (ii) we had exposure or rights to variable returns from our investment in such entities and (iii) we had the ability to use our power over such entities to affect the amountcommon stock of our returns. Our consolidated financial statementscompany, as a result of and for the year ended December 31, 2012 have been restated to retroactively apply this change.
Upon the adoption of IFRS 10,Consolidated Financial Statements, in 2013, we applied the standard described above and consolidated five asset-backed securitization specialty companies and seven funds (includingwhich KB Insurance became a subsidiary of a fund), while excluding KB-Glenwood Private Equity Fund 1, NPS KBIC Private Equity No. 1 and KBIC Private Equity Fund No. 3 from our scope of consolidation. The asset-backed securitization specialty companies that were consolidated in 2013 are Samho Kyungwon Co., Ltd., Taejon Samho The First Co., Ltd., Prince DCM Co., Ltd. and KH First Co., Ltd. The funds that were consolidated in 2013 are KB Hope Sharing BTL Private Special Asset, Hanbando BTL Private Special Asset Fund 1, Global Logistics Infra Private Fund 1, Global Logistics Infra Private Fund 2, KB Mezzanine Private Securities Fund 1, KB Private Real Estate Securities Fund 1 (NPL), K Star KTB ETF (Bond) and Woori KA First Asset Securitization (a subsidiary of KB Private Real Estate Securities Fund 1 (NPL)). For further information regarding changes in our consolidated subsidiaries, seewholly-owned subsidiary. See Note 4044 of the notes to our consolidated financial statements included elsewhere in this annual report. In connection with our acquisition of additional shares of KB Insurance in May 2017, we recognized ₩2,434 billion of intangible assets, consisting mainly of the value of business acquired, which represents the difference between the fair value of KB Insurance’s insurance contract liabilities acquired and their book value as of the acquisition date. The value of business acquired is amortized over an estimated useful life of 60 years using the declining balance method, and the related amortization expense is recorded as part of our insurance expense. See Notes 3.10 and 15 of the notes to our consolidated financial statements included elsewhere in this annual report. As of December 31, 2017, KB Insurance had total assets of ₩32,352 billion and total equity of ₩3,223 billion, and in 2017, its total revenues amounted to ₩8,741 billion and its profit for the year amounted to ₩330 billion.
In addition, in 2014,May 2016, we changedacquired 22.56% of the outstanding shares of Hyundai Securities Co., Ltd., a publicly listed Korean securities firm, from Hyundai Merchant Marine Co., Ltd. and other shareholders for ₩1,242 billion, and further increased our accounting policyshareholding in Hyundai Securities to 29.62% in June 2016 by acquiring treasury shares of Hyundai Securities for ₩107 billion. In October 2016, we increased our shareholding in Hyundai Securities to 100% by effecting a comprehensive stock swap of the outstanding shares of Hyundai Securities for 31,759,844 newly issued shares of common stock of our company, as a result of which Hyundai Securities became a consolidated subsidiary. In connection with respect to uncertain tax positions. Prior to January 1, 2014,such comprehensive stock swap, we had recognized gains on bargain purchase of ₩629 billion, representing the excess of the total identifiable net assets of Hyundai Securities over the total consideration transferred (consisting of the sum of the fair value of our uncertain tax positionsholdings of Hyundai Securities shares at the time of the comprehensive stock swap and the value of our common shares issued in the financial statements based on the guidance in International Accounting Standards 37, or IAS 37,Provisions, Contingent Liabilities and Contingent Assetscomprehensive stock swap), which allows recognitionwas recorded as part of ournon-operating income for 2016. Following such transaction, we merged an existing subsidiary, KB Investment & Securities, with and into Hyundai Securities in December 2016 and changed the name of the best estimatesurviving entity to KB Securities Co., Ltd. As of expenditures as tax expenses if the uncertain tax position is probableDecember 31, 2017, KB Securities had total assets of resulting₩37,352 billion and total equity of ₩4,416 billion, and in an additional payment2017, its total revenues amounted to the tax authorities. Under IAS 37, however, tax benefits are recognized only when it has become virtually certain that a tax refund from a claim for rectification or an appeal for refund of amounts claimed from the tax authorities will occur. Beginning in 2014, we recognize our uncertain tax positions in the financial statements based on the guidance in International Accounting Standards 12, or IAS 12,Income Taxes, which allows recognition of tax payments as current income tax assets to the extent it is probable that they will be recovered from the tax authorities. Our consolidated financial statements as of₩5,974 billion and its profit for the years ended December 31, 2012 and 2013 have been restatedyear amounted to retroactively apply such change₩272 billion. Changes in our accounting policy.Accounting Policies For further information regarding these and other changes to our accounting policies and their effect on our consolidated financial statements, see Note 2.1 of the notes to our consolidated financial statements included elsewhere in this annual report. Changes in Securities Values, Exchange Rates and Interest Rates Fluctuations of exchange rates, interest rates and stock prices affect, among other things, the demand for our products and services, the value of and rate of return on our assets, the availability and cost of funding and the financial condition of our customers. The following table shows, for the dates indicated, the stock price index of all equities listed on the KRX KOSPI Market as published in the KOSPI, the Won to U.S. dollar exchange rates and benchmark Won borrowing interest rates. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2010 | | | Dec. 30, 2010 | | | June 30, 2011 | | | Dec. 29, 2011 | | | June 29, 2012 | | | Dec. 31, 2012 | | | June 28, 2013 | | | Dec. 31, 2013 | | | June 30, 2014 | | | Dec. 31, 2014 | | KOSPI | | | 1,698.29 | | | | 2,051.00 | | | | 2,100.69 | | | | 1,825.74 | | | | 1,854.01 | (4) | | | 1,997.05 | | | | 1,863.32 | | | | 2,011.34 | (5) | | | 2,002.21 | | | | 1,915.59 | (6) | ₩/US$ exchange rates (1) | | ₩ | 1,220.9 | | | ₩ | 1,130.6 | | | ₩ | 1,066.3 | | | ₩ | 1,158.5 | | | ₩ | 1,141.2 | | | ₩ | 1,063.2 | | | ₩ | 1,141.5 | | | ₩ | 1,055.3 | | | ₩ | 1,011.6 | | | ₩ | 1,090.9 | | Corporate bond rates (2) | | | 4.96 | % | | | 4.30 | % | | | 4.49 | % | | | 4.22 | % | | | 3.94 | % | | | 3.44 | % | | | 3.54 | % | | | 3.64 | % | | | 3.42 | % | | | 2.87 | % | Treasury bond rates (3) | | | 3.86 | % | | | 3.38 | % | | | 3.76 | % | | | 3.34 | % | | | 3.30 | % | | | 2.82 | % | | | 2.88 | % | | | 2.86 | % | | | 2.68 | % | | | 2.10 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 28, 2013 | | | Dec. 31, 2013 | | | June 30, 2014 | | | Dec. 31, 2014 | | | June 30, 2015 | | | Dec. 31, 2015 | | | June 30, 2016 | | | Dec. 30, 2016 | | | June 30, 2017 | | | Dec. 28, 2017 | | KOSPI | | | 1,863.32 | | | | 2,011.34 | (4) | | | 2,002.21 | | | | 1,915.59 | (5) | | | 2,074.20 | | | | 1,961.31 | (6) | | | 1,970.35 | | | | 2,026.46 | (7) | | | 2,391.79 | | | | 2,467.49 | (8) | W/US$ exchange rates(1)
| | ₩ | 1,141.5 | | | ₩ | 1,055.3 | | | ₩ | 1,011.6 | | | ₩ | 1,090.9 | | | ₩ | 1,117.3 | | | ₩ | 1,169.3 | | | ₩ | 1,154.2 | | | ₩ | 1,203.7 | | | ₩ | 1,143.8 | | | ₩ | 1,067.4 | | Corporate bond rates(2) | | | 3.54 | % | | | 3.64 | % | | | 3.42 | % | | | 2.87 | % | | | 2.51 | % | | | 2.64 | % | | | 2.26 | % | | | 2.79 | % | | | 2.84 | % | | | 3.08 | % | Treasury bond rates(3) | | | 2.88 | % | | | 2.86 | % | | | 2.68 | % | | | 2.10 | % | | | 1.79 | % | | | 1.66 | % | | | 1.25 | % | | | 1.64 | % | | | 1.7 | % | | | 2.1 | % |
(1) | Represents the noon buying rate on the dates indicated. |
(2) | Measured by the yield on three-year Korean corporate bonds rated as A+ by the Korean credit rating agencies. |
(3) | Measured by the yield on three-year treasury bonds issued by the Ministry of Strategy and Finance of Korea. |
(4) | As of December 28, 2012, the last day of trading for the KRX KOSPI Market in 2012.
|
(5) | As of December 30, 2013, the last day of trading for the KRX KOSPI Market in 2013. |
(6)(5) | As of December 30, 2014, the last day of trading for the KRX KOSPI Market in 2014. |
(6) | As of December 30, 2015, the last day of trading for the KRX KOSPI Market in 2015. |
(7) | As of December 29, 2016, the last day of trading for the KRX KOSPI Market in 2016. |
(8) | As of December 28, 2017, the last day of trading for the KRX KOSPI Market in 2017. |
Critical Accounting Policies The notes to our consolidated financial statements contain a summary of our significant accounting policies, including a discussion of recently issued accounting pronouncements. Certain of these policies are critical to the portrayal of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. We discuss these critical accounting policies below. Impairment of Loans and Allowances for Loan Losses We evaluate our loan portfolio for impairment on an ongoing basis. We have established allowances for loan losses, which are available to absorb probable losses that have been incurred in our loan portfolio as of the balance sheet date.portfolio. If we believe that additions or changes to the allowances for loan losses are required, we record a provision for loan losses (as part of our provision for credit losses), which is treated as a charge against current income. Loan exposures that we deem to be uncollectible, including actual loan losses, net of recoveries of previouslywritten-off amounts, are charged directly against the allowances for loan losses. We have established our allowance for credit losses as of December 31, 2015, 2016 and 2017 in accordance with International Accounting Standard 39,Financial Instruments: Recognition and Measurement. IFRS 9Financial Instruments is effective, and replaces International Accounting Standard 39, for annual periods commencing on or after January 1, 2018. See “Item 5.B. Liquidity and Capital Resources—Recent Accounting Pronouncements.” International Accounting Standard 39 Our accounting policies under International Accounting Standard 39 for losses arising from the impairment of loans and allowances for loan losses are described in Note 3.6 of the notes to our consolidated financial statements. We base the level of our allowances for loan losses on an evaluation of the risk characteristics of our loan portfolio. The evaluation considers factors such as historical loss experience, the financial condition of our borrowers and current economic conditions. Allowances represent our management’s best estimate of losses incurred in the loan portfolio as of the balance sheet date. Our management is required to exercise judgment in making assumptions and estimates when calculating loan allowances on both individually and collectively assessed loans. The determination of the allowances required for loans which are deemed to be individually significant often requires the use of considerable management judgment concerning such matters as economic conditions, the financial performance of the counterparty and the value of any collateral held for which there may not be a readily accessible market. Once we have identified loans as impaired, we generally value them either based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at a loan’s observable market price or the fair value of the collateral if a loan is collateral dependent. The actual amount of the future cash flows and their timing may differ from the estimates used by our management and consequently may cause actual losses to differ from the reported allowances. The allowances for portfolios of smaller-balance homogenous loans, such as those to individuals and small business customers, and for those loans which are individually significant but for which no objective evidence of impairment exists, are determined on a collective basis. The collective allowances are calculated on a portfolio basis using statistical models which incorporate numerous estimates and judgments. We perform a regular review of the models and underlying data and assumptions. Our consolidated financial statements for the year ended December 31, 20142017 included total allowances for loan losses of ₩2,452₩2,110 billion as of that date. Our total loan charge-offs, net of recoveries, amounted to ₩1,560₩578 billion and we recorded a provision for loan losses (which forms a part of the provision for credit losses, together with provisions for unused loan commitments, acceptances and guarantees, financial guarantee contracts and other financial assets) of ₩1,211₩583 billion in 2014.2017. We believe that the accounting estimates related to our impairment of loans and allowances for loan losses are a “critical accounting policy” because: (1) they are highly susceptible to change from period to period because they require us to make assumptions about future default rates and losses relating to our loan portfolio; and (2) any significant difference between our estimated loan losses (as reflected in our allowances for loan losses) and actual loan losses could require us to take an additional provision which, if significant, could have a material impact on our profit. Our assumptions about estimated losses require significant judgment because actual losses have fluctuated in the past and are expected to continue to do so, based on a variety of factors. IFRS 9 IFRS 9 introduces a new impairment model which requires recording of allowance for credit losses based on expected losses instead of incurred losses (as is the case under International Accounting Standard 39), and recognition of any subsequent changes in expected credit losses in profit or loss. Under IFRS 9, the allowance required to be established with respect to a loan or receivable is the amount of the12-month expected credit loss or the lifetime expected credit loss for the applicable loan or receivable, according to the three stages of credit risk deterioration since initial recognition, as follows: Stage 1 (loans and receivables for which credit risk has not significantly increased since initial recognition): the allowance for credit losses must cover expected credit losses due to possible defaults on the relevant loan or receivable within a12-month period from the reporting date. Stage 2 (loans and receivables for which credit risk has significantly increased since initial recognition): the allowance for credit losses must over expected credit losses from all possible defaults during the expected lifetime of the relevant loan or receivable. Stage 3 (credit-impaired loans and receivables): the allowance for credit losses must over expected credit losses from all possible defaults during the expected lifetime of the relevant loan or receivable. For further information regarding IFRS 9, see Note 2.1 of the notes to our consolidated financial statements. We expect that the determination of the allowance for credit losses for loans and receivables under IFRS 9 will continue to require significant management judgment and estimates, regarding matters such as the level of credit risk and the amount of expected credit losses for our loans and receivables. Valuation of Financial Instruments Our accounting policy for determining the fair value of financial instruments is described in Notes 3.3 and 6 of the notes to our consolidated financial statements. The best evidence of fair value is a quoted price in an actively traded market. In the event that the market for a financial instrument is not active, a valuation technique is used. The majority of valuation techniques employ only observable market data and, as such, the reliability of the fair value measurement is high. However, certain financial instruments are valued on the basis of valuation techniques that feature one or more significant market inputs that are unobservable. Valuation techniques that rely to a greater extent on unobservable inputs require a higher level of management judgment to calculate a fair value than those based wholly on observable inputs. Valuation techniques used to calculate fair values are discussed in Note 6.1 of the notes to our consolidated financial statements. The main assumptions and estimates which our management considers when applying a model with valuation techniques are: The likelihood and expected timing of future cash flows on the instrument. These cash flows are usually governed by the terms of the instrument, although judgment may be required when the ability of the counterparty to service the instrument in accordance with the contractual terms is in doubt. Future cash flows may be sensitive to changes in market rates. Selecting an appropriate discount rate for the instrument. The determination of this rate is based on an assessment of what a market participant would regard as the appropriate spread of the rate for the instrument over the appropriate risk-free rate. Judgment to determine what model to use to calculate fair value in areas where the choice of valuation model is particularly subjective (for example, valuation of complex derivative products). The financial instruments carried at fair value have been categorized under the three levels of the IFRS fair value hierarchy as follows: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is a market-based measure considered from the perspective of a market participant. As such, even when market assumptions are not readily available, our own assumptions are intended to reflect those that market participants would use in pricing the asset or liability at the measurement date. For financial instruments traded in theover-the-counter market, we measure the fair value of such instruments as the arithmetic mean of prices obtained from Korea Asset Pricing (an affiliate of Fitch Ratings), KIS Pricing (an affiliate of Moody’s Investors Service) and, NICE Pricing and Information and FN Pricing, all threefour of which are recognized as major qualified independent pricing services in Korea. There are extremely rare cases where we do not receive price quotes from all threefour of the pricing services described above. In such cases, we contact the pricing service which did not submit a price quote to discuss the reason why it cannot provide a price and, following such discussion, we use the arithmetic mean of only the prices obtained from the other pricing services so long as there is no reason to believe that the prices that have been submitted are inadequate. We generally do not adjust the prices we obtain from these independent pricing services, as the variance among such prices is insignificant in most cases (primarily because most of the financial instruments we hold consist of government bonds and highly-rated corporate bonds, there is a high volume of transactions in theover-the-counter market and actual transaction prices are monitored and referenced by the pricing services). Our consolidated financial statements for the year ended December 31, 20142017 included financial assets measured at fair value using a valuation technique of ₩22,411₩61,347 billion, representing 63.8%73.33% of total financial assets measured at fair value, and financial liabilities measured at fair value using a valuation technique of ₩2,778₩12,947 billion, representing 76.9%85.37% of total financial liabilities measured at fair value. As used herein, the fair value using a valuation technique means the fair value at Level 2 and Level 3 in the fair value hierarchy. We believe that the accounting estimates related to the determination of the fair value of financial instruments are a “critical accounting policy” because: (1) they may be highly susceptible to change from period to period based on factors beyond our control; and (2) any significant difference between our estimate of the fair value of these financial instruments on any particular date and either their estimated fair value on a different date or the actual proceeds that we receive upon sale of these financial instruments could result in valuation losses or losses on disposal which may have a material impact on our profit. Our assumptions about the fair value of financial instruments we hold require significant judgment because actual valuations have fluctuated in the past and are expected to continue to do so, based on a variety of factors. Deferred Income Tax Assets Our accounting policy for the recognition of deferred income tax assets is described in Notes 3.213.22 and 16 of the notes to our consolidated financial statements. The recognition of deferred income tax assets relies on an assessment of the probability and sufficiency of future taxable profits, future reversals of existing taxable temporary differences and ongoing tax planning strategies. We recognize deferred income tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, unused tax losses and unused tax credits. Deferred income tax assets are recognized only to the extent it is probable that sufficient taxable profit will be available against which those deductible temporary differences, unused tax losses or unused tax credits can be utilized. This assessment requires significant management judgment and assumptions. In determining the amount of deferred income tax assets, we use historical tax capacity and profitability information and, if relevant, forecasted operating results, based upon approved business plans, including a review of the eligible carry-forward periods, available tax planning opportunities and other relevant considerations. Our consolidated financial statements for the year ended December 31, 20142017 included deferred income tax assets and liabilities of ₩16₩4 billion and ₩93₩533 billion, respectively, as of that date, after offsetting of ₩1,236₩1,321 billion of deferred income tax liabilities and assets. We believe that the estimates related to our recognition and measurement of deferred income tax assets are a “critical accounting policy” because: (1) they may be highly susceptible to change from period to period based on our assumptions regarding our future profitability; and (2) any significant difference between our estimates of future profits on any particular date and estimates of such future profits on a different date could result in an income tax expense or benefit which may have a material impact on our profit from period to period. Our assumptions about our future profitability require significant judgment and are inherently subjective. Uncertain Tax Positions Our accounting policy for the recognition of uncertain tax positions is described in Note 3.22 of the notes to our consolidated financial statements. We recognize our uncertain tax positions in our financial statements based on the guidance in International Accounting Standard 12,Income Taxes, which allows recognition of tax payments as current income tax assets to the extent it is probable that they will be recovered from the tax authorities. We believe that the estimates related to our recognition and measurement of uncertain tax positions are a “critical accounting policy” because they are measured upon the facts and circumstances that exist as of each reporting period and involve significant management judgment. Subsequent changes in judgment based upon new information may lead to changes in recognition, derecognition and measurement of uncertain tax positions. Results of Operations Net Interest Income The following table shows, for the periods indicated, the principal components of our net interest income: | | | Year Ended December 31, | | Percentage Change | | | Year Ended December 31, | | Percentage Change | | | | 2012 | | 2013 | | 2014 | | 2013/2012 | | 2014/2013 | | | 2015 | | 2016 | | 2017 | | 2016/2015 | | 2017/2016 | | | | (in billions of Won, except percentages) | | (%) | | | (in billions of Won, except percentages) | | (%) | | Interest income | | | | | | | | | | | | | | | | | | | | | Cash and interest earning deposits in other banks | | ₩ | 160 | | | ₩ | 146 | | | ₩ | 190 | | | | (8.8 | )% | | | 30.1 | % | | Due from financial institutions(1) | | | ₩ | 152 | | | ₩ | 111 | | | ₩ | 126 | | | (27.0 | )% | | 13.5 | % | Loans | | | 12,624 | | | | 10,942 | | | | 10,325 | | | | (13.3 | ) | | | (5.6 | ) | | 9,235 | | | 9,021 | | | 10,096 | | | (2.3 | ) | | 11.9 | | Financial investments (debt securities) (1)(2) | | | 1,426 | | | | 1,269 | | | | 1,120 | | | | (11.0 | ) | | | (11.7 | ) | | 989 | | | 890 | | | 1,160 | | | (10.0 | ) | | 30.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest income | | | 14,210 | | | | 12,357 | | | | 11,635 | | | | (13.0 | ) | | | (5.8 | ) | | 10,376 | | | 10,022 | | | 11,382 | | | (3.4 | ) | | 13.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest expense | | | | | | | | | | | | | | | | | | | | | Deposits | | | 5,450 | | | | 4,279 | | | | 3,845 | | | | (21.5 | ) | | | (10.1 | ) | | 3,035 | | | 2,477 | | | 2,346 | | | (18.4 | ) | | (5.3 | ) | Debts | | | 460 | | | | 365 | | | | 342 | | | | (20.7 | ) | | | (6.3 | ) | | 271 | | | 289 | | | 446 | | | 6.6 | | | 54.3 | | Debentures | | | 1,262 | | | | 1,190 | | | | 1,032 | | | | (5.7 | ) | | | (13.3 | ) | | 867 | | | 853 | | | 880 | | | (1.6 | ) | | 3.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest expense | | | 7,172 | | | | 5,834 | | | | 5,219 | | | | (18.7 | ) | | | (10.5 | ) | | 4,173 | | | 3,619 | | | 3,672 | | | (13.3 | ) | | 1.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income | | ₩ | 7,038 | | | ₩ | 6,523 | | | ₩ | 6,416 | | | | (7.3 | ) | | | (1.6 | ) | | ₩ | 6,203 | | | ₩ | 6,403 | | | ₩ | 7,710 | | | 3.2 | | | 20.4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest margin (2)(3) | | | 2.71 | % | | | 2.51 | % | | | 2.39 | % | | | | | | 2.20 | % | | 2.13 | % | | 2.27 | % | | | | |
(1) | Consists of cash and interest earning deposits in other banks. |
(2) | Consists of debt securities in ouravailable-for-sale andheld-to-maturity financial asset portfolios. |
(2)(3) | The ratio of net interest income to average interest earning assets. See “Item 3.A. Selected Financial Data—Profitability ratios and other data.” |
Comparison of 20142017 to 20132016 Interest incomeincome.. Interest income decreased 5.8%increased 13.6% from ₩12,357₩10,022 billion in 20132016 to ₩11,635₩11,382 billion in 2014,2017, primarily as a result of a 5.6% decreasean 11.9% increase in interest on loans. Averageloans and a 30.2% increase in interest on debt securities in our financial investments portfolio. The average volume of our interest earning assets increased 13.0% from ₩301,185 billion in 2016 to ₩340,295 billion in 2017, principally due to growth in our loan and debt securities portfolios. The effect of this increase was slightly enhanced by a 2 basis point increase in the average yields on our interest earning assets decreased 42 basis points from 4.76%3.33% in 20132016 to 4.34%3.34% in 2014,2017, which mainly reflected an increase in interest rates for loans commencing in the second half of 2017, despite a decrease in the general level of interest rates in Korea in 20142017 compared to 2013. The effect of this decrease was partially offset by a 3.3% increase in the average volume of our interest earning assets from ₩259,645 billion in 2013 to ₩268,330 billion in 2014, principally due to growth in our loan portfolio.2016. The 5.6% decrease11.9% increase in interest on loans from ₩10,942₩9,021 billion in 20132016 to ₩10,325₩10,096 billion in 20142017 was primarily the result of: a 439.2% increase in the average volume of corporate loans from ₩112,657 billion in 2016 to ₩123,004 billion in 2017, which was enhanced by a 14 basis point increase in the average yields on such loans from 3.08% in 2016 to 3.22% in 2017; a 17.3% increase in the average volume of other consumer loans from ₩39,506 billion in 2016 to ₩46,325 billion in 2017, which was partially offset by a 7 basis point decrease in the average yields on corporatesuch loans from 4.50%4.64% in 20132016 to 4.07%4.57% in 2014,2017; a 9.5% increase in the average volume of mortgage loans from ₩55,638 billion in 2016 to ₩60,944 billion in 2017, which was enhanced by a 2 basis point increase in the average yields on such loans from 2.74% in 2016 to 2.76% in 2017; and a 16.0% increase in the average volume of credit card receivables from ₩12,827 billion in 2016 to ₩14,881 billion in 2017, which was partially offset by a 1.3% increase in the average volume of such loans from ₩100,614 billion in 2013 to ₩101,875 billion in 2014; a 7731 basis point decrease in the average yields on credit card receivables from 10.70% in 2013 to 9.93% in 2014, which was enhanced by a 2.6% decrease in the average volume of such receivables from ₩11,611 billion in 2013 to ₩11,312 billion in 2014;
a 47 basis point decrease in the average yields on mortgage loans from 4.10% in 2013 to 3.63% in 2014, which was partially offset by an 8.2% increase in the average volume of such loans from ₩44,514 billion8.76% in 20132016 to ₩48,160 billion8.45% in 2014; and 2017.a 45 basis point decrease in the average yields on home equity loans from 4.25% in 2013 to 3.80% in 2014, which was partially offset by a 5.8% increase in the average volume of such loans from ₩30,275 billion in 2013 to ₩32,030 billion in 2014.
The average yields on corporate loans, credit card receivables, mortgage loans and home equity loans decreased mainly as a result of the decrease in the general level of interest rates in Korea applicable to such loans and receivables from 2013 to 2014. The increase in the average volume of corporate loans mainly reflected our increased marketing efforts as well asand increased demand for such loans from corporate borrowers in Korea.Korea, as well as the addition of the corporate loans of KB Insurance (which became a consolidated subsidiary in May 2017) to our corporate loan portfolio. The decreaseincrease in the average volume of other consumer loans and mortgage loans mainly reflected higher demand for such loans among consumers in Korea, as well as the addition of the other consumer loans (including policy loans) and mortgage loans of KB Insurance commencing in May 2017, and the full-year effect of the addition of the other consumer loans (including margin loans) of Hyundai Securities (which became a consolidated subsidiary in October 2016), to our other consumer and mortgage loan portfolios. The increase in the average volume of credit card loansreceivables was principally dueattributable primarily to initiatives byan increase in the Korean government to encouragenumber of credit cards issued, as well as in the use of debitcredit cards instead of credit cards.by our customers. The increase in the average volume ofyields on corporate loans and mortgage loans wasincreased mainly as a result of initiatives by the Korean government to revive the housing marketan increase in interest rates for such loans in Korea by loosening regulations on mortgage lending in 2014. The increasecommencing in the second half of 2017, while the average volumeyields on other consumer loans and credit card loans decreased primarily due to a decrease in the general level of home equity loans mainly reflected the loosening of the maximum loan-to-value ratios,interest rates in Korea in 2017 compared to which our home equity loans are subject, by the Korean government in 2014.2016.
Overall, the average yields on our loans decreasedincreased by 459 basis points from 4.96%3.50% in 20132016 to 4.51%3.59% in 2014,2017, while the average volume of our loans increased 3.9%9.3% from ₩220,401₩257,687 billion in 20132016 to ₩228,989₩281,538 billion in 2014.2017. Debt securities in our financial investments portfolio consist ofavailable-for-sale debt securities andheld-to-maturity debt securities, including debt securities issued by government-owned or -controlled enterprises or financial institutions and debt securities issued by Korean banks and other financial institutions. InterestThe 30.3% increase in interest on debt securities in our financial investments portfolio decreased 11.7% from ₩1,269₩890 billion in 20132016 to ₩1,120₩1,160 billion in 2014,2017 was primarily as athe result of a 2640.9% increase in the average volume of such debt securities from ₩34,868 billion in 2016 to ₩49,137 billion in 2017, which was partially offset by a 19 basis point decrease in average yields on such debt securities from 3.81%2.55% in 20132016 to 3.55%2.36% in 2014,2017. The increase in the average volume of such debt securities was principally due to the addition of the debt securities holdings of KB Insurance commencing in May 2017, and the full-year effect of the addition of the debt securities holdings of Hyundai Securities commencing in October 2016, to our financial investments portfolio. The decrease in average yields on such debt securities mainly reflected the lower interest rate environment in Korea in 2017 compared to 2016. Interest expense.Interest expense increased 1.5% from ₩3,619 billion in 2016 to ₩3,672 billion in 2017 primarily due to a 54.3% increase in interest expense on debts, which was mostly offset by a 5.3% decrease in interest expense on deposits. The average volume of interest bearing liabilities increased 10.7% from ₩283,868 billion in 2016 to ₩314,118 billion in 2017, which mainly reflected an increase in the average volume of deposits and debts. The effect of this increase was mostly offset by a 10 basis point decrease in the average cost of interest bearing liabilities from 1.27% in 2016 to 1.17% in 2017, which was driven mainly by a decrease in the general level of interest rates in Korea in 2017 compared to 2016. The 54.3% increase in interest expense on debts from ₩289 billion in 2016 to ₩446 billion in 2017 was primarily due to a 45.0% increase in the average volume of debts from ₩22,798 billion in 2016 to ₩33,065 billion in 2017, which was enhanced by an 8 basis point increase in the average cost of such debts from 1.27% in 2016 to 1.35% in 2017. The increase in the average volume of debts was principally due to the full-year effect of the addition of the debts (particularly repurchase agreements) of Hyundai Securities to our debts commencing in October 2016. The increase in the average cost of debts mainly reflected an increase in interest rates for borrowings in Korea commencing in the second half of 2017. The 5.3% decrease in interest expense on deposits from ₩2,477 billion in 2016 to ₩2,346 billion in 2017 was primarily due to an 11 basis point decrease in the average cost of time deposits from 1.69% in 2016 to 1.58% in 2017, which was offset in part by a 5.4%1.5% increase in the average volume of such deposits from ₩125,612 billion in 2016 to ₩127,478 billion in 2017. The decrease in the average cost of time deposits mainly reflected the lower interest rate environment in Korea in 2017 compared to 2016. The increase in the average volume of time deposits was principally due to an increase in time deposits for corporate customers. Overall, the average cost of our deposits decreased by 12 basis points from 1.09% in 2016 to 0.97% in 2017, while the average volume of our deposits increased 6.4% from ₩226,857 billion in 2016 to ₩241,286 billion in 2017. Net interest margin.Net interest margin represents the ratio of net interest income to average interest earning assets. Our overall net interest margin increased from 2.13% in 2016 to 2.27% in 2017, as a 20.4% increase in our net interest income from ₩6,403 billion in 2016 to ₩7,710 billion in 2017 outpaced a 13.0% increase in the average volume of our interest earnings assets from ₩301,185 billion in 2016 to ₩340,295 billion in 2017. The 13.0% growth in average interest earning assets outpaced a 10.7% increase in average interest bearing liabilities from ₩283,868 billion in 2016 to ₩314,118 billion in 2017, while the increase in interest income outpaced an increase in interest expense, resulting in an increase in net interest income. The magnitude of this increase was enhanced by an increase in our net interest spread, which represents the difference between the average yield on our interest earning assets and the average cost of our interest bearing liabilities, from 2.06% in 2016 to 2.18% in 2017. The increase in our net interest spread reflected a decrease in the average cost of our interest bearing liabilities compared to a slight increase in the average yield of our interest earning assets, primarily due to the earlier adjustment of interest rates on interest earning assets compared to interest rates on interest bearing liabilities in the context of an increase in the general level of interest rates in Korea commencing in the second half of 2017. Comparison of 2016 to 2015 Interest income.Interest income decreased 3.4% from ₩10,376 billion in 2015 to ₩10,022 billion in 2016, primarily as a result of a 2.3% decrease in interest on loans and a 10.0% decrease in interest on debt securities in our financial investments portfolio. Average yields on our interest earning assets decreased 34 basis points from 3.67% in 2015 to 3.33% in 2016, which reflected a decrease in the general level of interest rates in Korea in 2016 compared to 2015. The effect of this decrease was partially offset by a 6.7% increase in the average volume of our interest earnings assets from ₩282,315 billion in 2015 to ₩301,185 billion in 2016, principally due to growth in our loan portfolio. The 2.3% decrease in interest on loans from ₩9,235 billion in 2015 to ₩9,021 billion in 2016 was primarily the result of: a 34 basis point decrease in the average yields on corporate loans from 3.42% in 2015 to 3.08% in 2016, which was partially offset by a 6.5% increase in the average volume of such loans from ₩105,821 billion in 2015 to ₩112,657 billion in 2016; a 23 basis point decrease in the average yields on home equity loans from 3.12% in 2015 to 2.89% in 2016, which was partially offset by a 1.4% increase in the average volume of such loans from ₩33,572 billion in 2015 to ₩34,048 billion in 2016; a 28 basis point decrease in the average yields on mortgage loans from 3.02% in 2015 to 2.74% in 2016, which was partially offset by an 8.1% increase in the average volume of such loans from ₩51,467 billion in 2015 to ₩55,638 billion in 2016; and a 57 basis point decrease in the average yields on other consumer loans from 5.21% in 2015 to 4.64% in 2016, which was mostly offset by an 11.8% increase in the average volume of such loans from ₩35,351 billion in 2015 to ₩39,506 billion in 2016. The average yields on corporate loans, home equity loans, mortgage loans and other consumer loans decreased mainly as a result of the decrease in the general level of interest rates in Korea applicable to such loans from 2015 to 2016. The increase in the average volume of corporate loans mainly reflected our increased marketing efforts as well as increased demand for such loans from corporate borrowers in Korea. The increase in the average volume of home equity loans and mortgage loans mainly reflected increased demand for such loans in Korea, following initiatives by the Korean government in 2015 to revive the housing market in Korea by loosening regulations on mortgage lending. The increase in the average volume of other consumer loans mainly reflected higher demand for such loans in Korea, as well as the addition of the other consumer loans (including margin loans) of Hyundai Securities to our other consumer loan portfolio commencing in October 2016. Overall, the average yields on our loans decreased by 33 basis points from 3.83% in 2015 to 3.50% in 2016, while the average volume of our loans increased 7.0% from ₩240,912 billion in 2015 to ₩257,687 billion in 2016. The 10.0% decrease in interest on debt securities in our financial investments portfolio from ₩989 billion in 2015 to ₩890 billion in 2016 was primarily the result of a 50 basis point decrease in average yields on such debt securities from 3.05% in 2015 to 2.55% in 2016, which was partially offset by a 7.5% increase in the average volume of such debt securities from ₩33,339₩32,423 billion in 20132015 to ₩31,530₩34,868 billion in 2014.2016. The decrease in average yields on such debt securities was primarily due to a decrease in the general level of interest rates in Korea for debt securities from 20132015 to 2014.2016. The decreaseincrease in the average volume of such debt securities primarily reflected an increase in our decreased purchases of such debt securities due to the lower interest rate environment in Korea in 2014.issued by government-owned or -controlled enterprises and financial institutions. Interest expense.Interest expense decreased 10.5%13.3% from ₩5,834₩4,173 billion in 20132015 to ₩5,219₩3,619 billion in 20142016 primarily due to a 10.1%an 18.4% decrease in interest expense on deposits, which was enhancedoffset in part by a 13.3% decrease6.6% increase in interest expense on debentures.debts. The average cost of interest bearing liabilities decreased by 33 basis points from 2.45%1.60% in 20132015 to 2.12%1.27% in 2014,2016, which was driven mainly by the lower interest rate environment in Korea in 2014.2016. The effect of this decrease was offset in part by a 3.5%an 8.9% increase in the average volume of interest-bearinginterest bearing liabilities from ₩238,452₩260,770 billion in 20132015 to ₩246,692₩283,868 billion in 2014,2016, which mainly reflected an increase in the average volume of debentures.deposits. The 10.1%18.4% decrease in interest expense on deposits from ₩4,279₩3,035 billion in 20132015 to ₩3,845₩2,477 billion in 20142016 was primarily due to a 3247 basis point decrease in the average cost of time deposits from 3.02%2.16% in 20132015 to 2.70%1.69% in 2014.2016, which was offset in part by a 1.3% increase in the average volume of such deposits from ₩123,977 billion in 2015 to ₩125,612 billion in 2016. The decrease in the average cost of time deposits mainly reflected a decrease in the general level of interest rates in Korea from 20132015 to 2014.2016. The increase in the average volume of time deposits was principally due to an increase in time deposits for corporate customers. Overall, the average cost of our deposits decreased by 2935 basis points from 2.22%1.44% in 20132015 to 1.93%1.09% in 2014,2016, while the average volume of our deposits increased 3.4%7.9% from ₩192,960₩210,236 billion in 20132015 to ₩199,559₩226,857 billion in 2014.2016. The 13.3% decrease6.6% increase in interest expense on debenturesdebts from ₩1,190₩271 billion in 20132015 to ₩1,032₩289 billion in 20142016 was mainly due to a 10216.0% increase in the average volume of debts from ₩19,649 billion in 2015 to ₩22,798 billion in 2016, which was partially offset by an 11 basis point decrease in the average cost of debenturesdebts from 4.70%1.38% in 20132015 to 3.68%1.27% in 2014, which was offset in part by a 10.8%2016. The increase in the average volume of debentures from ₩25,319 billiondebts was principally due to the addition of the debts (particularly repurchase agreements) of Hyundai Securities to our debts commencing in 2013 to ₩28,048 billion in 2014.October 2016. The decrease in the average cost of debenturesdebts mainly reflected the general decrease in market interest rates in Korea including for long-term debentures, in 2014. The increase in the average volume of debentures was principally due to the addition of KB Capital as a consolidated subsidiary in March 2014.2016. Net interest margin. Net interest margin represents the ratio of net interest income to average interest earning assets. Our overall net interest margin decreased from 2.51%2.20% in 20132015 to 2.39%2.13% in 2014,2016, as a 1.6% decrease3.2% increase in our net interest income from ₩6,523₩6,203 billion in 20132015 to ₩6,416₩6,403 billion in 20142016 was enhancedoutpaced by a 3.3%6.7% increase in the average volume of our interest earningearnings assets from ₩259,645₩282,315 billion in 20132015 to ₩268,330₩301,185 billion in 2014.2016. The 6.7% growth in average interest earning assets exceeded a 3.5%was outpaced by an 8.9% increase in average interest bearing liabilities from ₩238,452₩260,770 billion in 20132015 to ₩246,692₩283,868 billion in 2014,2016, while the decrease in interest income was outpaced by a decrease in interest expense, resulting in a decreasean increase in net interest income. OurHowever, our net interest spread which represents the difference between the average yield on our interest earning assets and the average cost of our interest bearing liabilities, declined slightly from 2.31%2.07% in 20132015 to 2.22%2.06% in 2014.2016. The decline in our net interest spread reflected a larger decrease in the average yield of our interest earning assets, relative to the decrease in the average cost of our interest bearing liabilities, primarily due to the earlier adjustment of interest rates on interest earning assets compared to interest rates on interest bearing liabilities in the context of the lower interest rate environment as well as the continuing rate-based competition in the Korean banking industry for the marketing of both loan and deposit products.2016. Comparison of 2013 to 2012
Interest income. Interest income decreased 13.0% from ₩14,210 billion in 2012 to ₩12,357 billion in 2013, primarily as a result of a 13.3% decrease in interest on loans. The average balance of our interest earning assets decreased 0.2% from ₩260,120 billion in 2012 to ₩259,645 billion in 2013, principally due to a decrease in our loan portfolio. The effect of this decrease was enhanced by a 70 basis point decrease in average yields on our interest earning assets from 5.46% in 2012 to 4.76% in 2013, which reflected a decrease in the general level of interest rates in Korea in 2013.
The 13.3% decrease in interest on loans from ₩12,624 billion in 2012 to ₩10,942 billion in 2013 was primarily the result of:
a 68 basis point decrease in the average yields on corporate loans from 5.18% in 2012 to 4.50% in 2013, which was enhanced by a 2.1% decrease in the average volume of such loans from ₩102,773 billion in 2012 to ₩100,614 billion in 2013;
a 82 basis point decrease in the average yields on other consumer loans from 7.28% in 2012 to 6.46% in 2013, which was partially offset by a 2.7% increase in the average volume of such loans from ₩29,721 billion in 2012 to ₩30,536 billion in 2013;
a 76 basis point decrease in the average yields on mortgage loans from 4.86% in 2012 to 4.10% in 2013, which was partially offset by a 0.2% increase in the average volume of such loans from ₩44,444 billion in 2012 to ₩44,514 billion in 2013; and
an 84 basis point decrease in the average yields on home equity loans from 5.09% in 2012 to 4.25% in 2013, which was partially offset by a 0.3% increase in the average volume of such loans from ₩30,170 billion in 2012 to ₩30,275 billion in 2013.
The average yields for corporate loans, other consumer loans, mortgage loans and home equity loans decreased mainly as a result of the decrease in the general level of interest rates in Korea applicable to such loans from 2012 to 2013. The decrease in the average volume of corporate loans was primarily due to our efforts to improve the asset quality of our corporate loans by applying more stringent standards to the origination of new loans and renewal of existing loans to corporate customers. The increase in the average volume of other consumer loans was principally due to higher demand for such loans in Korea. The increase in the average volume of mortgage loans was primarily a result of an increase in loans relating to key money deposits. The increase in the average volume of home equity loans mainly reflected higher demand for such loans in Korea.
Overall, the average volume of our loans decreased 0.7%, from ₩221,930 billion in 2012 to ₩220,401 billion in 2013, while the average yields on our loans decreased by 73 basis points, from 5.69% in 2012 to 4.96% in 2013.
Interest on debt securities in our financial investments portfolio decreased 11.0% from ₩1,426 billion in 2012 to ₩1,269 billion in 2013 primarily as a result of a 46 basis point decrease in average yields on such debt securities from 4.27% in 2012 to 3.81% in 2013, which was enhanced by a 0.1% decrease in the average volume of such debt securities from ₩33,382 billion in 2012 to ₩33,339 billion in 2013. The decrease in average yields on such debt securities was primarily due to the decrease in the general level of interest rates in Korea for debt securities from 2012 to 2013.
Interest expense. Interest expense decreased 18.7% from ₩7,172 billion in 2012 to ₩5,834 billion in 2013 primarily due to a 21.5% decrease in interest expense on deposits, which was enhanced by a 20.7% decrease in interest expense on debts. The average volume of interest bearing liabilities decreased 1.0% from ₩240,831 billion in 2012 to ₩238,452 billion in 2013, which mainly reflected a decrease in the average volume of deposits. The effect of this decrease was enhanced by a decrease of 53 basis points in the average cost of interest bearing liabilities from 2.98% in 2012 to 2.45% in 2013, which was driven mainly by the lower interest rate environment in Korea in 2013.
The 21.5% decrease in interest expense on deposits from ₩5,450 billion in 2012 to ₩4,279 billion in 2013 was primarily due to a 67 basis point decrease in the average cost of time deposits from 3.69% in 2012 to 3.02% in 2013, which was enhanced by a 4.6% decrease in the average volume of such deposits from ₩136,617 billion in 2012 to ₩130,286 billion in 2013. The decrease in the average cost of time deposits mainly reflected the decrease in the general level of interest rates in Korea from 2012 to 2013. The decrease in the average volume of time deposits was principally due to a decrease in time deposits for corporate customers. Overall, the average cost of our deposits decreased by 58 basis points from 2.80% in 2012 to 2.22% in 2013, while the average volume of our deposits decreased by 0.8% from ₩194,506 billion in 2012 to ₩192,960 billion in 2013.
The 20.7% decrease in interest expense on debts from ₩460 billion in 2012 to ₩365 billion in 2013 resulted from a 30 basis point decrease in the average cost of debts from 2.11% in 2012 to 1.81% in 2013, which was enhanced by a 7.3% decrease in the average volume of debts from ₩21,773 billion in 2012 to ₩20,173 billion in 2013. The decrease in the average cost of debts was primarily attributable to the general decrease in market interest rates in Korea, including for short-term borrowings and call money, in 2013, while the decrease in the average volume of debts mainly reflected a decrease in the use of short-term borrowings to meet our funding needs.
Net interest margin. Our overall net interest margin decreased from 2.71% in 2012 to 2.51% in 2013, as a 7.3% decrease in our net interest income from ₩7,038 billion in 2012 to ₩6,523 billion in 2013 outpaced a 0.2% decrease in the average volume of our interest earning assets from ₩260,120 billion in 2012 to ₩259,645 billion in 2013. The decrease in average interest earning assets was outpaced by a 1.0% decrease in average interest bearing liabilities from ₩240,831 billion in 2012 to ₩238,452 billion in 2013, while the decrease in interest expense was more than offset by a decrease in interest income, resulting in a decrease in net interest income. Our net interest spread declined from 2.48% in 2012 to 2.31% in 2013. The decline in our net interest spread reflected a larger decrease in the average yield of our interest earning assets, relative to the decrease in the average cost of our interest bearing liabilities, primarily due to the earlier adjustment of interest rates on interest earning assets compared to interest rates on interest bearing liabilities in the context of the lower interest rate environment, as well as the continuing rate-based competition in the Korean banking industry for the marketing of loan products.
Provision for Credit Losses Provision for credit losses includes provision for loan losses, provision for unused loan commitments, provision for acceptances and guarantees, provision for financial guarantee contracts and provision for other financial assets, in each case net of reversal of provisions. Forprovisions.For a discussion of our loan loss provisioning policy, see “Item 4.B. Business Overview—Assets and Liabilities—Loan Portfolio—Provisioning Policy.” In accordance with the guidelines of the Financial Supervisory Service, if our provision for loan losses is deemed insufficient for regulatory purposes, we compensate for the difference by recording a regulatory reserve for credit losses, which is segregated within retained earnings. See “Item 4.B. Business Overview—Assets and Liabilities—Loan Portfolio—Regulatory Reserve for Credit Losses” and Note 2626.4 of the notes to our consolidated financial statements included elsewhere in this annual report. Comparison of 20142017 to 20132016 Our provision for credit losses decreased 14.9%increased 1.7% from ₩1,443₩539 billion in 20132016 to ₩1,228₩548 billion in 2014,2017, primarily due to an increase in provision for loan losses in respect of our retail loans. Such increase resulted mainly from an increase in the volume of our outstanding retail loans, as well as higher net write-offs of such loans. Such increase was offset in part by a decrease in provision for loan losses in respect of our corporate loans, and credit card receivables. Such decreasewhich resulted mainlyprimarily from an improvement in the overall asset quality of such loans and receivables reflectingour corporate loan portfolio, including a decrease in delinquency rates.impaired corporate loans. Our write-offs, net of recoveries, decreased 9.1%34.5% from ₩1,717₩884 billion in 20132016 to ₩1,560₩578 billion in 2014,2017, primarily due to a decrease in write-offs of corporate loans and an increase in recoveries fromwritten-off corporate loans. Our reversal of provision for acceptances and guarantees and unused loan commitments increased 12.8% from ₩8₩39 billion in 20132016 to ₩21₩44 billion in 2014,2017, due mainly to an increase in reversal of provision for acceptances and guarantees issued on behalf of construction companies, as well as an increase in reversal of provision for unused loan commitments. Comparison of 20132016 to 20122015 Our provision for credit losses decreased 10.2%48.0% from ₩1,607₩1,037 billion in 20122015 to ₩1,443₩539 billion in 2013,2016, primarily due to a decrease in provision for loan losses in respect of our corporate loans. Such decrease resulted mainly from an improvement in the overall asset quality of our loans reflectingcorporate loan portfolio, including a decrease in delinquency rates.impaired corporate loans. Our loan write-offs, net of recoveries, decreased 1.7%4.5% from ₩1,747₩926 billion in 20122015 to ₩1,717₩884 billion in 2013,2016, primarily due to a decrease in write-offs of credit card receivables.retail loans and an increase in recoveries fromwritten-off corporate loans. Our reversal of provision for acceptances and guarantees and unused loan commitments decreased 44.3% from ₩91₩70 billion in 20122015 to ₩8₩39 billion in 2013,2016, due primarilymainly to a decrease in reversal of provision for refundacceptances and guarantees issued on behalf of shipbuilding companies. Allowances for Loan Losses We establish allowances for loan losses with respect to loans to absorb such losses. We assess individually significant loans on acase-by-case basis and other loans on a collective basis. In addition, if we determine that no objective evidence of impairment exists for a loan, we include such loan in a group of loans with similar credit risk characteristics and assess them collectively for impairment regardless of whether such loan is significant. For further information on allowances for loan losses, see “—Critical Accounting Policies—Impairment of Loans and Allowances for Loan Losses” and “Item 4.B. Business Overview—Assets and Liabilities—Loan Portfolio—Allocation and Analysis of Allowances for Loan Losses.” Corporate Loans.The following table shows, for the periods indicated, certain information regarding our impaired corporate loans: | | | | | | | | | | | | | | | As of December 31, | | | | 2012 | | | 2013 | | | 2014 | | Impaired corporate loans as a percentage of total corporate loans | | | 2.3 | % | | | 2.8 | % | | | 2.0 | % | Allowances for loan losses for corporate loans as a percentage of total corporate loans | | | 2.2 | | | | 1.8 | | | | 1.5 | | Allowances for loan losses for corporate loans as a percentage of impaired corporate loans | | | 94.5 | | | | 65.5 | | | | 72.7 | | Net charge-offs of corporate loans as a percentage of total corporate loans | | | 1.0 | | | | 1.0 | | | | 0.8 | |
| | | | | | | | | | | | | | | As of December 31, | | | | 2015 | | | 2016 | | | 2017 | | Impaired corporate loans as a percentage of total corporate loans | | | 1.9 | % | | | 1.4 | % | | | 1.1 | % | Allowances for loan losses for corporate loans as a percentage of total corporate loans | | | 1.5 | | | | 1.2 | | | | 0.9 | | Allowances for loan losses for corporate loans as a percentage of impaired corporate loans | | | 80.4 | | | | 83.4 | | | | 86.7 | | Net charge-offs of corporate loans as a percentage of total corporate loans | | | 0.5 | | | | 0.4 | | | | 0.1 | |
During 2014,2017, both impaired corporate loans and allowances for loan losses for corporate loans, each as a percentage of total corporate loans, decreased primarily due to a decrease in our impaired corporate loans, which mainly reflected our efforts to improve the asset quality of our corporate loan portfolio.portfolio, as well as an increase in our total corporate loans. Such decrease in our impaired corporate loans outpaced a decrease in allowanceallowances for loan losses for corporate loans, which caused the level of allowances for loan losses for corporate loans as a percentage of impaired corporate loans to increase during 2014.2017. During 2013,2016, both impaired corporate loans as a percentage of total corporate loans increased due to a reclassification of impaired corporate loans to include all loans for which account-specific provisions have been made, whileand allowances for loan losses for corporate loans, as a percentage of total corporate loans, decreased primarily asdue to a result of an improvementdecrease in our impaired corporate loans, which mainly reflected our efforts to improve the overall asset quality of our corporate loan portfolio, as well as an increase in our total corporate loans. Such decrease in our impaired corporate loans resulting inoutpaced a decrease in allowanceallowances for loan losses for corporate loans, which caused the level of allowances for loan losses for corporate loans as a percentage of impaired corporate loans.loans to increase during 2016. During 2012,2015, impaired corporate loans as a percentage of total corporate loans remained relatively constant.decreased slightly as the rate of increase in the amount of our total corporate loans outpaced the rate of increase in our impaired corporate loans. Allowances for loan losses for corporate loans as a percentage of total corporate loans andremained constant, while allowances for loan losses for corporate loans as a percentage of impaired corporate loans respectively, decreasedincreased during 2012 primarily as a result of a decrease2015, reflecting an increase in our allowances for loan losses for such loans,in tandem with the growth in our corporate loan portfolio, which mainly reflected anoutpaced the increase in the relative proportion of such loan amounts that are secured by collateral.our impaired corporate loans. Retail Loans.The following table shows, for the periods indicated, certain information regarding our impaired retail loans: | | | As of December 31, | | | As of December 31, | | | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | Impaired retail loans as a percentage of total retail loans | | | 1.1 | % | | | 1.0 | % | | | 0.6 | % | | | 0.5 | % | | 0.4 | % | | 0.3 | % | Allowances for loan losses for retail loans as a percentage of total retail loans | | | 0.7 | | | | 0.5 | | | | 0.5 | | | | 0.4 | | | 0.4 | | | 0.3 | | Allowances for loan losses for retail loans as a percentage of impaired retail loans | | | 58.1 | | | | 56.7 | | | | 70.1 | | | | 80.3 | | | 83.6 | | | 86.6 | | Net charge-offs of retail loans as a percentage of total retail loans | | | 0.3 | | | | 0.4 | | | | 0.4 | | | | 0.1 | | | 0.1 | | | 0.1 | |
During 2014,2017, both impaired retail loans and allowances for loan losses for retail loans, as a percentage of total retail loans, decreased primarily due to a decrease in our impaired retail loans, which mainly reflected higher write-offs of such loans, as well as an increase in the amount of our total retail loans. Allowances for loan losses for retail loans as a percentage of impaired retail loans increased during 2017, as the decrease in our impaired retail loans outpaced a decrease in allowances for loan losses for retail loans. During 2016, impaired retail loans as a percentage of total retail loans decreased slightly as the effect of a decrease in our impaired retail loans, which reflected an improvement in the asset quality of our retail loan portfolio, was enhanced by an increase in the amount of our total retail loans. SuchAllowances for loan losses for retail loans as a percentage of total retail loans remained constant, while allowances for loan losses for retail loans as a percentage of impaired retail loans increased during 2016, as the decrease in our impaired retail loans outpaced a decrease in allowanceallowances for loan losses for retail loans. During 2015, both impaired retail loans and allowances for loan losses for retail loans, as a percentage of total retail loans, decreased slightly as the effect of decreases in our impaired retail loans and such allowances, which reflected an improvement in the asset quality of our retail loan portfolio, was enhanced by an increase in the amount of our total retail loans. Such decrease in our impaired retail loans outpaced the decrease in allowances for loan losses for retail loans, which caused the level of allowances for loan losses for retail loans as a percentage of impaired retail loans to increase during 2014.2015. During 2013, impaired retail loans as a percentage of total retail loans remained relatively constant. However, an improvement in the asset quality of our existing impaired retail loans led to a better overall mix of impaired loans, which caused the level of allowances for loan losses as a percentage of both total retail loans and impaired retail loans to decrease.
During 2012, impaired retail loans as a percentage of total retail loans increased as the effect of an increase in our impaired retail loans, which reflected a deterioration in the asset quality of our retail loan portfolio due to adverse economic conditions in Korea in 2012, was enhanced by a slight decrease in the amount of our total retail loans. Allowances for loan losses for retail loans as a percentage of total retail loans similarly increased during 2012 as the effect of an increase in allowances for retail loans, reflecting the deterioration in the asset quality of our retail loan portfolio, was enhanced by the decrease in the amount of our total retail loans. However, an improvement in the asset quality of our existing impaired retail loans reflecting our increased charge-offs of such loans in 2012 led to a better overall mix of impaired retail loans, which caused the level of allowances for loan losses for retail loans as a percentage of impaired retail loans to decrease.
Credit Card Balances.The following table shows, for the periods indicated, certain information regarding our impaired credit card balances: | | | As of December 31, | | | As of December 31, | | | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | Impaired credit card balances as a percentage of total credit card balances | | | 1.0 | % | | | 1.8 | % | | | 1.7 | % | | | 2.3 | % | | 2.2 | % | | 2.3 | % | Allowances for loan losses for credit card balances as a percentage of total credit card balances | | | 2.8 | | | | 3.5 | | | | 3.4 | | | | 3.3 | | | 3.1 | | | 3.0 | | Allowances for loan losses for credit card balances as a percentage of impaired credit card balances | | | 272.9 | | | | 196.4 | | | | 195.3 | | | | 143.2 | | | 137.1 | | | 128.6 | | Net charge-offs as a percentage of total credit card balances | | | 3.0 | | | | 2.2 | | | | 2.5 | | | | 2.0 | | | 1.6 | | | 1.8 | |
During 2014,2017, impaired credit card balances as a percentage of total credit card balances decreased slightlyincreased as the rate of decreaseincrease in our impaired credit card balances outpaced the rate of decreaseincrease in the amount of our total credit card balances. Allowances for loan losses for credit card balances as a percentage of both total credit card balances and impaired credit card balances similarly decreased slightly during 2014,2017, primarily as a result of an improvement in the asset quality of our credit card balances that were neither past due nor impaired. During 2016, both impaired credit card balances and allowances for loan losses for credit card balances, as a percentage of total credit card balances, decreased as the rate of increase in our impaired credit card balances and such allowances was outpaced by the rate of increase in the amount of our total credit card balances. Such increase in our impaired credit card balances outpaced the increase in allowances for loan losses for credit card balances, which caused the level of allowances for loan losses for credit card balances as a percentage of impaired credit card balances to decrease during 2016. During 2015, impaired credit card balances as a percentage of total credit card balances increased as the rate of increase in our impaired credit card balances outpaced the rate of increase in the amount of our total credit card balances. Allowances for loan losses for credit card balances as a percentage of both total credit card balances and impaired credit card balances decreased during 2015, primarily as a result of an improvement in the asset quality of our existing impaired credit card balances. During 2013, impaired credit card balances as a percentage of total credit card balances increased primarily due to an increase in impaired credit card balances, which mainly reflected a decrease in charge-off of such balances due to a change in our charge-off policy in 2013 which increased the delinquency period for credit card balances before charge-off from three months to six months. Allowances for loan losses for credit card balances as a percentage of total credit card balances increased during 2013 mainly as a result of an increase in impaired credit card balances. Allowance for loan losses for credit card balances as a percentage of impaired credit card balances decreased during 2013 as the increase in impaired credit card balances outpaced the increase in allowance for loans losses for credit card balances.
During 2012, impaired credit card balances as a percentage of total credit card balances increased slightly primarily due to the effect of a decrease in our total credit card balances while the amount of our impaired credit card balances remained relatively steady. Allowances for loan losses for credit card balances, which decreased during 2012 mainly as a result of a decrease in our total credit card balances as well as increased charge-offs (which, in turn, principally reflected increased delinquencies in our credit card portfolio from the second half of 2011 becoming subject to charge off in 2012), remained relatively constant as a percentage of total credit card balances and decreased as a percentage of impaired credit card balances.
Net Fee and Commission Income The following table shows, for the periods indicated, the components of our net fee and commission income: | | | Year Ended December 31, | | Percentage Change | | | Year Ended December 31, | | Percentage Change | | | | 2012 | | 2013 | | 2014 | | 2013/2012 | | 2014/2013 | | | 2015 | | 2016 | | 2017 | | 2016/2015 | | 2017/2016 | | | | (in billions of Won) | | (%) | | | (in billions of Won) | | (%) | | Fee and commission income | | ₩ | 2,754 | | | ₩ | 2,657 | | | ₩ | 2,666 | | | | (3.5 | )% | | | 0.3 | % | | ₩ | 2,971 | | | ₩ | 3,151 | | | ₩ | 3,988 | | | 6.1 | % | | 26.6 | % | Fee and commission expense | | | (1,187 | ) | | | (1,178 | ) | | | (1,283 | ) | | | (0.8 | ) | | | 8.9 | | | | (1,436 | ) | | (1,566 | ) | | (1,938 | ) | | 9.1 | | | 23.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net fee and commission income | | ₩ | 1,567 | | | ₩ | 1,479 | | | ₩ | 1,383 | | | | (5.6 | ) | | | (6.5 | ) | | ₩ | 1,535 | | | ₩ | 1,585 | | | ₩ | 2,050 | | | 3.3 | | | 29.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Comparison of 20142017 to 20132016 Our net fee and commission income decreased 6.5%increased 29.3% from ₩1,479₩1,585 billion in 20132016 to ₩1,383₩2,050 billion in 2014,2017, primarily due to an 8.9%a 26.6% increase in fee and commission income from ₩3,151 billion in 2016 to ₩3,988 billion in 2017, which was offset in part by a 23.8% increase in fee and commission expense from ₩1,178₩1,566 billion in 20132016 to ₩1,283₩1,938 billion in 2014. 2017.OurThe 26.6% increase in fee and commission income remained relatively constant at ₩2,666 billion in 2014 compared to ₩2,657 billion in 2013, aswas mainly the result of increases in trust and other fiduciarysecurities brokerage fees, and debitcredit card related fees and commissions were offset by decreases in agent activity fees and commissions from transfer agent services. Trusttrust and other fiduciary fees. Securities brokerage fees increased 43.5%190.3% from ₩161₩155 billion in 20132016 to ₩231₩450 billion in 20142017 primarily due to an increase in sales of equity linked securities. Debit card related fees and commissions increased 14.1% from ₩256 billion in 2013 to ₩292 billion in 2014, which mainly reflected the impactfull-year effect of the government initiativeaddition of the securities brokerage fees of Hyundai Securities (which became a consolidated subsidiary in October 2016) to encourageour fee and commission income, as well as the usecontinued growth of debit cards instead of credit cards.our securities brokerage business in 2017. Credit card related fees and commissions received decreasedincreased 15.0% from ₩1,127₩1,259 billion in 20132016 to ₩1,107₩1,448 billion in 2014. Agent activity fees decreased 23.7% from ₩207 billion in 2013 to ₩158 billion in 2014 principally2017 primarily as a result of reduced bancassurance activities, while commissionsan increase in the number of credit cards issued, as well as in the use of credit cards by our customers. Trust and other fiduciary fees increased 61.6% from transfer agent services decreased 16.3% from ₩178₩219 billion in 20132016 to ₩149₩354 billion in 2014 primarily2017 mainly due to a decreasean increase in trust fees, primarily reflecting an increase in our sales of beneficiary certificates.money trust products.
The 8.9%23.8% increase in fee and commission expense was primarily due to a 48.8%22.5% increase in other fees and commissions paid from ₩125 billion in 2013 to ₩186 billion in 2014 and a 4.9% increase in credit card and debit card related fees and commissions paid from ₩934₩1,210 billion in 20132016 to ₩980₩1,482 billion in 2014.2017. The increase in other fees and commissions paid resulted mainly from an increase in investment banking related fees and commissions. The increase in credit card and debit card related fees and commissions paid resulted primarily frommainly reflected the increases in the number and use of our credit cards, as well as an increase in debitcredit card related fees and commissions, including fees paid to value-added network providers, reflecting the increased use of debit cards.marketing expenses. Comparison of 20132016 to 20122015 Our net fee and commission income decreased 5.6%increased 3.3% from ₩1,567₩1,535 billion in 20122015 to ₩1,479₩1,585 billion in 2013,2016, primarily due to a 3.5% decrease6.1% increase in fee and commission income from ₩2,754₩2,971 billion in 20122015 to ₩2,657₩3,151 billion in 2013,2016, which was partially offset in part by a 0.8% decrease9.1% increase in fee and commission expense from ₩1,187₩1,436 billion in 20122015 to ₩1,178₩1,566 billion in 2013. 2016. The 3.5% decrease6.1% increase in fee and commission income was mainly the result of decreasesincreases in agent activitysecurities brokerage fees, mostly related to bancassurance activities, from ₩285 billion in 2012 to ₩207 billion in 2013lease fees and in credit card related fees and commissions receivedreceived. Securities brokerage fees increased 76.1% from ₩1,180₩88 billion in 20122015 to ₩1,127₩155 billion in 2013,2016 primarily due to the addition of the securities brokerage fees of Hyundai Securities to our fee and commission income commencing in October 2016. Lease fees increased 100.0% from ₩38 billion in 2015 to ₩76 billion in 2016, which mainly reflected the impact of the new government initiative to encourage the use of check cards instead of credit cards. Checkan increase in fees received on automobile leases and other lease-related income. Credit card related fees and commissions received increased 2.9% from ₩218₩1,223 billion in 20122015 to ₩256₩1,259 billion in 2013.2016, primarily as a result of increased use of credit cards by our customers. The 0.8% decrease9.1% increase in fee and commission expense was primarily due to a decreasean 10.6% increase in credit card and debit card related fees and commissions paid from ₩997₩1,094 billion in 20122015 to ₩934₩1,210 billion in 2013.2016. The effect of such decrease was partially offset by a 62.3% increase in other feecredit card related fees and commission expenses from ₩77 billion in 2012 to ₩125 billion in 2013,commissions paid mainly resulting fromreflected an increase in fee and commission expenses from factored receivables.credit card marketing expenses. For further information regarding our net fee and commission income, see Note 28 of the notes to our consolidated financial statements included elsewhere in this annual report. Net Insurance Income The following table shows, for the periods indicated, the components of our net insurance income: | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Percentage Change | | | | 2015 | | | 2016 | | | 2017 | | | 2016/2015 | | | 2017/2016 | | | | (in billions of Won) | | | (%) | | Insurance income(1) | | ₩ | 1,373 | | | ₩ | 1,201 | | | ₩ | 8,971 | | | | (12.5 | )% | | | 647.0 | % | Insurance expense(1) | | | (1,479 | ) | | | (1,319 | ) | | | (8,377 | ) | | | (10.8 | ) | | | 535.1 | | | | | | | | | | | | | | | | | | | | | | | Net insurance income (expense)(1) | | ₩ | (106 | ) | | ₩ | (118 | ) | | ₩ | 594 | | | | 11.3 | | | | N/M | (2) | | | | | | | | | | | | | | | | | | | | | |
(1) | Commencing in 2017, insurance income and expense (comprising insurance income and expense of KB Life Insurance and KB Kookmin Card, as well as insurance income and expense of KB Insurance from the date of its consolidation in May 2017) are recorded as separate line items, instead of as part of other operating income and expenses. Insurance income and expense of KB Life Insurance and KB Kookmin Card for prior years have been reclassified accordingly. |
(2) | “N/M” means not meaningful. |
Comparison of 2017 to 2016 Our net insurance income (expense) changed from an expense of ₩118 billion in 2016 to income of ₩594 billion in 2017, primarily due to a significant increase in insurance income from ₩1,201 billion in 2016 to ₩8,971 billion in 2017, which was offset in part by a significant increase in insurance expense from ₩1,319 billion in 2016 to ₩8,377 billion in 2017. The increase in insurance income was mainly due to increases in premium income and reinsurance income. Premium income increased significantly from ₩1,190 billion in 2016 to ₩8,235 billion in 2017, while reinsurance income increased significantly from ₩11 billion in 2016 to ₩565 billion in 2017. Such increases were attributable primarily to the addition of the premium and reinsurance income of KB Insurance (which became a consolidated subsidiary in May 2017) to our insurance income. The increase in insurance expense was primarily due to increases in insurance claims paid, refunds of surrender value and provision of policy reserves. Insurance claims paid increased significantly from ₩159 billion in 2016 to ₩2,945 billion in 2017, refunds of surrender value increased 218.0% from ₩690 billion in 2016 to ₩2,194 billion in 2017, and provision of policy reserves increased 349.2% from ₩366 billion in 2016 to ₩1,644 billion in 2017. Such increases were attributable mainly to the addition of the insurance claims paid, refunds of surrender value and provision of policy reserves of KB Insurance to our insurance expense commencing in May 2017. Comparison of 2016 to 2015 Our net insurance expense increased from ₩106 billion in 2015 to ₩118 billion in 2016, primarily due to a 12.5% decrease in insurance income from ₩1,373 billion in 2015 to ₩1,201 billion in 2016, which was offset in part by a 10.8% decrease in insurance expense from ₩1,479 billion in 2015 to ₩1,319 billion in 2016. The 12.5% decrease in insurance income was mainly due to a 12.7% decrease in premium income from ₩1,363 billion in 2015 to ₩1,190 billion in 2016, principally reflecting a decrease in our sales of savings-type insurance policies. The 10.8% decrease in insurance expense was principally due to a 44.5% decrease in provision of policy reserves from ₩660 billion in 2015 to ₩366 billion in 2016, mainly reflecting the decrease in our sales of savings-type insurance policies. Net Gain (Loss) on Financial Assets and Liabilities at Fair Value through Profit or Loss The following table shows, for the periods indicated, the components of our net gain on financial assets and liabilities at fair value through profit or loss: | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Percentage Change | | | | 2012 | | | 2013 | | | 2014 | | | 2013/2012 | | | 2014/2013 | | | | (in billions of Won) | | | (%) | | Net gain on financial assets held-for-trading | | ₩ | 437 | | | ₩ | 250 | | | ₩ | 414 | | | | (42.8 | )% | | | 65.6 | % | Net gain on derivatives held-for-trading | | | 456 | | | | 544 | | | | 98 | | | | 19.3 | | | | (82.0 | ) | Net loss on financial liabilities held-for-trading | | | (44 | ) | | | (15 | ) | | | (62 | ) | | | (65.9 | ) | | | 313.3 | | Net gain on financial instruments designated at fair value through profit or loss | | | (37 | ) | | | (22 | ) | | | (11 | ) | | | (40.5 | ) | | | (50.0 | ) | | | | | | | | | | | | | | | | | | | | | | Net gain on financial assets and liabilities at fair value through profit or loss | | ₩ | 812 | | | ₩ | 757 | | | ₩ | 439 | | | | (6.8 | ) | | | (42.0 | ) | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Percentage Change | | | | 2015 | | | 2016 | | | 2017 | | | 2016/2015 | | | 2017/2016 | | | | (in billions of Won) | | | (%) | | Net gain on financial assetsheld-for-trading | | ₩ | 328 | | | ₩ | 198 | | | ₩ | 594 | | | | (39.6 | )% | | | 200.0 | % | Net gain (loss) on derivativesheld-for-trading | | | (11 | ) | | | 173 | | | | 906 | | | | N/M | (1) | | | 423.7 | | Net gain (loss) on financial liabilitiesheld-for-trading | | | (61 | ) | | | 1 | | | | (29 | ) | | | N/M | (1) | | | N/M | (1) | Net gain (loss) on financial instruments designated at fair value through profit or loss | | | 104 | | | | (381 | ) | | | (731 | ) | | | N/M | (1) | | | 91.9 | | | | | | | | | | | | | | | | | | | | | | | Net gain (loss) on financial assets and liabilities at fair value through profit or loss | | ₩ | 360 | | | ₩ | (9 | ) | | ₩ | 740 | | | | N/M | (1) | | | N/M | (1) | | | | | | | | | | | | | | | | | | | | | |
(1) | “N/M” means not meaningful. |
Comparison of 20142017 to 20132016 Our net gain (loss) on financial assets and liabilities at fair value through profit or loss decreased 42.0%changed from ₩757a net loss of ₩9 billion in 20132016 to ₩439a net gain of ₩740 billion in 2014,2017. Such change was primarily as a result of an 82.0% decreaseattributable to increases in net gain on derivativesheld-for-trading from ₩544 billion and in 2013 to ₩98 billion in 2014,net gain on financial assetsheld-for-trading, which waswere offset in part by an increase in net loss on financial instruments designated at fair value through profit or loss. Our net gain on derivativesheld-for-trading increased more than five-fold from ₩173 billion in 2016 to ₩906 billion in 2017, primarily due to a 65.6%170.4% increase in net gain on financial assets stock or stock index derivativesheld-for-trading from ₩250₩240 billion in 20132016 to ₩414₩649 billion in 2014. The decrease in2017. Our net gain on derivatives financial assetsheld-for-trading was principally due to a 76.2% decrease in net gain on currency derivatives held-for-trading increased three-fold from ₩517₩198 billion in 20132016 to ₩123₩594 billion in 2014. The2017, mainly as a result of a 108.9% increase in net gain on financial assets held-for-trading mainly reflected a 94.6%debt securities from ₩192 billion in 2016 to ₩401 billion in 2017, as well as an increase in net gain on debtequity securities held-for-trading from ₩222₩6 billion in 20132016 to ₩432₩192 billion in 2014.2017. Comparison of 2013 to 2012
Our net loss on financial instruments designated at fair value through profit or loss increased 91.9% from ₩381 billion in 2016 to ₩731 billion in 2017, mainly due to a 61.3% increase in net loss on financial liabilities designated at fair value through profit or loss from ₩491 billion in 2016 to ₩792 billion in 2017. Such changes were attributable in part to the full-year effect of the addition of the net gain (loss) on financial assets and liabilities at fair value through profit or loss decreased 6.8%of Hyundai Securities (which became a consolidated subsidiary in October 2016) to our net gain (loss) on such assets and liabilities. Comparison of 2016 to 2015 Our net gain (loss) on financial assets and liabilities at fair value through profit or loss changed from ₩812a net gain of ₩360 billion in 20122015 to ₩757a net loss of ₩9 billion in 2013,2016. Such change was primarily asattributable to a result ofchange in net gain (loss) on financial instruments designated at fair value through profit or loss and a 42.8% decrease in net gain on financial assetsheld-for-trading, from ₩437 billion in 2012 to ₩250 billion in 2013, the effect of which was offset in part by a 19.3% increasechanges in net gain (loss) on both derivatives held-for-tradingand financial liabilitiesheld-for-trading. Our net gain (loss) on financial instruments designated at fair value through profit or loss changed from ₩456a net gain of ₩104 billion in 20122015 to ₩544a net loss of ₩381 billion in 2013. The decrease2016, mainly as a result of a change in net gain (loss) on financial liabilities designated at fair value through profit or loss from a net gain of ₩100 billion in 2015 to a net loss of ₩491 billion in 2016. Our net gain on financial assetsheld-for-trading was principally decreased 39.6% from ₩328 billion in 2015 to ₩198 billion in 2016, primarily due to a 43.1%38.3% decrease in net gain on debt securitiesheld-for-trading from ₩390₩311 billion in 20122015 to ₩222₩192 billion in 2013. The increase2016. Our net gain (loss) on derivativesheld-for-trading changed from a net loss of ₩11 in 2015 to a net gain of ₩173 billion in 2016, principally due to a change in net gain (loss) on stock or stock index derivativesheld-for-trading from a net loss of ₩89 billion in 2015 to a net gain of ₩240 billion in 2016. Our net gain (loss) on financial liabilitiesheld-for-trading changed from a net loss of ₩61 billion in 2015 to a net gain of ₩1 billion in 2016, which mainly reflected a 16.4% increase24.4% decrease in losses on financial liabilitiesheld-for-trading from ₩131 billion in 2015 to ₩99 billion in 2016. Such changes were attributable in part to the addition of the net gain (loss) on currency derivatives held-for-trading from ₩444 billionfinancial assets and liabilities at fair value through profit or loss of Hyundai Securities to our net gain (loss) on such assets and liabilities commencing in 2012 to ₩517 billion in 2013.October 2016. For further information regarding our net gain (loss) on financial assets and liabilities at fair value through profit or loss, see Note 29 of the notes to our consolidated financial statements included elsewhere in this annual report. General and Administrative Expenses The following table shows, for the periods indicated, the components of our general and administrative expenses: | | | Year Ended December 31, | | | Percentage Change | | | Year Ended December 31, | | | Percentage Change | | | | 2012 | | | 2013 | | | 2014 | | | 2013/2012 | | 2014/2013 | | | 2015 | | | 2016 | | | 2017 | | | 2016/2015 | | 2017/2016 | | | | (in billions of Won) | | | (%) | | | (in billions of Won) | | | (%) | | Employee compensation and benefits | | ₩ | 2,442 | | | ₩ | 2,534 | | | ₩ | 2,593 | | | | 3.8 | % | | | 2.3 | % | | ₩ | 3,126 | | | ₩ | 3,756 | | | ₩ | 3,769 | | | | 20.2 | % | | 0.3 | % | Depreciation and amortization | | | 328 | | | | 287 | | | | 261 | | | | (12.5 | ) | | | (9.1 | ) | | | 257 | | | | 289 | | | | 370 | | | | 12.5 | | | 28.0 | | Other general and administrative expenses | | | 1,076 | | | | 1,163 | | | | 1,155 | | | | 8.1 | | | | (0.7 | ) | | | 1,141 | | | | 1,184 | | | | 1,490 | | | | 3.8 | | | 25.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | General and administrative expenses | | ₩ | 3,846 | | | ₩ | 3,984 | | | ₩ | 4,010 | | | | 3.6 | | | | 0.7 | | | ₩ | 4,524 | | | ₩ | 5,229 | | | ₩ | 5,629 | | | | 15.6 | | | 7.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Comparison of 20142017 to 20132016 Our general and administrative expenses increased 0.7%7.6% from ₩3,984₩5,229 billion in 20132016 to ₩4,010₩5,629 billion in 2014,2017, primarily as a result of a 2.3%25.8% increase in other general and administrative expenses from ₩1,184 billion in 2016 to ₩1,490 billion in 2017, as well as a 28.0% increase in depreciation and amortization expenses from ₩289 billion in 2016 to ₩370 billion in 2017. The increase in other general and administrative expenses was attributable mainly to a 45.3% increase in taxes and dues from ₩135 billion in 2016 to ₩196 billion in 2017, a 40.0% increase in service fees from ₩129 billion in 2016 to ₩179 billion in 2017, and a 14.3% increase in rental expense from ₩281 billion in 2016 to ₩321 billion in 2017. Such increases were primarily due to the full-year effect of the addition of such expenses of Hyundai Securities (which became a consolidated subsidiary in October 2016), as well as the addition of such expenses of KB Insurance (which became a consolidated subsidiary in May 2017), to our general and administrative expenses. The increase in depreciation and amortization expenses was primarily due to the full-year effect of the addition of such expenses of Hyundai Securities commencing in October 2016, as well as the addition of such expenses of KB Insurance commencing in May 2017, to our depreciation and amortization expenses. Our employee compensation and benefits increased 0.3% from ₩3,756 billion in 2016 to ₩3,769 billion, principally due to a 31.5% increase in salaries from ₩1,874 billion in 2016 to ₩2,465 billion in 2017, as well as a 12.0% increase in other short-term employee benefits from ₩734 billion in 2016 to ₩823 billion in 2017. Such increases were attributable mainly to the full-year effect of the addition of such expenses of Hyundai Securities commencing in October 2016, as well as the addition of such expenses of KB Insurance commencing in May 2017, to our employee compensation and benefits. Such increases were offset in large part by an 82.2% decrease in termination benefits from ₩903 billion in 2016 to ₩161 billion in 2017, which resulted mainly from a significant decrease in the number of employees participating in the voluntary early retirement program implemented by Kookmin Bank. Comparison of 2016 to 2015 Our general and administrative expenses increased 15.6% from ₩4,524 billion in 2015 to ₩5,229 billion in 2016, primarily as a result of a 20.2% increase in employee compensation and benefits from ₩2,534₩3,126 billion in 20132015 to ₩2,593₩3,756 billion in 2014, which was offset in part by a 9.1% decrease in depreciation and amortization from ₩287 billion in 2013 to ₩261 billion in 2014.2016. The increase in employee compensation and benefits was principally due to a 3.6%130.4% increase in termination benefits from ₩392 billion in 2015 to ₩903 billion in 2016, which resulted mainly from a significant increase in the number of employees participating in the voluntary early retirement program implemented by Kookmin Bank. Such increase was enhanced by a 6.2% increase in salaries and short-term employee benefits from ₩1,641₩1,764 billion in 20132015 to ₩1,700₩1,874 billion in 2014, which mainly reflected an increase in the average wage of our employees. The 9.1% decrease in depreciation and amortization was principally due to a decrease in the depreciation and amortization of software. Comparison of 2013 to 2012
Our general and administrative expenses increased 3.6% from ₩3,846 billion in 2012 to ₩3,984 billion in 2013, primarily as a result of a 3.8% increase in employee compensation and benefits from ₩2,442 billion in 2012 to ₩2,534 billion in 2013,2016, which was enhanced by an 8.1% increaseattributable mainly to the addition of the salaries of Hyundai Securities to our salaries commencing in other general and administrative October 2016.expenses from ₩1,076 billion in 2012 to ₩1,163 billion in 2013. The increase in employee compensation and benefits was principally due to a 2.7% increase in salaries and short-term employee benefits from ₩1,598 billion in 2012 to ₩1,641 billion in 2013, which mainly reflected an increase in the average wage of our employees. The 8.1% increase in other general and administrative expenses was principally due to a 95.8% increase in tax and dues from ₩72 billion in 2012 to ₩141 billion in 2013, which primarily reflected refunds of previously levied education taxes in 2012 as a result of claims filed by Kookmin Bank which were not repeated in 2013.
Net Other Operating Expenses The following table shows, for the periods indicated, the components of our net other operating expenses: | | | Year Ended December 31, | | Percentage Change | | | Year Ended December 31, | | Percentage Change | | | | 2012 | | 2013 | | 2014 | | 2013/2012 | | 2014/2013 | | | 2015 | | 2016 | | 2017 | | 2016/2015 | | 2017/2016 | | | | (in billions of Won) | | (%) | | | (in billions of Won) | | (%) | | Other operating income(1) | | ₩ | 3,286 | | | ₩ | 3,137 | | | ₩ | 3,100 | | | | (4.5 | )% | | | (1.2 | )% | | ₩ | 3,225 | | | ₩ | 4,218 | | | ₩ | 3,237 | | | 30.8 | % | | (23.3 | )% | Other operating expenses(1) | | | (4,818 | ) | | | (4,442 | ) | | | (4,141 | ) | | | (7.8 | ) | | | (6.8 | ) | | | (3,835 | ) | | (4,634 | ) | | (4,139 | ) | | 20.8 | | | (10.7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net other operating expenses(1) | | ₩ | (1,532 | ) | | ₩ | (1,305 | ) | | ₩ | (1,041 | ) | | | (14.8 | ) | | | (20.2 | ) | | ₩ | (610 | ) | | ₩ | (416 | ) | | ₩ | (902 | ) | | (31.8 | ) | | 116.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Commencing in 2017, insurance income and expense (comprising insurance income and expense of KB Life Insurance and KB Kookmin Card, as well as insurance income and expense of KB Insurance from the date of its consolidation in May 2017) are recorded as separate line items, instead of as part of other operating income and expenses. Insurance income and expense of KB Life Insurance and KB Kookmin Card for prior years have been reclassified accordingly. |
Comparison of 20142017 to 20132016 Our net other operating expenses decreased 20.2%increased 116.8% from ₩1,305₩416 billion in 20132016 to ₩1,041₩902 billion in 20142017 as a 6.8%23.3% decrease in other operating income from ₩4,218 billion in 2016 to ₩3,237 billion in 2017 outpaced a 10.7% decrease in other operating expenses from ₩4,442₩4,634 billion in 20132016 to ₩4,141₩4,139 billion in 2014 outpaced a 1.2% decrease in other operating income from ₩3,137 billion in 2013 to ₩3,100 billion in 2014.2017. Other operating income includes principally gain on foreign exchange transactions, income related to insurance, gain on sale ofavailable-for-sale financial assets and other income. The 1.2%23.3% decrease in other operating income was primarily attributable mainly to a 51.3%29.4% decrease in gain on sale of available-for-sale financial assets from ₩189 billion in 2013 to ₩92 billion in 2014 and a 15.3% decrease in other income from ₩262 billion in 2013 to ₩222 billion in 2014, the effect of which was partially offset by a 7.5% increase in gain on foreign exchange transactions from ₩1,387₩3,568 billion in 20132016 to ₩1,491₩2,520 billion in 2014.2017. The decrease in gain on sale of available-for-sale financial assets was principally due to gains realized in 2013 from sales of shares of Hyundai Merchant Co., Ltd. and Kumho Petrochemical Co., Ltd. held by us, which were not repeated in 2014. The decrease in other income was mainly due to a decrease in gain on sales of loans. The increase in gain on foreign exchange transactions, which was mainly the result of increasedlower exchange rate volatility, was enhancedpartially offset by a decrease in loss on foreign exchange transactions, which is recorded as part of other operating expenses. On a net basis, we recognized aour net gain on foreign exchange transactions of ₩34decreased 82.3% from ₩265 billion in 2014 compared2016 to a net loss on foreign exchange transactions of ₩280₩47 billion in 2013.2017. Other operating expenses include principally loss on foreign exchange transactions, expenses related to insurance,impairment onavailable-for-sale financial assets, loss on sale ofavailable-for-sale financial assets and other expenses. The 6.8%10.7% decrease in other operating expensesexpense was primarilymainly the result of a 12.6%25.1% decrease in loss on foreign exchange �� 137
transactions from ₩1,667₩3,303 billion in 20132016 to ₩1,457₩2,473 billion in 2014.2017. The decrease in loss on foreign exchange transactions, which was mainlyprimarily due to a decrease in the volume of our foreign currency transactions, was enhancedmore than offset by a decrease in gain on foreign exchange transactions, which is recorded as part of other operating income as discussed above. Comparison of 2016 to 2015 Our net other operating expenses decreased 31.8% from ₩610 billion in 2015 to ₩416 billion in 2016 as a 30.8% increase in other operating income from ₩3,225 billion in 2015 to ₩4,218 billion in 2016 outpaced a 20.8% increase in other operating expenses from ₩3,835 billion in 2015 to ₩4,634 billion in 2016. The 30.8% increase in other operating income was attributable mainly to a 44.7% increase in gain on foreign exchange transactions from ₩2,465 billion in 2015 to ₩3,568 billion in 2016. The increase in gain on foreign exchange transactions, which was mainly the result of increased exchange rate volatility, was offset in part by an increase in loss on foreign exchange transactions, which is recorded as part of other operating expenses. On a net basis, our net gain on foreign exchange transactions increased 356.9% from ₩58 billion in 2015 to ₩265 billion in 2016. The 20.8% increase in other operating expenses was primarily the result of a 37.2% increase in loss on foreign exchange transactions from ₩2,407 billion in 2015 to ₩3,303 billion in 2016. The increase in loss on foreign exchange transactions, which was mainly due to an increase in the volume of our foreign currency transactions, was more than offset by an increase in gain on foreign exchange transactions, which is recorded as part of other operating income as discussed above. Comparison of 2013 to 2012
Our net other operating expenses decreased 14.8% from ₩1,532 billion in 2012 to ₩1,305 billion in 2013, as a 7.8% decrease in other operating expenses from ₩4,818 billion in 2012 to ₩4,442 billion in 2013 outpaced a 4.5% decrease in other operating income from ₩3,286 billion in 2012 to ₩3,137 billion in 2013.
The 4.5% decrease in other operating income was attributable mainly to a 28.7% decrease in income related to insurance from ₩1,730 billion in 2012 to ₩1,234 billion in 2013, the effect of which was partially offset by a 26.8% increase in gains on foreign exchange transaction from ₩1,094 billion in 2012 to ₩1,387 billion in 2013.
The decrease in income related to insurance was mainly the result of a decrease in demand for insurance products in 2013, which was substantially offset by a corresponding decrease in expense related to insurance, which is recorded as part of other operating expenses. On a net basis, our net expense related to insurance increased 35.9% from ₩92 billion in 2012 to ₩125 billion in 2013. The increase in gain on foreign exchange transactions, which was mainly the result of increased exchange rate volatility, was more than offset by a corresponding increase in loss on foreign exchange transactions, which is recorded as part of other operating expenses.
The 7.8% decrease in other operating expenses was primarily the result of a 25.4% decrease in expense related to insurance from ₩1,822 billion in 2012 to ₩1,359 billion in 2013, which was enhanced by a 36.6% decrease in expense related to available-for-sale financial assets from ₩298 billion in 2012 to ₩189 billion in 2013. The decrease in expense related to insurance reflected a decrease in policy reserves due to a decrease in insurance products sold. The decrease in expense related to available-for-sale financial assets, which was principally due to a decrease in impairment on available-for-sale financials assets, was partially offset by an increase in revenue related to available-for-sale financial assets, which is recorded as part of other operating income.
For further information regarding our net other operating expenses, see Note 30 of the notes to our consolidated financial statements included elsewhere in this annual report. NetNon-operating Profit (Loss) The following table shows, for the periods indicated, the components of our netnon-operating profit (loss): | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Percentage Change | | | | 2015 | | | 2016 | | | 2017 | | | 2016/2015 | | | 2017/2016 | | | | (in billions of Won) | | | (%) | | Share of profit of associates | | ₩ | 203 | | | ₩ | 281 | | | ₩ | 84 | | | | 38.4 | % | | | (70.1 | )% | Net othernon-operating income (expense) | | | 140 | | | | 671 | | | | 39 | | | | 379.3 | | | | (94.2 | ) | | | | | | | | | | | | | | | | | | | | | | Netnon-operating profit (loss) | | ₩ | 344 | | | ₩ | 952 | | | ₩ | 123 | | | | 176.7 | | | | (87.1 | ) | | | | | | | | | | | | | | | | | | | | | |
Comparison of 2017 to 2016 Our netnon-operating profit decreased 87.1% from ₩952 billion in 2016 to ₩123 billion in 2017, primarily as a result of a 94.2% decrease in net othernon-operating income from ₩671 billion in 2016 to ₩39 billion in 2017 and, to a lesser extent, a 70.1% decrease in share of profit of associates from ₩281 billion in 2016 to ₩84 billion in 2017. The 94.2% decrease in net othernon-operating income was attributable mainly to a 65.0% decrease in othernon-operating income from ₩746 billion in 2016 to ₩261 billion in 2017. Such decrease was mainly due to gains on bargain purchase of ₩629 billion recognized in connection with a comprehensive stock swap we effected in October 2016 to increase our shareholding in Hyundai Securities to 100%, which did not recur in 2017. See “—Overview—Acquisitions.” The 70.1% decrease in share of profit of associates was primarily due to a 75.8% decrease in gains on equity method accounting recognized with respect to KB Insurance from ₩161 billion in 2016 to ₩39 billion in 2017, principally as a result of it becoming a consolidated subsidiary in May 2017. Comparison of 2016 to 2015 Our netnon-operating profit increased 176.7% from ₩344 billion in 2015 to ₩952 billion in 2016, principally as a result of a 379.3% increase in net othernon-operating income from ₩140 billion in 2015 to ₩671 billion in 2016 and, to a lesser extent, a 38.4% increase in share of profit of associates from ₩203 billion in 2015 to ₩281 billion in 2016. The 379.3% increase in net othernon-operating income was attributable mainly to a 156.4% increase in othernon-operating income from ₩291 billion in 2015 to ₩746 billion in 2016. Such increase mainly reflected gains on bargain purchase of ₩629 billion recognized in connection with the comprehensive stock swap we effected in October 2016 to increase our shareholding in Hyundai Securities to 100%. The 38.4% increase in share of profit of associates was primarily due to ₩113 billion of gains on equity method accounting recognized with respect to our minority interest in Hyundai Securities in 2016 for the period prior to it becoming a consolidated subsidiary in October 2016. Income Tax Expense (Benefit) Our income tax expense is calculated by adding or subtracting changes in deferred income tax liabilities and assets to income tax amounts payable for the period. Deferred income tax assets are recognized for deductible temporary differences, unused tax losses and unused tax credits, while deferred income tax liabilities are recognized for taxable temporary differences. Temporary differences are those between the carrying values of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred income tax assets, including unused tax losses and credits, are recognized only to the extent it is probable that sufficient taxable profit will be available against which such deferred income tax assets can be utilized. Seeutilized.See “—Critical Accounting Policies—Deferred Income Tax Assets.” In 2014, we changed our accounting policy with respect to uncertain tax positions based on the guidance in IAS 12,Income Taxes, which allows recognition of tax payments as current income tax assets to the extent it is probable that they will be recovered from the tax authorities. Our consolidated financial statements as of and for the years ended December 31, 2012 and 2013 have been restated to reflect such change in accounting policy. See “—Overview—Changes in Accounting Policies” and Note 2.1 of the notes to our consolidated financial statements included elsewhere in this annual report.
Comparison of 20142017 to 20132016 Income tax expense decreased by 10.2%increased 81.1% from ₩541₩439 billion in 20132016 to ₩486₩795 billion in 2014,2017, primarily due to a decrease57.4% increase in adjustments recognized in 2014 for currentour profit before income tax of prior years,from 2016 to 2017, as well as a changethe effect of changes in deferred income tax expense (benefit) recognized directlyassets and liabilities from a benefit of ₩201 billion in equity relating2016 to the value of available-for-sale financial assets from an income tax expense of ₩8₩212 billion in 2013 to an income tax benefit of ₩79 billion in 2014.2017. The statutory tax rate was 24.2% in 20132016 and 2014.2017. As a result of changes to Korean corporate income tax laws that became effective in January 2018, the statutory tax rate applicable to us in 2018 will be 27.5%. Our effective tax rate was 25.6%19.2% in 20142017 compared to 29.8%16.7% in 2013.2016. Comparison of 20132016 to 20122015 Income tax expense increased 4.0% from ₩520remained relatively constant at ₩439 billion in 20122016 compared to ₩541₩437 billion in 2013, primarily due to an2015, despite a 21.4% increase in adjustments recognizedour profit before income tax from 2015 to 2016, as a 77.5% increase in 2013 for current tax expense from ₩342 billion in 2015 to ₩607 billion in 2016 was largely offset by the effect of prior years. Thechanges in deferred income tax assets and liabilities from an expense of ₩93 billion in 2015 to a benefit of ₩201 billion in 2016.The statutory tax rate was 24.2% in 20122015 and 2013.2016. Our effective tax rate was 29.8%16.7% in 20132016 compared to 22.6%20.2% in 2012.2015. See Note 33 of the notes to our consolidated financial statements included elsewhere in this annual report. Profit for the Year As a result of the factors described above, our profit for the year was ₩1,415₩3,343 billion in 2014,2017, compared to ₩1,275₩2,190 billion in 20132016 and ₩1,779₩1,727 billion in 2012.2015. Results by Principal Business Segment We compile and analyze financial information for our business segments based upon segment information used by our management for the purposes of resource allocation and performance evaluation. We are organized into sixseven major business segments: retail banking operations, corporate banking operations, other banking operations, credit card operations, investment and securities operations, life insurance operations and lifenon-life insurance operations. The following table shows, for the periods indicated, our results of operations by segment: | | | Profit (1)(2) for the Year Ended December 31, | | | Total Operating Revenue (3) for the Year Ended December 31, | | | Profit(1) for the Year Ended December 31, | | | Total Operating Revenue(2) for the Year Ended December 31, | | | | 2012 | | | 2013 | | | 2014 | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won) | | | (in billions of Won) | | Retail banking operations | | ₩ | 686 | | | ₩ | 178 | | | ₩ | 110 | | | ₩ | 3,041 | | | ₩ | 2,454 | | | ₩ | 2,212 | | | ₩ | 23 | | | ₩ | 108 | | | ₩ | 540 | | | ₩ | 2,116 | | | ₩ | 2,248 | | | ₩ | 2,711 | | Corporate banking operations | | | 238 | | | | 157 | | | | 383 | | | | 1,953 | | | | 1,732 | | | | 1,710 | | | | 119 | | | | 442 | | | | 964 | | | | 1,668 | | | | 1,803 | | | | 2,129 | | Other banking operations | | | 555 | | | | 496 | | | | 536 | | | | 1,297 | | | | 1,486 | | | | 1,481 | | | | 965 | | | | 414 | | | | 671 | | | | 1,615 | | | | 1,403 | | | | 1,405 | | Credit card operations | | | 291 | | | | 384 | | | | 333 | | | | 1,287 | | | | 1,421 | | | | 1,281 | | | | 355 | | | | 317 | | | | 297 | | | | 1,310 | | | | 1,270 | | | | 1,277 | | Investment and securities operations | | | 18 | | | | 12 | | | | 26 | | | | 143 | | | | 115 | | | | 141 | | | | 47 | | | | 642 | | | | 272 | | | | 185 | | | | 185 | | | | 1,074 | | Life insurance operations | | | 17 | | | | 9 | | | | 7 | | | | 131 | | | | 102 | | | | 105 | | | | 11 | | | | 13 | | | | 21 | | | | 143 | | | | 140 | | | | 130 | | Non-life insurance operations | | | | — | | | | — | | | | 330 | | | | — | | | | — | | | | 1,121 | | Other | | | 48 | | | | 61 | | | | 115 | | | | 33 | | | | 144 | | | | 266 | | | | 354 | | | | 338 | | | | 113 | | | | 345 | | | | 397 | | | | 345 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total (4) | | ₩ | 1,853 | | | ₩ | 1,297 | | | ₩ | 1,510 | | | ₩ | 7,885 | | | ₩ | 7,454 | | | ₩ | 7,196 | | | Total(3) | | | ₩ | 1,874 | | | ₩ | 2,274 | | | ₩ | 3,208 | | | ₩ | 7,382 | | | ₩ | 7,446 | | | ₩ | 10,192 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | After deduction of income tax allocated to each segment. |
(2) | The amounts for 2014 reflect a change in our accounting policies with respect to uncertain tax positions in 2014. Corresponding amounts for 2012 and 2013 have been restated to retroactively apply such change. See “—Overview—Changes in Accounting Policies.”
|
(3) | Represents operating revenue from external customers. See Note 5 of the notes to our consolidated financial statements. |
(4)(3) | Prior to adjustments for consolidation, inter-segment transactions and certain differences in classification under our management reporting system. |
Our other banking operations, which include treasury activities, provide funding to our retail banking operations and corporate banking operations and receive funds procured through the financing activities of such segments, such as deposit-taking activities. When our retail banking operations or corporate banking operations engage in an investing activity, such as lending, the relevant amount is recognized as an inter-segment borrowing from the other banking operations. When our retail banking operations or corporate banking operations engage in a financing activity, such as deposit-taking, the relevant amount is recognized as an inter-segment lending to the other banking operations (or as a reduction in inter-segment borrowings from the other banking operations). Generally, for our retail banking operations, the amounts procured from financing activities are greater than the amounts used in investing activities, whereas for our corporate banking operations, the amounts used in investing activities are greater than the amounts procured from financing activities. The cost of borrowing from the other banking operations is calculated by multiplying the average balance of the amounts used in investing activities by the applicable internal funding rate on such inter-segment borrowings, whereas the income from lending to the other banking operations is calculated by multiplying the average balance of the amounts procured from financing activities by the applicable internal funding rate on such inter-segment lendings. The applicable internal funding rates on inter-segment borrowings tend to be generally higher than the applicable internal funding rates on inter-segment lendings, primarily due to the difference in the maturity structure of interest rates on the amounts used in investing activities and the amounts procured from financing activities. The cost of borrowing from the other banking operations is offset by the income from lending to the other banking operations, and the difference is recorded as expenses related to inter-segment borrowings, within net other operating expenses, for our retail banking operations and corporate banking operations, while a corresponding amount is recorded as income from inter-segment lending, within net other operating income, for our other banking operations. Retail Banking Operations This segment consists of retail banking services provided by Kookmin Bank. The following table shows, for the periods indicated, our income statement data for this segment: | | | Year Ended December 31, | | Percentage Change | | | Year Ended December 31, | | Percentage Change | | | | 2012 | | 2013 | | 2014 | | 2013/2012 | | 2014/2013 | | | 2015 | | 2016 | | 2017 | | 2016/2015 | | 2017/2016 | | | | (in billions of Won) | | (%) | | | (in billions of Won) | | (%) | | Income statement data | | | | | | | | | | | | | | | | | | | | | Interest income | | ₩ | 5,682 | | | ₩ | 4,786 | | | ₩ | 4,433 | | | | (15.8 | )% | | | (7.4 | )% | | ₩ | 3,858 | | | ₩ | 3,740 | | | ₩ | 3,936 | | | (3.1 | )% | | 5.2 | % | Interest expense | | | (3,158 | ) | | | (2,773 | ) | | | (2,353 | ) | | | (12.2 | ) | | | (15.1 | ) | | | (1,756 | ) | | (1,387 | ) | | (1,288 | ) | | (21.0 | ) | | (7.1 | ) | Net fee and commission income | | | 696 | | | | 612 | | | | 525 | | | | (12.1 | ) | | | (14.2 | ) | | | 570 | | | 504 | | | 595 | | | (11.6 | ) | | 18.1 | | Net loss from financial assets and liabilities at fair value through profit or loss | | | (15 | ) | | | (2 | ) | | | (20 | ) | | | (86.7 | ) | | | 900.0 | | | Net other operating expense | | | (235 | ) | | | (261 | ) | | | (421 | ) | | | 11.1 | | | | 61.3 | | | | (556 | ) | | (609 | ) | | (532 | ) | | 9.5 | | | (12.6 | ) | General and administrative expenses | | | (1,673 | ) | | | (1,740 | ) | | | (1,696 | ) | | | 4.0 | | | | (2.5 | ) | | | (2,006 | ) | | (2,102 | ) | | (1,947 | ) | | 4.8 | | | (7.4 | ) | Provision for credit losses | | | (392 | ) | | | (358 | ) | | | (304 | ) | | | (8.7 | ) | | | (15.1 | ) | | | (80 | ) | | (3 | ) | | (122 | ) | | (96.3 | ) | | | N/M | (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit before income tax | | | 905 | | | | 264 | | | | 164 | | | | (70.8 | ) | | | (37.9 | ) | | | 30 | | | 143 | | | 642 | | | 376.7 | | | 349.0 | | Tax expense | | | (219 | ) | | | (86 | ) | | | (54 | ) | | | (60.7 | ) | | | (37.2 | ) | | | (7 | ) | | (35 | ) | | (102 | ) | | 400.0 | | | 191.4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit for the year | | ₩ | 686 | | | ₩ | 178 | | | ₩ | 110 | | | | (74.1 | ) | | | (38.2 | ) | | ₩ | 23 | | | ₩ | 108 | | | ₩ | 540 | | | 369.6 | | | 400.0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | “N/M” means not meaningful. |
Comparison of 20142017 to 20132016 Our profit before income tax for this segment decreased 37.9%increased 349.0% from ₩264₩143 billion in 20132016 to ₩164₩642 billion in 2014.2017. Interest income from our retail banking operations increased 5.2% from ₩3,740 billion in 2016 to ₩3,936 billion in 2017. This increase was principally due to increases in the average volume of other consumer and mortgage loans, mainly reflecting higher demand for such loans, growth in which were offset in part by a decrease in the average yield on other consumer loans from 2016 to 2017. Our largest and most important funding source is deposits from retail customers, which represent more than half of our total deposits. Interest expense for this segment decreased 7.1% from ₩1,387 billion in 2016 to ₩1,288 billion in 2017. This decrease was mainly due to a decrease in the average cost of time deposits held by retail customers, primarily reflecting a decrease in the general level of interest rates in Korea in 2017 compared to 2016, which was offset in part by an increase in the average volume of such deposits. Net fee and commission income attributable to this segment increased 18.1% from ₩504 billion in 2016 to ₩595 billion in 2017, mainly due to increases in trust fees received. Net other operating expense attributable to this segment decreased 12.6% from ₩609 billion in 2016 to ₩532 billion in 2017, mainly as a result of a decrease in expenses related to inter-segment borrowings. While the lower interest rate environment in Korea in 2017 compared to 2016 led to decreases in the internal funding rates applicable to both inter-segment borrowings and lendings from 2016 to 2017, the decrease in the cost of inter-segment borrowings was higher compared to the decrease in the yield on inter-segment lendings, leading to a decrease in expenses related to inter-segment borrowings. General and administrative expenses attributable to this segment decreased 7.4% from ₩2,102 billion in 2016 to ₩1,947 billion in 2017, primarily due to decreases in information technology and other common administrative expenses shared among the banking-related segments. Provision for credit losses increased significantly from ₩3 billion in 2016 to ₩122 billion in 2017, mainly due to an increase in the volume of our outstanding retail loans, as well as higher net write-offs of such loans. Comparison of 2016 to 2015 Our profit before income tax for this segment increased 376.7% from ₩30 billion in 2015 to ₩143 billion in 2016. Interest income from our retail banking operations decreased 7.4%3.1% from ₩4,786₩3,858 billion in 20132015 to ₩4,433₩3,740 billion in 2014.2016. This decrease was principally due to decreases in the average yields on mortgage, home equity and other consumer loans, mainly reflecting a decrease in the general level of interest rates in Korea from 20132015 to 2014,2016, which were partially offset in part by increases in the average volume of such loans from 20132015 to 2014.2016. Our largest and most important funding source is deposits from retail customers, which represent more than half of our total deposits. Interest expense for this segment decreased 15.1%21.0% from ₩2,773₩1,756 billion in 20132015 to ₩2,353₩1,387 billion in 2014.2016. This decrease was primarily due to a decrease in the average cost of time deposits held by retail customers, which mainly reflectedreflecting a decrease in the general level of interest rates in Korea from 20132015 to 2014.2016. Net fee and commission income attributable to this segment decreased 14.2%11.6% from ₩612₩570 billion in 20132015 to ₩525₩504 billion in 2014,2016, mainly due to decreasesa decrease in feebancassurance fees and commission income from bancassurance operations and sales of beneficiary certificates as agents. Net loss from financial assets and liabilities at fair value through profit or loss attributable to this segment increased tenfold from ₩2 billion in 2013 to ₩20 billion in 2014, principally as a result of an increase in valuation loss on derivatives.trust fees received.
Net other operating expense attributable to this segment increased 61.3%9.5% from ₩261₩556 billion in 20132015 to ₩421₩609 billion in 2014,2016, mainly as a result of an increasea decrease in expenses related to inter-segment borrowings.net gains on sales of loans. General and administrative expenses attributable to this segment decreased 2.5%increased 4.8% from ₩1,740₩2,006 billion in 20132015 to ₩1,696₩2,102 billion in 2014,2016, primarily due to a decreaseincreases in education taxes, reflecting a decrease in interest income. Education taxes are levied on revenues of financial institutions.information technology and other common administrative expenses shared among the banking-related segments. Provision for credit losses decreased 15.1%96.3% from ₩358₩80 billion in 20132015 to ₩304₩3 billion in 2014,2016, mainly due to an improvement in the asset quality of retail loans, reflecting a decrease in delinquency rates. Comparison of 2013 to 2012
Our profit before income tax for this segment decreased 70.8% from ₩905 billion in 2012 to ₩264 billion in 2013.
Interest income from our retail banking operations decreased 15.8% from ₩5,682 billion in 2012 to ₩4,786 billion in 2013. This decrease was principally due to a decrease in the average yields on mortgage, home equity and other consumer loans, mainly reflecting a decrease in the general level of interest rates in Korea in 2013.
Interest expense for this segment decreased 12.2% from ₩3,158 billion in 2012 to ₩2,773 billion in 2013. This decrease was primarily due to a decrease in the average cost of time deposits held by retail customers, which mainly reflected a decrease in the general level of interest rates in Korea in 2013.
Net fee and commission income attributable to this segment decreased 12.1% from ₩696 billion in 2012 to ₩612 billion in 2013, mainly due to a decrease in fee and commission income from bancassurance operations.
Net loss from financial assets and liabilities at fair value through profit or loss attributable to this segment decreased 86.7% from ₩15 billion in 2012 to ₩2 billion in 2013, principally as a result of a decrease in valuation loss on derivatives.
Net other operating expense attributable to this segment increased 11.1% from ₩235 billion in 2012 to ₩261 billion in 2013, mainly as a result of an increase in expenses related to inter-segment borrowings.
General and administrative expenses attributable to this segment increased 4.0% from ₩1,673 billion in 2012 to ₩1,740 billion in 2013, principally due to an increase in salary expense.
Provision for credit losses decreased 8.7% from ₩392 billion in 2012 to ₩358 billion in 2013, due mainly to an improvement in the asset quality of retail loans reflecting a decrease in delinquency rates for retail loans.
Corporate Banking Operations This segment consists of corporate banking services provided by Kookmin Bank. The following table shows, for the periods indicated, our income statement data for this segment: | | | Year Ended December 31, | | Percentage Change | | | Year Ended December 31, | | Percentage Change | | | | 2012 | | 2013 | | 2014 | | 2013/2012 | | 2014/2013 | | | 2015 | | 2016 | | 2017 | | 2016/2015 | | 2017/2016 | | | | (in billions of Won) | | (%) | | | (in billions of Won) | | (%) | | Income statement data | | | | | | | | | | | | | | | | | | | | | Interest income | | ₩ | 5,190 | | | ₩ | 4,391 | | | ₩ | 4,009 | | | | (15.4 | )% | | | (8.7 | )% | | ₩ | 3,514 | | | ₩ | 3,297 | | | ₩ | 3,584 | | | (6.2 | )% | | 8.7 | % | Interest expense | | | (2,597 | ) | | | (1,840 | ) | | | (1,560 | ) | | | (29.1 | ) | | | (15.2 | ) | | | (1,193 | ) | | (1,011 | ) | | (1,028 | ) | | (15.3 | ) | | 1.7 | | Net fee and commission income | | | 233 | | | | 241 | | | | 237 | | | | 3.4 | | | | (1.7 | ) | | | 233 | | | 231 | | | 236 | | | (0.9 | ) | | 2.2 | | Net gain (loss) from financial assets and liabilities at fair value through profit or loss | | | (1 | ) | | | — | | | | — | | | | (100.0 | ) | | | — | | | Net loss from financial assets and liabilities at fair value through profit or loss | | | | — | | | (1 | ) | | (2 | ) | | | N/M | (1) | | 100.0 | | Net other operating expense | | | (871 | ) | | | (1,055 | ) | | | (906 | ) | | | 21.1 | | | | (14.1 | ) | | | (834 | ) | | (704 | ) | | (679 | ) | | (15.6 | ) | | (3.6 | ) | General and administrative expenses | | | (792 | ) | | | (822 | ) | | | (711 | ) | | | 3.8 | | | | (13.5 | ) | | | (847 | ) | | (950 | ) | | (974 | ) | | 12.2 | | | 2.5 | | Provision for credit losses | | | (853 | ) | | | (706 | ) | | | (567 | ) | | | (17.2 | ) | | | (19.7 | ) | | Net other non-operating revenue | | | 6 | | | | 1 | | | | 2 | | | | (83.3 | ) | | | 100.0 | | | Provision (reversal of provision) for credit losses | | | | (716 | ) | | (278 | ) | | 7 | | | (61.2 | ) | | | N/M | (1) | Net othernon-operating revenue (expense) | | | | 1 | | | (1 | ) | | 2 | | | | N/M | (1) | | | N/M | (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit before income tax | | | 315 | | | | 210 | | | | 504 | | | | (33.3 | ) | | | 140.0 | | | | 158 | | | 583 | | | 1,146 | | | 269.0 | | | 96.6 | | Tax expense | | | (77 | ) | | | (53 | ) | | | (121 | ) | | | (31.2 | ) | | | 128.3 | | | | (39 | ) | | (141 | ) | | (182 | ) | | 261.5 | | | 29.1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit for the year | | ₩ | 238 | | | ₩ | 157 | | | ₩ | 383 | | | | (34.0 | ) | | | 143.9 | | | ₩ | 119 | | | ₩ | 442 | | | ₩ | 964 | | | 271.4 | | | 118.1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | “N/M” means not meaningful. |
Comparison of 20142017 to 20132016 Our profit before income tax for this segment increased 140.0%96.6% from ₩210₩583 billion in 20132016 to ₩504₩1,146 billion in 2014.2017. Interest income from our corporate banking operations increased 8.7% from ₩3,297 billion in 2016 to ₩3,584 billion in 2017. This increase was principally due to an increase in the average volume of corporate loans, mainly reflecting our increased marketing efforts and increased demand for such loans, which was enhanced by an increase in the average yields on such loans. Interest expense for this segment increased 1.7% from ₩1,011 billion in 2016 to ₩1,028 billion in 2017. This increase was principally due to an increase in the average volume of time deposits held by corporate customers, primarily reflecting higher demand for such deposits, which was offset in part by a decrease in the average cost of such deposits. Net fee and commission income attributable to this segment increased 2.2% from ₩231 billion in 2016 to ₩236 billion in 2017, primarily due to increases in fund transfer fees and trust fees received. Net other operating expense attributable to this segment decreased 3.6% from ₩704 billion in 2016 to ₩679 billion in 2017, mainly as a result of an increase in net gains on sales of corporate loans, as well as a decrease in expenses related to inter-segment borrowings. While the lower interest rate environment in Korea in 2017 compared to 2016 led to decreases in the internal funding rates applicable to both inter-segment borrowings and lendings from 2016 to 2017, the resulting effect on costs of inter-segment borrowing for this segment was greater than the effect on income from inter-segment lending for this segment, for which the amounts generated from investing activities (and thereby recognized as inter-segment borrowing) are greater than the amounts procured from financing activities (and thereby recognized as inter-segment lending), leading to a decrease in expenses related to inter-segment borrowings. General and administrative expenses attributable to this segment increased 2.5% from ₩950 billion in 2016 to ₩974 billion in 2017, principally due to increases in salaries and short-term benefits paid, which were offset in part by decreases in information technology and other common administrative expenses shared among the banking-related segments. Provision (reversal of provision) for credit losses changed from a provision of ₩278 billion in 2016 to a reversal of provision of ₩7 billion in 2017, due mainly to an improvement in the asset quality of corporate loans, reflecting a decrease in impaired corporate loans, as well as lower net write-offs of such loans. Net othernon-operating revenue (expense) attributable to this segment changed from an expense of ₩1 billion in 2016 to a revenue of ₩2 billion in 2017. Comparison of 2016 to 2015 Our profit before income tax for this segment increased 269.0% from ₩158 billion in 2015 to ₩583 billion in 2016. Interest income from our corporate banking operations decreased 8.7%6.2% from ₩4,391₩3,514 billion in 20132015 to ₩4,009₩3,297 billion in 2014.2016. This decrease was principally due to a decrease in the average yields on corporate loans, mainly reflecting the lower interest rate environment in Korea in 2014,2016, which was offset in part by an increase in the average volume of such loans. Interest expense for this segment decreased 15.2%15.3% from ₩1,840₩1,193 billion in 20132015 to ₩1,560₩1,011 billion in 2014.2016. This decrease was principally due to a decrease in the average cost of time deposits held by corporate customers, which mainly reflected a decrease in the general level of interest rates in Korea from 20132015 to 2014.2016. Net fee and commission income attributable to this segment decreased 1.7%0.9% from ₩241₩233 billion in 20132015 to ₩237₩231 billion in 2014,2016, primarily due to decreasesa decrease in foreign currency related fees and guarantee fees.received, which was mostly offset by a decrease in lending activity fees paid. Net other operating expense attributable to this segment decreased 14.1%15.6% from ₩1,055 in 2013 to ₩906₩834 billion in 2014,2015 to ₩704 billion in 2016, mainly as a result of a decrease in expenses related to inter-segment borrowings, which was offset in part by a decrease in net gains on sales of loans. While the lower interest rate environment in Korea in 2016 led to decreases in the internal funding rates applicable to both inter-segment borrowings and lendings from 2015 to 2016, the resulting decrease in costs of inter-segment borrowing for this segment was greater than the decrease in income from inter-segment lending for this segment, for which the amounts generated from investing activities (and thereby recognized as inter-segment borrowing) are greater than the amounts procured from financing activities (and thereby recognized as inter-segment lending), leading to a decrease in expenses related to inter-segment borrowings. General and administrative expenses attributable to this segment decreased 13.5%increased 12.2% from ₩822₩847 billion in 20132015 to ₩711₩950 billion in 2014,2016, principally due to a decreaseincreases in laborinformation technology and other common administrative expenses allocated to this segment based onshared among the relative volume of loans attributable to this segment.banking-related segments. Provision for credit losses decreased 19.7%61.2% from ₩706₩716 billion in 20132015 to ₩567₩278 billion in 2014,2016, due mainly to an overall improvement in the asset quality of corporate loans, reflecting a decrease in delinquency rates.impaired corporate loans. Net othernon-operating revenue (expense) attributable to this segment increasedchanged from a revenue of ₩1 billion in 2013 and ₩2 billion in 2014. Comparison of 2013 to 2012
Our profit before income tax for this segment decreased 33.3% from ₩315 billion in 2012 to ₩210 billion in 2013.
Interest income from our corporate banking operations decreased 15.4% from ₩5,190 billion in 2012 to ₩4,391 billion in 2013. This decrease was principally due to a decrease in the average yields on corporate loans, mainly reflecting the lower interest rate environment in Korea in 2013, which was enhanced by a decrease in the average volume of such loans.
Interest expense for this segment decreased 29.1% from ₩2,597 billion in 2012 to ₩1,840 billion in 2013. This decrease was principally due to a decrease in the average cost of time deposits held by corporate customers, which mainly reflected a decrease in the general level of interest rates in Korea in 2013.
Net fee and commission income attributable to this segment increased 3.4% from ₩233 billion in 2012 to ₩241 billion in 2013, due primarily2015 to an increase in commissions on managementexpense of retirement annuity pensions.
Net loss from financial assets and liabilities at fair value through profit or loss attributable to this segment decreased by ₩1 billion from 2012 to 2013.
Net other operating expense attributable to this segment increased 21.1% from ₩871 billion in 2012 to ₩1,055 billion in 2013, mainly as a result of an increase in expenses related to inter-segment borrowings.
General and administrative expenses attributable to this segment increased 3.8% from ₩792 billion in 2012 to ₩822 billion in 2013, principally due to an increase in the average wages of our employees in this segment.
Provision for credit losses decreased 17.2% from ₩853 billion in 2012 to ₩706 billion in 2013, due mainly to an overall improvement in the asset quality of corporate loans reflecting a decrease in delinquency rates for corporate loans.
Net other non-operating revenue attributable to this segment decreased 83.3% from ₩6 billion in 2012 to ₩1 billion in 2013, primarily due to a decrease in net other non-operating revenue from Kookmin Bank (China) Ltd., a subsidiary of Kookmin Bank.2016.
Other Banking Operations This segment primarily consists of Kookmin Bank’s banking operations other than retail and corporate banking operations, including treasury activities and Kookmin Bank’s “back office” administrative operations. The following table shows, for the periods indicated, our income statement data for this segment: | | | Year Ended December 31, | | Percentage Change | | | Year Ended December 31, | | Percentage Change | | | | 2012 | | 2013 | | 2014 | | 2013/2012 | | 2014/2013 | | | 2015 | | 2016 | | 2017 | | 2016/2015 | | 2017/2016 | | | | (in billions of Won) | | (%) | | | (in billions of Won) | | (%) | | Income statement data | | | | | | | | | | | | | | | | | | | | | Interest income | | ₩ | 1,623 | | | ₩ | 1,418 | | | ₩ | 1,261 | | | | (12.6 | )% | | | (11.1 | )% | | ₩ | 1,016 | | | ₩ | 855 | | | ₩ | 819 | | | (15.8 | )% | | (4.2 | )% | Interest expense | | | (961 | ) | | | (822 | ) | | | (819 | ) | | | (14.5 | ) | | | (0.4 | ) | | | (727 | ) | | (666 | ) | | (628 | ) | | (8.4 | ) | | (5.7 | ) | Net fee and commission income | | | 324 | | | | 252 | | | | 316 | | | | (22.2 | ) | | | 25.4 | | | | 354 | | | 352 | | | 394 | | | (0.6 | ) | | 11.9 | | Net gain from financial assets and liabilities at fair value through profit or loss | | | 757 | | | | 693 | | | | 376 | | | | (8.5 | ) | | | (45.7 | ) | | | 287 | | | 198 | | | 100 | | | (31.0 | ) | | (49.5 | ) | Net other operating income (expense) | | | (144 | ) | | | 261 | | | | 558 | | | | N/M | (1) | | | 113.8 | | | Net other operating income | | | | 968 | | | 912 | | | 923 | | | (5.8 | ) | | 1.2 | | General and administrative expenses | | | (811 | ) | | | (835 | ) | | | (966 | ) | | | 3.0 | | | | 15.7 | | | | (960 | ) | | (1,217 | ) | | (745 | ) | | 26.8 | | | (38.8 | ) | Provision for credit losses | | | (49 | ) | | | (1 | ) | | | (17 | ) | | | (98.0 | ) | | | 1,600.0 | | | Share of profit (loss) of associates | | | (6 | ) | | | (203 | ) | | | 18 | | | | 3,283.3 | | | | N/M | (1) | | Net other non-operating expense | | | (71 | ) | | | (25 | ) | | | (35 | ) | | | (64.8 | ) | | | 40.0 | | | Provision (reversal of provision) for credit losses | | | | 55 | | | 27 | | | | — | | | (50.9 | ) | | (100.0 | ) | Share of profit of associates | | | | 8 | | | 18 | | | 38 | | | 125.0 | | | 111.1 | | Net othernon-operating revenue (expense) | | | | 192 | | | 51 | | | (75 | ) | | (73.4 | ) | | (247.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit (loss) before income tax | | | 662 | | | | 738 | | | | 692 | | | | 11.5 | | | | (6.2 | ) | | Profit before income tax | | | | 1,193 | | | 530 | | | 826 | | | (55.6 | ) | | 55.8 | | Tax expense (2) | | | (107 | ) | | | (242 | ) | | | (156 | ) | | | 126.2 | | | | (35.5 | ) | | | (228 | ) | | (116 | ) | | (155 | ) | | (49.1 | ) | | 33.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit for the year (2) | | ₩ | 555 | | | ₩ | 496 | | | ₩ | 536 | | | | (10.6 | ) | | | 8.1 | | | ₩ | 965 | | | ₩ | 414 | | | ₩ | 671 | | | (57.1 | ) | | 62.1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | “N/M” means not meaningful.
|
(2) | The amounts for 2014 reflect a change in our accounting policies with respect to uncertain tax positions in 2014. Corresponding amounts for 2012 and 2013 have been restated to retroactively apply such change. See “—Overview—Changes in Accounting Policies.”
|
Comparison of 20142017 to 20132016 Our profit before income tax for this segment decreased 6.2%increased 55.8% from ₩738₩530 billion in 20132016 to ₩692₩826 billion in 2014.2017. Interest income from our other banking operations decreased 11.1%4.2% from ₩1,418₩855 billion in 20132016 to ₩1,261₩819 billion in 2014.2017. This decrease was attributable primarily to a decrease in the average yields on debt securities in Kookmin Bank’s financial investments portfolio, due mainly toreflecting the lower interest rate environment in Korea in 2014, as well as a decrease2017 compared to 2016, which was offset in part by an increase in the average volume of such debt securities. Interest expense for this segment remained relatively constant at ₩819decreased 5.7% from ₩666 billion in 20142016 to ₩628 billion in 2017. This decrease was principally due to a decrease in the average cost of long-term debentures issued by Kookmin Bank, mainly reflecting the lower interest rate environment in Korea in 2017 compared to ₩822 billion2016, which was offset in 2013.part by an increase in the average volume of such debentures. Net fee and commission income attributable to this segment increased 25.4%11.9% from ₩252₩352 billion in 20132016 to ₩316₩394 billion in 2014,2017, mainly due an increase otherto increases in brand usage fees received from affiliates and commissions received, as well as an increase in fee and commission income from providing agency services to affiliates.underwriting fees received. Net gain from financial assets and liabilities at fair value through profit or loss attributable to this segment decreased 45.7%49.5% from ₩693₩198 billion in 20132016 to ₩376₩100 billion in 2014,2017, principally as a result of a decreasedecreases in net gaingains on derivativesheld-for-trading. Net other operating income attributable to this segment increased 113.8%1.2% from ₩261₩912 billion in 20132016 to ₩558₩923 billion in 2014,2017, mainly as a result of an increase in income from inter-segment lending.net gain on foreign exchange transactions, which was offset in part by a decrease in net gain on disposals ofavailable-for-sale financial assets. General and administrative expenses attributable to this segment increased 15.7%decreased 38.8% from ₩835₩1,217 billion in 20132016 to ₩966₩745 billion in 2014,2017, primarily due to a decrease in termination benefits attributable mainly to a decrease in the number of employees participating in the voluntary early retirement program implemented by Kookmin Bank. Reversal of provision for credit losses attributable to this segment decreased from ₩27 billion in 2016 to less than ₩1 billion in 2017, principally due to a decrease in reversal of provisions for financial guarantees and an increase in salary expense. Provisionprovisions for credit losses increased seventeen-fold from ₩1 billion in 2013 to ₩17 billion in 2014, mainly reflecting an increase in provision for receivables from derivatives transactions.other assets.
Share of profit (loss) of associates attributable to this segment increased 111.1% from ₩18 billion in 2016 to ₩38 billion in 2017, principally as a result of an increase in gain on disposal of investments in associates and joint ventures. Net othernon-operating revenue (expense) attributable to this segment changed from a lossrevenue of ₩203₩51 billion in 20132016 to a profitan expense of ₩18₩75 billion in 2014, principally as a result of a decrease in loss on equity method investments from Kookmin Bank’s investment in JSC Bank CenterCredit. Net other non-operating expense attributable to this segment increased 40.0% from ₩25 billion in 2013 to ₩35 billion in 2014,2017, primarily due to an increaseaone-time contribution to the Korea Inclusive Finance Agency made by Kookmin Bank (together with other non-operating expense relatedKorean banks) relating to satisfaction of judgments in legal proceedings with respect to which the actual payments made were greater than the litigation allowances established.income from unclaimed cashiers’ checks.
Comparison of 20132016 to 20122015 Our profit before income tax for this segment increased 11.5%decreased 55.6% from ₩662₩1,193 billion in 20122015 to ₩738₩530 billion in 2013.2016. Interest income from our other banking operations decreased 12.6%15.8% from ₩1,623₩1,016 billion in 20122015 to ₩1,418₩855 billion in 2013.2016. This decrease was attributable primarily to a decrease in the average yields on debt securities in Kookmin Bank’s financial investments portfolio, due mainly toreflecting the lower interest rate environment in Korea in 2013.2016, which was offset in part by an increase in the average volume of such debt securities. Interest expense for this segment decreased 14.5%8.4% from ₩961₩727 billion in 20122015 to ₩822₩666 billion in 2013.2016. This decrease was principally due to a decrease in the average cost of debentures whichissued by Kookmin Bank, mainly reflectedreflecting the decrease in the general level oflower interest ratesrate environment in Korea in 2013.2016, which was offset in part by an increase in the average volume of such debentures. Net fee and commission income attributable to this segment decreased 22.2%0.6% from ₩324₩354 billion in 20122015 to ₩252₩352 billion in 2013,2016, mainly due to decreasesan increase in brokerageloan-related fees paid, which was mostly offset by increases in brand licensing fees received from affiliates, asset securitization-related fees received and participation fees.foreign currency related fees received. Net gain from financial assets and liabilities at fair value through profit or loss attributable to this segment decreased 8.5%31.0% from ₩757₩287 billion in 20122015 to ₩693₩198 billion in 2013,2016, principally as a result of a decreasedecreases in net gains onfrom financial instruments assets and derivativesheld-for-trading. Net other operating income (expense) changedattributable to this segment decreased 5.8% from a net expense of ₩144₩968 billion in 20122015 to a net income of ₩261₩912 billion in 2013,2016, mainly as a result of an increasedecreases in net gain on sales ofavailable-for-sale financial assets and in income from inter-segment lending.lendings (attributable primarily to a greater decrease in income from inter-segment lending to the corporate banking operations segment, compared to the decrease in costs of inter-segment borrowing from the retail banking operations segment, in the context of the lower interest rate environment in Korea in 2016), which were offset in part by a decrease in impairment losses onavailable-for-sale financial assets and an increase in gains on foreign currency transactions. General and administrative expenses attributable to this segment increased 3.0%26.8% from ₩811₩960 billion in 20122015 to ₩835₩1,217 billion in 2013,2016, primarily due to an increase in termination benefits attributable mainly to an increase in the number of employees participating in the voluntary early retirement program implemented by Kookmin Bank. Reversal of provision for credit losses attributable to this segment decreased 50.9% from ₩55 billion in 2015 to ₩27 billion in 2016, principally due to an increase in special termination benefits in connection with Kookmin Bank’s voluntary early retirement program, as well as an increase in salary expense. Provisionprovisions for credit losses decreased by ₩48 billion from ₩49 billion in 2012 to ₩1 billion in 2013, mainly reflecting a decrease in provision for receivables from derivative transactions.guarantees.
Share of lossprofit of associates attributable to this segment increased by ₩197 billion125.0% from ₩6₩8 billion in 20122015 to ₩203₩18 billion in 2013,2016, principally as a result of an increase ina loss on equity method investments frominvestment recognized in 2015 on Kookmin Bank’s investment in JSC Bank CenterCredit.CenterCredit, which was not repeated in 2016. Net othernon-operating expense revenue attributable to this segment decreased 64.8%73.4% from ₩71₩192 billion in 20122015 to ₩25₩51 billion in 2013,2016, primarily due to an increasea decrease in net other non-operating income including income from employment insurance support and interest on delinquent leasehold deposits. related to judgments in legal proceedings.Credit Card Operations This segment consists of credit card activities conducted by KB Kookmin Card. The following table shows, for the periods indicated, our income statement data for this segment: | | | Year Ended December 31, | | Percentage Change | | | Year Ended December 31, | | Percentage Change | | | | 2012 | | 2013 | | 2014 | | 2013/2012 | | 2014/2013 | | | 2015 | | 2016 | | 2017 | | 2016/2015 | | 2017/2016 | | | | (in billions of Won) | | (%) | | | (in billions of Won) | | (%) | | Income statement data | | | | | | | | | | | | | | | | | | | | | Interest income | | ₩ | 1,388 | | | ₩ | 1,436 | | | ₩ | 1,354 | | | | 3.5 | % | | | (5.7 | )% | | ₩ | 1,306 | | | ₩ | 1,261 | | | ₩ | 1,341 | | | (3.4 | )% | | 6.3 | % | Interest expense | | | (414 | ) | | | (379 | ) | | | (360 | ) | | | (8.5 | ) | | | (5.0 | ) | | | (326 | ) | | (280 | ) | | (257 | ) | | (14.1 | ) | | (8.2 | ) | Net fee and commission income | | | 158 | | | | 185 | | | | 95 | | | | 17.1 | | | | (48.6 | ) | | | 109 | | | 92 | | | 133 | | | (15.6 | ) | | 44.6 | | Net insurance income | | | | 27 | | | 21 | | | 20 | | | (22.2 | ) | | (4.8 | ) | Net other operating expense | | | (83 | ) | | | (39 | ) | | | (32 | ) | | | (53.0 | ) | | | (17.9 | ) | | | (63 | ) | | (86 | ) | | (154 | ) | | 36.5 | | | 79.1 | | General and administrative expenses | | | (349 | ) | | | (354 | ) | | | (341 | ) | | | 1.4 | | | | (3.7 | ) | | | (333 | ) | | (348 | ) | | (371 | ) | | 4.5 | | | 6.6 | | Provision for credit losses | | | (315 | ) | | | (345 | ) | | | (278 | ) | | | 9.5 | | | | (19.4 | ) | | | (246 | ) | | (250 | ) | | (337 | ) | | 1.6 | | | 34.8 | | Net other non-operating expense | | | (4 | ) | | | (2 | ) | | | (5 | ) | | | (50.0 | ) | | | 150.0 | | | Net othernon-operating revenue (expense) | | | | (12 | ) | | 2 | | | (7 | ) | | | N/M | (1) | | | N/M | (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit before income tax | | | 381 | | | | 502 | | | | 433 | | | | 31.8 | | | | (13.7 | ) | | | 462 | | | 412 | | | 368 | | | (10.8 | ) | | (10.7 | ) | Tax expense | | | (90 | ) | | | (118 | ) | | | (100 | ) | | | 31.1 | | | | (15.3 | ) | | | (107 | ) | | (95 | ) | | (71 | ) | | (11.2 | ) | | (25.3 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit for the year | | ₩ | 291 | | | ₩ | 384 | | | ₩ | 333 | | | | 32.0 | | | | (13.3 | ) | | ₩ | 355 | | | ₩ | 317 | | | ₩ | 297 | | | (10.7 | ) | | (6.3 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | “N/M” means not meaningful. |
Comparison of 20142017 to 20132016 Our profit before income tax for this segment decreased 13.7%10.7% from ₩502₩412 billion in 20132016 to ₩433₩368 billion in 2014.2017. Interest income from our credit card operations decrease 5.7%increased 6.3% from ₩1,436₩1,261 billion in 20132016 to ₩1,354₩1,341 billion in 2014.2017. This decreaseincrease was primarily due to a decrease inan increase the average yields onvolume of credit card receivables, mainly reflecting increases in the lower interest rate environmentnumber of credit cards issued and in Koreathe use of credit cards by customers, which were offset in 2014, which was enhancedpart by a decrease in the average volume ofyields on such receivables. Interest expense for this segment decreased 5.0%8.2% from ₩379₩280 billion in 20132016 to ₩360₩257 billion in 2014.2017. This decrease was primarily due to decreased funding costs for this segment in light of the lower interest rate environment in Korea in 2014.2017 compared to 2016. Net fee and commission income attributable to this segment decreased 48.6%increased 44.6% from ₩185₩92 billion in 20132016 to ₩95₩133 billion in 2014,2017, which resulted mainly from an increase in credit card related fees and debit card related fee and commission expenses. Such increase wascommissions principally due to an increaseincreases in debit card related feethe number and commission expenses, including fees paid to value-added network providers, reflecting the increased use of debitcredit cards. Net insurance income attributable to this segment remained relatively stable at ₩20 billion in 2017 compared to ₩21 billion in 2016. Net other operating expense attributable to this segment decreased 17.9%increased 79.1% from ₩39₩86 billion in 20132016 to ₩32₩154 billion in 2014,2017, primarily due to an increase in membership reward program-related costs mainly as a decreaseresult of increases in accumulated reward points that are recognized as other operating expense, reflecting a change in our rewards program in 2014.the number and use of credit cards. General and administrative expenses attributable to this segment decreased 3.7%increased 6.6% from ₩354₩348 billion in 20132016 to ₩341₩371 billion in 2014,2017, mainly due to a decreasean increase in other general and administrativesalary expenses, including communication expenses and supplies expenses.primarily reflecting an increase in wage levels. Provision for credit losses decreased 19.4%increased 34.8% from ₩345₩250 billion in 20132016 to ₩278₩337 billion in 2014,2017, mainly due to an improvement in the overall asset quality of our credit card receivables, reflecting a decrease in delinquency rates. Net other non-operating expense attributable to this segment increased 150.0% from ₩2 billion in 2013 to ₩5 billion in 2014, primarily due to an increase in miscellaneous other non-operating expense, which resulted mainly from an increase in expenses related to managementthe volume of our outstanding credit card receivables, as well as an increase in charitable donations by KB Kookmin Card. impaired credit card receivables.Net othernon-operating revenue (expense) attributable to this segment changed from a revenue of ₩2 billion in 2016 to an expense of ₩7 billion in 2017, primarily due to an increase in provisions for litigation and related costs. Comparison of 20132016 to 20122015 Our profit before income tax for this segment increased by 31.8%decreased 10.8% from ₩381₩462 billion in 20122015 to ₩502₩412 billion in 2013.2016. Interest income from our credit card operations increased by 3.5%decreased 3.4% from ₩1,388₩1,306 billion in 20122015 to ₩1,436₩1,261 billion in 2013.2016. This increasedecrease was primarily due to an increasea decrease in the average yields on credit card receivables, mainly reflecting the lower interest income from factored receivables, reflectingrate environment in Korea in 2016, which was offset in part by an increase in the average volume of such receivables. Interest expense for this segment decreased 8.5%14.1% from ₩414₩326 billion in 20122015 to ₩379₩280 billion in 2013.2016. This decrease was primarily due to decreased funding costs for this segment in light of the lower interest rate environment in Korea in 2013.2016. Net fee and commission income attributable to this segment increased 17.1%decreased 15.6% from ₩158₩109 billion in 20122015 to ₩185₩92 billion in 2013,2016, which resulted mainly from an increase in fee and commissionmarketing expenses. Net insurance income attributable to this segment decreased 22.2% from check cards.₩27 billion in 2015 to ₩21 billion in 2016, primarily due to a decrease in the sales of credit card-related insurance policies, which we stopped issuing commencing in 2016. Net other operating expense attributable to this segment decreased 53.0%increased 36.5% from ₩83₩63 billion in 20122015 to ₩39₩86 billion in 2013,2016, primarily due to an increase in accumulated reward points that are recognized as other operating income resulting from proceeds from salesexpense, which mainly reflected the increased use of written-offcheck cards and credit card loans to the National Happiness Fund.cards. General and administrative expenses attributable to this segment increased 1.4%4.5% from ₩349₩333 billion in 20122015 to ₩354₩348 billion in 2013,2016, mainly due to an increase in salary expense.expenses, primarily reflecting an increase in wage levels. Provision for credit losses increased 9.5%1.6% from ₩315₩246 billion in 20122015 to ₩345₩250 billion in 2013,2016, mainly reflecting a decrease in reversal of provisions primarily due to our sale of written-off credit card loans to the National Happiness Fund and an increase in impairedthe unused commitments of credit card balances due to a change in our charge-off policy in 2013 which increased the delinquency period for credit card balances before charge-off from three months to six months.cards. Net othernon-operating expense revenue (expense) attributable to this segment decreased 50.0%changed from ₩4an expense of ₩12 billion in 20122015 to a revenue of ₩2 billion in 2013,2016, primarily due to a decrease in charitable donations byothernon-operating expense mainly reflecting provisions in 2015 for litigation relating to the misappropriation of personal information of the customers of KB Kookmin Card.Card by a third party in 2014, which were not repeated in 2016. Investment and Securities Operations This segment consists primarily of securities brokerage, investment banking, securities investment and trading and other capital markets servicesactivities conducted by KB Securities, including its predecessor entities. KB Securities was the surviving entity in the merger in December 2016 of our former subsidiary, KB Investment & Securities.Securities, with and into Hyundai Securities, which had become our consolidated subsidiary in October 2016. See “—Overview—Acquisitions.” The following table shows, for the periods indicated, our income statement data for this segment: | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Percentage Change | | | | 2012 | | | 2013 | | | 2014 | | | 2013/2012 | | | 2014/2013 | | | | (in billions of Won) | | | (%) | | Income statement data | | | | | | | | | | | | | | | | | | | | | Interest income | | ₩ | 38 | | | ₩ | 41 | | | ₩ | 45 | | | | 7.9 | % | | | 9.8 | % | Interest expense | | | (19 | ) | | | (17 | ) | | | (27 | ) | | | (10.5 | ) | | | 58.8 | | Net fee and commission income | | | 86 | | | | 76 | | | | 76 | | | | (11.6 | ) | | | — | | Net gain from financial assets and liabilities at fair value through profit or loss | | | 39 | | | | 19 | | | | 47 | | | | (51.3 | ) | | | 147.4 | | Net other operating income | | | 5 | | | | 1 | | | | 5 | | | | (80.0 | ) | | | 400.0 | | General and administrative expenses | | | (118 | ) | | | (96 | ) | | | (103 | ) | | | (18.6 | ) | | | 7.3 | | Provision for credit losses | | | (4 | ) | | | (5 | ) | | | (4 | ) | | | 25.0 | | | | (20.0 | ) | Net other non-operating expense | | | (3 | ) | | | (2 | ) | | | — | | | | (33.3 | ) | | | (100.0 | ) | | | | | | | | | | | | | | | | | | | | | | Profit before income tax | | | 24 | | | | 17 | | | | 39 | | | | (29.2 | ) | | | 129.4 | | Tax expense (1) | | | (6 | ) | | | (5 | ) | | | (13 | ) | | | (16.7 | ) | | | 160.0 | | | | | | | | | | | | | | | | | | | | | | | Profit for the year | | ₩ | 18 | | | ₩ | 12 | | | ₩ | 26 | | | | (33.3 | ) | | | 116.7 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Percentage Change | | | | 2015(1) | | | 2016(2) | | | 2017 | | | 2016/2015 | | | 2017/2016 | | | | (in billions of Won) | | | (%) | | Income statement data | | | | | | | | | | | | | | | | | | | | | Interest income | | ₩ | 50 | | | ₩ | 143 | | | ₩ | 453 | | | | 186.0 | % | | | 216.8 | % | Interest expense | | | (25 | ) | | | (70 | ) | | | (201 | ) | | | 180.0 | | | | 187.1 | | Net fee and commission income | | | 98 | | | | 193 | | | | 551 | | | | 96.9 | | | | 185.5 | | Net gain (loss) from financial assets and liabilities at fair value through profit or loss | | | 51 | | | | (213 | ) | | | 526 | | | | N/M | (3) | | | N/M | (3) | Net other operating income (expense) | | | 14 | | | | 134 | | | | (256 | ) | | | 857.1 | | | | N/M | (3) | General and administrative expenses | | | (120 | ) | | | (317 | ) | | | (734 | ) | | | 164.2 | | | | 131.5 | | Provision (reversal of provision) for credit losses | | | (5 | ) | | | 9 | | | | (23 | ) | | | N/M | (3) | | | N/M | (3) | Share of profit of associates and joint ventures | | | — | | | | 106 | | | | 1 | | | | N/M | (3) | | | (99.1 | ) | Net othernon-operating revenue | | | — | | | | 636 | | | | 2 | | | | N/M | (3) | | | (99.7 | ) | | | | | | | | | | | | | | | | | | | | | | Profit before income tax | | | 63 | | | | 621 | | | | 319 | | | | 885.7 | | | | (48.6 | ) | Tax expense (benefit) | | | (16 | ) | | | 21 | | | | (47 | ) | | | N/M | (3) | | | N/M | (3) | | | | | | | | | | | | | | | | | | | | | | Profit for the year | | ₩ | 47 | | | ₩ | 642 | | | ₩ | 272 | | | | 1,266.0 | | | | (57.6 | ) | | | | | | | | | | | | | | | | | | | | | |
(1) | Represents income tax attributable toIncome statement data for 2015 represents such data for KB Investment & Securities.
|
(2) | Income statement data for 2016 represents (i) for the period before Hyundai Securities became our consolidated subsidiary in October 2016, such data for KB Investment & Securities and for our minority interest in Hyundai Securities, and (ii) for the period after Hyundai Securities became our consolidated subsidiary, the combined income statement data for KB Investment & Securities and Hyundai Securities, which were merged to form KB Securities in December 2016. |
(3) | “N/M” means not meaningful. |
Comparison of 20142017 to 20132016 Our profit before income tax for this segment increased 129.4%decreased 48.6% from ₩17₩621 billion in 20132016 to ₩39₩319 billion in 2014.2017. Interest income from this segmentour investment and securities operations increased 9.8%216.8% from ₩41₩143 billion in 20132016 to ₩45₩453 billion in 2014.2017. This increase was primarily due to an increase in our holdings of debt securities, mainly reflecting the average volumefull-year impact of loans secured by securities.the addition of Hyundai Securities as a consolidated subsidiary in October 2016. Interest expense for this segment increased 58.8%187.1% from ₩17₩70 billion in 20132016 to ₩27₩201 billion in 2014, which mainly reflected2017, principally as a result of an increase in the average volume of repurchase agreements.debts, mainly reflecting the full-year impact of the addition of Hyundai Securities as a consolidated subsidiary in October 2016. Net fee and commission income attributable to this segment remained constant at ₩76increased 185.5% from ₩193 billion in 20132016 to ₩551 billion in 2017, primarily due to increases in securities brokerage commissions as well as investment banking and 2014.advisory fees received, mainly reflecting the full-year impact of the addition of Hyundai Securities as a consolidated subsidiary in October 2016. Net gain (loss) from financial assets and liabilities at fair value through profit or loss attributable to this segment increased 147.4%changed from ₩19a loss of ₩213 billion in 20132016 to ₩47a gain of ₩526 billion in 2014,2017, principally as a result ofdue to an increase in net gain on financial assets held-for-tradingtransaction and valuation of derivatives held-for-trading.and valuation of hybrid securities, offset in part by a decrease in net gain on disposal of hybrid securities, which mainly reflected the full-year impact of the addition of Hyundai Securities as a consolidated subsidiary in October 2016. Net other operating income (expense) attributable to this segment increased five-foldchanged from ₩1an income of ₩134 billion in 20132016 to ₩5an expense of ₩256 billion in 2014, principally as2017, primarily due to a result of an increasesignificant decrease in net gain on foreign exchange transactions.currency translation with respect to the foreign currency assets of the former Hyundai Securities, mainly as a result of the appreciation of the Won against the U.S. dollar during 2017. General and administrative expenses attributable to this segment increased 7.3%131.5% from ₩96₩317 billion in 20132016 to ₩103₩734 billion in 2014,2017, principally due to an increase in performance-based salary expense.employee compensation and benefits, mainly reflecting thefull-year impact of an increase in the number of employees as a result of the addition of Hyundai Securities as a consolidated subsidiary in October 2016. Provision (reversal of provision) for credit losses decreased 20.0%changed from ₩5a reversal of provision of ₩9 billion in 20132016 to ₩4a provision of ₩23 billion in 2014.2017, primarily due to the recognition in 2016 of a reversal of provisions for credit losses on privately placed bonds, which was not repeated in 2017. Net other non-operating expenseShare of profit of associates and joint ventures attributable to this segment decreased 99.1% from ₩106 billion in 2016 to ₩1 billion in 2017, primarily due to gains on equity method accounting recognized in 2016 with respect to our minority interest in Hyundai Securities for the period prior to its addition as a consolidated subsidiary in October 2016, which did not recur in 2017.
Net othernon-operating revenue attributable to this segment decreased 99.7% from ₩636 billion in 2016 to ₩2 billion in 20132017, mainly due to nilgains on bargain purchase recognized in 2014.connection with a comprehensive stock swap we effected in October 2016 to increase our shareholding in Hyundai Securities to 100%, which did not recur in 2017. Comparison of 20132016 to 20122015 Our profit before income tax for this segment decreased 29.2%increased more than ninefold from ₩24₩63 billion in 20122015 to ₩17₩621 billion in 2013.2016. Interest income from this segmentour investment and securities operations increased 7.9%186.0% from ₩38₩50 billion in 20122015 to ₩41₩143 billion in 2013.2016. This increase was primarily due to an increase in our holdings of debt securities as a result of the average volumeaddition of available-for-sale financial assets.Hyundai Securities as a consolidated subsidiary in October 2016. Interest expense for this segment decreased 10.5%increased 180.0% from ₩19₩25 billion in 20122015 to ₩17₩70 billion in 2013,2016, which mainly reflected a general decreasean increase in the average costvolumes of our debts in lightand debentures as a result of the lower interest rate environmentaddition of Hyundai Securities as a consolidated subsidiary in Korea, which was enhanced by a decrease in the average volume of call money and customers’ deposits.October 2016. Net fee and commission income attributable to this segment decreased 11.6%increased 96.9% from ₩86₩98 billion in 20122015 to ₩76₩193 billion in 2013, principally2016, primarily due to an increase in securities brokerage commissions as a result of the addition of Hyundai Securities as a decreaseconsolidated subsidiary in commissions relating to securities underwriting activities.October 2016. Net gain (loss) from financial assets and liabilities at fair value through profit or loss attributable to this segment decreased 51.3%changed from ₩39a gain of ₩51 billion in 20122015 to ₩19a loss of ₩213 billion in 2013,2016, principally due to losses recognized on derivative-linked securities issued by Hyundai Securities, which were acquired as a result of the addition of Hyundai Securities as a decreaseconsolidated subsidiary in net gain on financial assets held-for-trading and derivatives held-for-trading.October 2016. Net other operating income attributable to this segment decreased 80.0%increased more than eightfold from ₩5₩14 billion in 20122015 to ₩1₩134 billion in 2013, primarily2016, mainly reflecting increases in net gains on sales ofavailable-for-sale securities and foreign currency translation as a result of the addition of Hyundai Securities as a reversal of provisions for litigationconsolidated subsidiary in 2012 that was not repeated in 2013.October 2016. General and administrative expenses attributable to this segment decreased by 18.6%increased 164.2% from ₩118₩120 billion in 20122015 to ₩96₩317 billion and 2013,in 2016, principally due to an increase in employee compensation and benefits, reflecting an increase in the number of employees as a decreaseresult of the addition of Hyundai Securities as a consolidated subsidiary in performance-based salary expense.October 2016. Provision (reversal of provision) for credit losses increased 25.0%changed from ₩4 billion in 2012 toa provision of ₩5 billion in 2013.2015 to a reversal of provision of ₩9 billion in 2016, primarily due to a net reversal of provision on loans acquired as a result of the addition of Hyundai Securities as a consolidated subsidiary in October 2016. Net other non-operating expenseShare of profit of associates and joint ventures attributable to this segment decreased 33.3%increased from ₩3nil in 2015 to ₩106 billion in 20122016, primarily due to ₩2gains on equity method accounting recognized in 2016 with respect to our minority interest in Hyundai Securities for the period prior to its addition as a consolidated subsidiary in October 2016.
Net othernon-operating revenue attributable to this segment increased from nil in 2015 to ₩636 billion in 2012.2016, principally reflecting gains on bargain purchase recognized in connection with a comprehensive stock swap we effected in October 2016 to increase our shareholding in Hyundai Securities to 100%. Life Insurance Operations This segment consists of the life insurance and wealth management services provided byoperations of KB Life Insurance. The following table shows, for the periods indicated, our income statement data for this segment: | | | Year Ended December 31, | | Percentage Change | | | Year Ended December 31, | | Percentage Change | | | | 2012 | | 2013 | | 2014 | | 2013/2012 | | 2014/2013 | | | 2015 | | 2016 | | 2017 | | 2016/2015 | | 2017/2016 | | | | (in billions of Won) | | (%) | | | (in billions of Won) | | (%) | | Income statement data | | | | | | | | | | | | | | | | | | | | | Interest income | | ₩ | 192 | | | ₩ | 200 | | | ₩ | 227 | | | | 4.2 | % | | | 13.5 | % | | ₩ | 236 | | | ₩ | 234 | | | ₩ | 216 | | | (0.8 | )% | | (7.7 | )% | Interest expense | | | — | | | | — | | | | — | | | | — | | | | — | | | Net fee and commission expense | | | | — | | | (1 | ) | | (4 | ) | | | N/M | (1) | | 300.0 | | Net insurance expense | | | | (168 | ) | | (166 | ) | | (141 | ) | | (1.2 | ) | | (15.1 | ) | Net gain from financial assets and liabilities at fair value through profit or loss | | | 8 | | | | 18 | | | | 10 | | | | 125.0 | | | | (44.4 | ) | | | 8 | | | 8 | | | 8 | | | | — | | | | — | | Net other operating expense | | | (132 | ) | | | (154 | ) | | | (163 | ) | | | 16.7 | | | | 5.8 | | | Net other operating income | | | | 32 | | | 39 | | | 30 | | | 21.9 | | | (23.1 | ) | General and administrative expenses | | | (45 | ) | | | (51 | ) | | | (60 | ) | | | 13.3 | | | | 17.6 | | | | (79 | ) | | (95 | ) | | (72 | ) | | 20.3 | | | (24.2 | ) | Provision for credit losses | | | — | | | | (1 | ) | | | (1 | ) | | | N/M | (1) | | | — | | | | (10 | ) | | (2 | ) | | (2 | ) | | (80.0 | ) | | | — | | Net other non-operating expense | | | (1 | ) | | | — | | | | (1 | ) | | | (100.0 | ) | | | N/M | (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit before income tax | | | 22 | | | | 12 | | | | 12 | | | | (45.5 | ) | | | — | | | | 19 | | | 17 | | | 35 | | | (10.5 | ) | | 105.9 | | Tax expense (2) | | | (5 | ) | | | (3 | ) | | | (5 | ) | | | (40.0 | ) | | | 66.7 | | | | (8 | ) | | (4 | ) | | (14 | ) | | (50.0 | ) | | 250.0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit for the year | | ₩ | 17 | | | ₩ | 9 | | | ₩ | 7 | | | | (47.1 | ) | | | (22.2 | ) | | ₩ | 11 | | | ₩ | 13 | | | ₩ | 21 | | | 18.2 | | | 61.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | “N/M” means not meaningful. |
(2) | Represents income tax attributable to KB Life Insurance. |
Comparison of 20142017 to 20132016 Our profit before income tax for this segment remained constant at ₩12increased 105.9% from ₩17 billion in 2013 and 2014.2016 to ₩35 billion in 2017. Interest income from this segment increased 13.5%our life insurance operations decreased 7.7% from ₩200₩234 billion in 20132016 to ₩227₩216 billion in 2014,2017, primarily due to a decrease in the average yields on the debt securities and loan portfolios of KB Life Insurance, mainly reflecting the lower interest rate environment in Korea in 2017 compared to 2016, which was offset in part by an increase in the average volume of held-to-maturity debt securities held by KB Life Insurance, particularly government agency debt securities. Net insurance expense attributable to this segment decreased 15.1% from ₩166 billion in 2016 to ₩141 billion in 2017, mainly due to a decrease in provision of policy reserves, which was offset in part by a decrease in premium income from savings-type insurance policies. Net gain from financial assets and liabilities at fair value through profit or loss attributable to this segment decreased 44.4% from ₩18remained constant at ₩8 billion in 2013 to ₩10 billion in 2014, which mainly reflected a decrease in gains on sales of beneficiary certificates.2016 and 2017. Net other operating expenseincome attributable to this segment increased 5.8%decreased 23.1% from ₩154₩39 billion in 20132016 to ₩163₩30 billion in 2014,2017, principally due to a decrease in income related to insurance as the number of insurance policies cancelled or partially withdrawn increased, mainly reflecting a downturn in the economy.net gain on foreign currency translation. General and administrative expenses attributable to this segment increased 17.6%decreased 24.2% from ₩51₩95 billion in 20132016 to ₩60₩72 billion in 2014,2017, primarily due to increasesdecreases in rental expensemarketing expenses and salary expense.depreciation and amortization expenses. Provision for credit losses remained constant at ₩1₩2 billion in 20132016 and 2014.2017. Net other non-operating expense attributable to this segment changed from nil in 2013 to ₩1 billion in 2014.
Comparison of 20132016 to 20122015 Our profit before income tax for this segment decreased 45.5%10.5% from ₩22₩19 billion in 20122015 to ₩12₩17 billion in 2013.2016. Interest income for this segment increased 4.2% from ₩192our life insurance operations decreased 0.8% from ₩236 billion in 20122015 to ₩200₩234 billion in 2013,2016, primarily due to a decrease in the average yields on the debt securities and loan portfolios of KB Life Insurance, mainly reflecting the lower interest rate environment in Korea in 2016, which was offset in part by an increase in the average volume of held-to-maturity debt securities held by KB Life Insurance, particularly government agency debt securities. Net insurance expense attributable to this segment decreased 1.2% from ₩168 billion in 2015 to ₩166 billion in 2016, primarily due to a decrease in insurance claims paid, which was offset in part by a decrease in premium income from savings-type insurance policies. Net gain from financial assets and liabilities at fair value through profit or loss attributable to this segment increased 125.0% fromremained constant at ₩8 billion in 2012 to ₩18 billion in 2013, which mainly reflected an increase in gains on sales of beneficiary certificates.2015 and 2016. Net other operating expenseincome attributable to this segment increased 16.7%21.9% from ₩132₩32 billion in 20122015 to ₩154₩39 billion in 2013,2016, principally due to an increase in the amortization expense of deferred acquisition costs.other operating income, mainly reflecting an increase in distributions received on beneficiary certificates. General and administrative expenses attributable to this segment increased 13.3%20.3% from ₩45₩79 billion in 20122015 to ₩51₩95 billion in 2013,2016, primarily due to increases in salary expenses, mainly reflecting an increase in expenses relating to tax and dues.wage levels as well as an increase in sales promotion expenses. Provision for credit losses changeddecreased 80.0% from nil in 2012 to ₩1₩10 billion in 2013. Net other non-operating expense attributable2015 to this segment decreased from ₩1₩2 billion in 20122016, mainly due to nila decrease in 2013.provision for loan losses relating to corporate loans.
Non-Life Insurance Operations This segment consists of thenon-life insurance operations of KB Insurance. KB Insurance became a consolidated subsidiary in May 2017 and subsequently became a wholly-owned subsidiary in July 2017. See “—Overview—Acquisitions.” The following table shows, for the periods indicated, our income statement data for this segment: | | | | | | | Year Ended December 31, | | | | 2017(1) | | | | (in billions of Won) | | Income statement data | | | | | Interest income | | ₩ | 465 | | Interest expense | | | — | | Net fee and commission expense | | | (98 | ) | Net insurance income | | | 700 | | Net gain from financial assets and liabilities at fair value through profit or loss | | | 41 | | Net other operating income | | | 31 | | General and administrative expenses | | | (629 | ) | Reversal of provision for credit losses | | | (9 | ) | Net othernon-operating revenue | | | 11 | | | | | | | Profit before income tax | | | 512 | | Tax expense | | | (181 | ) | | | | | | Profit for the year | | ₩ | 331 | | | | | | |
(1) | Income statement data for 2017 represents such data for KB Insurance for the period after it became our consolidated subsidiary in May 2017. |
Other “Other” includes the operations of our holding company and all of our subsidiaries that were consolidated under IFRS as issued by the IASB as of December 31, 20142017 except Kookmin Bank, KB Kookmin Card, KB Investment & Securities (including its predecessor entities), KB Life Insurance and KB Life Insurance, including principally KB Asset Management, KB Real Estate Trust, KB Investment, KB Credit Information, KB Data System, KB Savings Bank and KB Capital (commencing in 2014).Capital. See “—Overview—Acquisitions.” The following table shows, for the periods indicated, our income statement data for this segment: | | | Year Ended December 31, | | Percentage Change | | | Year Ended December 31, | | Percentage Change | | | | 2012 | | 2013 | | 2014 | | 2013/2012 | | 2014/2013 | | | 2015 | | 2016 | | 2017 | | 2016/2015 | | 2017/2016 | | | | (in billions of Won) | | (%) | | | (in billions of Won) | | (%) | | Income statement data | | | | | | | | | | | | | | | | | | | | | Interest income | | ₩ | 123 | | | ₩ | 106 | | | ₩ | 326 | | | | (13.8 | )% | | | 207.5 | % | | ₩ | 414 | | | ₩ | 502 | | | ₩ | 583 | | | 21.3 | % | | 16.1 | % | Interest expense | | | (47 | ) | | | (25 | ) | | | (123 | ) | | | (46.8 | ) | | | 392.0 | | | | (163 | ) | | (219 | ) | | (286 | ) | | 34.4 | | | 30.6 | | Net fee and commission income | | | 97 | | | | 118 | | | | 134 | | | | 21.6 | | | | 13.6 | | | | 169 | | | 213 | | | 253 | | | 26.0 | | | 18.8 | | Net gain from financial assets and liabilities at fair value through profit or loss | | | 25 | | | | 29 | | | | 26 | | | | 16.0 | | | | (10.3 | ) | | | 15 | | | 8 | | | 20 | | | (46.7 | ) | | 150.0 | | Net other operating income | | | 37 | | | | 40 | | | | 70 | | | | 8.1 | | | | 75.0 | | | Net other operating income (expense) | | | | 59 | | | 53 | | | (53 | ) | | (10.2 | ) | | (200.0 | ) | General and administrative expenses | | | (133 | ) | | | (142 | ) | | | (189 | ) | | | 6.8 | | | | 33.1 | | | | (227 | ) | | (267 | ) | | (292 | ) | | 17.6 | | | 9.4 | | Provision (reversal of provision) for credit losses | | | 6 | | | | (28 | ) | | | (57 | ) | | | N/M | (1) | | | 103.6 | | | Share of loss of associates | | | — | | | | (38 | ) | | | (14 | ) | | | N/M | (1) | | | (63.2 | ) | | Net non-operating revenue (expense) | | | (45 | ) | | | 31 | | | | (25 | ) | | | N/M | (1) | | | N/M | (1) | | Provision for credit losses | | | | (35 | ) | | (43 | ) | | (63 | ) | | 22.9 | | | 46.5 | | Share of profit of associates | | | | 195 | | | 157 | | | 6 | | | (19.5 | ) | | (96.2 | ) | Net othernon-operating revenue (expense) | | | | (35 | ) | | | — | | | 7 | | | (100.0 | ) | | | N/M | (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit before income tax | | | 63 | | | | 91 | | | | 148 | | | | 44.4 | | | | 62.6 | | | | 391 | | | 404 | | | 175 | | | 3.3 | | | (56.7 | ) | Tax expense (2) | | | (15 | ) | | | (30 | ) | | | (33 | ) | | | 100.0 | | | | 10.0 | | | | (37 | ) | | (66 | ) | | (62 | ) | | 78.4 | | | (6.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit for the year | | ₩ | 48 | | | ₩ | 61 | | | ₩ | 115 | | | | 27.1 | | | | 88.5 | | | ₩ | 354 | | | ₩ | 338 | | | ₩ | 113 | | | (4.5 | ) | | (66.6 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | “N/M” means not meaningful. |
(2) | Represents income tax attributable to our holding company and all of our subsidiaries that were consolidated under IFRS as issued by the IASB except Kookmin Bank, KB Kookmin Card, KB Investment & Securities (including its predecessor entities), KB Life Insurance and KB Life Insurance. |
Comparison of 20142017 to 20132016 Our profit before income tax for this segment increased 62.6%decreased 56.7% from ₩91₩404 billion in 20132016 to ₩148₩175 billion in 2014.2017. Interest income attributable to this segment increased 207.5%16.1% from ₩106₩502 billion in 20132016 to ₩326₩583 billion in 2014.2017. This increase was primarily due to an increase in interest on loans mainly reflecting the addition of KB Capital to this segment from 2014.Capital. Interest expense attributable to this segment increased 392.0%30.6% from ₩25₩219 billion in 20132016 to ₩123₩286 billion in 2014, principally reflecting the addition2017, mainly due to an increase in interest expense on debentures of our holding company and KB Capital to this segment from 2014.Capital. Net fee and commission income attributable to this segment increased 13.6%18.8% from ₩118₩213 billion in 20132016 to ₩134₩253 billion in 2014, mainly as the result of increases2017, principally reflecting an increase in automobile rental fees and lease fees received by KB Capital, as well as increases in trust and other fiduciary fees received by KB Real Estate Trust. Net gain from financial assets and liabilities at fair value through profit or loss attributable to this segment increased 150.0% from ₩8 billion in 2016 to ₩20 billion in 2017, primarily as a result of an increase in net gain related to financial instrumentsheld-for-trading of securities funds included in this segment. Net other operating income (expense) attributable to this segment changed from an income of ₩53 billion in 2016 to an expense of ₩53 billion in 2017, which mainly reflecting the additionreflected a decrease in net gain on disposal of equity interests held by KB Investment, as well as an increase in depreciation expenses with respect to leased assets of KB Capital. General and administrative expenses attributable to this segment increased 9.4% from ₩267 billion in 2016 to ₩292 billion in 2017, principally due to increases in salary expenses of KB Capital and our holding company. Provision for credit losses increased 46.5% from ₩43 billion in 2016 to ₩63 billion in 2017, primarily due to an increase in provision for loan losses for KB Capital and KB Investment. Share of profit of associates attributable to this segment decreased 96.2% from 2014.₩157 billion in 2016 to ₩6 billion in 2017, mainly reflecting a decrease in the share of profit of KB Insurance as a result of it becoming a consolidated subsidiary in May 2017. Net othernon-operating revenue attributable to this segment increased from nil in 2016 to ₩7 billion in 2017, principally reflecting gains on disposal of property recognized by KB Asset Management. Comparison of 2016 to 2015 Our profit before income tax for this segment increased 3.3% from ₩391 billion in 2015 to ₩404 billion in 2016. Interest income attributable to this segment increased 21.3% from ₩414 billion in 2015 to ₩502 billion in 2016. This increase was primarily due to an increase in interest on loans of KB Capital. Interest expense attributable to this segment increased 34.4% from ₩163 billion in 2015 to ₩219 billion in 2016, principally reflecting an increase in interest expense on debentures of our holding company and KB Capital. Net fee and commission income attributable to this segment increased 26.0% from ₩169 billion in 2015 to ₩213 billion in 2016, mainly due to an increase in automobile rental and lease fees received by KB Capital, as well as increases in trust and other fiduciary fees received by KB Asset Management and KB Real Estate Trust. Net gain from financial assets and liabilities at fair value through profit or loss attributable to this segment decreased 10.3%46.7% from ₩29₩15 billion in 20132015 to ₩26₩8 billion in 2014,2016, principally due to a decrease in net gaingains on valuation and transaction of derivatives held by KB Mezzanine Private Securities Fund I, which was partially offset by an increase in net gain on valuation of financial assets held for trading by KStar KTB ETF (Bond).derivatives. Net other operating income attributable to this segment increased 75.0%decreased 10.2% from ₩40₩59 billion in 20132015 to ₩70₩53 billion in 2014,2016, primarily as a result of an increase in depreciation expenses with respect to leased assets of KB Capital as well as increases in other operating income fromexpenses of KB Investment and KB Capital. Such increases were offset in part by an increase in net gains on sales of non-performing loans held by KB Capital and KB Savings Bank.Capital. General and administrative expenses attributable to this segment increased 33.1%17.6% from ₩142₩227 billion in 20132015 to ₩189₩267 billion in 2014,2016, which mainly reflected the additionincreases in salary expenses and advertising expenses of KB Capital, to this segment from 2014.as well as an increase in commission expense of our holding company. Provision for credit losses increased 103.6%22.9% from ₩28₩35 billion in 20132015 to ₩57₩43 billion in 2014, principally reflecting the addition of KB Capital to this segment from 2014. Share of loss of associates attributable to this segment decreased 63.2% from ₩38 billion in 2013 to ₩14 billion in 2014, primarily due to a decrease in impairment losses attributable to this segment.
Net other non-operating revenue (expense) attributable to this segment changed from a revenue of ₩31 billion in 2013 to an expense of ₩25 billion in 2014, primarily due to a decrease in other non-operating revenue from KB Asset Management, which was enhanced by an increase in impairment losses on goodwill recognized by KB Savings Bank.
Comparison of 2013 to 2012
Our profit before income tax for this segment increased 44.4% from ₩63 billion in 2012 to ₩91 billion in 2013.
Interest income attributable to this segment decreased 13.8% from ₩123 billion in 2012 to ₩106 billion in 2013. This decrease was primarily due to a decrease in the average volume of deposits attributable to KB Savings Bank.
Interest expense attributable to this segment decreased 46.8% from ₩47 billion in 2012 to ₩25 billion in 2013, principally reflecting a decrease in the average volume of time deposits attributable to KB Savings Bank.
Net fee and commission income attributable to this segment increased 21.6% from ₩97 billion in 2012 to ₩118 billion in 2013, mainly as the result of an increase in fees received by KB Asset Management.
Net gain from financial assets and liabilities at fair value through profit or loss attributable to this segment increased 16.0% from ₩25 billion in 2012 to ₩29 billion in 2013, principally due to an increase in gain on valuation of derivatives held by KB Mezzanine Private Securities Fund 1.
Net other operating income attributable to this segment increased 8.1% from ₩37 billion in 2012 to ₩40 billion in 2013, primarily as a result of an increase in other operating income from sales of non-performing loans held by KB Savings Bank.
General and administrative expenses attributable to this segment increased 6.8% from ₩133 billion in 2012 to ₩142 billion in 2013, which mainly reflected an increase in salary expense for KB Asset Management and the inclusion of Yehansoul Savings Bank in this segment in 2013.
Provision for credit losses attributable to this segment changed from a reversal of provision of ₩6 billion in 2012 to a provision of ₩28 billion in 2013,2016, principally due to an increase in provision for creditloan losses relating to the trust account lending activities offor KB Real Estate Trust.Savings Bank, mainly reflecting an increase in outstanding loan volumes.
Share of profit of associates attributable to this segment changeddecreased 19.5% from nil in 2012 to a loss of ₩38₩195 billion in 2013, primarily due2015 to ₩157 billion in 2016, mainly reflecting gains on bargain purchase recognized in connection with our acquisition of treasury shares of KB Insurance in 2015, which were not repeated to the same extent in 2016. Such decrease in gains was offset in part by an increase in impairment losses attributablethe share of profit of KB Insurance, mainly due to this segment.the inclusion of such share of profit for a full year in 2016 compared to a partial year in 2015 following the addition of KB Insurance as an associate in June 2015. Net othernon-operating revenue (expense) attributable to this segment changeddecreased from an expense of ₩45₩35 billion in 20122015 to a revenue of ₩31 billionnil in 2013,2016, primarily due to an increasea decrease in other non-operating revenue fromthe provision for litigation costs of KB Asset Management. Item 5.B. | Liquidity and Capital Resources |
Financial Condition Assets The following table sets forth, as of the dates indicated, the principal components of our assets: | | | As of December 31, | | Percentage Change | | | As of December 31, | | Percentage Change | | | | 2012 | | 2013 | | 2014 | | 2013/2012 | | 2014/2013 | | | 2015 | | 2016 | | 2017 | | 2016/2015 | | 2017/2016 | | | | (in billions of Won) | | (%) | | | (in billions of Won) | | (%) | | Cash and due from financial institutions | | ₩ | 10,593 | | | ₩ | 14,793 | | | ₩ | 15,424 | | | | 39.6 | % | | | 4.3 | % | | ₩ | 16,316 | | | ₩ | 17,885 | | | ₩ | 19,818 | | | 9.6 | % | | 10.8 | % | Financial assets at fair value through profit or loss | | | 9,560 | | | | 9,329 | | | | 10,758 | | | | (2.4 | ) | | | 15.3 | | | | 11,174 | | | 27,858 | | | 32,227 | | | 149.3 | | | 15.7 | | Derivative financial assets | | | 2,091 | | | | 1,819 | | | | 1,968 | | | | (13.0 | ) | | | 8.2 | | | | 2,278 | | | 3,382 | | | 3,310 | | | 48.5 | | | (2.1 | ) | Financial investments | | | 36,467 | | | | 34,849 | | | | 34,961 | | | | (4.4 | ) | | | 0.3 | | | | 39,137 | | | 45,148 | | | 66,608 | | | 15.4 | | | 47.5 | | Loans: | | | | | | | | | | | | | | | | | | | | | Loans to banks | | | 4,398 | | | | 6,335 | | | | 6,208 | | | | 44.0 | | | | (2.0 | ) | | | 6,780 | | | 5,543 | | | 5,315 | | | (18.2 | ) | | (4.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans to customers other than banks: | | | | | | | | | | | | | | | | | | | | | Loans in Won | | | 185,889 | | | | 189,516 | | | | 200,345 | | | | 2.0 | | | | 5.7 | | | | 212,777 | | | 231,924 | | | 252,645 | | | 9.0 | | | 8.9 | | Loans in foreign currencies | | | 3,538 | | | | 3,055 | | | | 2,624 | | | | (13.7 | ) | | | (14.1 | ) | | | 2,702 | | | 2,758 | | | 3,200 | | | 2.1 | | | 16.0 | | Domestic import usance bills | | | 3,595 | | | | 2,978 | | | | 3,694 | | | | (17.2 | ) | | | 24.0 | | | | 3,445 | | | 2,963 | | | 2,129 | | | (14.0 | ) | | (28.1 | ) | Off-shore funding loans | | | 754 | | | | 670 | | | | 665 | | | | (11.1 | ) | | | (0.7 | ) | | | 585 | | | 560 | | | 731 | | | (4.3 | ) | | 30.5 | | Call loans | | | 1,193 | | | | 697 | | | | 292 | | | | (41.6 | ) | | | (58.1 | ) | | | 198 | | | 264 | | | 335 | | | 33.3 | | | 26.9 | | Bills bought in Won | | | 30 | | | | 14 | | | | 7 | | | | (53.3 | ) | | | (50.0 | ) | | | 5 | | | 6 | | | 4 | | | 20.0 | | | (33.3 | ) | Bills bought in foreign currencies | | | 2,522 | | | | 1,588 | | | | 1,958 | | | | (37.0 | ) | | | 23.3 | | | | 2,812 | | | 2,834 | | | 3,876 | | | 0.8 | | | 36.8 | | Guarantee payments under payment guarantee | | | 45 | | | | 38 | | | | 13 | | | | (15.6 | ) | | | (65.8 | ) | | | 26 | | | 11 | | | 6 | | | (57.7 | ) | | (45.5 | ) | Credit card receivables in Won | | | 11,871 | | | | 11,782 | | | | 11,629 | | | | (0.7 | ) | | | (1.3 | ) | | | 12,132 | | | 13,526 | | | 15,201 | | | 11.5 | | | 12.4 | | Credit card receivables in foreign currencies | | | 3 | | | | 2 | | | | 3 | | | | (33.3 | ) | | | 50.0 | | | | 4 | | | 4 | | | 4 | | | | — | | | | — | | Bonds purchased under repurchase agreements | | | 1,251 | | | | 1,683 | | | | 1,082 | | | | 34.5 | | | | (35.7 | ) | | | 228 | | | 1,244 | | | 1,198 | | | 445.6 | | | (3.7 | ) | Privately placed bonds | | | 604 | | | | 732 | | | | 743 | | | | 21.2 | | | | 1.5 | | | | 822 | | | 1,468 | | | 1,995 | | | 78.6 | | | 35.9 | | Factored receivables | | | 1,221 | | | | 2,772 | | | | 2,793 | | | | 127.0 | | | | 0.8 | | | | 2,708 | | | 829 | | | 53 | | | (69.4 | ) | | (93.6 | ) | Lease receivables | | | — | | | | — | | | | 860 | | | | — | | | | N/M | (1) | | | 1,210 | | | 1,537 | | | 1,834 | | | 27.0 | | | 19.3 | | Loans for installment credit | | | — | | | | — | | | | 985 | | | | — | | | | N/M | (1) | | | 1,153 | | | 2,293 | | | 3,707 | | | 98.9 | | | 61.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total loans to customers other than banks | | | 212,516 | | | | 215,527 | | | | 227,693 | | | | 1.4 | | | | 5.6 | | | | 240,807 | | | 262,221 | | | 286,918 | | | 8.9 | | | 9.4 | | Less: | | | | | | | | | | | | | | | | | | | | | Allowances for loan losses | | | (3,269 | ) | | | (2,861 | ) | | | (2,451 | ) | | | (12.5 | ) | | | (14.3 | ) | | | (2,582 | ) | | (2,278 | ) | | (2,110 | ) | | (11.8 | ) | | (7.4 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total loans, net | | | 213,645 | | | | 219,001 | | | | 231,450 | | | | 2.5 | | | | 5.7 | | | | 245,005 | | | 265,486 | | | 290,123 | | | 8.4 | | | 9.3 | | Property and equipment | | | 3,100 | | | | 3,061 | | | | 3,083 | | | | (1.3 | ) | | | 0.7 | | | | 3,287 | | | 3,627 | | | 4,202 | | | 10.3 | | | 15.9 | | Other assets (3)(1) | | | 10,614 | | | | 9,316 | | | | 10,712 | | | | (12.2 | ) | | | 15.0 | | | | 11,868 | | | 12,288 | | | 20,498 | | | 3.5 | | | 66.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total assets | | ₩ | 286,070 | | | ₩ | 292,168 | | | ₩ | 308,356 | | | | 2.1 | | | | 5.5 | | | ₩ | 329,065 | | | ₩ | 375,674 | | | ₩ | 436,786 | | | 14.2 | | | 16.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | “N/M” means not meaningful.
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(2) | Includes investments in associates and joint ventures, investment properties, intangible assets, current income tax assets, deferred income tax assets, assets held for sale and other assets. |
(3) | The amount as of December 31, 2014 reflects a change in our accounting policy with respect to uncertain tax positions in 2014. Corresponding amounts as of December 31, 2012 and 2013 have been restated to retroactively apply such change. See “—Overview—Changes in Accounting Policies” and Note 2.1 of the notes to our consolidated financial statements included elsewhere in this annual report.
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For further information on our assets, see “Item 4.B. Business Overview—Assets and Liabilities.” Comparison of 20142017 to 20132016
Our total assets increased 5.5%16.3% from ₩292,168₩375,674 billion as of December 31, 20132016 to ₩308,356₩436,786 billion as of December 31, 2014,2017, principally due to a 5.7%47.5% increase in loansfinancial investments from ₩219,001₩45,148 billion as of December 31, 20132016 to ₩231,450₩66,608 billion as of December 31, 2014. This increase in loans was mainly the result of2017, as well as a 5.7%8.9% increase in loans in Won from ₩189,516₩231,924 billion as of December 31, 20132016 to ₩200,345₩252,645 billion as of December 31, 2014, which was offset in part by a 35.7% decrease in bonds purchased under repurchase2017. Comparison of 2016 to 2015 Our total assets increased 14.2% from ₩1,683₩329,065 billion as of December 31, 20132015 to ₩1,082₩375,674 billion as of December 31, 2014,2016, principally due to a 14.1% decrease9.0% increase in loans in foreign currenciesWon from ₩3,055₩212,777 billion as of December 31, 20132015 to ₩2,624₩231,924 billion as of December 31, 2014 and2016, as well as a 58.1% decrease149.3% increase in call loansfinancial assets at fair value through profit or loss from ₩697₩11,174 billion as of December 31, 20132015 to ₩292₩27,858 billion as of December 31, 2014.2016. Comparison of 2013 to 2012
Our total assets increased 2.1% from ₩286,070 billion as of December 31, 2012 to ₩292,168 billion as of December 31, 2013, principally due to a 2.5% increase in loans from ₩213,645 billion as of December 31, 2012 to ₩219,001 billion as of December 31, 2013 and a 39.6% increase in cash and due from financial institutions from ₩10,593 billion as of December 31, 2012 to ₩14,793 billion as of December 31, 2013. The effect of these increases was partially offset by a 4.4% decrease in financial investments from ₩36,467 billion as of December 31, 2012 to ₩34,849 billion as of December 31, 2013 and a 12.2% decrease in other assets from ₩10,604 billion as of December 31, 2012 to ₩9,316 billion as of December 31, 2013.
Liabilities and Equity The following table sets forth, as of the dates indicated, the principal components of our liabilities and our equity: | | | As of December 31, | | | Percentage Change | | | As of December 31, | | Percentage Change | | | | 2012 | | | 2013 | | | 2014 | | | 2013/2012 | | 2014/2013 | | | 2015 | | | 2016 | | 2017 | | 2016/2015 | | 2017/2016 | | | | (in billions of Won) | | | (%) | | | (in billions of Won) | | (%) | | Liabilities: | | | | | | | | | | | | | | | | | | | | | Financial liabilities at fair value through profit or loss | | ₩ | 1,851 | | | ₩ | 1,115 | | | ₩ | 1,819 | | | | (39.8 | )% | | | 63.1 | % | | ₩ | 2,975 | | | ₩ | 12,123 | | | ₩ | 12,023 | | | 307.5 | % | | (0.8 | )% | Deposits | | | 197,346 | | | | 200,882 | | | | 211,549 | | | | 1.8 | | | | 5.3 | | | | 224,268 | | | | 239,731 | | | 255,800 | | | 6.9 | | | 6.7 | | Debts | | | 15,965 | | | | 14,101 | | | | 15,865 | | | | (11.7 | ) | | | 12.5 | | | | 16,241 | | | | 26,251 | | | 28,821 | | | 61.6 | | | 9.8 | | Debentures | | | 24,270 | | | | 27,040 | | | | 29,201 | | | | 11.4 | | | | 8.0 | | | | 32,601 | | | | 34,992 | | | 44,993 | | | 7.3 | | | 28.6 | | Provisions | | | 670 | | | | 678 | | | | 614 | | | | 1.2 | | | | (9.4 | ) | | | 607 | | | | 538 | | | 568 | | | (11.4 | ) | | 5.6 | | Insurance contract liabilities | | | | 6,925 | | | | 7,291 | | | 31,801 | | | 5.3 | | | 336.2 | | Other liabilities (1) | | | 20,886 | | | | 22,369 | | | | 21,795 | | | | 7.1 | | | | (2.6 | ) | | | 16,546 | | | | 23,487 | | | 28,735 | | | 41.9 | | | 22.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | | 260,988 | | | | 266,185 | | | | 280,843 | | | | 2.0 | | | | 5.5 | | | | 300,163 | | | | 344,413 | | | 402,741 | | | 14.7 | | | 16.9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity: | | | | | | | | | | | | | | | | | | | | | Capital stock | | | 1,932 | | | | 1,932 | | | | 1,932 | | | | — | | | | — | | | | 1,932 | | | | 2,091 | | | 2,091 | | | 8.2 | | | | — | | Capital surplus | | | 15,840 | | | | 15,855 | | | | 15,855 | | | | 0.1 | | | | — | | | | 15,855 | | | | 16,995 | | | 17,122 | | | 7.2 | | | 0.7 | | Accumulated other comprehensive income | | | 295 | | | | 336 | | | | 461 | | | | 13.9 | | | | 37.2 | | | | 429 | | | | 405 | | | 538 | | | (5.6 | ) | | 32.8 | | Retained earnings (2) | | | 6,820 | | | | 7,860 | | | | 9,067 | | | | 15.2 | | | | 15.4 | | | Retained earnings | | | | 10,464 | | | | 12,229 | | | 15,044 | | | 16.9 | | | 23.0 | | Treasury shares | | | | — | | | | (722 | ) | | (756 | ) | | | — | | | 4.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity attributable to stockholders | | | 24,887 | | | | 25,983 | | | | 27,315 | | | | 4.4 | | | | 5.1 | | | | 28,680 | | | | 30,998 | | | 34,039 | | | 8.1 | | | 9.8 | | Non-controlling interests | | | 195 | | | | — | | | | 198 | | | | (100.0 | ) | | | N/M | (3) | | | 222 | | | | 263 | | | 6 | | | 18.5 | | | (97.7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total equity | | | 25,082 | | | | 25,983 | | | | 27,513 | | | | 3.6 | | | | 5.9 | | | | 28,902 | | | | 31,261 | | | 34,045 | | | 8.2 | | | 8.9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities and equity | | ₩ | 286,070 | | | ₩ | 292,168 | | | ₩ | 308,356 | | | | 2.1 | | | | 5.5 | | | ₩ | 329,065 | | | ₩ | 375,674 | | | ₩ | 436,786 | | | 14.2 | | | 16.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes derivative financial liabilities, current income tax liabilities, deferred income tax liabilities, defined benefit liabilities and other liabilities. |
(2) | The amount as of December 31, 2014 reflects a change in our accounting policy with respect to uncertain tax positions in 2014. Corresponding amounts as of December 31, 2012 and 2013 have been restated to retroactively apply such change. See “—Overview—Changes in Accounting Policies” and Note 2.1 of the notes to our consolidated financial statements included elsewhere in this annual report.
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(3) | “N/M” means not meaningful.
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Comparison of 20142017 to 20132016 Our total liabilities increased 5.5%16.9% from ₩266,185₩344,413 billion as of December 31, 20132016 to ₩280,843₩402,741 billion as of December 31, 2014.2017. The increase was primarily due to a 5.3%336.2% increase in deposits insurance contract liabilities from ₩200,882₩7,291 billion as of December 31, 20132016 to ₩211,549₩31,801 billion as of December 31, 2014.2017, mainly reflecting the addition of KB Insurance as a consolidated subsidiary, as well as a 6.7% increase in deposits from ₩239,731 billion as of December 31, 2016 to ₩255,800 billion as of December 31, 2017, and a 28.6% increase in debentures from ₩34,992 billion as of December 31, 2016 to ₩44,993 billion as of December 31, 2017. Our deposits increased mainly as a result of an increase in demand deposits. Our total equity increased 5.9%8.9% from ₩25,983₩31,261 billion as of December 31, 20132016 to ₩27,513₩34,045 billion as of December 31, 2014.2017. This increase resulted principally from an increase in our retained earnings, which was attributable to the profit we generated in 2014.2017. Comparison of 20132016 to 20122015 Our total liabilities increased 2.0%14.7% from ₩260,988₩300,163 billion as of December 31, 20122015 to ₩266,185₩344,413 billion as of December 31, 2013.2016. The increase was primarily due to increasesa 6.9% increase in deposits and debentures. Our deposits increased 1.8% from ₩197,346₩224,268 billion as of December 31, 20122015 to ₩200,882₩239,731 billion as of December 31, 2013,2016. Our deposits increased mainly as a result of an increase in demand deposits. Our debenturestotal equity increased 11.4%8.2% from ₩24,270₩28,902 billion as of December 31, 20122015 to ₩27,040₩31,261 billion as of December 31, 2013, principally due to an increase in our debentures in Won and an increase in discount or premium on debentures in Won. Our total equity increased by 3.6% from ₩25,082 billion as of December 31, 2012 to ₩25,983 billion as of December 31, 2013.2016. This increase resulted principally from an increase in our retained earnings, which was attributable to the profit we generated in 2013.2016.
Liquidity Our primary source of funding has historically been and continues to be deposits. Deposits amounted to ₩197,346₩224,268 billion, ₩200,882₩239,731 billion and ₩211,549 billion₩255,800 as of December 31, 2012, 20132015, 2016 and 2014,2017, which represented approximately 83.1%82.1%, 83.0%79.7% and 82.4%77.6% of our total funding, respectively. Werespectively.We have been able to use customer deposits to finance our operations generally, including meeting a portion of our liquidity requirements. Although the majority of deposits are short-term, it has been our experience that the majority of our depositors generally roll over their deposits at maturity, thus providing us with a stable source of funding. However,funding.However, in the event that a substantial number of our depositors do not roll over their deposits or otherwise decide to withdraw their deposited funds, we would need to place increased reliance on alternative sources of funding, some of which may be more expensive than customer deposits, in order to finance our operations. See “Item 3.D. Risk Factors—Risks relating to liquidity and capital management—Our funding is highly dependent on short-term deposits, which dependence may adversely affect our operations.” In particular, we may increase our utilization of alternative funding sources such as short-term borrowings and cash and cash equivalents (including funds from maturing loans), as well as liquidating our positions in financial assets and using the proceeds to fund parts of our operations, as necessary. We also obtain funding through debentures and debts to meet our liquidity needs. Debentures represented 10.2%11.9%, 11.2%11.6% and 11.4%13.7% of our total funding as of December 31, 2012, 20132015, 2016 and 2014,2017, respectively. Debts represented 6.7%, 5.8% and 6.2%5.9% of our total funding as of December 31, 2012, 20132015 and 2014, respectively.8.7% of our total funding as of December 31, 2016 and 2017. For further information on our sources of funding, see “Item 4.B. Business Overview—Assets and Liabilities—Funding.” The Financial Services Commission of Korea requires each financial holding company and bank in Korea to maintain specific Won and foreign currency liquidity ratios.ratios and each bank in Korea to maintain a liquidity coverage ratio and a foreign currency liquidity coverage ratio. These ratios require us and Kookmin Bank to keep the ratio of liquid assets to liquid liabilities above certain minimum levels. For a description of these requirements, see “Item 4.B. Business Overview—Supervision and Regulation—Principal Regulations Applicable to Financial Holding Companies—Liquidity” and “Item 4.B. Business Overview—Supervision and Regulation—Principal Regulations Applicable to Banks—Liquidity.” We are exposed to liquidity risk arising from withdrawals of deposits, payments of insurance contract claims and refunds, and maturities of our debentures and debts, as well as the need to fund our lending, trading and investment activities (including our capital expenditures) and the management of our trading positions. The goal of liquidity management is for us to be able, even under adverse conditions, to meet all of our liability repayments on time and fund all investment opportunities. For an explanation of how we manage our liquidity risk, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Liquidity Risk Management.” In March 2016, we entered into a land purchase agreement for the purchase of a site located in Yeouido, Seoul, on which we plan to construct a new headquarters building for Kookmin Bank. We anticipate that our total capital expenditures for the construction of the building, which is scheduled to be completed in 2020, will amount to approximately ₩425 billion, of which an aggregate amount of ₩162 billion was incurred as of December 31, 2017. In addition, in August 2016, we entered into a land purchase agreement for the purchase of a site located in Gimpo, in the outskirts of Seoul, in order to construct a new IT center for Kookmin Bank. We anticipate that our total capital expenditures for the construction of the IT center, which is scheduled to be completed in 2019, will amount to approximately ₩229 billion, of which an aggregate amount of ₩26 billion was incurred as of December 31, 2017. We are a financial holding company, and substantially all of our operations are in our subsidiaries. Accordingly, we rely on distributions from our subsidiaries (as well as associates), direct borrowings and issuances of debt and equity securities to fund our liquidity obligations.obligations at the holding company level. We received aggregate dividends of ₩688 billion, ₩282 billion and ₩509₩316 billion from our subsidiaries in 2012, 20132015 and 2014,₩695 billion and ₩710 billion from our subsidiaries and associates in 2016 and 2017, respectively. See “Item 3.D. Risk Factors—Risks relating to our financial holding company structure and strategy.” Asset Encumbrance Part of our future funding and collateral needs are supported by assets readily available and unrestricted. The following table sets forth our assets that are available and those that are encumbered and not available to support our future funding and collateral needs as of December 31, 2017. | | | | | | | | | | | | | | | | | | | December 31, 2017 | | | | | | | | | | Unencumbered Assets | | | | Assets | | | Encumbered Asset(1) | | | Readily Available(2) | | | Other | | | | (in billions of Won) | | On-balance sheet | | | | | | | | | | | | | | | | | Cash and due from financial institutions | | ₩ | 19,818 | | | ₩ | 3,618 | | | ₩ | 15,176 | | | ₩ | 1,024 | | Financial assets at fair value through profit or loss | | | 32,227 | | | | 14,663 | | | | 3,273 | | | | 14,291 | | Derivative financial assets | | | 3,310 | | | | 2 | | | | — | | | | 3,308 | | Loans | | | 290,123 | | | | 6,629 | | | | — | | | | 283,494 | | Financial investments | | | 66,608 | | | | 7,762 | | | | 35,629 | | | | 23,217 | | Investments in associates and joint ventures | | | 335 | | | | — | | | | — | | | | 335 | | Property and equipment | | | 4,202 | | | | 327 | | | | — | | | | 3,875 | | Investment property | | | 849 | | | | 460 | | | | — | | | | 389 | | Intangible assets | | | 2,943 | | | | — | | | | — | | | | 2,943 | | Net defined benefit assets | | | 1 | | | | — | | | | — | | | | 1 | | Current income tax assets | | | 6 | | | | — | | | | — | | | | 6 | | Deferred income tax assets | | | 4 | | | | — | | | | — | | | | 4 | | Assets held for sale | | | 156 | | | | — | | | | — | | | | 156 | | Other assets | | | 16,204 | | | | 23 | | | | — | | | | 16,181 | | | | | | | | | | | | | | | | | | | Totalon-balance sheet | | ₩ | 436,786 | | | ₩ | 33,484 | | | ₩ | 54,078 | | | ₩ | 349,224 | | | | | | | | | | | | | | | | | | | Off-balance sheet | | | | | | | | | | | | | | | | | Fair value of securities accepted as collateral | | ₩ | 2,678 | | | ₩ | — | | | ₩ | 2,678 | | | ₩ | — | | | | | | | | | | | | | | | | | | | Totaloff-balance sheet | | ₩ | 2,678 | | | ₩ | — | | | ₩ | 2,678 | | | ₩ | — | | | | | | | | | | | | | | | | | | |
(1) | Represent assets that have been pledged as collateral against an existing liability or are otherwise restricted in their use to secure funding. |
(2) | Represent thoseon- andoff-balance sheet assets that are not otherwise encumbered, and which are in freely transferable form. |
Contractual Cash Obligations The following table sets forth our contractual cash obligations (excluding short-term borrowings) as of December 31, 2014.2017. | | | Payments Due by Period | | | Payments Due by Period | | | | Total | | | 1 Year or Less | | | 1-3 Years | | | 3-5 Years | | | More Than 5 Years | | | Total | | | 1 Year or Less | | | 1-3 Years | | | 3-5 Years | | | More Than 5 Years | | | | (in billions of Won) | | | (in billions of Won) | | Long-term borrowing obligations (1)(2) | | ₩ | 34,756 | | | ₩ | 9,552 | | | ₩ | 16,776 | | | ₩ | 3,806 | | | ₩ | 4,622 | | | ₩ | 51,132 | | | ₩ | 13,298 | | | ₩ | 24,279 | | | ₩ | 9,737 | | | ₩ | 3,818 | | Operating lease obligations (3) | | | 262 | | | | 124 | | | | 82 | | | | 22 | | | | 34 | | | | 399 | | | | 169 | | | | 148 | | | | 48 | | | | 34 | | Capital lease obligations | | | 25 | | | | 19 | | | | 3 | | | | 2 | | | | 1 | | | | 5 | | | | 3 | | | | 2 | | | | — | | | | — | | Pension obligations | | | 195 | | | | 195 | | | | — | | | | — | | | | — | | | | 203 | | | | 203 | | | | — | | | | — | | | | — | | Deposits (2)(4) | | | 140,225 | | | | 127,291 | | | | 8,302 | | | | 1,365 | | | | 3,267 | | | | 138,777 | | | | 124,635 | | | | 9,195 | | | | 2,279 | | | | 2,668 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 175,463 | | | ₩ | 137,181 | | | ₩ | 25,163 | | | ₩ | 5,195 | | | ₩ | 7,924 | | | ₩ | 190,516 | | | ₩ | 138,308 | | | ₩ | 33,624 | | | ₩ | 12,064 | | | ₩ | 6,520 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes debt and debentures with original maturities of one year or more. |
(2) | Includes estimated future interest payments, which have been estimated using contractual interest rates and scheduled contractual maturities of the outstanding debt obligations and borrowings as of December 31, 2014.2017. In order to calculate future interest payments on debt with floating rates, we used contractual interest rates as of December 31, 2014. 2017. |
(3) | This line item is not included within our consolidated statements of financial position. |
(4) | Excluding demand deposits. |
Commitments and Guarantees The following table sets forth our commitments and guarantees as of December 31, 2014.2017. These commitments and guarantees are not included within our consolidated statements of financial position. | | | | | | | | | | | | | | | | | | | | | | | Payments Due by Period | | | | Total | | | 1 Year or Less | | | 1-3 Years | | | 3-5 Years | | | More Than 5 Years | | | | (in billions of Won) | | Financial guarantees (1) | | ₩ | 4,460 | | | ₩ | 1,055 | | | ₩ | 3,283 | | | ₩ | 58 | | | ₩ | 64 | | Confirmed acceptances and guarantees | | | 5,159 | | | | 3,174 | | | | 1,664 | | | | 244 | | | | 77 | | Commitments | | | 96,317 | | | | 94,399 | | | | 1,117 | | | | 431 | | | | 370 | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 105,936 | | | ₩ | 98,628 | | | ₩ | 6,064 | | | ₩ | 733 | | | ₩ | 511 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Payments Due by Period | | | | Total | | | 1 Year or Less | | | 1-3 Years | | | 3-5 Years | | | More Than 5 Years | | | | (in billions of Won) | | Financial guarantees(1) | | ₩ | 3,684 | | | ₩ | 807 | | | ₩ | 2,253 | | | ₩ | 537 | | | ₩ | 87 | | Confirmed acceptances and guarantees | | | 4,342 | | | | 3,149 | | | | 939 | | | | 252 | | | | 2 | | Commitments | | | 102,183 | | | | 99,575 | | | | 1,644 | | | | 326 | | | | 638 | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 110,209 | | | ₩ | 103,531 | | | ₩ | 4,836 | | | ₩ | 1,115 | | | ₩ | 727 | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes ₩3,883₩3,024 billion of irrevocable commitments to provide contingent liquidity credit lines to special purpose entities for which we serve as the administrator. See Note 39 of the notes to our consolidated financial statements. |
Capital Adequacy Kookmin Bank is subject to capital adequacy requirements of the Financial Services Commission applicable to Korean banks. The requirements applicable prior to December 2013 were formulated based on Basel II, which was first published by the Basel Committee on Banking Supervision, Bank for International Settlements in 2004. The requirements applicable commencing in December 2013 pursuant to amended Financial Services Commission regulations promulgated in July 2013 were formulated based on Basel III, which was first introduced by the Basel Committee on Banking Supervision, Bank for International Settlements in December 2009. Under the amended Financial Services Commission regulations, all banks in Korea are required to maintain certain minimum ratios of common equity Tier I capital, total Tier I capital and total Tier I and Tier II capital to risk-weighted assets. See “Item 4.B. Business Overview—Supervision and Regulation—Principal Regulations Applicable to Banks—Capital Adequacy.” As of December 31, 2014,2017, Kookmin Bank’s total Tier I and Tier II capital adequacy ratio was 15.97%16.01%. The following table sets forth a summary of Kookmin Bank’s capital and capital adequacy ratios as of December 31, 20122015, 2016 and 2017, based on Basel II and as of December 31, 2013 and 2014 based on Basel III.applicable regulatory reporting standards. | | | As of December 31, | | | As of December 31, | | | | 2012 (1) | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | | | (in billions of Won, except percentages) | | | (in billions of Won, except percentages) | | Tier I capital: | | ₩ | 16,141 | | | ₩ | 18,502 | | | ₩ | 19,621 | | | ₩ | 20,332 | | | ₩ | 22,343 | | | ₩ | 24,040 | | Common equity Tier I capital | | | — | | | | 18,502 | | | | 19,621 | | | | 20,332 | | | 22,343 | | | 24,040 | | Paid-in capital | | | 2,022 | | | | 2,022 | | | | 2,022 | | | | 2,022 | | | 2,022 | | | 2,022 | | Capital reserves | | | 5,042 | | | | 5,220 | | | | 5,220 | | | | 5,220 | | | 5,220 | | | 5,220 | | Retained earnings | | | 9,622 | | | | 11,237 | | | | 12,260 | | | | 13,170 | | | 15,588 | | | 17,404 | | Non-controlling interests in consolidated subsidiaries | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | — | | Others | | | (546 | ) | | | 23 | | | | 119 | | | | (79 | ) | | (487 | ) | | (606 | ) | Additional Tier I capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Tier II capital: | | | 5,250 | | | | 4,122 | | | | 3,801 | | | | 3,354 | | | 2,236 | | | 1,873 | | Revaluation reserves | | | 177 | | | | — | | | | — | | | | — | | | | — | | | | — | | Allowances for credit losses (2)(1) | | | 987 | | | | 843 | | | | 886 | | | | 803 | | | 49 | | | 51 | | Hybrid debt | | | 73 | | | | 43 | | | | 31 | | | | 22 | | | 9 | | | | — | | Subordinated debt | | | 3,611 | (3) | | | 3,236 | | | | 2,884 | | | | 2,529 | | | 2,178 | | | 1,822 | | Valuation gain on investment securities | | | 83 | | | | — | | | | — | | | | — | | | | — | | | | — | | Others | | | 319 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | Total core and supplementary capital | | | 21,391 | | | | 22,624 | | | | 23,422 | | | | 23,686 | | | 24,579 | | | 25,913 | | Risk-weighted assets | | | 148,544 | | | | 146,743 | | | | 146,690 | | | | 147,973 | | | 150,648 | | | 161,825 | | Credit risk: | | | | | | | | | | | | | On-balance sheet | | | 127,462 | | | | 125,044 | | | | 124,325 | | | | 124,251 | | | 126,988 | | | 139,448 | | Off-balance sheet | | | 6,622 | | | | 6,787 | | | | 8,128 | | | | 9,138 | | | 9,482 | | | 6,511 | | Market risk | | | 4,693 | | | | 4,012 | | | | 3,445 | | | | 4,189 | | | 3,884 | | | 5,747 | | Operational risk | | | 9,767 | | | | 10,900 | | | | 10,792 | | | | 10,394 | | | 10,295 | | | 10,119 | | Total Tier I and Tier II capital adequacy ratio | | | 14.40 | % | | | 15.42 | % | | | 15.97 | % | | | 16.01 | % | | 16.32 | % | | 16.01 | % | Tier I capital adequacy ratio | | | 10.87 | % | | | 12.61 | % | | | 13.38 | % | | | 13.74 | % | | 14.83 | % | | 14.86 | % | Common equity Tier I capital adequacy ratio | | | — | | | | 12.61 | % | | | 13.38 | % | | | 13.74 | % | | 14.83 | % | | 14.86 | % | Tier II capital adequacy ratio | | | 3.53 | % | | | 2.81 | % | | | 2.59 | % | | | 2.27 | % | | 1.48 | % | | 1.16 | % |
(1) | With effect from December 1, 2013, the Financial Services Commission adopted amended guidelines that implemented capital adequacy requirements in Korea based on Basel III. Amounts and ratios as of December 31, 2012 were computed in accordance with previously applicable guidelines based on Basel II and therefore are not directly comparable to corresponding amounts and ratios as of December 31, 2013 and 2014.
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(2) | Under the standardized approach, allowances for credit losses in respect of credits classified as normal or precautionary are used to calculate Tier II capital only to the extent they represent up to 1.25% of credit risk-weighted assets. Under the internal ratings-based approach, allowances for credit losses, less estimated losses, are used to calculate Tier II capital only to the extent they represent up to 0.6% of credit risk-weighted assets. |
(3) | Subordinated debt up to an amount equal to 50% of Tier I capital may be used in the calculation of Tier II capital.
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In addition, we, as a bank holding company, are required to maintain certain minimum capital adequacy ratios pursuant to applicable regulations of the Financial Services Commission. See “Item 4.B. Business Overview—Supervision and Regulation—Principal Regulations Applicable to Financial Holding Companies—Capital Adequacy.” The following table sets forth a summary of our consolidated capital adequacy ratio as of December 31, 20132015, 2016 and 2014,2017, based on IFRS and applicable regulatory reporting standards: | | | As of December 31, | | | As of December 31, | | | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | | | (in billions of Won, except percentages) | | | (in billions of Won) | | Tier I capital | | | | | | | | | | | Common equity Tier I capital | | ₩ | 22,694 | | | ₩ | 24,062 | | | ₩ | 25,352 | | | ₩ | 29,014 | | | ₩ | 31,059 | | Additional Tier I capital | | | — | | | | 186 | | | | 234 | | | 251 | | | | — | | | | | | | | | | | | | | | | | | Total Tier I capital | | ₩ | 22,694 | | | ₩ | 24,248 | | | ₩ | 25,586 | | | ₩ | 29,265 | | | ₩ | 31,059 | | Tier II capital | | | 4,603 | | | | 4,099 | | | | 3,554 | | | 1,839 | | | 1,342 | | | | | | | | | | | | | | | | | | Risk-weighted assets | | ₩ | 177,514 | | | ₩ | 182,486 | | | ₩ | 188,213 | | | ₩ | 203,649 | | | ₩ | 212,777 | | | | | | | | | | | | | | | | | | Total Tier I and Tier II capital adequacy ratio | | | 15.38 | % | | | 15.53 | % | | | 15.48 | % | | 15.27 | % | | 15.23 | % | Tier I capital adequacy ratio | | | 12.78 | % | | | 13.29 | % | | | 13.59 | % | | 14.37 | % | | 14.60 | % | Common equity Tier I capital adequacy ratio | | | 12.78 | % | | | 13.19 | % | | | 13.47 | % | | 14.25 | % | | 14.60 | % | Tier II capital adequacy ratio | | | 2.60 | % | | | 2.24 | % | | | 1.89 | % | | 0.90 | % | | 0.63 | % |
Recent Accounting Pronouncements SeeIFRS 9
IFRS 9Financial Instruments, issued by the IASB in July 2014, is a new IFRS accounting standard aimed at improving and simplifying the accounting treatment of financial instruments and is effective for annual periods beginning on or after January 1, 2018. IFRS 9, which replaces International Accounting Standard 39,Financial Instruments: Recognition and Measurement, requires all financial assets to be classified and measured on the basis of an entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. A new impairment model is introduced which requires recording of allowance for credit losses based on expected losses instead of incurred losses, and recognition of any subsequent changes in expected credit losses in profit or loss. Also, hedge accounting rules are amended to allow more hedging instruments and hedged items to qualify for hedge accounting. The impact on our financial statements due to the application of IFRS 9 will depend on judgments made by us in applying the new standard, the nature of financial instruments held by us and macroeconomic variables. We have performed an assessment of the financial impact of IFRS 9 on our consolidated financial statements. We expect that the application of IFRS 9 will result in higher impairment loss allowances that are recognized earlier, on a more forward-looking basis and on a broader scope of financial instruments than is the case under International Accounting Standard 39 and, as a result, will have a material impact on our reported financial condition. In addition, the move from incurred to expected credit losses will have the potential to impact our performance under stressed economic conditions or regulatory stress tests. In particular, the application of IFRS 9 will result in aone-off increase in allowance for credit losses and a corresponding decrease in our retained earnings in our consolidated statement of financial position. Measurement will require increased complexity in our impairment modeling as it will involve a greater degree of management judgment with respect to forward-looking information. We expect that impairment charges will tend to be more volatile as a result. For additional information regarding IFRS 9, as well as a description of other recent accounting pronouncements under IFRS as issued by the IASB, see Note 22.1 of the notes to our consolidated financial statements included elsewhere in this annual report for a description of recent accounting pronouncements under IFRS as issued by the IASB that have been issued but are not yet effective.report. Item 5.C. | Research and Development, Patents and Licenses, etc. |
Not applicable. Item 5.D. | Trend Information |
These matters are discussed under Item 5.A. and Item 5.B. above where relevant. Item 5.E. | Off-BalanceOff-Balance Sheet Arrangements |
See “Item 5B. Liquidity and Capital Resources—Financial Condition—Contractual Cash Obligations” and “Item 5B. Liquidity and Capital Resources—Financial Condition—Commitments and Guarantees.” Item 5.F. | Tabular Disclosure of Contractual Obligations |
See “Item 5B. Liquidity and Capital Resources—Financial Condition—Contractual Cash Obligations.” See “Forward-Looking“Forward-Looking Statements.” Item 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Item 6.A. | Directors and Senior Management |
Board of Directors Our board of directors, currently consisting of one executive director, onenon-standing director andseven non-executive directors, has the ultimate responsibility for the management of our affairs. Our articles of incorporation provide that: we may have no more than 30 directors; the number of executive directors must be less than 50% of the total number of directors; and we have five or morenon-executive directors. The term of office for each director is renewable and is subject to the Korean Commercial Code, the Act on the Corporate Governance of Financial Holding Company ActCompanies and related regulations. Our board of directors meets on a regular basis to discuss and resolve material corporate matters. Additional extraordinary meetings may also be convened at the request of any director or any committee that serves under the board of directors. The names and positions of our directors are set forth below. The business address of all of the directors is our registered office at 84, Namdaemoon-ro, Jung-gu,26,Gukjegeumyung-ro8-gil,Yeongdeungpo-gu, Seoul 100-703,07331, Korea. Executive Director The table below identifies our executive director as of the date of this annual report: | | | | | | | | | Name | | Date of Birth | | Position | | Director Since | | End of Term | Jong Kyoo Yoon | | October 13, 1955 | | Chairman and Chief Executive Officer | | November 21, 2014 | | November 20, 20172020 |
Our executive director does not have any significant activities outside KB Financial Group. Jong Kyoo Yoonis our chairman and chief executive officer. He has been an executive director since November 2014. Mr. Yoon also servesHe previously served as the president and chief executive officer of Kookmin Bank. He previously served asBank, our deputy president, chief financial officer and chief risk officer, a senior advisor of Kim & Chang, a senior executive vice president, chief financial officer and chief strategic officer of Kookmin Bank and a senior partner of Samil PricewaterhouseCoopers Korea. Mr. Yoon received a B.A. in business administration from Sungkyunkwan University, an M.B.A. from Seoul National University and a Ph.D. in business administration from Sungkyunkwan University. Non-standing Director The table below identifies ournon-standing director as of the date of this annual report: | | | | | | | | | Name | | Date of Birth | | Position | | Director Since | | End of Term | Yin Hur | | December 19, 1961 | | End of TermNon-standing | Hong Lee
| | April 7, 1958 | | Non-standing director; SeniorPresident and Chief Executive Vice PresidentOfficer of Kookmin Bank | | March 27, 2015November 21, 2017 | | Date of the Annual General Meeting of Shareholders in March 26, 20172020 |
Hong LeeYin Hurhas been anon-standing director since March 2015.November 2017. He has also servedcurrently serves as a senior executive vicethe president and the headchief executive officer of the sales group at Kookmin Bank since 2015.Bank. Mr. LeeHur previously served as a senior executive vice president of the corporate bankingsales group, a senior managing director of the strategy and finance planning group, and a managing director of the credit analysis division, at Kookmin Bank. HeMr. Hur received a B.A. in linguisticslaw and an M.A. in law from Seoul National University and an M.B.A. from Helsinki School of Economics. University.Non-executive Directors Ournon-executive directors are selected based on the candidates’ knowledge and experience in diverse areas, such as financial services,business, accounting, finance, law and regulation, risk management human resources and information technology.consumer protection. All sevennon-executive directors below were nominated by ourNon-executive Director Nominating Committee and approved by our shareholders. The table below identifies ournon-executive directors as of the date of this annual report: | | | | | | | | | Name | | Date of Birth | | Position | | Position Director Since | | Director Since
| | YearDate Term Ends(1) | Young Hwi Choi
| | October 28, 1945 | | Non-executive Director | | March 27, 2015 | | 2016 | Woon Youl Choi
| | April 2, 1950 | | Non-executive Director | | March 27, 2015 | | 2016 | Suk Ryul Yoo | | April 21, 1950 | | Chairman of the Board andNon-executive Director | | March 27, 2015 | | 2016March 22, 2019 | Michael Byungnam LeeStuart B. Solomon
| | July 17, 1949 | | Non-executive Director | | March 24, 2017 | | March 23, 2019 | Suk Ho Sonu | | September 24, 195416, 1951 | | Non-executive Director | | March 27, 201523, 2018 | | 2016March 22, 2020 | Myung Hee Choi | | February 22, 1952 | | Non-executive Director | | March 23, 2018 | | March 22, 2020 | Kouwhan Jeong | | September 30, 1953 | | Non-executive Director | | March 23, 2018 | | March 22, 2020 | Jae Ha Park | | November 25, 1957 | | Non-executive Director | | March 27, 2015 | | 2016March 22, 2019 | Eunice Kyonghee KimJongsoo Han
| | March 29, 1959October 16, 1960 | | Non-executive Director | | March 27, 2015 | | 2016 | Jong Soo Han
| | October 16, 1960 | | Non-executive Director | | March 27, 2015 | | 201622, 2019 |
(1) | The date on which each term will end will be the date of the general stockholders’ meeting in the relevant year unless otherwise specified. |
Young Hwi Choi has been a non-executive director since March 2015. He previously served as the president and chief executive officer of Shinhan Financial Group Co., Ltd., a deputy president of Shinhan Bank and a deputy director at the former Ministry of Finance. Mr. Choi received a B.A. in economics from Sungkyunkwan University.
Woon Youl Choi has been a non-executive director since March 2015. He is currently a professor at Sogang University. Mr. Choi previously served as an executive vice president of Sogang University, a member of the Korea Monetary Board, the president of the Korea Money and Finance Association and the president of the Korean Securities Association. He received a B.A. in business administration from Seoul National University and an M.B.A. and a Ph.D. in finance from the University of Georgia.
Suk Ryul Yoo has been anon-executive director since March 2015. HeMr. Yoo previously served as thean advisor to Samsung Electronics Co., Ltd., chairman of the Credit Finance Association and the president and chief executive officer of Samsung Total Petrochemicals Co., Ltd., Samsung Card Co., Ltd., Samsung Life Insurance Co., Ltd., Samsung Securities Co., Ltd. and Samsung Capital Co., Ltd. Mr. YooHe received a B.A. in business administration from Seoul National University and an M.S. in industrial engineering from Korea Advanced Institute of Science and Technology. Michael Byungnam LeeStuart B. Solomon has been anon-executive director since March 2015. He is currently2017. Mr. Solomon previously served as the chairman, president and chief executive officer of LG Academy.MetLife Korea. He received an undergraduate degree from Syracuse University.
Suk Ho Sonu has been anon-executive director since March 2018. Mr. LeeSonu is currently a visiting professor at Seoul National University Business School. Mr. Sonu previously served as an executive vicethe dean of Hongik Graduate School of Business Administration, president of human resources at LG Corporation, a vicethe Korea Money and Finance Association and president of LG Academy and an assistant professor at Georgia State University and California State University. Hethe Korea Finance Association. Mr. Sonu received a B.A. in economicsapplied mathematics from SogangSeoul National University, an M.L.H.R.M.B.A. from Ohio Statementthe Kellogg School of Management of Northwestern University and a Ph.D. in industrial relationsfinance from the Wharton School of the University of Minnesota.Pennsylvania. Myung Hee Choi has been anon-executive director since March 2018. She is currently a vice president at the Korea Internal Control Assessment Institute. Ms. Choi previously served as an auditor at the Korea Exchange Bank, a director of the Financial Supervisory Service and senior operations officer of Citibank Korea, Seoul Branch. Ms. Choi received a B.A. in English from Yonsei University. Kouwhan Jeong has been anon-executive director since March 2018. He is currently the presidentattorney-at-law of Nambujeil Law and Notary Office Inc. He previously served as the chairperson of the Consumer Dispute Settlement Commission of the Korea Consumer Agency, a standing mediator at Korea Medical Dispute Mediation and Arbitration Agency and the branch chief prosecutor at the Bucheon Branch Office of the Incheon District Prosecutor’s Office. Mr. Jeong received a B.A. in law from Seoul National University. Jae Ha Park has been anon-executive director since March 2015. He is currently a senior research fellow at the Korea Institute of Finance. Mr. Park previously served as a deputy dean of the Asian Development Bank Institute, a vice president of the Korea Institute of Finance, a vice chairman of the Korea Money and Finance Association and a senior counselor to the Minister of the former Ministry of Finance and Economy. He has also served as anon-executive director of Shinhan Bank, Daewoo Securities Co., Ltd. and Jeonbuk Bank. Mr. Park received a B.A. in economics from Seoul National University and a Ph.D. in economics from Pennsylvania State University. Eunice Kyonghee Kim has been a non-executive director since March 2015. She is currently a professor at Ewha Law School. Ms. Kim previously served as the deputy chief executive officer and chief compliance officer of Hana
Financial Group Inc., a managing director and chief compliance officer of Citibank Japan Inc., an executive vice president and chief legal officer of Citibank Korea Inc. and a vice-chairperson of the International Association of Korean Lawyers. She received a B.A. in Chinese studies and administrative science from Yale University and a J.D. from Yale Law School.
Jongsoo Han has been anon-executive director since March 2015. He is currently a professor at Ewha Womans University.University and also serves as the president of the Korean Academic Society of Accounting and a member of the IFRS Interpretations Committee. Mr. Han previously served as a member of the Korea Accounting Deliberating Council of the Financial Services Commission and the Korea Accounting Standards Board, as well as a vice president of Korea Accounting Association and a member of the Korea Accounting Standards Board.Association. Mr. Han received a B.A. in business administration and an M.B.A. from Yonsei University and a Ph.D. in accounting from Joseph M. Katz Graduate School of Business, University of Pittsburgh. Any director having an interest in a transaction that is subject to approval by the board of directors may not vote at the meeting during which the board approves the transaction. Executive Officers
The table below identifies our senior executive officers who are not executive directors as of the date of this annual report: | | | | | Name | | Date of Birth | | Position | Jong-Hee YangKi Heon Kim
| | June 10,1961October 17, 1955 | | Deputy President and Chief Information Technology Officer | Kyung Eun Yoon | | May 16, 1962 | | Deputy President; Financial Planning Department, Investor Relations Department and Human Resources DepartmentCapital Market Business Units | Jeong Rim Park | | November 27, 1963 | | Deputy President; RiskWealth Management Planning Department | Ki HeonKi-Hwan Kim
| | October 17, 1955 | | Deputy President; Digital Finance Department | Jae Hong Park
| | April 10, 1967March 20, 1963 | | Senior Managing Director; Marketing & Synergy Planning Department, Strategic Planning DepartmentDirector and KB ResearchChief Finance Officer | Ki Bum LeeYoung-Tae Park
| | NovemberDecember 24, 19571961 | | Senior Managing Director; Audit DepartmentDirector and Information Security DepartmentChief Data Officer | Young-Tae ParkPil Kyu Im
| | December 24,1961March 20, 1964 | | Senior Managing Director; Marketing & Synergy Planning Department | Kyu Sul Choi
| | August 16, 1960 | | Managing Director; Investor Relations DepartmentDirector and Chief Compliance Officer | Kyung Yup Cho | | September 9, 1961 | | Senior Managing Director; KB Research | Ki Hwan KimBo Youl Oh
| | March 20,January 5, 1962 | | Senior Managing Director; Corporate and Investment Banking Planning Department | Young Hyuk Jo | | April 22, 1963 | | Senior Managing Director; Public RelationsAudit Department | Minkyu ChungChang Kwon Lee
| | February 7, 1970November 15, 1965 | | Managing Director and Chief ComplianceStrategy Officer | Hyun Jin Shin | | February 10, 1965 | | Managing Director and Chief Risk Management Officer | Dong Whan Han | | January 30, 1965 | | Managing Director and Chief Digital Innovation Officer | Nam Hoon Cho | | June 28, 1968 | | Managing Director and Chief Global Strategy Officer | Soon Bum Kwon | | October 20, 1966 | | Managing Director and Chief Human Resources Officer | Chai Hyun Sung | | September 12, 1965 | | Managing Director and Chief Public Relation Officer |
None of the executive officers has any significant activities outside KB Financial Group. Jong-Hee Yang is a deputy president and oversees the Financial Planning Department, Investor Relations Department and Human Resources Department. He previously served as a managing director, the chief information security officer and the head of our Office of the Board of Directors and Strategic Planning Department. Mr. Yang received a B.A. in Korean history from Seoul National University.
Jeong Rim Park is a deputy president and oversees the Risk Management Department. She also serves as a senior executive vice president of Kookmin Bank and heads its risk management group. Ms. Park previously served as a senior managing director of Kookmin Bank and headed its wealth management division. She received a B.A. in business administration and an M.B.A. from Seoul National University.
Ki Heon Kim is a deputy president and oversees the Digital Finance Department.our chief information technology officer. He also serves as a chief executive officer of KB Data Systems. Mr. Kim previously served as a senior executive vice president of Kookmin Bank and heads itsBank’s information technology group. Mr. Kim previously served as an expert for the financial services division of Samsung SDS Co., Ltd. and the head of branch offices of Peace Bank of Korea. He received a B.A. in accounting from Hanyang University. Kyung Eun Yoon is a deputy president and heads the Capital Market Business Units. He also serves as the chief executive officer of KB Securities. Mr. Yoon previously served as a deputy president of Shinhan Investment and headed its trading group. Mr. Yoon received a B.A. in English from Hankuk University of Foreign Studies. Jae HongJeong Rim Parkis a deputy president and heads the Wealth Management Planning Department. She also serves as a senior executive vice president of Kookmin Bank and heads its wealth management group, as well as a deputy president of KB Securities in charge of its wealth management division. Ms. Park previously served as a deputy president of our company and oversaw the Risk Management Department. She also served as a senior managing director of Kookmin Bank and headed its wealth management division. Ms. Park received a B.A. in business administration and an M.B.A. from Seoul National University.
Ki-Hwan Kimis a senior managing director and oversees the Marketing & Synergy Planning Department, Strategic Planning Department and KB Research. Heour chief finance officer. Mr. Kim previously served as the headour chief risk management officer and as a senior managing director of the future strategy department at Hanwha Life Insurance Co., Ltd., the head of the global business department at Samsung Fire & Marine Insurance Co., Ltd. and a partner at McKinsey & Company.Kookmin Bank’s consumer protection group. He received a B.A. in economics from Seoul National University and a Ph.D. in economics from Princeton University. YoungKi-Bum Lee-Tae Parkis a senior managing director and oversees Audit Department and the Information Security Department.our chief data officer. He also serves as a non-standingsenior managing director of KB Kookmin Card Co., Ltd. Mr. Lee previously served as our chief risk officer, the head of Kookmin Bank’s audit department, the chief compliance officer of Kookmin Bank and the head of Gyeongseo and Bucheon regional offices ofKB Kookmin Bank. He received a B.A. in German language and literature from Sogang University. Young-Tae Parkis a managing directorCard and heads the Marketing & Synergy Planning Department. Hetheir data strategy divisions. Mr. Park previously served as the head of Kookmin Bank’s marketing departmentMarketing Department and the head of several branch offices of Kookmin Bank. HeMr. Park received a B.A. and an M.S. in economics from Korea University.
Pil Kyu Sul ChoiIm is a senior managing director and heads the Investor Relations Department.our chief compliance officer. He previously served as the headbranch manager of Kookmin Bank’s investor relations departmentGwanghwamoon branch and asset and liability management department and the head of Korea First Bank’s treasury department. HeStar Tower branch. Mr. Im received a B.A. in business administrationagricultural economics from YonseiKorea University.
Kyung Yup Cho is a senior managing director and heads KB Research. He previously served as a senior editor at MaeKyung Media Group and the head of financial news, political news, social affairs and international news at Maeil Business Newspaper. HeMr. Cho received a B.A. in business administration and a Ph.D. in business administration from Yonsei University. Ki Hwan KimBo Youl Oh is a senior managing director and heads the Public RelationsCorporate and Investment Banking Planning Department. He also serves as a senior managing director of Kookmin Bank and heads its consumer protection group.corporate and investment banking customer group, as well as a deputy president of KB Securities in charge of its investment banking division. Mr. KimOh previously served as the head of Kookmin Bank’s human resource department.credit analysis division and Corporate Analysis Department. Mr. Oh received a B.A. in global management from Hanyang Cyber University.
Young Hyuk Jo is a senior managing director and heads the Audit Department. He previously served as the head of Kookmin Bank’s Ansan financial center. Mr. Jo received a B.A. in economics from Seoul NationalDong-A University. Minkyu ChungChang Kwon Leeis a managing director and our chief compliancestrategy officer. He previously served as a vice chief public prosecutor at the Supreme Prosecutors’ Officegeneral manager of Korea and a managing partner at the law firm of The Firm. HeKB Kookmin Card’s Strategic Planning Department. Mr. Lee received a B.A. in lawapplied statistics from Korea University.
Hyun Jin Shinis a managing director and our chief risk management officer. He previously served as a chief risk officer of KB Insurance and as our general manager of risk management. Mr. Shin received a B.A. in economics from Korea University and an M.B.A. from the Korea Advanced Institute of Science and Technology. Dong Whan Hanis a managing director and our chief digital innovation officer. He also serves as a managing director of Kookmin Bank’s digital business group. Mr. Han previously served as the head of our Office of the Board of Directors and a general manager of Kookmin Bank’s Strategic Planning Department. He received an M.S. in geography from Seoul National University and an M.B.A. from the University of Washington. Nam Hoon Chois a managing director and our chief global strategy officer. He previously served as a managing director of KB Securities’ global business division and management supporting division. Mr. Cho received a B.A. in economics from Sungkyunkwan University. Soon Bum Kwonis a managing director and our chief human resources officer. He previously served as an executive secretary for our company and Kookmin Bank, as well as a general manager of Kookmin Bank’s Human Resources Department. Mr. Kwon received a B.A. in science of public administration from Korea University. Chai Hyun Sungis a managing director and our chief public relation officer. He previously served as our chief human resources officer and as an executive secretary for the group and Kookmin Bank. Mr. Sung received a B.S. in accounting from Chonbuk National University. The aggregate remuneration paid andbenefits-in-kind granted, excluding stock grants, by us and our subsidiaries to our chairman and chief executive officer, our other executive andnon-standing directors, ournon-executive directors and our executive officers for the year ended December 31, 20142017 was ₩3,578₩7,519 million. In addition, forFor the year ended December 31, 2014,2017, we set aside ₩183₩415 million for allowances for severance and retirement benefits for our chairman and chief executive officer, the other executive directors and our executive officers. The compensation of our directorsdirector who received total annual compensation exceeding ₩500 million in 20142017 was as follows: | | | | | | | | | Name | | Position | | Total Compensation in 2014 (1)2017 (in millions of Won) | | | Long-term Incentive Compensation for Payment Subsequent to 20142017 | | | | | (In millions of Won) | Young-Rok LimJong Kyoo Yoon
| | Former Chairman and Chief Executive Officer
| | ₩ | 7661,702(1) | | | NoneGrant of 67,601 long-term performance-based shares(2)(3) |
(1) | Includes earned income2017 annual salary of ₩473 million (including allowances for business expenses of ₩210 million) and performance baseda short-term incentive payments madepayment of ₩453 million, of which ₩240 million was based on performance in 2016 and paid in the first quarter of 2014 with respect2017 and ₩213 was based on performance from January 1, 2017 to services performedNovember 20, 2017 before reappointment and paid in 2013. the fourth quarter of 2017. Also includes payments from Kookmin Bank consisting of 2017 annual salary of ₩327 million and a short-term incentive payment of ₩396 million, of which ₩210 million was based on performance in 2016 and paid in the first quarter of 2017 and ₩186 million was based on performance from January 1, 2017 to November 20, 2017 before retirement and paid in the fourth quarter of 2017, as well as a retirement payment of ₩53 million paid upon his retirement from Kookmin Bank on November 20, 2017. |
(2) | Consists of 36,054 and 31,547 long-term performance-based shares expected to be granted by us and Kookmin Bank, respectively, from 2018 to 2020. The actual payment amount will be determined in the future based on the market price of our common shares. |
(3) | In addition, a maximum of 46,890 shares are expected to be granted over a three-year period as a long-term performance-based stock grant. The actual payment amount will be determined in the future based on a performance evaluation over a three-year period from November 21, 2017 to November 20, 2020. |
Pursuant to a resolution of our board of directors, effective January 7, 2015, Woong-Won Yoon, our former deputy president and chief financial officer, was appointed a business management advisor for a term of one year. We do not have service contracts with any of our other directors or officers providing for benefits upon termination of their employment with us.
Kookmin Bank granted stock options to its president and chief executive officer, other directors and executive officers, as well as employees. In connection with the comprehensive stock transfer in September 2008 pursuant to which we were established, such stock options were converted into stock options with respect to our common stock. See “Item 6.E. Share Ownership—Stock Options.” For all of the options granted, upon their exercise, we are required to pay in cash the difference between the exercise price and the market price of our common stock at the date of exercise. Generally, upon vesting, options may be exercised from after three years from the grant date up to eight years after such date, once restrictions on the exercise of options, including continued employment for at least two years from the grant date, lapse.
In 2014, we did not recognize any compensation expense for the stock options granted under our stock option plan. For additional information regarding our compensation expense in connection with our stock option plan, see Note 31 to our consolidated financial statements included elsewhere in this annual report.
In 2008, we also established a stock grant plan. Pursuant to this plan, we have entered into performance share agreements with certain of our and our subsidiaries’ directors, executive officers and other senior management, whereby we may grant shares of our common stock (or the equivalent monetary amount based on the market value of such shares at the time of the grant)shares) within specified periods aslong-term incentive performance shares in accordance withpre-determined performance targets. Seetargets.See “Item 6.E. Share Ownership—Performance Share Agreements.” In 2014,2017, we recognized ₩11,422incurred ₩73,370 million asof compensation expense for the disbursements madecosts relating to stock grants under such agreements. See Note 31.2 of the notes to our consolidated financial statements included elsewhere in this annual report. See “Item 6.A. Directors and Senior Management” above for information concerning the terms of office and contractual employment arrangements with our directors and executive officers. Committees of the Board of Directors We currently have the following committees that serve under the board: the Corporate Governance Committee;
the Risk Management Committee; the Evaluation & Compensation Committee; the Non-executiveNon-Executive Director Nominating Committee; and the Audit Committee Member Nominating Committee; the CEO Nominating Committee; and the Subsidiaries’ CEO Director Nominating Committee. Each committee member is appointed by the board of directors, except for members of the Audit Committee, who are elected at the general meeting of stockholders. Audit Committee
The committeeThecommittee currently consists of fournon-executive directors, Young Hwi Choi, Woon Youl Choi, Eunice Kyonghee KimSuk Ho Sonu, Kouwhan Jeong, Jae Ha Park and Jongsoo Han. TheHan.The chairperson of the Audit Committee is Woon Youl Choi.Jongsoo Han. The committee oversees our financial reporting and approves the appointment of our independent registered public accounting firm. The committee also reviews our financial information, auditor’s examinations, key financial statement issues, the plans and evaluation of internal control and the administration of our financial affairs by the
board of directors. In connection with the general meetings of stockholders, the committee examines the agenda for, and financial statements and other reports to be submitted by, the board of directors to each general meeting of stockholders. The committee holds regular meetings every quarter. Corporate GovernanceRisk Management Committee
The committee currently consists of one non-standing director, Hong Lee, and three fournon-executive directors, Young Hwi Choi, Woon YoulStuart B. Solomon, Suk Ho Sonu, Myung Hee Choi and Michael Byungnam Lee, together with our chairman and chief executive officer, Jong Kyoo Yoon. The chairperson of the Corporate Governance Committee is Jong Kyoo Yoon. The committee is responsible for establishing and monitoring procedures for our chairman candidate cultivation and succession program, as well as for candidate cultivation and succession programs for chief executive officers of our subsidiaries. The committee holds regular meetings annually. Risk Management Committee
The committee currently consists of one non-standing director, Hong Lee, and three non-executive directors, Suk Ryul Yoo, Jae Ha Park and Eunice Kyonghee Kim.Soo Han. The chairperson of the committee is Jae Ha Park.Suk Ho Sonu. The Risk Management Committee oversees and makes determinations on all issues relating to our comprehensive risk management function. In order to ensure our stable financial condition and to maximize our profits, the committee monitors our overall risk exposure and reviews our compliance with risk policies and risk limits. In addition, the committee reviews risk and control strategies and policies, evaluates whether each risk is at an adequate level, establishes or abolishes risk management divisions and reviewsrisk-based capital allocations. The committee holds regular meetings every quarter.
Evaluation & Compensation Committee The committee currently consists of fournon-executive directors, Michael Byungnam Lee,Stuart B. Solomon, Suk Ryul Yoo, Jae Ha ParkMyung Hee Choi and Jongsoo Han.Kouwhan Jeong. The chairperson of the committee is Michael Byungnam Lee.Myung Hee Choi. The Evaluation and Compensation Committee reviews compensation schemes and compensation levels of us and our subsidiaries. The committee is also responsible for deliberating and deciding the compensation of directors, evaluating management’s performance and implementing management training programs, as well as deciding and supervising theperformance-based annual salary of the president and the executive officers of us and our subsidiaries. The committee holds regular meetings every quarter.semi-annually. Non-executive Director Nominating Committee The committee currently consists of three fournon-executive directors, Suk Ryul Yoo, Young Hwi ChoiSuk Ho Sonu, Jae Ha Park and Woon Youl Choi, together with our chairman and chief executive officer, Jong Kyoo Yoon.Soo Han. The chairperson of the committee is Suk Ryul Yoo.Jae Ha Park. The committee is responsible for the management and evaluation of a pool ofnon-executive director candidates and recommendation of thenon-executive director candidates to be nominated at the annual general meeting of shareholders. The committee holds regular meetingssemi-annually. Audit Committee Member Nominating Committee The committee currently has no members. The last meeting of the committee was on February 27, 201523, 2018 to nominate Young Hwi Choi, Woon Youl Choi, Eunice Kyonghee Kim and Jongsoo Han as new Audit Committee members. The committee oversees the selection of Audit Committee member candidates and recommends them annually sometime prior to the general stockholders meeting. The term of office of its members is from the first meeting of the committee held to nominate the Audit Committee members until the Audit Committee members are appointed. CEO Nominating Committee Thecommittee currently consists of all seven of ournon-executive directors.The chairperson of the CEO Nominating Committee is Suk Ryul Yoo. The committee is responsible for establishing and monitoring procedures for our CEO candidate cultivation and succession program pursuant to our “CEO Succession Regulations,” which cover, among other things, the qualifications of CEO candidates, continued maintenance of the candidate pool and the CEO candidate nomination process. The committee holds regular meetings semi-annually. Subsidiaries’ CEO Director Nominating Committee Thecommittee currently consists of onenon-standing director, Yin Hur, and threenon-executive directors, Suk Ryul Yoo, Myung Hee Choi and Jae Ha Park, together with our chairman and chief executive officer, Jong Kyoo Yoon. The chairperson of the Subsidiaries’ CEO Director Nominating Committee is Jong Kyoo Yoon. The committee is responsible for candidate cultivation and succession programs for chief executive officers of our subsidiaries. The committee holds regular meetings semi-annually. As of December 31, 2014,2017, we had a total of 168 164full-time employees, excluding seven15 executive officers, at our financial holding company. The following table sets forth information regarding our employees at both our financial holding company and our subsidiaries as of the dates indicated: | | | | | As of December 31, | | | | | As of December 31, | | | | | | 2012 | | | 2013 | | | 2014 | | | | | 2015 | | | 2016 | | | 2017 | | KB Financial Group | | Full-time employees (1) | | | 157 | | | | 151 | | | | 168 | | | Full-time employees(1) | | | 181 | | | | 159 | | | | 164 | | | | Contractual employees | | | — | | | | — | | | | — | | | Contractual employees | | | — | | | | — | | | | — | | | | Managerial employees | | | 127 | | | | 116 | | | | 131 | | | Managerial employees | | | 144 | | | | 135 | | | | 147 | | | | Members of Korea Financial Industry Union | | | — | | | | — | | | | — | | | Members of Korea Financial Industry Union | | | — | | | | — | | | | — | | Kookmin Bank | | Full-time employees (1) | | | 16,358 | | | | 16,617 | | | | 20,758 | | | Full-time employees(1) | | | 19,855 | | | | 19,458 | | | | 16,925 | | | | Contractual employees | | | 5,713 | | | | 5,136 | | | | 903 | | | Contractual employees | | | 1,044 | | | | 1,218 | | | | 1,422 | | | | Managerial employees | | | 11,383 | | | | 11,539 | | | | 11,561 | | | Managerial employees | | | 11,034 | | | | 11,023 | | | | 9,799 | | | | Members of Korea Financial Industry Union | | | 17,149 | | | | 17,123 | | | | 16,977 | | | Members of Korea Financial Industry Union | | | 16,548 | | | | 16,406 | | | | 14,501 | | Other subsidiaries | | Full-time employees (1) | | | 2,724 | | | | 2,786 | | | | 3,186 | | | Full-time employees(1) | | | 6,658 | | | | 8,366 | | | | 8,231 | | | | Contractual employees | | | 541 | | | | 137 | | | | 355 | | | Contractual employees | | | 887 | | | | 1,366 | | | | 1,600 | | | | Managerial employees | | | 1,554 | | | | 1,554 | | | | 1,765 | | | Managerial employees | | | 3,286 | | | | 4,467 | | | | 4,554 | | | | Members of Korea Financial Industry Union | | | 1,370 | | | | 1,509 | | | | 1,324 | | | Members of Korea Financial Industry Union | | | 4,523 | | | | 4,433 | | | | 6,043 | |
(1) | Excluding executive officers. |
We consider our relations with our employees to be satisfactory. We and our subsidiaries each have a jointlabor-management council which serves as a forum for ongoing discussions between our management and employees. At fiveseven of our subsidiaries, Kookmin Bank, KB Securities, KB Insurance, KB Kookmin Card, KB Capital, KB Real Estate Trust and KB Credit Information, our employees have a labor union. Every year, the unions at Kookmin Bank, KB Securities, KB Insurance, KB Kookmin Card, KB Capital, KB Real Estate Trust and KB Credit Information and their respective managements negotiate and enter into new collective bargaining agreements and negotiate annual wage adjustments. Our compensation packages consist of base salary and base bonuses. We also provideperformance-based compensation to employees and management officers, including those of our subsidiaries, depending on level of responsibility of the employee or officer and business of the relevant subsidiary. Typically, executive officers, heads of regional headquarters and employees in positions that require professional skills, such as fund managers and dealers, are compensated depending on their individual annual performance evaluation. Also, Kookmin Bank has implemented aprofit-sharing system in order to enhance the performance of Kookmin Bank’s employees. Under this system, Kookmin Bank pays bonuses to its employees, in addition to the base salary and depending on Kookmin Bank’s annual performance. In January 2016, we implemented a “mileage stock” program, pursuant to which we may grant to our and our subsidiaries’ employees performance-based cash payments that correspond to the market value of our common shares. The accumulated “miles” of common shares can be exercised for cash during a two-year period commencing on theone-year anniversary of the grant date. We provide a wide range of benefits to our employees, including our executive directors. Specific benefits provided may vary for each of our subsidiaries but generally include medical insurance, employment insurance, workers compensation, employee and spouse life insurance, free medical examinations, child tuition and fee reimbursement, disabled child financial assistance and reimbursement for medical expenses, and other benefits may be provided depending on the subsidiary. In accordance with the National Pension Act, we contribute an amount equal to 4.5% of employee wages, and each employee contributes 4.5% of his or her wages, into each employee’s personal pension account. In addition, in accordance with the Guarantee of Worker’s Retirement Benefits Act, we have adopted a retirement pension plan for our employees. Contributions under the retirement pension plan are deposited annually into a financial institution, and an employee may elect to receive a monthly pension or alump-sum amount upon retirement. Our retirement pension plans are provided in the form of a defined benefit plan and a defined contribution plan. The defined benefit plan guarantees a certain payout at retirement, according to a fixed formula based on the employee’s average salary and the number of years for which the employee has been a plan member. The defined contribution plan, in which the employer’s contribution is determined in advance based on one twelfth of an employee’s total annual pay, is managed directly by the employees. Under Korean law, we may not terminate the employment offull-time employees except under certain limited circumstances. However, from time to time, we invite our employees to apply for our early retirement programs, which provide for varying amounts of severance pay based on the duration of time an employee has worked for us, along with several other key features. We believe that such programs enhance our productivity and efficiency by improving our labor structure. In June 2009, we established an employee stock ownership plan. All of our employees are eligible to participate in this plan. We are not required to, and do not, make cash contributions to this plan. Members of our employee stock ownership association havepre-emptive rights to acquire up to 20% of our shares issued in public offerings by us pursuant to the Financial Investment Services and Capital Markets Act. In August 2009, we offered to members of our employee stock ownership association 6,000,000 of the 30,000,000 new shares of common stock to be issued in our rights offering to our existing shareholders, and the entire amount was subscribed by members of our employee stock ownership association. The employee stock ownership association held 2,452,0811,998,038 shares of our common stock as of December 31, 2014.2017. Employees of Kookmin Bank have been eligible to participate in its employee stock ownership plan, which will be terminated once all of our common stock held by the plan (which the plan received following the transfer of Kookmin Bank shares held by it as a result of the comprehensive stock transfer pursuant to which we were established) have been distributed to the relevant Kookmin Bank employees at the requests of such employees following the expiration of the required holding periods. As of December 31, 2014,2017, Kookmin Bank’s employee stock ownership association held 814,050507,335 shares of our common stock. In order to develop our next generation of leaders and enhance the operational capability of our employees at each of our subsidiaries, we operate various employee training programs. These programs, which are aimed at cultivating financial specialists with higher levels of management and business skills, developing regional experts for increased global capabilities and enhancing employee loyalty, comprise a number of customized programs such as training courses for employees of different positions, domestic and foreign MBA courses and intensive human resources development programs for high performers to cultivate future leaders. For example, Kookmin Bank offers training programs at its employees’ worksites to facilitate access to training, as well as a foreign regional expert training program and a global language training course. We also provide financial and other support for our employees to develop theirfinance-related knowledge and skills by enrolling in training courses or engaging inself-study programs. The broad spectrum of training programs, combined with thestate-of-the-art technologies such as cyber training, satellite broadcasting andmobile-learning, maximizes the level of exposure of the trainees to the contents of the programs. We also believe that our training scheme based on classified training courses and a development evaluation system has facilitated systemic development of employee skills and a spontaneous learning environment. Common Stock As of March 31, 2015,2018, the persons who are currently our directors or executive officers, as a group, held an aggregate of 10,59225,747 shares of our common stock, representing approximately 0.003% 0.005%of the issued shares of our common stock as of such date. None of these persons individually held more than 1% of the outstanding shares of our common stock as of such date. The following table presents information regarding our directors and executive officers who beneficially owned our shares as of March 31, 2015.2018: | | | | | Name of Executive Officer or Director(1) | | Number of Shares of Common Stock | | Jong Kyoo Yoon | | | 5,30016,000 | | Hong LeeYin Hur
| | | 4591,000 | | Jong-Hee YangKyung Eun Yoon
| | | 9143,814 | | Jeong Rim Park | | | 540 | | Ki Bum LeeKi-Hwan Kim
| | | 600321 | | Young-Tae Park | | | 450 | | Pil Kyu Sul ChoiIm | | | 1,506445 | | Kyung Yup Cho | | | 500800 | | Ki Hwan KimYoung Hyuk Jo
| | | 321461 | | Minkyu ChungDong Whan Han
| | | 2100 | | Chai Hyun Sung | | | 674 | | Soon Bum Kwon | | | 1,142 | | | | | | | Total | | | 10,59225,747 | | | | | | |
(1) | On April 7, 2015, Michael Byungnam Lee, our non-executive director, acquired 1,020 share of our common stock on the Korea Exchange.
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Stock Options
We have not, following our establishment pursuant to a comprehensive stock transfer in September 2008, granted any stock options with respect to our capital stock to our directors, executive officers and employees. Prior to our establishment, Kookmin Bank granted stock options with respect to its common stock to its directors, executive officers and employees. In connection with the comprehensive stock transfer, in September 2008, such stock options with respect to Kookmin Bank common stock were converted into stock options with respect to our common stock. As of March 31, 2015, all of such stock options granted to Kookmin Bank’s directors, executive officers and employees have been exercised and there are no stock options outstanding as of such date. For all of such options granted, upon their exercise, we were required to pay in cash the difference between the exercise price and the market price of our common stock at the date of exercise.
Performance Share Agreements In March 2009,Pursuant to a stock grant plan we established in 2008, we have entered into performance share agreements with certain of our shareholders approved at the annual general meeting of shareholders the disbursement of a maximum of 250,000and our subsidiaries’ executive officers and senior management, pursuant to which we may grant shares of our common stock (or the equivalent monetary amount based on the market value of such shares at the time of disbursement), between September 29, 2008 and September 28, 2011, to our directorsshares) within specified periods aslong-term incentive performance shares over the term of their office in accordance with thepre-determined performance targets set forth in the performance share agreements between us and such directors. In June 2009, we paid ₩24 million, the equivalent monetary amount for 733 shares of our common stock, to our former non-executive director, Kee Young Chung. In March 2010, our shareholders approved at the annual general meeting of shareholders the disbursement of a maximum of 250,000 shares of our common stock (or the equivalent monetary amount based on the market value of such shares at the time of disbursement), between September 29, 2009 and September 28, 2012, to our directors as long-term incentive performance shares over the term of their office in accordance with the performance targets set forth in the performance share agreements between us and such directors. In April 2010, we paid an aggregate of ₩184 million, the equivalent monetary amount for 3,563 shares of our common stock, to our former non-executive directors, Dam Cho and Bo Kyung Byun. In November 2010, we paid ₩110 million, the equivalent monetary amount for 2,149 shares of our common stock, to our former non-executive director, Chee Joong Kim. In January 2011, we paid ₩133 million, the equivalent monetary amount for 2,323 shares of our common stock, to our former non-executive director, Chan Soo Kang. In April 2011, we paid an aggregate of ₩229 million, the equivalent monetary amount for 4,056 shares of our common stock, to our former non-executive directors, Suk Sig Lim and Jacques Kemp. In April 2013, we paid an aggregate of ₩96 million, the equivalent monetary amount for 2,543 shares of our common stock, to our former non-executive director, Sang Moon Ham. In April 2014, we paid an aggregate of ₩115 million, the equivalent monetary amount for 3,090 shares of our common stock, to our former non-executive director, Jae Mok Cho.targets. Since January 2010, in accordance with the best practice guidelines for outside directors of banking institutions announced by the Korea Federation of Banks, which have been replaced with the Financial Corporate Governance Code issued by the Financial Services Commission in December 2014, we have not entered into any performance share agreements with ournon-executive directors.
We have also entered into performance share agreements with certain of our executive officers and senior management who are not directors, pursuant to which we may grant shares of our common stock (or the equivalent monetary amount based on the market value of such shares at the time of the grant) within specified periods as long-term incentive performance shares in accordance with pre-determined performance targets.
We expect that further actualActual disbursements under the performance share agreements with our and our subsidiaries’ directors, executive officers and senior management and directors other than non-executive directors willhave generally bebeen in the form of cash disbursements of equivalent monetary amounts based on the market value of our shares at such time. shares.Item 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
Item 7.A. | Major Shareholders |
The following table presents information regarding the beneficial ownership of our shares at December 31, 20142017 by each person or entity known to us to own beneficially more than 5% of our issued and outstanding shares. Except as otherwise indicated, each stockholder identified by name has: sole voting and investment power with respect to its shares; and record and beneficial ownership with respect to its shares. | Beneficial Owner | | Number of Shares of Common Stock | | | Percentage of Total Outstanding Shares of Common Stock (%) (1) | | | Number of Shares of Common Stock | | | Percentage of Total Outstanding Shares of Common Stock (%)(1) | | Korean National Pension Service | | | 36,383,211 | | | | 9.42 | % | | | 40,204,583 | | | | 9.62 | % | Bank of New York Mellon (2) | | | 32,474,273 | | | | 8.41 | % | | JPMorgan Chase Bank, N.A.(2) | | | | 25,755,140 | | | | 6.16 | % |
(1) | Calculated based on 386,351,693418,111,537 shares of our common stock outstandingissued as of December 31, 2014. 2017. |
Other than as set forth above, no other person or entity known by us to be acting in concert, directly or indirectly, jointly or separately, owned 5.0% or more of the issued shares of our common stock or exercised control or could exercise control over us as of December 31, 2014.2017. None of our major stockholders has different voting rights from our other stockholders. Item 7.B. | Related Party Transactions |
As of December 31, 2014,2017, we had an aggregate of ₩2,530₩1,667 million in loans outstanding to our executive officers and directors and Kookmin Bank’s executive officers and directors. In addition, as of such date, we had loans outstanding to various companies whose directors or executive officers were serving concurrently as our directors or executive officers. See Note 43 of the notes to our consolidated financial statements included elsewhere in this annual report. All of these loans were made in the ordinary course of business, on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectibilitycollectability or present other unfavorable features. None of our directors or officers have or had any interest in any transactions effected by us that are or were unusual in their nature or conditions or significant to our business which were effected during the current or immediately preceding year or were effected during an earlier year and remain in any respect outstanding or unperformed. Item 7.C. | Interests of Experts and Counsel |
Not applicable. Item 8. | FINANCIAL INFORMATION |
Item 8.A. | Consolidated Statements and Other Financial Information |
See “Item 18. Financial Statements” and pages F-1 through F-185. F-207.Legal Proceedings Excluding the legal proceedings discussed below, we and our subsidiaries are not a party to any legal or administrative proceedings and no proceedings are known by any of us or our subsidiaries to be contemplated by governmental authorities or third parties, which, if adversely determined, may have a material adverse effect on our consolidated financial condition or results of operations. During the first half of 2007, the National Tax Service of Korea completed a tax audit in respect of Kookmin Bank for the fiscal years 2002, 2003, 2004 and 2005, as a result of which Kookmin Bank was assessed ₩190 billion (including residence tax) for tax deficiencies. In addition, during the second half of 2007, the National Tax Service of Korea assessed additional income taxes for prior years amounting to ₩292 billion (including residence tax) for tax deficiencies. Kookmin Bank paid the entire amount of such additional assessments in 2007, but filed an appeal with the National Tax Tribunal with respect to tax assessments made in 2007 amounting to ₩482 billion (including residence tax), which dismissed the appeal in March 2010. In June 2010, Kookmin Bank filed an appeal with the Seoul Administrative Court, which ruled in favor of Kookmin Bank on April 1, 2011. On April 19, 2011, the National Tax Service of Korea appealed this case to the Seoul High Court, which ruled in favor of Kookmin Bank on January 12, 2012. On January 30, 2012, the National Tax Service of Korea appealed this case to the Supreme Court, which ruled in favor of Kookmin Bank on January 15, 2015.
Since November 2008, certain of Kookmin Bank’s customers have filed lawsuits against it in connection with its sales of foreign currency derivatives products known as “KIKO” (which stands for “knock-in knock-out”), which are intended to operate as hedging instruments against fluctuations in the exchange rate between the Won and the U.S. dollar. Due to the significant depreciation of the Won against the U.S. dollar in 2008 and 2009, customers who have purchased KIKO products from Kookmin Bank are required to make large payments to it. Twelve lawsuits were filed against Kookmin Bank alleging that the contracts under which the relevant KIKO products were sold should be invalidated and that Kookmin Bank should return payments received thereunder. Eight of the lawsuits were ruled in favour of Kookmin Bank by the Seoul Central District Court and not appealed. In two of the lawsuits, rulings were issued in favor of Kookmin Bank by the Seoul High Court in February 2013 and November 2014 and not appealed. In one of the lawsuits, the Supreme Court of Korea ruled in favor of Kookmin Bank in May 2014. As of April 3, 2015, the amount of the one remaining claim, which is pending at the Seoul High Court, was approximately ₩0.7 billion. Additional lawsuits, as well as motions for preliminary injunctions, may be filed against Kookmin Bank with respect to KIKO products, and the final outcome of such litigation remains uncertain.
In January 2008, the Korea Fair Trade Commission instituted certain amendments to standard loan policy conditions for mortgage loan agreements to require banks to be responsible for the payment of mortgage registration expenses when issuing mortgage loans. Subsequently, the Korea Federation of Banks and 16 banks, including Kookmin Bank, filed a lawsuit against the Korea Fair Trade Commission to prevent the implementation of such amendments. In August 2010, the Supreme Court ruled in favor of the Korea Fair Trade Commission. Since such ruling in August 2010, certain of Kookmin Bank’s customers have filed 133 lawsuits against Kookmin Bank, as of April 3, 2015, alleging that it should return the mortgage registration expenses paid by such customers under mortgage loan agreements that did not reflect the amendments instituted by the Korea Fair Trade Commission in January 2008. As of April 3, 2015, 132 such lawsuits had been concluded and one lawsuit was appealed and pending in the appellate court. The aggregate amount of claimed damages in the one remaining lawsuit, as of April 3, 2015, was approximately ₩0.7 billion. Additional lawsuits may be filed against Kookmin Bank with respect to its mortgage loans, and the final outcome of such litigation remains uncertain.
In July 2010, Fairfield Sentry Limited, or Fairfield, which is currently in liquidation and whose assets were directly or indirectly invested with Bernard L. Madoff Investment Securities LLC, or BLMIS, filed a lawsuit in the Supreme Court of the State of New York against Kookmin Bank, which acted as a trustee bank for its clients who invested in Fairfield. Fairfield seeks restitution of approximately US$42 million paid to Kookmin Bank in connection with share redemptions on the ground that such payments were made by mistake, based on inflated values resulting from BLMIS’ fraud. TheIn September 2010, the case was transferred to the United States Bankruptcy Court for the Southern District of New York, where it is currently pending at such court.pending. Fairfield has filed similar actions against numerous other fund investors to seek recovery of redemption payments. In May 2012, the trustee appointed for the liquidation of BLMIS filed a lawsuit against Kookmin Bank in the United States Bankruptcy Court for the Southern District of New York. The trustee seeks recovery of approximately US$42 million, which amount is alleged to be equal to the amount of funds that were redeemed from Fairfield between June 2004 and January 2006 by Kookmin Bank. The trustee alleges that Fairfield was a “feeder fund” that invested in BLMIS and redemptions from such BLMIS feeder fund are avoidable and recoverable under the U.S. Bankruptcy Code and New York law. The case is currently pending at such court. The trustee has filed similar clawback actions against numerous other institutions. In November 2012, Kookmin Bank filed a lawsuit against theExport-Import Bank of Korea and other creditor financial institutions comprising the creditors’ committee of a Korean shipbuilding company which is a borrower of Kookmin Bank and is currently in workout. Kookmin Bank voted against extending new credit to such borrower and exercised its appraisal rights. Kookmin Bank is seeking ₩103 billion as compensation for damages and payment of the purchase price of debt held by Kookmin Bank. In November 2012, theExport-Import Bank of Korea and other creditor financial institutions of the borrower filed a counter lawsuit against Kookmin Bank seeking ₩46 billion in damages in connection with the borrower’s debt restructuring plan. In August 2014, the Seoul Central District Court ruled partially in favor of Kookmin Bank in its lawsuit against theExport-Import Bank of Korea and other creditor financial institutions of the borrower, but ruled against Kookmin Bank in the counter lawsuit brought against Kookmin Bank. Both cases have beenwere appealed to the Seoul High Court, which dismissed the appeals in February 2016. Both cases have been appealed to the Supreme Court of Korea in February 2016, where they are currently pending. Commencing in November 2013, Kookmin Bank was subject to a number of investigations by the Financial Supervisory Service and other governmental authorities concerning alleged issues with Kookmin Bank’s internal controls and possible legal violations by Kookmin Bank and its employees.
In November 2013, Kookmin Bank filed a complaint against the former head and two former employees of its Tokyo Branch for allegedly extending illegal loans under borrowed names. Each of the Financial Supervisory Service and the Financial Services Agency of Japan launched an investigation into the allegations. The Financial Supervisory Service launched an investigation into alleged embezzlement of funds by employees at Kookmin Bank’s headquarters, who have since been dismissed, through the presentation for payment of forged Korean government housing bonds.
In May 2014, the Financial Supervisory Service launched an investigation into a dispute between Kookmin Bank and us regarding the replacement of Kookmin Bank’s main computing system.
In August 2014, the Financial Supervisory Agency of Japan suspended Kookmin Bank from conducting new transactions at its branches in Japan for four months from September 2014 to January 2015. Furthermore, in August 2014, the Financial Supervisory Service imposed disciplinary sanctions on Kookmin Bank and a number of its officers, directors and employees, including the then chief executive officer of Kookmin Bank. In September 2014, the Financial Services Commission imposed a disciplinary sanction on our then chief executive officer. Both the chief executive officer of Kookmin Bank and our chief executive officer, as well as a number of our respective outside directors, subsequently resigned from their posts and have been replaced. In September 2014, the Financial Supervisory Service completed its investigation into Kookmin Bank and us with respect to such allegations.
Furthermore, in February 2014, the Financial Services Commission suspended the new credit card issuance and other related activities of KB Kookmin Card for three months from February to May 2014, in response to an incident involving the misappropriation of the personal information of a large number of its customers by an employee of the Korea Credit Bureau in the first half of 2013. Specifically, during such suspension period, KB Kookmin Card was prohibited from engaging in the following activities:
adding new subscribers for credit cards, prepaid cards and debit cards or issuing such types of cards (except as permitted by the chairman of the Financial Services Commission for public policy purposes); providing new or additional credit lines to credit card customers; and providing new services through mail order or telemarketing channels or related to travel or insurance products. In connection with the misappropriation incident, as of February 28, 2015,December 31, 2017, certain of KB Kookmin Card’s customers havehad filed a total of 101120 lawsuits against KB Kookmin Card with the aggregate amount of claimed damages amounting to approximately ₩52₩10 billion. The final outcome of such lawsuits remains uncertain. In addition, KB Kookmin Card could become subject to additional litigation and regulatory sanctions, and may also incur significant costs relating to the compensation of customers for losses incurred as a result of the fraudulent use of the misappropriated personal information. In February 2018, pursuant to a request by the Financial Supervisory Service, the Supreme Prosecutors’ Office of Korea commenced an investigation into alleged irregularities in hiring practices at five Korean banks, including Kookmin Bank. According to the allegations made by the Financial Supervisory Service, Kookmin Bank unfairly gave favorable treatment to certain individuals, including relatives of the former president of Kookmin Bank (our current chairman and chief executive officer) and our formernon-executive director, in connection with their hiring in 2015 and 2016. While the investigation is currently ongoing and, as of the date of this annual report, there have been no formal charges or indictments against us, one of the employees in the Human Resources Department of Kookmin Bank was indicted in connection with such allegations in April 2018. The trial against such individual is currently ongoing in the Seoul Southern District Court. Dividends Dividends must be approved by the stockholders at the annual general meeting of stockholders. Cash dividends may be paid out of retained earnings that have not been appropriated to statutory reserves. See “Item 10.B. Memorandum and Articles of Association—Description of Capital Stock—Dividends and Other Distributions.” The table below sets forth, for the periods indicated, the dividend per share of common stock and the total amount of dividends declared and paid by us in respect of the years ended December 31, 2010, 2011, 2012, 20132015, 2016 and 2014.2017. The dividends set out for each of the years below were paid within 30 days after our annual stockholders meeting, which is held no later than March of the following year. | | | | | | | | | | | | | | | | | | | | | Fiscal Year | | Dividends per Common Share (1) | | | Dividends per Preferred Share | | | Total Amount of Cash Dividends Paid | | | | | | | | | | | | | | | | (in millions of Won) | | 2010 (2) | | ₩ | 120 | | | US$ | 0.11 | | | | — | | | | — | | | ₩ | 41,163 | | 2011 (3) | | | 720 | | | | 0.62 | | | | — | | | | — | | | | 278,173 | | 2012 (4) | | | 600 | | | | 0.56 | | | | — | | | | — | | | | 231,811 | | 2013 (5) | | | 500 | | | | 0.47 | | | | — | | | | — | | | | 193,176 | | 2014 (6) | | | 780 | | | | 0.72 | | | | — | | | | — | | | | 301,354 | |
| | | | | | | | | | | | | | | | | | | | | Fiscal Year | | Dividends per Common Share(1) | | | Dividends per Preferred Share | | | Total Amount of Cash Dividends Paid | | | | | | | | | | | | | | | | (in millions of Won) | | 2015(2) | | ₩ | 980 | | | US$ | 0.84 | | | | — | | | | — | | | ₩ | 378,625 | | 2016(3) | | | 1,250 | | | | 1.04 | | | | — | | | | — | | | | 497,969 | | 2017(4) | | | 1,920 | | | | 1.80 | | | | — | | | | — | | | | 766,728 | |
(1) | Won amounts are expressed in U.S. dollars at the noon buying rate in effect at the end of the relevant periods as quoted by the Federal Reserve Bank of New York in the United States. |
(2) | On February 10, 2011,4, 2016, our board of directors passed a board resolution recommending a cash dividend of ₩120₩980 per common share (before dividend tax), representing 2.4%19.6% of the par value of each share, for the fiscal year ended December 31, 2010.2015. This resolution was approved and ratified by our stockholders on March 25, 2011. 2016. |
(3) | On February 9, 2012,2017, our board of directors passed a board resolution recommending a cash dividend of ₩720₩1,250 per common share (before dividend tax), representing 14.4%25.0% of the par value of each share, for the fiscal year ended December 31, 2011.2016. This resolution was approved and ratified by our stockholders on March 23, 2012. 24, 2017. |
(4) | On February 7, 2013,8, 2018, our board of directors passed a board resolution recommending a cash dividend of ₩600₩1,920 per common share (before dividend tax), representing 12.0%38.4% of the par value of each share, for the fiscal year ended December 31, 2012.2017. This resolution was approved and ratified by our stockholders on March 22, 2013. |
(5) | On February 7, 2014, our board of directors passed a board resolution recommending a cash dividend of ₩500 per common share (before dividend tax), representing 10.0% of the par value of each share, for the fiscal year ended December 31, 2013. This resolution was approved and ratified by our stockholders on March 28, 2014.
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(6) | On February 5, 2015, our board of directors passed a board resolution recommending a cash dividend of ₩780 per common share (before dividend tax), representing 15.6% of the par value of each share, for the fiscal year ended December 31, 2014. This resolution was approved and ratified by our stockholders on March 27, 2015. 23, 2018. |
Future dividends will depend upon our revenues, cash flow, financial condition and other factors. As an owner of ADSs, you will be entitled to receive dividends payable in respect of the shares of common stock represented by such ADSs. For a description of the tax consequences of dividends paid to our stockholders, see “Item 10.E. Taxation—United States Taxation” and “—Korean Taxation—Taxation of Dividends.” Item 8.B. | Significant Changes |
Not applicable. Item 9. | THE OFFER AND LISTING |
Item 9.A. | Offering and Listing Details |
Market Price Information The principal trading market for our common stock is the KRX KOSPI Market. Our common stock has been listed on the KRX KOSPI Market since October 10, 2008, and the ADSs have been listed on the New York Stock Exchange under the symbol “KB” since September 29, 2008. The ADSs are identified by the CUSIP number 48241A105. Kookmin Bank’s common stock was listed on the KRX KOSPI Market on November 9, 2001, and was suspended from trading from September 25, 2008 and de-listed on October 10, 2008 in connection with the comprehensive stock transfer pursuant to which we were established. Kookmin Bank ADSs were listed on the New York Stock Exchange from November 1, 2001 to September 26, 2008. The Kookmin Bank ADSs were identified by the CUSIP number 50049M109.
The table below sets forth, for the periods indicated, the high and low closing prices and the average daily volume of trading activity on the KRX KOSPI Market for Kookmin Bank common stock with respect to the periods up to and including the third quarter of 2008 and for our common stock, with respect to the subsequent periods, and the high and low closing prices and the average daily volume of trading activity on the New York Stock Exchange for Kookmin Bank ADSs with respect to the periods up to and including the third quarter of 2008 and for our ADSs with respect to the subsequent periods.ADSs. | | | | | | | | | | | | | | | | | | | | | | | | | | | KRX KOSPI Market(1) | | | New York Stock Exchange(2) | | | | Closing Price Per Common Stock | | | Average Daily Trading Volume (in thousands of shares) | | | Closing Price Per ADS | | | Average Daily Trading Volume (in thousands of shares) | | | | High | | | Low | | | | High | | | Low | | | 2010 | | ₩ | 60,400 | | | ₩ | 45,900 | | | | 1,921.9 | | | US$ | 52.89 | | | US$ | 37.81 | | | | 326.8 | | 2011 | | | 62,100 | | | | 34,600 | | | | 2,385.3 | | | | 55.00 | | | | 29.64 | | | | 202.3 | | 2012 | | | 45,000 | | | | 33,000 | | | | 1,342.3 | | | | 40.63 | | | | 28.84 | | | | 150.1 | | 2013 | | | 43,950 | | | | 32,600 | | | | 1,236.0 | | | | 41.26 | | | | 28.85 | | | | 144.3 | | First Quarter | | | 40,750 | | | | 36,150 | | | | 1,629.3 | | | | 37.45 | | | | 32.16 | | | | 188.4 | | Second Quarter | | | 37,600 | | | | 33,650 | | | | 1,093.7 | | | | 33.46 | | | | 29.17 | | | | 147.7 | | Third Quarter | | | 38,800 | | | | 32,600 | | | | 1,155.2 | | | | 35.72 | | | | 28.85 | | | | 124.0 | | Fourth Quarter | | | 43,950 | | | | 37,700 | | | | 1,072.2 | | | | 41.26 | | | | 35.38 | | | | 122.0 | | 2014 | | | 43,000 | | | | 34,200 | | | | 1,068.9 | | | | 42.00 | | | | 32.34 | | | | 118.2 | | First Quarter | | | 42,100 | | | | 35,900 | | | | 1,215.4 | | | | 39.33 | | | | 32.34 | | | | 143.7 | | Second Quarter | | | 37,800 | | | | 34,200 | | | | 997.0 | | | | 36.33 | | | | 33.42 | | | | 91.8 | | Third Quarter | | | 43,000 | | | | 34,650 | | | | 1,191.1 | | | | 42.00 | | | | 34.63 | | | | 93.1 | | Fourth Quarter | | | 43,000 | | | | 36,150 | | | | 872.1 | | | | 40.63 | | | | 32.62 | | | | 144.9 | | October | | | 43,000 | | | | 37,300 | | | | 1,173.5 | | | | 40.63 | | | | 35.06 | | | | 109.5 | | November | | | 41,800 | | | | 38,900 | | | | 750.2 | | | | 38.31 | | | | 34.93 | | | | 64.2 | | December | | | 39,350 | | | | 36,150 | | | | 686.8 | | | | 35.41 | | | | 32.62 | | | | 251.7 | | 2015 (through April 24) | | | 41,650 | | | | 35,000 | | | | 966.9 | | | | 38.57 | | | | 31.22 | | | | 121.5 | | First Quarter | | | 40,000 | | | | 35,000 | | | | 927.1 | | | | 35.97 | | | | 31.22 | | | | 128.1 | | January | | | 38,200 | | | | 35,000 | | | | 873.7 | | | | 35.43 | | | | 31.22 | | | | 149.6 | | February | | | 39,700 | | | | 36,350 | | | | 854.0 | | | | 35.94 | | | | 33.46 | | | | 154.1 | | March | | | 40,000 | | | | 36,650 | | | | 1,034.7 | | | | 35.97 | | | | 32.49 | | | | 86.0 | | April (through April 24) | | | 41,650 | | | | 36,800 | | | | 1,099.5 | | | | 38.57 | | | | 33.69 | | | | 98.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | KRX KOSPI Market(1) | | | New York Stock Exchange(2) | | | | Closing Price Per Common Stock | | | Average Daily Trading Volume (in thousands of shares) | | | Closing Price Per ADS | | | Average Daily Trading Volume (in thousands of shares) | | | | High | | | Low | | | | High | | | Low | | | 2013 | | ₩ | 43,950 | | | ₩ | 32,600 | | | | 1,236.0 | | | US$ | 41.26 | | | US$ | 28.85 | | | | 144.3 | | 2014 | | | 43,000 | | | | 34,200 | | | | 1,068.9 | | | | 42.00 | | | | 32.34 | | | | 118.2 | | 2015 | | | 41,900 | | | | 33,150 | | | | 935.9 | | | | 38.91 | | | | 27.87 | | | | 131.8 | | 2016 | | | 44,400 | | | | 28,300 | | | | 1,013.4 | | | | 38.39 | | | | 23.23 | | | | 138.7 | | First Quarter | | | 32,800 | | | | 28,300 | | | | 1,143.2 | | | | 28.16 | | | | 23.23 | | | | 165.2 | | Second Quarter | | | 36,500 | | | | 32,150 | | | | 919.9 | | | | 31.38 | | | | 26.59 | | | | 129.7 | | Third Quarter | | | 39,900 | | | | 31,800 | | | | 915.0 | | | | 36.35 | | | | 27.54 | | | | 117.5 | | Fourth Quarter | | | 44,400 | | | | 37,850 | | | | 1,021.6 | | | | 38.39 | | | | 34.15 | | | | 143.7 | | 2017 | | | 63,800 | | | | 42,400 | | | | 1,065.3 | | | | 58.80 | | | | 35.47 | | | | 140.5 | | First Quarter | | | 51,900 | | | | 42,400 | | | | 1,057.3 | | | | 45.77 | | | | 35.47 | | | | 154.7 | | Second Quarter | | | 57,800 | | | | 47,000 | | | | 1,077.0 | | | | 50.49 | | | | 41.27 | | | | 158.6 | | Third Quarter | | | 60,200 | | | | 51,100 | | | | 1,139.7 | | | | 54.25 | | | | 44.57 | | | | 138.8 | | Fourth Quarter | | | 63,800 | | | | 55,800 | | | | 978.0 | | | | 58.80 | | | | 49.15 | | | | 110.1 | | October | | | 59,200 | | | | 57,000 | | | | 970.2 | | | | 52.60 | | | | 49.15 | | | | 124.7 | | November | | | 59,900 | | | | 55,800 | | | | 955.0 | | | | 55.31 | | | | 50.82 | | | | 94.3 | | December | | | 63,800 | | | | 58,300 | | | | 1,011.3 | | | | 58.80 | | | | 53.70 | | | | 110.6 | | 2018 (through April 25) | | | 68,600 | | | | 56,600 | | | | 995.7 | | | | 63.90 | | | | 52.99 | | | | 144.8 | | First Quarter | | | 68,600 | | | | 60,100 | | | | 1,013.4 | | | | 63.90 | | | | 55.94 | | | | 138.8 | | January | | | 68,600 | | | | 63,000 | | | | 894.8 | | | | 63.90 | | | | 59.32 | | | | 128.6 | | February | | | 67,700 | | | | 61,000 | | | | 1,215.9 | | | | 62.07 | | | | 56.03 | | | | 149.0 | | March | | | 64,000 | | | | 60,100 | | | | 964.2 | | | | 59.76 | | | | 55.94 | | | | 139.6 | | April (through April 25) | | | 61,300 | | | | 56,600 | | | | 935.4 | | | | 57.21 | | | | 52.99 | | | | 165.1 | |
Source: Global Stock Information Financial Network and KRX KOSPI Market (1) | Trading of Kookmin Bank common shares on the KRX KOSPI Market commenced on November 9, 2001 and ended on September 24, 2008. Trading of our common shares on the KRX KOSPI Market commenced on October 10, 2008.
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(2) | Trading of Kookmin Bank ADSs on the New York Stock Exchange commenced on November 1, 2001 and ended on September 26, 2008. Trading of our ADSs on the New York Stock Exchange commenced on September 29, 2008. Each ADS represents the right to receive one share.
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Item 9.B. | Plan of Distribution |
Not applicable. The KRX KOSPI Market The KRX KOSPI Market (formerly known as the Stock Market Division of the Korea Exchange) began its operations in 1956. It has a single trading floor located in Seoul. The KRX KOSPI Market is a membership organization consisting of most of the Korean financial investment companies with a dealing and/or brokerage license and some Korean branches of foreign financial investment companies with such license. As of December 31, 2014,2017, the aggregate market value of equity securities listed on the KRX KOSPI Market was approximately ₩1,192₩1,606 trillion. The average daily trading volume of equity securities for 20142017 was approximately 278340 million shares and the average daily transaction value was ₩3,984₩5,326 billion. The KRX KOSPI Market has the power in some circumstances to suspend trading in the shares of a given company or tode-list a security pursuant to the Listing Regulation of the KRX KOSPI Market. The KRX KOSPI Market also restricts share price movements. All listed companies are required to file accounting reports annually, semiannually and quarterly and to release immediately all information that may affect trading in a security. The KRX KOSPI Market publishes the KOSPI, which is an index of all equity securities listed on the KRX KOSPI Market, every ten seconds. On January 1, 1983, theThe method of computing KOSPI was changed from the Dow Jones method tois the aggregate value method. In the new method, pursuant to which the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed companies as of the base date, January 4, 1980. The following table sets out movements in KOSPI: | Year | | Opening | | | High | | | Low | | | Closing | | | Opening | | | High | | | Low | | | Closing | | 1985 | | | 139.53 | | | | 163.37 | | | | 131.40 | | | | 163.37 | | | | 139.53 | | | | 163.37 | | | | 131.40 | | | | 163.37 | | 1986 | | | 161.40 | | | | 279.67 | | | | 153.85 | | | | 272.61 | | | | 161.40 | | | | 279.67 | | | | 153.85 | | | | 272.61 | | 1987 | | | 264.82 | | | | 525.11 | | | | 264.82 | | | | 525.11 | | | | 264.82 | | | | 525.11 | | | | 264.82 | | | | 525.11 | | 1988 | | | 532.04 | | | | 922.56 | | | | 527.89 | | | | 907.20 | | | | 532.04 | | | | 922.56 | | | | 527.89 | | | | 907.20 | | 1989 | | | 919.61 | | | | 1,007.77 | | | | 844.75 | | | | 909.72 | | | | 919.61 | | | | 1,007.77 | | | | 844.75 | | | | 909.72 | | 1990 | | | 908.59 | | | | 928.82 | | | | 566.27 | | | | 696.11 | | | | 908.59 | | | | 928.82 | | | | 566.27 | | | | 696.11 | | 1991 | | | 679.75 | | | | 763.10 | | | | 586.51 | | | | 610.92 | | | | 679.75 | | | | 763.10 | | | | 586.51 | | | | 610.92 | | 1992 | | | 624.23 | | | | 691.48 | | | | 459.07 | | | | 678.44 | | | | 624.23 | | | | 691.48 | | | | 459.07 | | | | 678.44 | | 1993 | | | 697.41 | | | | 874.10 | | | | 605.93 | | | | 866.18 | | | | 697.41 | | | | 874.10 | | | | 605.93 | | | | 866.18 | | 1994 | | | 879.32 | | | | 1,138.75 | | | | 855.37 | | | | 1,027.37 | | | | 879.32 | | | | 1,138.75 | | | | 855.37 | | | | 1,027.37 | | 1995 | | | 1,013.57 | | | | 1,016.77 | | | | 847.09 | | | | 882.94 | | | | 1,013.57 | | | | 1,016.77 | | | | 847.09 | | | | 882.94 | | 1996 | | | 888.85 | | | | 986.84 | | | | 651.22 | | | | 651.22 | | | | 888.85 | | | | 986.84 | | | | 651.22 | | | | 651.22 | | 1997 | | | 653.79 | | | | 792.29 | | | | 350.68 | | | | 376.31 | | | | 653.79 | | | | 792.29 | | | | 350.68 | | | | 376.31 | | 1998 | | | 385.49 | | | | 579.86 | | | | 280.00 | | | | 562.46 | | | | 385.49 | | | | 579.86 | | | | 280.00 | | | | 562.46 | | 1999 | | | 587.57 | | | | 1,028.07 | | | | 498.42 | | | | 1,028.07 | | | | 587.57 | | | | 1,028.07 | | | | 498.42 | | | | 1,028.07 | | 2000 | | | 1,059.04 | | | | 1,059.04 | | | | 500.60 | | | | 504.62 | | | | 1,059.04 | | | | 1,059.04 | | | | 500.60 | | | | 504.62 | | 2001 | | | 520.95 | | | | 704.50 | | | | 468.76 | | | | 693.70 | | | | 520.95 | | | | 704.50 | | | | 468.76 | | | | 693.70 | | 2002 | | | 724.95 | | | | 937.61 | | | | 584.04 | | | | 627.55 | | | | 724.95 | | | | 937.61 | | | | 584.04 | | | | 627.55 | | 2003 | | | 635.17 | | | | 822.16 | | | | 515.24 | | | | 810.71 | | | | 635.17 | | | | 822.16 | | | | 515.24 | | | | 810.71 | | 2004 | | | 821.26 | | | | 936.06 | | | | 719.59 | | | | 895.92 | | | | 821.26 | | | | 936.06 | | | | 719.59 | | | | 895.92 | | 2005 | | | 893.71 | | | | 1,379.37 | | | | 870.84 | | | | 1,379.37 | | | | 893.71 | | | | 1,379.37 | | | | 870.84 | | | | 1,379.37 | | 2006 | | | 1,389.27 | | | | 1,464.70 | | | | 1,203.86 | | | | 1,434.46 | | | | 1,389.27 | | | | 1,464.70 | | | | 1,203.86 | | | | 1,434.46 | | 2007 | | | 1,435.26 | | | | 2,064.85 | | | | 1,355.79 | | | | 1,897.13 | | | | 1,435.26 | | | | 2,064.85 | | | | 1,355.79 | | | | 1,897.13 | | 2008 | | | 1,853.45 | | | | 1,888.88 | | | | 938.75 | | | | 1,124.47 | | | | 1,853.45 | | | | 1,888.88 | | | | 938.75 | | | | 1,124.47 | | 2009 | | | 1,157.40 | | | | 1,723.17 | | | | 992.69 | | | | 1,682.77 | | | | 1,157.40 | | | | 1,723.17 | | | | 992.69 | | | | 1,682.77 | | 2010 | | | 1,696.14 | | | | 2,052.97 | | | | 1,548.78 | | | | 2,051.00 | | | | 1,696.14 | | | | 2,052.97 | | | | 1,548.78 | | | | 2,051.00 | | 2011 | | | 2,070.08 | | | | 2,228.96 | | | | 1,652.71 | | | | 1,825.74 | | | | 2,070.08 | | | | 2,228.96 | | | | 1,652.71 | | | | 1,825.74 | | 2012 | | | 1,826.37 | | | | 2,049.28 | | | | 1,769.31 | | | | 1,997.05 | | | | 1,826.37 | | | | 2,049.28 | | | | 1,769.31 | | | | 1,997.05 | | 2013 | | | 2,031.10 | | | | 2,059.58 | | | | 1,780.63 | | | | 2,011.34 | | | | 2,031.10 | | | | 2,059.58 | | | | 1,780.63 | | | | 2,011.34 | | 2014 | | | 1,967.19 | | | | 2,082.61 | | | | 1,886.85 | | | | 1,915.59 | | | | 1,967.19 | | | | 2,082.61 | | | | 1,886.85 | | | | 1,915.59 | | 2015 (through April 24) | | | 1,926.44 | | | | 2,173.41 | | | | 1,882.45 | | | | 2,159.80 | | | 2015 | | | | 1,926.44 | | | | 2,173.41 | | | | 1,829.81 | | | | 1,961.31 | | 2016 | | | | 1,918.76 | | | | 2,068.72 | | | | 1,835.28 | | | | 2,026.46 | | 2017 | | | | 2,026.16 | | | | 2,557.97 | | | | 2,026.16 | | | | 2,467.49 | | 2018 (through April 25) | | | | 2,479.65 | | | | 2,598.19 | | | | 2,363.77 | | | | 2,448.81 | |
Source: The KRX KOSPI Market Shares are quoted “ex-dividend”“ex-dividend” on the first trading day of the relevant company’s accounting period. Since the calendar year is the accounting period for the majority of listed companies, this may account for the drop in KOSPI between its closing level at the end of one calendar year and its opening level at the beginning of the following calendar year. With certain exceptions, principally to take account of a share being quoted “ex-dividend”“ex-dividend” and “ex-rights,“ex-rights,” permitted upward and downward movements in share prices of any category of shares on any day are limited under the rules of the KRX KOSPI Market to 15%30% of the previous day’s closing price of the shares, rounded down as set out below: | | | | | Previous Day’s Closing Price (₩) | | Rounded Down to₩ | | Less than 1,000 | | | 1 | | 1,000 to less than 5,000 | | | 5 | | 5,000 to less than 10,000 | | | 10 | | 10,000 to less than 50,000 | | | 50 | | 50,000 to less than 100,000 | | | 100 | | 100,000 to less than 500,000 | | | 500 | | 500,000 or more | | | 1,000 | |
As a consequence, if a particular closing price is the same as the price set by the fluctuation limit, the closing price may not reflect the price at which persons would have been prepared, or would be prepared to continue, if so permitted, to buy and sell shares. Orders are executed on an auction system with priority rules to deal with competing bids and offers. Due to the deregulation of restrictions on brokerage commission rates, the brokerage commission rate on equity securities transactions may be determined by the parties, subject to commission schedules being filed with the KRX KOSPI Market by the financial investment companies with a brokerage license. In addition, a securities transaction tax will generally be imposed on the transfer of shares or certain securities representing rights to subscribe for shares. An agriculture and fishery special surtax of 0.15% of the sales prices will also be imposed on transfer of these shares and securities on the KRX KOSPI Market. See “Item 10.E. Taxation—Korean Taxation.” The following table sets forth the number of companies listed on the KRX KOSPI Market, the corresponding total market capitalization at the end of the periods indicated and the average daily trading volume for those periods: | | | Market Capitalization on the Last Day of Each Period | | Average Daily Trading Volume, Value | | | Market Capitalization on the Last Day of Each Period | | | Average Daily Trading Volume, Value | | Year | | Number of Listed Companies | | (Billions of Won) | | (Millions of US$) (1) | | Thousands of Shares | | (Millions of Won) | | (Thousands of US$) (1) | | | Number of Listed Companies | | | (Billions of Won) | | | Thousands of Shares | | | (Millions of Won) | | 1985 | | | 342 | | | ₩ | 6,570 | | | US$ | 7,921 | | | | 18,925 | | | ₩ | 12,315 | | | US$ | 14,846 | | | | 342 | | | ₩ | 6,570 | | | | 18,925 | | | ₩ | 12,315 | | 1986 | | | 355 | | | | 11,994 | | | | 13,439 | | | | 31,755 | | | | 32,870 | | | | 36,830 | | | | 355 | | | | 11,994 | | | | 31,755 | | | | 32,870 | | 1987 | | | 389 | | | | 26,172 | | | | 30,250 | | | | 20,353 | | | | 70,185 | | | | 81,120 | | | | 389 | | | | 26,172 | | | | 20,353 | | | | 70,185 | | 1988 | | | 502 | | | | 64,544 | | | | 81,177 | | | | 10,367 | | | | 198,364 | | | | 249,483 | | | | 502 | | | | 64,544 | | | | 10,367 | | | | 198,364 | | 1989 | | | 626 | | | | 95,477 | | | | 138,997 | | | | 11,757 | | | | 280,967 | | | | 409,037 | | | | 626 | | | | 95,477 | | | | 11,757 | | | | 280,967 | | 1990 | | | 669 | | | | 79,020 | | | | 115,610 | | | | 10,866 | | | | 183,692 | | | | 268,753 | | | | 669 | | | | 79,020 | | | | 10,866 | | | | 183,692 | | 1991 | | | 686 | | | | 73,118 | | | | 101,623 | | | | 14,022 | | | | 214,263 | | | | 297,795 | | | | 686 | | | | 73,118 | | | | 14,022 | | | | 214,263 | | 1992 | | | 688 | | | | 84,712 | | | | 110,691 | | | | 24,028 | | | | 308,246 | | | | 402,779 | | | | 688 | | | | 84,712 | | | | 24,028 | | | | 308,246 | | 1993 | | | 693 | | | | 112,665 | | | | 142,668 | | | | 35,130 | | | | 574,048 | | | | 726,919 | | | | 693 | | | | 112,665 | | | | 35,130 | | | | 574,048 | | 1994 | | | 699 | | | | 151,217 | | | | 185,657 | | | | 36,862 | | | | 776,257 | | | | 953,047 | | | | 699 | | | | 151,217 | | | | 36,862 | | | | 776,257 | | 1995 | | | 721 | | | | 141,151 | | | | 178,266 | | | | 26,130 | | | | 487,762 | | | | 616,016 | | | | 721 | | | | 141,151 | | | | 26,130 | | | | 487,762 | | 1996 | | | 760 | | | | 117,370 | | | | 151,289 | | | | 26,571 | | | | 486,834 | | | | 627,525 | | | | 760 | | | | 117,370 | | | | 26,571 | | | | 486,834 | | 1997 | | | 776 | | | | 70,989 | | | | 82,786 | | | | 41,525 | | | | 555,759 | | | | 648,115 | | | | 776 | | | | 70,989 | | | | 41,525 | | | | 555,759 | | 1998 | | | 748 | | | | 137,799 | | | | 81,297 | | | | 97,716 | | | | 660,429 | | | | 389,634 | | | | 748 | | | | 137,799 | | | | 97,716 | | | | 660,429 | | 1999 | | | 725 | | | | 349,504 | | | | 294,319 | | | | 278,551 | | | | 3,481,620 | | | | 2,931,891 | | | | 725 | | | | 349,504 | | | | 278,551 | | | | 3,481,620 | | 2000 | | | 704 | | | | 188,042 | | | | 166,703 | | | | 306,163 | | | | 2,602,211 | | | | 2,306,925 | | | | 704 | | | | 188,042 | | | | 306,163 | | | | 2,602,211 | | 2001 | | | 689 | | | | 255,850 | | | | 200,039 | | | | 473,241 | | | | 1,997,420 | | | | 1,561,705 | | | | 689 | | | | 255,850 | | | | 473,241 | | | | 1,997,420 | | 2002 | | | 683 | | | | 258,681 | | | | 217,379 | | | | 857,245 | | | | 3,041,598 | | | | 2,308,789 | | | | 683 | | | | 258,681 | | | | 857,245 | | | | 3,041,598 | | 2003 | | | 684 | | | | 355,363 | | | | 298,123 | | | | 542,010 | | | | 2,216,636 | | | | 1,859,594 | | | | 684 | | | | 355,363 | | | | 542,010 | | | | 2,216,636 | | 2004 | | | 683 | | | | 412,588 | | | | 398,597 | | | | 372,895 | | | | 2,232,108 | | | | 2,156,418 | | | | 683 | | | | 412,588 | | | | 372,895 | | | | 2,232,108 | | 2005 | | | 702 | | | | 655,075 | | | | 648,589 | | | | 467,629 | | | | 3,157,662 | | | | 3,126,398 | | | | 702 | | | | 655,075 | | | | 467,629 | | | | 3,157,662 | | 2006 | | | 731 | | | | 704,588 | | | | 757,621 | | | | 279,096 | | | | 3,435,180 | | | | 3,693,742 | | | | 731 | | | | 704,588 | | | | 279,096 | | | | 3,435,180 | | 2007 | | | 745 | | | | 951,900 | | | | 1,017,205 | | | | 363,732 | | | | 5,539,588 | | | | 5,919,628 | | | | 745 | | | | 951,900 | | | | 363,732 | | | | 5,539,588 | | 2008 | | | 763 | | | | 592,635 | | | | 469,600 | | | | 355,205 | | | | 5,189,643 | | | | 4,112,238 | | | | 763 | | | | 592,635 | | | | 355,205 | | | | 5,189,643 | | 2009 | | | 770 | | | | 887,935 | | | | 763,027 | | | | 485,657 | | | | 5,795,426 | | | | 4,980,172 | | | | 770 | | | | 887,935 | | | | 485,657 | | | | 5,795,426 | | 2010 | | | 777 | | | | 1,141,885 | | | | 1,009,981 | | | | 380,859 | | | | 5,619,768 | | | | 4,970,607 | | | | 777 | | | | 1,141,885 | | | | 380,859 | | | | 5,619,768 | | 2011 | | | 791 | | | | 1,041,999 | | | | 899,438 | | | | 353,759 | | | | 6,863,146 | | | | 5,924,166 | | | | 791 | | | | 1,041,999 | | | | 353,759 | | | | 6,863,146 | | 2012 | | | 784 | | | | 1,154,294 | | | | 1,085,638 | | | | 486,480 | | | | 4,823,643 | | | | 4,536,739 | | | | 784 | | | | 1,154,294 | | | | 486,480 | | | | 4,823,643 | | 2013 | | | 777 | | | | 1,185,974 | | | | 1,123,879 | | | | 328,325 | | | | 3,993,422 | | | | 3,784,337 | | | | 777 | | | | 1,185,974 | | | | 328,325 | | | | 3,993,422 | | 2014 | | | 773 | | | | 1,192,253 | | | | 1,092,918 | | | | 278,082 | | | | 3,983,580 | | | | 3,651,679 | | | | 773 | | | | 1,192,253 | | | | 278,082 | | | | 3,983,580 | | 2015 (through April 24) | | | 762 | | | | 1,346,808 | | | | 1,251,855 | | | | 398,452 | | | | 5,133,955 | | | | 4,771,999 | | | 2015 | | | | 770 | | | | 1,242,832 | | | | 455,256 | | | | 5,351,734 | | 2016 | | | | 779 | | | | 1,308,440 | | | | 376,773 | | | | 4,523,044 | | 2017 | | | | 774 | | | | 1,605,821 | | | | 340,457 | | | | 5,325,760 | | 2018 (through April 25) | | | | 777 | | | | 1,634,742 | | | | 409,131 | | | | 7,139,579 | |
Source: The KRX KOSPI Market (1) | Converted at the noon buying rate of the Federal Reserve Bank of New York in effect on the last business day of the period indicated.
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The Korean securities markets are principally regulated by the Financial Services Commission and the Financial Investment Services and Capital Markets Act, which replaced the Korean Securities Exchange Act in February 2009.Act. The Financial Investment Services and Capital Markets Act imposes restrictions on insider trading, price manipulation and deceptive action (including unfair trading), requires specified information to be made available by listed companies to investors and establishes rules regarding margin trading, proxy solicitation, takeover bids, acquisition of treasury shares and reporting requirements for stockholders holding substantial interests. Protection of Customer’s Interest in Case of Insolvency of Financial Investment Companies with a Brokerage License
Under Korean law, the relationship between a customer and a financial investment company with a brokerage license in connection with a securities sell or buy order is deemed to be consignment and the securities acquired by a consignment agent (i.e., the financial investment company with a brokerage license) through such sell or buy order are regarded as belonging to the customer in so far as the customer and the consignment agent’s creditors are concerned. Therefore, in the event of a bankruptcy or reorganization procedure involving a financial investment company with a brokerage license, the customer of such financial investment company is entitled to the proceeds of the securities sold by such financial investment company. When a customer places a sell order with a financial investment company with a brokerage license which is not a member of the KRX KOSPI Market, and that financial investment company places a sell order with another financial investment company with a brokerage license, which is a member of the KRX KOSPI Market, the customer is still entitled to the proceeds of the securities sold and received by thenon-member company from the member company regardless of the bankruptcy or reorganization of thenon-member company. Under the Financial Investment Services and Capital Markets Act, the KRX KOSPI Market is obliged to indemnify any loss or damage incurred by a counterparty as a result of a breach by its members. If a financial investment company with a brokerage license which is a member of the KRX KOSPI Market breaches its obligation in connection with a buy order, the KRX KOSPI Market is obliged to pay the purchase price on behalf of the breaching member. Therefore, the customer can acquire the securities that have been ordered to be purchased by the breaching member. When a customer places a buy order with anon-member company and thenon-member company places a buy order with a member company, the customer has the legal right to the securities received by thenon-member company from the member company because the purchased securities are regarded as belonging to the customer in so far as the customer and thenon-member company’s creditors are concerned. As the cash deposited with a financial investment company with a brokerage license is regarded as belonging to such financial investment company, which is liable to return the same at the request of its customer, the customer cannot take back deposited cash from such financial investment company if a bankruptcy or reorganization procedure is instituted against such financial investment company and, therefore, can suffer from loss or damage as a result. However, the Depositor Protection Act provides that the Korea Deposit Insurance Corporation will, upon the request of the investors, pay investors an amount equal to the full amount of cash deposited with a financial investment company with a brokerage license prior to August 1, 1998 in case of such financial investment company’s bankruptcy, liquidation, cancellationcancelation of securities business license or other insolvency events. However, this indemnification was available only until the end of 2000. From 2001, the maximum amount to be paid to each customer is limited to ₩50 million. Pursuant to the Financial Investment Services and Capital Markets Act, financial investment companies with a dealing and/or brokerage license are required to deposit the cash received from its customers to the extent the amount is not covered by the insurance with the Korea Securities Finance Corporation, a special entity established pursuant to the Financial Investment Services and Capital Markets Act.Set-off or attachment of cash deposits by such financial investment companies is prohibited. The premiums related to this insurance are paid by such financial investment companies. Reporting Requirements for Holders of Substantial Interests Any person whose direct or beneficial ownership of our common stock with voting rights, whether in the form of shares of common stock or ADSs, certificates representing the rights to subscribe for shares orequity-related debt securities including convertible bonds and bonds with warrants (which we refer to collectively as “Equity Securities”), together with the Equity Securities beneficially owned by certain related persons or by any person acting in concert with the person, accounts for 5% or more of the total issued and outstanding shares (plus Equity(Equity Securities of us held by such persons)persons and treasury stock) is required to report the status and purpose (in terms of whether the purpose of the shareholding is to exercise control over our management) of the holdings to the Financial Services Commission and the KRX KOSPI Market within five business days after reaching the 5% ownership interest. In addition, any change in (i) the ownership interest subsequent to the report that equals or exceeds 1% of the total issued and outstanding Equity Securities of us or (ii) the purpose of the shareholding is required to be reported to the Financial Services Commission and the KRX KOSPI Market within five business days from the date of the change. Violation of these reporting requirements may subject a person to criminal sanctions such as fines or imprisonment, an administrative fine of up to 0.001% of the aggregate market value of the total issued and outstanding stock or ₩500 million, whichever is lower, and/or a loss of voting rights with respect to the ownership of Equity Securities exceeding 5% of the total issued and outstanding Equity Securities with respect to which the reporting requirements were violated. Furthermore, the Financial Services Commission may order the disposal of the unreported Equity Securities. In addition to the reporting requirements described above, any person whose direct or beneficial ownership of our stock accounts for 10% or more of the total issued and outstanding stock (which we refer to as a “major stockholder”) must report the status of his/her shareholding to the Korea Securities and Futures Commission and the KRX KOSPI Market within five days after becoming a major stockholder. In addition, any change in the ownership interest subsequent to the report must be reported to the Korea Securities and Futures Commission and the KRX KOSPI Market within five days of the occurrence of the change.change, provided that such reporting obligation would not apply if the change in the ownership interest consists of less than 1,000 shares and the amount of such change is less than ₩10 million. Violation of these reporting requirements may subject a person to criminal sanctions such as fines or imprisonment. Any single stockholder and persons who stand in a special relationship with that stockholder that acquire more than 4% of the voting stock of a nationwide Korean bank pursuant to the Bank Act will be subject to reporting requirements. In addition, any single stockholder and persons who stand in a special relationship with that stockholder that acquire in excess of 10% of a nationwide bank’s total issued and outstanding shares with voting rights must receive approval from the Financial Services Commission to acquire shares in each instance where the total shareholding would exceed 10%, 25% or 33%, respectively, of the bank’s total issued and outstanding shares with voting rights. See “Item 4.B. Business Overview—Supervision and Regulation—Principal Regulations Applicable to Banks—Restrictions on Bank Ownership.” Restrictions Applicable to ADSs No Korean governmental approval is necessary for the sale and purchase of our ADSs in the secondary market outside Korea or for the withdrawal of shares of our common stock underlying the ADSs and the delivery inside Korea of shares in connection with the withdrawal, provided that a foreigner who intends to acquire the shares must obtain an investment registration card from the Financial Supervisory Service as described below. The acquisition of the shares by a foreigner must be immediately reported to the governor of the Financial Supervisory Service, either by the foreigner or by his standing proxy in Korea. Persons who have acquired shares of our common stock as a result of the withdrawal of shares underlying our ADSs may exercise their preemptive rights for new shares, participate in free distributions and receive dividends on shares without any further Korean governmental approval. Under current Korean laws and regulations, the depositary is required to obtain our prior consent for the number of shares of our common stock to be deposited in any given proposed deposit that exceeds the difference between: | (1) | the aggregate number of shares of our common stock deposited by us for the issuance of our ADSs (including deposits in connection with the initial issuance and all subsequent offerings of our ADSs and stock dividends or other distributions related to these ADSs); and |
| (2) | the number of shares of our common stock on deposit with the depositary at the time of such proposed deposit. |
We have agreed to grant such consent to the extent that the total number of shares on deposit with the depositary would not exceed 116,583,985 at any time. Restrictions Applicable to Shares As a result of amendments to the Foreign Exchange Transaction Laws and Financial Services Commission regulations (which we refer to collectively as the “Investment Rules”) adopted in connection with the stock market opening from January 1992 and after that date, foreigners may invest, with limited exceptions and subject to procedural requirements, in all shares of Korean companies, whether listed on the KRX KOSPI Market or on the KRX KOSDAQ Market, unless prohibited by specific laws. Foreign investors may trade shares listed on the KRX KOSPI Market or on the KRX KOSDAQ Market only through the KRX KOSPI Market or the KRX KOSDAQ Market, except in limited circumstances, including: odd-lot trading of shares; acquisition of shares (which we refer to as “Converted Shares”) by exercise of warrants, conversion rights or exchange rights under bonds with warrants, convertible bonds or exchangeable bonds or withdrawal rights under depositary receipts issued outside of Korea by a Korean company; acquisition of shares as a result of inheritance, donation, bequest or exercise of stockholders’ rights, including preemptive rights or rights to participate in free distributions and receive dividends; over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been reached or exceeded subject to certain exceptions; and sale and purchase of shares at fair value between foreigners who are part of an investor group comprised of foreign companies investing under the control of a common investment manager pursuant to applicable laws or contract. Forover-the-counter transactions of shares between foreigners outside the KRX KOSPI Market or the KRX KOSDAQ Market for shares with respect to which the limit on aggregate foreign ownership has been reached or exceeded, a financial investment company with a brokerage license in Korea must act as an intermediary.Odd-lot trading of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market must involve a financial investment company with a dealing license as the other party. Foreign investors are prohibited from engaging in margin transactions by borrowing shares from a financial investment company with a dealing and/or brokerage license with respect to shares that are subject to a foreign ownership limit. The Investment Rules require a foreign investor who wishes to invest in shares on the KRX KOSPI Market or the KRX KOSDAQ Market (including Converted Shares and shares being issued for initial listing on the KRX KOSPI Market or on KRX KOSDAQ Market) to register its identity with the Financial Supervisory Service prior to making any such investment. The registration requirement does not, however, apply to foreign investors who acquire Converted Shares with the intention of selling such Converted Shares within three months from the date of acquisition. Upon registration, the Financial Supervisory Service will issue to the foreign investor an investment registration card, which must be presented each time the foreign investor opens a brokerage account with a financial investment company with a brokerage license. Foreigners eligible to obtain an investment registration card include foreign nationals who have not been residing in Korea for a consecutive period of six months or more, foreign governments, foreign municipal authorities, foreign public institutions, international financial institutions or similar international organizations, corporations incorporated under foreign laws and any person in any additional category designated by the Enforcement Decree of the Financial Investment Services and Capital Markets Act. All Korean offices of a foreign corporation as a group are treated as a separate foreigner from the offices of the corporation outside Korea for the purpose of investment registration. However, a foreign corporation or depositary issuing depositary receipts may obtain one or more investment registration cards in its name in certain circumstances as described in the relevant regulations. Upon a foreign investor’s purchase of shares through the KRX KOSPI Market or the KRX KOSDAQ Market, no separate report by the investor is required because the investment registration card system is designed to control and oversee foreign investment through a computer system. However, a foreign investor’s acquisition or sale of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market (as discussed above) must be reported by the foreign investor or his standing proxy to the governor of the Financial Supervisory Service at the time of each such acquisition or sale. In particular, if a foreign investor acquires or sells his shares in connection with a tender offer,odd-lot trading of shares or trades of a class of shares for which the aggregate foreign ownership limit has been reached or exceeded, such foreign investor or his standing proxy must ensure that the financial investment company that was engaged to facilitate the transaction reports such transaction to the governor of the Financial Supervisory Service. A foreign investor may appoint a standing proxy from among the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing and/or brokerage license (including domestic branches of foreign financial investment companies with such license), financial investment companies with a collective investment license (including domestic branches of foreign financial investment companies with such license) and internationally recognized custodians which will act as a standing proxy to exercise stockholders’ rights or perform any matters related to the foregoing activities if the foreign investor does not perform these activities himself. Generally, a foreign investor may not permit any person, other than its standing proxy, to exercise rights relating to his shares or perform any tasks related thereto on his behalf. However, a foreign investor may be exempted from complying with these standing proxy rules with the approval of the governor of the Financial Supervisory Service in cases deemed inevitable, including by reason of conflict between laws of Korea and the home country of the foreign investor. Certificates evidencing shares of Korean companies must be kept in the custody of an eligible custodian in Korea. The same entities eligible to act as a standing proxy are eligible to act as a custodian of shares for anon-resident or foreign investor. A foreign investor must ensure that its custodian deposits its shares with the Korea Securities Depository. A foreign investor may be exempted from complying with this deposit requirement with the approval of the governor of the Financial Supervisory Service in circumstances where compliance with that requirement is made impracticable, including cases where compliance would contravene the laws of the foreign investors’ home country. Under the Investment Rules, with certain exceptions, foreign investors may acquire shares of a Korean company without being subject to any foreign investment ceiling. As one such exception, designated public corporations are subject to a 40% ceiling on the acquisition of shares by foreigners in the aggregate. In addition, designated public corporations may set a ceiling on the acquisition of shares by a single person in their articles of incorporation. Currently, Korea Electric Power Corporation is the only designated public corporation that has set such a ceiling. Furthermore, an investment by a foreign investor in 10% or more of the issued and outstanding shares with voting rights of a Korean company is defined as a foreign direct investment under the Foreign Investment Promotion Act of Korea. Generally, a foreign direct investment must be reported to the Ministry of Trade, Industry and Energy of Korea. The acquisition of shares of a Korean company by a foreign investor may also be subject to certain foreign or other shareholding restrictions in the event that the restrictions are prescribed in a specific law that regulates the business of the Korean company. For a description of such restrictions applicable to Korean banks, see “Item 4.B. Business Overview—Supervision and Regulation—Principal Regulations Applicable to Banks—Restrictions on Bank Ownership.” Item 9.D. | Selling Shareholders |
Not applicable. Not applicable. Item 9.E.9.F. | DilutionExpenses of the Issue |
Not applicable. Item 9.F.10. | ADDITIONAL INFORMATION |
Item 10.A. | Expenses of the IssueShare Capital |
Not applicable. Item 10. | ADDITIONAL INFORMATION |
Not applicable.
Item 10.B. | Memorandum and Articles of Association |
Description of Capital Stock Set forth below is information relating to our capital stock, including brief summaries of certain provisions of our articles of incorporation, the Korean Commercial Code, Financial Investment Services and Capital Markets Act and certain related laws of Korea, all as currently in effect. The following summaries do not purport to be complete and are subject to the articles of incorporation and the applicable provisions of the Financial Investment Services and Capital Markets Act, the Korean Commercial Code, and certain other related laws of Korea. As of December 31, 2014,2017, our authorized share capital is 1,000,000,000 shares. Pursuant to our articles of incorporation, we are authorized to issue shares with preferred dividend,non-voting shares, class shares with conversion rights, class shares with redemption rights and shares with a combination of all or any of the foregoing characteristics (collectively, “Class Shares”), as well as common shares. Subject to applicable laws and regulations, we are authorized to issue Class Shares up toone-half of all of our issued and outstanding shares. Under our articles of incorporation, dividends onnon-voting shares with preferred dividend are required to be at least 1% per annum of the par value and the board of directors must determine at the time of issuance of such shares the dividend rate, type of distributable properties, method of determining the value of distributable properties and conditions on payment of dividends. Also, we may, pursuant to a resolution of the board of directors, issue suchnon-voting shares with preferred dividend as redeemable shares that may be redeemed with profits at the relevant shareholder’s or our discretion, up toone-half of all of our issued and outstanding shares. In addition, pursuant to a resolution of the board of directors, we may issue shares that are convertible into common shares or Class Shares at the request of the relevant shareholders, up to 20% of all of our issued and outstanding shares. The period during which a relevant shareholder may make a request for conversion may be determined by a resolution of the board of directors and must be a period between one and ten years from the issue date. Furthermore, through an amendment of the articles of incorporation, we may create new classes of shares, which may be common shares or Class Shares having additional features as prescribed under the Korean Commercial Code. See “—Voting Rights.” As of the date of this annual report, 386,351,693418,111,537 shares of common stock were issued and 386,351,693399,037,583 shares of common stock were outstanding. No Class Shares are currently outstanding. All of the issued and outstanding shares arefully-paid andnon-assessable, and are in registered form. Our authorized but unissued share capital consists of 613,648,307 shares. We581,888,463 shares.We may issue the unissued shares without further stockholder approval, subject to a board resolution as provided in the articles of incorporation. See “—Preemptive Rights and Issuances of Additional Shares” and “—Dividends and Other Distributions—Distribution of Free Shares.” Our articles of incorporation provide that our stockholders may, by special resolution, grant to our and our subsidiaries’ officers directors and employees stock options exercisable for up to 15% of the total number of our issued and outstanding shares. Our board of directors may also grant stock options to non-director officers and employees other than directors exercisable for up to 1% of our issued and outstanding shares, provided that such grant must be approved by a resolution of the subsequent general meeting of stockholders. As of March 31, 2015,2018, none of our officers, directors and employees held options to purchase shares of our common stock. Upon their exercise of such stock options, we are required to pay in cash the difference between the exercise price and the market price of our common stock at the date of exercise. See “Item 6.E. Share Ownership—Stock Options.” Share certificates are issued in denominations of one, five, ten, 50, 100, 500, 1,000 and 10,000 shares. Organization and Register We are a financial holding company established under the Financial Holding Company Act. We are registered with the commercial registry office of Seoul Central District Court. Dividends and Other Distributions Dividends Dividends are distributed to stockholders in proportion to the number of shares of the relevant class of capital stock owned by each stockholder following approval by the stockholders at an annual general meeting of stockholders. Subject to the requirements of the Korean Commercial Code and other applicable laws and regulations, we expect to pay full annual dividends on newly issued shares for the year in which the new shares are issued. We declare our dividend annually at the annual general meeting of stockholders, which are held within three months after the end of each fiscal year. Once declared, the annual dividend must be paid to the stockholders of record as of the end of the preceding fiscal year within one month after the annual general meeting unless otherwise resolved thereby. Annual dividends may be distributed either in cash or in shares provided that shares must be distributed at par value and, if the market price of the shares is less than their par value, dividends in shares may not exceedone-half of the total annual dividend (including dividends in shares). Under the Korean Commercial Code and our articles of incorporation, we do not have an obligation to pay any annual dividend unclaimed for five years from the payment date. The Financial Holding Company Act and related regulations require that each time a Korean financial holding company pays an annual dividend, it must set aside in its legal reserve to stated capital an amount equal to at leastone-tenth of its net income after tax until the amount set aside reaches at least the aggregate amount of its stated capital. Unless it sets aside this amount, a Korean financial holding company may not pay an annual dividend. We intend to set aside allowances for loan losses and reserves for severance pay in addition to this legal reserve. For information regarding Korean taxes on dividends, see “Item 10.E. Taxation—Korean Taxation.” Distribution of Free Shares In addition to permitting dividends in the form of shares to be paid out of retained or current earnings, the Korean Commercial Code permits a company to distribute to its stockholders, in the form of free shares, an amount transferred from the capital surplus or legal reserve to stated capital. These free shares must be distributed pro rata to all stockholders. Our articles of incorporation provide that the types of shares to be distributed to the holders ofnon-voting shares with preferred dividend will be the same type ofnon-voting shares with preferred dividend held by such holders. Preemptive Rights and Issuances of Additional Shares Unless otherwise provided in the Korean Commercial Code, a company may issue authorized but unissued shares at such times and upon such terms as the board of directors of the company may determine. The company must offer the new shares on uniform terms to all stockholders who have preemptive rights and who are listed on the stockholders’ register as of the applicable record date. Our stockholders will be entitled to subscribe for any newly issued shares in proportion to their existing shareholdings. However, as provided in our articles of incorporation, new shares may be issued to persons other than existing stockholders if such shares are: (1) publicly offered pursuant to the Financial Investment Services and Capital Markets Act, (2) issued to an employee stock ownership association, (3) issued upon exercise of stock options pursuant to the Financial Investment Services and Capital Markets Act, (4) issued for the issuance of our depositary receipts, (5) issued to certain foreign or domestic financial institutions or institutional investors to raise funds to meet urgent needs for our management or operations or (6) issued primarily to a third party who has contributed to the management of our business, including by providing financing, credit, advanced financing technique,know-how or entering into close business alliances, except that, in the case of issuances of new shares under (1), (4), (5) and (6) above, the number of new shares issued to persons other than existing stockholders may not exceed 50% of our total issued and outstanding capital stock. Public notice of the preemptive rights to new shares and the transferability thereof must be given not less than two weeks (excluding the period during which the stockholders’ register is closed) prior to the record date. We will notify the stockholders or persons other than existing stockholders, who are entitled to subscribe for newly issued shares of the deadline for subscription at least two weeks prior to the deadline. If such stockholders or persons fail to subscribe on or before such deadline, their preemptive rights will lapse. Our board of directors may determine how to distribute shares in respect of which preemptive rights have not been exercised or where fractions of shares occur. Under the Financial Investment Services and Capital Markets Act, members of a company’s employee stock ownership association, whether or not they are stockholders, will have a preemptive right, subject to certain exceptions, to subscribe for up to 20% of the shares publicly offered pursuant to the Financial Investment Services and Capital Markets Act. This right is exercisable only to the extent that the total number of shares so acquired and held by such members does not exceed 20% of the total number of shares then issued and outstanding. Voting Rights Each outstanding share of our common stock is entitled to one vote per share. However, voting rights with respect to shares of common stock that we hold or any of our subsidiaries holds may not be exercised. Unless stated otherwise in a company’s articles of incorporation, the Korean Commercial Code permits holders of an aggregate of 1% or more of the issued and outstanding shares with voting rights to request cumulative voting when electing two or more directors. Our articles of incorporation do not prohibit cumulative voting. The Korean Commercial Code and our articles of incorporation provide that an ordinary resolution may be adopted if approval is obtained from the holders of at least a majority of those shares of common stock present or represented at such meeting and such majority also represents at leastone-fourth of the total of our issued and outstanding voting shares. Holders ofnon-voting shares (other than enfranchisednon-voting shares) will not be entitled to vote on any resolution or to receive notice of any general meeting of stockholders unless the agenda of the meeting includes consideration of a resolution on which such holders are entitled to vote. The Korean Commercial Code provides that a company’s articles of incorporation may prescribe conditions for the enfranchisement ofnon-voting shares. For example, if our annual general stockholders’ meeting resolves not to pay to holders ofnon-voting shares with preferred dividend the annual dividend as determined by the board of directors at the time of issuance of such shares, the holders ofnon-voting shares with preferred dividend will be entitled to exercise voting rights from the general stockholders’ meeting following the meeting adopting such resolution to the end of a meeting to declare to pay such dividend with respect to thenon-voting shares with preferred dividend. Holders of such enfranchisednon-voting shares with preferred dividend will have the same rights as holders of common stock to request, receive notice of, attend and vote at a general meeting of stockholders. The Korean Commercial Code provides that to amend the articles of incorporation, which is also required for any change to the authorized share capital of the company, and in certain other instances, including removal of a director of a company, dissolution, merger or consolidation of a company, transfer of the whole or a significant part of the business of a company, acquisition of all of the business of any other company, acquisition of a part of the business of any other company having a material effect on the business of the company or issuance of new shares at a price lower than their par value, a special resolution must be adopted by the approval of the holders of at leasttwo-thirds of those shares present or represented at such meeting and such special majority also represents at leastone-third of the total issued and outstanding shares with voting rights of the company. In addition, in the case of amendments to the articles of incorporation or any merger or consolidation of a company or in certain other cases, where the rights or interest of the holders of Class Shares are adversely affected, a resolution must be adopted by a separate meeting of holders of Class Shares. Such a resolution may be adopted if the approval is obtained from stockholders of at leasttwo-thirds of the Class Shares present or represented at such meeting and such shares also represent at leastone-third of the total issued and outstanding Class Shares of the company. A stockholder may exercise his voting rights by proxy given to another stockholder. The proxy must present the power of attorney prior to the start of a meeting of stockholders. Liquidation Rights In the event we are liquidated, the assets remaining after the payment of all debts, liquidation expenses and taxes will first be distributed to holders of Class Shares which have a preference right in respect of the distribution of residual properties as determined by our board of directors at the time of their issuance, and the residue thereafter will be distributed to the other stockholders in proportion to the number of shares held by them. General Meetings of Stockholders There are two types of general meetings of stockholders: annual general meetings and extraordinary general meetings. We will beare required to convene our annual general meeting within three months after the end of each fiscal year. Subject to a board resolution or court approval, an extraordinary general meeting of stockholders may be held when necessary or at the request of the holders of an aggregate of 3% or more of our issued and outstanding shares, or the holders of an aggregate of 1.5%0.75% or more of our issued and outstanding stock with voting rights, who have held those shares at least for six months.months, under the Act on the Corporate Governance of Financial Companies and itssub-regulations. Under the Korean Commercial Code, an extraordinary general meeting of stockholders may also be convened at the request of our Audit Committee, subject to a board resolution or court approval. Holders ofnon-voting shares may be entitled to request a general meeting of stockholders only to the extent thenon-voting shares have become enfranchised as described under the section entitled “—Voting Rights” above, hereinafter referred to as “enfranchisednon-voting shares.” Meeting agendas will be determined by the board of directors or proposed by holders of an aggregate of 3% or more of the issued and outstanding shares with voting rights, or by holders of an aggregate of 0.5%0.1% or more of our issued and outstanding shares with voting rights, who have held those shares for at least six months, by way of a written proposal to the board of directors at least six weeks prior to the meeting.meeting, under the Act on the Corporate Governance of Financial Companies and itssub-regulations. Written notices ore-mail notices stating the date, place and agenda of the meeting must be given to the stockholders at least two weeks prior to the date of the general meeting of stockholders. Notice may, however, be given to holders of 1% or less of the total number of issued and outstanding shares which are entitled to vote, either by placing at least two public notices at least two weeks in advance of the meeting in at least two daily newspapers or by placing a notice through the electronic disclosure system operated by the Financial Supervisory Service or the Korea Exchange. Stockholders who are not on the stockholders’ register as of the record date will not be entitled to receive notice of the general meeting of stockholders, and they will not be entitled to attend or vote at such meeting. Holders of enfranchisednon-voting shares who are on the stockholders’ register as of the record date will be entitled to receive notice of the general meeting of stockholders and they will be entitled to attend and vote at such meeting. Otherwise, holders ofnon-voting shares will not be entitled to receive notice of or vote at general meetings of stockholders. The general meeting of stockholders will be held at our head office, which is our registered head office, or, if necessary, may be held anywhere in the vicinity of our head office. Rights of Dissenting Stockholders Pursuant to the Financial Investment Services and Capital Markets Act and the Act on the Improvement of the Structure of the Financial Industry, in certain limited circumstances (including, without limitation, if we transfer all or any significant part of our business, if we acquire a part of the business of any other company and such acquisition has a material effect on our business or if we merge or consolidate with another company), dissenting holders of shares of our common stock and our stock with preferred dividend who acquired such shares prior to the announcement of the relevant resolution of the board of directors (or up to one day after such announcement in the event that such resolution is made by the board of directors pursuant to an Enforcement Decree) will have the right to require us to purchase their shares by providing written notice to us. Tous.To exercise such a right, stockholders must submit to us a written notice of their intention to dissent prior to the general meeting of stockholders. Within 20 days (10 days in the case of a merger or consolidation under the Law on Improvement of the Structure of the Financial Industry) after the date on which the relevant resolution is passed at such meeting, such dissenting stockholders must request in writing that we purchase their shares. We are obligated to purchase the shares from dissenting stockholders within one month after the end of such request period (within two months after the receipt of such request in the case of a merger or consolidation under the Law on Improvement of the Structure of Financial Industry) at a price to be determined by negotiation between the stockholder and us. If we cannot agree on a price with the stockholder through such negotiations, the purchase price will be the arithmetic mean of: the weighted average of the daily stock prices on the KRX KOSPI Market for thetwo-month period prior to the date of the adoption of the relevant board of directors’ resolution; the weighted average of the daily stock prices on the KRX KOSPI Market for theone-month period prior to the date of the adoption of the relevant board of directors’ resolution; and the weighted average of the daily stock prices on the KRX KOSPI Market for theone-week period prior to the date of the adoption of the relevant board of directors’ resolution. However, any dissenting stockholder who wishes to contest the purchase price may bring a claim in court. Required Disclosure of Ownership Under Korean law, stockholders who beneficially hold more than a certain percentage of our common stock, or who are related to or are acting in concert with other holders of certain percentages of our common stock or our other equity securities, must report the status of their holdings to the Financial Services Commission and other relevant governmental authorities. For a description of such required disclosure of ownership, see “Item 4.B. Business Overview—Supervision and Regulation—Principal Regulations Applicable to Financial Holding Companies—Restrictions on Ownership of a Financial Holding Company” and “Item 9.C. Markets—Reporting Requirements for Holders of Substantial Interests.” Other Provisions
Register of Stockholders and Record Dates We maintain the register of our stockholders at our principal office in Seoul, Korea. We register transfers of shares on the register of stockholders upon presentation of the share certificates. The record date for annual dividends is December 31. For the purpose of determining the holders of shares entitled to annual dividends, the register of stockholders may be closed for the period beginning from January 1 and ending on January 31. Further, the Korean Commercial Code and our articles of incorporation permit us upon at least two weeks’ public notice to set a record date and/or close the register of stockholders for not more than three months for the purpose of determining the stockholders entitled to certain rights pertaining to the shares. However, in the event that the register of stockholders is closed for the period beginning from January 1 and ending on January 31 for the purpose of determining the holders of shares entitled to attend the annual general meeting of stockholders, the Korean Commercial Code and our articles of incorporation waive the requirement to provide at least two weeks’ public notice. Thenotice.The trading of shares and the delivery of certificates in respect thereof may continue while the register of stockholders is closed. Also, we may distribute dividends to stockholders on a quarterly basis, and the record dates for these quarterly dividends are the end of March, June and September of each year. Annual Reports At least one week before the annual general meeting of stockholders, we must make our management report to shareholders and audited financial statements available for inspection at our head office and at all of our branch offices. Copies of this report, the audited financial statements and any resolutions adopted at the general meeting of stockholders are available to our stockholders. Under the Financial Investment Services and Capital Markets Act, we must file with the Korean Financial Services Commission and the KRX KOSPI Market an annual business report within 90 days after the end of each fiscal year, ahalf-year business report within 45 days after the end of the first six months of each fiscal year and quarterly business reports within 45 days after the end of the first three months and nine months of each fiscal year, respectively. Copies of such business reports will be available for public inspection at the Korean Financial Services Commission and the KRX KOSPI Market. Transfer of Shares Under the Korean Commercial Code, the transfer of shares is effected by the delivery of share certificates. The Financial Investment Services and Capital Markets Act provides, however, that in case of a company listed on the KRX KOSPI Market such as us, share transfers can be effected by thebook-entry method. In order to assert stockholders’ rights against us, the transferee must have his name and address registered on the register of stockholders. For this purpose, stockholders are required to file with us their name, address and seal.Non-resident stockholders must notify us of the name of their proxy in Korea to which our notice can be sent. Under current Korean regulations, the following entities may act as agents and provide related services for foreign stockholders: the Korea Securities Depository; internationally recognized foreign custodians; financial investment companies with a dealing license (including domestic branches of foreign financial investment companies with such license); financial investment companies with a brokerage license (including domestic branches of foreign financial investment companies with such license); foreign exchange banks (including domestic branches of foreign banks); and financial investment companies with a collective investment license (including domestic branches of foreign financial investment companies with such license). In addition, foreign stockholders may appoint a standing proxy among the foregoing and generally may not allow any person other than the standing proxy to exercise rights to the acquired shares or perform any tasks related thereto on their behalf. Certain foreign exchange controls and securities regulations apply to the transfer of shares bynon-residents ornon-Koreans. See “Item 9.C. Markets” and “Item 10.D. Exchange Controls.” Except as provided in the Financial Holding Company, the ceiling on the aggregate shareholdings of a single stockholder and persons who stand in a special relationship with such stockholder is 10% of our issued and outstanding voting shares. See “Item 4.B. Business Overview—Supervision and Regulation—Principal Regulations Applicable to Financial Holding Companies—Restrictions on Ownership of a Financial Holding Company.” Acquisition of Our Shares Under the Korean Commercial Code, we may acquire our own shares upon a resolution of a general meeting of shareholders by either (i) purchasing them on a stock exchange or (ii) purchasing a number of shares, other than the redeemable shares as set forth in Article 345, Paragraph (1) of the Korean Commercial Code, from each shareholder in proportion to their existing shareholding ratio through the methods set forth in the Presidential Decree, provided that the total purchase price does not exceed the amount of our profit that may be distributed as dividends in respect of the immediately preceding fiscal year. Additionally, pursuant to the Financial Investment Services and Capital Markets Act and regulations under the Financial Holding Company Act and after submission of certain reports to the Korean Financial Services Commission, we may purchase our own shares on the KRX KOSPI Market or through a tender offer, subject to the restrictions that: the aggregate purchase price of such shares may not exceed the total amount available for distribution of dividends at the end of the preceding fiscal year; and the purchase of such shares shall meet therisk-adjusted capital ratio requirements prescribed in the regulations under the Financial Holding Company Act based on Bank for International Settlements standards. Subject to certain limited exceptions, our subsidiaries will not be permitted to acquire our shares pursuant to the Financial Holding Company Act. Item 10.C. | Material Contracts |
None. Item 10.D. | Exchange Controls |
General The Foreign Exchange Transaction Act of Korea and the Enforcement Decree and regulations under that Act and Decree, which we refer to collectively as the “Foreign Exchange Transaction Laws,” regulate investment in Korean securities bynon-residents and issuance of securities outside Korea by Korean companies.Non-residents may invest in Korean securities pursuant to the Foreign Exchange Transaction Laws. The Financial Services Commission has also adopted, pursuant to its authority under the Financial Investment Services and Capital Markets Act, regulations that restrict investment by foreigners in Korean securities and regulate issuance of securities outside Korea by Korean companies. Under the Foreign Exchange Transaction Laws, (1) if the Korean government deems that it is inevitable due to the outbreak of natural calamities, wars, conflict of arms or grave and sudden changes in domestic or foreign economic circumstances or other situations equivalent thereto, the Ministry of Strategy and Finance may temporarily suspend payment, receipt or the whole or part of transactions to which the Foreign Exchange Transaction Laws apply, or impose an obligation tosafe-keep, deposit or sell means of payment in or to certain Korean governmental agencies or financial institutions; and (2) if the Korean government deems that international balance of payments and international finance are confronted or are likely to be confronted with serious difficulty or the movement of capital between Korea and abroad brings or is likely to bring about serious obstacles in carrying out its currency policies, exchange rate policies and other macroeconomic policies, the Ministry of Strategy and Finance may take measures to require any person who intends to perform capital transactions to obtain permission or to require any person who performs capital transactions to deposit part of the payments received in such transactions at certain Korean governmental agencies or financial institutions, in each case subject to certain limitations. Restrictions Applicable to Shares Under the Foreign Exchange Transaction Laws, a foreign investor who intends to acquire shares must designate a foreign exchange bank at which he must open a foreign currency account and a Won account exclusively for stock investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be transferred from the foreign currency account at the time required to place a deposit for, or settle the purchase price of, a stock purchase transaction to a Won account opened at a financial investment company with a dealing and/or brokerage license. Funds in the foreign currency account may be remitted abroad without any Korean governmental approval. Dividends on shares of Korean companies are paid in Won. No Korean governmental approval is required for foreign investors to receive dividends on, or the Won proceeds of the sale of, any shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any shares held by anon-resident of Korea must be deposited either in a Won account with the investor’s financial investment company with a dealing and/or brokerage license or in his Won account. Funds in the investor’s Won account may be transferred to his foreign currency account or withdrawn for local living expenses up to certain limitations. Funds in the Won account may also be used for future investment in shares or for payment of the subscription price of new shares obtained through the exercise of preemptive rights. Financial investment companies with dealing and/or brokerage licenses are allowed to open foreign currency accounts with foreign exchange banks exclusively for accommodating foreign investors’ stock investments in Korea. Through these accounts, such financial investment companies may enter into foreign exchange transactions on a limited basis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or on behalf of foreign investors, without the investors having to open their own accounts with foreign exchange banks. United States Taxation This summary describes certain material U.S. federal income tax consequences for a U.S. holder (as defined below) of acquiring, owning, and disposing of common shares or ADSs. This summary applies to you only if you hold the common shares or ADSs as capital assets for tax purposes. This summary does not apply to you if you are a member of a class of holders subject to special rules, such as: a dealer in securities or currencies; a trader in securities that elects to use amark-to-market method of accounting for securities holdings; a life insurance company; atax-exempt organization; an entity treated as a partnership for U.S. federal income tax purposes or a partner in such partnership; a person that holds common shares or ADSs that are a hedge or that are hedged against interest rate or currency risks; a person that holds common shares or ADSs as part of a straddle or conversion transaction for tax purposes; a person whose functional currency for tax purposes is not the U.S. dollar; or a person that owns or is deemed to own 5%10% or more of any class of our stock. stock, measured by voting power or value.This summary is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations promulgated thereunder, and published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. This summary does not discuss the application of the U.S. federal estate and gift taxes, the Medicare net investment income tax or the alternative minimum tax. Please consult your own tax advisers concerning the U.S. federal, state, local, and other tax consequences of purchasing, owning, and disposing of common shares or ADSs in your particular circumstances. For purposes of this summary, you are a “U.S. holder” if you are the beneficial owner of a common share or an ADS and are: a citizen or resident of the United States; a U.S. domestic corporation; or otherwise subject to U.S. federal income tax on a net income basis with respect to income from the common share or ADS. In general, if you are the beneficial owner of ADSs, you will be treated as the beneficial owner of the common shares represented by those ADSs for U.S. federal income tax purposes, and no gain or loss will be recognized if you exchange an ADS for the common share represented by that ADS. Dividends The gross amount of cash dividends that you receive (prior to deduction of Korean taxes) generally will be subject to U.S. federal income taxation as foreign source “passive category” dividend income and will not be eligible for the dividends received deduction. Dividends paid in Won will be included in your income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of your receipt of the dividend, in the case of common shares, or the depositary’s receipt, in the case of ADSs, regardless of whether the payment is in fact converted into U.S. dollars. If such a dividend is converted into U.S. dollars on the date of receipt, you generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. Subject to certain exceptions forshort-term and hedged positions, the U.S. dollar amount of dividends received by an individual with respect to the ADSs will be subject to taxation at reduced rates if the dividends are “qualified dividends.” Dividends paid on the common shares or ADSs will be treated as qualified dividends if (i) the common shares or ADSs are readily tradable on an established securities market in the United States or we are eligible for the benefits of a comprehensive tax treaty with the United States that the U.S. Treasury determines is satisfactory for purposes of this provision and that includes an exchange of information program; and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company as defined for U.S. federal income tax purposes (“PFIC”). The ADSs are listed on the New York Stock Exchange, and will qualify as readily tradable on an established securities market in the United States so long as they are so listed. In addition, the U.S. Treasury has determined that the Korea-United States income tax treaty meets the requirements for reduced rates of taxation, and we believe we are eligible for the benefits of that treaty. Based on our audited financial statements, we believe that we were not a PFIC in our 20132016 or 20142017 taxable year. In addition, based on our audited financial statements and current expectations regarding our income, assets and activities, we do not anticipate becoming a PFIC for our 20152018 taxable year. Therefore, we believe that dividends received by U.S. holders with respect to either common shares or ADSs will be “qualified dividends.” Holders should consult their own tax advisers regarding the availability of the reduced dividend tax rate in light of their own particular circumstances. Distributions of additional shares in respect of common shares or ADSs that are made as part of apro-rata distribution to all of our stockholders generally will not be subject to U.S. federal income tax. Sale or Other Disposition For U.S. federal income tax purposes, gain or loss you realize on a sale or other disposition of common shares or ADSs generally will be treated as U.S. source capital gain or loss, and will belong-term capital gain or loss if the common shares or ADSs were held for more than one year. Your ability to offset capital losses against ordinary income is limited.Long-term capital gain recognized by an individual U.S. holder generally is subject to taxation at reduced rates. If a U.S. holder sells or otherwise disposes of our common shares or ADSs in exchange for currency other than U.S. dollars, the amount realized generally will be the U.S. dollar value of the currency received at the spot rate on the date of sale or other disposition (or, if the shares are traded on an established securities market at such time, in the case of cash basis and electing accrual basis U.S. holders, the settlement date). An accrual basis U.S. holder that does not elect to determine the amount realized using the spot exchange rate on the settlement date will recognize foreign currency gain or loss equal to the difference between the U.S. dollar value of the amount received based on the spot exchange rates in effect on the date of the sale or other disposition and the settlement date. If an accrual basis U.S. holder makes the election described in the first sentence of this paragraph, it must be applied consistently from year to year and cannot be revoked without the consent of the Internal Revenue Service. A U.S. holder should consult its own tax advisors regarding the treatment of any foreign currency gain or loss realized with respect to any currency received in a sale or other disposition of the common shares or ADSs. Foreign Tax Credit Considerations You should consult your own tax advisers to determine whether you are subject to any special rules that limit your ability to make effective use of foreign tax credits, including the possible adverse impact of failing to take advantage of benefits under the income tax treaty between the United States and Korea. If no such rules apply, you may claim a credit against your U.S. federal income tax liability for Korean taxes withheld from dividends on the common shares or ADSs, so long as you have owned the common shares or ADSs (and not entered into specified kinds of hedging transactions) for at least a16-day period that includes theex-dividend date. Instead of claiming a credit, you may, if you so elect, deduct such Korean taxes in computing your taxable income, subject to generally applicable limitations under U.S. tax law. Korean taxes withheld from a distribution of additional shares that is not subject to U.S. tax may be treated for U.S. federal income tax purposes as imposed on “general category” income. Such treatment could affect your ability to utilize any available foreign tax credit in respect of such taxes. Any Korean securities transaction tax or agriculture and fishery special surtax that you pay will not be creditable for foreign tax credit purposes. Similarly, a U.S. holder will not be able to claim a foreign tax credit against its U.S. federal income tax liability for any Korean inheritance or gift tax imposed in respect of the common shares or ADSs. Foreign tax credits will not be allowed for withholding taxes imposed in respect of certainshort-term or hedged positions in securities and may not be allowed in respect of arrangements in which a U.S. holder’s expected economic profit is insubstantial. The calculation of foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign taxes, the availability of deductions involve the application of complex rules that depend on a U.S. holder’s particular circumstances. You should consult your own tax advisers regarding the creditability or deductibility of such taxes. Specified Foreign Financial Assets Certain U.S. holders that own “specified foreign financial assets” with an aggregate value in excess of US$50,000 are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at anon-U.S. financial institution, as well as securities issued by anon-U.S. issuer (which would include the common shares or ADSs) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. holders who fail to report the required information could be subject to substantial penalties. Prospective investors should consult their own tax advisers concerning the application of these rules to their investment in the common shares or ADSs, including the application of the rules to their particular circumstances. U.S. Information Reporting and Backup Withholding Rules Payments of dividends and sales proceeds that are made within the United States or through certainU.S.-related financial intermediaries are subject to information reporting and may be subject to backup withholding unless the holder (i) is a corporation or other exempt recipient and demonstrates this when required or (ii) provides a taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. Holders that are not U.S. persons generally are not subject to information reporting or backup withholding. However, such a holder may be required to provide a certification of itsnon-U.S. status in connection with payments received within the United States or through aU.S.-related financial intermediary. Korean Taxation The following summary of Korean tax considerations applies to you so long as you are not: a corporation with its head office, principal place of business or place of effective management in Korea; or engaged in a trade or business in Korea through a permanent establishment or a fixed base to which the relevant income is attributable or with which the relevant income is effectively connected. Taxation of Dividends on Common Shares or ADSs We will deduct Korean withholding tax from dividends paid to you (whether payable in cash or in shares) at a rate of 22.0% (inclusive of local income surtax). If you are a qualified resident and a beneficial owner of the dividends in a country that has entered into a tax treaty with Korea, you may qualify for a reduced rate of Korean withholding tax. See “—Tax Treaties” below for a discussion on treaty benefits. If we distribute to you free shares representing a transfer of earning surplus or certain capital reserves intopaid-in capital, that distribution may be subject to Korean withholding tax. Taxation of Capital Gains from Transfer of Common Shares or ADSs As a general rule, capital gains earned bynon-residents upon transfer of our common shares or ADSs are subject to Korean withholding tax at the lower of (1) 11.0% (inclusive of local income surtax) of the gross proceeds realized or (2) subject to the production of satisfactory evidence of acquisition costs and certain direct transaction costs of the common shares or ADSs, 22.0% (inclusive of local income surtax) of the net realized gain, unless exempt from Korean income taxation under the applicable Korean tax treaty with thenon-resident’s country of tax residence. See “—Tax Treaties” below for a discussion on treaty benefits. Even if you do not qualify for an exemption under a tax treaty, you will not be subject to the foregoing withholding tax on capital gains if you qualify under the relevant Korean domestic tax law exemptions discussed in the following paragraphs. In regards to the transfer of our common shares through the Korea Exchange, you will not be subject to the withholding tax on capital gains (as described in the preceding paragraph) if you (1) have no permanent establishment in Korea and (2) did not own or have not owned (together with any shares owned by any person with which you have a certain special relationship) 25% or more of the total issued and outstanding shares, which may include the common shares represented by the ADSs, at any time during the calendar year in which the sale occurs and during the five consecutive calendar years prior to the calendar year in which the sale occurs. Under Korean tax law, ADSs are viewed as shares of common stock for capital gains tax purposes. Accordingly, capital gains from the sale or disposition of ADSs are taxed (if such sale or disposition constitutes a taxable event) as if such gains are from the sale or disposition of the underlying common shares. Capital gains that you earn (regardless of whether you have a permanent establishment in Korea) from a transfer of ADSs outside of Korea will generally be exempt from Korean income taxation by virtue of the Special Tax Treatment Control Law of Korea, or the STTCL, provided that the issuance of the ADSs is deemed to be an overseas issuance under the STTCL. However, if you transfer ADSs after having converted the underlying common shares, such exemption under the STTCL will not apply and you will be required to file a corporate income tax return and pay tax in Korea with respect to any capital gains derived from such transfer unless the purchaser or a financial investment company with a brokerage license, as applicable, withholds and pays such tax. If you are subject to tax on capital gains with respect to the sale of ADSs, or of our common shares you acquired as a result of a withdrawal, the purchaser or, in the case of the sale of the common shares on the Korea Exchange or through a financial investment company with a brokerage license in Korea, such financial investment company is required to withhold Korean tax on capital gains from the sales price in an amount equal to the lower of (1) 11.0% (inclusive of local income surtax) of the gross realization proceeds or (2) subject to the production of satisfactory evidence of acquisition costs and certain direct transaction costs of the common shares or ADSs, 22.0% (inclusive of local income surtax) of the net realized gain, and to make payment of these amounts to the Korean tax authority, unless you establish your entitlement to an exemption under an applicable tax treaty or domestic tax law. See the discussion under “—Tax Treaties” below for an additional explanation on claiming treaty benefits. Tax Treaties Korea has entered into a number of income tax treaties with other countries (including the United States), which would reduce or exempt Korean withholding tax on dividends on, and capital gains on transfer of, the common shares or ADSs. For example, under theKorea-United States income tax treaty, reduced rates of Korean withholding tax of 16.5% or 11.0% (depending on your shareholding ratio and inclusive of local income surtax) on dividends and an exemption from Korean withholding tax on capital gains are available to residents of the United States that are beneficial owners of the relevant dividend income or capital gains, subject to certain exceptions. However, under Article 17 (Investment or Holding Companies) of theKorea-United States income tax treaty, such reduced rates and exemption do not apply if (i) you are a United States corporation, (ii) by reason of any special measures, the tax imposed on you by the United States with respect to such dividend income or capital gains is substantially less than the tax generally imposed by the United States on corporate profits and (iii) 25% or more of your capital is held of record or is otherwise determined, after consultation between competent authorities of the United States and Korea, to be owned directly or indirectly by one or more persons who are not individual residents of the United States. Also, under Article 16 (Capital Gains) of theKorea-United States income tax treaty, the exemption on capital gains does not apply if (a) you have a permanent establishment in Korea and any shares of common stock in which you hold an interest and which gives rise to capital gains are effectively connected with such permanent establishment, (b) you are an individual and you maintain a fixed base in Korea for an aggregate of 183 days or more during a given taxable year and your ADSs or common shares giving rise to capital gains are effectively connected with such fixed base or (c) you are an individual and you are present in Korea for an aggregate of 183 days or more during a given taxable year. You should inquire for yourself whether you are entitled to the benefit of a tax treaty between Korea and the country where you are a resident. It is the responsibility of the party claiming the benefits of an income tax treaty in respect of dividend payments or capital gains to submit to us, the purchaser or the financial investment company, as applicable, a certificate as to his tax residence. In the absence of sufficient proof, we, the purchaser or the financial investment company, as applicable, must withhold tax at the normal rates. Furthermore, in order for you to claim the benefit of a tax rate reduction or tax exemption on certain Korean source income (such as dividends or capital gains) under an applicable tax treaty, Korean tax law requires you (or your agent) to submit an application (for reduced withholding tax rate, “application for entitlement to reduced tax rate,” and in the case of exemptions from withholding tax, “application for tax exemption,” along with a certificate of your tax residency issued by a competent authority of your country of tax residence, subject to certain exceptions) as the beneficial owner of such Korean source income (“BO application”). For example, a U.S. resident would be required to provide Form 6166 as a certificate of tax residency together with the application for entitlement to reduced tax rate or the application for tax exemption. Such application should be submitted to the withholding agent prior to the payment date of the relevant income. Subject to certain exceptions, where the relevant income is paid to an overseas investment vehicle (which is not the beneficial owner of such income) (“OIV”), a beneficial owner claiming the benefit of an applicable tax treaty with respect to such income must submit its BO application to such OIV, which must submit an OIV report and a schedule of beneficial owners to the withholding agent prior to the payment date of such income. In the case of a tax exemption application, the withholding agent is required to submit such application (together with the applicable OIV report in the case of income paid to an OIV) to the relevant district tax office by the ninth day of the month following the date of the payment of such income. Inheritance Tax and Gift Tax If you die while holding an ADS or donate an ADS, it is unclear whether, for Korean inheritance tax and gift tax purposes, you will be treated as the owner of the common shares underlying the ADSs. If the tax authority interprets depositary receipts as the underlying share certificates, you may be treated as the owner of the common shares and your heir or the donee (or in certain circumstances, you as the donor) will be subject to Korean inheritance tax or gift tax presently at the rate of 10% to 50%, provided that the value of the ADSs or the common shares is greater than a specified amount. If you die while holding a common share or donate a common share, your heir or donee (or in certain circumstances, you as the donor) will be subject to Korean inheritance tax or gift tax at the same rate as indicated above. At present, Korea has not entered into any tax treaty relating to inheritance tax or gift taxes.tax. Securities Transaction Tax
If you transfer our common shares on the Korea Exchange, you will be subject to securities transaction tax at the rate of 0.15% and an agriculture and fishery special surtax at the rate of 0.15% of the sale price of the common shares. If your transfer of the common shares is not made on the Korea Exchange, subject to certain exceptions, you will be subject to securities transaction tax at the rate of 0.5% and will not be subject to an agriculture and fishery special surtax. Under the Securities Transaction Tax Law, depositary receipts (such as American depositary receipts) constitute share certificates subject to the securities transaction tax. However, the transfer of depositary receipts listed on the New York Stock Exchange, the Nasdaq Global Market, or other qualified foreign exchanges is exempt from the securities transaction tax. In principle, the securities transaction tax, if applicable, must be paid by the transferor of the common shares or ADSs. When the transfer is effected through a securities settlement company, such settlement company is generally required to withhold and pay the tax to the tax authorities. When such transfer is made through a financial investment company only, such financial investment company is required to withhold and pay the tax. Where the transfer is effected by anon-resident without a permanent establishment in Korea, other than through a securities settlement company or a financial investment company, the transferee is required to withhold the securities transaction tax. Non-reporting orunder-reporting of securities transaction tax will generally result in penalties equal to 20% to 60% of thenon-reported tax amount or 10% to 60% ofunder-reported tax amount. Also, a failure to timely pay securities transaction tax will result in a penalty equal to 10.95% per annum of the due but unpaid tax amount. The penalties are imposed on the party responsible for paying the securities transaction tax or, if such tax is required to be withheld, on the party that has the obligation to withhold. Item 10.F. | Dividends and Paying Agents |
Not applicable. Item 10.G. | Statement by Experts |
Not applicable. Item 10.H. | Documents on Display |
We are subject to the information requirements of the Exchange Act, and, in accordance therewith, are required to file reports, including annual reports on Form20-F, and other information with the U.S. Securities and Exchange Commission. These materials, including this annual report and the exhibits thereto, may be inspected and copied at the Commission’s public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the Commission at1-800-SEC-0330 for further information on the public reference rooms. As a foreign private issuer, we are also required to make filings with the Commission by electronic means. Any filings we make electronically will be available to the public over the Internet at the Commission’s web site at http://www.sec.gov. Item 10.I. | Subsidiary Information |
Not applicable. Item 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Overview As a financial services provider, we are exposed to various risks related to our lending and trading businesses, our funding activities and our operating environment, principally through Kookmin Bank, our banking subsidiary. Our goal in risk management is to ensure that we identify, measure, monitor and control the various risks that arise, and that our organization adheres strictly to the policies and procedures which we establish to address these risks. Under our internal regulations pertaining to our consolidated capital adequacy ratio and internal standards for risk appetite and economicinternal capital under Basel III, we identify the following eight separate categories of risk inherent in our business activities: credit risk, market risk, operational risk, interest rate risk, liquidity risk, credit concentration risk, reputation risk and strategic risk. Of these, the principal risks to which we are exposed are credit risk, market risk, liquidity risk and operational risk, and we strive to manage these and other risks within acceptable limits. Organization We have amulti-tiered risk management governance structure. Our Risk Management Committee is ultimately responsible forgroup-wide risk management, and directs our various subordinate risk management entities. The Risk Management Council reports directly to the Risk Management Committee and coordinates the implementation of directives set forth by the Risk Management Committee with the relevant risk management units of our subsidiaries. The Subsidiary Risk Management Committee of each of our subsidiaries, based on the Risk Management Committee’s directives, determines risk management strategies and implements risk management policies and guidelines for such subsidiary and directs the activities of the subsidiary’s risk management units within the risk guidelines set at the group level. Each Subsidiary Risk Management CommitteesCommittee generally receivereceives inputs from the respective risk management units of such subsidiary, who alsowhich report directly to the Risk Management Committee. The following chart sets out our risk management governance structure as of the date of this annual report:
Risk Management Committee Our Risk Management Committee is aboard-level committee that is responsible for overseeing all risks and advising the board of directors with respect to riskmanagement-related issues. The committee consists of onenon-standing director and threenon-executive directors (one of whom serves as the chairman of the committee), and itsconvenes on a quarterly basis. Its major roles include: establishing risk management strategies in accordance with the directives of the board of directors; determining our target risk appetite; allocating risk capital to each subsidiary and approving our subsidiaries’ risk limits; and reviewing the level of risks we are exposed to and the appropriateness of our risk management policies, systems and operations; andoperations. allocating risk capital to each subsidiary and approving our subsidiaries’ risk limits.
Risk Management Council Our Risk Management Council is responsible for coordinating with the risk management units of our subsidiaries to ensure that they implement the policies, guidelines and limits established by the Risk Management Committee. Its responsibilities include: analyzing our risk status by using information provided by our subsidiary-level risk management units;
adjusting the integrated risk capital allocation plan and risk limits for each of our subsidiaries; and
coordinating issues relating to the group-wide integration of our risk management functions.
The Risk Management Council is comprised of our chief risk management officer and the chief risk management officers of all of our subsidiaries. It operates independently from all business units and reports directly the Risk Management Committee. Our Risk Management Council convenes on a quarterly basis. Its responsibilities include: analyzing our risk status by using information provided by oursubsidiary-level risk management units; deliberating adjustments to the integrated risk capital allocation plan and risk limits for each of our subsidiaries; and coordinating issues relating to thegroup-wide integration of our risk management functions. Subsidiary Risk Management Committees Each of our subsidiaries has delegated risk management authority to its Subsidiary Risk Management Committee. Each Subsidiary Risk Management Committee measures and monitors the various risks faced by the relevant subsidiary and reports to that subsidiary’s board of directors regarding decisions that it makes on risk management issues. It also makes certain strategicrisk-related decisions regarding the operations of the relevant subsidiary, such as setting total exposure limits, allocating credit risk limits setting total exposure limits and marketrisk-related limits and determining which market risk derivatives instruments the subsidiary can trade. The major activities of each Subsidiary Risk Management Committee include: determining and monitoring risk policies, guidelines, limits and tolerance levels and the level of subsidiary risk in accordance with group policy; reviewing and analyzing the subsidiary’s risk profile; setting limits for and adjusting the risk capital allocation plan and risk levels for each business unit within the subsidiary; and monitoring compliance with ourgroup-wide risk management policies and practices at the business unit and subsidiary level. Each Subsidiary Risk Management Committee is comprised of the subsidiary’s chief executive officer and thenon-executive directors on its board of directors and the director of its risk management unit.directors. Credit Risk Management Credit risk is the risk of expected and unexpected losses in the event of borrower or counterparty defaults. Credit risk management aims to improve asset quality and generate stable profits while reducing risk through diversified and balanced loan portfolios. We determine the creditworthiness of each type of borrower or counterparty through reviews conducted by our credit experts and through our credit rating systems, and we set a credit limit for each borrower or counterparty. We assess and manage all credit exposures. We measure expected losses and economicinternal capital on assets (whetheron- oroff-balance sheet) that are subject to credit risk management and use expected losses and economicinternal capital as management indicators. We manage credit risk by allocating credit risk economicinternal capital limits. In addition, we control credit concentration risk exposure by applying and managing total exposure limits to prevent excessive risk concentration to particular industries or borrowers. Credit exposures that we assess and manage include loans to borrowers and counterparties, investments in securities, letters of credit, bankers’ acceptances, derivatives and commitments. Our risk appetite, which is the ratio of our required economicinternal capital to our estimated available book capital, is approved by the Risk Management Committee once a year. Thereafter, Kookmin Bank calculates economicwe calculate internal capital every month for its business groupsall of our subsidiaries and bank-wideon a holding company level based on attributed economicinternal capital in accordance with the risk appetite as approved by the Risk Management Committee, and measuresmeasure and reportsreport profiles of credit risk on a bank-wideholding company level and by business groupsubsidiary regularly to its relevant business groups andour senior management, including Kookmin Bank’s Risk Management Council andour Risk Management Committee. We use expected default rates and recovery rates to determine the expected loss rate of a borrower or counterparty. We use the expected loss rate to make credit related decisions, including pricing, loan approval and establishment of standards to be followed at each level of decision making. These rates are calculated using information gathered from our internal database. With respect to large corporate borrowers, we also use information provided by external credit rating services to calculate default rates and recovery rates. Our credit risk management processes include: establishing credit policy; credit evaluation and approval; total exposure management; collateral evaluation and monitoring; early warning and credit review; and post-credit extension monitoring. Credit Evaluation Kookmin Bank evaluates the ability of all loan applicants to repay their debts before it approves any loans, except for loans fully guaranteed by letters of guarantee issued by the Credit Guarantee Fund and the Korea Technology Credit Guarantee Fund, for loans fully secured by deposits and for other loans similarly guaranteed or secured. Kookmin Bank assigns each borrower or guarantor a credit rating based on the judgment of its experts or scores calculated using the appropriate credit rating system. Factors that Kookmin Bank considers in assigning credit ratings include both financial factors andnon-financial factors, such as its perception of a borrower’s reliability, management and operational risk and risk relating to the borrower’s industry. The credit rating process differs according to the type, size and characteristics of a borrower. Kookmin Bank uses its internally developed credit rating systems to rate potential borrowers. As the characteristics of each customer segment differ, Kookmin Bank uses several credit rating systems for its customers. The nature of the credit rating system used for a particular borrower depends on whether the borrower is an individual, a “small office/home office” customer, asmall- andmedium-sized enterprise or a large company. For large companies and small- andmedium-sized enterprises, Kookmin Bank has 17 credit ratings ranging from AAA to D. For small- and medium-sized enterprises, it has 15 credit ratings ranging from AA to D.D for risk management purposes. For retail customers, it has 13 credit ratings ranging from grade 1 to grade 13. Based on the credit rating of a borrower, Kookmin Bank applies different credit policies, which affect factors such as credit limit, loan period, loan pricing, loan classification and provisioning. Kookmin Bank also uses these credit ratings in evaluating itsbank-wide risk management strategy. Factors Kookmin Bank considers in making this evaluation include the profitability of each company or transaction, performance of each business unit and portfolio management. Kookmin Bank monitors the credit status of borrowers and collect information to adjust its ratings appropriately. If Kookmin Bank changes a borrower’s credit rating, it will also change the credit policies relating to that borrower and may also change the policies underlying its loan portfolio. Retail Loan Approval Process
Mortgage Loans and Secured Retail Loans. Branch staff employees of Kookmin Bank forward loan applications to processing centers and Kookmin Bank’s processing center staff reviews mortgage loans and retail loans secured by real estate or guarantees. Branch staff employees of Kookmin Bank forward loan applications to processing centers. However, in the case of loans secured by deposits with Kookmin Bank, its branch staff approves such loans. Kookmin Bank makes lending decisions based on its assessment of the value of the collateral, debt service capability and the borrower’s score generated from its credit scoring systems.
For mortgage loans and loans secured by real estate, Kookmin Bank evaluates the value of the real estate offered as collateral using a database it has developed that contains information about real estate values throughout Korea. Kookmin Bank also uses information from a third party provider about the real estate market in Korea, which gives itup-to-date market value information for Korean real estate. In addition, Kookmin Bank’s processing center staff employees review the value of real estate provided by the evaluation system to ensure there are no significant discrepancies. Kookmin Bank bases decisions regarding the approval of such loans primarily on the results of its credit scoring systems. For loans secured by deposits, Kookmin Bank will generally grant loans up to 95%of the deposit amount if it holds the deposit. With respect to mortgage loans and secured retail loans, Kookmin Bank screens customers based on various items on its checklistcriteria that indicate whether the customer may have deteriorating credit using internal information and rating information from credit bureaus. Kookmin Bank also evaluates debt service capability for eligible customers pursuant to certain checklist items, such as type of residence, profession, family information, annual income, age, credit card overdue information, transaction history (with both it and other financial institutions) and other relevant credit information. Kookmin Bank generally decides whether to evaluate a loan application within three to five days after recording the relevant information in its credit scoring systems. Unsecured Retail Loans. Kookmin Bank reviews applications for unsecured retail loans in accordance with its credit scoring systems. These automated systems evaluate loan applications and determine an appropriate pricing for the loan. The major benefits of using a credit scoring system are that it yields uniform results regardless of the user and that it can be used effectively by employees who do not necessarily have extensive experience in credit evaluation and that it can be updated easily to reflect changing market conditions by adjusting how each factor is weighted.evaluation. The staff of Kookmin Bank’s processing centers reviews the results of the credit scoring system based on information input by its branch staff and, if approved, issues the loan. Kookmin Bank’s credit scoring systems take into account factors including borrower’s income, assets, profession, age, transaction history (with both it and other financial institutions) and other relevant credit information. The systems rank each borrower in an appropriate grade, and that grade is used as a factor in deciding whether to approve loans as well as to determine loan amounts. Kookmin Bank generally bases its decisions on the results of its credit scoring systems to evaluate applications. However, a credit officer may overturn the results of the credit scoring systems, in certain circumstances. Corporate Loan Approval Process We approve corporate loans at different levels of our organization depending on the size and type of the loan, the credit risk level assessed by the credit rating system, whether the loan is secured by collateral and, if secured, the value of the collateral. The lowest level of authority is the branch staff employee of Kookmin Bank, who can approve small loans and loans that have the lowest range of credit risk. Larger loans and loans with higher credit risk are approved by higher levels of authority depending on where they fall in a matrix of loan size and credit risk. Depending on the size and terms of any particular loan or the credit risk relating to a particular borrower, more than one entity may review the application, although generally loan applications are reviewed only by the entity having corresponding authority to approve the loan. Kookmin Bank evaluates all of its corporate borrowers by using credit rating systems, except for applicants whose borrowings are fully secured by deposits or applicants who have obtainedthird-party guarantees from the government or certain other very highly rated guarantors. See “—Credit Evaluation.” Forowner-operated enterprises (which we refer to as SOHOs) with total outstanding loans of ₩1 billion or less, Kookmin Bank has put in place a retail SOHO credit rating system, which adopts simplified credit evaluation modeling procedures and has the same structure and process as the credit rating system for individual retail borrowers. This system consists of a scoring model and a preliminary examination checklist. The scoring model analyzes information with respect to the customer’s personal information and bank transaction history, as well as information from credit bureaus. The preliminary examination checklist is based on information regarding the customer’s credit delinquencies and history ofwrite-offs. This system classifies customers into 13 possible credit ratings. For SOHOs with total outstanding loans of more than ₩1 billion, Kookmin Bank has put in place a separate credit rating system known as “SOHO CRS.” For othersmall- andmedium-sized enterprises, Kookmin Bank has put in place a similar credit rating system known as CRS. For large corporations, Kookmin Bank has put in place a similar credit rating system known as LCRS. For financial institutions, certainnon-profit organizations and public institutions, Kookmin Bank has put in place a similar credit rating system known as FNP CRS. The SOHO CRS, the CRS, the LCRS and the FNP CRS models consist of the following three parts: | • | | Financial ModelModel.. The financial model uses the borrower’s current status and trend of financial ratios calculated using its financial statements. The financial model classifies potential borrowers into one of three size categories and one of five types of industry. This model incorporates logistic regression and statistical methods, which use financial ratios such as stability ratio, cash flow ratio, profitability ratio and turnover ratio to make credit determinations. |
| • | | NonNon-financial Model-financial Model.. The Non-financialnon-financial model uses various qualitative and quantitative factors, such as future repayment capability, market prospects, management capability and business capability, to evaluate borrowers. The factors that are evaluated and the weighting given to each factor vary by type of industry and size of company. |
| • | | Default Signal Check ModelModel.. The default signal check model checks the consistency of the preliminary rating. This model checks various factors, including financial ratios with low scores, any non-quantitative factors that may causehave low frequency of occurrence but are highly likely to lead to a corporate default and any information arising from past experience, to determinein the likelihoodevent of a future default.an occurrence. The results of the default signal check model may be used to cap a borrower’s credit grade. |
In addition to the three parts outlined above, the SOHO CRS also includes a “CEO Evaluation Model,” which analyzes information with respect to personal information and bank transaction history of the individual owner of such SOHO. We often refer to corporate information gathered or ratings assigned by external credit rating agencies, such as Korea Information Service, National Information & Credit Evaluation Inc. and Korea Management Consulting & Credit Rating Corporation, in order to improve the accuracy of our credit ratings. Credit Card Approval Process We make decisions on all credit card approvals based on the Financial Supervisory Service standard of review for payment ability (such as the occupation and income of the applicant), as well as a combination of KB Kookmin Card’s internal application scoring system and a credit scoring system developed by independent credit bureaus. KB Kookmin Card’s application scoring system reflects various credit information, including basic customer information (such as credit history), transaction history with it, if any, delinquency and transaction history with other card companies and financial institutions and credit information provided by the Korea Federation of Banks and other credit bureaus. KB Kookmin Card also considers repayment ability, total assets, total outstanding debts and the length of the applicant’s relationship, if any, and past contribution to our profitability, if any. The credit scoring system developed by credit bureaus, reflects various sources of information regarding the credit risk of customers, including delinquency and transaction history with other credit card companies and financial institutions. On the basis of the standard of review for payment ability and the combination of the scores from our application scoring system and the credit scoring system developed by independent credit bureaus, KB Kookmin Card establishes, among other things, the term of any new approvals, initial limits and differentiation of fee rates with respect to its credit cards. KB Kookmin Card’s systems allow it to differentiate applicants into groups that receive immediate credit card approval or rejection, or that may require it to further investigate that applicant’s credit qualifications. The initial limits of new applicants are based on their estimated disposable income, which is based on their occupation and the value of their personal assets. KB Kookmin Card applies its fee rates to applicants differently according to risk premium and profitability. Total Exposure Management We establish and manage total exposure limits for corporations,chaebols and industries, as well as certainsmall- andmedium-sized enterprises, in order to optimize the use of credit availability and avoid excessive risk concentration. We establishKookmin Bank establishes total exposure limits for large corporations to which we have exposures (in the form of securities or loans) of over ₩30 billion, small- and medium-sized enterprises to which we have exposures (in the form of securities or loans) of over ₩20 billion andchaebols(i) main debtor groups designated by the Financial Supervisory Service, or by(ii) groups to which Kookmin Bank has total exposure of ₩50 billion or more, (iii) enterprises that belong to a main debtor group or large enterprises, in both cases to which Kookmin Bank has total exposure of ₩30 billion or more, (iv) small- andmedium-sized enterprises to which Kookmin Bank has total exposure of ₩20 billion or more and (v) other groups or individual enterprises designated by the head of Kookmin Bank’s Risk Management Council as necessary. Kookmin Bank establishes total exposure limit by reviewing factors such as their industry, size, cash flows, financial ratios and credit ratings, while establishing exposure limits for industries by peer group, as defined by us, by reviewing the sales growth rate and risk concentration for each industry. The guidelines used to set theseThese total exposure limits are approvedset following approval by Kookmin Bank’s Risk Management Council after review by the Credit Risk Management Subcommittee. Kookmin Bank’s maximum exposure limit is within 25% of its Tier I and Tier II capital for a singlechaebol, and within 10% of its Tier I and Tier II capital for an individual large corporation. We manage and control exposure limits on a daily basis. The principal system that we use for this purpose is the Total Exposure Management System. This system allows us to monitor and control our total exposure to large corporations,chaebols and industries. We monitor ourKookmin Bank monitors its exposure to large corporations to which we haveit has an exposure of ₩30 billion or more, individual corporations to which we haveit has an exposure of more than ₩20 billion or more, and also ourits exposure to 142 business groups, which comprise the 65 chaebols, which are comprised of the 4236 largest highly-indebted business groups amongchaebols in Korea designated as such by the Financial Supervisory Service based on their outstanding exposures, as well as 23 chaebols18 business groups and individual corporations selected for monitoring by the Senior Executive Vice PresidentHead of Kookmin Bank’s Risk Management Division.Group as well as 88 business groups to which it has exposures (in the form of securities or loans) of ₩50 billion or more. We also monitor our exposure to industries by peer groups. Our Total Exposure Management System integrates all of ourcredit-related risk including credit extended by our overseas branches and affiliates. The assets subject to the system include allWon-denominated and foreigncurrency-denominated loans, all assets in trust accounts except specified money trusts, guarantees,trade-related credits, commercial paper, corporate bonds and other securities and derivatives. Collateral Evaluation and Monitoring System Kookmin Bank uses the Collateral Evaluation and Monitoring System to manage the liquidation value of collateral it holds. The Collateral Evaluation and Monitoring System is a computerized collateral management system that can be accessed from Kookmin Bank’s headquarters and its branches. Using this system, Kookmin Bank can more accurately assess the actual liquidation value of collateral, determine the recovery rate on its loans and use this information in setting its credit risk management and loan policies. Kookmin Bank can monitor the value of all the collateral a borrower provides and the value of that collateral based on its liquidation value. When appraising the value of real estate collateral, which makes up the largest part of Kookmin Bank’s collateral, Kookmin Bank consults a regularly updated database provided by a third party that tracks the prices at which various types of real estate in various regions of Korea are sold. Kookmin Bank appraises the value of collateral when it makes a loan, when the loan is due for renewal and when events occur that may change the value of the collateral. Credit Risk Management and Monitoring Kookmin Bank’s Credit Risk Department manages and regulates our loan portfolio policies. It also analyzes and monitors our loan portfolios and monitors our compliance with the applicable limits for credit risk. Moreover, it separately manageshigh-risk products, such as real estate project financing loans andover-the-counter derivative products, by setting appropriate limits. Credit Review Kookmin Bank’s credit review function is independent of the business groups which manage our assets. Its Credit Review Department: reviews internal credit regulations, policies and systems; analyzes the credit status of selected loan assets and verifies the appropriateness of the credit evaluations/approvals made by branches and headquarters; and evaluates the corporate credit risk of potentially insolvent companies. More specifically, Kookmin Bank’s Credit Review Department continuously reviews the financial condition of selected borrowers with respect to their current debt, collateral, business, transactions with related parties and debt service capability. Based on such review, Kookmin Bank may adjust the borrower’s credit rating, lending policy or asset quality classification of the loan provided to the borrower, depending on the applicable circumstances. Kookmin Bank also regularly reviews other aspects of the lending process, including industries and regions in which its borrowers operate and the quality of its domestic and overseas assets. Kookmin Bank’s industry reviews focus on growth, stability, competition and ability to adapt to a changing environment. Based on the results of a particular industry review, Kookmin Bank may revise the total exposure limit assigned to that industry and lending policy for each company within that industry. When a review takes place, Kookmin Bank may adjust not only credit ratings of its borrowers based on a variety of factors, but also asset quality classification, credit limits and applied interest rates or its credit policies. Credit review results are reported to Kookmin Bank’s chief risk officer and its Risk Management Committee on a quarterly basis. Kookmin Bank’s Credit Review Department also conductson-site reviews of selected branches and related credit analysis centers whichthat are experiencing increasing delinquency ratios and bad debts. During these visits Kookmin Bank examines the loan processes and recommendrecommends improvement plans and appropriatefollow-up measures. Also, based on guidelines provided by the Financial Supervisory Service to all Korean banks, Kookmin Bank operates a corporate credit risk assessment program to facilitate the identification of weak companies and possible commencement of corporate restructuring. Through this program, Kookmin Bank, together with other banks, is able to detect symptoms of financially troubled companies at an early stage, assess related credit risk and support the normalization of companies that are likely to turnaround through a workout process, or seek to liquidate those companies that are not likely to recover. Kookmin Bank’s Credit Review Department also analyzes issues related to credit risk and provides information necessary for the formulation of effective credit policies and strategies and for effective credit risk management. Market Risk Management The major risk to which we are exposed is interest rate risk on debt instruments and interest bearing securities and, to a lesser extent, stock price risk and foreign exchange risk. The financial instruments that expose us to these risks are securities and financial derivatives. We are not exposed to commodity risk, the other recognized form of market risk, as we currently do not engage in commodities trading. We are also exposed to interest rate risk and liquidity risk in Kookmin Bank’s banking book. We divide market risk into risks arising from trading activities and risks arising fromnon-trading activities. Kookmin Bank’s Risk Management Council establishes overall market risk management principles. It has delegated the responsibility for the market risk management for trading activities to the Market Risk Management Subcommittee of Kookmin Bank, which is chaired by Kookmin Bank’s chief risk officer. This subcommittee meets on a regular basis each month and as required to respond to developments in the market and the economy. Based on the policies approved by Kookmin Bank’s Risk Management Council, the Market Risk Management Subcommittee reviews and approves reports as required that include trading profits and losses, position reports, limit utilization, sensitivity analysis and VaR results for our trading activities. Kookmin Bank’s Risk Management Council is responsible for interest rate and liquidity risk management for itsnon-trading activities. The council meets on a regular basis and as required to respond to developments in the market and the economy. Members of the Risk Management Council, acting through Kookmin Bank’s Risk Management Department, review Kookmin Bank’s interest rate and liquidity gap position monthly, formulate a view on interest rates, establishing strategies with respect to deposit and lending rates and reviewas well as the business profile and its impact on asset and liability management. To ensure adequate interest rate and liquidity risk management, we have assigned the responsibilities for our asset and liability risk management to Kookmin Bank’s Risk Management Department in Kookmin Bank’s Risk Management Group, which monitors and reviews the asset and liability operating procedures and activities of Kookmin Bank’s Financial Planning Department and Asset and Liability Risk Management Department, and independently reports to the management on the related issues. Market Risk Management for Trading Activities Our trading activities consist of: trading activities for our own account to realizeshort-term trading profits inWon-denominated debt and equities markets and foreign exchange markets based on ourshort-term forecast of changes in the market situation; and trading activities involving derivatives, such as swaps, forwards, futures and option transactions, to realize profits primarily from selling derivative products to our customers and to hedge market risk incurred from those activities. In addition, certain derivative products that we use to hedge our own market risk are classified as trading activities as they do not qualify for hedge accounting treatment under IFRS. We believe, however, that certain of these products are effective as economic hedges. We use derivative instruments to hedge our market risk and, to a limited extent, to make profits by trading derivative products within acceptable risk limits. The principal objective of our hedging strategy is to manage our market risk within established limits. We use the following hedging instruments to manage relevant risks: to hedge interest rate risk arising from its trading activities, the TradingTrading/Capital Markets Department of Kookmin Bank occasionally uses interest rate futures (Korea Treasury Bond Futures) and interest rate swaps; to hedge stock price risk arising from its trading activities, the TradingTrading/Capital Markets Department of Kookmin Bank selectively uses stock index futures; to hedge interest rate risk and foreign exchange risk arising from our foreigncurrency-denominated asset and liability positions as well as our trading activities, the Trading Department andTreasury Unit within the Fund ManagementCapital Markets Department of Kookmin Bank useuses interest rate swaps,cross-currency interest rate swaps, foreign exchange forwards and futures,Euro-dollar futures and currency options; and to change the interest rate characteristics of certain assets and liabilities after the original investment or funding, we use swaps. For example, depending on the market situation, we may choose to obtain fixed rate funding instead of floating rate funding if we believe that the terms are more favorable, which we can achieve by entering into interest rate swaps. We generally manage our market risk at the portfolio level. To control our exposure to market risk, we use ECinternal capital limits set by Kookmin Bank’s Risk Management CouncilCommittee for Kookmin Bank and at the group level within Kookmin Bank, VaR, position and stop loss limits set by Kookmin Bank’s Risk Management Council for Kookmin Bank and at the group level within Kookmin Bank, and VaR, position, stop loss and sensitivity limits (PVBP, Delta, Gamma, Vega) set by Kookmin Bank’s Market Risk Management Subcommittee at the department level within Kookmin Bank. We prepared our risk control and management guidelines for derivative trading based on the regulations and guidelines promulgated by the Financial Supervisory Service. In addition, we have implemented internal processes which include a number of key controls designed to ensure that fair value is measured appropriately, particularly where a fair value model is internally developed and used to price a significant product. See “Item 5.A. Operating Results—Critical Accounting Policies—Valuation of Financial Instruments” and Notes 3.3 and 6 of the notes to our consolidated financial statements. For example, each year, Kookmin Bank’s Risk Management Department reviews the existing pricing and valuation models, with a focus on their underlying modeling assumptions and restrictions, to assess the appropriateness of their continued use. In consultation with Kookmin Bank’s Trading Department, the Risk Management Department recommends potential valuation models to Kookmin Bank’s Fair Value Evaluation Committee. Upon approval by Kookmin Bank’s Fair Value Evaluation Committee, the selected valuation models are reported to its Market Risk Management Subcommittee. We monitor market risk arising from trading activities of our business groups and departments. The market risk measurement model we use for both ourWon-denominated trading operations and foreigncurrency-denominated trading operations is implemented through our integrated market risk management system called Adaptiv, which enables us to generate consistent VaR numbers for all trading activities. Value at Risk analysis.We use VaR to measure market risk. VaR is a statistically estimated maximum amount of loss that could occur over a given period of time at a given level of confidence. VaR is a commonly used market risk management technique. However, this approach does have some shortcomings. VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a good indicator of future events, as there may be conditions and circumstances in the future that the model does not anticipate. As a result, the timing and magnitude of the actual losses can be different depending on the assumptions made at the time of calculation. In addition, the time periods used for the model, generally one or ten days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient, or too long, the VaR results may understate or overstate the potential loss. Different VaR methodologies and distributional assumptions could produce a materially different VaR. VaR is most appropriate as a risk measure for trading positions in liquid capital markets and will understate the risk associated with severe events, such as a period of extreme illiquidity. We use a 99% single tail confidence level to measure VaR, which means the actual amount of loss may exceed the VaR, on average, once out of 100 business days. Until 2011, we used the “variance-covariance “variance-covariance method” or parametric VaR (“PVaR”) methodology to measure our daily VaR, which took into account the diversification effects among different risk categories as well as within the same risk category. In 2012, we received authorization from the Financial Services Commission to use a historical simulation VaR (“HSVaR”) methodology, which we believe to be more accurate and responsive in reflecting market volatilities, to measure market risk. Ourten-day HSVaR method, which is computed using a full valuation and is computationally intensive, uses an archive of historic price data and the VaR for a portfolio is estimated by creating a hypothetical time series of returns on that portfolio, obtained by running the portfolio through actualten-day historical data and computing the changes that would have occurred in eachten-day period. The following table shows the volume and types of positions held by Kookmin Bank for which the VaR method is used to measure market risk as of December 31, 2012, 20132015, 2016 and 2014.2017. | | | As of December 31, | | | As of December 31, | | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (in millions of Won) | | | (in millions of Won) | | Securities—Bond(1) | | ₩ | 6,181,712 | | | ₩ | 6,918,051 | | | ₩ | 7,393,643 | | | ₩ | 6,368,805 | | | ₩ | 7,700,731 | | | ₩ | 8,179,481 | | Securities��� Equity(1) | | | 173,757 | | | | 93,122 | | | | 60,122 | | | Securities—Equity(1) | | | | 31,397 | | | | 34,131 | | | | 43,214 | | Spot exchanges(2) | | | 271,500 | | | | 1,569,768 | | | | 1,192,918 | | | | 1,276,665 | | | | 2,316,311 | | | | 4,029,675 | | Derivatives(3) | | | 4,091,473 | | | | 3,465,130 | | | | 3,808,515 | | | | 4,416,844 | | | | 5,778,082 | | | | 5,438,917 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 10,718,442 | | | ₩ | 12,046,071 | | | ₩ | 12,455,198 | | | ₩ | 12,093,711 | | | ₩ | 15,829,255 | | | ₩ | 17,691,288 | | | | | | | | | | | | | | | | | | | | |
(1) | Represents amounts marked to market. market and as shown on the balance sheet information that is prepared and submitted to the Financial Supervisory Service for risk management purposes. |
(2) | Represents the overall net open currency position in each currency, which is the greater of (i) the sum of the absolute value of all short positions and (ii) the sum of the absolute value of all long positions. |
(3) | ForFor over-the-counter derivatives, represents the absolute value ofover-the-counter derivatives measured at fair value at year end for monitoring purposes.end. Forexchange-traded derivatives, includes the amount of deposits and the collateral posted for such derivatives. |
The following table shows Kookmin Bank’sten-day HSVaRs (at a 99% confidence level for aten-day holding period) as of December 31, 2012, 20132015, 2016 and 20142017 for interest risk, stock price risk and foreign exchange risk relating to its trading activities. The following figures were calculated on a consolidated basis. | | | As of December 31, | | | As of December 31, | | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (in billions of Won) | | | (in billions of Won) | | Risk categories: | | | | | | | | | Interest risk | | ₩ | 8.3 | | | ₩ | 17.0 | | | ₩ | 10.1 | | | ₩ | 15.8 | | | ₩ | 14.9 | | | ₩ | 23.8 | | Stock price risk | | | 4.9 | | | | 1.1 | | | | 0.9 | | | | 2.1 | | | | 1.3 | | | | 1.3 | | Foreign exchange risk | | | 11.2 | | | | 5.3 | | | | 10.8 | | | | 21.9 | | | | 10.1 | | | | 24.3 | | Less: diversification | | | (12.7 | ) | | | (7.0 | ) | | | (8.8 | ) | | | (16.6 | ) | | | (6.5 | ) | | | (29.7 | ) | | | | | | | | | | | | | | | | | | | | Diversified VaR for overall trading activities | | ₩ | 11.7 | | | ₩ | 16.4 | | | ₩ | 13.0 | | | ₩ | 23.2 | | | ₩ | 19.8 | | | ₩ | 19.6 | | | | | | | | | | | | | | | | | | | | |
In 2014,2017, the average, high, low and ending amounts often-day HSVaR (at a 99% confidence level for aten-day holding period) for Kookmin Bank relating to its trading activities were as follows. | | | | | | | | | | | | | | | | | | | Trading activities VaR for 2014 | | | | Average | | | Minimum | | | Maximum | | | As of December 31, 2014 | | | | (in billions of Won) | | Interest risk | | ₩ | 12.9 | | | ₩ | 7.7 | | | ₩ | 19.8 | | | ₩ | 10.1 | | Stock price risk | | | 1.6 | | | | 0.7 | | | | 3.9 | | | | 0.9 | | Foreign exchange risk | | | 12.0 | | | | 5.1 | | | | 14.7 | | | | 10.8 | | Less: diversification | | | | | | | | | | | | | | | (8.8 | ) | | | | | | | | | | | | | | | | | | Diversified VaR for overall trading activities | | | 15.4 | | | | 10.1 | | | | 23.6 | | | ₩ | 13.0 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Trading activities VaR for 2017 | | | | Average | | | Minimum | | | Maximum | | | As of December 31, 2017 | | | | (in billions of Won) | | Interest risk | | ₩ | 22.7 | | | ₩ | 14.3 | | | ₩ | 42.2 | | | ₩ | 23.8 | | Stock price risk | | | 1.0 | | | | 0.8 | | | | 1.3 | | | | 1.3 | | Foreign exchange risk | | | 32.7 | | | | 12.4 | | | | 44.3 | | | | 24.3 | | Less: diversification | | | | | | | | | | | | | | | (29.8 | ) | | | | | | | | | | | | | | | | | | Diversified VaR for overall trading activities | | | 23.3 | | | | 16.5 | | | | 30.2 | | | ₩ | 19.6 | | | | | | | | | | | | | | | | | | |
In 2013,2016, the average, high, low and ending amounts often-day HSVaR (at a 99% confidence level for aten-day holding period) for Kookmin Bank relating to its trading activities were as follows. | | | Trading activities VaR for 2013 | | | Trading activities VaR for 2016 | | | | Average | | | Minimum | | | Maximum | | | As of December 31, 2013 | | | Average | | Minimum | | Maximum | | As of December 31, 2016 | | | | (in billions of Won) | | | (in billions of Won) | | Interest risk | | ₩ | 16.3 | | | ₩ | 7.4 | | | ₩ | 24.9 | | | ₩ | 17.0 | | | ₩ | 15.7 | | | ₩ | 10.8 | | | ₩ | 19.5 | | | ₩ | 14.9 | | Stock price risk | | | 3.5 | | | | 0.9 | | | | 7.1 | | | | 1.1 | | | 1.8 | | | 0.7 | | | 2.3 | | | 1.3 | | Foreign exchange risk | | | 9.3 | | | | 5.3 | | | | 13.6 | | | | 5.3 | | | 16.5 | | | 10.1 | | | 22.2 | | | 10.1 | | Less: diversification | | | | | | | | | (7.0 | ) | | | | | | | | (6.5 | ) | | | | | | | | | | | | | | | | | | | | Diversified VaR for overall trading activities | | | 17.3 | | | | 10.9 | | | | 22.2 | | | ₩ | 16.4 | | | 19.0 | | | 11.6 | | | 28.5 | | | ₩ | 19.8 | | | | | | | | | | | | | | | | | | | | |
In 2012,2015, the average, high, low and ending amounts often-day HSVaR (at a 99% confidence level for aten-day holding period) for Kookmin Bank relating to its trading activities were as follows. | | | Trading activities VaR for 2012 | | | Trading activities VaR for 2015 | | | | Average | | | Minimum | | | Maximum | | | As of December 31, 2012 | | | Average | | Minimum | | Maximum | | As of December 31, 2015 | | | | (in billions of Won) | | | (in billions of Won) | | Interest risk | | ₩ | 20.1 | | | ₩ | 8.3 | | | ₩ | 29.3 | | | ₩ | 8.3 | | | ₩ | 18.4 | | | ₩ | 10.0 | | | ₩ | 27.1 | | | ₩ | 15.8 | | Stock price risk | | | 4.2 | | | | 0.5 | | | | 8.7 | | | | 4.9 | | | 1.7 | | | 0.9 | | | 3.9 | | | 2.1 | | Foreign exchange risk | | | 26.6 | | | | 9.6 | | | | 39.2 | | | | 11.2 | | | 12.4 | | | 8.3 | | | 21.9 | | | 21.9 | | Less: diversification | | | | | | | | | (12.7 | ) | | | | | | | | (16.6 | ) | | | | | | | | | | | | | | | | | | | | Diversified VaR for overall trading activities | | | 20.6 | | | | 10.6 | | | | 28.7 | | | ₩ | 11.7 | | | 23.9 | | | 11.7 | | | 33.9 | | | ₩ | 23.2 | | | | | | | | | | | | | | | | | | | | |
Standardized Method. Market risk for positions not measured by VaR are measured using the standardized method for measuring marketrisk-based required equity capital specified by the Financial Supervisory Service, which takes into account certain risk factors. Under the standardized method, the required equity capital is measured using therisk-weighted values for each risk factor. The method used to measure the marketrisk-based required equity capital for each risk factor is as follows: General market risk: General market risk relates to the risk of losses from macroscopic events which could have an impact on interest rates, stock prices, exchange rates, and market prices of general commodities. General market interest rate risk of a debt security is calculated on its net position, taking into consideration the remaining maturity and coupon rate. Specific risk: Specific risk relates to the risk of loss from changes in credit risk of issuers of debt securities or equities, excluding changes in general market prices. Specific interest rate risk of a debt security is measured by multiplying the interest rate position appraised based on the market price of such security by the risk-weighted value applicable to the type of debt security, credit rating and the remaining maturity. | debt security is measured by multiplying the interest rate position appraised based on the market price of such security by therisk-weighted value applicable to the type of debt security, credit rating and the remaining maturity. |
Equity risk: General and specific equity risk are calculated by multiplying the bought or sold position by the relevantrisk-weighted values. Foreign exchange risk: Foreign exchange risk is measured by multiplying the larger of the absolute values among the net bought or sold positions of each currency by the relevantrisk-weighted values. Option risk: Option risk is measured using the delta, gamma and vega of the option. The standardized method is used to measure the market risk of the positions for which the Financial Supervisory Service has not approved the use of the VaR method. In addition, we use the standardized method for positions which are held by certain subsidiaries or for which measuring VaR is difficult due to the lack of daily position data. See Note 4.4.2 of the notes to our consolidated financial statements included elsewhere in this annual report. The following table shows the volume and types of instruments held by Kookmin Bank for which the standardized method is used to measure its required equity capital as of December 31, 2012, 20132015, 2016 and 2014.2017. | | | As of December 31, | | | As of December 31, | | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (in millions of Won) | | | (in millions of Won) | | 30-year government bonds(1) | | ₩ | — | | | ₩ | — | | | ₩ | 7,913 | | | Currency rate swaps and foreign exchange positions(2) | | | 131,723 | | | | 122,537 | | | | 117,334 | | | Swaps and foreign exchange positions(1) | | | | — | | | | 1,706 | | | | 14,742 | | Derivative-linked securities(2) | | | | — | | | | 129,535 | | | | 95,357 | | Options embedded in convertible bonds(3) | | | 17,459 | | | | 2,328 | | | | 2,383 | | | | 346 | | | | 9,183 | | | | 17,303 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 149,182 | | | ₩ | 124,865 | | | ₩ | 127,630 | | | ₩ | 346 | | | ₩ | 140,424 | | | ₩ | 127,402 | | | | | | | | | | | | | | | | | | | | |
(1) | Represents amounts marked to market.
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(2) | Represents the overall net open currency position in each currency held by Kookmin Bank (China) Ltd. and a special purpose vehicle with respect to Kookmin Bank’s covered bond program. The overall net open currency position is the greater of (i) the sum of the absolute value of all short positions and (ii) the sum of the absolute value of all long positions. In the first half of 2015, Kookmin Bank received approval from the Financial Supervisory Service to use its internal VaR model, in lieu of the standardized method, to measure the market risk of positions held by Kookmin Bank (China) Ltd. As of December 31, 2015, Kookmin Bank held no currency rate swaps and foreign exchange positions that required the use of the standardized method to measure Kookmin Bank’s required equity capital. Amounts as of December 31, 2016 represent only the value of interest rate swaps held by a special purpose vehicle of Kookmin Bank, for which the standardized method is used to measure Kookmin Bank’s required equity capital. Amounts as of December 31, 2017 represent the value of interest rate swaps held by a special purpose vehicle of Kookmin Bank and the foreign exchange positions held by KB Microfinance Myanmar Co., Ltd., for which the standardized method is used to measure Kookmin Bank’s required equity capital. |
(2) | Amounts as of December 31, 2016 and 2017 represent the value of derivative-linked securities held by the trust accounts of Kookmin Bank subject to consolidation, for which the standardized method is used to measure Kookmin Bank’s required equity capital. |
(3) | Represents the absolute value ofover-the-counter derivatives measured at fair value at year end for monitoring purposes. |
The following table shows Kookmin Bank’s required equity capital measured using the standardized method as of December 31, 2012, 20132015, 2016 and 2014.2017. | | | As of December 31, | | | As of December 31, | | | | 2012 | | | 2013 | | | 2014 | | | 2015(1) | | | 2016(1) | | | 2017(1) | | | | (in millions of Won) | | | (in millions of Won) | | Risk categories: | | | | | | | | | Interest risk | | ₩ | 1,673 | | | ₩ | 921 | | | ₩ | 792 | | | ₩ | 34 | | | ₩ | 15,161 | | | ₩ | 98,236 | | Stock price risk | | | 4,567 | | | | 2 | | | | 1,101 | | | | 118 | | | | 4,816 | | | | 1,646 | | Foreign exchange risk | | | 9,081 | | | | 9,214 | | | | 9,387 | | | | — | | | | — | | | | 810 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 15,321 | | | ₩ | 10,137 | | | ₩ | 11,280 | | | ₩ | 152 | | | ₩ | 19,977 | | | ₩ | 100,691 | | | | | | | | | | | | | | | | | | | | |
(1) | In the first half of 2015, Kookmin Bank received approval from the Financial Supervisory Service to use its internal VaR model, in lieu of the standardized method, to measure the market risk of certain instruments held by Kookmin Bank, including30-year government bonds held by Kookmin Bank, as well as positions held by certain subsidiaries of Kookmin Bank, including Kookmin Bank (China) Ltd. |
BackBack-Testing.-Testing. We conduct back testing on a daily basis to validate the adequacy of our market risk model. In back testing, we compare both the actual and hypothetical profit and loss with the VaR calculations and analyze any results that fall outside our predetermined confidence interval of 99%. The number of times the actual changes in fair values, earnings or cash flows from the market risk sensitive instruments exceeded the VaR amounts in 2012, 20132015, 2016 and 20142017 was nil,6, 4 and 1,0, respectively. Stress testing.testing. In addition to VaR, which assumes normal market situations, we use stress testing to assess our market risk exposure to abnormal market fluctuations. Abnormal market fluctuations include significant declines in the stock market and significant increases in the general level of interest rates. This is an important way to supplement VaR, as VaR is a statistical expression of possible loss under a given confidence level and holding period. It does not cover potential loss if the market moves in a manner that is outside our normal expectations. Stress testing projects the anticipated change in value of holding positions under certain scenarios assuming that no action is taken during a stress event to change the risk profile of a portfolio. According to Kookmin Bank’s stress testing, we estimate that as of December 31, 2014,2017, Kookmin Bank’s trading portfolio could have lost ₩299₩457 billion for an assumedshort-term extreme decline of approximately 25% in the equity market and an approximate 7750 basis point increase in the Korean treasury bond rates under an abnormal stress environment. We monitor the impact of market turmoil or any abnormality by conducting stress tests and confirming that the results are within our market risk limits. If the impact is large, Kookmin Bank’s chief risk officer may request that our portfolio be restructured or other appropriate action be taken. Interest Risk Interest risk from trading activities arises mainly from our trading ofWon-denominated debt securities. Our trading strategy is to benefit fromshort-term movements in the prices of debt securities arising from changes in interest rates. As our trading accounts aremarked-to-market daily, we manage the interest risk related to our trading accounts using marketvalue-based tools such as VaR and sensitivity analysis. As of December 31, 2014,2017, the VaR of Kookmin Bank’s interest risk from trading was ₩10.1₩23.8 billion and the weighted average duration, or weighted average maturity, of itsWon-denominated debt securities at fair value through profit or loss was approximately 2.12.3 years. Foreign Exchange Risk Foreign exchange risk arises because we have assets and liabilities that are denominated in currencies other than Won, as well asoff-balance sheet items such as foreign exchange forwards and currency swaps. Prior to August 2010, Our assets and liabilities denominated in U.S. dollars, Japanese yen,Yen, Euro, Kazakhstan Tenge and EuroChinese Renminbi have typically accounted for the majority of our foreign currency assets and liabilities. Beginning in August 2010, the Kazakhstan tenge has accounted for a large portion of our foreign currency assets and liabilities, although its impact has decreased since 2013 due to impairment losses on our equity stake in JSC Bank CenterCredit, a Kazakhstan Bank. Until August 2010, our investment in JSC Bank CenterCredit was fully hedged against currency risk. See “Item 4.B. Business Overview—Capital Markets Activities and International Banking—International Banking.” However, in August 2010, we decided to discontinue such currency hedge as the value of the Won had remained relatively stable against the Kazakhstan tenge for a prolonged period of time.
The difference between our foreign currency assets and liabilities is offset against forward foreign exchange positions, currency options and currency swaps to obtain our net foreign currency open position. Kookmin Bank’s Risk Management Council and Market Risk Management Subcommittee oversee Kookmin Bank’s foreign exchange exposure for both trading andnon-trading purposes by establishing a limit for this net foreign currency open position, together with stop loss limits. VaR limits are established on a combined basis for our domestic operations and foreign branches. The following table shows Kookmin Bank’snon-consolidated net open positions at the end of 2012, 20132015, 2016 and 2014.2017. Positive amounts represent long positions and negative amounts represent short positions. The net open positions held by subsidiaries other than Kookmin Bank are not significant. | | | As of December 31,(1) | | | As of December 31,(1) | | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (in millions of US$) | | | (in millions of US$) | | Currency: | | | | | | | | | U.S. dollars | | US$ | (72.0 | ) | | US$ | (135.0 | ) | | US$ | (174.7 | ) | | US$ | (317.6 | ) | | US$ | (530.5 | ) | | US$ | (714.4 | ) | Japanese yen | | | (8.3 | ) | | | (17.3 | ) | | | (1.8 | ) | | Japanese Yen | | | | (0.2 | ) | | | 1.3 | | | | (0.7 | ) | Euro | | | (4.8 | ) | | | (5.5 | ) | | | (1.1 | ) | | | (3.3 | ) | | | (5.6 | ) | | | (1.3 | ) | Kazakhstan tenge | | | 314.5 | | | | 82.5 | | | | 56.5 | | | Kazakhstan Tenge | | | | 29.7 | | | | 27.0 | | | | — | | Chinese Renminbi | | | | 11.3 | | | | 70.8 | | | | 47.21 | | Others | | | 25.4 | | | | 22.9 | | | | 34.6 | | | | 7.8 | | | | 5.7 | | | | 7.35 | | | | | | | | | | | | | | | | | | | | | Total | | US$ | 254.8 | | | US$ | (52.4 | ) | | US$ | (86.5 | ) | | US$ | (272.3 | ) | | US$ | (431.3 | ) | | US$ | (661.8 | ) | | | | | | | | | | | | | | | | | | | |
(1) | Amounts prepared on anon-consolidated basis. |
Equity Price Risk Equity price risk results from our equity derivatives trading portfolio in Won since we do not have any trading exposure to shares denominated in foreign currencies other than foreign equity index futures. The equity derivatives trading portfolio in Won consists ofexchange-traded stocks and equity derivatives under strict limits on diversification as well as position limits and stop loss limits. Kookmin Bank’s Risk Management Council and Market Risk Management Subcommittee set annual and monthly stop loss limits that are monitored by Kookmin Bank’s Risk Management Department. In order to ensure timely action, the stop loss limit of individual securities is monitored by the relevant middle office. As of December 31, 2014,2017, Kookmin Bank’s equity trading position was ₩60.1₩43 billion. Derivative Market Risk Our derivative trading includes interest rate andcross-currency swaps, foreign exchange forwards, stock index and interest rate futures and currency options. These activities consist primarily of the following: sales oftailor-made derivative products that meet various needs of our corporate customers and related transactions to reduce our exposure resulting from those sales; taking positions in limited cases when we expectshort-swing profits based on our market forecasts; and trading to hedge our interest rate and foreign currency risk exposure as described above. Market risk from trading derivatives is not significant since our derivative trading activities are primarily driven by customer deals with very limited open trading positions. Market Risk Management forNon-Trading Activities Interest Rate Risk Our principal market risk fromnon-trading activities is interest rate risk. Interest rate risk arises due to mismatches in the maturities orre-pricing periods of theserate-sensitive assets and liabilities. We measure interest rate risk for Won and foreign currency assets and liabilities in our bank accounts (including derivatives) and our principal guaranteed trust accounts. Most of our interest earning assets and interest bearing liabilities are denominated in Won and our foreigncurrency-denominated assets and liabilities are mostly denominated in U.S. dollars. Our principal interest rate risk management objectives are to generate stable net interest revenues and to protect our asset value against interest rate fluctuations. We principally manage this risk for ournon-trading activities by analyzing and managing maturity and duration gaps between our interest earning assets and interest bearing liabilities. AlthoughIn addition, we have useduse hedging instruments only on a limited basis for interest rate risk management for ournon-trading assets and liabilities, to date the Korean financial market has not been sufficiently developed for this purpose. We expect to increase our use of derivatives to hedge this risk in the near future as the Korean financial market becomes more sophisticated.liabilities. Interest rate gap analysis measures expected changes in net interest revenues by calculating the difference in the amounts of interest earning assets and interest bearing liabilities at each maturity and interest resetting date. We perform interest rate gap analysis forWon-denominated and foreigncurrency-denominated assets and trust assets on a monthly basis or more frequently when deemed necessary. Interest Rate Gap Analysis.We perform interest rate gap analysis based on interest rate repricing maturities of assets and liabilities. However, for some of our assets and liabilities with either no maturities or unique characteristics, we use or assume certain maturities, including the following examples: With respect to asset maturities, we assume remaining maturities of primerate-linked loans with remaining maturities of over one year to be one year and use the actual maturities for primerate-linked loans with remaining maturities of less than one year. With respect to liability maturities, we use last 36 months’ average balance to segregate “non-core”“non-core” and “core” demand deposits. We assume “non-core”“non-core” demand deposits to have remaining maturities of one month or less, and we assume “core” demand deposits to have remaining maturities between one month and five years. The following table shows Kookmin Bank’s interest rate gap forWon-denominated accounts and foreigncurrency-denominated accounts as of December 31, 2014.2017. | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2014 | | | | 0-3 Months | | | 3-6 Months | | | 6-12 Months | | | 1-3 Years | | | Over 3 Years | | | Total | | | | (in billions of Won, except percentages) | | Won-denominated Interest earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | Loans | | ₩ | 68,691 | | | ₩ | 55,961 | | | ₩ | 43,967 | | | ₩ | 11,881 | | | ₩ | 12,885 | | | ₩ | 193,384 | | Securities | | | 3,291 | | | | 2,140 | | | | 4,959 | | | | 13,258 | | | | 3,052 | | | | 26,701 | | Others | | | 9,429 | | | | 262 | | | | 275 | | | | 703 | | | | 105 | | | | 10,774 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 81,411 | | | ₩ | 58,363 | | | ₩ | 49,201 | | | ₩ | 25,842 | | | ₩ | 16,042 | | | ₩ | 230,859 | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Deposits | | ₩ | 76,842 | | | ₩ | 37,206 | | | ₩ | 51,233 | | | ₩ | 21,161 | | | ₩ | 16,554 | | | ₩ | 202,995 | | Borrowings | | | 5,050 | | | | 0 | | | | 2 | | | | 0 | | | | 150 | | | | 5,202 | | Others | | | 10,126 | | | | 1,310 | | | | 1,762 | | | | 4,677 | | | | 3,188 | | | | 21,063 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 92,018 | | | ₩ | 38,516 | | | ₩ | 52,996 | | | ₩ | 25,838 | | | ₩ | 19,892 | | | ₩ | 229,260 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sensitivity gap | | | (10,607 | ) | | | 19,847 | | | | (3,795 | ) | | | 3 | | | | (3,849 | ) | | | 1,599 | | Cumulative gap | | | (10,607 | ) | | | 9,240 | | | | 5,445 | | | | 5,448 | | | | 1,599 | | | | | | % of total assets | | | (4.6 | )% | | | 4.0 | % | | | 2.4 | % | | | 2.4 | % | | | 0.7 | % | | | | | Foreign currency-denominated Interest earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | Due from banks | | ₩ | 8,893 | | | ₩ | 1,925 | | | ₩ | 1,054 | | | ₩ | 260 | | | ₩ | 11 | | | ₩ | 12,144 | | Loans | | | 212 | | | | 33 | | | | 79 | | | | 367 | | | | 107 | | | | 797 | | Securities | | | 870 | | | | 330 | | | | 335 | | | | 879 | | | | 0 | | | | 2,415 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 9,976 | | | ₩ | 2,287 | | | ₩ | 1,469 | | | ₩ | 1,506 | | | ₩ | 117 | | | ₩ | 15,356 | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Deposits | | ₩ | 1,856 | | | ₩ | 2,400 | | | ₩ | 354 | | | ₩ | 124 | | | ₩ | 38 | | | ₩ | 4,772 | | Borrowings | | | 3,995 | | | | 1,311 | | | | 824 | | | | 83 | | | | 13 | | | | 6,226 | | Others | | | 3,471 | | | | 0 | | | | 297 | | | | 1,209 | | | | 0 | | | | 4,977 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 9,322 | | | ₩ | 3,711 | | | ₩ | 1,476 | | | ₩ | 1,416 | | | ₩ | 51 | | | ₩ | 15,975 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sensitivity gap | | | 654 | | | | (1,423 | ) | | | (7 | ) | | | 90 | | | | 66 | | | | (620 | ) | Cumulative gap | | | 654 | | | | (769 | ) | | | (776 | ) | | | (686 | ) | | | (620 | ) | | | | | % of total assets | | | 4.3 | % | | | (5.0 | )% | | | (5.1 | )% | | | (4.5 | )% | | | (4.0 | )% | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2017 | | | | 0-3 Months | | | 3-6 Months | | | 6-12 Months | | | 1-3 Years | | | Over 3 Years | | | Total | | | | (in billions of Won, except percentages) | | Won-denominated Interest earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | Loans | | ₩ | 95,978 | | | ₩ | 68,665 | | | ₩ | 35,921 | | | ₩ | 15,003 | | | ₩ | 18,480 | | | ₩ | 234,047 | | Securities | | | 4,882 | | | | 4,731 | | | | 6,429 | | | | 13,751 | | | | 5,391 | | | | 35,184 | | Others | | | 7,268 | | | | 129 | | | | 161 | | | | 36 | | | | 0 | | | | 7,594 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 108,128 | | | ₩ | 73,525 | | | ₩ | 42,511 | | | ₩ | 28,790 | | | ₩ | 23,871 | | | ₩ | 276,825 | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Deposits | | ₩ | 90,176 | | | ₩ | 39,084 | | | ₩ | 55,321 | | | ₩ | 29,798 | | | ₩ | 23,852 | | | ₩ | 238,231 | | Borrowings | | | 7,076 | | | | 62 | | | | 0 | | | | 0 | | | | 120 | | | | 7,258 | | Others | | | 6,728 | | | | 1,950 | | | | 3,068 | | | | 7,170 | | | | 2,960 | | | | 21,876 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 103,980 | | | ₩ | 41,096 | | | ₩ | 58,389 | | | ₩ | 36,968 | | | ₩ | 26,932 | | | ₩ | 267,365 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sensitivity gap | | | 4,148 | | | | 32,429 | | | | (15,878 | ) | | | (8,178 | ) | | | (3,061 | ) | | | 9,460 | | Cumulative gap | | | 4,148 | | | | 36,577 | | | | 20,699 | | | | 12,521 | | | | 9,460 | | | | | | % of total assets | | | 1.5 | % | | | 13.2 | % | | | 7.5 | % | | | 4.5 | % | | | 3.4 | % | | | | | Foreigncurrency-denominated Interest earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | Due from banks | | ₩ | 1,635 | | | ₩ | 53 | | | ₩ | 101 | | | ₩ | 0 | | | ₩ | 0 | | | ₩ | 1,789 | | Loans | | | 11,425 | | | | 1,321 | | | | 595 | | | | 24 | | | | 83 | | | | 13,448 | | Securities | | | 522 | | | | 112 | | | | 251 | | | | 1,082 | | | | 1,390 | | | | 3,357 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 13,582 | | | ₩ | 1,486 | | | ₩ | 947 | | | ₩ | 1,106 | | | ₩ | 1,473 | | | ₩ | 18,594 | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Deposits | | ₩ | 5,386 | | | ₩ | 4,554 | | | ₩ | 1,088 | | | ₩ | 235 | | | ₩ | 37 | | | ₩ | 11,300 | | Borrowings | | | 4,450 | | | | 1,818 | | | | 646 | | | | 13 | | | | 5 | | | | 6,932 | | Others | | | 786 | | | | 177 | | | | 177 | | | | 867 | | | | 1,280 | | | | 3,287 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 10,622 | | | ₩ | 6,549 | | | ₩ | 1,911 | | | ₩ | 1,115 | | | ₩ | 1,322 | | | ₩ | 21,519 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sensitivity gap | | | 2,960 | | | | (5,063 | ) | | | (964 | ) | | | (9 | ) | | | 151 | | | | (2,925 | ) | Cumulative gap | | | 2,960 | | | | (2,103 | ) | | | (3,076 | ) | | | (3,076 | ) | | | (2,925 | ) | | | | | % of total assets | | | 15.9 | % | | | (11.3 | )% | | | (16.5 | )% | | | (16.5 | )% | | | (15.7 | )% | | | | |
Duration Gap Analysis. We also perform duration gap analysis to measure and manage interest rate risk. Duration gap analysis is a morelong-term risk indicator than interest rate gap analysis, as interest rate gap analysis focuses more on accounting income as opposed to the market value of the assets and liabilities. We emphasize duration gap analysis because, in the long run, our principal concern with respect to interest rate fluctuations is the net asset value rather than net interest revenue changes. In 2014,2017, ourWon-denominated asset and liability duration gap was negative and it moved between (-(+)0.0350.008 years and (-)0.0440.051 years. Accordingly, our net asset value would have declined (or increased) between ₩78₩22 billion and ₩102₩142 billion if interest rates had decreased (or increased) by one percentage point. For duration gap analysis we use or assume the same maturities for different assets and liabilities that we use or assume for our interest rate gap analysis. The following table shows Kookmin Bank’s duration gaps and net asset value changes when interest rates decrease by one percentage point as of the specified dates, on anon-consolidated basis. | Won-denominated | | Asset Duration | | | Liability Duration | | | Duration Gap | | Net Asset Value Change | | | Asset Duration | | | Liability Duration | | | Duration Gap | | Net Asset Value Change | | Date | | (in years) | | | (in years) | | | (in years) | | (in billions of Won) | | | (in years) | | | (in years) | | | (in years) | | (in billions of Won) | | June 30, 2014 | | | 0.733 | | | | 0.801 | | | | (0.035 | ) | | | (78 | ) | | December 31, 2014 | | | 0.762 | | | | 0.838 | | | | (0.044 | ) | | | (102 | ) | | June 30, 2017 | | | | 0.893 | | | | 0.939 | | | | 0.008 | | | ₩ | 22 | | December 31, 2017 | | | | 0.807 | | | | 0.915 | | | | (0.051 | ) | | | 142 | |
| Foreign currency-denominated | | Asset Duration | | | Liability Duration | | | Duration Gap | | Net Asset Value Change | | | Asset Duration | | | Liability Duration | | | Duration Gap | | Net Asset Value Change | | Date | | (in years) | | | (in years) | | | (in years) | | (in billions of Won) | | | (in years) | | | (in years) | | | (in years) | | (in billions of Won) | | June 30, 2014 | | | 0.298 | | | | 0.341 | | | | (0.066 | ) | | | (9 | ) | | December 31, 2014 | | | 0.303 | | | | 0.307 | | | | (0.033 | ) | | | (4 | ) | | June 30, 2017 | | | | 0.618 | | | | 0.466 | | | | 0.067 | | | ₩ | 12 | | December 31, 2017 | | | | 0.539 | | | | 0.528 | | | | (0.067 | ) | | | 12 | |
We set interest rate risk limits using historical interest rate volatility of financial bonds and duration gaps with respect to expected asset and liability positions based on our annual business plans. The Risk Management Department in Kookmin Bank’s Risk Management Group submits interest rate gap analysis reports, duration gap analysis reports and interest rate risk limit compliance reports monthly to Kookmin Bank’s Risk Management Council and quarterly to Kookmin Bank’s Risk Management Committee. The following table summarizes Kookmin Bank’s interest rate risk, taking into account asset and liability durations as of December 31, 2014.2017. | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2014 | | | | 3 Months or Less | | | 3-6 Months | | | 6-12 Months | | | 1-3 Years | | | Over 3 Years | | | Total | | | | (in billions of Won, except percentages and maturities in years) | | Won-denominated: | | | | | | | | | | | | | | | | | | | | | | | | | Asset position | | ₩ | 81,411 | | | ₩ | 58,363 | | | ₩ | 49,201 | | | ₩ | 25,842 | | | ₩ | 16,042 | | | ₩ | 230,859 | | Liability position | | | 92,018 | | | | 38,516 | | | | 52,996 | | | | 25,838 | | | | 19,892 | | | | 229,260 | | Gap | | | (10,607 | ) | | | 19,847 | | | | (3,795 | ) | | | 3 | | | | (3,849 | ) | | | 1,599 | | Average maturity | | | 0.242 | | | | 0.482 | | | | 0.956 | | | | 2.753 | | | | 5.123 | | | | | | Interest rate volatility | | | (0.97 | )% | | | (0.83 | )% | | | (0.47 | )% | | | 0.12 | % | | | 0.37 | % | | | | | Amount at risk | | | 3 | | | | 66 | | | | (11 | ) | | | (8 | ) | | | 60 | | | | 110 | | | | | | | | | Foreign currency-denominated: | | | | | | | | | | | | | | | | | | | | | | | | | Asset position | | ₩ | 9,976 | | | ₩ | 2,287 | | | ₩ | 1,469 | | | ₩ | 1,506 | | | ₩ | 117 | | | ₩ | 15,356 | | Liability position | | | 9,322 | | | | 3,711 | | | | 1,476 | | | | 1,416 | | | | 51 | | | | 15,975 | | Gap | | | 654 | | | | (1,423 | ) | | | (7 | ) | | | 90 | | | | 66 | | | | (620 | ) | Average maturity | | | 0.249 | | | | 0.496 | | | | 0.982 | | | | 2.859 | | | | 5.445 | | | | | | Interest rate volatility | | | 0.24 | % | | | 0.40 | % | | | 0.46 | % | | | 0.33 | % | | | 0.27 | % | | | | | Amount at risk | | | (0 | ) | | | 3 | | | | (0 | ) | | | (0 | ) | | | (1 | ) | | | 2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2017 | | | | 3 Months or Less | | | 3-6 Months | | | 6-12 Months | | | 1-3 Years | | | Over 3 Years | | | Total | | | | (in billions of Won, except percentages and maturities in years) | | Won-denominated: | | | | | | | | | | | | | | | | | | | | | | | | | Asset position | | ₩ | 108,128 | | | ₩ | 73,525 | | | ₩ | 42,512 | | | ₩ | 28,790 | | | ₩ | 23,871 | | | ₩ | 276,825 | | Liability position | | | 103,980 | | | | 41,096 | | | | 58,389 | | | | 36,968 | | | | 26,932 | | | | 267,365 | | Gap | | | 4,148 | | | | 32,429 | | | | (15,878 | ) | | | (8,178 | ) | | | (3,061 | ) | | | 9,460 | | Average maturity | | | 0.246 | | | | 0.489 | | | | 0.969 | | | | 2.786 | | | | 5.215 | | | | | | Interest rate volatility | | | (0.51 | )% | | | (0.62 | )% | | | (0.72 | )% | | | (0.91 | )% | | | (1.07 | )% | | | | | Amount at risk | | | (21 | ) | | | (82 | ) | | | 101 | | | | 161 | | | | 157 | | | | 316 | | | | | | | | | Foreigncurrency-denominated: | | | | | | | | | | | | | | | | | | | | | | | | | Asset position | | ₩ | 13,582 | | | ₩ | 1,486 | | | ₩ | 947 | | | ₩ | 1,106 | | | ₩ | 1,473 | | | ₩ | 18,594 | | Liability position | | | 10,622 | | | | 6,549 | | | | 1,911 | | | | 1,115 | | | | 1,322 | | | | 21,519 | | Gap | | | 2,960 | | | | (5,063 | ) | | | (964 | ) | | | (9 | ) | | | 151 | | | | (2,925 | ) | Average maturity | | | 0.247 | | | | 0.491 | | | | 0.964 | | | | 2.750 | | | | 5.104 | | | | | | Interest rate volatility | | | (1.33 | )% | | | (1.46 | )% | | | (1.41 | )% | | | (1.46 | )% | | | (1.54 | )% | | | | | Amount at risk | | | (7 | ) | | | 35 | | | | 9 | | | | (1 | ) | | | (3 | ) | | | 34 | |
Interest Rate VaR Analysis. Interest rate VaR is the estimated maximum possible loss on netnon-trading assets due to unfavorable changes in interest rates. We calculate interest rate VaR based on interest earning assets and interest bearing liabilities, excluding trading positions, at a 99.94%99.9% confidence level. In 2012, we changed ourOur method of calculating the interest rate impact from the previous internal simulation method of applying probable interest rate scenarios tois a historical simulation method which uses actual historical price, volatility and yield changes in comparison with the current position to generate hypothetical portfolios and calculate a distribution of position and portfolio market value changes. The previous internal simulation method used extreme values in applying hypothetical interest rates to each maturity period, which weWe believe may result in exaggerated interest rate VaR values. Accordingly, we believe that the change in our interest rate VaR methodology to a historical simulation method will allowallows us to benefit from more sophisticated risk measurements using practical scenarios. Using the historical simulation method, Kookmin Bank’s interest rate VaR was ₩203₩95 billion as of December 31, 2013 and ₩1122015, ₩76 billion as of December 31, 2014.2016 and ₩350 billion as of December 31, 2017. See Note 4.4.3 of the notes to our consolidated financial statements included elsewhere in this annual report. Foreign Exchange Risk
We manage foreign exchange rate risk arising from ournon-trading operations together with such risks arising from our trading operations. See “—Market Risk Management for Trading Activities—Foreign Exchange Risk” above. Liquidity Risk Management Liquidity risk is the risk of insolvency or loss due to a disparity between the inflow and outflow of funds resulting from, for example, maturity mismatches, obtaining funds at a high price or disposing of securities at an unfavorable price due to lack of available funds. We manage our liquidity in order to meet our financial liabilities from withdrawals of deposits, redemption of matured debentures and repayments at maturity of borrowed funds. We also require sufficient liquidity to fund loans, to extend other credits and to invest in securities. Our liquidity management goal is to meet all our liability repayments on time and fund all investment opportunities even under adverse conditions. To date, we have not experienced significant liquidity risk. We maintain liquidity by holding sufficient quantities of assets that can be liquidated to meet actual or potential demands for funds from depositors and others. We also manage liquidity by ensuring that the excess of maturing liabilities over maturing assets in any period is kept to manageable levels relative to the amount of funds we believe we could raise by issuing securities. We seek to minimize our liquidity costs by managing our liquidity position on a daily basis and by limiting the amount of cash at any time that is not invested in interest earning assets or securities. We maintain diverse sources of liquidity to facilitate flexibility in meeting our funding requirements. We fund our operations principally by accepting deposits from retail and corporate depositors, accessing the call loan market (ashort-term market for loans with maturities of less than 90 days), issuing debentures and borrowing from the Bank of Korea. We use the majority of funds we raise to extend loans or purchase securities. Generally, deposits are of shorter average maturity than loans or investments. ForWon-denominated assets and liabilities, we manage liquidity using a cash flow structure based on holdingshort-term liabilities andlong-term assets. Generally, the average initial contract maturity of our newWon-denominated time deposits was less than one year, while during the same period most of our new loans and securities had maturities over one year. We manage liquidity risk within the limits set on Won and foreign currency accounts in accordance with the regulations of the Financial Services Commission. The Financial Services Commission requires Korean banks, including Kookmin Bank, to maintain a liquidity coverage ratio of not less than 80%95% from January 1, 20152018 to December 31, 2015,2018 (compared to not less than 90% from January 1, 2017 to December 31, 2017), with such minimum liquidity coverage ratio to increase in increments of 5% per annum to 100% by 2019, and a foreign currency liquidity ratio of not less than 85%.2019. The Financial Services Commission defines the liquidity coverage ratio as the ratio of highly liquid assets to total net cash outflows over a one-month30-day period. The highly liquid assets and total net cash outflows included in the calculation of the liquid coverage ratio are determined in accordance with the “Standards for Calculation of Liquidity Coverage Ratio” under the “Detailed RegulationsDetailed Regulation on the Supervision of the Banking Business.” In addition, the Financial Services Commission requires Korean banks, including Kookmin Bank, to maintain a foreign currency liquidity coverage ratio of not less than 70% from January 1, 2018 to December 31, 2018, with such minimum foreign currency liquidity coverage ratio to increase to 80% by 2019. Kookmin Bank’s TreasuryAsset Liability Management Department is responsible for daily liquidity risk management ofwith respect to its Won and foreign currency exposure. It reports monthly plans for funding and operations to the Asset Liability Management Committee of Kookmin Bank, which discusses factors such as interest rate movements and maturity structures of its deposits, loans and securities.securities and establishes strategies with respect to deposit and lending rates. The following table shows Kookmin Bank’s liquidity status and limits for Woncoverage ratio and foreign currency accounts asliquidity coverage ratio on an average balance basis for the month of December 31, 20142017 in accordance with Financial Services Commission regulations: | | | | | Won accounts:Liquidity coverage ratio:
| | 1 Month or Less | | | | (in billions of Won,
except percentages) | | AssetsHighly liquid assets (A)
| | ₩ | 54,47643,947 | | LiabilitiesCash outflows (B)
| | | 44,99160,388 | | Cash inflows (C) | | | 16,441 | | Total net cash outflows (D =B-C) | | | 43,947 | | Liquidity gapcoverage ratio (A/D) | | | 9,485100.00 | % | Minimum limit | | | 90 | % |
| | | | | Foreign currency liquidity coverage ratio: | | 1 Month or Less | | | | (in millions of US$, except percentages) | | Highly liquid assets (A) | | US$ | 2,235 | | Cash outflows (B) | | | 6,402 | | Cash inflows (C) | | | 4,731 | | Total net cash outflows (D =B-C) | | | 1,671 | | Liquidity coverage ratio (A/B)D) | | | 121.08133.76 | % | LimitMinimum limit
| | | 10060 | % |
| | | | | | | | | | | | | | | 7 Days or Less | | | 1 Month or Less | | | 3 Months or Less | | | | (in millions of US$, except percentages) | | Foreign currency assets (A) | | US$ | 5,135 | | | US$ | 9,670 | | | US$ | 15,703 | | Foreign currency liabilities (B) | | | 4,122 | | | | 8,060 | | | | 13,501 | | Maturity gap (C) | | | 1,013 | | | | 1,609 | | | | 2,202 | | Cumulative gap | | | 1,013 | | | | 2,622 | | | | 4,824 | | Total assets (D) | | | 34,830 | | | | 34,830 | | | | 34,830 | | Liquidity gap ratio (C/D) | | | 2.91 | % | | | 4.62 | % | | | 116.31 | %(1) | Limits | | | (3.00 | )% | | | (10.00 | )% | | | 85.00 | % |
(1) | Liquidity ratio (A/B).
|
The Risk Management Department in Kookmin Bank’s Risk Management Group reports whether it is complying with these limits monthly to Kookmin Bank’s Risk Management Council and quarterly to Kookmin Bank’s Risk Management Committee. Operational Risk Management Overall Status There is no complete consensus on the definition of operational risk in the banking industry. We define operational risk broadly to include all financial andnon-financial risks, other than credit risk, market risk, interest rate risk and liquidity risk, that may arise from our operations that could negatively impact our capital, including the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events as defined under Basel II. Our operational risk management objectives include not only satisfying regulatory requirements, but also providing internal support through the growth of a strong risk management culture, reinforcement of internal controls, improvement of work processes and provision of timely feedback to management members and staff throughout the bank. group.We manageEach of our subsidiaries manages operational risk primarily throughrisks related to its own business, and we regularly monitor them. Kookmin Bank, our banking subsidiary. Kookmin Banksubsidiary, uses an operational risk management framework meeting the Basel II Advanced Measurement Approach, or AMA, under which Kookmin Bank:
calculates its operational risk VaR on a quarterly basis using the “loss distribution approach VaR” and “scenario based VaR” methodology, and monitors operational risk in terms of Key Risk Indicators, or KRI,KRIs, using tolerance levels for each indicator; executes integrated compliance and operational risk Control Self Assessments, or CSAs, that enhance the effect on internal controls, which Kookmin Bank employees are able to access and use for process improvement; collects and analyzes internal and external loss data; conducts scenario analyses to evaluate exposure tohigh-severity events; manages certaininsurance-related activities relating to insurance strategies established to mitigate operational risk; examines operational risks arising in connection with the development of, changes in or discontinuance of products, policies or systems; uses a detailed business continuity plan covering all of its operations and locations to prepare against unexpected events, including an alternate analternateback-up site for use in disaster events as well as annualfull-scale testing of such site. site; refinesbank-wide operational risk policies and procedures; provides appropriate training and support to business line operational risk managers; and reports overall operational risk status to our senior management. EachWhile Kookmin Bank’s Risk Management Department advises relevant business units with respect to the review of and suggested improvements on related operational processes and procedures, each of Kookmin Bank’s relevant business units has primary responsibility for the management of its own operational risk. In addition, the Operational Risk Unit, which is part of Kookmin Bank’s Risk Management Department, monitorsbank-wide operational risk. Kookmin Bank also has internal controlbusiness line operational risk managers in all of its subsidiaries, departments and branches who periodically conduct CSAs and monitor KRIs. For example, Kookmin Bank has developed KRIs relating to customer data protection, which are applied and monitored at all domestic branches and offices. In addition, in order to strengthen risk management of its overseas operations, Kookmin Bank designates expert auditors for overseas branches and conducts internal audits designed especially to check key risks identified for each overseas branch. Kookmin Bank has also established a risk CSA system for overseas branches, pursuant to which all employees (including locally hired staff) of such branches are required to perform a risk CSA on a quarterly basis. Furthermore, Kookmin Bank regularly monitors operational risks related to new businesses as well as existing operating processes and seeks to develop appropriate new KRIs and risk CSA measures on an ongoing basis. Through this method,such methods, Kookmin Bank is able to ensure proper monitoring and measurement of operational risk in each of its business groups.groups and overseas operations.
Internal Control To monitor and control operational risks, we maintain a system of comprehensive policies and have put in place a control framework designed to provide a stable andwell-managed operational environment throughout our organization. We have in place regular staff rotation and a mandatory leave policy for employees in certain high-risk categories to safeguard against fraud and to check for weaknesses in internal controls. In addition, we maintain an external whistleblower “ombudsman” channel to encourage whistleblowing and voluntary reporting of fraudulent behavior. Each of our subsidiaries establishes its own internal control system in accordance with thegroup-level internal control principles. Our Compliance Supporting Department is responsible for monitoring and advising our subsidiaries regarding their internal control systems. Our Audit Committee, which consists of fournon-executive directors, is an independent authority that evaluates the effectiveness and efficiency of ourgroup-wide internal control systems and business processes and monitors our subsidiaries’ compliance with such systems and processes, as well as reviews the reliability of our financial statements to secure the transparency and stability of our management (including through the activities of our independent auditors). In particular, we have establishedgroup-wide internal guidelines with respect to our subsidiaries’ reporting requirements. Our subsidiaries review their operations and their level of compliance with internal control systems and business processes on a periodic basis and, as part of this process, they are required to report any problems discovered and any remedial actions taken to our chief compliance officer, who is responsible for reporting to our Audit Committee. Based on the results of these reports, or on an ad hoc basis in response to any problem or potential problem that it identifies, the Audit Committee may direct a subsidiary to conduct an audit of its operations or, if it chooses to do so, conduct its own audit of those operations. The Audit Committee interacts on a regular basis with our Audit Department, Compliance Supporting Department and our independent auditors. In carrying out these duties, the Audit Committee ultimately protects our property for the benefit of our shareholders, investors and customers by independently monitoring our management. Our Audit Department supports our Audit Committee in monitoring our accounting and business operations and overseeing the management of our subsidiaries’ internal control systems by performing the following activities: general audits, which includefull-scale audits of the overall operations performed according to an annual audit plan, and sectional audits of selected operations; and special audits of troubled or weak operations, which are performed when our Audit Committee or executive officer responsible for audits deems it necessary or pursuant to requests by our board, executive officers or supervisory authorities, such as the Financial Supervisory Service. The Financial Supervisory Service periodically conducts a general examination of our operations. It also performs specific audits on particular aspects of our operations, such as risk management, credit monitoring and liquidity, as the need arises. Kookmin Bank’s audit division consists of two departments, the Channel Audit Department and the Management Audit Department, and they areis the execution bodiesbody for its audit committee and supportsupports Kookmin Bank’s management objectives by auditing the operations of its branches using a risk analysis system and reviewing the operations of its headquarters and subsidiaries through the use of “risk-based“risk-based audit” in accordance with the “business measurement process” audit methodology, which requires that its Managementthe Audit Department evaluate the risk and process of its business units and concentrate theirits audit capacity with respect to high risk areas. As a result of recent regulatory trends, Kookmin Bank’s audit divisionAudit Department is continuing its efforts to establish an advanced audit system andvalue-added internal audit by introducingrisk-based audit techniques. Our Compliance Supporting Department operates a compliance system to ensure that all of our employees comply with the relevant laws and regulations. This system’s main function is to establish and manage our compliance program, educate employees and management and improve our internal control process. Legal Risk We consider legal risk as a part of our operational risk. The uncertainty of the enforceability of the obligations of our customers and counterparties creates legal risk. Changes in laws and regulations could also adversely affect us. Legal risk is higher in new areas of business where the law is often untested in the courts, although legal risk can also increase in our traditional business to the extent that the legal and regulatory landscape in Korea is changing and many new laws and regulations governing the financial industry remain untested. Our Compliance Supporting Department seeks to minimize legal risk by using stringent legal documentation, employing procedures designed to ensure that transactions are properly authorized and consulting legal advisers. IT System Operational Risk The integrity of our IT systems, and their ability to withstand potential catastrophic events, are crucial to our continuing operations. Accordingly, we are continuing to strengthen our disaster recovery capabilities. In order to minimize operational risks relating to our IT systems, we have implemented amulti-CPU system that runs multiple CPUs simultaneouslyon-site and ensures system continuity in case any of the CPUs fails. This system backs up our data systems at anoff-site location on areal-time basis to ensure that our operations can be carried out normally and without material interruption in the event of CPU failure. Also, in order to protect our Internet banking services from system failures and cyber attacks, we process our Internet transactions through three separate data processing centers. We currently test our disaster recovery systems on a quarterly basis, with the comprehensive testing including our branches and the main IT center’s disaster recovery system. Our disaster recovery capabilities involve a number of operations other than our core banking operations, including credit card and call center transactions. Internally, our ITSystem Operations Department monitors all of our computerized network processes and IT systems. This department monitors and reports on any unusual delays or irregularities reported by our branches. In addition, Kookmin Bank’s Information Security Department is responsible for the daily monitoring of its information security system. Our business operations other than our core banking and credit card operations, regularly conduct joint IT security assessmentsinspections with respect to such operations and have implemented measures to identify and respond collectively to security breach attempts, such as hacking attempts. In particular, at Kookmin Bank, we have taken steps to establish a comprehensive security system aimed at detecting and responding to internal and external threats to its IT system and have implemented network segregation on the computers of all employees so that Intranet and Extranet functions are segregated. We have endeavored to enhance protection of customer data by using personal identification numbers internally generated and managed by Kookmin Bank in all customer financial transaction, in lieu of the resident registration numbers of its customers, and by amending forms and templates to minimize collection of potentially sensitive customer data. Kookmin Bank’s chief information security officer is responsible for ensuring protection of information assets and technologies and reducing IT risks. At KB Kookmin Card, we have taken steps to strengthen its information security infrastructure by implementing a solution to prevent attacks on its website and a security system to prevent unauthorized access to local networks and information, as well as an anti-photography system to prevent information leaks via photographs taken with smartphones. As part of strengthening its operational processes and procedures for customer information protection, KB Kookmin Card prohibits use of portable devices within the premises, requires managerial approval for all documents sent externally, including via email, and continuously monitors compliance with data protection policies, including through spot inspection of each department. In 2009, Kookmin Bank obtained ISO 27001 certification, which relates to information security. In 2011, Kookmin Bank also obtained ISO 20000 certification, which relates to IT service management, and BS 25999 certification, which relates to business continuity management. Kookmin Bank is the first Korean bank to have obtained all three such international certifications. In addition, in 2013, 2015 and 2016, Kookmin Bank, we and KB Kookmin Card, respectively, obtained ISMS certification, which relates to information security management. In 2017, KB Kookmin Card obtained PCI DSS certification, which relates to protection of credit card data. We implement various year-round education programs and training sessions designed to raise the information security awareness of both management and employees. Item 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
Fees and Charges Under the terms of the deposit agreement, as a holder of our ADSs, you are required to pay the following service fees to the depositary: | | | Services | | Fees | Issuance of ADSs | | Up to $5.00 per 100 ADSs (or portion thereof) issued | | | Delivery of deposited shares against surrender of ADSs | | Up to $5.00 per 100 ADSs (or portion thereof) surrendered | | | Distribution of cash dividends or other cash distributions | | Up to $0.02 per ADS (or portion thereof) held | | | Transfer of ADSs, combination andsplit-up of American depositary receipts or interchange of certificated and uncertificated ADSs | | Up to $1.50 per American depositary receipt transferred | | | Distribution or sale of ADSssecurities pursuant to stock dividends, free stock distributions, or exercise of rights. | | Up to $5.00 per 100 ADSs (or portion thereof) held | | | Distribution of securitiesrights or any other than ADSs or rights to purchase additional ADSsnon-cash distributions
| | A fee equivalent to the fee that would be payable if securities distributed or sold, as the case may be, had been shares and such shares had been deposited for issuance of ADSs.ADSs | | | Depositary Services | | Up to $0.02 per ADS (or portion thereof) held on the applicable record date(s) established by the depositary |
As a holder of our ADSs, you are also responsible for paying certain fees and expenses incurred by the depositary and certain taxes and governmental charges such as: | • | | Fees for the transfer and registration of shares charged by the registrar and transfer agent for the shares in Korea (i.e., upon deposit and withdrawal of shares). |
Expenses incurred for converting foreign currency into U.S. dollars. Expenses for cable, telex and fax transmissions and for delivery of securities. | • | | Taxes and duties upon the transfer of securities (i.e., when shares are deposited or withdrawn from deposit). |
Fees and expenses incurred in connection with the delivery or servicing of shares on deposit or other deposited securities. Depositary fees payable upon the issuance and surrender of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for surrender. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date. The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than cash (i.e., stock dividend, rights), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via the Depository Trust Company, or DTC), the depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary. In the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to such holder of ADSs. Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary. You will receive prior notice of such changes. Fees and Payments from the Depositary to Us In 2014,2017, we received the following payments from the depositary: | Reimbursement of listing fees: | | $ | 42,000 | | | $ | 59,500 | | Reimbursement of SEC filing fees: | | $ | 34,430 | | | $ | 72,510 | | Reimbursement of expenses related to proxy process (printing, postage and distribution) and ADS holders identification: | | $ | 45,648 | | | $ | 51,262 | | Reimbursement of legal fees: | | $ | 345,154 | | | $ | 320,498 | | Reimbursement of expenses related to our investor relations activities (investor conferences and investor relations agency fees, etc.): | | $ | 126,832 | | | $ | 10,231 | |
In addition, as part of its service to us, the depositary waives its fees for the standard costs and operating expenses associated with the administration of the ADS facility. Item 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
Not applicable. Item 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
Not applicable. Item 15. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures We have evaluated, with the participation of our chief executive officer and chief financialfinance officer, the effectiveness of our disclosure controls and procedures as of December 31, 2014.2017. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our chief executive officer and chief financialfinance officer concluded that our disclosure controls and procedures as of December 31, 20142017 were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our chief executive officer and chief financialfinance officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules13a-15(f) and15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our chief executive officer and chief financialfinance officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Control—Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by the IASB. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS as issued by the IASB, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk 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 evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2014. 2017. Our management has excluded KB Insurance Co., Ltd. and its subsidiaries from our assessment of internal control over financial reporting as of December 31, 2017 in accordance with the SEC’s general guidance that an assessment of a recently acquired business may be omitted from the scope of assessment in the year of acquisition. Through a tender offer conducted in May 2017, we increased our shareholding in KB Insurance to 94.30%, as a result of which KB Insurance became a consolidated subsidiary. We subsequently effected a comprehensive stock swap in July 2017 to acquire the remaining outstanding shares of KB Insurance, as a result of which KB Insurance became a wholly-owned subsidiary. KB Insurance and its subsidiaries accounted for approximately 7.41% of our consolidated total assets as of December 31, 2017 and its profit before income tax for the period subsequent to its consolidation in 2017 amounted to 12.37% of our consolidated total profit before income tax. The effectiveness of our internal control over financial reporting as of December 31, 20142017 has been audited by Samil PricewaterhouseCoopers, an independent registered public accounting firm, as stated in its report included herein which expressed an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2014.2017. Attestation Report of the Registered Public Accounting Firm The attestation report of our independent registered public accounting firm is furnishedincluded in Item 18 of this Form20-F. Changes in Internal Control Over Financial Reporting ThereAs a result of our acquisition of a 100% shareholding in KB Insurance in July 2017, we are evaluating and implementing changes to processes, policies and other components of our internal control over financial reporting as part of our ongoing integration activities. Our management continues to be engaged in efforts to evaluate the effectiveness of our internal control procedures and the design of those control procedures in
connection with the acquisition of KB Insurance, with a plan to report its evaluation of the internal control over financial reporting of KB Insurance at December 31, 2018. Except for the foregoing, there has been no change in our internal control over financial reporting during 20142017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
Our board of directors has determined that each of Woon Youl Choi and Jongsoo Han and Suk Ho Sonu, ournon-executive directors and members of our Audit Committee, qualifiesqualify as an “audit committee financial expert”experts” and isare independent within the meaning of this Item 16A. We have adopted a code of ethics, as defined in Item 16B of Form20-F under the Exchange Act. Our code of ethics applies to our chief executive officer and chief financialfinance officer, as well as to ournon-executive directors,non-standing directors and other officers and employees. Our code of ethics is available on our website athttp://www.kbfg.com. If we amend the provisions of our code of ethics that apply to our chief executive officer and chief financialfinance officer and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website at the same address. Item 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Audit andNon-audit Fees The following table sets forth the fees billed to us by independent registered public accounting firm Samil PricewaterhouseCoopers during the fiscal years ended December 31, 20132016 and 2014:2017: | | | Year Ended December 31, | | | Year Ended December 31, | | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (in millions of Won) | | | (in millions of Won) | | Audit fees | | ₩ | 5,524 | | | ₩ | 5,517 | | | ₩ | 6,628 | | | ₩ | 7,277 | | Audit-related fees | | | 35 | | | | — | | | | 198 | | | | 547 | | Tax fees | | | 16 | | | | — | | | | | | | | | | | | | | | | Total fees | | ₩ | 5,575 | | | ₩ | 5,517 | | | ₩ | 6,826 | | | ₩ | 7,824 | | | | | | | | | | | | | | |
Audit fees in the above table are the aggregate fees billed by Samil PricewaterhouseCoopers in connection with: the audits of our annual financial statements and the review of our interim financial statements; the audits of our special purpose entities in connection with the Korean Securities Exchange Act or the Financial Investment Services and Capital Markets Act; and our financial debenture offering services. Audit-related fees in the above table are fees billed by Samil PricewaterhouseCoopers in connection with attestationdue diligence services rendered in the ordinary course of our financial statements under IFRS. Tax fees in the above table are fees billed by Samil PricewaterhouseCoopers in connection with tax filing services for our subsidiaries.business. Audit CommitteePre-Approval Policies and Procedures Our Audit Committeepre-approves the engagement of our independent auditors for audit services with respect to our financial statements. Our Audit Committee has implemented a policy regardingpre-approval of certain other services provided by our independent auditors to our subsidiaries that the Audit Committee has deemed as not affecting their independence. Under this policy,pre-approvals for the following services to our subsidiaries have been granted by our Audit Committee to each of our subsidiaries’ audit committees: (i) services related to the audit of financial statements prepared in accordance with IFRS as adopted by Korea and internal controls under Korean laws and regulations; (ii) general tax advisory services; (iii) due diligence services; (iv) issuance of comfort letters in connection with offering of securities; and (v) educational services provided to employees. Any other audit or permittednon-audit service must bepre-approved by the Audit Committee on acase-by-case basis. Our Audit Committee did notpre-approve anynon-audit services under thede minimis exception of Rule 2.01(c)(7)(i)(C) of RegulationS-X as promulgated by the Securities and Exchange Commission. Item 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
Not applicable. Item 16E. | PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
NeitherThe following table sets forth information regarding purchases by us of our common shares during the period covered by this annual report.
| | | | | | | | | | | | | | | | | Period | | Total Number of Shares Purchased | | | Average Price Paid per Share | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (as of end of period) | | January 1 to January 31, 2017 | | | 1,400,000 | (1) | | ₩ | 45,263 | | | | 1,400,000 | | | $ | 17,560,205.68 | | February 1 to February 28, 2017 | | | 392,500 | (1) | | | 47,751 | | | | 392,500 | | | | 1,718.30 | | March 1 to March 31, 2017 | | | — | | | | — | | | | — | | | | — | | April 1 to April 30, 2017 | | | — | | | | — | | | | — | | | | — | | May 1 to May 31, 2017 | | | — | | | | — | | | | — | | | | — | | June 1 to June 30, 2017 | | | — | | | | — | | | | — | | | | — | | July 1 to July 31, 2017 | | | — | | | | — | | | | — | | | | — | | August 1 to August 31, 2017 | | | — | | | | — | | | | — | | | | — | | September 1 to September 30, 2017 | | | — | | | | — | | | | — | | | | — | | October 1 to October 31, 2017 | | | — | | | | — | | | | — | | | | — | | November 1 to November 30, 2017 | | | 263,618 | (2) | | | 59,289 | | | | 263,618 | | | | 266,409,016.79 | | December 1 to December 31, 2017 | | | 1,702,253 | (2) | | | 61,180 | | | | 1,702,253 | | | | 168,843,826.61 | | | | | | | | | | | | | | | | | | | Total | | | 3,758,371 | | | | 53,716 | | | | 3,758,371 | | | | 168,843,826.61 | | | | | | | | | | | | | | | | | | |
(1) | Comprises common shares that were purchased through a broker in a series of open-market transactions in Korea in the periods indicated above, pursuant to a trust agreement for the acquisition of treasury shares dated August 3, 2016, which expired on April 17, 2017. |
(2) | Comprises common shares that were purchased through a broker in a series of open-market transactions in Korea in the periods indicated above, pursuant to a trust agreement for the acquisition of treasury shares dated November 27, 2017, which will expire on November 26, 2018. |
Other than as described above, neither we nor any “affiliated purchaser,” as defined in Rule10b-18(a)(3) of the Exchange Act, purchased any of our equity securities during the period covered by this annual report. Item 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
Not applicable. Item 16G. | CORPORATE GOVERNANCE |
Differences in Corporate Governance Practices Pursuant to the rules of the New York Stock Exchange applicable to foreign private issuers like us that are listed on the New York Stock Exchange, we are required to disclose significant differences between the New York Stock Exchange’s corporate governance standards and those that we follow under Korean law and in accordance with our own internal procedures. The following is a summary of such significant differences: | | | NYSE Corporate Governance Standards | | KB Financial Group | | | Director Independence | | | Listed companies must have a majority of independent directors. | | The majority of our board of directors is independent (as defined in accordance with the New York Stock Exchange’s standards), as seven out of nine directors arenon-executive directors. | | | Executive Session | | | Non-management directors must meet in regularly scheduled executive sessions without management. Independent directors should meet alone in an executive session at least once a year. | | Ournon-executive directors hold executive sessions as needed in accordance with the Regulation of the Board of Directors. | | | Nomination/Corporate Governance Committee | | | A nomination/corporate governance committee of independent directors is required. The committee must have a charter that addresses the purpose, responsibilities (including development of corporate governance guidelines) and annual performance evaluation of the committee. | | We maintain aNon-executive Director Nominating Committee composed of three fournon-executive directors and our chief executive officer. directors. We maintain a Corporate GovernanceCEO Nominating Committee composed of three all seven of ournon-executive directors, one non-standing director and our chief executive officer. directors. | | | Compensation Committee | | | A compensation committee of independent directors is required. The committee must have a charter that addresses the purpose, responsibilities and annual performance evaluation of the committee. The charter must be made available on the company’s website. In addition, in accordance with the U.S. Securities and Exchange Commission rules adopted pursuant to Section 952 of theDodd-Frank Act, the New York Stock Exchange listing standards were amended to expand the factors relevant in determining whether a committee member has a relationship with the company that will materially affect that member’s duties to the compensation committee. | | We maintain an Evaluation and Compensation Committee composed of four non-executive directors. |
| | | NYSE Corporate Governance Standards
| | KB Financial Group
| Additionally, the committee may obtain or retain the advice of a compensation adviser only after taking into consideration all factors relevant to determining that adviser’s independence from management. | | We maintain an Evaluation and Compensation Committee composed of fournon-executive directors. |
| | | NYSE Corporate Governance Standards | | KB Financial Group | | | Audit Committee | | | Listed companies must have an audit committee that satisfies the independence and other requirements of Rule10A-3 under the Exchange Act. All members must be independent. The committee must have a charter addressing the committee’s purpose, an annual performance evaluation of the committee, and the duties and responsibilities of the committee. The charter must be made available on the company’s website. | | We maintain an Audit Committee composed of fournon-executive directors. Accordingly, we are in compliance with Rule10A-3 under the Exchange Act. | | | Audit Committee Additional Requirements | | | Listed companies must have an audit committee that is composed of at least three directors. | | Our Audit Committee has four members, as described above. | | | Shareholder Approval of Equity Compensation Plan | | | Listed companies must allow its shareholders to exercise their voting rights with respect to any material revision to the company’s equity compensation plan. | | We currently have threetwo equity compensation plans: one providing for the grant of stock options to officers and directors;(i) performance share agreements with certain of our directors;directors, executive officers and other senior management and (ii) an employee stock ownership plan, or ESOP. | | | | | Matters related to the performance share agreements or ESOP are not subject to shareholders’ approval under Korean law. Our Articles of Incorporation provide that our stockholders may, by special resolution, grant stock options to officers, directors and employees. All material matters related to our stock option planoptions are provided in our Articles of Incorporation, and any amendments to the Articles of Incorporation are subject to shareholders’ approval. | | | | | Matters related to the performance share agreements or ESOP are not subject to shareholders’ approval under Korean law. | | | Corporate Governance Guidelines | | | Listed companies must adopt and disclose corporate governance guidelines. | | We have adopted but have not disclosed, corporate governance guidelines.standards, the Korean-language version of which is available on our website. |
Item 16H. | MINE SAFETY DISCLOSURE |
Not applicable. Item 17. | FINANCIAL STATEMENTS |
Not Applicable. Item 18. | FINANCIAL STATEMENTS |
Reference is made to Item 19(a) for a list of all financial statements filed as part of this annual report. | (a) | List of Financial Statements: |
| | | | | | | Page | | Audited consolidated financial statements of KB Financial Group Inc. and subsidiaries, prepared in accordance with IFRS as issued by the IASB | | | | | Report of Samil PricewaterhouseCoopers, independent registered public accounting firm | | | F-1 | | Consolidated statements of financial position as of January 1, 2013 and December 31, 20132016 and 20142017 | | | F-2F-3 | | Consolidated statements of comprehensive income for the years ended December 31, 2012, 20132015, 2016 and 20142017 | | | F-3F-4 | | Consolidated statements of changes in equity for the years ended December 31, 2012, 20132015, 2016 and 20142017 | | | F-5F-6 | | Consolidated statements of cash flows for the years ended December 31, 2012, 20132015, 2016 and 20142017 | | | F-9F-10 | | Notes to consolidated financial statements | | | F-11F-12 | |
Pursuant to the rules and regulations of the U.S. Securities and Exchange Commission, KB Financial Group has filed certain agreements as exhibits to this Annual Report on Form20-F. These agreements may contain representations and warranties made by the parties. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and (i) may be intended not as statements of fact, but rather as a way of allocating the risk to one of the parties to such agreements if those statements turn out to be inaccurate, (ii) may have been qualified by disclosures that were made to such other party or parties and that either have been reflected in the company’s filings or are not required to be disclosed in those filings, (iii) may apply materiality standards different from what may be viewed as material to investors and (iv) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments. Accordingly, these representations and warranties may not describe KB Financial Group’s actual state of affairs at the date of this annual report. | | | Number | | Description | | | 1.1 | | Articles of Incorporation of KB Financial Group (translation in English). | | | 2.1** | | Form of Share Certificate of KB Financial Group’s common stock, par value ₩5,000₩5,000 per share (translation in English). | | | 2.2*** | | Form of Fifth Amended and Restated Deposit Agreement among KB Financial Group, TheJPMorgan Chase Bank, of New York Mellon,N.A., as depositary, and all owners and holders from time to time of American depositary shares evidenced byreceipts issued thereunder, evidencing American depositary receipts issued thereunder,shares, including the form of American depositary receipt. | | | 8.1**** | | List of subsidiaries of KB Financial Group. | | | 11.1**** | | Code of Ethics. | | | 12.1 | | Section 302 certifications. | | | 13.1 | | Section 906 certifications. |
* | Incorporated by reference to the registrant’s filing on Form20-F (No.000-53445), filed on June 23, 2010.15, 2009. |
** | Incorporated by reference to the registrant’s filing on Form 20-F (No. 000-53445), filed on June 15, 2009. |
*** | Incorporated by reference to the registrant’s filing on Form F-6 (No. 333-184696)333-208008), filed on November 1, 2012.13, 2015. |
**** | Incorporated by reference to Note 40 of the consolidated financial statements of the registrant included in this annual report. |
**** | Incorporated by reference to the registrant’s filing on Form20-F (No.000-53445), filed on April 28, 2016. |
SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. | KB FINANCIAL GROUP INC. | (Registrant) | | /s/ Jong Kyoo Yoon | (Signature) | | Jong Kyoo Yoon | Chairman and Chief Executive Officer | (Name and Title) |
Date: April 29, 201527, 2018 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of KB Financial Group Inc.: In our opinion,Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial position of KB Financial Group Inc. (the “Company”) and its subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of KB Financial Group Inc. (the “Company”) and subsidiariesthe Company as of December 31, 20142017 and 2013, and January 1, 2013,2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 20142017 in conformity with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,2017, based on criteria established inInternal Control—Integrated Framework 2013 (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’sManagement’s Annual Report on Internal Control over Financial Reporting.” Our responsibility is to express opinions on thesethe Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the consolidated financial statement presentation.statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As described in Management’s Annual Report on Internal Control Over Financial Reporting, management has excluded KB Insurance Co., Ltd. and its subsidiaries from its assessment of internal control over financial reporting as of December 31, 2017 because it was acquired by the Company in a purchase business combination during 2017. We have also excluded KB Insurance Co., Ltd. and its subsidiaries from our audit of internal control over financial reporting. KB Insurance Co., Ltd. and its subsidiaries is a wholly-owned subsidiary whose total assets and profit before income tax represent 7.41% and 12.37%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2017. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Samil PricewaterhouseCoopers Seoul, Korea April 29, 201527, 2018 We have served as the Company’s auditor since 2008. KB FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF JANUARY 1, 2013, DECEMBER 31, 20132016 AND 20142017 | | | Jan. 1 2013 | | | Dec. 31 2013 | | | Dec. 31 2014 | | | 2014 | | | Dec. 31 2016 | | Dec. 31 2017 | | 2017 | | | | | | | | | | | | | Translation into U.S. dollars(Note 3) | | | | | | | Translation into U.S. dollars (Note 3) | | | | (In millions of Korean won) | | | (In thousands) | | | (In millions of Korean won) | | (In thousands) | | ASSETS | | | | | | | | | | | | | | | Cash and due from financial institutions | | ₩ | 10,592,605 | | | ₩ | 14,792,654 | | | ₩ | 15,423,847 | | | US$ | 14,138,774 | | | ₩ | 17,884,863 | | | ₩ | 19,817,825 | | | US$ | 18,566,099 | | Financial assets at fair value through profit and loss | | | 9,559,719 | | | | 9,328,742 | | | | 10,757,910 | | | | 9,861,590 | | | Financial assets at fair value through profit or loss | | | | 27,858,364 | | | 32,227,345 | | | 30,191,813 | | Derivative financial assets | | | 2,091,285 | | | | 1,819,409 | | | | 1,968,190 | | | | 1,804,206 | | | | 3,381,935 | | | 3,310,166 | | | 3,101,090 | | Loans | | | 213,644,791 | | | | 219,001,356 | | | | 231,449,653 | | | | 212,165,895 | | | | 265,486,134 | | | 290,122,838 | | | 271,798,203 | | Financial investments | | | 36,467,352 | | | | 34,849,095 | | | | 34,960,620 | | | | 32,047,796 | | | | 45,147,797 | | | 66,608,243 | | | 62,401,157 | | Investments in associates and joint ventures | | | 934,641 | | | | 755,390 | | | | 670,332 | | | | 614,482 | | | | 1,770,673 | | | 335,070 | | | 313,906 | | Property and equipment | | | 3,100,393 | | | | 3,060,843 | | | | 3,082,985 | | | | 2,826,119 | | | | 3,627,268 | | | 4,201,697 | | | 3,936,311 | | Investment property | | | 52,974 | | | | 166,259 | | | | 377,544 | | | | 346,088 | | | | 755,011 | | | 848,481 | | | 794,890 | | Intangible assets | | | 493,131 | | | | 443,204 | | | | 488,922 | | | | 448,186 | | | | 652,316 | | | 2,943,060 | | | 2,757,171 | | Net defined benefit assets | | | | — | | | 894 | | | 838 | | Current income tax assets | | | 332,970 | | | | 346,910 | | | | 306,313 | | | | 280,792 | | | | 65,738 | | | 6,324 | | | 5,925 | | Deferred income tax assets | | | 18,432 | | | | 15,422 | | | | 15,562 | | | | 14,265 | | | | 133,624 | | | 3,991 | | | 3,739 | | Assets held for sale | | | 35,412 | | | | 37,718 | | | | 70,357 | | | | 64,495 | | | | 52,148 | | | 155,506 | | | 145,684 | | Other assets | | | 8,745,799 | | | | 7,550,596 | | | | 8,783,473 | | | | 8,051,658 | | | | 8,857,785 | | | 16,204,169 | | | 15,180,687 | | | | | | | | | | | | | | | | | | | | | | | | Total assets | | | 286,069,504 | | | | 292,167,598 | | | | 308,355,708 | | | | 282,664,346 | | | | 375,673,656 | | | 436,785,609 | | | 409,197,513 | | | | | | | | | | | | | | | | | | | | | | | | LIABILITIES | | | | | | | | | | | | | | | Financial liabilities at fair value through profit and loss | | | 1,851,135 | | | | 1,115,202 | | | | 1,818,968 | | | | 1,667,417 | | | | 12,122,836 | | | 12,023,058 | | | 11,263,662 | | Derivative financial liabilities | | | 2,054,742 | | | | 1,795,339 | | | | 1,797,390 | | | | 1,647,636 | | | | 3,807,128 | | | 3,142,765 | | | 2,944,263 | | Deposits | | | 197,346,205 | | | | 200,882,064 | | | | 211,549,121 | | | | 193,923,421 | | | | 239,729,695 | | | 255,800,048 | | | 239,643,297 | | Debts | | | 15,965,458 | | | | 14,101,331 | | | | 15,864,500 | | | | 14,542,713 | | | | 26,251,486 | | | 28,820,928 | | | 27,000,551 | | Debentures | | | 24,270,212 | | | | 27,039,534 | | | | 29,200,706 | | | | 26,767,782 | | | | 34,992,057 | | | 44,992,724 | | | 42,150,910 | | Provisions | | | 669,729 | | | | 678,073 | | | | 614,347 | | | | 563,161 | | | | 537,717 | | | 568,033 | | | 532,155 | | Defined benefit liabilities | | | 83,723 | | | | 64,473 | | | | 75,684 | | | | 69,378 | | | Net defined benefit liabilities | | | | 96,299 | | | 154,702 | | | 144,931 | | Current income tax liabilities | | | 264,666 | | | | 211,263 | | | | 231,907 | | | | 212,585 | | | | 441,812 | | | 433,870 | | | 406,466 | | Deferred income tax liabilities | | | 154,303 | | | | 61,816 | | | | 93,211 | | | | 85,445 | | | | 103,482 | | | 533,069 | | | 499,399 | | Insurance contract liabilities | | | | 7,290,844 | | | 31,801,275 | | | 29,792,654 | | Other liabilities | | | 18,327,740 | | | | 20,236,229 | | | | 19,597,202 | | | | 17,964,416 | | | | 19,038,897 | | | 24,470,308 | | | 22,924,723 | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | | 260,987,913 | | | | 266,185,324 | | | | 280,843,036 | | | | 257,443,955 | | | | 344,412,253 | | | 402,740,780 | | | 377,303,011 | | | | | | | | | | | | | | | | | | | | | | | | TOTAL EQUITY | | | | | | | | | | | | | | | Capital stock | | | 1,931,758 | | | | 1,931,758 | | | | 1,931,758 | | | | 1,770,809 | | | | 2,090,558 | | | 2,090,558 | | | 1,958,515 | | Capital surplus | | | 15,840,300 | | | | 15,854,605 | | | | 15,854,510 | | | | 14,533,555 | | | | 16,994,902 | | | 17,122,228 | | | 16,040,760 | | Accumulated other comprehensive income | | | 295,142 | | | | 336,312 | | | | 461,679 | | | | 423,213 | | | | 405,329 | | | 537,668 | | | 503,708 | | Retained earnings | | | 6,819,869 | | | | 7,859,599 | | | | 9,067,145 | | | | 8,311,695 | | | | 12,229,228 | | | 15,044,204 | | | 14,093,988 | | Treasury shares | | | | (721,973 | ) | | (755,973 | ) | | (708,225 | ) | | | | | | | | | | | | | | | | | | | | | | | Equity attributable to shareholders of the company | | | 24,887,069 | | | | 25,982,274 | | | | 27,315,092 | | | | 25,039,273 | | | | 30,998,044 | | | 34,038,685 | | | 31,888,746 | | Non-controlling interests | | | 194,522 | | | | — | | | | 197,580 | | | | 181,118 | | | | 263,359 | | | 6,144 | | | 5,756 | | | | | | | | | | | | | | | | | | | | | | | | Total equity | | | 25,081,591 | | | | 25,982,274 | | | | 27,512,672 | | | | 25,220,391 | | | | 31,261,403 | | | 34,044,829 | | | 31,894,502 | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities and equity | | ₩ | 286,069,504 | | | ₩ | 292,167,598 | | | ₩ | 308,355,708 | | | US$ | 282,664,346 | | | ₩ | 375,673,656 | | | ₩ | 436,785,609 | | | US$ | 409,197,513 | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. KB FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2012, 20132015, 2016 and 20142017 | | | 2012 | | 2013 | | 2014 | | 2014 | | | 2015 | | 2016 | | 2017 | | 2017 | | | | | | | | | | Translation into U.S. dollars (Note 3) | | | | | | | | | Translation into U.S. dollars (Note 3) | | | | (In millions of Korean won, except per share amounts) | | (In thousands, except per share amounts) | | | (In millions of Korean won, except per share amounts) | | (In thousands, except per share amounts) | | Interest income | | ₩ | 14,210,106 | | | ₩ | 12,356,930 | | | ₩ | 11,635,296 | | | US$ | 10,665,875 | | | ₩ | 10,375,823 | | | ₩ | 10,021,882 | | | ₩ | 11,382,452 | | | US$ | 10,663,518 | | Interest expense | | | (7,172,323 | ) | | | (5,834,098 | ) | | | (5,219,521 | ) | | | (4,784,645 | ) | | (4,172,624 | ) | | (3,619,353 | ) | | (3,672,443 | ) | | (3,440,486 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income | | | 7,037,783 | | | | 6,522,832 | | | | 6,415,775 | | | | 5,881,230 | | | 6,203,199 | | | 6,402,529 | | | 7,710,009 | | | 7,223,032 | | | | | | | | | | | | | | | | | | | | | | | | | | | Fee and commission income | | | 2,753,876 | | | | 2,657,365 | | | | 2,666,185 | | | | 2,444,046 | | | 2,971,095 | | | 3,150,877 | | | 3,988,250 | | | 3,736,346 | | Fee and commission expense | | | (1,187,170 | ) | | | (1,178,126 | ) | | | (1,283,456 | ) | | | (1,176,522 | ) | | (1,436,112 | ) | | (1,565,985 | ) | | (1,938,226 | ) | | (1,815,805 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net fee and commission income | | | 1,566,706 | | | | 1,479,239 | | | | 1,382,729 | | | | 1,267,524 | | | 1,534,983 | | | 1,584,892 | | | 2,050,024 | | | 1,920,541 | | | | | | | | | | | | | | | | | | | | | | | | | | | Insurance income | | | 1,373,373 | | | 1,201,352 | | | 8,970,992 | | | 8,404,369 | | Insurance expense | | | (1,478,987 | ) | | (1,319,155 | ) | | (8,377,282 | ) | | (7,848,159 | ) | | | | | | | | | | | | | | | Net insurance income(expense) | | | (105,614 | ) | | (117,803 | ) | | 593,710 | | | 556,210 | | | | | | | | | | | | | | | | Net gains(losses) on financial assets/liabilities at fair value through profit or loss | | | 811,964 | | | | 756,822 | | | | 439,198 | | | | 402,605 | | | 359,727 | | | (8,768 | ) | | 740,329 | | | 693,569 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net other operating income(expense) | | | (1,531,942 | ) | | | (1,304,765 | ) | | | (1,040,909 | ) | | | (954,183 | ) | | (610,346 | ) | | (415,908 | ) | | (901,890 | ) | | (844,925 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | General and administrative expenses | | | (3,845,610 | ) | | | (3,983,564 | ) | | | (4,009,694 | ) | | | (3,675,617 | ) | | (4,523,584 | ) | | (5,228,711 | ) | | (5,628,664 | ) | | (5,273,148 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Operating profit before provision for credit losses | | | 4,038,901 | | | | 3,470,564 | | | | 3,187,099 | | | | 2,921,559 | | | 2,858,365 | | | 2,216,231 | | | 4,563,518 | | | 4,275,279 | | | | | | | | | | | | | | | | | | | | | | | | | | | Provision for credit losses | | | (1,606,703 | ) | | | (1,443,572 | ) | | | (1,227,976 | ) | | | (1,125,664 | ) | | (1,037,231 | ) | | (539,283 | ) | | (548,244 | ) | | (513,616 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net operating profit | | | 2,432,198 | | | | 2,026,992 | | | | 1,959,123 | | | | 1,795,894 | | | 1,821,134 | | | 1,676,948 | | | 4,015,274 | | | 3,761,663 | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of profit(loss) of associates | | | (15,282 | ) | | | (199,392 | ) | | | 13,428 | | | | 12,309 | | | Share of profit of associates and joint ventures | | | 203,097 | | | 280,838 | | | 84,274 | | | 78,951 | | Net other non-operating income(expense) | | | (118,272 | ) | | | (12,309 | ) | | | (71,126 | ) | | | (65,200 | ) | | 140,464 | | | 670,869 | | | 38,876 | | | 36,420 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net non-operating profit (loss) | | | (133,554 | ) | | | (211,701 | ) | | | (57,698 | ) | | | (52,891 | ) | | 343,561 | | | 951,707 | | | 123,150 | | | 115,371 | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit before income tax | | | 2,298,644 | | | | 1,815,291 | | | | 1,901,425 | | | | 1,743,003 | | | 2,164,695 | | | 2,628,655 | | | 4,138,424 | | | 3,877,034 | | | | | | | | | | | | | | | | | | | | | | | | | | | Tax income(expense) | | | (519,977 | ) | | | (540,593 | ) | | | (486,314 | ) | | | (445,796 | ) | | Income tax expense | | | (437,389 | ) | | (438,475 | ) | | (794,963 | ) | | (744,752 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Profit for the year | | ₩ | 1,778,667 | | | ₩ | 1,274,698 | | | ₩ | 1,415,111 | | | US$ | 1,297,208 | | | ₩ | 1,727,306 | | | ₩ | 2,190,180 | | | ₩ | 3,343,461 | | | US$ | 3,132,282 | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-4 (Continued)
KB FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2012, 20132015, 2016 and 20142017 | | | 2012 | | 2013 | | 2014 | | 2014 | | | 2015 | | 2016 | | 2017 | | 2017 | | | | | | Translation into U.S. dollars (Note 3) | | | | | | | | | Translation into U.S. dollars (Note 3) | | | | (In millions of Korean won, except per share amounts) | | (In thousands, except per share amounts) | | | (In millions of Korean won, except per share amounts) | | (In thousands, except per share amounts) | | Items that will not be reclassified to profit or loss | | | | | | | | | | Remeasurements of net defined benefit liabilities | | ₩ | (30,272 | ) | | ₩ | 40,984 | | | ₩ | (99,594 | ) | | US$ | (91,296 | ) | | ₩ | (22,906 | ) | | ₩ | 12,671 | | | ₩ | 22,605 | | | US$ | 21,177 | | Share of other comprehensive income of associates and joint ventures | | | 402 | | | 3,623 | | | (145 | ) | | (136 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Items that will not be reclassified to profit or loss | | | (30,272 | ) | | | 40,984 | | | | (99,594 | ) | | | (91,296 | ) | | | | | | | | | | | | | | | | (22,504 | ) | | 16,294 | | | 22,460 | | | 21,041 | | | | | | | | | | | | | | | | Items that may be reclassified subsequently to profit or loss | | | | | | | | | | Exchange differences on translating foreign operations | | | (25,690 | ) | | | (2,298 | ) | | | 17,280 | | | | 15,840 | | | 45,143 | | | 20,148 | | | (110,037 | ) | | (103,086 | ) | Change in value of financial investments | | | 245,757 | | | | (3,591 | ) | | | 248,880 | | | | 228,144 | | | (28,969 | ) | | (47,871 | ) | | 89,117 | | | 83,488 | | Shares of other comprehensive income of associates | | | (44,263 | ) | | | (9,811 | ) | | | (32,206 | ) | | | (29,523 | ) | | Shares of other comprehensive income of associates and joint ventures | | | (180 | ) | | (10,716 | ) | | 100,880 | | | 94,508 | | Cash flow hedges | | | (813 | ) | | | 1,618 | | | | (10,497 | ) | | | (9,622 | ) | | 725 | | | 4,303 | | | 20,959 | | | 19,635 | | Gains(losses) on hedges of a net investment in a foreign operation | | | (25,477 | ) | | (7,095 | ) | | 26,614 | | | 24,933 | | Other comprehensive income of separate account | | | | — | | | | — | | | (13,767 | ) | | (12,897 | ) | | | | | | | | | | | | | | | | | | (8,758 | ) | | (41,231 | ) | | 113,766 | | | 106,581 | | | | | | | | | | | | | | | | | | | | | | | | | | | Other comprehensive income(loss) for the year, net of tax | | | 144,719 | | | | 26,902 | | | | 123,863 | | | | 113,543 | | | (31,262 | ) | | (24,937 | ) | | 136,226 | | | 127,622 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income for the year | | | 1,923,386 | | | | 1,301,600 | | | | 1,538,974 | | | | 1,410,751 | | | 1,696,044 | | | 2,165,243 | | | 3,479,687 | | | 3,259,904 | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit attributable to: | | | | | | | | | | | | | | | | | Shareholders of the parent company | | | 1,769,568 | | | | 1,271,502 | | | | 1,400,722 | | | | 1,284,018 | | | 1,698,318 | | | 2,143,744 | | | 3,311,438 | | | 3,102,282 | | Non-controlling interests | | | 9,099 | | | | 3,196 | | | | 14,389 | | | | 13,190 | | | 28,988 | | | 46,436 | | | 32,023 | | | 30,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,778,667 | | | | 1,274,698 | | | | 1,415,111 | | | | 1,297,208 | | | 1,727,306 | | | 2,190,180 | | | 3,343,461 | | | 3,132,282 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income for the year attributable to: | | | | | | | | | | | | | | | | | Shareholders of the parent company | | | 1,903,671 | | | | 1,312,672 | | | | 1,526,089 | | | | 1,398,939 | | | 1,666,883 | | | 2,118,829 | | | 3,445,285 | | | 3,227,675 | | Non-controlling interests | | | 19,715 | | | | (11,072 | ) | | | 12,885 | | | | 11,811 | | | 29,161 | | | 46,414 | | | 34,402 | | | 32,229 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ₩ | 1,923,386 | | | ₩ | 1,301,600 | | | ₩ | 1,538,974 | | | US$ | 1,410,751 | | | ₩ | 1,696,044 | | | ₩ | 2,165,243 | | | ₩ | 3,479,687 | | | US$ | 3,259,904 | | | | | | | | | | | | | | | | | | | | | | | | | | | Earnings per share | | | | | | | | | | | | | | | | | Basic earnings per share | | ₩ | 4,580 | | | ₩ | 3,291 | | | ₩ | 3,626 | | | US$ | 3.32 | | | ₩ | 4,396 | | | ₩ | 5,588 | | | ₩ | 8,305 | | | US$ | 7.78 | | Diluted earnings per share | | | 4,567 | | | | 3,277 | | | | 3,611 | | | | 3.31 | | | 4,376 | | | 5,559 | | | 8,257 | | | 7.74 | |
The accompanying notes are an integral part of these consolidated financial statements. KB FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2012, 20132015, 2016 and 20142017 | | | Equity attributable to shareholders of the parent company | | | | | Equity attributable to shareholders of the parent company | | | | | | | | Share capital | | Capital surplus | | Accumulated other comprehensive income | | Retained earnings | | Non-controlling interest | | Total equity | | | Capital Stock | | Capital surplus | | Accumulated other comprehensive income | | Retained earnings | | Non-controlling interest | | Total equity | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Balance at January 1, 2012 | | ₩ | 1,931,758 | | | ₩ | 15,841,824 | | | ₩ | 161,039 | | | ₩ | 5,048,558 | | | ₩ | 181,820 | | | ₩ | 23,164,999 | | | Changes in accounting policy | | | — | | | | — | | | | — | | | | 279,916 | | | | — | | | | 279,916 | | | | | | | | | | | | | | | | | | | | | | | Restated balance | | | 1,931,758 | | | | 15,841,824 | | | | 161,039 | | | | 5,328,474 | | | | 181,820 | | | | 23,444,915 | | | Balance at January 1, 2015 | | | ₩ | 1,931,758 | | | ₩ | 15,854,510 | | | ₩ | 461,679 | | | ₩ | 9,067,145 | | | ₩ | 197,580 | | | ₩ | 27,512,672 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | Profit for the year | | | — | | | | — | | | | — | | | | 1,769,568 | | | | 9,099 | | | | 1,778,667 | | | | — | | | | — | | | | — | | | 1,698,318 | | | 28,988 | | | 1,727,306 | | Remeasurements of net defined benefit liabilities | | | — | | | | — | | | | (30,253 | ) | | | — | | | | (19 | ) | | | (30,272 | ) | | | — | | | | — | | | (23,062 | ) | | | — | | | 156 | | | (22,906 | ) | Exchange differences on translating foreign operations | | | — | | | | — | | | | (25,597 | ) | | | — | | | | (93 | ) | | | (25,690 | ) | | | — | | | | — | | | 45,143 | | | | — | | | | — | | | 45,143 | | Change in value of financial investments | | | — | | | | — | | | | 235,029 | | | | — | | | | 10,728 | | | | 245,757 | | | | — | | | | — | | | (28,862 | ) | | | — | | | (107 | ) | | (28,969 | ) | Shares of other comprehensive income of associates | | | — | | | | — | | | | (44,263 | ) | | | — | | | | — | | | | (44,263 | ) | | | — | | | | — | | | 222 | | | | — | | | | — | | | 222 | | Cash flow hedges | | | — | | | | — | | | | (813 | ) | | | — | | | | — | | | | (813 | ) | | | — | | | | — | | | 601 | | | | — | | | 124 | | | 725 | | Losses on hedges of a net investment in foreign operation | | | | — | | | | — | | | (25,477 | ) | | | — | | | | — | | | (25,477 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income | | | | | | | 134,103 | | | | 1,769,568 | | | | 19,715 | | | | 1,923,386 | | | | — | | | | — | | | (31,435 | ) | | 1,698,318 | | | 29,161 | | | 1,696,044 | | Transactions with shareholders | | | | | | | | | | | | | | | | | | | | | | | | | Dividends paid to shareholders of the parent company | | | — | | | | — | | | | — | | | | (278,173 | ) | | | — | | | | (278,173 | ) | | | — | | | | — | | | | — | | | (301,354 | ) | | (4,640 | ) | | (305,994 | ) | Changes in interest in subsidiaries | | | — | | | | (1,524 | ) | | | — | | | | — | | | | (7,013 | ) | | | (8,537 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total transactions with shareholders | | | — | | | | (1,524 | ) | | | — | | | | (278,173 | ) | | | (7,013 | ) | | | (286,710 | ) | | | — | | | | — | | | | — | | | (301,354 | ) | | (4,640 | ) | | (305,994 | ) | Balance at December 31, 2012 | | ₩ | 1,931,758 | | | ₩ | 15,840,300 | | | ₩ | 295,142 | | | ₩ | 6,819,869 | | | ₩ | 194,522 | | | ₩ | 25,081,591 | | | Balance at December 31, 2015 | | | ₩ | 1,931,758 | | | ₩ | 15,854,510 | | | ₩ | 430,244 | | | ₩ | 10,464,109 | | | ₩ | 222,101 | | | ₩ | 28,902,722 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-6 (Continued)
KB FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2012, 20132015, 2016 and 20142017 | | | Equity attributable to shareholders of the parent company | | | | | Equity attributable to shareholders of the parent company | | | | | | | | Share capital | | Capital surplus | | Accumulated other comprehensive income | | Retained earnings | | Non-controlling interest | | Total equity | | | Capital Stock | | Capital surplus | | Accumulated other comprehensive income | | Retained earnings | | Treasury shares | | Non-controlling interest | | Total equity | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Balance at January 1, 2013 | | ₩ | 1,931,758 | | | ₩ | 15,840,300 | | | ₩ | 295,142 | | | ₩ | 6,819,869 | | | ₩ | 194,522 | | | ₩ | 25,081,591 | | | Balance at January 1, 2016 | | | ₩ | 1,931,758 | | | ₩ | 15,854,510 | | | ₩ | 430,244 | | | ₩ | 10,464,109 | | | ₩ | — | | | ₩ | 222,101 | | | ₩ | 28,902,722 | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit for the year | | | — | | | | — | | | | — | | | | 1,271,502 | | | | 3,196 | | | | 1,274,698 | | | | — | | | | — | | | | — | | | 2,143,744 | | | | — | | | 46,436 | | | 2,190,180 | | Remeasurements of net defined benefit liabilities | | | — | | | | — | | | | 40,984 | | | | — | | | | — | | | | 40,984 | | | | — | | | | — | | | 12,821 | | | | — | | | | — | | | (150 | ) | | 12,671 | | Exchange differences on translating foreign operations | | | — | | | | — | | | | (2,372 | ) | | | — | | | | 74 | | | | (2,298 | ) | | | — | | | | — | | | 20,148 | | | | — | | | | — | | | | — | | | 20,148 | | Change in value of financial investments | | | — | | | | — | | | | 10,751 | | | | — | | | | (14,342 | ) | | | (3,591 | ) | | | — | | | | — | | | (47,794 | ) | | | — | | | | — | | | (77 | ) | | (47,871 | ) | Shares of other comprehensive income of associates | | | — | | | | — | | | | (9,811 | ) | | | — | | | | — | | | | (9,811 | ) | | | — | | | | — | | | (7,093 | ) | | | — | | | | — | | | | — | | | (7,093 | ) | Cash flow hedges | | | — | | | | — | | | | 1,618 | | | | — | | | | — | | | | 1,618 | | | | — | | | | — | | | 4,098 | | | | — | | | | — | | | 205 | | | 4,303 | | Losses on hedges of a net investment in a foreign operation | | | | — | | | | — | | | (7,095 | ) | | | — | | | | — | | | | — | | | (7,095 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income | | | — | | | | — | | | | 41,170 | | | | 1,271,502 | | | | (11,072 | ) | | | 1,301,600 | | | | — | | | | — | | | (24,915 | ) | | 2,143,744 | | | | — | | | 46,414 | | | 2,165,243 | | Transactions with shareholders | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends paid to shareholders of the parent company | | | — | | | | — | | | | — | | | | (231,811 | ) | | | — | | | | (231,811 | ) | | | — | | | | — | | | | — | | | (378,625 | ) | | | — | | | (5,156 | ) | | (383,781 | ) | Changes in interest in subsidiaries | | | — | | | | 14,305 | | | | — | | | | 39 | | | | (183,450 | ) | | | (169,106 | ) | | Acquisition of treasury shares | | | | — | | | | — | | | | — | | | | — | | | (721,973 | ) | | | — | | | (721,973 | ) | Issue of ordinary shares related to business combination | | | 158,800 | | | 1,142,359 | | | | — | | | | — | | | | — | | | | — | | | 1,301,159 | | Others | | | | — | | | (1,967 | ) | | | — | | | | — | | | | — | | | | — | | | (1,967 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total transactions with shareholders | | | — | | | | 14,305 | | | | — | | | | (231,772 | ) | | | (183,450 | ) | | | (400,917 | ) | | 158,800 | | | 1,140,392 | | | | — | | | (378,625 | ) | | (721,973 | ) | | (5,156 | ) | | 193,438 | | Balance at December 31, 2013 | | ₩ | 1,931,758 | | | ₩ | 15,854,605 | | | ₩ | 336,312 | | | ₩ | 7,859,599 | | | ₩ | — | | | ₩ | 25,982,274 | | | Balance at December 31, 2016 | | | ₩ | 2,090,558 | | | ₩ | 16,994,902 | | | ₩ | 405,329 | | | ₩ | 12,229,228 | | | ₩ | (721,973 | ) | | ₩ | 263,359 | | | ₩ | 31,261,403 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-7 (Continued)
KB FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2012, 20132015, 2016 and 20142017 | | | Equity attributable to shareholders of the parent company | | | | | Equity attributable to shareholders of the parent company | | | | | | | | Share capital | | Capital surplus | | Accumulated other comprehensive income | | Retained earnings | | Non-controlling interest | | Total equity | | | Capital Stock | | Capital surplus | | Accumulated other comprehensive income | | Retained earnings | | Treasury shares | | Non-controlling interest | | Total equity | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Balance at January 1, 2014 | | ₩ | 1,931,758 | | | ₩ | 15,854,605 | | | ₩ | 336,312 | | | ₩ | 7,859,599 | | | ₩ | — | | | ₩ | 25,982,274 | | | Balance at January 1, 2017 | | | ₩ | 2,090,558 | | | ₩ | 16,994,902 | | | ₩ | 405,329 | | | ₩ | 12,229,228 | | | ₩ | (721,973 | ) | | ₩ | 263,359 | | | ₩ | 31,261,403 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit for the year | | | — | | | | — | | | | — | | | | 1,400,722 | | | | 14,389 | | | | 1,415,111 | | | | — | | | | — | | | | — | | | 3,311,438 | | | | — | | | 32,023 | | | 3,343,461 | | Remeasurements of net defined benefit liabilities | | | — | | | | — | | | | (98,291 | ) | | | — | | | | (1,303 | ) | | | (99,594 | ) | | | — | | | | — | | | 22,685 | | | | — | | | | — | | | (80 | ) | | 22,605 | | Exchange differences on translating foreign operations | | | — | | | | — | | | | 17,280 | | | | — | | | | — | | | | 17,280 | | | | — | | | | — | | | (109,727 | ) | | | — | | | | — | | | (310 | ) | | (110,037 | ) | Change in value of financial investments | | | — | | | | — | | | | 248,843 | | | | — | | | | 37 | | | | 248,880 | | | | — | | | | — | | | 86,176 | | | | — | | | | — | | | 2,941 | | | 89,117 | | Shares of other comprehensive income of associates | | | — | | | | — | | | | (32,206 | ) | | | — | | | | — | | | | (32,206 | ) | | Shares of other comprehensive income of associates and joint ventures | | | | — | | | | — | | | 100,735 | | | | — | | | | — | | | | — | | | 100,735 | | Cash flow hedges | | | — | | | | — | | | | (10,259 | ) | | | — | | | | (238 | ) | | | (10,497 | ) | | | — | | | | — | | | 21,055 | | | | — | | | | — | | | (96 | ) | | 20,959 | | Losses on hedges of a net investment in a foreign operation | | | | — | | | | — | | | 26,614 | | | | — | | | | — | | | | — | | | 26,614 | | Other comprehensive income of separate account | | | | — | | | | — | | | (13,692 | ) | | | — | | | | — | | | (75 | ) | | (13,767 | ) | Transfer to other accounts | | | | — | | | | — | | | (1,507 | ) | | 1,507 | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income | | | — | | | | — | | | | 125,367 | | | | 1,400,722 | | | | 12,885 | | | | 1,538,974 | | | | — | | | | — | | | 132,339 | | | 3,312,945 | | | | — | | | 34,403 | | | 3,479,687 | | Transactions with shareholders | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends paid to shareholders of the parent company | | | — | | | | — | | | | — | | | | (193,176 | ) | | | — | | | | (193,176 | ) | | Dividends paid to shareholders of the Parent Company | | | | — | | | | — | | | | — | | | (497,969 | ) | | | — | | | (5,156 | ) | | (503,125 | ) | Acquisition of treasury shares | | | | — | | | | — | | | | — | | | | — | | | (202,051 | ) | | | — | | | (202,051 | ) | Disposal of treasury shares | | | | — | | | 87,212 | | | | — | | | | — | | | 168,051 | | | | — | | | 255,263 | | Changes in interest in subsidiaries | | | — | | | | (95 | ) | | | — | | | | — | | | | 184,695 | | | | 184,600 | | | | — | | | 41,352 | | | | — | | | | — | | | | — | | | (288,802 | ) | | (247,450 | ) | Others | | | | — | | | (1,238 | ) | | | — | | | | — | | | | — | | | 2,340 | | | 1,102 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total transactions with shareholders | | | — | | | | (95 | ) | | | — | | | | (193,176 | ) | | | 184,695 | | | | (8,576 | ) | | | — | | | 127,326 | | | | — | | | (497,969 | ) | | (34,000 | ) | | (291,618 | ) | | (696,261 | ) | Balance at December 31, 2014 | | ₩ | 1,931,758 | | | ₩ | 15,854,510 | | | ₩ | 461,679 | | | ₩ | 9,067,145 | | | ₩ | 197,580 | | | ₩ | 27,512,672 | | | Balance at December 31, 2017 | | | ₩ | 2,090,558 | | | ₩ | 17,122,228 | | | ₩ | 537,668 | | | ₩ | 15,044,204 | | | ₩ | (755,973 | ) | | ₩ | 6,144 | | | ₩ | 34,044,829 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-8 (Continued)
KB FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2012, 20132015, 2016 and 20142017 | | | Equity attributable to shareholders of the parent company | | | | | Equity attributable to shareholders of the parent company | | | | | | | | Share capital | | Capital surplus | | Accumulated other comprehensive income | | Retained earnings | | Non-controlling interest | | Total equity | | | Capital Stock | | Capital surplus | | Accumulated other comprehensive income | | Retained earnings | | Treasury shares | | Non-controlling interest | | Total equity | | | | (Translation into U.S. dollars(Note 3))(In thousands) | | | (Translation into U.S. dollars(Note 3))(In thousands) | | Balance at January 1, 2014 | | US$ | 1,770,809 | | | US$ | 14,533,642 | | | US$ | 308,291 | | | US$ | 7,204,758 | | | US$ | — | | | US$ | 23,817,501 | | | Balance at January 1, 2017 | | | US$ | 1,958,515 | | | US$ | 15,921,476 | | | US$ | 379,728 | | | US$ | 11,456,810 | | | US$ | (676,372 | ) | | US$ | 246,725 | | | US$ | 29,286,882 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Profit for the year | | | — | | | | — | | | | — | | | | 1,284,018 | | | | 13,190 | | | | 1,297,208 | | | | — | | | | — | | | | — | | | 3,102,282 | | | | — | | | 30,000 | | | 3,132,282 | | Remeasurements of net defined benefit liabilities | | | — | | | | — | | | | (90,102 | ) | | | — | | | | (1,194 | ) | | | (91,296 | ) | | | — | | | | — | | | 21,252 | | | | — | | | | — | | | (75 | ) | | 21,177 | | Exchange differences on translating foreign operations | | | — | | | | — | | | | 15,840 | | | | — | | | | — | | | | 15,840 | | | | — | | | | — | | | (102,796 | ) | | | — | | | | — | | | (290 | ) | | (103,086 | ) | Change in value of financial investments | | | — | | | | — | | | | 228,110 | | | | — | | | | 34 | | | | 228,144 | | | | — | | | | — | | | 80,733 | | | | — | | | | — | | | 2,755 | | | 83,488 | | Shares of other comprehensive income of associates | | | — | | | | — | | | | (29,523 | ) | | | — | | | | — | | | | (29,523 | ) | | Shares of other comprehensive income of associates and joint ventures | | | | — | | | | — | | | 94,372 | | | | — | | | | — | | | | — | | | 94,372 | | Cash flow hedges | | | — | | | | — | | | | (9,404 | ) | | | — | | | | (218 | ) | | | (9,622 | ) | | | — | | | | — | | | 19,725 | | | | — | | | | — | | | (90 | ) | | 19,635 | | Losses on hedges of a net investment in a foreign operation | | | | — | | | | — | | | 24,933 | | | | — | | | | — | | | | — | | | 24,933 | | Other comprehensive income of separate account | | | | — | | | | — | | | (12,827 | ) | | | — | | | | — | | | (70 | ) | | (12,897 | ) | Transfer to other accounts | | | | — | | | | — | | | (1,412 | ) | | 1,412 | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income | | | — | | | | — | | | | 114,922 | | | | 1,284,018 | | | | 11,811 | | | | 1,410,751 | | | | — | | | | — | | | 123,980 | | | 3,103,694 | | | | — | | | 32,230 | | | 3,259,904 | | Transactions with shareholders | | | | | | | | | | | | | | | | | | | | | | | | | Dividends paid to shareholders of the parent company | | | — | | | | — | | | | — | | | | (177,081 | ) | | | — | | | | (177,081 | ) | | Dividends paid to shareholders of the Parent Company | | | | — | | | | — | | | | — | | | (466,516 | ) | | | — | | | (4,830 | ) | | (471,346 | ) | Acquisition of treasury shares | | | | — | | | | — | | | | — | | | | — | | | (189,289 | ) | | | — | | | (189,289 | ) | Disposal of treasury shares | | | | — | | | 81,704 | | | | — | | | | — | | | 157,436 | | | | — | | | 239,140 | | Changes in interest in subsidiaries | | | | — | | | 38,740 | | | | — | | | | — | | | | — | | | (270,561 | ) | | (231,821 | ) | Others | | | — | | | | (87 | ) | | | — | | | | — | | | | 169,307 | | | | 169,220 | | | | — | | | (1,160 | ) | | | — | | | | — | | | | — | | | 2,192 | | | 1,032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total transactions with shareholders | | | — | | | | (87 | ) | | | — | | | | (177,081 | ) | | | 169,307 | | | | (7,861 | ) | | | — | | | 119,284 | | | | — | | | (466,516 | ) | | (31,853 | ) | | (273,199 | ) | | (652,284 | ) | Balance at December 31, 2014 | | US$ | 1,770,809 | | | US$ | 14,533,555 | | | US$ | 423,213 | | | US$ | 8,311,695 | | | US$ | 181,118 | | | US$ | 25,220,391 | | | Balance at December 31, 2017 | | | US$ | 1,958,515 | | | US$ | 16,040,760 | | | US$ | 503,708 | | | US$ | 14,093,988 | | | US$ | (708,225 | ) | | US$ | 5,756 | | | US$ | 31,894,502 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. KB FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2012, 20132015, 2016 and 20142017 | | | 2012 | | 2013 | | 2014 | | 2014 | | | 2015 | | 2016 | | 2017 | | 2017 | | | | | | | | | | Translation into U.S. dollars (Note 3) | | | | | | | | | Translation into U.S. dollars (Note 3) | | | | (In millions of Korean won) | | (In thousands) | | | (In millions of Korean won) | | (In thousands) | | Cash flows from operating activities: | | | | | | | | | | | | | | | | | Profit for the year | | ₩ | 1,778,667 | | | ₩ | 1,274,698 | | | ₩ | 1,415,111 | | | US$ | 1,297,208 | | | ₩ | 1,727,306 | | | ₩ | 2,190,180 | | | ₩ | 3,343,461 | | | US$ | 3,132,282 | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjustment for non-cash items | | | | | | | | | | | | | | | | | Net loss(gain) on financial assets/liabilities at fair value through profit or loss | | | (247,854 | ) | | | (110,425 | ) | | | (151,483 | ) | | | (138,862 | ) | | | (63,319 | ) | | 401,556 | | | (106,868 | ) | | (100,118 | ) | Net loss(gain) on derivative financial instruments for hedging purposes | | | 15,165 | | | | 48,787 | | | | 27,088 | | | | 24,831 | | | | 47,466 | | | 69,573 | | | (135,363 | ) | | (126,813 | ) | Adjustment of fair value of derivative financial instruments | | | 42 | | | | 699 | | | | (2,040 | ) | | | (1,870 | ) | | | 1,771 | | | 338 | | | (1,000 | ) | | (937 | ) | Provision for credit loss | | | 1,606,703 | | | | 1,443,572 | | | | 1,227,976 | | | | 1,125,664 | | | | 1,037,231 | | | 539,283 | | | 548,244 | | | 513,616 | | Net loss(gain) on financial investments | | | 148,211 | | | | (1,191 | ) | | | 109,461 | | | | 100,341 | | | | (166,911 | ) | | (139,800 | ) | | 110,156 | | | 103,198 | | Share of loss (profit) of associates | | | 15,282 | | | | 199,392 | | | | (13,428 | ) | | | (12,309 | ) | | Share of loss (profit) of associates and joint ventures | | | | (203,097 | ) | | (280,838 | ) | | (84,274 | ) | | (78,951 | ) | Depreciation and amortization expense | | | 328,320 | | | | 286,858 | | | | 261,197 | | | | 239,435 | | | | 257,457 | | | 289,438 | | | 550,343 | | | 515,582 | | Other net losses on property and equipment/intangible assets | | | 40,881 | | | | 39,777 | | | | 41,115 | | | | 37,689 | | | | 9,458 | | | 5,259 | | | 30,893 | | | 28,942 | | Share-based payments(reversal) | | | 13,871 | | | | 17,289 | | | | 11,422 | | | | 10,470 | | | Share-based payments | | | | 17,429 | | | 38,190 | | | 73,370 | | | 68,736 | | Policy reserve appropriation | | | 1,305,730 | | | | 761,877 | | | | 666,155 | | | | 610,653 | | | | 659,501 | | | 366,145 | | | 1,644,389 | | | 1,540,527 | | Post-employment benefits | | | 172,391 | | | | 172,579 | | | | 166,671 | | | | 152,784 | | | | 187,882 | | | 197,696 | | | 233,501 | | | 218,753 | | Net interest expense | | | 229,691 | | | | 314,866 | | | | 360,500 | | | | 330,464 | | | | 431,157 | | | 421,679 | | | 363,803 | | | 340,825 | | Loss(gains) on foreign currency translation | | | (148,877 | ) | | | 17,082 | | | | 116,035 | | | | 106,367 | | | Loss(gain) on foreign currency translation | | | | 228,727 | | | 15,931 | | | (70,399 | ) | | (65,952 | ) | Gains on bargain purchase | | | | — | | | (628,614 | ) | | (122,986 | ) | | (115,218 | ) | Net other expense(income) | | | 2,783 | | | | (24,981 | ) | | | (17,076 | ) | | | (15,653 | ) | | | 88,518 | | | 65,412 | | | 204,122 | | | 191,229 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,482,339 | | | | 3,166,181 | | | | 2,803,593 | | | | 2,570,005 | | | | 2,533,270 | | | 1,361,248 | | | 3,237,931 | | | 3,033,419 | | | | | | | | | | | | | | | | | | | | | | | | | | | Changes in operating assets and liabilities | | | | | | | | | | | | | | | | | Financial asset at fair value through profit or loss | | | (3,102,488 | ) | | | 214,181 | | | | (1,364,780 | ) | | | (1,251,070 | ) | | | (418,431 | ) | | (1,463,824 | ) | | (3,946,805 | ) | | (3,697,518 | ) | Derivative financial instruments | | | 193,373 | | | | 116,660 | | | | 104,333 | | | | 95,640 | | | | 124,687 | | | 147,137 | | | (295,795 | ) | | (277,112 | ) | Loans | | | (2,964,229 | ) | | | (7,335,434 | ) | | | (10,027,349 | ) | | | (9,191,897 | ) | | | (14,847,214 | ) | | (16,423,939 | ) | | (22,465,758 | ) | | (21,046,784 | ) | Current income tax assets | | | (41,456 | ) | | | (13,940 | ) | | | 40,597 | | | | 37,215 | | | | 287,788 | | | (8,868 | ) | | 59,334 | | | 55,586 | | Deferred income tax assets | | | 3,211 | | | | 1,349 | | | | (140 | ) | | | (128 | ) | | | 9,223 | | | (87,701 | ) | | 3,186 | | | 2,985 | | Other assets | | | 2,204,202 | | | | (5,075,338 | ) | | | 427,501 | | | | 391,883 | | | | (682,627 | ) | | 1,393,689 | | | (3,938,297 | ) | | (3,689,548 | ) | Financial liabilities at fair value through profit or loss | | | 357,825 | | | | (773,558 | ) | | | 704,389 | | | | 645,701 | | | | 1,296,333 | | | 356,880 | | | 66,222 | | | 62,039 | | Deposits | | | 4,495,876 | | | | 2,584,993 | | | | 10,668,675 | | | | 9,779,790 | | | | 12,602,806 | | | 12,042,422 | | | 18,858,210 | | | 17,667,094 | | Deferred income tax liabilities | | | (138,374 | ) | | | (74,463 | ) | | | (27,242 | ) | | | (24,972 | ) | | | 105,752 | | | (150,333 | ) | | 108,355 | | | 101,511 | | Other liabilities | | | 1,375,612 | | | | (430,856 | ) | | | (1,467,942 | ) | | | (1,345,637 | ) | | | (545,262 | ) | | 1,768,096 | | | 133,931 | | | 125,472 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,383,552 | | | | (10,786,406 | ) | | | (941,958 | ) | | | (863,477 | ) | | | (2,066,945 | ) | | (2,426,441 | ) | | (11,417,417 | ) | | (10,696,275 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash generated from (used in) operating activities | | ₩ | 7,644,558 | | | ₩ | (6,345,527 | ) | | ₩ | 3,276,746 | | | US$ | 3,003,736 | | | Net cash inflow (outflow) from operating activities | | | ₩ | 2,193,631 | | | ₩ | 1,124,987 | | | ₩ | (4,836,025 | ) | | US$ | (4,530,574 | ) | | | | | | | | | | | | | | | | | | | | | | | | | |
(Continued) KB FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2012, 20132015, 2016 and 20142017 | | | 2012 | | 2013 | | 2014 | | 2014 | | | 2015 | | 2016 | | 2017 | | 2017 | | | | | | | | | | Translation into U.S. dollars (Note 3) | | | | | | | | | Translation into U.S. dollars (Note 3) | | | | (In millions of Korean won) | | (In thousands) | | | (In millions of Korean won) | | (In thousands) | | Cash flows from investing activities: | | | | | | | | | | | | | | | | | Disposal of financial investments | | ₩ | 24,805,560 | | | ₩ | 25,655,149 | | | ₩ | 19,632,047 | | | US$ | 17,996,358 | | | ₩ | 21,648,312 | | | ₩ | 28,066,113 | | | ₩ | 38,050,549 | | | US$ | 35,647,214 | | Acquisition of financial investments | | | (26,141,095 | ) | | | (23,020,912 | ) | | | (19,463,101 | ) | | | (17,841,488 | ) | | | (25,688,235 | ) | | (30,737,148 | ) | | (46,538,295 | ) | | (43,598,860 | ) | Decrease in investments in associates | | | 16,573 | | | | 20,554 | | | | 81,321 | | | | 74,546 | | | Acquisition of investments in associates | | | (217,081 | ) | | | (23,340 | ) | | | (17,650 | ) | | | (16,179 | ) | | Disposal of investments in associates and joint ventures | | | | 40,350 | | | 106,658 | | | 141,052 | | | 132,143 | | Acquisition of investments in associates and joint ventures | | | | (904,399 | ) | | (1,558,731 | ) | | (53,375 | ) | | (50,004 | ) | Disposal of property and equipment | | | 16,912 | | | | 1,070 | | | | 223 | | | | 204 | | | | 2,951 | | | 809 | | | 31,167 | | | 29,198 | | Acquisition of property and equipment | | | (143,139 | ) | | | (153,469 | ) | | | (202,007 | ) | | | (185,176 | ) | | | (229,210 | ) | | (397,157 | ) | | (298,368 | ) | | (279,523 | ) | Disposal of investment property | | | | — | | | | — | | | 1,593 | | | 1,492 | | Acquisition of investment property | | | — | | | | (114,609 | ) | | | (211,995 | ) | | | (194,332 | ) | | | (4,289 | ) | | (1,254 | ) | | (262 | ) | | (245 | ) | Disposal of intangible assets | | | 10,176 | | | | 5,072 | | | | 4,590 | | | | 4,208 | | | | 3,761 | | | 8,330 | | | 7,603 | | | 7,123 | | Acquisition of intangible assets | | | (81,899 | ) | | | (68,091 | ) | | | (30,755 | ) | | | (28,193 | ) | | | (52,126 | ) | | (111,603 | ) | | (111,894 | ) | | (104,827 | ) | Business combination, net of cash acquired | | | 40,575 | | | | 322,641 | | | | (266,899 | ) | | | (244,662 | ) | | Net cash flows from the change in subsidiaries | | | | — | | | 95,304 | | | (405,817 | ) | | (380,185 | ) | Others | | | (838,816 | ) | | | 1,554,752 | | | | (1,210,071 | ) | | | (1,109,251 | ) | | | 107,555 | | | 90,141 | | | 446,628 | | | 418,419 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) investing activities | | | (2,532,234 | ) | | | 4,178,817 | | | | (1,684,297 | ) | | | (1,543,966 | ) | | Net cash inflow (outflow) from investing activities | | | | (5,075,330 | ) | | (4,438,538 | ) | | (8,729,419 | ) | | (8,178,055 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | | | | | Net cash flows from derivative financial instrument for hedging purposes | | | 75,761 | | | | 10,977 | | | | (204,563 | ) | | | (187,519 | ) | | | (61,543 | ) | | 11,035 | | | 63,827 | | | 59,796 | | Net increase (decrease) in debts | | | (796,842 | ) | | | (1,990,258 | ) | | | 1,129,837 | | | | 1,035,702 | | | Net increase in debts | | | | 178,497 | | | 1,849,513 | | | 4,272,011 | | | 4,002,184 | | Increase in debentures | | | 10,282,920 | | | | 10,758,948 | | | | 43,135,390 | | | | 39,541,466 | | | | 80,263,530 | | | 99,305,813 | | | 139,700,967 | | | 130,877,224 | | Decrease in debentures | | | (12,945,650 | ) | | | (7,924,609 | ) | | | (43,816,790 | ) | | | (40,166,094 | ) | | | (77,062,704 | ) | | (98,484,764 | ) | | (129,235,557 | ) | | (121,072,827 | ) | Increase in other payables to trust accounts | | | 456,449 | | | | 414,279 | | | | 124,904 | | | | 114,497 | | | Dividends paid to shareholders of the parent company | | | (278,173 | ) | | | (231,811 | ) | | | (193,176 | ) | | | (177,081 | ) | | Increase in other payables from trust accounts | | | | 242,827 | | | 1,639,104 | | | 587,523 | | | 550,414 | | Dividends paid to shareholders of the Parent Company | | | | (301,354 | ) | | (378,625 | ) | | (497,969 | ) | | (466,516 | ) | Disposal of treasury shares | | | | — | | | | — | | | 3,515 | | | 3,293 | | Acquisition of treasury shares | | | | — | | | (716,808 | ) | | (185,532 | ) | | (173,813 | ) | Dividends paid tonon-controlling interests | | | | (4,640 | ) | | (5,156 | ) | | (5,156 | ) | | (4,830 | ) | Changes in interest in subsidiaries | | | (8,048 | ) | | | (168,293 | ) | | | (95 | ) | | | (87 | ) | | | — | | | | — | | | (163,658 | ) | | (153,321 | ) | Others | | | (38,680 | ) | | | 837,906 | | | | (930,573 | ) | | | (853,040 | ) | | | 652 | | | (38,786 | ) | | 148,775 | | | 139,377 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) financing activities | | | (3,252,263 | ) | | | 1,707,139 | | | | (755,066 | ) | | | (692,156 | ) | | Net cash inflow (outflow) from financing activities | | | | 3,255,265 | | | 3,181,326 | | | 14,688,746 | | | 13,760,981 | | | | | | | | | | | | | | | | | | | | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | | (13,560 | ) | | | 41,452 | | | | 12,227 | | | | 11,208 | | | | 65,557 | | | 89,142 | | | (133,240 | ) | | (124,824 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 1,846,501 | | | | (418,119 | ) | | | 849,610 | | | | 778,823 | | | | 439,123 | | | (43,083 | ) | | 990,062 | | | 927,528 | | Cash and cash equivalents at the beginning of the year | | | 4,740,804 | | | | 6,587,305 | | | | 6,169,186 | | | | 5,655,186 | | | | 7,018,796 | | | 7,457,919 | | | 7,414,836 | | | 6,946,503 | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents at the end of the year | | ₩ | 6,587,305 | | | ₩ | 6,169,186 | | | ₩ | 7,018,796 | | | US$ | 6,434,009 | | | ₩ | 7,457,919 | | | ₩ | 7,414,836 | | | ₩ | 8,404,898 | | | US$ | 7,874,031 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. KB FINANCIAL GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The Parent Company KB Financial Group Inc. (the “Parent Company”) was incorporated on September 29, 2008, under the Financial Holding Companies Act of Korea. KB Financial Group Inc. and its subsidiaries (the “Group”) derive substantially all of their revenue and income from providing a broad range of banking and related financial services to consumers and corporations primarily in Korea and in selected international markets. The Parent Company’s principal business includes ownership and management of subsidiaries and associated companies that are engaged in financial services or activities. In 2011, Kookmin Bank spun off its credit card business segment and established a new separate credit card company, KB Kookmin Card Co., Ltd., and KB Investment & Securities Co., Ltd. merged with KB Futures Co., Ltd. The Group established KB Savings Bank Co., Ltd. in January 2012, acquired Yehansoul Savings Bank Co., Ltd. in September 2013, and KB Savings Bank Co., Ltd. merged with Yehansoul Savings Bank Co., Ltd. in January 2014. In addition,March 2014, the Group acquired Woori Financial Co., Ltd. and changed the name to KB Capital Co., Ltd. Meanwhile, the Group included LIG Insurance Co., Ltd. as an associate and changed the name to KB Insurance Co., Ltd. in March 2014.June 2015. Also, the Group included Hyundai Securities Co., Ltd. as an associate in June 2016 and included as a subsidiary in October 2016 by comprehensive exchange of shares. Hyundai Securities Co., Ltd. merged with KB Investment & Securities Co., Ltd. in December 2016 and changed the name to KB Securities Co., Ltd. in January 2017. KB Insurance Co., Ltd. became one of the subsidiaries through a tender offer in May 2017. See Note 44 for details of business combination. The Parent Company’s share capital as of December 31, 2014,2017, is ₩1,931,758₩2,090,558 million. The Parent Company is authorized to issue up to 1 billion shares. The Parent Company has been listed on the Korea Exchange (“KRX”) since October 10, 2008, and on the New York Stock Exchange (“NYSE”) for its American Depositary Shares (“ADS”) since September 29, 2008. Number of shares authorized onin its Articles of Incorporation is 1,000 million. 2. Basis of Preparation 2.1 Application of IFRS The Group’s consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”). IFRS are the standards, subsequent amendments and related interpretations (“IFRICs”) issued by the International Accounting Standards Board (“IASB”). The preparation of consolidated financial statements requires the use of certain critical accounting estimates. ItManagement also requires managementneeds to exercise judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.4. The Group has applied the following accounting policystandards and amendments for the first time for their annual reporting period commencing January 1, 2017. The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. | • | | Amendments to IAS 7,Statement of Cash Flows |
Amendments to IAS 7Statement of Cash flows requires to provide disclosures that enable users of financial yearstatements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows andnon-cash flows. | • | | Amendments to IAS 12,Income Tax |
Amendments to IAS 12 clarify how to account for deferred tax assets related to debt instruments measured at fair value. IAS 12 provides requirements on the recognition and measurement of current or deferred tax liabilities or assets. The amendments issued clarify the requirements on recognition of deferred tax assets for unrealized losses, to address diversity in practice. | • | | Amendments to IFRS 12,Disclosure of Interests in Other Entities |
Amendments to IFRS 12 clarify when an entity’s interest in a subsidiary, a joint venture or an associate is classified as held for sales in accordance with IFRS 5, the entity is required to disclose other information except for summarized financial information in accordance with IFRS 12. Certain new accounting standards and interpretations that have been published that are not mandatory for annual reporting period commencing January 1, 2017 and have not been early adopted by the Group are set out below. | • | | Amendments to IAS 28,Investments in Associates and Joint Ventures |
When an investment in an associate or a joint venture is held by, or it held indirectly through, an entity that is a venture capital organization, or a mutual fund, unit trust and similar entities including investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with IFRS 9. The amendments clarify that an entity shall make this election separately for each associate of joint venture, at initial recognition of the associate or joint venture. The Group will apply these amendments retrospectively for annual periods beginning on or after January 1, 2014 Amendment to IAS 32, Financial Instruments: Presentation
According to Amendment to IAS 32, Financial Instruments: Presentation, provides that the right to offset must not be contingent on a future event2018, and must be legally enforceable in all of circumstances; and if an entity can settle amounts in a manner such that outcomeearly adoption is in effect, equivalent to net settlement, the entity will meet the net settlement criterion.permitted. The application of this amendmentGroup does not expect the amendments to have a materialsignificant impact on the consolidated financial statements.statements because the Group is not a venture capital organization.
Amendment
| • | | Amendments to IAS 40,Transfers of Investment Property |
Paragraph 57 of IAS 40 clarifies that a transfer to, IAS 36, Impairmentor from, investment property, including Property under construction, can only be made if there has been a change in use that is supported by Evidence, and provides a list of Assetscircumstances as examples. The amendment will be effective for annual periods beginning on or after January 1, 2018. With early adoption permitted. The Group does not expect the amendment to have a significant impact on the financial statements. Amendment
| • | | Amendments to IFRS 2,Share-based Payment |
Amendments to IAS 36, ImpairmentIFRS 2 clarify accounting for a modification to the terms and conditions of Assets, removed certain disclosuresa share-based payment that changes the classification of the recoverable amounttransaction from cash-settled to equity-settled. Amendments also clarify that the measurement approach should treat the terms and conditions of cash-generating units which had been includeda cash-settled award in this amendment by the issuance of IFRS 13.same way as for an equity-settled award. The application of this amendmentamendments will be effective for annual periods beginning on or after January 1, 2018, with early adoption. The Group does not expect the amendments to have a materialsignificant impact on the consolidated financial statements. | • | | Enactments to IFRIC 22,Foreign Currency Transactions and Advance Consideration |
AmendmentAccording to IAS 39, Financial Instruments: Recognition and Measurement
Amendmentthese enactments, the date of the transaction for the purpose of determining the exchange rate to IAS 39, Financial Instruments: Recognition and Measurement, allowsuse on initial recognition of the continuationrelated asset, expense or income (or part of hedge accountingit) is the date on which an entity initially recognizes thenon-monetary asset ornon-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for a derivative that has been designated as a hedging instrument in a circumstance in which that derivative is novated to a central counterparty (CCP) as a consequenceeach payment or receipt of lawsadvance consideration. These enactments will be effective for annual periods beginning on or regulations.after January 1, 2018, with early adoption permitted. The application of this amendmentGroup does not expect the enactments to have a materialsignificant impact on the consolidated financial statements.
Amendment to IFRS 2, Share-based payment
| • | | IFRS 9,Financial Instruments |
IFRS 2, Share-based payment, clarifies the definition of ‘vesting conditions’ such as ‘performance condition’, ‘service condition’ and others. This amendmentThe new standard for financial instruments issued in July 2014 is applied to share-based payment transactionseffective for which the grant date isannual periods beginning on or after JulyJanuary 1, 2014.2018 with early application permitted. This standard will replace IAS 39Financial Instruments: Recognition and Measurement. The Group will apply the standards for annual periods beginning on or after January 1, 2018.
The standard requires retrospective application with some exceptions. For example, an entity is not required to restate prior periods in relation to classification, measurement and impairment of financial instruments. The standard requires prospective application of this amendment does not have a materialits hedge accounting requirements for all hedging relationships except the accounting for time value of options and other exceptions. IFRS 9Financial Instruments requires all financial assets to be classified and measured on the basis of the entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. A new impairment model, an expected credit loss model, is introduced and any subsequent changes in expected credit losses will be recognized in profit or loss. Also, hedge accounting rules are amended to allow more hedging instruments and hedged items to qualify for hedge accounting. An effective implementation of IFRS 9 requires preparation processes including financial impact assessment, accounting policy establishment, accounting system development and the system stabilization. The impact on the Group’s financial statements due to the application of the standard is dependent on judgements made in applying the standard, financial instruments held by the Group and macroeconomic variables. Within the Group, IFRS 9 Task Force Team (‘TFT’) has been set up to prepare for implementation of IFRS 9 since October 2015. There are three stages for implementation of IFRS, such as analysis, design and implementation, and preparation for application. The Group analyzed the financial impacts of IFRS 9 on its consolidated financial statements. Enactment
| | | | | Stage | | Period | | Process | 1 | | From Oct. to Dec. 2015 (for 3 months) | | Analysis of GAAP differences and development of methodology | | | | 2 | | From Jan. to Dec. 2016 (for 12 months) | | Development of methodology, definition of business requirement, and the system development and test. | | | | 3 | | From Jan. 2017 to Mar. 2018 (for 15 months) | | Preparation for opening balances of the financial statements |
The Group performed an impact assessment to identify potential financial effects of IFRIC 2121, Leviesapplying IFRS 9. The assessment was performed based on available information as at December 31, 2017, and the results of the assessment are explained as below. The results of the assessment in the financial effects as at December 31, 2017 may change due to additional information and decisions that the Group may obtain in the future. IFRIC 2121, Levies,(a) Classification and Measurement of Financial Assets When implementing IFRS 9, the classification of financial assets will be driven by the Group’s business model for managing the financial assets and contractual terms of cash flow. The following table shows the classification of financial assets measured subsequently at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss. For hybrid (combined) instruments, the Group does not measure an embedded derivative separately from its host contract, financial assets with embedded derivatives are classified in their entirety. | | | | | Business model | | Contractual cash flows characteristics | | | Solely represent payments of principal and interest | | All other | Hold the financial asset for the collection of the contractual cash flows | | Measured at amortized cost1 | | Recognized at fair value through profit or loss2 | Hold the financial asset for the collection of the contractual cash flows and sale | | Measured at fair value through other comprehensive income1 | | Hold for sale and others | | Measured at fair value through profit or loss | |
1 | A designation at fair value through profit or loss is allowed only if such designation mitigates an accounting mismatch (irrevocable). |
2 | A designation at fair value through other comprehensive income is allowed only if the financial instrument is the equity investment that is not held for trading (irrevocable). |
With the implementation of IFRS 9, the criteria to classify the financial assets at amortized cost or at fair value through other comprehensive income are more strictly applied than the criteria applied with IAS 39. Accordingly, the financial assets at fair value through profit or loss may increase by implementing IFRS 9 and may result an extended fluctuation in profit or loss.
The following table presents the impact of the change in classification and measurement of financial instrument (excluding derivatives) held by the Group as at December 31, 2017, using the financial instrument accounting system developed by the Group with applying IFRS 9. | | | | | | | | | | | Classification in accordance with | | Amount in accordance with | | IAS 39 | | IFRS 9 | | IAS 391 | | | IFRS 91 | | | | | | (In millions of Korean won) | | Cash and due from financial institutions | | Measured at amortized cost | | ₩ | 19,817,825 | | | ₩ | 17,020,727 | | | | Recognized at fair value through profit or loss2 | | | — | | | | 2,782,821 | | | | | | | | | | | | | Sub-total | | | 19,817,825 | | | | 19,803,548 | | | | | | | | | | | | | Financial assets at fair value through profit or loss | | Trading Securities-Debt | | Recognized at fair value through profit or loss | | | 25,168,338 | | | | 32,227,345 | | Trading Securities-Equity | | | | 4,935,100 | | | Trading Securities-Others | | | | 73,855 | | | Financial assets designated at fair value through profit and loss3 | | | | 2,050,052 | | | | | | | | | | | | | | Sub-total | | | 32,227,345 | | | | 32,227,345 | | | | | | | | | | | | | Loans | | Measured at amortized cost | | | 290,122,838 | | | | 288,970,214 | | | | Recognized at fair value through profit or loss2 | | | — | | | | 629,223 | | | | | | | | | | | | | Sub-total | | | 290,122,838 | | | | 289,599,437 | | | | | | | | | | | | | Financial investments | | | | | | | | | | | Available-for-sale Securities- Debt | | Recognized at fair value through other comprehensive income | | | 38,959,401 | | | | 33,611,908 | | | | Recognized at fair value through profit or loss2 | | | — | | | | 2,511,902 | | | | Measured at amortized cost | | | — | | | | 2,839,709 | | Available-for-sale Securities- Equity | | Recognized at fair value through other comprehensive income | | | 9,156,862 | | | | 2,367,745 | | | | Recognized at fair value through profit or loss2 | | | — | | | | 6,800,632 | | Financial assetsheld-to-maturity | | Measured at amortized cost | | | 18,491,980 | | | | 18,222,076 | | | | Recognized at fair value through profit or loss2 | | | — | | | | 269,661 | | | | | | | | | | | | | Sub-total | | | 66,608,243 | | | | 66,623,633 | | | | | | | | | | | | | Other assets | | Measured at amortized cost | | | 10,195,015 | | | | 10,188,309 | | | | | | | | | | | | | Total | | ₩ | 418,971,266 | | | ₩ | 418,442,272 | | | | | | | | | | | | |
1 | Loans and other financial assets are net of allowance. |
2 | In accordance with IFRS 4, the Group applied Overlay approach to the financial instruments related to insurance contracts (cash and due from financial institutions ₩186,293 million, Loans ₩587 million,Available-for-sale securities ₩6,349,091 million, andHeld-to-maturity securities ₩57,386 million). For the financial assets designated as fair value through profit or loss, the Group reclassifies the amount reported in profit or loss for the designated financial assets applying IFRS 9 to the amount that would have been reported in profit or loss for the designated financial assets of the insurer has applied IAS 39. |
3 | The financial assets amounting to ₩2,050,052 million that was previously classified as financial assets designated at fair value through profit or loss in accordance with IAS 39, will be reclassified as financial assets recognized at fair value through profit or loss, even if the financial assets are not designated at fair value through profit or loss. |
With the implementation of IFRS 9, as at December 31, 2017, ₩2,782,821 million of cash and due from financial institutions, ₩629,223 million of loans, ₩9,312,534 million of financial assetsavailable-for-sales and ₩269,661 million of assetsheld-to-maturity are classified to a liabilityfinancial assets recognize at fair value through profit or loss. These classifications will increase the financial assets recognized at fair value through profit or loss from 7.7% to pay a levy imposed by a government10.8% over the total financial assets (excluding derivatives) of ₩418,442,272 million and may result an extended fluctuation in accordance with the legislation. The interpretationprofit or loss. (b) Classification and Measurement of Financial Liabilities IFRS 9 requires that the liabilityamount of the change of fair value attributable to paychanges in the credit risk in the financial liabilities designated at fair value through profit or loss will be recognized in other comprehensive income, not in profit or loss, unless this treatment of the credit risk component creates or enlarges a levymeasurement mismatch. Amounts presented in other comprehensive income are not subsequently transferred to profit or loss. Under IAS 39, all financial liabilities designated at fair value through profit or loss recognized their fair value change in profit or loss. However, under IFRS 9, certain fair value change will be recognized in other comprehensive income and as a result, profit or loss from fair value change may decrease. Based on the impact assessment, ₩10,438 million was identified as changes in credit risk in relation to the financial liabilities of ₩10,078,288 million designated as fair value through profit or loss. (c) Impairment: Financial Assets and Contract Assets The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortized cost, debt instruments measured at fair value through other comprehensive income, lease receivables, contract assets, loan commitments and certain financial guarantee contracts. Under IFRS 9, a credit event (or impairment ‘trigger’) no longer has to occur before credit losses are recognized. The Group will always recognize (at a minimum)12-month expected credit losses in profit or loss. Lifetime expected losses will be recognized on assets for which there is a significant increase in credit risk after initial recognition. | | | | | Stage | | Loss allowance | 1 | | No significant increase in credit risk after initial recognition | | 12-month expected credit losses: expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date | | | | 2 | | Significant increase in credit risk after initial recognition | | Lifetime expected credit losses: expected credit losses that result from all possible default events over the life of the financial instrument | 3 | | Credit-impaired | |
Under IFRS 9, the asset that is credit-impaired at initial recognition would recognize all changes in lifetime expected credit losses since the initial recognition as a loss allowance. According to the financial assessment, the Group owns loss allowance set out below. | | | | | | | | | | | | | | | Classification in accordance with | | Loss allowance in accordance with | | | Difference (b)-(a) | | IAS 39 | | IFRS 9 | | IAS 39(a) | | | IFRS 9(b) | | | | | | | (In millions of Korean won) | | Loans and receivables | | | | | | | | | | | | | | | Due from financial institutions | | Measured at amortized cost | | ₩ | — | | | ₩ | 1,797 | | | ₩ | 1,797 | | Loans | | Measured at amortized cost | | | 2,064,469 | | | | 2,608,937 | | | | 544,468 | | | | Recognized at fair value through profit or loss | | | 45,763 | | | | — | | | | (45,763 | ) | Other assets | | Measured at amortized cost | | | 104,813 | | | | 109,899 | | | | 5,086 | | Available-for-sale Securities | | | | | | | | | | | | | | | Debt Securities | | Recognized at fair value through other comprehensive income | | | — | | | | 4,433 | | | | 4,433 | | | | Measured at amortized cost | | | — | | | | 176 | | | | 176 | | Financial assetsheld-to-maturity | | | | | | | | | | | | | | | Debt Securities | | Measured at amortized cost | | | — | | | | 1,530 | | | | 1,530 | | | | | | | | | | | | | | | | | Sub-total | | | 2,215,045 | | | | 2,726,772 | | | | 511,727 | | | | | | | | | | | | | | | | | Unused Commitment and Guarantee | | | 267,011 | | | | 295,648 | | | | 28,637 | | | | | | | | | | | | | | | Sub-total | | | 267,011 | | | | 295,648 | | | | 28,637 | | | | | | | | | | | | | | | | | Financial Guarantee Contract | | | 2,682 | | | | 4,857 | | | | 2,175 | | | | | | | | | | | | | | | Sub-total | | | 2,682 | | | | 4,857 | | | | 2,175 | | | | | | | | | | | | | | | Total | | ₩ | 2,484,738 | | | ₩ | 3,027,277 | | | ₩ | 542,539 | | | | | | | | | | | | | | | | |
(d) Hedge Accounting Hedge accounting mechanics (fair value hedges, cash flow hedges and hedge of net investments in a foreign operations) required by IAS 39 remains unchanged in IFRS 9, however, the new hedge accounting rules will align the accounting for hedging instruments more closely with the Group’s risk management practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more principles-based approach. IFRS 9 allows more hedging instruments and hedged items to qualify for hedge accounting, and relaxes the hedge accounting requirement by removing two hedge effectiveness tests that are a prospective test to ensure that the hedging relationship is expected to be highly effective and a quantitative retrospective test (within range of80-125%) to ensure that the hedging relationship has been highly effective throughout the reporting period. With implementation of IFRS 9, volatility in profit or loss may be reduced as some items that were not eligible as hedged items or hedging instruments under IAS 39 are now eligible under IFRS 9. Furthermore, when the Group first applies IFRS 9, it may choose as its accounting policy to continue to apply all of the hedge accounting requirements of IAS 39 instead of the requirements of IFRS 9. Meanwhile, as at December 31, 2017, no hedge accounting was applied to risk management activity which is eligible for being hedged under IFRS 9 but not under IAS 39. | • | | IFRS 15, Revenue from Contracts with Customers |
IFRS 15Revenue from Contracts with Customers issued in May 2014 replaces IAS 18Revenue, IAS 11Construction Contracts, SIC 31Revenue-Barter Transactions Involving Advertising Services, IFRIC 13Customer Loyalty Programs, IFRIC 15Agreements for the Construction of Real Estate and IFRIC 18Transfers of assets from customers. IAS 18 and other, the current standard, provide revenue recognition criteria by type of transactions; such as, sales goods, the rendering of services, interest income, royalty income, dividend income, and construction contracts. However, IFRS 15, the new standard, is based on the principle that revenue is recognized when control of a good or service transfers to a customer—so the activity that triggersnotion of control replaces the paymentexisting notion of risks and rewards. A new five-step process must be applied before revenue from contract with customer can be recognized: Identify contracts with customers Identify the separate performance obligation Determine the transaction price of the levy occurs,contract Allocate the transaction price to each of the separate performance obligations, and Recognize the revenue as identified byeach performance obligation is satisfied. The Group will apply new standard for annual reporting periods beginning on or after January 1, 2018 and early adoption is permitted. The Group performed a preliminary impact assessment on the legislation (the obligating event). The interpretation doesemployees of the accounting department based on the current situation and available information as at December 31, 2017 to identify potential financial effects of applying IFRS 15. As a result, the Group expects the standard will not have a significant impact on the consolidated financial statements. Changes in accounting policy with respect to uncertain tax position
For The results of the periods prior to the year endedassessment as at December 31, 2014, pursuant2017, may change due to IAS 37 if an uncertain tax position satisfied the criteria for provisions,additional information that the Group measuredmay obtain after the best estimate of expenditures for the uncertain tax position. Group’s claims of refund of the amounts levied by the tax authority were then treated as contingent assets. However, in 2014, the Group retrospectively applied the accounting policy in accordance with the IAS 12, which allows recognition of the tax payment as income tax assets when it is probable to receive a tax refund. The restated comparative consolidated financial statements reflect adjustments resulting from the retrospective application.
The effect of these changes in accounting policy to financial position as of January 1, 2013, December 31, 2013, 2014, and to comprehensive income for the years ended December 31, 2012, 2013 and 2014, are as follows:
Effect on Consolidated Statements of Financial Positionassessment.
| | | | | | | | | | | | | | | Jan. 1, 2013 | | | Dec. 31, 2013 | | | Dec. 31, 2014 | | | | (In millions of Korean won) | | Increase in current income tax assets | | ₩ | 318,450 | | | ₩ | 329,443 | | | ₩ | 306,313 | | Increase in retained earnings | | | 318,450 | | | | 329,443 | | | | 306,313 | |
Effect on Consolidated Statements of Comprehensive Income
| | | | | | | | | | | | | | | 2012 | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Decrease(increase) in income tax | | ₩ | 38,534 | | | ₩ | 10,993 | | | ₩ | (23,130 | ) | | | | | (In Korean won) | | Increase(decrease) in earnings per share | | | 100 | | | | 28 | | | | (60 | ) | Increase(decrease) in diluted earnings per share | | | 100 | | | | 28 | | | | (60 | ) |
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been applied in preparing these consolidated financial statement. None of these is expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below:
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was16Leases issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The group is yet to assess IFRS 9’s full impact. IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard2016 is effective for annual periods beginning on or after January 1, January 20172019, with early adoption permitted. This standard will replace IAS 17Leases, IFRIC 4Determining whether an Arrangement contains a Lease, IFRIC 15Operating Leases-Incentives, and earlierSIC 27Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
At inception of a contract, the entity shall assess whether the contract is, or contains, a lease. Also, at the date of initial application, the entity shall assess whether the contract is, permitted.or contains, a lease in accordance with the standard. However, the entity will not need to reassess all contracts with applying the practical expedient because the entity elected to apply the practical expedient only to contracts entered before the date of initial application. For a contract that is, or contains, a lease, the entity shall account for each lease component within the contract as a lease separately fromnon-lease components of the contract. A lease is required to recognize aright-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. The grouplessee may elect not to apply the requirements to short-term lease (a lease term of 12 months or less at the commencement date) and low value assets (e.g. underlying assets below $ 5,000). In addition, as a practical expedient, the lessee may elect, by class of underlying asset, not to separatenon-lease components from lease components, and instead account for each lease component and any associatednon-lease components as a single lease component. The classification criteria between a financial lease and an operating lease for a lessor under IFRS 16 are similar to IAS 17. The Group is assessingcurrently in progress of analyzing the potential impact on its consolidated financial statements resulting from the application of IFRS 15.16. | • | | IFRS 17,Insurance Contracts |
IFRS 17 was issued in May 2017 as replacement for IFRS 4 Insurance Contracts and is effective for periods beginning on or after January 1, 2021. It requires a current measurement model where estimates arere-measured each reporting period. Contracts are measured using the building blocks of: discounted probability-weighted cash flows an explicit risk adjustment, and a contractual service margin (“CSM”) representing the unearned profit of the contract which is recognized as revenue over the coverage period. The standard allows a choice between recognizing changes in discount rates either in the income statement or directly in other comprehensive income. The choice is likely to reflect how insurers account for their financial assets under IFRS 9. An optional, simplified premium allocation approach is permitted for the liability for the remaining coverage for short duration contracts, which are often written bynon-life insurers. There is a modification of the general measurement model called the ‘variable fee approach’ for certain contracts written by life insurers where policyholders share in the returns from underlying items. When applying the variable fee approach the entity’s share of the fair value changes of the underlying items is included in the contractual service margin. The results of insurers using this model are therefore likely to be less volatile than under the general model. The new rules will affect the financial statements and key performance indicators of all entities that issue insurance contracts or investment contracts with discretionary participation features. 2.2 Measurement Basis The consolidated financial statements have been prepared under the historical cost convention unless otherwise specified. 2.3 Functional and Presentation Currency Items included in the financial statements of each entity of the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Korean won, which is the Parent Company’s functional and presentation currency. Refer to currency(Notes 3.2.1 and 3.2.2.3.2.2). 2.4 SignificantCritical Accounting Estimates The preparation of consolidated financial statements requires the application of accounting policies, certain critical accounting estimates and assumptions that may have a significant impact on the assets (liabilities) and incomeincomes (expenses). Management’s estimates of outcomes may differ from actual outcomes if management’s estimates and assumptions based on management’s best judgment at the reporting date are different from the actual environment. Estimates and assumptions are continually evaluated and any change in an accounting estimate is recognized prospectively by including it in profit or loss in the period of the change, if the change affects that period only. Alternatively if the change in accounting estimate affects both the period of change and future periods, that change is recognized in the profit or loss of all those periods. Uncertainty in estimates and assumptions with significant risk that may result in material adjustment to the consolidated financial statements are as follows: 2.4.1 Deferred incomeIncome taxes The recognitionGroup is operating in numerous countries and the income generated from these operations is subject to income taxes based on tax laws and interpretations of a deferred tax asset relies on an assessmentauthorities in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain. If certain portion of the probabilitytaxable income is not used for investments, increase in wages, or dividends in accordance with the Tax System for Recirculation of Corporate Income, the Group is liable to pay additional income tax calculated based on the tax laws. The new tax system is effective for three years from 2015. Accordingly, the measurement of current and sufficiency of future taxable profits, future reversals of existing taxable temporary differencesdeferred income tax is affected by the tax effects from the new system. As the Group’s income tax is dependent on the investments, increase in wages and ongoingdividends, there exists uncertainty with regard to measuring the final tax planning strategies.effects. 2.4.2 Fair value of financial instruments The fair value of financial instruments where no active market exists or where quoted prices are not otherwise available is determined by using valuation techniques. Financial instruments, which are not actively traded in the market and those with less transparent market prices, will have less objective fair values and require broad judgment on liquidity, concentration, uncertainty in market factors and assumptions in price determination and other risks. As described in the significant accounting policies in Note 3.3, ‘Recognition and Measurement of Financial Instruments’, diverse valuation techniques are used to determine the fair value of financial instruments, from generally accepted market valuation models to internally developed valuation models that incorporate various types of assumptions and variables. 2.4.3 Provisions for credit losses (allowances for loan losses, provisions for acceptances and guarantees, and unused loan commitments) The Group determines and recognizes allowances for losses on loans through impairment testing and recognizes provisions for guarantees, and unused loan commitments. The accuracy of provisions for credit losses is determined by the methodology and assumptions used for estimating expected cash flows of the borrower for individually assessed allowances of loans, collectively assessed allowances for groups of loans, guarantees and unused loan commitments. 2.4.4 Measurements of netNet defined benefit liabilitiesliability The present value of net defined benefit liability depends on a number of factors that are determined on an actuarial basis using a number of assumptions (Note 24). 2.4.5 Estimated impairmentImpairment of goodwill The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash-generating units have been determined based onvalue-in-use calculations to test whether goodwill has suffered any impairment (Note 15).
3. Significant Accounting Policies
The significant accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all yearsperiods presented, unless otherwise stated. 3.1 Consolidation 3.1.1 Subsidiaries Subsidiaries are companies that are controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effects of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date when control is transferred to the Group andde-consolidated from the date when control is lost. If a subsidiary uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to make the subsidiary’s accounting policies conform to those of the Group when the subsidiary’s financial statements are used by the Group in preparing the consolidated financial statements. Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to thenon-controlling interests, if any. Total comprehensive income is attributed to the owners of the parent and to thenon-controlling interests even if this results in thenon-controlling interests having a deficit balance. Transactions withnon-controlling interests that do not result in loss of control are accounted for as equity transactions; that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals tonon-controlling interests are also recorded in equity. When the Group ceases to have control, any retained interest in the entity isre-measured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss. The Group applies the acquisition method to account for business combinations. The consideration transferred is measured at the fair values of the assets transferred, and identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at their fair values at the acquisition date. The Group recognizes anynon-controlling interest in the acquiree on anacquisition-by-acquisition basis in the event of liquidation, either at fair value or at thenon-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred. In a business combination achieved in stages, the Group shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in profit or loss or other comprehensive income, as appropriate. In prior reporting periods, the Group may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognized in other comprehensive income shall be recognized on the same basis as would be required if the Group had disposed directly of the previously held equity interest. The Group applies the book amount method to account for business combinations of entities under a common control. Identifiable assets acquired and liabilities assumed in a business combination are measured at their book amounts on the consolidated financial statements of the Group. In addition, the difference between the sum of consolidated book amounts of the assets and liabilities transferred and accumulated other comprehensive income; and the consideration paid is recognized as capital surplus. 3.1.2 Associates and Joint ventures Associates and joint ventures are entities over which the Group has significant influence in the financial and operating policy decisions. If the Group holds 20% or more of the voting power of the investee, it is presumed that the Group has significant influence. Under the equity method, investments in associates and joint ventures are initially recognized at cost and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss of the investee and changes in the investee’s equity after the date of acquisition. The Group’s share of the profit or loss of the investee is recognized in the Group’s profit or loss. Distributions received from an investee reduce the carrying amount of the investment. Profit and lossesloss resulting from ‘upstream’ and ‘downstream’ transactions between the Group and associates are eliminated to the extent ofat the Group’s interest in associates. Unrealized losses are eliminated in the same way as unrealized gains except that they are only eliminated to the extent that there is no evidence of impairment. If associates and joint ventures use accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to make the associate’s accounting policies conform to those of the Group when the associate’s financial statements are used by the Group in applying equity method. After the carrying amount of the investment is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee. The Group determines at each reporting dateperiod whether there is any objective evidence that the investments in the associates and joint ventures are impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associates and its carrying value and recognizes the amount as ‘share of profit or loss of associates’‘non-operating income (expense)’ in the statements of comprehensive income. 3.1.3 Structured entity A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. When the Group decides whether it has power to the structured entities in which the Group has interests, it considers factors such as the purpose, the form, the practical ability to direct the relevant activities of a structured entity, the nature of its relationship with a structured entity and the amount of exposure to variable returns. 3.1.4 Management of FundsTrusts and funds The Group provides management services for trust assets, collective investment and other funds. These trusts and funds are not consolidated in the Group’s consolidated financial statements, except for trusts and funds over which the Group has control. 3.1.5 Intra-group transactions All intra-group balances and transactions, and any unrealized gains arising on intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains except that they are only eliminated to the extent that there is no evidence of impairment. 3.2 Foreign Currency
3.2.1 Foreign currency transactions and balances A foreign currency transaction is recorded, on initial recognition in the functional currency, by applying the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period, foreign currency monetary items are translated using the closing rate which is the spot exchange rate at the end of the reporting period.Non-monetary items that are measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined andnon-monetary items that are measured in terms of historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous consolidated financial statements are recognized in profit or loss in the yearperiod in which they arise.arise, except for exchange differences arising on net investments in a foreign operation and financial liability designated as a hedge of the net investment. When gains or losses on anon-monetary item are recognized in other comprehensive income, any exchange component of those gains or losses are also recognized in other comprehensive income. Conversely, when gains or losses on anon-monetary item are recognized in profit or loss, any exchange component of those gains or losses are also recognized in profit or loss. 3.2.2 Foreign Operationsoperations The financial performance and financial position of all foreign operations, whose functional currencies differ from the Group’s presentation currency, are translated into the Group’s presentation currency using the following procedures:procedures. Assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period. Income and expenses in the statement of comprehensive income presented are translated at average exchange rates for the period. All resulting exchange differences are recognized in other comprehensive income. Any goodwill arising from the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and are translated into the presentation currency at the closing rate. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, areis reclassified from equity to profit or loss (as a reclassification adjustment) when the gains or losses on disposal are recognized. On the partial disposal of a subsidiary that includes a foreign operation, the Group re-attributesredistributes the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income to thenon-controlling interests in that foreign operation. In any other partial disposal of a foreign operation, the Group reclassifies to profit or loss only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income. 3.3 Recognition and Measurement of Financial Instruments 3.3.1 Initial recognition The Group recognizes a financial asset or a financial liability in its statement of financial position when the Group becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets (a purchase or sale of a financial asset under a contract whose terms require delivery of the financial instruments within the time frame established generally by market regulation or practice) is recognized and derecognized using trade date accounting. The Group classifies financial assets as financial assets at fair value through profit or loss,held-to-maturity financial assets,available-for-sale financial assets, or loans and receivables.receivables, or other financial assets. The Group classifies financial liabilities as financial liabilities at fair value through profit or loss, or other financial liabilities. The classification depends on the nature and holding purpose of the financial instrument at initial recognition in the consolidated financial statements. At initial recognition, a financial asset or financial liability is measured at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value of a financial instrument on initial recognition is normally the transaction price (that is, the fair value of the consideration given or received) in an arm’s length transaction. 3.3.2 Subsequent measurement After initial recognition, financial instruments are measured at amortized cost or fair value based on classification at initial recognition. Amortized cost The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition and adjusted to reflect principal repayments, cumulative amortization using the effective interest method and any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.uncollectability. Fair value Fair values, which the Group primarily uses for the measurement of financial instruments, are the published price quotations based on market prices or dealer price quotations of financial instruments traded in an active market where available. These are the best evidence of fair value. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, an entity in the same industry, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. If the market for a financial instrument is not active, fair value is determined either by using a valuation technique or independent third-party valuation service. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available, referencing to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. The Group uses valuation models that are commonly used by market participants and customized for the Group to determine fair values of commonover-the-counter (OTC) derivatives such as options, interest rate swaps and currency swaps which are based on the inputs observable in markets. For more complex instruments, the Group uses internally developed models, which are usually based on valuation methods and techniques generally recognized as standardused within the industry, or a value measured by an independent external valuation institution as the fair values if all or some of the inputs to the valuation models are not market observable and therefore it is necessary to estimate fair value based on certain assumptions. The Group’s Fair Value Evaluation Committee, which consists of the risk management department, trading department and accounting department, reviews the appropriateness of internally developed valuation models, and approves the selection and changing of the external valuation institution and other considerations related to fair value measurement. The review results on the fair valuation models are reported to the Market Risk Management subcommittee by the Fair Value Evaluation Committee on a regular basis. If the valuation technique does not reflect all factors which market participants would consider in setting a price, the fair value is adjusted to reflect those factors. TheseThose factors include counterparty credit risk,bid-ask spread, liquidity risk and others. The chosen valuation technique makes maximum use of market inputs and relies as little as possible on entity-specific inputs. It incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies applied for pricing financial instruments. Periodically, the Group calibrates the valuation technique and tests it forits validity using prices fromof observable current market transactions of the same instrument or based on other relevant observable market data. 3.3.3 Derecognition Derecognition is the removal of a previously recognized financial asset or financial liability from the statement of financial position. The Group derecognizes a financial asset or a financial liability when, and only when: Derecognition of financial assets Financial assets are derecognized when the contractual rights to the cash flows from the financial assets expire or the financial assets have been transferred and substantially all the risks and rewards of ownership of the financial assets are also transferred, or all the risks and rewards of ownership of the financial assets are neither substantially transferred nor retained and the Group has not retained control. If the Group neither transfers nor disposes of substantially all the risks and rewards of ownership of the financial assets, the Group continues to recognize the financial asset to the extent of its continuing involvement in the financial asset. If the Group transfers the contractual rights to receive the cash flows of the financial asset, but retains substantially all the risks and rewards of ownership of the financial asset, the Group continues to recognize the transferred asset in its entirely and recognize a financial liability for the consideration received. Derecognition of financial liabilities Financial liabilities are derecognized from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expires. 3.3.4 Offsetting Financial assets and liabilities are offset and the net amount reported in the consolidated statements of financial position where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Group or the counterparty. 3.4 Cash and cash equivalentsCash Equivalents Cash and cash equivalents include cash on hand, foreign currency, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 3.53.5 Non-derivative financial assets Financial Assets 3.5.1 Financial assets at fair value through profit or loss This category comprises twosub-categories: financial assets classified as held for trading, and financial assets designated by the Group as at fair value through profit or loss upon initial recognition. Anon-derivative financial asset is classified as held for trading if either: It is acquired for the purpose of selling in the near term, or It is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. The Group may designate certain financial assets, other than held for trading, upon initial recognition as at fair value through profit or loss when one of the following conditions is met: It eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. A group of financial assets is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the Group’s key management personnel. | • | | A contract contains one or more embedded derivatives; the Group may designate the entire hybrid (combined) contract as a financial asset at fair value through profit or loss if allowed by IAS 39,Financial Instruments: Recognition and measurement.measurement . |
After initial recognition, a financial asset at fair value through profit or loss is measured at fair value and gains or losses arising from a change in the fair value are recognized in profit or loss. Interest income, dividend income, and gains or losses from sale and repayment from financial assets at fair value through profit or loss are recognized in the statement of comprehensive income as net gains on financial instruments at fair value through profit or loss. 3.5.2 Financial Investments Available-for-sale andheld-to-maturity financial assets are presented as financial investments. Available-for-sale financial assets Profit or loss of financial assets classified as available for sale, except for impairment loss and foreign exchange gains and losses resulting from changes in amortized cost of debt securities, is recognized as other comprehensive income, and cumulative profit or loss is reclassified from equity to current profit or loss at the derecognition of the financial asset, and it is recognized as part of other operating profit or loss in the statement of comprehensive income. However, interest revenueincome measured using the effective interest method is recognized in current profit or loss, and dividends of financial assets classified asavailable-for-sale are recognized when the right to receive payment is established. Available-for-sale financial assets denominated in foreign currencies are translated at the closing rate. Foravailable-for-sale debt securities denominated in foreign currency, exchange differences resulting from changes in amortized cost are recognized in profit or loss as part of other operating income and expenses. Foravailable-for-sale equity securities denominated in foreign currency, the entire change in fair value including any exchange component is recognized in other comprehensive income. Held-to-maturity financial assets Held-to-maturity financial assets arenon-derivative financial assets with fixed or determinable payments and fixed maturity that the Group’s management has the positive intention and ability to hold to maturity.Held-to-maturity financial assets are subsequently measured at amortized cost using the effective interest method after initial recognition and interest income is recognized using the effective interest method. 3.5.3 Loans and receivables Non-derivative financial assets which meet the following conditions are classified as loans and receivables: Those with fixed or determinable payments. Those that are not quoted in an active market. Those that the Group does not intend to sell immediately or in the near term. Those that the Group, upon initial recognition, does not designate asavailable-for-sale or as at fair value through profit or loss. After initial recognition, these are subsequently measured at amortized cost using the effective interest method. If the financial asset is purchased under an agreement to resale the asset at a fixed price or at a price that provides a lender’s return on the purchase price, the consideration paid is recognized as loans and receivables. 3.6 Impairment of financial assetsFinancial Assets The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets except for financial assets at fair value through profit or loss is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred, if and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. However, losses expected as a result of future events, no matter how likely, are not recognized. Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the holder of the asset about the following loss events: Significant financial difficulty of the issuer or obligor. A breach of contract, such as a default or delinquency in interest or principal payments. The lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider. It becomes probable that the borrower will declare bankruptcy or undergo financial reorganization. The disappearance of an active market for that financial asset because of financial difficulties. Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio. In addition to the types of events in the preceding paragraphs, objective evidence of impairment for an investment in an equity instrument classified as anavailable-for-sale financial asset includes a significant or prolonged decline in the fair value below its cost. Accordingly, theThe Group considers the decline in the fair value of over 30% against the original cost as a “significant decline” and a six-month. A decline is considered as prolonged if the period, in which the fair value of the financial asset has been below its original cost for an equity instrumentat initial recognition, is same as a “prolonged decline”.or more than six months. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured and recognized in profit or loss as either provisions for credit loss or other operating income and expenses. 3.6.1 Loans and receivables If there is objective evidence that an impairmentThe amount of the loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant (individual assessment of impairment), and individually or collectively for financial. Financial assets that are not individually significant.significant assess objective evidence of impairment individually or collectively. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment (collective assessment of impairment). Individual assessment of impairment Individual assessment of impairment losses are calculated by discounting the expected future cash flows of a loan at its original effective interest rate and comparing the resultant present value with the loan’s current carrying amount. This process normally encompasses management’s best estimate, such as operating cash flow of the borrower and net realizable value of any collateral held. Collective assessment of impairment A methodology based on historical loss experience is used to estimate inherent incurred loss on groups of assets for collective assessment of impairment. Such methodology incorporates factors such as type of collateral, product and borrowers, credit rating, loss emergence period, recovery period and applies probability of default on a group of assets and loss given default by type of recovery method. Also, consistent assumptions are applied to form a formula-based model in estimating inherent loss and to determine factors on the basis of historical loss experience and current condition. The methodology and assumptions used for collective assessment of impairment are reviewed regularly to reduce any differences between loss estimates and actual loss experience. Impairment loss on loans reduces the carrying amount of the asset through use of an allowance account, and when a loan becomes uncollectable, it is written off against the related allowance account. If, in a subsequent period, the amount of the impairment loss decreases and is objectively related to the subsequent event after recognition of impairment, the previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognized in profit or loss. 3.6.2Available-for-sale financial assets When a decline in the fair value of anavailable-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss (the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognized in profit or loss) that had been recognized in other comprehensive income is reclassified from equity to profit or loss as part of other operating income and expenses. The impairment loss onavailable-for-sale financial assets is directly deducted from the carrying amount. If, in a subsequent period, the fair value of a debt instrument classified asavailable-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, a portion of the impairment loss is reversed up to but not exceeding the previously recorded impairment loss, with the amount of the reversal recognized in profit or loss as part of other operating income and expenses in the statement of comprehensive income. However, impairment losses recognized in profit or loss for anavailable-for-sale equity instrument classified as available for sale are not reversed through profit or loss. 3.6.3Held-to-maturity financial assets If there is objective evidence that an impairment loss onheld-to-maturity financial assets carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The amount of the loss is recognized in profit or loss as part of other operating income and expenses. The impairment loss onheld-to-maturity financial assets is directly deducted from the carrying amount. In the case of a financial asset classified as held to maturity, if, in a subsequent period, the amount of the impairment loss decreases and it is objectively related to an event occurring after the impairment is recognized, a portion of the previously recognized impairment loss is reversed up to but not exceeding the extent of amortized cost at the date of recovery. The amount of reversal is recognized in profit or loss as part of other operating income and expenses in the statement of comprehensive income. 3.7 Derivative Financial Instruments The Group enters into numerous derivative financial instrument contracts such as currency forwards, interest rate swaps, currency swaps and others for trading purposes or to manage its exposures to fluctuations in interest rates and currency exchange, amongst others. These derivative financial instruments are presented as derivative financial instruments within the consolidated financial statements irrespective of transaction purpose and subsequent measurement requirement. The Group designates certain derivatives as hedging instruments to hedge the risk of changes in fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge) and the risk of changes in cash flow (cash flow hedge). The Group designatesnon-derivatives as hedging instruments to hedge the risk of foreign exchange of a net investment in a foreign operation (hedge of net investment). At the inception of the hedge, there is formal designation and documentation of the hedging relationship and the Group’s risk management objective and strategy for undertaking the hedge. That documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value attributable to the hedged risk. 3.7.1 Derivative financial instruments held for trading All derivative financial instruments, except for derivatives that are designated and qualify for hedge accounting, are classified as financial instruments held for trading and are measured at fair value. Gains or losses arising from a change in fair value are recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss. 3.7.2 Fair value hedges If derivatives qualify for a fair value hedge, the change in fair value of the hedging instrument and the change in fair value of the hedged item attributable to the hedged risk are recognized in profit or loss as part of other operating income and expenses. Fair value hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. Once fair value hedge accounting is discontinued, the adjustment to the carrying amount of a hedged item is fully amortized to profit or loss by the maturity of the financial instrument using the effective interest method. 3.7.3 Cash flow hedges The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized directly in other comprehensive income and the ineffective portion of the gain or loss on the hedging instrument is recognized in profit or loss. The associated gains or losses that were previously recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the same period or periods during which the hedged forecast cash flows affects profit or loss. Cash flow hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. When the cash flow hedge accounting is discontinued, the cumulative gains or losses on the hedging instrument that have been recognized in other comprehensive income are reclassified to profit or loss over the year in which the forecast transaction occurs. If the forecast transaction is no longer expected to occur, the cumulative gains or losses that had been recognized in other comprehensive income are immediately reclassified to profit or loss. 3.7.4 Hedge of net investment If financial liabilities qualify for a net investment hedge, the effective portion of changes in fair value of hedging instrument is recognized in other comprehensive income and the ineffective portion is recognized in profit. The gain or loss on the hedging instrument relating to the effective portion of the hedge that has been recognized in other comprehensive income will be reclassified from other comprehensive income to profit or loss as a reclassification adjustment on the disposal or partial disposal of the foreign operation in accordance with IAS 39,Financial Instruments: Recognition and Measurement. 3.7.5 Embedded derivatives An embedded derivative is separated from the host contract and accounted for as a derivative if, and only if the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract and a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative and the hybrid (combined) instrument is not measured at fair value with changes in fair value recognized in profit or loss. Gains or losses arising from a change in the fair value of an embedded derivative separated from the host contract are recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss. 3.7.53.7.6 Day one gain and loss
If the Group uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of the financial instrument, there may be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. If the fair value of the financial instrument is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss or other operating income and expenses. 3.8 Property and equipmentEquipment 3.8.1 Recognition and Measurementmeasurement All property and equipment that qualify for recognition as an asset are measured at cost and subsequently carried at cost less any accumulated depreciation and any accumulated impairment losses. The cost of property and equipment includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Subsequent expenditures are capitalized only when they prolong the useful life or enhance values of the assets but the costs of theday-to-day servicing of the assets such as repair and maintenance costs are recognized in profit or loss as incurred. When part of an item of an asset has a useful life different from that of the entire asset, it is recognized as a separate asset. 3.8.2 Depreciation Land is not depreciated, whereas other property and equipment are depreciated using the method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. The depreciable amount of an asset is determined after deducting its residual value. As for leased assets, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life. Each part of an item of property and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. The depreciation method and estimated useful lives of the assets are as follows: | | | | | Property and equipment | | Depreciation method | | Estimated useful liveslife | Buildings and structures | | Straight-line | | 40 years | Leasehold improvements | | Declining-balanceDeclining-balance/ Straight-line | | 4 years | Equipment and vehicles | | Declining-balanceDeclining-balance/ Straight-line | | 43~8 years | Finance leased assets | | Declining-balance | | 8 months ~ 5 years and 8 months |
The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end, if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate. 3.9 Investment propertiesProperties 3.9.1 Recognition and Measurement Properties held to earn rentals or for capital appreciation or both are classified as investment properties. Investment properties are measured initially at their cost and subsequently the cost model is used. 3.9.2 Depreciation Land is not depreciated, whereas other investment properties are depreciated using the method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. The depreciable amount of an asset is determined after deducting its residual value. The depreciation method and estimated useful lives of the assets are as follows: | | | | | Property and equipmentInvestment property
| | Depreciation method | | Estimated useful liveslife | Buildings | | Straight-line | | 40 years |
The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end and, if expectations differ from previous estimates, or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate. 3.10 Intangible assets Assets
Intangible assets are measured initially at cost and subsequently carried at their cost less any accumulated amortization and any accumulated impairment losses. Intangible assets, except for goodwill and membership rights, are amortized using the straight-line method or double declining balance method with no residual value over their estimated useful economic life since the asset is available for use. | | | | | Intangible assets | | Amortization method | | Estimated useful lives life | Industrial property rights | | Straight-line | | 3~10 years | Software | | Straight-line | | 3~5 years | Finance leased assets | | Straight-line | | 8 months ~ 5 years and 8 months | VOBA | | Declining-Balance | | 60 years | Others | | Straight-line | | 4~2~30 years |
The amortization period and the amortization method for intangible assets with a finite useful life are reviewed at least at each financial year end. Where an intangible asset is not being amortized because its useful life is considered to be indefinite, the Group carries out a review in each accounting period to confirm whether or not events and circumstances still support the assumption of an indefinite useful life. If they do not, the change from the indefinite to finite useful life is accounted for as a change in an accounting estimate. 3.10.1 Value of Business Acquired (VOBA) The Group recorded Value of business acquired (VOBA) as intangible assets, which are the differences between the fair value of insurance liabilities and book value calculated based on the accounting policy of the acquired company. VOBA is an estimated present value of future cash flow of long-term insurance contracts at the acquisition date. VOBA is amortized for above estimated useful life using declining balance method, the depreciation is recognized as insurance expense. 3.10.2 Goodwill Recognition and measurement Goodwill acquired from business combinations before January 1, 2010, is stated at its carrying amount which was recognized under the Group’s previous accounting policy, prior to the transition to IFRS. Goodwill acquired from business combinations after January 1, 2010, is initially measured as the excess of the aggregate of the consideration transferred, fair value ofnon-controlling interest and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the business acquired, the difference is recognized in profit or loss. For each business combination, the Group decides whether thenon-controlling interest in the acquiree is initially measured at fair value or at thenon-controlling interest’s proportionate share of the acquiree’s identifiable net assets at the acquisition date. Acquisition-related costs incurred to effect a business combination are charged to expenses in the periods in which the costs are incurred and the services are received, except for the costs to issue debt or equity securities. Additional acquisitions ofnon-controlling interest Additional acquisitions ofnon-controlling interests are accounted for as equity transactions. Therefore, no additional goodwill is recognized. Subsequent measurement
Goodwill is not amortized and is stated at cost less accumulated impairment losses. However, goodwill that forms part of the carrying amount of an investment in associates is not separately recognized and an impairment loss recognized is not allocated to any asset, including goodwill, which forms part of the carrying amount of the investment in the associates. 3.10.23.10.3 Subsequent expenditure
Subsequent expenditure is capitalized only when it enhances values of the assets. Internally generated intangible assets, such as goodwill and trade name, are not recognized as assets but expensed as incurred. 3.11 Leases 3.11.1 Finance lease A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. At the commencement of the lease term, the Group recognizes finance leases as assets and liabilities in its statements of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs of the lessee are added to the amount recognized as an asset. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred. The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the Group adopts for depreciable assets that are owned. If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is fully depreciated over the shorter of the lease term and its useful life. 3.11.2 Operating lease A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. Leases in the financial statements of lessors Lease income from operating leases are recognized in income on a straight-line basis over the lease term, unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished. Initial direct costs incurred by lessors in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income. Leases in the financial statements of lessees Lease payments under an operating lease (net of any incentives received from the lessor) are recognized as an expense on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the asset’s benefit. 3.12 Greenhouse Gas Emission Rights and Liabilities The Group measured at zero the emission rights received free of charge from the government following the Enforcement of Allocation and Trading of Greenhouse Gas Emissions Allowances. Emission rights purchased are measured initially at cost and subsequently carried at their costs less any accumulated impairment losses. Emission liabilities are measured as the sum of the carrying amount of emission allowances held by the Group and best estimate of the expenditure required to settle the obligation for any excess emissions at the end of reporting period. The emission rights and liabilities are classified as ‘intangible assets’ and ‘provisions’, respectively, in the consolidated statement of financial position. The emission rights held for trading are measured at fair value and the changes in fair value are recognized in profit or loss. The changes in fair value and gain or loss on disposal are classified as3.12non-operating income and expenses. 3.13 Impairment of non-financial assetsNon-Financial Assets The Group assesses at the end of each reporting period whether there is any indication that anon-financial asset, except for (i) deferred income tax assets, (ii) assets arising from employee benefits and(iii) non-current assets (or group of assets to be sold) classified as held for sale, may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset. However, irrespective of whether there is any indication of impairment, the Group tests (i) goodwill acquired in a business combination, (ii) intangible assets with an indefinite useful life and (iii) intangible assets not yet available for use for impairment annually by comparing their carrying amount with their recoverable amount. The recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the cash-generating unit to which the asset belongs (the asset’s cash-generating unit). A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit that are discounted by apre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss and recognized immediately in profit or loss. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units that are expected to benefit from the synergies of the combination. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period. The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset, other than goodwill, may no longer exist or may have decreased, and an impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss cannot exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years. 3.143.13 Non-current assets heldNon-Current Assets Held for saleSale Anon-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. Anon-current asset (or disposal group) classified as held for sale is measured at the lower of its carrying amount and fair value less costs to sell which is measured in accordance with the applicable IFRS, immediately before the initial classification of the asset (or disposal group) as held for sale. Anon-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale is not depreciated (or amortized). Impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. Gains are recognized for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment loss that has been recognized. 3.143.15 Financial liabilitiesLiabilities at fair valueFair Value through profitProfit or lossLoss
Financial liabilities at fair value through profit or loss are financial liabilities held for trading. After initial recognition, financial liabilities at fair value through profit or loss are measured at fair value and gains or losses arising from changes in the fair value, and gains or losses from sale and repayment of financial liabilities at fair value through profit or loss are recognized as net gains on financial instruments at fair value through profit or loss in the statement of comprehensive income. 3.153.16 Insurance Contracts
KB Life Insurance Co., Ltd., oneand KB Insurance Co., of the subsidiaries of the Group, issues insurance contracts. Insurance contracts are defined as “a contract under which one party (the insurer) accepts significant insurance risk from another party by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder”. A contract that qualifies as an insurance contract remains an insurance contract until all rights and obligations are extinguished or expire. Such a contract that does not contain significant insurance risk is classified as an investment contract and is within the scope of IAS 39,Financial Instruments: Recognition and measurement to the extent that it gives rise to a financial asset or financial liability, except if the investment contract contains a Discretionary Participation Features (DPF). If the contract has a DPF, the contract is subject to IFRS 4,Insurance Contracts. The Group recognizes assets (liabilities) and gains (losses) relating to insurance contracts as other assets (liabilities) in the statements of financial position, and as other operating income (expenses) in the statements of comprehensive income, respectively. 3.15.13.16.1 Insurance premiums
The Group recognizes collected premiums as revenue when aon the due date of collection of premiums from insurance contracts comes and the collected premium which is unmatured at the end of the reporting period is recognized as unearned premium. 3.15.23.16.2 Insurance liabilities
The Group recognizes a liability for future claims, refunds, policyholders’ dividends and related expenses as follows: Premium reserve A premium reserve refers to an amount based on the net premium method for payment of future claims with respect to events covered by insurance policies which have not yet occurred as of the reporting date.period. Reserve for outstanding claims
A reserve for outstanding claims refers to the amount not yet paid, out of an amount to be paid or expected to be paid with respect to the insured events which have arisen as of the end of each fiscal year. Unearned premium reserve Unearned premium refers to the portion of the premium that has been paid in advance for insurance that has not yet been provided. An unearned premium reserve refers to the amount maintained by the insurer to refund in the event of either party cancelling the contract. Policyholders’ dividends reserve Policyholders’ dividends reserve including an interest rate guarantee reserve, a mortality dividend reserve and an interest rate difference dividend reserve is recognized for the purpose of provisioning for policyholders’ dividends in the future in accordance with statutes or insurance terms and conditions. 3.15.33.16.3 Liability adequacy test
The Group assesses at each reporting dateperiod whether its insurance liabilities are adequate, using current estimates of all future contractual cash flows and related cash flow such as claims handling cost, as well as cash flows resulting from embedded options and guarantees under its insurance contracts in accordance with IFRS 4. If the assessment shows that the carrying amount of its insurance liabilities is inadequate in light of the estimated future cash flows, the entire deficiency is recognized in profit or loss and reserved as insurance liabilities. Future cash flows from long-term insurance are discounted at a future rate of return on operating assets, whereas future cash flows from general insurance are not discounted to present value. For liability adequacy tests of premium and unearned premium reserves, the Group considers all cash flow factors such as future insurance premium, deferred acquisition costs, operating expenses and operating premiums. In relation to the reserve for outstanding claims, the Group elects a model that best reflects the trend of paid claims among several statistical methods to perform the adequacy test. 3.15.43.16.4 Deferred acquisition costs
Acquisition cost is deferred in an amount actually spent for an insurance contract and equally amortized over the premium payment period or the period in which acquisition costs are charged for the relevant insurance contract. Acquisition costs are amortized over the shorter of seven years or premium payment period; if there is any unamortized acquisition costs remaining as of the date of surrender or lapse, such remainder shall be amortized in the period in which the contract is surrendered or lapsed. 3.163.17 Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of provisions, and where the effect of the time value of money is material, the amount of provisions are the present value of the expenditures expected to be required to settle the obligation. Provisions on confirmed and unconfirmed acceptances and guarantees, unfunded commitments of credit cards and unused credit lines of consumer and corporate loans are recognized using a valuation model that applies the credit conversion factor, probability of default, and loss given default. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provisions are reversed. If the Group has a contract that is onerous, the present obligation under the contract is recognized and measured as provisions. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the minimum net cost to exit from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it. 3.173.18 Financial guarantee contractsGuarantee Contracts
A financial guarantee contract is a contract that requires the issuer (the Group) to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the original or modified terms of a debt instrument. Financial guarantee contracts are initially recognized at fair value. After initial recognition, financial guarantee contracts are measured at the higher of: | • | | The amount determined in accordance with IAS 37,Provisions, Contingent Liabilities and Contingent Assetsand |
| • | | The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance with IAS 18,RevenueRevenue. |
3.183.19 Equity instrumentsInstruments issued by the Group
An equity instrument is any contract or agreement that evidences a residual interest in the assets of an entity after deducting all of its liabilities. 3.18.13.19.1 Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are deducted net of tax, from the equity. 3.18.23.19.2 Treasury shares
If entities of the Group reacquireacquire the Parent Company’s equity instruments, those instruments (‘treasury shares’) are deducted from equity. No gains or losses are recognized in profit or loss on the purchase, sale, issue or cancellation of own equity instruments. 3.193.20 Revenue recognitionRecognition
3.19.13.20.1 Interest income and expense
Interest income and expense are recognized using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability (or groups of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. In those rare cases when it is not possible to estimate reliably the cash flows or the expected life of a financial instrument (or group of financial instruments), the Group uses the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments). Interest on impaired financial assets is recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. 3.19.23.20.2 Fee and commission income
The Group recognizes financial service fees in accordance with the accounting standard of the financial instrument related to the fees earned. Fees that are an integral part of the effective interest of a financial instrument Such fees are generally treated as adjustments of effective interest. Such fees may include compensation for activities such as evaluating the borrower’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, negotiating the terms of the instrument, preparing and processing documents and closing the transaction and origination fees received on issuing financial liabilities measured at amortized cost. However, fees relating to the creation or acquisition of a financial instrument at fair value through profit or loss are recognized as revenue immediately. Fees earned as services are provided Such fees are recognized as revenue as the services are provided. The fees include fees charged for servicing a financial instrument and charged for managing investments. Fees that are earned on the execution of a significant act Such fees are recognized as revenue when the significant act has been completed. Commission on the allotment of shares to a client is recognized as revenue when the shares have been allotted and placement fees for arranging a loan between a borrower and an investor is recognized as revenue when the loan has been arranged. A syndication fee received by the Group that arranges a loan and retains no part of the loan package for itself (or retains a part at the same effective interest rate for comparable risk as other participants) is compensation for the service of syndication. Such a fee is recognized as revenue when the syndication has been completed. 3.19.33.20.3 Dividend income
Dividend income is recognized in profit or loss when the right to receive payment is established. Dividend income from financial assets at fair value through profit or loss and financial investment is recognized in profit or loss as part of net gains on financial assets at fair value through profit or loss and other operating income and expenses, respectively. 3.203.21 Employee compensationCompensation and benefits Benefits
3.20.13.21.1 Post-employment benefits:benefits
Defined benefit plans All post-employment benefits, other than defined contribution plans, are classified as defined benefit plans. The amount recognized as a defined benefit liability is the present value of the defined benefit obligation less the fair value of plan assets at the end of the reporting period. The present value of the defined benefit obligation is calculated annually by independent actuaries using the Projected Unit Credit method. The rate used to discount post-employment benefit obligations is determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The currency and term of the corporate bonds are consistent with the currency and estimated term of the post-employment benefit obligations. Actuarial gains and losses including experience adjustments and the effects of changes in actuarial assumptions are recognized in other comprehensive income (loss).income. When the total of the present value of the defined benefit obligation minus the fair value of plan assets results in an asset, it is recognized to the extent of the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. Past service cost is the change in the present value of the defined benefit obligation, which arises when the Group introduces a defined benefit plan or changes the benefits of an existing defined benefit plan. Such past service cost is immediately recognized as an expense for the year. Defined contribution plans The contributions are recognized as employee benefit expense when they are incurred. due.3.20.23.21.2 Short-term employee benefits
Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within 12 months after the end of the period in which the employees render the related service. The undiscounted amount of short-term employee benefits expected to be paid in exchange for that service is recognized as a liability (accrued expense), after deducting any amount already paid. The expected cost of profit-sharing and bonus payments are recognized as liabilities when the Group has a present legal or constructive obligation to make such payments as a result of past events rendered by employees and a reliable estimate of the obligation can be made. 3.20.33.21.3 Share-based payment
The Group operates share-based payment arrangements granting awardshas share option and share grant programs to directors and employees of the Group. TheWhen the options are exercised, the Group has a choicecan either select to issue new shares or distribute treasury shares, or compensate the difference in fair value of whether to settle the awards in cash or by issuing equity instruments of the parent company at the date of settlement.shares and exercise price. For a share-based payment transaction in which the terms of the arrangement provide the Group with the choice of whether to settle in cash or by issuing equity instruments, the Group determineddetermines that it has a present obligation to settle in cash because the Group has a past practice and a stated policy of settling in cash. Therefore, the Group accounts for the transaction in accordance with the requirements of cash-settled share-based payment transactions. The Group measures the services acquired and the liability incurred at fair value.value, and the fair value is recognized as expense and accrued expenses over the vesting period. Until the liability is settled, the Group remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the year. 3.20.43.21.4 Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. An entityThe Group shall recognize a liability and expense for termination benefits at the earlier of the following dates: when the entityGroup can no longer withdraw the offer of those benefits and when the entityGroup recognizes costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. Termination benefits are measured by considering the number of employees expected to accept the offer in the case of a voluntary early retirement. Termination benefits over 12 months after the reporting period are discounted to present value. 3.213.22 Income tax expensesTax Expenses
Income tax expense (tax income) comprises current tax expense (current tax income) and deferred income tax expense (deferred income tax income).expense. Current and deferred income tax are recognized as income or expense and included in profit or loss for the year,period, except to the extent that the tax arises from (a) a transaction or an event which is recognized, in the same or a different period outside profit or loss, either in other comprehensive income or directly in equity and (b) a business combination. 3.21.13.22.1 Current income tax
Current income tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss)(loss) for a period. A difference between the taxable profit and accounting profit may arise when income or expense is included in accounting profit in one period, but is included in taxable profit in a different period. Differences may also arise if there is revenue that is exempt from taxation, or expense that is not deductible in determining taxable profit (tax loss)(loss). Current income tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The Group offsets current income tax assets and current income tax liabilities if, and only if, the Group (a) has a legally enforceable right to offset the recognized amounts and (b) intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. 3.21.23.22.2 Deferred income tax
Deferred income tax is recognized, using the asset-liability method, on temporary differences arising between the tax based amount of assets and liabilities and their carrying amount in the financial statements. Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. However, deferred income tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liabilities for which the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period. The Group reduces the carrying amount of a deferred income tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred income tax asset to be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred income tax liabilities and deferred income tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. The Group offsets deferred income tax assets and deferred income tax liabilities when the Group has a legally enforceable right to offset current income tax assets against current income tax liabilities; and the deferred income tax assets and the deferred income tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity; or different taxable entities which intend either to settle current income tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred income tax liabilities or assets are expected to be settled or recovered. 3.21.33.22.3 Uncertain tax positions
Uncertain tax positions arise from tax treatments applied by the Group which may be challenged by the tax authorities due to the complexity of the transaction or different interpretation of the tax laws, a claim for rectification brought by the Group, or an appeal for a refund of tax levied byclaimed from the tax authorities or others duerelated to different interpretation of tax laws or others.additional assessments. The Group recognizes its uncertain tax positions in the consolidated financial statements based on the guidance in IAS 12. The income tax asset is recognized if a tax refund is probable for taxes paid and levied by the tax authority. However, interest and penalties related to income tax are recognized in accordance with IAS 37. 3.223.23 Earnings per shareShare
The Group calculates basic earnings per share amounts and diluted earnings per share amounts for profit or loss attributable to ordinary equity holders of the parent entityParent Company and presents them in the statement of comprehensive income. Basic earnings per share is calculated by dividing profit or loss attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the period. For the purpose of calculating diluted earnings per share, the Group adjusts profit or loss attributable to ordinary equity holders of the Parent Company and the weighted average number of shares outstanding for the effects of all dilutive potential ordinary shares including convertible bonds and share options. 3.233.24 Operating segmentsSegments
Operating segments are components of the Group where separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Segment information includes items which are directly attributable and reasonably allocated to the segment. 3.243.25 United States dollar amounts
The Group operates primarily in Korea and its official accounting records are maintained in Korean won. The U.S. dollar amounts are provided herein as supplementary information solely for the convenience of the reader. Korean won amounts are expressed in U.S. dollars at the rate of ₩1,090.89₩1067.42 to U.S. $1.00, the U.S. Federal Reserve Bank of New York buying exchange rate in effect at noon, December 31, 2014.29, 2017. Such convenience translation into US dollars should not be construed as representations that the Korean won amounts have been, could have been, or could in the future be, converted at this or any other rate of exchange. 4. Financial risk managementRisk Management 4.1 Summary 4.1.1 Overview of Financial Risk Management Policy The financial risks that the Group is exposed to are credit risk, market risk, liquidity risk, operational risk and others. The note regarding financial risk management provides information about the risks that the Group is exposed to, including the objectives, policies and processes for managing the risks, the methods used to measure the risks, and capital adequacy. Additional quantitative information is disclosed throughout the consolidated financial statements.
The Group’s risk management system focuses on increasing transparency, developing the risk management environment, preventing transmission of risk to other related subsidiaries, and the preemptive response to risk due to rapid changes in the financial environment to support the Group’s long-term strategy and business decisions efficiently. Credit risk, market risk, liquidity risk, and operational risk have been recognized as the Group’s key risks. These risks are measured and managed in Economic Capital or VaR (Value at Risk) and are managed using a statistical method. 4.1.2 Risk Management Organization Risk Management Committee The Risk Management Committee establishes risk management strategies in accordance with the directives of the Board of Directors and determines the Group’s target risk appetite,appetite. The Committee approves significant risk matters and reviews the level of risks that the Group is exposed to and the appropriateness of the Group’s risk management operations as an ultimate decision-making authority. Risk Management Council The Risk Management Council is a consultative group which reviews and makes decisions on matters delegated by the Risk Management Committee, and discusses the detailed issues relating to the Group’s risk management. Risk Management DepartmentDivision The Risk Management DepartmentDivision is responsible for monitoring and managing the Group’s economic capital limit and managing specificdetailed policies, procedures and workworking processes relating to the Group’s risk management. 4.2 Credit Risk 4.2.1 Overview of Credit Risk Credit risk is the risk of possible losses in an asset portfolio in the event of a counterparty’s default, breach of contract and deterioration in the credit quality of the counterparty. For risk management reporting purposes, the individual borrower’s default risk, country risk, specific risks and other credit risk exposure components are considered as a whole. 4.2.2 Credit Risk Management The Group measures expected losses and economic capital on assets that are subject to credit risk management whetheron- or off-balance sheet items and uses expected losses and economic capital as a management indicator. The Group manages credit risk by allocating credit risk economic capital limits. In addition, the Group controls the credit concentration risk exposure by applying and managing total exposure limits to prevent an excessive risk concentration to each industry and borrower. The Group has organized a credit risk management team that focuses on credit risk management in accordance with the Group’s credit risk management policy. For Kookmin Bank, which isEspecially, the main subsidiary, its loan analysis department which is independent fromof Kookmin Bank, one of the sales departmentsubsidiaries, is responsible for loan policy, loan limit, loan review, credit evaluation,management, restructuring and subsequent events. Kookmin Bank’sevent management, independently of operating department. On the other hand, risk management group of Kookmin Bank is also responsible for planning risk management policy, applying limits of credit lines, measuring the credit risk economic capital, adjusting credit limits, reviewing credit and verifying credit evaluation models. 4.2.3 Maximum exposureExposure to credit riskCredit Risk The Group’s maximum exposures of financial instruments, excluding equity securities, to credit risk without consideration of collateral values as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets | | | | | | | | | Due from financial institutions | | ₩ | 12,094,103 | | | ₩ | 12,878,430 | | | ₩ | 15,326,173 | | | ₩ | 17,219,661 | | Financial assets at fair value through profit or loss | | | | | | | | | Financial assets held for trading(1) | | | 7,866,037 | | | | 9,763,553 | | | Financial assets held for trading1 | | | | 23,058,919 | | | | 25,242,193 | | Financial assets designated at fair value through profit or loss | | | 210,805 | | | | 442,960 | | | | 1,693,255 | | | | 1,982,224 | | Derivatives | | | 1,819,409 | | | | 1,968,190 | | | | 3,381,935 | | | | 3,310,166 | | Loans(2) | | | 219,001,356 | | | | 231,449,653 | | | Loans2 | | | | 265,486,134 | | | | 290,122,838 | | Financial investments | | | | | | | | | Available-for-sale financial assets | | | 18,933,288 | | | | 19,359,822 | | | | 27,445,752 | | | | 38,959,401 | | Held-to-maturity financial assets | | | 13,016,991 | | | | 12,569,154 | | | | 11,177,504 | | | | 18,491,980 | | Other financial assets(2) | | | 6,251,679 | | | | 7,559,631 | | | Other financial assets2 | | | | 7,322,335 | | | | 10,195,015 | | | | | | | | | | | | | | | Total financial assets | | | 279,193,668 | | | | 295,991,393 | | | | 354,892,007 | | | | 405,523,478 | | | | | | | | | | | | | | | Off-balance sheet items | | | | | | | | | Acceptances and guarantees contracts | | | 9,804,692 | | | | 9,045,824 | | | | 7,822,124 | | | | 6,977,468 | | Financial guarantee contracts | | | 3,097,372 | | | | 4,459,645 | | | | 4,746,292 | | | | 3,683,875 | | Commitments | | | 95,422,032 | | | | 96,316,581 | | | | 97,005,556 | | | | 102,183,167 | | | | | | | | | | Total off-balance sheet items | | | 108,324,096 | | | | 109,822,050 | | | | 109,573,972 | | | | 112,844,510 | | | | | | | | | | | | | | | Total | | ₩ | 387,517,764 | | | ₩ | 405,813,443 | | | ₩ | 464,465,979 | | | ₩ | 518,367,988 | | | | | | | | | | | | | | |
(1)1 | The amounts of ₩40,252 million and ₩51,345 million as of December 31, 2013 and 2014, respectively, related to financialFinancial instruments indexed to the price of gold amounting to ₩72,349 million and ₩73,855 million as of December 31, 2016 and 2017, respectively are included.
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(2)2 | Loans and other financial assets are net of allowance. |
4.2.4 Credit riskRisk of loansLoans The Group maintains an allowance for loan losses associated with credit risk on loans to manage its credit risk. The Group recognizes an impairment loss on loansloan carried at amortized cost when there is any objective indication of impairment. Under IFRS, an impairmentImpairment loss is based on lossesdefined as incurred at the endloss in accordance with IFRS; therefore, a loss that might be occur due to a future event is not recognized in spite of the reporting year. Therefore, the Group does not recognize losses expected as a result of future events.its likelihood. The Group measures inherent incurred losses on loans and presents them in the consolidated financial statements through the use of an allowance account which is offset against the related loans. Loans as of December 31, 2016 and 2017, are classified as follows: | | | 2013 | | | 2016 | | | | Retail | | Corporate | | Credit card | | Total | | | | | Amount | | % | | Amount | | % | | Amount | | % | | Amount | | % | | | Loans | | | Retail | | Corporate | | Credit card | | Total | | | | Amount | | % | | Amount | | % | | Amount | | % | | Amount | | % | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Neither past due nor impaired | | ₩ | 104,751,607 | | | | 97.22 | | | ₩ | 98,939,364 | | | | 96.68 | | | ₩ | 11,253,836 | | | | 95.50 | | | ₩ | 214,944,807 | | | | 96.88 | | | ₩ | 133,491,252 | | | 98.86 | | | ₩ | 117,346,453 | | | 98.44 | | | ₩ | 13,001,473 | | | 96.09 | | | ₩ | 263,839,178 | | | 98.53 | | Past due but not impaired | | | 1,967,127 | | | | 1.83 | | | | 538,571 | | | | 0.53 | | | | 321,978 | | | | 2.73 | | | | 2,827,676 | | | | 1.27 | | | 961,370 | | | 0.71 | | | 202,474 | | | 0.17 | | | 226,648 | | | 1.68 | | | 1,390,492 | | | 0.52 | | Impaired | | | 1,024,480 | | | | 0.95 | | | | 2,856,933 | | | | 2.79 | | | | 208,644 | | | | 1.77 | | | | 4,090,057 | | | | 1.85 | | | 575,711 | | | 0.43 | | | 1,656,387 | | | 1.39 | | | 302,122 | | | 2.23 | | | 2,534,220 | | | 0.95 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 107,743,214 | | | | 100.00 | | | | 102,334,868 | | | | 100.00 | | | | 11,784,458 | | | | 100.00 | | | | 221,862,540 | | | | 100.00 | | | 135,028,333 | | | 100.00 | | | 119,205,314 | | | 100.00 | | | 13,530,243 | | | 100.00 | | | 267,763,890 | | | 100.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowances(1) | | | (580,510 | ) | | | 0.54 | | | | (1,870,874 | ) | | | 1.83 | | | | (409,800 | ) | | | 3.48 | | | | (2,861,184 | ) | | | 1.29 | | | Less: Allowances1 | | | (481,289 | ) | | 0.36 | | | (1,382,172 | ) | | 1.16 | | | (414,295 | ) | | 3.06 | | | (2,277,756 | ) | | 0.85 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying amount | | ₩ | 107,162,704 | | | | | ₩ | 100,463,994 | | | | | ₩ | 11,374,658 | | | | | ₩ | 219,001,356 | | | | | ₩ | 134,547,044 | | | | | �� | 117,823,142 | | | | | ₩ | 13,115,948 | | | | | ₩ | 265,486,134 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Retail | | Corporate | | Credit card | | Total | | | | | Amount | | % | | Amount | | % | | Amount | | % | | Amount | | % | | | Loans | | | Retail | | Corporate | | Credit card | | Total | | | | Amount | | % | | Amount | | % | | Amount | | % | | Amount | | % | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Neither past due nor impaired | | ₩ | 116,956,042 | | | | 98.04 | | | ₩ | 100,542,430 | | | | 97.64 | | | ₩ | 11,155,710 | | | | 95.90 | | | ₩ | 228,654,182 | | | | 97.76 | | | ₩ | 144,705,621 | | | 98.93 | | | ₩ | 129,130,466 | | | 98.76 | | | ₩ | 14,496,109 | | | 95.34 | | | ₩ | 288,332,196 | | | 98.67 | | Past due but not impaired | | | 1,576,365 | | | | 1.32 | | | | 331,780 | | | | 0.32 | | | | 276,875 | | | | 2.38 | | | | 2,185,020 | | | | 0.93 | | | 1,069,813 | | | 0.73 | | | 206,925 | | | 0.16 | | | 359,468 | | | 2.36 | | | 1,636,206 | | | 0.56 | | Impaired | | | 765,751 | | | | 0.64 | | | | 2,097,041 | | | | 2.04 | | | | 199,711 | | | | 1.72 | | | | 3,062,503 | | | | 1.31 | | | 495,546 | | | 0.34 | | | 1,419,851 | | | 1.08 | | | 349,270 | | | 2.30 | | | 2,264,667 | | | 0.77 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 119,298,158 | | | | 100.00 | | | | 102,971,251 | | | | 100.00 | | | | 11,632,296 | | | | 100.00 | | | | 233,901,705 | | | | 100.00 | | | 146,270,980 | | | 100.00 | | | 130,757,242 | | | 100.00 | | | 15,204,847 | | | 100.00 | | | 292,233,069 | | | 100.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowances(1) | | | (536,959 | ) | | | 0.45 | | | | (1,525,152 | ) | | | 1.48 | | | | (389,941 | ) | | | 3.35 | | | | (2,452,052 | ) | | | 1.05 | | | Less: Allowances1 | | | (429,299 | ) | | 0.29 | | | (1,231,666 | ) | | 0.94 | | | (449,266 | ) | | 2.95 | | | (2,110,231 | ) | | 0.72 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying amount | | ₩ | 118,761,199 | | | | | ₩ | 101,446,099 | | | | | ₩ | 11,242,355 | | | | | ₩ | 231,449,653 | | | | | ₩ | 145,841,681 | | | | | ₩ | 129,525,576 | | | | | ₩ | 14,755,581 | | | | | ₩ | 290,122,838 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)1 | Collectively assessed allowances for loans are included as they are not impaired individually. |
Credit quality of loans that are neither past due nor impaired are as follows: | | | 2013 | | | 2016 | | | | Retail | | | Corporate | | | Credit card | | | Total | | | Retail | | | Corporate | | | Credit card | | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Grade 1 | | ₩ | 88,331,532 | | | ₩ | 40,950,125 | | | ₩ | 5,670,689 | | | ₩ | 134,952,346 | | | ₩ | 110,720,263 | | | ₩ | 57,754,882 | | | ₩ | 6,804,763 | | | ₩ | 175,279,908 | | Grade 2 | | | 12,320,960 | | | | 43,497,358 | | | | 3,806,194 | | | | 59,624,512 | | | | 18,400,111 | | | | 49,531,423 | | | | 4,774,368 | | | | 72,705,902 | | Grade 3 | | | 3,195,119 | | | | 11,993,854 | | | | 1,438,491 | | | | 16,627,464 | | | | 3,188,861 | | | | 7,722,663 | | | | 1,147,814 | | | | 12,059,338 | | Grade 4 | | | 637,556 | | | | 2,237,288 | | | | 184,110 | | | | 3,058,954 | | | | 935,265 | | | | 1,728,631 | | | | 249,529 | | | | 2,913,425 | | Grade 5 | | | 266,440 | | | | 260,739 | | | | 154,352 | | | | 681,531 | | | | 246,752 | | | | 608,854 | | | | 24,999 | | | | 880,605 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 104,751,607 | | | ₩ | 98,939,364 | | | ₩ | 11,253,836 | | | ₩ | 214,944,807 | | | ₩ | 133,491,252 | | | ₩ | 117,346,453 | | | ₩ | 13,001,473 | | | ₩ | 263,839,178 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Retail | | | Corporate | | | Credit card | | | Total | | | | (In millions of Korean won) | | Grade 1 | | ₩ | 99,314,075 | | | ₩ | 43,166,076 | | | ₩ | 5,705,083 | | | ₩ | 148,185,234 | | Grade 2 | | | 12,557,654 | | | | 43,913,621 | | | | 3,788,572 | | | | 60,259,847 | | Grade 3 | | | 4,057,239 | | | | 11,014,410 | | | | 1,342,891 | | | | 16,414,540 | | Grade 4 | | | 775,407 | | | | 1,984,073 | | | | 163,279 | | | | 2,922,759 | | Grade 5 | | | 251,667 | | | | 464,250 | | | | 155,885 | | | | 871,802 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 116,956,042 | | | ₩ | 100,542,430 | | | ₩ | 11,155,710 | | | ₩ | 228,654,182 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2017 | | | | Retail | | | Corporate | | | Credit card | | | Total | | | | (In millions of Korean won) | | Grade 1 | | ₩ | 124,133,056 | | | ₩ | 67,575,021 | | | ₩ | 8,095,629 | | | ₩ | 199,803,706 | | Grade 2 | | | 16,790,644 | | | | 53,842,610 | | | | 4,920,767 | | | | 75,554,021 | | Grade 3 | | | 2,701,697 | | | | 5,703,159 | | | | 1,379,409 | | | | 9,784,265 | | Grade 4 | | | 851,446 | | | | 1,390,131 | | | | 71,207 | | | | 2,312,784 | | Grade 5 | | | 228,778 | | | | 619,545 | | | | 29,097 | | | | 877,420 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 144,705,621 | | | ₩ | 129,130,466 | | | ₩ | 14,496,109 | | | ₩ | 288,332,196 | | | | | | | | | | | | | | | | | | |
Credit quality of loans graded according to internal credit ratings are as follows: | | | | | | | | | | | | | | | Range of PDProbability of Default (%)
(Probability of Default) | | | Retail | | | Corporate | | Grade 1 | | | 0.0 ~ 1.0 | | | | 1 ~5~ 5 grade | | | | AAA ~ BBB+ | | Grade 2 | | | 1.0 ~ 5.0 | | | | 6 ~ 8 grade | | | | BBB ~ BB | | Grade 3 | | | 5.0 ~ 15.0 | | | | 9 ~ 10 grade | | | | BB- ~ B | | Grade 4 | | | 15.0 ~ 30.0 | | | | 11 grade | | | | B- ~ CCC | | Grade 5 | | | 30.0 ~ | | | | 12 grade or under | | | | CC or under | |
Loans that are past due but not impaired are as follows: | | | 2013 | | | 2016 | | | | 1 ~ 29 days | | | 30 ~ 59 days | | | 60 ~ 89 days | | | 90 days or more | | | Total | | | 1 ~ 29 days | | | 30 ~ 59 days | | | 60 ~ 89 days | | | 90 days or more | | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Retail | | ₩ | 1,729,091 | | | ₩ | 169,341 | | | ₩ | 68,629 | | | ₩ | 66 | | | ₩ | 1,967,127 | | | ₩ | 782,262 | | | ₩ | 119,667 | | | ₩ | 57,187 | | | ₩ | 2,254 | | | ₩ | 961,370 | | Corporate | | | 435,700 | | | | 54,900 | | | | 47,971 | | | | — | | | | 538,571 | | | | 134,432 | | | | 44,086 | | | | 23,956 | | | | — | | | | 202,474 | | Credit card | | | 234,003 | | | | 51,416 | | | | 36,259 | | | | 300 | | | | 321,978 | | | | 176,390 | | | | 31,880 | | | | 18,378 | | | | — | | | | 226,648 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 2,398,794 | | | ₩ | 275,657 | | | ₩ | 152,859 | | | ₩ | 366 | | | ₩ | 2,827,676 | | | ₩ | 1,093,084 | | | ₩ | 195,633 | | | ₩ | 99,521 | | | ₩ | 2,254 | | | ₩ | 1,390,492 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | 1 ~ 29 days | | | 30 ~ 59 days | | | 60 ~ 89 days | | | 90 days or more | | | Total | | | 1 ~ 29 days | | | 30 ~ 59 days | | | 60 ~ 89 days | | | 90 days or more | | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Retail | | ₩ | 1,271,327 | | | ₩ | 211,857 | | | ₩ | 93,125 | | | ₩ | 56 | | | ₩ | 1,576,365 | | | ₩ | 890,759 | | | ₩ | 117,057 | | | ₩ | 59,632 | | | ₩ | 2,365 | | | ₩ | 1,069,813 | | Corporate | | | 279,413 | | | | 37,918 | | | | 14,449 | | | | — | | | | 331,780 | | | | 162,668 | | | | 27,065 | | | | 17,192 | | | | — | | | | 206,925 | | Credit card | | | 201,652 | | | | 41,428 | | | | 32,839 | | | | 956 | | | | 276,875 | | | | 302,871 | | | | 35,774 | | | | 20,823 | | | | — | | | | 359,468 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 1,752,392 | | | ₩ | 291,203 | | | ₩ | 140,413 | | | ₩ | 1,012 | | | ₩ | 2,185,020 | | | ₩ | 1,356,298 | | | ₩ | 179,896 | | | ₩ | 97,647 | | | ₩ | 2,365 | | | ₩ | 1,636,206 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired loans are as follows: | | | 2013 | | | 2016 | | | | Retail | | Corporate | | Credit card | | Total | | | Retail | | Corporate | | Credit card | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Loans | | ₩ | 1,024,480 | | | ₩ | 2,856,933 | | | ₩ | 208,644 | | | ₩ | 4,090,057 | | | ₩ | 575,711 | | | ₩ | 1,656,387 | | | ₩ | 302,122 | | | ₩ | 2,534,220 | | Allowances | | | | | | | | | | Allowances under | | | | | | | | | | Individual assessment | | | (2 | ) | | | (1,126,249 | ) | | | — | | | | (1,126,251 | ) | | | (3 | ) | | (860,829 | ) | | | — | | | (860,832 | ) | Collective assessment | | | (381,739 | ) | | | (229,058 | ) | | | (133,616 | ) | | | (744,413 | ) | | | (217,535 | ) | | (133,507 | ) | | (183,211 | ) | | (534,253 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total allowances | | | (381,741 | ) | | | (1,355,307 | ) | | | (133,616 | ) | | | (1,870,664 | ) | | | (217,538 | ) | | (994,336 | ) | | (183,211 | ) | | (1,395,085 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying amount | | ₩ | 642,739 | | | ₩ | 1,501,626 | | | ₩ | 75,028 | | | ₩ | 2,219,393 | | | ₩ | 358,173 | | | ₩ | 662,051 | | | ₩ | 118,911 | | | ₩ | 1,139,135 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Retail | | | Corporate | | | Credit card | | | Total | | | | (In millions of Korean won) | | Loans | | ₩ | 765,751 | | | ₩ | 2,097,041 | | | ₩ | 199,711 | | | ₩ | 3,062,503 | | Allowances | | | | | | | | | | | | | | | | | Individual assessment | | | — | | | | (827,386 | ) | | | — | | | | (827,386 | ) | Collective assessment | | | (287,548 | ) | | | (212,625 | ) | | | (129,518 | ) | | | (629,691 | ) | | | | | | | | | | | | | | | | | | Total allowances | | | (287,548 | ) | | | (1,040,011 | ) | | | (129,518 | ) | | | (1,457,077 | ) | | | | | | | | | | | | | | | | | | Carrying amount | | ₩ | 478,203 | | | ₩ | 1,057,030 | | | ₩ | 70,193 | | | ₩ | 1,605,426 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2017 | | | | Retail | | | Corporate | | | Credit card | | | Total | | | | (In millions of Korean won) | | Loans | | ₩ | 495,546 | | | ₩ | 1,419,851 | | | ₩ | 349,270 | | | ₩ | 2,264,667 | | Allowances under | | | | | | | | | | | | | | | | | Individual assessment | | | (788 | ) | | | (791,205 | ) | | | — | | | | (791,993 | ) | Collective assessment | | | (178,337 | ) | | | (90,771 | ) | | | (212,729 | ) | | | (481,837 | ) | | | | | | | | | | | | | | | | | | Total allowances | | | (179,125 | ) | | | (881,976 | ) | | | (212,729 | ) | | | (1,273,830 | ) | | | | | | | | | | | | | | | | | | Carrying amount | | ₩ | 316,421 | | | ₩ | 537,875 | | | ₩ | 136,541 | | | ₩ | 990,837 | | | | | | | | | | | | | | | | | | |
AThe quantification of the extent to which collateral and other credit enhancements mitigate credit risk as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Impaired Loans | | | Non-impaired Loans | | | | | | Impaired Loans | | | Non-impaired Loans | | | | | | | Individual | | | Collective | | | Past due | | | Not past due | | | Total | | | Individual | | | Collective | | | Past due | | | Not past due | | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Guarantees | | ₩ | 29,929 | | | ₩ | 226,721 | | | ₩ | 382,997 | | | ₩ | 32,102,952 | | | ₩ | 32,742,599 | | | ₩ | 21,168 | | | ₩ | 131,752 | | | ₩ | 207,493 | | | ₩ | 52,994,315 | | | ₩ | 53,354,728 | | Deposits and savings | | | 5,099 | | | | 27,060 | | | | 56,066 | | | | 2,324,625 | | | | 2,412,850 | | | | 10,849 | | | | 6,114 | | | | 51,815 | | | | 2,115,376 | | | | 2,184,154 | | Property and equipment | | | 11,843 | | | | 1,959 | | | | 1,281 | | | | 1,676,443 | | | | 1,691,526 | | | | 7,083 | | | | 25,035 | | | | 28,053 | | | | 5,380,329 | | | | 5,440,500 | | Real estate | | | 425,748 | | | | 537,904 | | | | 1,506,854 | | | | 114,659,274 | | | | 117,129,780 | | | | 262,340 | | | | 341,803 | | | | 590,196 | | | | 137,263,717 | | | | 138,458,056 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 472,619 | | | ₩ | 793,644 | | | ₩ | 1,947,198 | | | ₩ | 150,763,294 | | | ₩ | 153,976,755 | | | ₩ | 301,440 | | | ₩ | 504,704 | | | ₩ | 877,557 | | | ₩ | 197,753,737 | | | ₩ | 199,437,438 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Impaired Loans | | | Non-impaired Loans | | | | | | Impaired Loans | | | Non-impaired Loans | | | | | | | Individual | | | Collective | | | Past due | | | Not past due | | | Total | | | Individual | | | Collective | | | Past due | | | Not past due | | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Guarantees | | ₩ | 19,654 | | | ₩ | 190,491 | | | ₩ | 359,532 | | | ₩ | 37,754,080 | | | ₩ | 38,323,757 | | | ₩ | 17,257 | | | ₩ | 113,551 | | | ₩ | 209,180 | | | ₩ | 57,828,611 | | | ₩ | 58,168,599 | | Deposits and savings | | | 954 | | | | 15,466 | | | | 35,756 | | | | 2,286,691 | | | | 2,338,867 | | | | 11,857 | | | | 5,461 | | | | 40,833 | | | | 4,149,157 | | | | 4,207,308 | | Property and equipment | | | 7,772 | | | | 4,921 | | | | 2,449 | | | | 2,769,360 | | | | 2,784,502 | | | | 2,676 | | | | 30,455 | | | | 53,647 | | | | 9,720,857 | | | | 9,807,635 | | Real estate | | | 270,230 | | | | 529,446 | | | | 1,125,065 | | | | 123,451,062 | | | | 125,375,803 | | | | 189,480 | | | | 282,327 | | | | 688,502 | | | | 148,183,907 | | | | 149,344,216 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 298,610 | | | ₩ | 740,324 | | | ₩ | 1,522,802 | | | ₩ | 166,261,193 | | | ₩ | 168,822,929 | | | ₩ | 221,270 | | | ₩ | 431,794 | | | ₩ | 992,162 | | | ₩ | 219,882,532 | | | ₩ | 221,527,758 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
4.2.5 Credit qualityQuality of securitiesSecurities The financialFinancial assets at fair value through profit or loss and financial investments excluding equity securities that are exposed to credit risk as of December 31, 2016 and 2017, are as follows:
| | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Securities that are neither past due nor impaired | | ₩ | 39,977,309 | | | ₩ | 42,077,873 | | | ₩ | 63,298,248 | | | ₩ | 84,597,074 | | Impaired securities | | | 9,560 | | | | 6,271 | | | | 4,833 | | | | 4,869 | | | | | | | | | | | | | | | Total | | ₩ | 39,986,869 | | | ₩ | 42,084,144 | | | ₩ | 63,303,081 | | | ₩ | 84,601,943 | | | | | | | | | | | | | | |
The credit quality of securities, (excludingexcluding equity securities)securities, that are neither past due nor impaired as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Grade 1 | | | Grade 2 | | | Grade 3 | | | Grade 4 | | | Grade 5 | | | Total | | | Grade 1 | | | Grade 2 | | | Grade 3 | | | Grade 4 | | | Grade 5 | | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Securities that are neither past due nor impaired | | | | | | | | | | | | | | Financial assets held for trading | | ₩ | 6,634,168 | | | ₩ | 1,172,476 | | | ₩ | 19,141 | | | ₩ | — | | | ₩ | — | | | ₩ | 7,825,785 | | | ₩ | 20,101,364 | | | ₩ | 2,752,038 | | | ₩ | 46,113 | | | ₩ | 18,397 | | | ₩ | 68,658 | | | ₩ | 22,986,570 | | Financial assets designated at fair value through profit or loss | | | 89,527 | | | | 119,489 | | | | — | | | | 1,789 | | | | — | | | | 210,805 | | | | 1,563,152 | | | | 120,925 | | | | 8,176 | | | | — | | | | 1,002 | | | | 1,693,255 | | Available-for-sale financial assets | | | 18,078,177 | | | | 785,216 | | | | 60,335 | | | | — | | | | — | | | | 18,923,728 | | | | 26,082,139 | | | | 1,310,782 | | | | 47,998 | | | | — | | | | — | | | | 27,440,919 | | Held-to-maturity financial assets | | | 13,016,991 | | | | — | | | | — | | | | — | | | | — | | | | 13,016,991 | | | | 11,177,504 | | | | — | | | | — | | | | — | | | | — | | | | 11,177,504 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 37,818,863 | | | ₩ | 2,077,181 | | | ₩ | 79,476 | | | ₩ | 1,789 | | | ₩ | — | | | ₩ | 39,977,309 | | | ₩ | 58,924,159 | | | ₩ | 4,183,745 | | | ₩ | 102,287 | | | ₩ | 18,397 | | | ₩ | 69,660 | | | ₩ | 63,298,248 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | | Grade 1 | | | Grade 2 | | | Grade 3 | | | Grade 4 | | | Grade 5 | | | Total | | | | | (In millions of Korean won) | | Securities that are neither past due nor impaired | | | | | | | | | | | | | | Financial assets held for trading | | | ₩ | 21,002,043 | | | ₩ | 3,958,261 | | | ₩ | 93,887 | | | ₩ | 28,232 | | | ₩ | 85,915 | | | ₩ | 25,168,338 | | Financial assets designated at fair value through profit or loss | | | | 1,550,617 | | | | 200,633 | | | | 63,856 | | | | 60,332 | | | | 106,786 | | | | 1,982,224 | | Available-for-sale financial assets | | | | 36,471,247 | | | | 2,433,685 | | | | 47,079 | | | | 2,521 | | | | — | | | | 38,954,532 | | Held-to-maturity financial assets | | | | 18,466,624 | | | | 21,113 | | | | 4,243 | | | | — | | | | — | | | | 18,491,980 | | | | | | | | | | | | | | | | | | | | | | Total | | | ₩ | 77,490,531 | | | ₩ | 6,613,692 | | | ₩ | 209,065 | | | ₩ | 91,085 | | | ₩ | 192,701 | | | ₩ | 84,597,074 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Grade 1 | | | Grade 2 | | | Grade 3 | | | Grade 4 | | | Grade 5 | | | Total | | | | (In millions of Korean won) | | Financial assets held for trading | | ₩ | 8,464,038 | | | ₩ | 1,248,170 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 9,712,208 | | Financial assets designated at fair value through profit or loss | | | 76,893 | | | | 366,067 | | | | — | | | | — | | | | — | | | | 442,960 | | Available-for-sale financial assets | | | 18,442,055 | | | | 847,565 | | | | 63,931 | | | | — | | | | — | | | | 19,353,551 | | Held-to-maturity financial assets | | | 12,569,154 | | | | — | | | | — | | | | — | | | | — | | | | 12,569,154 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 39,552,140 | | | ₩ | 2,461,802 | | | ₩ | 63,931 | | | ₩ | — | | | ₩ | — | | | ₩ | 42,077,873 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The credit qualities of securities, (excludingexcluding equity securities)securities, according to the credit ratings by external rating agencies are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | | Foreign | | Credit quality
| | KAPForeign | Credit quality | | | KIS | | | NICE P&I | | | S&PKAP | | | Fitch-IBCAFnPricing Inc. | | | Moody’sS&P | | Fitch-IBCA | | Moody’s | Grade 1 | | | AA0 to AAA | | AA0 to AAA | | AA0 to AAA | | | | AA0 to AAA | | | | A- to AAA | | | | A- to AAA | | | | A3 to Aaa | | Grade 2 | | | A- to AA- | | | | A- to AA- | | | | A- to AA- | | A- to AA- | | BBB- to BBB+ | | | | BBB- to BBB+ | | | | Baa3 to Baa1 | | Grade 3 | | | BBB0 to BBB+ | | BBB0 to BBB+ | | BBB0 to BBB+ | | | | BBB0 to BBB+ | | | | BB to BB+ | | | | BB to BB+ | | | | Ba2 to Ba1 | | Grade 4 | | | BB0 to BBB- | | BB0 to BBB- | | BB0 to BBB- | | | | BB0 to BBB- | | | | B+ to BB- | | | | B+ to BB- | | | | B1 to Ba3 | | Grade 5 | | | BB- or under | | | | BB- or under | | | | BB- or under | | BB- or under | | B or under | | | | B or under | | | | B2 or under | |
Debt securities’ creditCredit qualities of debit securities denominated in Korean won are based on the lowest credit rating by the three domestic credit rating agencies above, and those denominated in foreign currencies are based on the lowest credit rating by the three foreign credit rating agencies above.
4.2.6 Credit risk mitigation of derivative financial instruments A quantification of the extent to which collateral and other credit enhancements mitigate credit risk of derivative financial instruments as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Deposits and savings, securities and others | | ₩ | 271,380 | | | ₩ | 329,482 | | | ₩ | 478,567 | | | ₩ | 1,277,851 | | | | | | | | | | | | | | | Total | | ₩ | 271,380 | | | ₩ | 329,482 | | | ₩ | 478,567 | | | ₩ | 1,277,851 | | | | | | | | | | | | | | |
4.2.7 Credit risk concentration analysisRisk Concentration Analysis The detailsDetails of the Group’s regional loans by country as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Retail | | Corporate | | Credit card | | Total | | % | | Allowances | | Carrying amount | | | Retail | | Corporate | | Credit card | | Total | | % | | Allowances | | Carrying amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Korea | | ₩ | 107,644,600 | | | ₩ | 100,533,577 | | | ₩ | 11,782,169 | | | ₩ | 219,960,346 | | | | 99.14 | | | ₩ | (2,797,651 | ) | | ₩ | 217,162,695 | | | ₩ | 134,956,004 | | | ₩ | 116,271,176 | | | ₩ | 13,526,026 | | | ₩ | 264,753,206 | | | 98.88 | | | ₩ | (2,234,971 | ) | | ₩ | 262,518,235 | | Europe | | | 9 | | | | 98,752 | | | | 406 | | | | 99,167 | | | | 0.04 | | | | (288 | ) | | | 98,879 | | | 1 | | | 206,580 | | | 245 | | | 206,826 | | | 0.08 | | | (1,719 | ) | | 205,107 | | China | | | 227 | | | | 583,176 | | | | 315 | | | | 583,718 | | | | 0.26 | | | | (16,075 | ) | | | 567,643 | | | | — | | | 1,328,525 | | | 2,570 | | | 1,331,095 | | | 0.50 | | | (23,500 | ) | | 1,307,595 | | Japan | | | 5,708 | | | | 475,242 | | | | 350 | | | | 481,300 | | | | 0.22 | | | | (44,248 | ) | | | 437,052 | | | 1,352 | | | 90,977 | | | 205 | | | 92,534 | | | 0.03 | | | (10,385 | ) | | 82,149 | | U.S | | | — | | | | 448,868 | | | | 578 | | | | 449,446 | | | | 0.20 | | | | (654 | ) | | | 448,792 | | | United States | | | | — | | | 984,472 | | | 566 | | | 985,038 | | | 0.37 | | | (2,032 | ) | | 983,006 | | Others | | | 92,670 | | | | 195,253 | | | | 640 | | | | 288,563 | | | | 0.14 | | | | (2,268 | ) | | | 286,295 | | | 70,976 | | | 323,584 | | | 631 | | | 395,191 | | | 0.14 | | | (5,149 | ) | | 390,042 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 107,743,214 | | | ₩ | 102,334,868 | | | ₩ | 11,784,458 | | | ₩ | 221,862,540 | | | | 100.00 | | | ₩ | (2,861,184 | ) | | ₩ | 219,001,356 | | | ₩ | 135,028,333 | | | ₩ | 119,205,314 | | | ₩ | 13,530,243 | | | ₩ | 267,763,890 | | | 100.00 | | | ₩ | (2,277,756 | ) | | ₩ | 265,486,134 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Retail | | | Corporate | | | Credit card | | | Total | | | % | | | Allowances | | | Carrying amount | | | | (In millions of Korean won) | | Korea | | ₩ | 146,149,814 | | | ₩ | 127,298,283 | | | ₩ | 15,200,843 | | | ₩ | 288,648,940 | | | | 98.77 | | | ₩ | (2,063,919 | ) | | ₩ | 286,585,021 | | Europe | | | — | | | | 192,980 | | | | 310 | | | | 193,290 | | | | 0.07 | | | | (2,327 | ) | | | 190,963 | | China | | | — | | | | 1,879,030 | | | | 1,458 | | | | 1,880,488 | | | | 0.64 | | | | (31,017 | ) | | | 1,849,471 | | Japan | | | 539 | | | | 127,009 | | | | 339 | | | | 127,887 | | | | 0.04 | | | | (6,269 | ) | | | 121,618 | | United States | | | — | | | | 866,867 | | | | 1,001 | | | | 867,868 | | | | 0.30 | | | | (1,600 | ) | | | 866,268 | | Others | | | 120,627 | | | | 393,073 | | | | 896 | | | | 514,596 | | | | 0.18 | | | | (5,099 | ) | | | 509,497 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 146,270,980 | | | ₩ | 130,757,242 | | | ₩ | 15,204,847 | | | ₩ | 292,233,069 | | | | 100.00 | | | ₩ | (2,110,231 | ) | | ₩ | 290,122,838 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Retail | | | Corporate | | | Credit card | | | Total | | | % | | | Allowances | | | Carrying amount | | | | (In millions of Korean won) | | Korea | | ₩ | 119,248,111 | | | ₩ | 100,878,627 | | | ₩ | 11,629,337 | | | ₩ | 231,756,075 | | | | 99.08 | | | ₩ | (2,401,417 | ) | | ₩ | 229,354,658 | | Europe | | | 9 | | | | 184,307 | | | | 428 | | | | 184,744 | | | | 0.08 | | | | (390 | ) | | | 184,354 | | China | | | 84 | | | | 764,415 | | | | 240 | | | | 764,739 | | | | 0.33 | | | | (15,544 | ) | | | 749,195 | | Japan | | | 2,581 | | | | 271,914 | | | | 263 | | | | 274,758 | | | | 0.12 | | | | (31,394 | ) | | | 243,364 | | U.S | | | — | | | | 698,294 | | | | 834 | | | | 699,128 | | | | 0.30 | | | | (631 | ) | | | 698,497 | | Others | | | 47,373 | | | | 173,694 | | | | 1,194 | | | | 222,261 | | | | 0.09 | | | | (2,676 | ) | | | 219,585 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 119,298,158 | | | ₩ | 102,971,251 | | | ₩ | 11,632,296 | | | ₩ | 233,901,705 | | | | 100.00 | | | ₩ | (2,452,052 | ) | | ₩ | 231,449,653 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The detailsDetails of the Group’s industrial corporate loans by industry as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Loans | | | % | | | Allowances | | Carrying amount | | | Loans | | | % | | | Allowances | | Carrying amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial institutions | | ₩ | 10,524,203 | | | | 10.28 | | | ₩ | (87,471 | ) | | ₩ | 10,436,732 | | | ₩ | 10,603,474 | | | | 8.90 | | | ₩ | (20,870 | ) | | ₩ | 10,582,604 | | Manufacturing | | | 31,160,890 | | | | 30.45 | | | | (611,257 | ) | | | 30,549,633 | | | | 36,505,044 | | | | 30.62 | | | | (539,512 | ) | | 35,965,532 | | Service | | | 38,375,826 | | | | 37.50 | | | | (448,114 | ) | | | 37,927,712 | | | | 48,529,236 | | | | 40.71 | | | | (307,132 | ) | | 48,222,104 | | Wholesale & Retail | | | 13,873,681 | | | | 13.56 | | | | (194,840 | ) | | | 13,678,841 | | | | 14,246,756 | | | | 11.95 | | | | (116,233 | ) | | 14,130,523 | | Construction | | | 4,427,615 | | | | 4.33 | | | | (502,223 | ) | | | 3,925,392 | | | | 3,381,470 | | | | 2.84 | | | | (357,439 | ) | | 3,024,031 | | Public sector | | | 654,998 | | | | 0.64 | | | | (8,469 | ) | | | 646,529 | | | | 886,583 | | | | 0.74 | | | | (6,318 | ) | | 880,265 | | Others | | | 3,317,655 | | | | 3.24 | | | | (18,500 | ) | | | 3,299,155 | | | | 5,052,751 | | | | 4.24 | | | | (34,668 | ) | | 5,018,083 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 102,334,868 | | | | 100.00 | | | ₩ | (1,870,874 | ) | | ₩ | 100,463,994 | | | ₩ | 119,205,314 | | | | 100.00 | | | ₩ | (1,382,172 | ) | | ₩ | 117,823,142 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Loans | | | % | | | Allowances | | Carrying amount | | | Loans | | | % | | | Allowances | | Carrying amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial institutions | | ₩ | 9,117,333 | | | | 8.85 | | | ₩ | (85,507 | ) | | ₩ | 9,031,826 | | | ₩ | 11,093,682 | | | | 8.48 | | | ₩ | (47,531 | ) | | ₩ | 11,046,151 | | Manufacturing | | | 32,694,233 | | | | 31.75 | | | | (524,868 | ) | | | 32,169,365 | | | | 40,201,037 | | | | 30.74 | | | | (449,439 | ) | | 39,751,598 | | Service | | | 39,384,520 | | | | 38.25 | | | | (306,588 | ) | | | 39,077,932 | | | | 54,268,271 | | | | 41.50 | | | | (288,521 | ) | | 53,979,750 | | Wholesale & Retail | | | 13,286,775 | | | | 12.90 | | | | (152,391 | ) | | | 13,134,384 | | | | 15,061,632 | | | | 11.52 | | | | (90,390 | ) | | 14,971,242 | | Construction | | | 3,862,457 | | | | 3.75 | | | | (429,297 | ) | | | 3,433,160 | | | | 3,021,889 | | | | 2.31 | | | | (269,535 | ) | | 2,752,354 | | Public sector | | | 755,150 | | | | 0.73 | | | | (6,740 | ) | | | 748,410 | | | | 1,056,520 | | | | 0.81 | | | | (15,341 | ) | | 1,041,179 | | Others | | | 3,870,783 | | | | 3.77 | | | | (19,761 | ) | | | 3,851,022 | | | | 6,054,211 | | | | 4.64 | | | | (70,909 | ) | | 5,983,302 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 102,971,251 | | | | 100.00 | | | ₩ | (1,525,152 | ) | | ₩ | 101,446,099 | | | ₩ | 130,757,242 | | | | 100.00 | | | ₩ | (1,231,666 | ) | | ₩ | 129,525,576 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The detailsTypes of the Group’s retail and credit card loans by type as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Loans | | | % | | | Allowances | | Carrying amount | | | Loans | | | % | | | Allowances | | Carrying amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Housing purpose | | ₩ | 46,485,300 | | | | 38.89 | | | ₩ | (77,985 | ) | | ₩ | 46,407,315 | | | General purpose | | | 61,257,914 | | | | 51.25 | | | | (502,525 | ) | | | 60,755,389 | | | Housing | | | ₩ | 59,015,452 | | | | 39.73 | | | ₩ | (22,787 | ) | | ₩ | 58,992,665 | | General | | | | 76,012,881 | | | | 51.17 | | | | (458,502 | ) | | 75,554,379 | | Credit card | | | 11,784,458 | | | | 9.86 | | | | (409,800 | ) | | | 11,374,658 | | | | 13,530,243 | | | | 9.10 | | | | (414,295 | ) | | 13,115,948 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 119,527,672 | | | | 100.00 | | | ₩ | (990,310 | ) | | ₩ | 118,537,362 | | | ₩ | 148,558,576 | | | | 100.00 | | | ₩ | (895,584 | ) | | ₩ | 147,662,992 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2017 | | | | Loans | | | % | | | Allowances | | | Carrying amount | | | | (In millions of Korean won) | | Housing | | ₩ | 64,140,941 | | | | 39.72 | | | ₩ | (18,646 | ) | | ₩ | 64,122,295 | | General | | | 82,130,039 | | | | 50.86 | | | | (410,653 | ) | | | 81,719,386 | | Credit card | | | 15,204,847 | | | | 9.42 | | | | (449,266 | ) | | | 14,755,581 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 161,475,827 | | | | 100.00 | | | ₩ | (878,565 | ) | | ₩ | 160,597,262 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Loans | | | % | | | Allowances | | | Carrying amount | | | | (In millions of Korean won) | | Housing purpose | | ₩ | 52,530,611 | | | | 40.12 | | | ₩ | (30,966 | ) | | ₩ | 52,499,645 | | General purpose | | | 66,767,547 | | | | 50.99 | | | | (505,993 | ) | | | 66,261,554 | | Credit card | | | 11,632,296 | | | | 8.89 | | | | (389,941 | ) | | | 11,242,355 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 130,930,454 | | | | 100.00 | | | ₩ | (926,900 | ) | | ₩ | 130,003,554 | | | | | | | | | | | | | | | | | | |
The detailsDetails of the Group’s industrial securities, (excludingexcluding equity securities)securities, and derivative financial instruments by industry as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Amount | | | % | | | Amount | | | % | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets held for trading | | | | | | | | | Government and government funded institutions | | ₩ | 3,057,633 | | | | 39.07 | | | ₩ | 7,875,106 | | | | 34.26 | | Banking and Insurance | | | 3,776,119 | | | | 48.25 | | | Banking and insurance | | | | 11,408,503 | | | | 49.63 | | Others | | | 992,033 | | | | 12.68 | | | | 3,702,961 | | | | 16.11 | | | | | | | | | | | | | | | Sub-total | | | 7,825,785 | | | | 100.00 | | | | 22,986,570 | | | | 100.00 | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | | | | Banking and Insurance | | | 210,805 | | | | 100.00 | | | Banking and insurance and others | | | | 1,693,255 | | | | 100.00 | | | | | | | | | | | | | | | Sub-total | | | 210,805 | | | | 100.00 | | | | 1,693,255 | | | | 100.00 | | | | | | | | | | | | | | | Derivative financial assets | | | | | | | | | Government and government funded institutions | | | 18,248 | | | | 1.00 | | | | 104,025 | | | | 3.08 | | Banking and Insurance | | | 1,606,285 | | | | 88.29 | | | Banking and insurance | | | | 2,998,412 | | | | 88.66 | | Others | | | 194,876 | | | | 10.71 | | | | 279,498 | | | | 8.26 | | | | | | | | | | | | | | | Sub-total | | | 1,819,409 | | | | 100.00 | | | | 3,381,935 | | | | 100.00 | | | | | | | | | | | | | | | Available-for-sale financial assets | | | | | | | | | Government and government funded institutions | | | 9,966,361 | | | | 52.64 | | | | 10,579,880 | | | | 38.55 | | Banking and Insurance | | | 6,986,895 | | | | 36.90 | | | Banking and insurance | | | | 13,901,908 | | | | 50.65 | | Others | | | 1,980,032 | | | | 10.46 | | | | 2,963,964 | | | | 10.80 | | | | | | | | | | | | | | | Sub-total | | | 18,933,288 | | | | 100.00 | | | | 27,445,752 | | | | 100.00 | | | | | | | | | | | | | | | Held-to-maturity financial assets | | | | | | | | | Government and government funded institutions | | | 10,923,807 | | | | 83.92 | | | | 5,373,994 | | | | 48.08 | | Banking and Insurance | | | 1,259,282 | | | | 9.67 | | | Banking and insurance | | | | 5,471,443 | | | | 48.95 | | Others | | | 833,902 | | | | 6.41 | | | | 332,067 | | | | 2.97 | | | | | | | | | | | | | | | Sub-total | | | 13,016,991 | | | | 100.00 | | | | 11,177,504 | | | | 100.00 | | | | | | | | | | | | | | | Total | | ₩ | 41,806,278 | | | | | ₩ | 66,685,016 | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Amount | | | % | | | Amount | | | % | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets held for trading | | | | | | | | | Government and government funded institutions | | ₩ | 4,003,061 | | | | 41.22 | | | ₩ | 8,345,463 | | | | 33.16 | | Banking and Insurance | | | 4,368,341 | | | | 44.98 | | | Banking and insurance | | | | 11,486,321 | | | | 45.64 | | Others | | | 1,340,806 | | | | 13.80 | | | | 5,336,554 | | | | 21.20 | | | | | | | | | | | | | | | Sub-total | | | 9,712,208 | | | | 100.00 | | | | 25,168,338 | | | | 100.00 | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | | | | Banking and Insurance | | | 442,960 | | | | 100.00 | | | Banking and insurance and others | | | | 1,982,224 | | | | 100.00 | | | | | | | | | | | | | | | Sub-total | | | 442,960 | | | | 100.00 | | | | 1,982,224 | | | | 100.00 | | | | | | | | | | | | | | | Derivative financial assets | | | | | | | | | Government and government funded institutions | | | 19,732 | | | | 1.00 | | | | 12,099 | | | | 0.37 | | Banking and Insurance | | | 1,762,160 | | | | 89.53 | | | Banking and insurance | | | | 3,098,350 | | | | 93.60 | | Others | | | 186,298 | | | | 9.47 | | | | 199,717 | | | | 6.03 | | | | | | | | | | | | | | | Sub-total | | | 1,968,190 | | | | 100.00 | | | | 3,310,166 | | | | 100.00 | | | | | | | | | | | | | | | Available-for-sale financial assets | | | | | | | | | Government and government funded institutions | | | 8,274,026 | | | | 42.74 | | | | 9,498,819 | | | | 24.38 | | Banking and Insurance | | | 8,192,189 | | | | 42.32 | | | Banking and insurance | | | | 23,314,336 | | | | 59.84 | | Others | | | 2,893,607 | | | | 14.95 | | | | 6,146,246 | | | | 15.78 | | | | | | | | | | | | | | | Sub-total | | | 19,359,822 | | | | 100.00 | | | | 38,959,401 | | | | 100.00 | | | | | | | | | | | | | | | Held-to-maturity financial assets | | | | | | | | | Government and government funded institutions | | | 10,221,322 | | | | 81.32 | | | | 8,449,839 | | | | 45.69 | | Banking and Insurance | | | 1,734,462 | | | | 13.80 | | | Banking and insurance | | | | 6,765,593 | | | | 36.59 | | Others | | | 613,370 | | | | 4.88 | | | | 3,276,548 | | | | 17.72 | | | | | | | | | | | | | | | Sub-total | | | 12,569,154 | | | | 100.00 | | | | 18,491,980 | | | | 100.00 | | | | | | | | | | | | | | | Total | | ₩ | 44,052,334 | | | | | ₩ | 87,912,109 | | | | | | | | | | | | | | |
The detailsDetails of the Group’s regional securities, (excludingexcluding equity securities)securities, and derivative financial instruments by country, as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Amount | | | % | | | Amount | | | % | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets held for trading | | | | | | | | | Korea | | ₩ | 7,809,495 | | | | 99.79 | | | ₩ | 22,359,665 | | | | 97.27 | | India | | | 3,194 | | | | 0.04 | | | United States | | | | 141,022 | | | | 0.61 | | Others | | | 13,096 | | | | 0.17 | | | | 485,883 | | | | 2.12 | | | | | | | | | | | | | | | Sub-total | | | 7,825,785 | | | | 100.00 | | | | 22,986,570 | | | | 100.00 | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | | | | Korea | | | 205,512 | | | | 97.49 | | | | 1,232,226 | | | | 72.77 | | United States | | | | 72,837 | | | | 4.30 | | Others | | | 5,293 | | | | 2.51 | | | | 388,192 | | | | 22.93 | | | | | | | | | | | | | | | Sub-total | | | 210,805 | | | | 100.00 | | | | 1,693,255 | | | | 100.00 | | | | | | | | | | | | | | | Derivative financial assets | | | | | | | | | Korea | | | 617,804 | | | | 33.96 | | | | 2,323,198 | | | | 68.69 | | United States | | | 284,795 | | | | 15.65 | | | | 291,160 | | | | 8.61 | | Others | | | 916,810 | | | | 50.39 | | | | 767,577 | | | | 22.70 | | | | | | | | | | | | | | | Sub-total | | | 1,819,409 | | | | 100.00 | | | | 3,381,935 | | | | 100.00 | | | | | | | | | | | | | | | Available-for-sale financial assets | | | | | | | | | Korea | | | 18,908,743 | | | | 99.87 | | | | 26,855,024 | | | | 97.85 | | United States | | | | 141,473 | | | | 0.52 | | Others | | | 24,545 | | | | 0.13 | | | | 449,255 | | | | 1.63 | | | | | | | | | | | | | | | Sub-total | | | 18,933,288 | | | | 100.00 | | | | 27,445,752 | | | | 100.00 | | | | | | | | | | | | | | | Held-to-maturity financial assets | | | | | | | | | Korea | | | 13,016,991 | | | | 100.00 | | | | 10,029,429 | | | | 89.73 | | United States | | | | 193,360 | | | | 1.73 | | Others | | | | 954,715 | | | | 8.54 | | | | | | | | | | | | | | | Sub-total | | | 13,016,991 | | | | 100.00 | | | | 11,177,504 | | | | 100.00 | | | | | | | | | | | | | | | Total | | ₩ | 41,806,278 | | | | | ₩ | 66,685,016 | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Amount | | | % | | | Amount | | | % | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets held for trading | | | | | | | | | Korea | | ₩ | 9,653,123 | | | | 99.39 | | | ₩ | 23,462,909 | | | | 93.22 | | United States | | | | 643,249 | | | | 2.56 | | Others | | | 59,085 | | | | 0.61 | | | | 1,062,180 | | | | 4.22 | | | | | | | | | | | | | | | Sub-total | | | 9,712,208 | | | | 100.00 | | | | 25,168,338 | | | | 100.00 | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | | | | Korea | | | 442,960 | | | | 100.00 | | | | 1,178,197 | | | | 59.44 | | United States | | | | 120,000 | | | | 6.05 | | Others | | | | 684,027 | | | | 34.51 | | | | | | | | | | | | | | | Sub-total | | | 442,960 | | | | 100.00 | | | | 1,982,224 | | | | 100.00 | | | | | | | | | | | | | | | Derivative financial assets | | | | | | | | | Korea | | | 791,704 | | | | 40.22 | | | | 1,743,201 | | | | 52.66 | | United States | | | 274,608 | | | | 13.95 | | | | 325,909 | | | | 9.85 | | Others | | | 901,878 | | | | 45.83 | | | | 1,241,056 | | | | 37.49 | | | | | | | | | | | | | | | Sub-total | | | 1,968,190 | | | | 100.00 | | | | 3,310,166 | | | | 100.00 | | | | | | | | | | | | | | | Available-for-sale financial assets | | | | | | | | | Korea | | | 19,307,222 | | | | 99.73 | | | | 36,705,979 | | | | 94.22 | | United States | | | 4,948 | | | | 0.03 | | | | 1,110,157 | | | | 2.85 | | Others | | | 47,652 | | | | 0.24 | | | | 1,143,265 | | | | 2.93 | | | | | | | | | | | | | | | Sub-total | | | 19,359,822 | | | | 100.00 | | | | 38,959,401 | | | | 100.00 | | | | | | | | | | | | | | | Held-to-maturity financial assets | | | | | | | | | Korea | | | 12,569,154 | | | | 100.00 | | | | 16,243,987 | | | | 87.84 | | United States | | | | 1,076,331 | | | | 5.82 | | Others | | | | 1,171,662 | | | | 6.34 | | | | | | | | | | | | | | | Sub-total | | | 12,569,154 | | | | 100.00 | | | | 18,491,980 | | | | 100.00 | | | | | | | | | | | | | | | Total | | ₩ | 44,052,334 | | | | | ₩ | 87,912,109 | | | | | | | | | | | | | | |
The counterparties to the financial assets under due from financial institutions and financial instruments indexed to the price of gold within financial assets held for trading and derivatives are in the bankingfinancial and insurance industries andwhich have high credit ratings. 4.3 Liquidity riskRisk 4.3.1 Overview of liquidity riskLiquidity Risk Liquidity risk is a risk that the Group becomes insolvency due to uncertain liquidity caused by unexpected cash outflows, or a risk of insolvencyborrowing high interest debts or loss due to a disparity between the inflowdisposal of liquid and outflow of funds, unexpected outflow of funds, and obtaining fundsother assets at a high price or disposing of securities at an unfavorable price due to lack of available funds.substantial discount. The Group manages its liquidity risk through analysis of the contractual maturity of interest-bearing assets and liabilities, assets and liabilities related to the other incash flow, and outflows, and off-balance sheet items related to in and outflowscash flow of currency derivative instruments and others. Cash flows disclosed for the maturity analysis are undiscounted contractual principal and interest to be received (paid) and,and; thus, differ fromare not identical to the amount in the financial statements whichthat are based on the present value of expected cash flows in some cases. The amount of interest to be received or paid on floating rate assets and liabilities is measured on the assumption that the current interest rate would be the same through the maturity. 4.3.2
4.3.2. Liquidity risk managementRisk Management and indicatorIndicator The liquidity risk is managed by ALM (‘Asset Liability Management’)risk management policy and relatedliquidity risk management guidelines which are applied to the risk management policies and procedures that address all the possible risks that arise from the overall business of the Group. For the purpose of liquidity management, the liquidity ratioThe Group computes and accumulatedmanages cumulative liquidity gap ratio on alland liquidity rate subject to every transactions affectingthat affect cash flow in Korean won and foreign currencies andoff-balance sheet transactions in relation to the in and outflows of funds and transactions of off-balance items are measured, managed and reportedliquidity. The Group regularly reports to the Risk Planning Council and Risk Management Committee on a regular basis.Committee.
As the main subsidiary, Kookmin Bank regularly reports the liquidity gap ratio, liquidity ratio, maturity gap ratio and the results of the stress testing related to liquidity risk to the Asset-Liability Management Committee (‘ALCO’) which establishes and monitors the liquidity risk management strategy.
4.3.34.3.3. Analysis of remaining contractual maturityRemaining Contractual Maturity of financial assetsFinancial Assets and liabilitiesLiabilities
Cash flows disclosed below are undiscounted contractual principal and interest to be received (paid) and,and; thus, differ fromare not identical to the amount in the consolidated financial statements whichthat are based on the present value of expected cash flows. The amount of interest to be received or paid on floating rate assets and liabilities is measured on the assumption that the current interest rate would be the same through the maturity. The remaining contractual maturity of financial assets and liabilities, excluding derivatives held for cash flow hedging, as of December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | On demand | | | Up to 1 month | | | 1-3 months | | | 3-12 months | | | 1-5 years | | | Over 5 years | | | Total | | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | | | | | | Cash and due from financial institutions(1) | | ₩ | 5,672,570 | | | ₩ | 501,100 | | | ₩ | 183,931 | | | ₩ | 586,696 | | | ₩ | 49,314 | | | ₩ | 160,826 | | | ₩ | 7,154,437 | | Financial assets held for trading(2) | | | 8,967,006 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 8,967,006 | | Financial assets designated at fair value through profit or loss(2) | | | 326,583 | | | | — | | | | — | | | | — | | | | — | | | | 35,153 | | | | 361,736 | | Derivatives held for trading(2) | | | 1,680,880 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,680,880 | | Derivatives held for fair value hedging(3) | | | — | | | | 10,944 | | | | 1,617 | | | | 16,036 | | | | 124,794 | | | | 123,782 | | | | 277,173 | | Loans | | | 112,484 | | | | 22,354,010 | | | | 23,245,138 | | | | 77,032,831 | | | | 57,284,561 | | | | 82,239,530 | | | | 262,268,554 | | Available-for-sale financial assets(4) | | | 2,496,486 | | | | 571,796 | | | | 1,542,912 | | | | 4,891,859 | | | | 12,313,615 | | | | 1,977,317 | | | | 23,793,985 | | Held-to-maturity financial assets | | | — | | | | 261,124 | | | | 518,368 | | | | 3,343,087 | | | | 9,254,470 | | | | 1,268,563 | | | | 14,645,612 | | Other financial assets | | | 27,788 | | | | 4,262,763 | | | | 22,473 | | | | 1,526,228 | | | | 6,554 | | | | 2,382 | | | | 5,848,188 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 19,283,797 | | | ₩ | 27,961,737 | | | ₩ | 25,514,439 | | | ₩ | 87,396,737 | | | ₩ | 79,033,308 | | | ₩ | 85,807,553 | | | ₩ | 324,997,571 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities held for trading(2) | | ₩ | 236,637 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 236,637 | | Financial liabilities designated at fair value through profit or loss(2) | | | 878,565 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 878,565 | | Derivatives held for trading(2) | | | 1,580,029 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,580,029 | | Derivatives held for fair value hedging(3) | | | — | | | | — | | | | 25,411 | | | | 179,000 | | | | 8,959 | | | | — | | | | 213,370 | | Deposits(5) | | | 74,110,641 | | | | 14,193,153 | | | | 28,638,089 | | | | 77,181,179 | | | | 8,603,695 | | | | 2,677,536 | | | | 205,404,293 | | Debts | | | 270,987 | | | | 3,279,051 | | | | 1,711,622 | | | | 4,733,173 | | | | 4,038,514 | | | | 356,424 | | | | 14,389,771 | | Debentures | | | 17,917 | | | | 1,237,666 | | | | 2,039,452 | | | | 9,489,594 | | | | 13,576,339 | | | | 4,722,857 | | | | 31,083,825 | | Other financial liabilities | | | 141,041 | | | | 8,372,426 | | | | 13,101 | | | | 63,409 | | | | 198,068 | | | | 509,412 | | | | 9,297,457 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 77,235,817 | | | ₩ | 27,082,296 | | | ₩ | 32,427,675 | | | ₩ | 91,646,355 | | | ₩ | 26,425,575 | | | ₩ | 8,266,229 | | | ₩ | 263,083,947 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Off- balance sheet items | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commitments(6) | | ₩ | 95,422,032 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 95,422,032 | | Financial guarantee contract(7) | | | 3,097,372 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,097,372 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 98,519,404 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 98,519,404 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | On demand | | | Up to 1 month | | | 1-3 months | | | 3-12 months | | | 1-5 years | | | Over 5 years | | | Total | | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and due from financial institutions1 | | ₩ | 6,431,488 | | | ₩ | 815,026 | | | ₩ | 414,076 | | | ₩ | 629,696 | | | ₩ | 353,581 | | | ₩ | — | | | ₩ | 8,643,867 | | Financial assets held for trading2 | | | 26,099,518 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 26,099,518 | | Financial assets designated at fair value through profit or loss2 | | | 1,758,846 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,758,846 | | Derivatives held for trading2 | | | 3,263,115 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,263,115 | | Derivatives held for fair value hedging3 | | | — | | | | 4,075 | | | | 1,719 | | | | 1,791 | | | | (584 | ) | | | 53,185 | | | | 60,186 | | Loans | | | 25,333 | | | | 24,246,878 | | | | 27,731,932 | | | | 88,710,331 | | | | 73,969,738 | | | | 90,290,586 | | | | 304,974,798 | | Available-for-sale financial assets4 | | | 6,444,890 | | | | 617,457 | | | | 1,734,077 | | | | 6,027,364 | | | | 17,804,826 | | | | 3,916,630 | | | | 36,545,244 | | Held-to-maturity financial assets | | | — | | | | 280,822 | | | | 552,875 | | | | 1,423,078 | | | | 6,478,050 | | | | 4,457,977 | | | | 13,192,802 | | Other financial assets | | | 138,840 | | | | 5,316,491 | | | | 34,215 | | | | 1,188,493 | | | | 42,957 | | | | 10,408 | | | | 6,731,404 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 44,162,030 | | | ₩ | 31,280,749 | | | ₩ | 30,468,894 | | | ₩ | 97,980,753 | | | ₩ | 98,648,568 | | | ₩ | 98,728,786 | | | ₩ | 401,269,780 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | On demand | | | Up to 1 month | | | 1-3 months | | | 3-12 months | | | 1-5 years | | | Over 5 years | | | Total | | | | (In millions of Korean won) | | Financial liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities held for trading2 | | ₩ | 1,143,510 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 1,143,510 | | Financial liabilities designated at fair value through profit or loss2 | | | 10,979,326 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10,979,326 | | Derivatives held for trading2 | | | 3,712,015 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,712,015 | | Derivatives held for fair value hedging3 | | | (1,145 | ) | | | 3,462 | | | | (5,114 | ) | | | 8,081 | | | | (37,880 | ) | | | — | | | | (32,596 | ) | Deposits5 | | | 118,054,880 | | | | 13,886,329 | | | | 24,840,830 | | | | 72,178,631 | | | | 10,393,616 | | | | 3,790,933 | | | | 243,145,219 | | Debts | | | 8,473,706 | | | | 5,830,600 | | | | 3,567,985 | | | | 5,124,571 | | | | 4,195,123 | | | | 116,023 | | | | 27,308,008 | | Debentures | | | 52,188 | | | | 2,078,866 | | | | 2,403,874 | | | | 7,493,938 | | | | 20,673,639 | | | | 3,273,158 | | | | 35,975,663 | | Other financial liabilities | | | 1,656,767 | | | | 10,969,703 | | | | 29,248 | | | | 114,381 | | | | 354,976 | | | | 895,950 | | | | 14,021,025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 144,071,247 | | | ₩ | 32,768,960 | | | ₩ | 30,836,823 | | | ₩ | 84,919,602 | | | ₩ | 35,579,474 | | | ₩ | 8,076,064 | | | ₩ | 336,252,170 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Off- balance sheet items | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commitments6 | | ₩ | 97,005,556 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 97,005,556 | | Financial guarantee contract7 | | | 4,746,292 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,746,292 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 101,751,848 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 101,751,848 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | On demand | | | Up to 1 month | | | 1-3 months | | | 3-12 months | | | 1-5 years | | | Over 5 years | | | Total | | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and due from financial institutions(1) | | ₩ | 6,397,552 | | | ₩ | 675,876 | | | ₩ | 544,520 | | | ₩ | 675,266 | | | ₩ | 57,441 | | | ₩ | — | | | ₩ | 8,350,655 | | Financial assets held for trading(2) | | | 10,121,570 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10,121,570 | | Financial assets designated at fair value through profit or loss(2) | | | 636,340 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 636,340 | | Derivatives held for trading(2) | | | 1,858,637 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,858,637 | | Derivatives held for fair value hedging(3) | | | — | | | | 7,742 | | | | (1,147 | ) | | | 20,804 | | | | 77,968 | | | | 118,804 | | | | 224,171 | | Loans | | | 95,437 | | | | 21,432,048 | | | | 24,040,500 | | | | 79,199,603 | | | | 60,798,143 | | | | 88,936,816 | | | | 274,502,547 | | Available-for-sale financial assets(4) | | | 2,849,188 | | | | 501,929 | | | | 1,688,594 | | | | 5,008,162 | | | | 12,201,794 | | | | 1,365,437 | | | | 23,615,104 | | Held-to-maturity financial assets | | | — | | | | 276,462 | | | | 665,030 | | | | 3,618,565 | | | | 8,174,038 | | | | 1,184,433 | | | | 13,918,528 | | Other financial assets | | | 159,698 | | | | 5,341,800 | | | | 22,324 | | | | 1,330,773 | | | | 8,163 | | | | 8,931 | | | | 6,871,689 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 22,118,422 | | | ₩ | 28,235,857 | | | ₩ | 26,959,821 | | | ₩ | 89,853,173 | | | ₩ | 81,317,547 | | | ₩ | 91,614,421 | | | ₩ | 340,099,241 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities held for trading(2) | | ₩ | 836,542 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 836,542 | | Financial liabilities designated at fair value through profit or loss(2) | | | 982,426 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 982,426 | | Derivatives held for trading(2) | | | 1,775,341 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,775,341 | | Derivatives held for fair value hedging(3) | | | — | | | | — | | | | 652 | | | | 146 | | | | 6,304 | | | | (15,580 | ) | | | (8,478 | ) | Deposits(5) | | | 83,154,750 | | | | 13,861,281 | | | | 25,306,312 | | | | 80,646,054 | | | | 9,666,892 | | | | 3,266,842 | | | | 215,902,131 | | Debts | | | 943,012 | | | | 4,058,558 | | | | 2,078,905 | | | | 5,200,009 | | | | 3,611,420 | | | | 282,484 | | | | 16,174,388 | | Debentures | | | 159,620 | | | | 1,112,986 | | | | 1,812,861 | | | | 6,894,122 | | | | 16,971,344 | | | | 4,339,194 | | | | 31,290,127 | | Other financial liabilities | | | 152,035 | | | | 7,737,557 | | | | 23,709 | | | | 109,784 | | | | 298,553 | | | | 559,911 | | | | 8,881,549 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 88,003,726 | | | ₩ | 26,770,382 | | | ₩ | 29,222,439 | | | ₩ | 92,850,115 | | | ₩ | 30,554,513 | | | ₩ | 8,432,851 | | | ₩ | 275,834,026 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Off- balance sheet items | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commitments(6) | | ₩ | 96,316,581 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 96,316,581 | | Financial guarantee contract(7) | | | 4,459,645 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,459,645 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 100,776,226 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 100,776,226 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | On demand | | | Up to 1 month | | | 1-3 months | | | 3-12 months | | | 1-5 years | | | Over 5 years | | | Total | | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and due from financial institutions1 | | ₩ | 6,355,289 | | | ₩ | 1,842,808 | | | ₩ | 319,173 | | | ₩ | 324,703 | | | ₩ | 357,340 | | | ₩ | 11,462 | | | ₩ | 9,210,775 | | Financial assets held for trading2 | | | 30,177,293 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,177,293 | | Financial assets designated at fair value through profit or loss2 | | | 2,050,052 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,050,052 | | Derivatives held for trading2 | | | 2,980,462 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,980,462 | | Derivatives held for fair value hedging3 | | | 559 | | | | 48,093 | | | | 29,693 | | | | 42,163 | | | | (2,577 | ) | | | 52,698 | | | | 170,629 | | Loans | | | 3,437,020 | | | | 22,062,457 | | | | 30,802,580 | | | | 103,782,624 | | | | 75,345,756 | | | | 96,863,329 | | | | 332,293,766 | | Available-for-sale financial assets4 | | | 10,063,251 | | | | 1,580,946 | | | | 2,311,652 | | | | 11,655,746 | | | | 20,322,800 | | | | 7,567,341 | | | | 53,501,736 | | Held-to-maturity financial assets | | | — | | | | 658,856 | | | | 493,420 | | | | 3,217,345 | | | | 6,890,530 | | | | 13,247,255 | | | | 24,507,406 | | Other financial assets | | | 8,416 | | | | 7,934,856 | | | | 52,757 | | | | 1,305,410 | | | | 43,433 | | | | 16,532 | | | | 9,361,404 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 55,072,342 | | | ₩ | 34,128,016 | | | ₩ | 34,009,275 | | | ₩ | 120,327,991 | | | ₩ | 102,957,282 | | | ₩ | 117,758,617 | | | ₩ | 464,253,523 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | On demand | | | Up to 1 month | | | 1-3 months | | | 3-12 months | | | 1-5 years | | | Over 5 years | | | Total | | | | (In millions of Korean won) | | Financial liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities held for trading2 | | ₩ | 1,944,770 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 1,944,770 | | Financial liabilities designated at fair value through profit or loss2 | | | 10,078,288 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10,078,288 | | Derivatives held for trading2 | | | 3,050,471 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,050,471 | | Derivatives held for fair value hedging3 | | | 404 | | | | 3,740 | | | | (4,715 | ) | | | (19,705 | ) | | | (7,143 | ) | | | 244 | | | | (27,175 | ) | Deposits5 | | | 127,035,944 | | | | 12,365,158 | | | | 23,236,756 | | | | 82,586,445 | | | | 11,473,834 | | | | 2,667,969 | | | | 259,366,106 | | Debts | | | 5,957,108 | | | | 10,024,019 | | | | 3,741,022 | | | | 5,724,453 | | | | 4,409,543 | | | | 599,680 | | | | 30,455,825 | | Debentures | | | 40,655 | | | | 1,015,298 | | | | 3,020,683 | | | | 9,644,135 | | | | 29,611,835 | | | | 3,245,342 | | | | 46,577,948 | | Other financial liabilities | | | 200,082 | | | | 14,060,432 | | | | 145,538 | | | | 229,873 | | | | 342,397 | | | | 965,929 | | | | 15,944,251 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 148,307,722 | | | ₩ | 37,468,647 | | | ₩ | 30,139,284 | | | ₩ | 98,165,201 | | | ₩ | 45,830,466 | | | ₩ | 7,479,164 | | | ₩ | 367,390,484 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Off- balance sheet items | | | | | | | | | | | | | | | | | | | | | | | | | | Commitments6 | | ₩ | 102,183,167 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 102,183,167 | | Financial guarantee contract7 | | | 3,683,875 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,683,875 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 105,867,042 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 105,867,042 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)1 | The amounts of ₩7,671,914₩9,307,958 million and ₩7,136,623₩10,669,956 million, which are restricted amounts due from the financial institutions as of December 31, 20132016 and 2014,2017, respectively, are excluded. |
(2)2 | Financial instrumentsassets/liabilities held for trading, financial instrumentsassets/liabilities designated at fair value through profit or loss and derivatives held for trading are not managed by contractual maturity because they are expected to be traded or redeemed before maturity. Therefore, the carrying amounts of those financial instruments are classified as ‘On demand’ category. However, hybrid capital instruments classified as financial instruments designated at fair value through profit or lossthe cash flows of the embedded derivatives (e.g. conversion options and others) which are includedseparated from their host contracts in accordance with the requirement IAS 39, are considered in the ‘Over 5 years’ category which they can be redeemed, owing to uncertain pointcash flows of sale. the host contracts. |
(3)3 | Cash flows of derivative instruments held for fair value hedging are shown at net amounts of cash inflows and outflowsflow by remaining contractual maturity. |
(4)4 | InEquity investments in financial assets classified asavailable-for-sale are generally included in the ‘On demand’ category as most are available for sale at any time. However, in the case of equity investments restricted for sale, they are shown in the period in which the restriction is expected to be expired. expire. |
(5)5 | Deposits that are contractually repayable on demand or on short notice are classified under the ‘On demand’ cate category. |
(6)6 | Commitments are included under the ‘On demand’ category because payments canwill be requiredmade upon request. |
(7)7 | The financial guarantee contracts are included under the ‘On demand’ category as payments canwill be requiredmade upon request. |
The contractual cash flows of derivatives held for cash flow hedging as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Up to 1 month | | 1-3 months | | 3-12 months | | 1-5 years | | | Over 5 years | | | Total | | | Up to 1 month | | 1-3 months | | 3-12 months | | 1-5 years | | Over 5 years | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Net cash flow of net settlement derivatives | | ₩ | (449 | ) | | ₩ | (1,127 | ) | | ₩ | (3,815 | ) | | ₩ | 1,212 | | | ₩ | — | | | ₩ | (4,179 | ) | | ₩ | (283 | ) | | ₩ | (1,078 | ) | | ₩ | (3,088 | ) | | ₩ | (3,141 | ) | | ₩ | — | | | ₩ | (7,590 | ) | Cash flow to be received of total settlement derivatives | | | 169 | | | | 370 | | | | 317,714 | | | | — | | | | — | | | | 318,253 | | | 302 | | | 948 | | | 245,909 | | | 121,152 | | | | — | | | 368,311 | | Cash flow to be paid of total settlement derivatives | | | (617 | ) | | | (1,153 | ) | | | (326,160 | ) | | | — | | | | — | | | | (327,930 | ) | | (522 | ) | | (1,080 | ) | | (224,600 | ) | | (110,373 | ) | | | — | | | (336,575 | ) | | | | | 2017 | | | | | Up to 1 month | | 1-3 months | | 3-12 months | | 1-5 years | | Over 5 years | | Total | | | | | (In millions of Korean won) | | Net cash flow of net settlement derivatives | | | ₩ | (224 | ) | | ₩ | (1,556 | ) | | ₩ | (3,044 | ) | | ₩ | (442 | ) | | ₩ | 16 | | | ₩ | (5,250 | ) | Cash flow to be received of total settlement derivatives | | | 196,795 | | | 298,108 | | | 745,490 | | | 1,404,317 | | | | — | | | 2,644,710 | | Cash flow to be paid of total settlement derivatives | | | (188,698 | ) | | (285,397 | ) | | (698,054 | ) | | (1,324,504 | ) | | | — | | | (2,496,653 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Up to 1 month | | | 1-3 months | | | 3-12 months | | | 1-5 years | | | Over 5 years | | | Total | | | | (In millions of Korean won) | | Net cash flow of net settlement derivatives | | ₩ | (688 | ) | | ₩ | (1,365 | ) | | ₩ | (5,203 | ) | | ₩ | (8,437 | ) | | ₩ | — | | | ₩ | (15,693 | ) | Cash flow to be received of total settlement derivatives | | | 171 | | | | 423 | | | | 2,531 | | | | 344,051 | | | | — | | | | 347,176 | | Cash flow to be paid of total settlement derivatives | | | (504 | ) | | | (1,062 | ) | | | (5,006 | ) | | | (343,149 | ) | | | — | | | | (349,721 | ) |
4.4 Market riskRisk 4.4.1 Overview of market riskMarket Risk Definition of market riskConcept
Market risk is the risk of possible losses which arise from changes in market factors,factors; such as, interest rate, stock price, foreign exchange rate and other market factors that affect the fair value or future cash flows of financial instruments,instruments; such as, securities and derivatives amongst others. The most significant risks associated with trading positions are interest rate risks, and currency risks and other risks includealso, stock price risks. In addition, the Group is exposed to interest rate risks and currency risks associated withnon-trading positions. The Group classifies exposures to market risk into either trading ornon-trading positions. The Group measures and manages market risk separately for each subsidiary in the Group.subsidiary. Market risk management groupRisk Management
The Group sets economicinternal capital limits for market risk and interest rate risk and monitors the risks to manage the risk of trading andnon-trading positions. The Group maintains risk management systems and procedures,procedures; such as, trading policies and procedures, and market risk management guidelines for trading positions, and interest rate risk management guidelines fornon-trading positions in order to manage market risk efficiently. The procedures mentioned are implemented with approval from the Risk Management Committee and Risk Management Council. AsKookmin Bank, one of the main subsidiary, Kookmin Banksubsidiaries, establishes market risk management policy, sets position limits, loss limits and VaR limits of each business group and approves newly developed derivative instruments through its Risk Management Council. The Risk Management Council has delegated the responsibility for market risk management of individual business departments to the Market Risk Management Committee, which is chaired by athe Chief Risk Officer (CRO). The Market Risk Management Committee, is the decision maker and sets position limits, loss limits, VaR limits, sensitivity limits and scenario loss limits for each division, at the level of each individual business department.
The ALCO of Kookmin Bank determines the operational standards of interest and commission, the details of the establishment and prosecution of the Asset Liability Management (ALM) policies and enacts and amends relevant guidelines. The Risk Management Committee and Risk Management Council monitor the establishment and enforcement of ALM risk management policies, and enact and amend ALM risk management guidelines. The interest rate risk limit is set based on the future assets/liabilities position and interest rate volatility estimation reflects the annual work plan. The Financial Planning Department and Risk Management Department measures and monitors the interest risk status and limits on a regular basis. The status and limits of interest rate risks,risks; such as, interest rate gap, duration gap and sensitivity,interest rate VaR (Value at Risk), are reported to the ALCO and Risk Management Council on a monthly basis and to the Risk Management Committee on a quarterly basis. To ensure adequacy of interest rate and liquidity risk management, the Risk Management Department assigns the limits, monitors and reviews the risk management procedures and tasks conducted by the Financial Planning Department. Also, the Risk Management Department independently reports related information to the management. 4.4.2 Trading Position Definition of a trading position Trading positions subject to market risk management are defined under the Trading Policy and Guideline, and the basic requirements are as follows: The trading position is not restricted for sale, is measured daily at fair value, and its significant inherent risks are able to be hedged in the market. The criteria for classification as a trading position are clearly defined in the Trading Policy and Guideline, and separately managed by the trading department. The trading position is operated in accordance with the documented trading strategy and managed through position limits. The operating department or professional dealers have an authority to enforce a deal on the trading position within predetermined limits withoutpre-approval. The trading position is reported periodically to management for the purpose of the Group’s risk management. managementObservation method on market risk arising from trading positions TheSubsidiaries of the Group calculatescalculate VaR to measure the market risk by using market risk management systems on the entire trading portfolio. Generally, the Group manages market risk on the trading portfolio. In addition, the Group controls and manages the risk of derivative trading based on the regulations and guidelines formulated by the Financial Supervisory Service.
VaR (Value at Risk) i. VaR (Value at Risk) The GroupKookmin Bank, one of the subsidiaries, uses thevalue-at-risk methodology to measure the market risk of trading positions. The GroupKookmin Bank uses the10-day VaR, which estimates the maximum amount of loss that could occur in ten days under an historical simulation model which is considered to be a full valuation method. The distributions of portfolio’s value changes are estimated based on the data over the previous 250 business days, andten-day VaR is calculated by subtracting net present market value from the value measured at a 99% confident level of portfolio’s value distribution results. However, the KB Investment & Securities Co., Ltd. calculates ten-day VaR using the variance-covariance method and a 99% single tail confidence level based on historical data for the previous 250 business days calculated by the equal-weighted average method. It means the maximum amount of loss for the 10 days that could occur under normal distribution of financial changes.
VaR is a commonly used market risk measurement technique. However, the method has some shortcomings. VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movements are, however, not necessarily a good indicator of future events, as there may be conditions and circumstances in the future that the model does not anticipate. As a result, the timing and magnitude of the actual losses may vary depending on the assumptions made at the time of the calculation. In addition, the time periods used for the model, generally one or ten days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient, or too long, the VaR results may understate or overstate the potential loss. The GroupA subsidiary which hold trading positions uses an internal model (VaR) to measure general risk, and a standard method to measure each individual risk. Also, general and individual risks in some positions included inWhen the consolidated financial statements in adoption of IFRS, are measured using ainternal model is not permitted for certain market risk, the Group uses the standard method. Therefore, the market risk VaR may not reflect the market risk of each individual risk and some specific positions. And also, from this year,non-banking subsidiaries use the same standard method applied to measure regulatory capital for improvement of market risk VaR management utility (improvement of relation with regulatory capital).
ii. Back-Testing Back-testing is conducted on a daily basis to validate the adequacy of the market risk model. In back-testing, the Group compares both the actual and hypothetical profit and loss with the VaR calculations. iii. Stress Testing Stress testing is carried out to analyze the impact of abnormal market situations on the trading andavailable-for-sale portfolio. It reflects changes in interest rates, stock prices, foreign exchange rates, implied volatilities of derivatives and other risk factors that have significant influence on the value of the portfolio. The Group mainly uses an historical scenario toolscenarios and also uses a hypothetical scenario toolscenarios for the analysis of abnormal market situations. Stress testing is performed at least once every quarter.year. VaR at a 99% confidence level of interest rate, stock price and foreign exchange rate risk for trading positions with aten-day holding period by a subsidiary as of December 31, 20132016 and 2014,2017, are as follows: Kookmin Bank | | | 2013 | | | 2016 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 16,270 | | | ₩ | 7,428 | | | ₩ | 24,979 | | | ₩ | 16,967 | | | ₩ | 15,683 | | | ₩ | 10,817 | | | ₩ | 19,538 | | | ₩ | 14,906 | | Stock price risk | | | 3,480 | | | | 932 | | | | 7,114 | | | | 1,049 | | | | 1,757 | | | | 726 | | | | 2,269 | | | | 1,201 | | Foreign exchange rate risk | | | 9,264 | | | | 5,287 | | | | 13,589 | | | | 5,287 | | | | 16,493 | | | | 10,123 | | | | 22,206 | | | | 10,123 | | Deduction of diversification effect | | | | | | | | | (6,928 | ) | | | | | | | | | (6,477 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 17,316 | | | ₩ | 10,868 | | | ₩ | 22,249 | | | ₩ | 16,375 | | | ₩ | 19,018 | | | ₩ | 11,558 | | | ₩ | 28,519 | | | ₩ | 19,753 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 12,938 | | | ₩ | 7,657 | | | ₩ | 19,801 | | | ₩ | 10,148 | | | ₩ | 22,682 | | | ₩ | 14,313 | | | ₩ | 42,155 | | | ₩ | 23,758 | | Stock price risk | | | 1,627 | | | | 714 | | | | 3,858 | | | | 851 | | | | 1,002 | | | | 757 | | | | 1,345 | | | | 1,255 | | Foreign exchange rate risk | | | 12,049 | | | | 5,070 | | | | 14,705 | | | | 10,814 | | | | 32,709 | | | | 12,405 | | | | 44,322 | | | | 24,315 | | Deduction of diversification effect | | | | | | | | | (8,809 | ) | | | | | | | | | (29,727 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 15,383 | | | ₩ | 10,089 | | | ₩ | 23,560 | | | ₩ | 13,004 | | | ₩ | 23,312 | | | ₩ | 16,498 | | | ₩ | 30,247 | | | ₩ | 19,601 | | | | | | | | | | | | | | | | | | | | | | | | | | |
KB Investment & Securities Co., Ltd.
| | | | | | | | | | | | | | | | | | | 2013 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 2,503 | | | ₩ | 160 | | | ₩ | 6,825 | | | ₩ | 1,825 | | Stock price risk | | | 1,920 | | | | 507 | | | | 6,244 | | | | 1,139 | | Foreign exchange rate risk | | | 527 | | | | 24 | | | | 1,311 | | | | 53 | | Deduction of diversification effect | | | | | | | | | | | | | | | (698 | ) | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 3,319 | | | ₩ | 589 | | | ₩ | 8,908 | | | ₩ | 2,318 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 1,334 | | | ₩ | 294 | | | ₩ | 2,971 | | | ₩ | 1,874 | | Stock price risk | | | 1,154 | | | | 480 | | | | 3,054 | | | | 1,414 | | Foreign exchange rate risk | | | 12 | | | | 1 | | | | 125 | | | | 55 | | Deduction of diversification effect | | | | | | | | | | | | | | | (878 | ) | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 1,773 | | | ₩ | 753 | | | ₩ | 3,098 | | | ₩ | 2,465 | | | | | | | | | | | | | | | | | | |
KB Life Insurance Co., Ltd.
| | | | | | | | | | | | | | | | | | | 2013 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 279 | | | ₩ | 157 | | | ₩ | 441 | | | ₩ | 329 | | Deduction of diversification effect | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 279 | | | ₩ | 157 | | | ₩ | 441 | | | ₩ | 329 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 121 | | | ₩ | 33 | | | ₩ | 374 | | | ₩ | 33 | | Deduction of diversification effect | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 121 | | | ₩ | 33 | | | ₩ | 374 | | | ₩ | 33 | | | | | | | | | | | | | | | | | | |
KB Investment Co., Ltd.
| | | | | | | | | | | | | | | | | | | 2013 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Foreign exchange rate risk | | ₩ | 40 | | | ₩ | 29 | | | ₩ | 53 | | | ₩ | 30 | | Deduction of diversification effect | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 40 | | | ₩ | 29 | | | ₩ | 53 | | | ₩ | 30 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Foreign exchange rate risk | | ₩ | 30 | | | ₩ | 18 | | | ₩ | 37 | | | ₩ | 25 | | Deduction of diversification effect | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 30 | | | ₩ | 18 | | | ₩ | 37 | | | ₩ | 25 | | | | | | | | | | | | | | | | | | |
Meanwhile, the required equity capital using the standardized method related to the positions which are not measured by VaR or thenon-banking subsidiaries as of December 31, 20132016 and 2014, is2017, are as follows: Kookmin Bank | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 921 | | | ₩ | 792 | | | ₩ | 15,161 | | | ₩ | 98,236 | | Stock price risk | | | 2 | | | | 1,101 | | | | 4,816 | | | | 1,646 | | Foreign exchange rate risk | | | 9,214 | | | | 9,387 | | | | — | | | | 810 | | | | | | | | | | | | | | | Total | | ₩ | 10,137 | | | ₩ | 11,280 | | | ₩ | 19,977 | | | ₩ | 100,692 | | | | | | | | | | | | | | |
KB Investment & Securities Co., Ltd. | | | | | | | 20161 | | | | 2013 | | | 2014 | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 5,081 | | | ₩ | 8,865 | | | ₩ | 79,205 | | | ₩ | 41,116 | | | ₩ | 312,094 | | | ₩ | 312,094 | | Stock price risk | | | 3,602 | | | | 2,590 | | | | 57,816 | | | | 36,140 | | | | 199,182 | | | | 199,182 | | Foreign exchange rate risk | | | | 1,766 | | | | 471 | | | | 10,790 | | | | 10,790 | | Commodity risk | | | | 80 | | | | — | | | | 125 | | | | — | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 8,683 | | | ₩ | 11,455 | | | Total VaR | | | ₩ | 138,867 | | | ₩ | 77,727 | | | ₩ | 522,191 | | | ₩ | 522,066 | | | | | | | | | | | | | | | | | | | | |
1 | Including Hyundai Securities Co., Ltd.(included as a subsidiary in October 2016) |
| | | | | | | | | | | | | | | | | | | 2017 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 421,275 | | | ₩ | 347,369 | | | ₩ | 498,631 | | | ₩ | 457,470 | | Stock price risk | | | 193,791 | | | | 138,044 | | | | 239,685 | | | | 200,101 | | Foreign exchange rate risk | | | 11,113 | | | | 7,599 | | | | 15,446 | | | | 7,674 | | Commodity risk | | | 5 | | | | — | | | | 34 | | | | 3 | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 626,184 | | | ₩ | 493,012 | | | ₩ | 753,796 | | | ₩ | 665,248 | | | | | | | | | | | | | | | | | | |
KB Insurance Co., Ltd. | | | | | | | | | | | | | | | | | | | 20171 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 47,569 | | | ₩ | 40,546 | | | ₩ | 55,875 | | | ₩ | 41,467 | | Stock price risk | | | 81 | | | | — | | | | 133 | | | | — | | Foreign exchange rate risk | | | 18,002 | | | | 12,313 | | | | 23,099 | | | | 18,695 | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 65,652 | | | ₩ | 52,859 | | | ₩ | 79,107 | | | ₩ | 60,162 | | | | | | | | | | | | | | | | | | |
1 | Including KB Insurance Co., Ltd.(included as a subsidiary in second quarter, 2017) |
KB Life Insurance Co., Ltd. | | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Stock price risk | | ₩ | 106 | | | ₩ | — | |
| | | | | | | | | | | | | | | | | | | 2016 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 1,428 | | | ₩ | 1,123 | | | ₩ | 2,440 | | | ₩ | 1,675 | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 1,428 | | | ₩ | 1,123 | | | ₩ | 2,440 | | | ₩ | 1,675 | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 1,381 | | | ₩ | 593 | | | ₩ | 1,961 | | | ₩ | 1,596 | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 1,381 | | | ₩ | 593 | | | ₩ | 1,961 | | | ₩ | 1,596 | | | | | | | | | | | | | | | | | | |
KB Investment Co., Ltd. | | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Stock price risk | | ₩ | 1,424 | | | ₩ | 1,979 | |
| | | | | | | | | | | | | | | | | | | 2016 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Stock price risk | | ₩ | 2,852 | | | ₩ | 1,571 | | | ₩ | 4,516 | | | ₩ | 4,516 | | Foreign exchange rate risk | | | 592 | | | | 357 | | | | 792 | | | | 792 | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 3,444 | | | ₩ | 1,928 | | | ₩ | 5,308 | | | ₩ | 5,308 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2017 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Stock price risk | | ₩ | 3,904 | | | ₩ | — | | | ₩ | 4,766 | | | ₩ | 3,897 | | Foreign exchange rate risk | | | 1,053 | | | | 746 | | | | 1,797 | | | | 1,797 | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 4,957 | | | ₩ | 746 | | | ₩ | 6,563 | | | ₩ | 5,694 | | | | | | | | | | | | | | | | | | |
KB Asset Management Co., Ltd. | | | | | | | | | | | | | | | | | | | 2017 | | | | Average | | | Minimum | | | Maximum | | | Ending | | | | (In millions of Korean won) | | Interest rate risk | | ₩ | 19 | | | ₩ | — | | | ₩ | 215 | | | ₩ | 8 | | Stock price risk | | | 241 | | | | — | | | | 1,634 | | | | 1,634 | | Foreign exchange rate risk | | | 93 | | | | — | | | | 1,049 | | | | 1,049 | | | | | | | | | | | | | | | | | | | Total VaR | | ₩ | 353 | | | ₩ | — | | | ₩ | 2,898 | | | ₩ | 2,691 | | | | | | | | | | | | | | | | | | |
Details of risk factors i. Interest rate risk Trading position interest rate risk usually arises from debt securities denominated in Korean won. The Group’s trading strategy is to benefit from short-term movements in the prices of debt securities arising from changes in interest rates. The Group manages interest rate risk on trading positions using market value-based tools such as VaR and sensitivity analysis (Price Value of a Basis Point: PVBP). ii. Stock price risk Stock price risk only arises from trading securities denominated in Korean won as the Group does not have any trading exposure to shares denominated in foreign currencies. The trading securities portfolio in Korean won are composed of exchange-traded stocks and derivative instruments linked to stock with strict limits on diversification. iii. Foreign exchange rate risk Foreign exchange rate risk arises from holding assets and liabilities denominated in foreign currency.currency and foreign currency derivatives. Net foreign currency exposure mostly occurs from the foreign assets and liabilities which are denominated in US dollars and Kazakhstan Tenge, and the remainder in Japanese Yen or Euro.Chinese Yuan. The Group sets both loss limits and net foreign currency exposure limits and manages comprehensive net foreign exchange exposures which consider both trading andnon-trading portfolios. 4.4.3Non-trading position Definition ofnon-trading position Managed interest rate risk innon-trading position includeson- oroff-balance sheet assets, liabilities and derivatives that are sensitive to interest rate, except trading position for market risk. The most criticalinterest rate sensitive assets and liabilities are interest-bearing assets and liabilities that create interest income and expenses. Observation method on market risk that arises in arising fromnon-trading portfolios is interest rate risk. position Interest rate risk occurs due to mismatches on maturities and interest rate changereset periods between interest sensitive assets and liabilities. The Group measures interest rate risk arising from assets and liabilities denominated in Korean won and foreign currencies including derivative financial instruments held for hedging. Most interest-bearing assets and interest-bearing liabilities are denominated in Korean won. Most foreign currency assets and liabilities are denominated in US Dollars and the remainder in Japanese Yen or Euro. Observation method on market risk arising from non-trading position
The main objective of interest rate risk management is to generate stable net interest income and to protect asset values against interest rate fluctuations.liabilities. The Group manages the risk through measuring and managing interest rate gap analysis on interest rate maturities between interest-bearing assetsVaR and interest-bearing liabilitiesEaR that are maximum expected decreases in net asset value (NPV) and measuring interest rate VaR.
Disclosure of results from each observation method
i. Interest rate gap analysis
Interest rate gap analysis is based on the interest rates repricing dates for interest-bearing assets and interest-bearing liabilities. It measures expected changes in net interest income by calculating the difference(NII) for one year, respectively, arising from unfavorable changes in the amounts of interest-bearing assets and interest-bearing liabilities in each maturity bucket. The Group conductsmarket interest gap analysis on assets denominated in Korean won and foreign currencies on a monthly basis. However, where there is no contractual maturity for a particular instrument, then a maturity date is set according to internal liquidity risk management guidelines, determined by ALM. rate.The results of the interest rate gap analysis by subsidiary as of December 31, 2013 and 2014, are as follows:
Kookmin Bank
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 83,935,439 | | | ₩ | 54,589,446 | | | ₩ | 46,832,862 | | | ₩ | 21,608,336 | | | ₩ | 14,297,239 | | | ₩ | 221,263,322 | | Interest-bearing liabilities in Korean won | | | 91,505,923 | | | | 37,966,586 | | | | 50,647,954 | | | | 20,948,789 | | | | 18,244,867 | | | | 219,314,119 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | (7,570,484 | ) | | ₩ | 16,622,860 | | | ₩ | (3,815,092 | ) | | ₩ | 659,547 | | | ₩ | (3,947,628 | ) | | ₩ | 1,949,203 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | (7,570,484 | ) | | | 9,052,376 | | | | 5,237,284 | | | | 5,896,831 | | | | 1,949,203 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | (3.42 | ) | | | 4.09 | | | | 2.37 | | | | 2.67 | | | | 0.88 | | | | | | Interest-bearing assets in foreign currencies | | ₩ | 10,112,905 | | | ₩ | 1,888,724 | | | ₩ | 607,499 | | | ₩ | 396,714 | | | ₩ | 257,419 | | | ₩ | 13,263,261 | | Interest-bearing liabilities in foreign currencies | | | 9,500,565 | | | | 2,631,393 | | | | 1,527,154 | | | | 225,300 | | | | 124,357 | | | | 14,008,769 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 612,340 | | | ₩ | (742,669 | ) | | ₩ | (919,655 | ) | | ₩ | 171,414 | | | ₩ | 133,062 | | | ₩ | (745,508 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 612,340 | | | | (130,329 | ) | | | (1,049,984 | ) | | | (878,570 | ) | | | (745,508 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 4.62 | | | | (0.98 | ) | | | (7.92 | ) | | | (6.62 | ) | | | (5.62 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 81,410,723 | | | ₩ | 58,363,078 | | | ₩ | 49,200,979 | | | ₩ | 25,841,692 | | | ₩ | 16,042,468 | | | ₩ | 230,858,940 | | Interest-bearing liabilities in Korean won | | | 92,018,008 | | | | 38,515,842 | | | | 52,996,290 | | | | 25,838,417 | | | | 19,891,843 | | | | 229,260,400 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | (10,607,285 | ) | | ₩ | 19,847,236 | | | ₩ | (3,795,311 | ) | | ₩ | 3,275 | | | ₩ | (3,849,375 | ) | | ₩ | 1,598,540 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | (10,607,285 | ) | | | 9,239,951 | | | | 5,444,640 | | | | 5,447,915 | | | | 1,598,540 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | (4.59 | ) | | | 4.00 | | | | 2.36 | | | | 2.36 | | | | 0.69 | | | | | | Interest-bearing assets in foreign currencies | | ₩ | 9,976,001 | | | ₩ | 2,287,466 | | | ₩ | 1,468,572 | | | ₩ | 1,506,339 | | | ₩ | 117,486 | | | ₩ | 15,355,864 | | Interest-bearing liabilities in foreign currencies | | | 9,321,764 | | | | 3,710,940 | | | | 1,475,686 | | | | 1,415,952 | | | | 51,071 | | | | 15,975,413 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 654,237 | | | ₩ | (1,423,474 | ) | | ₩ | (7,114 | ) | | ₩ | 90,387 | | | ₩ | 66,415 | | | ₩ | (619,549 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 654,237 | | | | (769,237 | ) | | | (776,351 | ) | | | (685,964 | ) | | | (619,549 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 4.26 | | | | (5.01 | ) | | | (5.06 | ) | | | (4.47 | ) | | | (4.03 | ) | | | | |
KB Kookmin Card Co., Ltd.
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 3,951,261 | | | ₩ | 1,212,736 | | | ₩ | 1,600,360 | | | ₩ | 5,010,999 | | | ₩ | 3,108,753 | | | ₩ | 14,884,109 | | Interest-bearing liabilities in Korean won | | | 940,000 | | | | 782,765 | | | | 1,868,825 | | | | 4,704,000 | | | | 2,190,000 | | | | 10,485,590 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 3,011,261 | | | ₩ | 429,971 | | | ₩ | (268,465 | ) | | ₩ | 306,999 | | | ₩ | 918,753 | | | ₩ | 4,398,519 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 3,011,261 | | | | 3,441,232 | | | | 3,172,767 | | | | 3,479,766 | | | | 4,398,519 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 20.23 | | | | 23.12 | | | | 21.32 | | | | 23.38 | | | | 29.55 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 4,116,795 | | | ₩ | 1,293,247 | | | ₩ | 1,695,695 | | | ₩ | 4,852,525 | | | ₩ | 3,143,092 | | | ₩ | 15,101,354 | | Interest-bearing liabilities in Korean won | | | 1,060,000 | | | | 988,000 | | | | 1,461,000 | | | | 4,604,840 | | | | 2,104,920 | | | | 10,218,760 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 3,056,795 | | | ₩ | 305,247 | | | ₩ | 234,695 | | | ₩ | 247,685 | | | ₩ | 1,038,172 | | | ₩ | 4,882,594 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 3,056,795 | | | | 3,362,042 | | | | 3,596,737 | | | | 3,844,422 | | | | 4,882,594 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 20.24 | | | | 22.26 | | | | 23.82 | | | | 25.46 | | | | 32.33 | | | | | |
KB Investment & Securities Co., Ltd.
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 491,652 | | | ₩ | 14,000 | | | ₩ | 227,542 | | | ₩ | 169,990 | | | ₩ | 1,823 | | | ₩ | 905,007 | | Interest-bearing liabilities in Korean won | | | 516,734 | | | | 160,000 | | | | 10,000 | | | | 32,000 | | | | — | | | | 718,734 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | (25,082 | ) | | ₩ | (146,000 | ) | | ₩ | 217,542 | | | ₩ | 137,990 | | | ₩ | 1,823 | | | ₩ | 186,273 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | (25,082 | ) | | | (171,082 | ) | | | 46,460 | | | | 184,450 | | | | 186,273 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | (2.77 | ) | | | (18.90 | ) | | | 5.13 | | | | 20.38 | | | | 20.58 | | | | | | Interest-bearing assets in foreign currencies | | ₩ | 66,576 | | | ₩ | 6,162 | | | ₩ | 56,558 | | | ₩ | — | | | ₩ | — | | | ₩ | 129,296 | | Interest-bearing liabilities in foreign currencies | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 66,576 | | | ₩ | 6,162 | | | ₩ | 56,558 | | | ₩ | — | | | ₩ | — | | | ₩ | 129,296 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 66,576 | | | | 72,738 | | | | 129,296 | | | | 129,296 | | | | 129,296 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 51.49 | | | | 56.26 | | | | 100.00 | | | | 100.00 | | | | 100.00 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 490,113 | | | ₩ | 214,300 | | | ₩ | 212,351 | | | ₩ | 15,190 | | | ₩ | 19,211 | | | ₩ | 951,165 | | Interest-bearing liabilities in Korean won | | | 1,365,885 | | | | 125,000 | | | | 36,997 | | | | — | | | | — | | | | 1,527,882 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | (875,772 | ) | | ₩ | 89,300 | | | ₩ | 175,354 | | | ₩ | 15,190 | | | ₩ | 19,211 | | | ₩ | (576,717 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | (875,772 | ) | | | (786,472 | ) | | | (611,118 | ) | | | (595,928 | ) | | | (576,717 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | (92.07 | ) | | | (82.69 | ) | | | (64.25 | ) | | | (62.65 | ) | | | (60.63 | ) | | | | | Interest-bearing assets in foreign currencies | | ₩ | 20,815 | | | ₩ | 10,419 | | | ₩ | 64,997 | | | ₩ | — | | | ₩ | — | | | ₩ | 96,231 | | Interest-bearing liabilities in foreign currencies | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 20,815 | | | ₩ | 10,419 | | | ₩ | 64,997 | | | ₩ | — | | | ₩ | — | | | ₩ | 96,231 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 20,815 | | | | 31,234 | | | | 96,231 | | | | 96,231 | | | | 96,231 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 21.63 | | | | 32.46 | | | | 100.00 | | | | 100.00 | | | | 100.00 | | | | | |
KB Life Insurance Co., Ltd.
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 249,863 | | | ₩ | 187,377 | | | ₩ | 630,846 | | | ₩ | 1,314,773 | | | ₩ | 2,502,573 | | | ₩ | 4,885,432 | | Interest-bearing liabilities in Korean won | | | 27,836 | | | | 72,309 | | | | 4,862,687 | | | | 36,488 | | | | 528,861 | | | | 5,528,181 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 222,027 | | | ₩ | 115,068 | | | ₩ | (4,231,841 | ) | | ₩ | 1,278,285 | | | ₩ | 1,973,712 | | | ₩ | (642,749 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 222,027 | | | | 337,095 | | | | (3,894,746 | ) | | | (2,616,461 | ) | | | (642,749 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 4.54 | | | | 6.90 | | | | (79.72 | ) | | | (53.56 | ) | | | (13.16 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 501,452 | | | ₩ | 317,004 | | | ₩ | 732,000 | | | ₩ | 1,883,395 | | | ₩ | 2,648,788 | | | ₩ | 6,082,639 | | Interest-bearing liabilities in Korean won | | | 2,068 | | | | 949 | | | | 1,579,923 | | | | 4,137,043 | | | | 465,131 | | | | 6,185,114 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 499,384 | | | ₩ | 316,055 | | | ₩ | (847,923 | ) | | ₩ | (2,253,648 | ) | | ₩ | 2,183,657 | | | ₩ | (102,475 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 499,384 | | | | 815,439 | | | | (32,484 | ) | | | (2,286,132 | ) | | | (102,475 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 8.21 | | | | 13.41 | | | | (0.53 | ) | | | (37.58 | ) | | | (1.68 | ) | | | | |
KB Savings Bank Co., Ltd.
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 160,377 | | | ₩ | 64,008 | | | ₩ | 90,405 | | | ₩ | 71,477 | | | ₩ | 43,765 | | | ₩ | 430,032 | | Interest-bearing liabilities in Korean won | | | 88,608 | | | | 108,965 | | | | 212,012 | | | | 26,693 | | | | 1,271 | | | | 437,549 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 71,769 | | | ₩ | (44,957 | ) | | ₩ | (121,607 | ) | | ₩ | 44,784 | | | ₩ | 42,494 | | | ₩ | (7,517 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 71,769 | | | | 26,812 | | | | (94,795 | ) | | | (50,011 | ) | | | (7,517 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 16.69 | | | | 6.23 | | | | (22.04 | ) | | | (11.63 | ) | | | (1.75 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 209,895 | | | ₩ | 109,368 | | | ₩ | 156,869 | | | ₩ | 53,424 | | | ₩ | 86,272 | | | ₩ | 615,828 | | Interest-bearing liabilities in Korean won | | | 133,057 | | | | 160,070 | | | | 249,389 | | | | 62,139 | | | | 2,403 | | | | 607,058 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 76,838 | | | ₩ | (50,702 | ) | | ₩ | (92,520 | ) | | ₩ | (8,715 | ) | | ₩ | 83,869 | | | ₩ | 8,770 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 76,838 | | | | 26,136 | | | | (66,384 | ) | | | (75,099 | ) | | | 8,770 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 12.48 | | | | 4.24 | | | | (10.78 | ) | | | (12.19 | ) | | | 1.42 | | | | | |
Yehansoul Savings Bank Co., Ltd.
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 109,603 | | | ₩ | 11,149 | | | ₩ | 1,881 | | | ₩ | 4,515 | | | ₩ | 23,659 | | | ₩ | 150,807 | | Interest-bearing liabilities in Korean won | | | 60,126 | | | | 48,336 | | | | 42,739 | | | | 6,008 | | | | 111 | | | | 157,320 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 49,477 | | | ₩ | (37,187 | ) | | ₩ | (40,858 | ) | | ₩ | (1,493 | ) | | ₩ | 23,548 | | | ₩ | (6,513 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 49,477 | | | | 12,290 | | | | (28,568 | ) | | | (30,061 | ) | | | (6,513 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 32.81 | | | | 8.15 | | | | (18.94 | ) | | | (19.93 | ) | | | (4.32 | ) | | | | |
KB Capital Co., Ltd.
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Up to 3 months | | | 3~6 months | | | 6~12 months | | | 1~3 years | | | Over 3 years | | | Total | | | | (In millions of Korean won) | | Interest-bearing assets in Korean won | | ₩ | 574,781 | | | ₩ | 423,694 | | | ₩ | 694,273 | | | ₩ | 1,768,434 | | | ₩ | 498,480 | | | ₩ | 3,959,662 | | Interest-bearing liabilities in Korean won | | | 414,253 | | | | 36,399 | | | | 66,512 | | | | 1,841,011 | | | | 254,094 | | | | 2,612,269 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gap | | ₩ | 160,528 | | | ₩ | 387,295 | | | ₩ | 627,761 | | | ₩ | (72,577 | ) | | ₩ | 244,386 | | | ₩ | 1,347,393 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated gap | | | 160,528 | | | | 547,823 | | | | 1,175,584 | | | | 1,103,007 | | | | 1,347,393 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage (%) | | | 4.05 | | | | 13.84 | | | | 29.69 | | | | 27.86 | | | | 34.03 | | | | | |
ii. Interest Rate VaR
Interest rate VaR is the maximum possible loss due to interest rate risk under a normal distribution at a 99.94%99.9% confidence level. The measurement results of risk as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Kookmin Bank | | ₩ | 203,503 | | | ₩ | 112,500 | | | ₩ | 75,990 | | | ₩ | 350,178 | | KB Securities Co., Ltd.1 | | | | 33,345 | | | | 39,717 | | KB Insurance Co., Ltd.2 | | | | — | | | | 451,335 | | KB Kookmin Card Co., Ltd. | | | 73,135 | | | | 55,101 | | | | 43,730 | | | | 12,775 | | KB Investment & Securities Co., Ltd. | | | 7,503 | | | | 3,489 | | | KB Life Insurance Co., Ltd. | | | 168,542 | | | | 103,424 | | | | 21,510 | | | | 51,677 | | KB Savings Bank Co., Ltd. | | | 3,870 | | | | 4,649 | | | | 5,694 | | | | 6,447 | | Yehansoul Savings Bank Co., Ltd. | | | 1,604 | | | | — | | | KB Capital Co.,Ltd | | | — | | | | 3,685 | | | KB Capital Co., Ltd. | | | | 4,794 | | | | 10,912 | |
1 | Including Hyundai Securities Co., Ltd.(included as a subsidiary in fourth quarter, 2016) |
2 | Including KB Insurance Co., Ltd.(included as a subsidiary in second quarter, 2017) |
4.4.4 Financial Instruments in Foreign Currencies Details of financial instruments presented in foreign currencies Financial instruments in foreign currencies translated into Korean won as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | USD | | JPY | | EUR | | GBP | | CNY | | Others | | Total | | | USD | | JPY | | EUR | | GBP | | CNY | | Others | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and due from financial institutions | | ₩ | 1,324,563 | | | ₩ | 123,527 | | | ₩ | 87,765 | | | ₩ | 5,495 | | | ₩ | 130,290 | | | ₩ | 216,250 | | | ₩ | 1,887,890 | | | ₩ | 2,562,178 | | | ₩ | 209,264 | | | ₩ | 353,841 | | | ₩ | 17,224 | | | ₩ | 601,317 | | | ₩ | 343,825 | | | ₩ | 4,087,649 | | Financial assets held for trading | | | 16,290 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 16,290 | | | 1,078,304 | | | 123,733 | | | 2,927 | | | | — | | | 6,275 | | | | — | | | 1,211,239 | | Financial assets designated at fair value through profit or loss | | | 5,293 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,293 | | | 458,422 | | | | — | | | | — | | | | — | | | | — | | | | — | | | 458,422 | | Derivatives held for trading | | | 94,664 | | | | — | | | | 946 | | | | — | | | | — | | | | — | | | | 95,610 | | | 84,938 | | | 13 | | | 24,616 | | | | — | | | | — | | | 90,626 | | | 200,193 | | Derivatives held for hedging | | | 16,094 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 16,094 | | | 5,917 | | | | — | | | | — | | | | — | | | | — | | | | — | | | 5,917 | | Loans | | | 10,061,929 | | | | 1,235,187 | | | | 381,415 | | | | 51,677 | | | | 456 | | | | 190,827 | | | | 11,921,491 | | | 10,824,626 | | | 342,100 | | | 895,208 | | | 5,799 | | | 552,966 | | | 180,445 | | | 12,801,144 | | Available-for-sale financial assets | | | 777,081 | | | | 10,052 | | | | — | | | | — | | | | — | | | | 3,747 | | | | 790,880 | | | 2,214,244 | | | 150,510 | | | | — | | | | — | | | 35,873 | | | 1,033 | | | 2,401,660 | | Held-to-maturity financial assets | | | 1,148,075 | | | | — | | | | — | | | | — | | | | — | | | | — | | | 1,148,075 | | Other financial assets | | | 512,717 | | | | 314,632 | | | | 76,016 | | | | 1,332 | | | | — | | | | 91,405 | | | | 996,102 | | | 930,606 | | | 245,827 | | | 35,981 | | | 30,793 | | | 176,833 | | | 648,089 | | | 2,068,129 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 12,808,631 | | | ₩ | 1,683,398 | | | ₩ | 546,142 | | | ₩ | 58,504 | | | ₩ | 130,746 | | | ₩ | 502,229 | | | ₩ | 15,729,650 | | | ₩ | 19,307,310 | | | ₩ | 1,071,447 | | | ₩ | 1,312,573 | | | ₩ | 53,816 | | | ₩ | 1,373,264 | | | ₩ | 1,264,018 | | | ₩ | 24,382,428 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities designated at fair value through profit or loss | | ₩ | 5,287 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 5,287 | | | ₩ | 457,766 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 457,766 | | Derivatives held for trading | | | 127,308 | | | | — | | | | 1,333 | | | | — | | | | 15 | | | | — | | | | 128,656 | | | 105,918 | | | | — | | | 129,349 | | | | — | | | | — | | | 315,403 | | | 550,670 | | Derivatives held for hedging | | | 63,634 | | | | — | | | | — | | | | — | | | | — | | | | — | | | 63,634 | | Deposits | | | 3,914,192 | | | | 515,595 | | | | 150,713 | | | | 15,816 | | | | 10,905 | | | | 280,863 | | | | 4,888,084 | | | 7,259,601 | | | 597,173 | | | 457,447 | | | 52,710 | | | 791,825 | | | 399,683 | | | 9,558,439 | | Debts | | | 5,830,466 | | | | 574,307 | | | | 318,748 | | | | 4,382 | | | | 100,464 | | | | 174,898 | | | | 7,003,265 | | | 7,273,597 | | | 169,507 | | | 83,105 | | | 279 | | | 85,123 | | | 37,491 | | | 7,649,102 | | Debentures | | | 2,717,876 | | | | 236,020 | | | | 193,062 | | | | — | | | | — | | | | 148,687 | | | | 3,295,645 | | | 3,830,709 | | | | — | | | | — | | | | — | | | | — | | | | — | | | 3,830,709 | | Other financial liabilities | | | 1,475,826 | | | | 59,820 | | | | 150,815 | | | | 51,678 | | | | 913 | | | | 42,241 | | | | 1,781,293 | | | 1,453,669 | | | 52,275 | | | 534,224 | | | 1,429 | | | 176,382 | | | 294,933 | | | 2,512,912 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 14,070,955 | | | ₩ | 1,385,742 | | | ₩ | 814,671 | | | ₩ | 71,876 | | | ₩ | 112,297 | | | ₩ | 646,689 | | | ₩ | 17,102,230 | | | ₩ | 20,444,894 | | | ₩ | 818,955 | | | ₩ | 1,204,125 | | | ₩ | 54,418 | | | ₩ | 1,053,330 | | | ₩ | 1,047,510 | | | ₩ | 24,623,232 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Off-balance sheet items | | ₩ | 16,574,161 | | | ₩ | 3,486 | | | ₩ | 4,878 | | | ₩ | 4,787 | | | ₩ | 9,958 | | | ₩ | 60,221 | | | ₩ | 16,657,491 | | | ₩ | 14,570,708 | | | ₩ | 822 | | | ₩ | 39,000 | | | ₩ | — | | | ₩ | 131,210 | | | ₩ | 470,900 | | | ₩ | 15,212,640 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | USD | | JPY | | EUR | | GBP | | CNY | | Others | | Total | | | USD | | JPY | | EUR | | GBP | | CNY | | Others | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and due from financial institutions | | ₩ | 1,554,219 | | | ₩ | 148,923 | | | ₩ | 104,932 | | | ₩ | 10,875 | | | ₩ | 47,653 | | | ₩ | 180,518 | | | ₩ | 2,047,120 | | | ₩ | 1,820,651 | | | ₩ | 268,482 | | | ₩ | 309,890 | | | ₩ | 20,062 | | | ₩ | 872,650 | | | ₩ | 356,242 | | | ₩ | 3,647,977 | | Financial assets held for trading | | | 43,753 | | | | — | | | | 15,333 | | | | — | | | | — | | | | — | | | | 59,086 | | | 3,021,509 | | | 84,980 | | | 81,394 | | | 8922 | | | 15,492 | | | 20,767 | | | 3,233,064 | | Financial assets designated at fair value through profit or loss | | | 11,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 11,000 | | | 826,906 | | | | — | | | | — | | | | — | | | | — | | | | — | | | 826,906 | | Derivatives held for trading | | | 55,895 | | | | 83 | | | | 694 | | | | — | | | | 37 | | | | 6 | | | | 56,715 | | | 124,434 | | | 446 | | | 10,172 | | | | — | | | 96 | | | 56,362 | | | 191,510 | | Derivatives held for hedging | | | 5,032 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,032 | | | 29,489 | | | | — | | | | — | | | | — | | | | — | | | | — | | | 29,489 | | Loans | | | 10,753,455 | | | | 900,972 | | | | 402,656 | | | | 6,612 | | | | 3,492 | | | | 115,633 | | | | 12,182,820 | | | 10,689,732 | | | 228,747 | | | 1,503,493 | | | 9,549 | | | 795,302 | | | 287,591 | | | 13,514,414 | | Available-for-sale financial assets | | | 798,353 | | | | — | | | | — | | | | — | | | | — | | | | 1,914 | | | | 800,267 | | | 6,061,404 | | | 101,003 | | | 124,045 | | | | — | | | 38,606 | | | 21,123 | | | 6,346,181 | | Held-to-maturity financial assets | | | 2,313,099 | | | | — | | | 44,267 | | | | — | | | 4,905 | | | 4,242 | | | 2,366,513 | | Other financial assets | | | 1,192,982 | | | | 61,140 | | | | 75,970 | | | | 1,710 | | | | 46,434 | | | | 10,212 | | | | 1,388,448 | | | 1,615,795 | | | 453,029 | | | 406,793 | | | 13,382 | | | 226,301 | | | 708,965 | | | 3,424,265 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 14,414,689 | | | ₩ | 1,111,118 | | | ₩ | 599,585 | | | ₩ | 19,197 | | | ₩ | 97,616 | | | ₩ | 308,283 | | | ₩ | 16,550,488 | | | ₩ | 26,503,019 | | | ₩ | 1,136,687 | | | ₩ | 2,480,054 | | | ₩ | 51,915 | | | ₩ | 1,953,352 | | | ₩ | 1,455,292 | | | ₩ | 33,580,319 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities designated at fair value through profit or loss | | | ₩ | 1,840,217 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 1,840,217 | | Derivatives held for trading | | ₩ | 86,046 | | | ₩ | — | | | ₩ | 921 | | | ₩ | — | | | ₩ | — | | | ₩ | 47 | | | ₩ | 87,014 | | | 109,197 | | | 1,399 | | | 73,298 | | | | — | | | 3,563 | | | 183,461 | | | 370,918 | | Derivatives held for hedging | | | 226 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 226 | | | 49,962 | | | | — | | | | — | | | | — | | | | — | | | | — | | | 49,962 | | Deposits | | | 4,611,932 | | | | 389,071 | | | | 188,431 | | | | 19,924 | | | | 21,297 | | | | 273,357 | | | | 5,504,012 | | | 8,469,129 | | | 759,394 | | | 389,049 | | | 39,993 | | | 1,093,998 | | | 590,793 | | | 11,342,356 | | Debts | | | 6,382,288 | | | | 258,483 | | | | 303,866 | | | | 880 | | | | 3,577 | | | | 168,908 | | | | 7,118,002 | | | 7,570,727 | | | 44,885 | | | 102,005 | | | 737 | | | | — | | | 24,185 | | | 7,742,539 | | Debentures | | | 3,094,159 | | | | 73,606 | | | | 26,730 | | | | — | | | | — | | | | 22,671 | | | | 3,217,166 | | | 3,473,284 | | | | — | | | | — | | | | — | | | | — | | | 219,376 | | | 3,692,660 | | Other financial liabilities | | | 1,194,927 | | | | 76,150 | | | | 78,093 | | | | 7,157 | | | | 46,710 | | | | 13,043 | | | | 1,416,080 | | | 2,361,161 | | | 44,137 | | | 887,561 | | | 3,339 | | | 224,675 | | | 302,596 | | | 3,823,469 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 15,369,578 | | | ₩ | 797,310 | | | ₩ | 598,041 | | | ₩ | 27,961 | | | ₩ | 71,584 | | | ₩ | 478,026 | | | ₩ | 17,342,500 | | | ₩ | 23,873,677 | | | ₩ | 849,815 | | | ₩ | 1,451,913 | | | ₩ | 44,069 | | | ₩ | 1,322,236 | | | ₩ | 1,320,411 | | | ₩ | 28,862,121 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Off-balance sheet items | | ₩ | 17,850,878 | | | ₩ | 19,783 | | | ₩ | 6,549 | | | ₩ | 4,704 | | | ₩ | 18,898 | | | ₩ | 78,818 | | | ₩ | 17,979,630 | | | ₩ | 12,852,959 | | | ₩ | 705 | | | ₩ | 2,404 | | | ₩ | — | | | ₩ | 257,940 | | | ₩ | 233,509 | | | ₩ | 13,347,517 | | | | | | | | | | | | | | | | | | | | | | | | |
4.5 Operational Risk 4.5.1 Concept The Group defines operational risk broadly to include all financial andnon-financial risks that may arise from operating activities and could cause a negative effect on capital. 4.5.2 Risk managementManagement The purpose of operational risk management is not only to comply with supervisory and regulatory requirements but also to promote a risk management culture, strengthen internal controls, innovate processes and provide timely feedback to management and employees. In addition, Kookmin Bank established Business Continuity Plans (BCP) to ensure critical business functions can be maintained, or restored, in the event of material disruptions arising from internal or external events. It has constructed replacement facilities as well as has carried out exercise drills for head office and IT departments to test its BCPs. 4.6. Capital Adequacy The Group complies with the capital adequacy standard established by the Financial Services Commission. The capital adequacy standard is based on Basel III published by Basel Committee on Banking Supervision in Bank of International Settlements in June 2011, and was implemented in Korea in December 2013. The Group is required to maintain a minimum Common Equity Tier 1 ratio of at least 4.0%(3.5%,2013)6.25%(2016: 5.375%), a minimum Tier 1 ratio of 5.5%(4.5%,2013)7.75%(2016: 6.875%) and a minimum Total Regulatory Capital of 8.0%(8.0%,2013)9.75%(2016: 8.875%) as of December 31, 2014.2017. The Group’s equity capital is classified into three categories in accordance with the Supervisory Regulations and Detailed Supervisory Regulations on Financial Holding Companies: Common Equity Tier 1 Capital: Common equity Tier 1 Capital represents the issued capital that takes the first and proportionately greatest share of any losses and represents the most subordinated claim in liquidation of the Group, and not repaid outside of liquidation. It includes common shares issued, capital surplus, retained earnings,non-controlling interests of consolidated subsidiaries, accumulated other comprehensive income, other capital surplus and others. Additional Tier 1 Capital: Additional Tier 1 Capital includes (i) perpetual instruments issued by the Group that meet the criteria for inclusion in Additional Tier 1 capital, and (ii) stock surplus resulting from the issue of instruments included in Additional Tier 1 capital and others. Tier 2 Capital: Tier 2 Capital represents the capital that takes the proportionate share of losses in the liquidation of the Group. Tier 2 Capital includes a fund raised by issuing subordinated debentures maturing in not less than 5five years that meet the criteria for inclusion in Additional Tier 2 capital, and the allowance for loan losses which are accumulated for assets classified as normal or precautionary as a result of classification of asset soundness in accordance with Regulation on Supervision of Financial Holding Companies and others. Risk weighted asset means the inherent risks in the total assets held by the Group. The Group calculates risk weighted asset by each risk (credit risk, market risk, and operational risk) based on the Supervisory Regulations and Detailed Supervisory Regulations on Financial Holding Companies and uses it for BIS ratio calculation. The Group assesses and monitors its adequacy of capital by using the internal assessment and management policy of the capital adequacy. The assessment of the capital adequacy is conducted by comparing available capital (actual amount of available capital) and economicinternal capital (amount of capital enough to cover all significant risks under target credit rate set by the Group). The Group monitors the soundness of finance and provides risk adjusted basis for performance review using the assessment of the capital adequacy. EconomicInternal Capital is the amount of capital to prevent the inability of payment due to unexpected loss in the future. The Group measures, allocates and monitors economicinternal capital by risk type and subsidiaries.
The Risk Management Council of the Group determines the Group’s risk appetite and allocates economicinternal capital by risk type and subsidiary. Each subsidiary efficiently operates its capital within a range of allocated economicinternal capital. The Risk Management Department of the Group monitors the limit on economicinternal capital and reports the results to management and the Risk Management Council. The Group maintains the adequacy of capital through proactive review and approval of the Risk Management Committee when the economicinternal capital is expected to exceed the limits due to new business or business expansion. The Group and its subsidiaries comply with external capital adequacy requirements as of December 31, 2013 and 2014. The detailsDetails of the Group’s capital adequacy calculation in line with Basel III requirements as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Equity Capital: | | ₩ | 27,296,535 | | | ₩ | 28,347,675 | | | ₩ | 31,103,291 | | | ₩ | 32,401,580 | | Tier 1 Capital | | | 22,693,836 | | | | 24,248,598 | | | | 29,264,494 | | | | 31,059,475 | | Common Equity Tier 1 Capital | | | 22,693,836 | | | | 24,062,475 | | | | 29,013,954 | | | | 31,059,475 | | Additional Tier 1 Capital | | | — | | | | 186,123 | | | | 250,540 | | | | — | | Tier 2 Capital | | | 4,602,699 | | | | 4,099,077 | | | | 1,838,797 | | | | 1,342,105 | | Risk-weighted assets: | | | 177,514,060 | | | | 182,485,957 | | | | 203,649,442 | | | | 212,777,226 | | Equity Capital (%): | | | 15.38 | | | | 15.53 | | | | 15.27 | | | | 15.23 | | Tier 1 Capital (%) | | | 12.78 | | | | 13.29 | | | | 14.37 | | | | 14.6 | | Common Equity Tier 1 Capital (%) | | | 12.78 | | | | 13.19 | | | | 14.25 | | | | 14.6 | |
5. Segment Information
5.1 Overall Segment Information and Business Segments The Group is organized into the following business segments. These business divisions areclassifies reporting segments based on the nature of the products and services provided, the type or class of customer, and the Group’s management organization. | | | | | Banking businessBusiness | | Corporate Banking | | The activities within this segment include providing credit, deposit products and other related financial services to large, small-and small andmedium-sized enterprises and SOHOs. | | | Retail Banking | | The activities within this segment include providing credit, deposit products and other related financial services to individuals and households. | | | Other Banking servicesServices | | The activities within this segment include trading activities in securities and derivatives, funding and other supporting activities. | Securities Business | | The activities within this segment include investment banking, brokerage services and other supporting activities. | Non-life Insurance Business | | The activities within this segment include property insurance and other supporting activities. | Credit Card businessBusiness | | The activities within this segment include credit sale, cash service, card loan and other supporting activities. | Investment & Securities business
| | The activities within this segment include investment banking and brokerage services and other supporting activities.
| Life Insurance businessBusiness | | The activities within this segment include life insurance and other supporting activities. |
Financial information by business segment for the year ended December 31, 2012,2016, is as follows: | | | Banking business | | | | | | | | | | | | | | | Banking business | | | | | | | | | | | | | | | | Corporate Banking | | Retail Banking | | Other Banking Services | | Sub-total | | Credit Card | | Investment & Securities | | Life Insurance | | Others | | Intra-group Adjustments | | Total | | | Corporate Banking | | Retail Banking | | Other Banking Services | | Sub-total | | Securities | | Credit Card | | Life Insurance | | Others | | Intra-group Adjustments | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Operating revenues from external customers | | ₩ | 1,952,464 | | | ₩ | 3,041,135 | | | ₩ | 1,297,400 | | | ₩ | 6,290,999 | | | ₩ | 1,286,719 | | | ₩ | 142,617 | | | ₩ | 131,188 | | | ₩ | 32,988 | | | ₩ | — | | | ₩ | 7,884,511 | | | ₩ | 1,803,204 | | | ₩ | 2,248,035 | | | ₩ | 1,402,861 | | | ₩ | 5,454,100 | | | ₩ | 184,856 | | | ₩ | 1,269,573 | | | ₩ | 139,847 | | | ₩ | 396,566 | | | ₩ | — | | | ₩ | 7,444,942 | | Segment operating revenues (expenses) | | | 2,289 | | | | (70,422 | ) | | | 300,356 | | | | 232,223 | | | | (238,094 | ) | | | 5,971 | | | | (62,774 | ) | | | 201,566 | | | | (138,892 | ) | | | — | | | Intra-segment operating revenues(expenses) | | | 9,274 | | | | — | | | 249,235 | | | 258,509 | | | 3,268 | | | (261,747 | ) | | (26,528 | ) | | 159,944 | | | (133,446 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | ₩ | 1,954,753 | | | ₩ | 2,970,713 | | | ₩ | 1,597,756 | | | ₩ | 6,523,222 | | | ₩ | 1,048,625 | | | ₩ | 148,588 | | | ₩ | 68,414 | | | ₩ | 234,554 | | | ₩ | (138,892 | ) | | ₩ | 7,884,511 | | | ₩ | 1,812,478 | | | ₩ | 2,248,035 | | | ₩ | 1,652,096 | | | ₩ | 5,712,609 | | | ₩ | 188,124 | | | ₩ | 1,007,826 | | | ₩ | 113,319 | | | ₩ | 556,510 | | | ₩ | (133,446 | ) | | ₩ | 7,444,942 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income | | | 2,593,646 | | | | 2,524,163 | | | | 661,666 | | | | 5,779,475 | | | | 974,419 | | | | 19,059 | | | | 192,011 | | | | 75,971 | | | | (3,152 | ) | | | 7,037,783 | | | 2,286,347 | | | 2,353,232 | | | 189,331 | | | 4,828,910 | | | 73,205 | | | 981,342 | | | 233,742 | | | 283,158 | | | 2,172 | | | 6,402,529 | | Interest income | | | 5,190,403 | | | | 5,681,723 | | | | 1,622,918 | | | | 12,495,044 | | | | 1,387,987 | | | | 38,206 | | | | 191,907 | | | | 123,096 | | | | (26,134 | ) | | | 14,210,106 | | | 3,297,791 | | | 3,740,601 | | | 855,764 | | | 7,894,156 | | | 142,960 | | | 1,261,787 | | | 233,764 | | | 501,675 | | | (12,460 | ) | | 10,021,882 | | Interest expense | | | (2,596,757 | ) | | | (3,157,560 | ) | | | (961,252 | ) | | | (6,715,569 | ) | | | (413,568 | ) | | | (19,147 | ) | | | 104 | | | | (47,125 | ) | | | 22,982 | | | | (7,172,323 | ) | | (1,011,444 | ) | | (1,387,369 | ) | | (666,433 | ) | | (3,065,246 | ) | | (69,755 | ) | | (280,445 | ) | | (22 | ) | | (218,517 | ) | | 14,632 | | | (3,619,353 | ) | Net fee and commission income | | | 232,981 | | | | 696,311 | | | | 324,120 | | | | 1,253,412 | | | | 157,788 | | | | 85,610 | | | | 211 | | | | 96,899 | | | | (27,214 | ) | | | 1,566,706 | | | 231,182 | | | 504,259 | | | 352,410 | | | 1,087,851 | | | 193,384 | | | 92,070 | | | (927 | ) | | 212,723 | | | (209 | ) | | 1,584,892 | | Fee and commission income | | | 274,794 | | | | 760,802 | | | | 401,892 | | | | 1,437,488 | | | | 1,427,271 | | | | 96,247 | | | | 211 | | | | 117,008 | | | | (324,349 | ) | | | 2,753,876 | | | 293,336 | | | 583,048 | | | 433,998 | | | 1,310,382 | | | 220,938 | | | 1,658,034 | | | 85 | | | 252,031 | | | (290,593 | ) | | 3,150,877 | | Fee and commission expense | | | (41,813 | ) | | | (64,491 | ) | | | (77,772 | ) | | | (184,076 | ) | | | (1,269,483 | ) | | | (10,637 | ) | | | — | | | | (20,109 | ) | | | 297,135 | | | | (1,187,170 | ) | | (62,154 | ) | | (78,789 | ) | | (81,588 | ) | | (222,531 | ) | | (27,554 | ) | | (1,565,964 | ) | | (1,012 | ) | | (39,308 | ) | | 290,384 | | | (1,565,985 | ) | Net insurance income | | | | — | | | | — | | | | — | | | | — | | | | — | | | 20,825 | | | (166,095 | ) | | | — | | | 27,467 | | | (117,803 | ) | Insurance income | | | | — | | | | — | | | | — | | | | — | | | | — | | | 33,874 | | | 1,167,478 | | | | — | | | | — | | | 1,201,352 | | Insurance expenses | | | | — | | | | — | | | | — | | | | — | | | | — | | | (13,049 | ) | | (1,333,573 | ) | | | — | | | 27,467 | | | (1,319,155 | ) | Net gains (losses) on financial assets/ liabilities at fair value through profit or loss | | | (501 | ) | | | (15,102 | ) | | | 756,103 | | | | 740,500 | | | | — | | | | 39,137 | | | | 7,703 | | | | 24,617 | | | | 7 | | | | 811,964 | | | (1,166 | ) | | | — | | | 198,064 | | | 196,898 | | | (212,522 | ) | | | — | | | 8,154 | | | 7,851 | | | (9,149 | ) | | (8,768 | ) | Net other operating income (loss) | | | (871,373 | ) | | | (234,659 | ) | | | (144,133 | ) | | | (1,250,165 | ) | | | (83,582 | ) | | | 4,782 | | | | (131,511 | ) | | | 37,067 | | | | (108,533 | ) | | | (1,531,942 | ) | | Net other operating income (expense) | | | (703,885 | ) | | (609,456 | ) | | 912,291 | | | (401,050 | ) | | 134,057 | | | (86,411 | ) | | 38,445 | | | 52,778 | | | (153,727 | ) | | (415,908 | ) | General and administrative expenses | | | (792,533 | ) | | | (1,672,741 | ) | | | (811,714 | ) | | | (3,276,988 | ) | | | (348,243 | ) | | | (117,861 | ) | | | (45,166 | ) | | | (133,069 | ) | | | 75,717 | | | | (3,845,610 | ) | | (950,038 | ) | | (2,102,384 | ) | | (1,216,527 | ) | | (4,268,949 | ) | | (316,958 | ) | | (348,121 | ) | | (94,753 | ) | | (266,124 | ) | | 66,194 | | | (5,228,711 | ) | Operating profit before provision for credit losses | | | 1,162,220 | | | | 1,297,972 | | | | 786,042 | | | | 3,246,234 | | | | 700,382 | | | | 30,727 | | | | 23,248 | | | | 101,485 | | | | (63,175 | ) | | | 4,038,901 | | | 862,440 | | | 145,651 | | | 435,569 | | | 1,443,660 | | | (128,834 | ) | | 659,705 | | | 18,566 | | | 290,386 | | | (67,252 | ) | | 2,216,231 | | Provision (reversal) for credit losses | | | (852,964 | ) | | | (392,354 | ) | | | (48,712 | ) | | | (1,294,030 | ) | | | (314,843 | ) | | | (3,244 | ) | | | (479 | ) | | | 5,842 | | | | 51 | | | | (1,606,703 | ) | | (278,277 | ) | | (2,615 | ) | | 26,563 | | | (254,329 | ) | | 9,083 | | | (249,809 | ) | | (1,663 | ) | | (42,893 | ) | | 328 | | | (539,283 | ) | Net operating profit | | | 309,256 | | | | 905,618 | | | | 737,330 | | | | 1,952,204 | | | | 385,539 | | | | 27,483 | | | | 22,769 | | | | 107,327 | | | | (63,124 | ) | | | 2,432,198 | | | Share of profit of associates | | | — | | | | — | | | | (5,712 | ) | | | (5,712 | ) | | | — | | | | — | | | | — | | | | (185 | ) | | | (9,385 | ) | | | (15,282 | ) | | Net other non-operating revenue (expense) | | | 5,522 | | | | — | | | | (69,537 | ) | | | (64,015 | ) | | | (4,334 | ) | | | (2,987 | ) | | | (856 | ) | | | (44,177 | ) | | | (1,903 | ) | | | (118,272 | ) | | Net operating income (expense) | | | 584,163 | | | 143,036 | | | 462,132 | | | 1,189,331 | | | (119,751 | ) | | 409,896 | | | 16,903 | | | 247,493 | | | (66,924 | ) | | 1,676,948 | | Share of profit of associates and joint ventures | | | | — | | | | — | | | 17,615 | | | 17,615 | | | 106,423 | | | (20 | ) | | | — | | | 156,820 | | | | — | | | 280,838 | | Net othernon-operating income (expense) | | | (1,300 | ) | | | — | | | 50,611 | | | 49,311 | | | 634,863 | | | 2,262 | | | (148 | ) | | (440 | ) | | (14,979 | ) | | 670,869 | | Segment profits before income tax | | | 314,778 | | | | 905,618 | | | | 662,081 | | | | 1,882,477 | | | | 381,205 | | | | 24,496 | | | | 21,913 | | | | 62,965 | | | | (74,412 | ) | | | 2,298,644 | | | 582,863 | | | 143,036 | | | 530,358 | | | 1,256,257 | | | 621,535 | | | 412,138 | | | 16,755 | | | 403,873 | | | (81,903 | ) | | 2,628,655 | | Income tax expense | | | (76,854 | ) | | | (219,173 | ) | | | (107,793 | ) | | | (403,820 | ) | | | (90,464 | ) | | | (6,604 | ) | | | (5,268 | ) | | | (14,894 | ) | | | 1,073 | | | | (519,977 | ) | | Profit for the year | | | 237,924 | | | | 686,445 | | | | 554,288 | | | | 1,478,657 | | | | 290,741 | | | | 17,892 | | | | 16,645 | | | | 48,071 | | | | (73,339 | ) | | | 1,778,667 | | | Profit attributable to Shareholders of the parent company | | | 237,924 | | | | 686,445 | | | | 553,919 | | | | 1,478,288 | | | | 290,741 | | | | 17,892 | | | | 16,645 | | | | 48,071 | | | | (82,069 | ) | | | 1,769,568 | | | Profit attributable to Non-controlling interests | | | — | | | | — | | | | 369 | | | | 369 | | | | — | | | | — | | | | — | | | | — | | | | 8,730 | | | | 9,099 | | | Total assets(1) | | | 93,143,686 | | | | 100,591,642 | | | | 67,629,975 | | | | 261,365,303 | | | | 14,046,174 | | | | 3,314,907 | | | | 5,987,928 | | | | 21,072,698 | | | | (19,717,506 | ) | | | 286,069,504 | | | Total liabilities(1) | | | 84,489,904 | | | | 115,521,270 | | | | 41,018,121 | | | | 241,029,295 | | | | 10,966,541 | | | | 2,769,160 | | | | 5,594,727 | | | | 1,097,595 | | | | (469,405 | ) | | | 260,987,913 | | | Income tax benefit (expense) | | | (140,910 | ) | | (34,614 | ) | | (116,477 | ) | | (292,001 | ) | | 20,765 | | | (95,035 | ) | | (4,041 | ) | | (66,262 | ) | | (1,901 | ) | | (438,475 | ) | Profit (loss) for the year | | | 441,953 | | | 108,422 | | | 413,881 | | | 964,256 | | | 642,300 | | | 317,103 | | | 12,714 | | | 337,611 | | | (83,804 | ) | | 2,190,180 | | Profit (loss) attributable to shareholders of the parent company | | | | 441,953 | | | | 108,422 | | | | 413,881 | | | | 964,256 | | | | 642,300 | | | | 317,103 | | | | 12,714 | | | | 291,175 | | | | (83,804 | ) | | 2,143,744 | | Profit attributable tonon-controlling interests | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 46,436 | | | | — | | | 46,436 | | Total assets1 | | | 109,500,342 | | | 122,806,490 | | | 74,759,538 | | | 307,066,370 | | | 32,382,795 | | | 15,772,036 | | | 8,887,413 | | | 36,646,767 | | | (25,081,725 | ) | | 375,673,656 | | Total liabilities1 | | | 91,685,643 | | | 140,082,958 | | | 51,972,767 | | | 283,741,368 | | | 28,198,439 | | | 11,807,038 | | | 8,337,849 | | | 12,468,290 | | | (140,731 | ) | | 344,412,253 | |
(1)1 | AmountsAssets and liabilities of the reporting segments are amounts before intra-groupintra-segment transaction adjustment. |
Financial information by business segment for the year ended December 31, 2013,2017, is as follows: | | | Banking business | | | | | | | | | | | | | | | Banking business | | | | | | | | | | | | | | | | | | Corporate Banking | | Retail Banking | | Other Banking Services | | Sub-total | | Credit Card | | Investment & Securities | | Life Insurance | | Others | | Intra-group Adjustments | | Total | | | Corporate Banking | | Retail Banking | | Other Banking Services | | Sub-total | | Securities | | Non-life Insurance | | Credit Card | | Life Insurance | | Others | | Intra-group Adjustments | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | | | Operating revenues from external customers | | ₩ | 1,731,770 | | | ₩ | 2,453,683 | | | ₩ | 1,486,647 | | | ₩ | 5,672,100 | | | ₩ | 1,420,937 | | | ₩ | 115,054 | | | ₩ | 102,226 | | | ₩ | 143,811 | | | ₩ | — | | | ₩ | 7,454,128 | | | ₩ | 2,128,913 | | | ₩ | 2,710,798 | | | ₩ | 1,405,605 | | | ₩ | 6,245,316 | | | ₩ | 1,074,365 | | | ₩ | 1,121,108 | | | ₩ | 1,276,803 | | | ₩ | 129,513 | | | ₩ | 345,077 | | | ₩ | — | | | ₩ | 10,192,182 | | Segment operating revenues(expenses) | | | 4,945 | | | | (91,800 | ) | | | 314,854 | | | | 227,999 | | | | (218,231 | ) | | | 5,180 | | | | (38,327 | ) | | | 124,281 | | | | (100,902 | ) | | | — | | | Intra-segment operating revenues(expenses) | | | (18,447 | ) | | | — | | | 203,310 | | | 184,863 | | | (1,157 | ) | | 18,039 | | | (194,167 | ) | | (20,515 | ) | | 171,422 | | | (158,485 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | ₩ | 1,736,715 | | | ₩ | 2,361,883 | | | ₩ | 1,801,501 | | | ₩ | 5,900,099 | | | ₩ | 1,202,706 | | | ₩ | 120,234 | | | ₩ | 63,899 | | | ₩ | 268,092 | | | ₩ | (100,902 | ) | | ₩ | 7,454,128 | | | ₩ | 2,110,466 | | | ₩ | 2,710,798 | | | ₩ | 1,608,915 | | | ₩ | 6,430,179 | | | ₩ | 1,073,208 | | | ₩ | 1,139,147 | | | ₩ | 1,082,636 | | | ₩ | 108,998 | | | ₩ | 516,499 | | | ₩ | (158,485 | ) | | ₩ | 10,192,182 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income | | | 2,550,728 | | | | 2,012,661 | | | | 596,851 | | | | 5,160,240 | | | | 1,057,046 | | | | 23,985 | | | | 200,422 | | | | 80,694 | | | | 445 | | | | 6,522,832 | | | 2,555,780 | | | 2,647,768 | | | 190,767 | | | 5,394,315 | | | 251,967 | | | 465,016 | | | 1,083,665 | | | 215,743 | | | 296,920 | | | 2,383 | | | 7,710,009 | | Interest income | | | 4,390,623 | | | | 4,785,526 | | | | 1,419,231 | | | | 10,595,380 | | | | 1,435,952 | | | | 40,567 | | | | 200,422 | | | | 106,336 | | | | (21,727 | ) | | | 12,356,930 | | | 3,584,021 | | | 3,935,895 | | | 818,508 | | | 8,338,424 | | | 452,862 | | | 465,144 | | | 1,341,150 | | | 215,768 | | | 582,864 | | | (13,760 | ) | | 11,382,452 | | Interest expense | | | (1,839,895 | ) | | | (2,772,865 | ) | | | (822,380 | ) | | | (5,435,140 | ) | | | (378,906 | ) | | | (16,582 | ) | | | — | | | | (25,642 | ) | | | 22,172 | | | | (5,834,098 | ) | | (1,028,241 | ) | | (1,288,127 | ) | | (627,741 | ) | | (2,944,109 | ) | | (200,895 | ) | | (128 | ) | | (257,485 | ) | | (25 | ) | | (285,944 | ) | | 16,143 | | | (3,672,443 | ) | Net fee and commission income | | | 240,698 | | | | 612,165 | | | | 251,881 | | | | 1,104,744 | | | | 184,679 | | | | 75,796 | | | | 109 | | | | 118,136 | | | | (4,225 | ) | | | 1,479,239 | | | 235,210 | | | 595,322 | | | 394,157 | | | 1,224,689 | | | 551,619 | | | (97,828 | ) | | 132,686 | | | (3,612 | ) | | 252,813 | | | (10,343 | ) | | 2,050,024 | | Fee and commission income | | | 282,403 | | | | 674,250 | | | | 324,997 | | | | 1,281,650 | | | | 1,406,239 | | | | 84,168 | | | | 109 | | | | 137,796 | | | | (252,597 | ) | | | 2,657,365 | | | 315,994 | | | 668,227 | | | 487,259 | | | 1,471,480 | | | 637,630 | | | 1,532 | | | 1,901,112 | | | 69 | | | 299,783 | | | (323,356 | ) | | 3,988,250 | | Fee and commission expense | | | (41,705 | ) | | | (62,085 | ) | | | (73,116 | ) | | | (176,906 | ) | | | (1,221,560 | ) | | | (8,372 | ) | | | — | | | | (19,660 | ) | | | 248,372 | | | | (1,178,126 | ) | | (80,784 | ) | | (72,905 | ) | | (93,102 | ) | | (246,791 | ) | | (86,011 | ) | | (99,360 | ) | | (1,768,426 | ) | | (3,681 | ) | | (46,970 | ) | | 313,013 | | | (1,938,226 | ) | Net gains(losses) on financial assets/ liabilities at fair value through profit or loss | | | 184 | | | | (1,804 | ) | | | 692,121 | | | | 690,501 | | | | — | | | | 19,422 | | | | 18,051 | | | | 28,898 | | | | (50 | ) | | | 756,822 | | | Net other operating income(loss) | | | (1,054,895 | ) | | | (261,139 | ) | | | 260,648 | | | | (1,055,386 | ) | | | (39,019 | ) | | | 1,031 | | | | (154,683 | ) | | | 40,364 | | | | (97,072 | ) | | | (1,304,765 | ) | | Net insurance income | | | | — | | | | — | | | | — | | | | — | | | | — | | | 699,873 | | | 19,948 | | | (141,421 | ) | | | — | | | 15,310 | | | 593,710 | | Insurance income | | | | — | | | | — | | | | — | | | | — | | | | — | | | 7,947,262 | | | 33,579 | | | 1,008,329 | | | | — | | | (18,178 | ) | | 8,970,992 | | Insurance expenses | | | | — | | | | — | | | | — | | | | — | | | | — | | | (7,247,389 | ) | | (13,631 | ) | | (1,149,750 | ) | | | — | | | 33,488 | | | (8,377,282 | ) | Net gains (losses) on financial assets/ liabilities at fair value through profit or loss | | | (1,750 | ) | | | — | | | 101,012 | | | 99,262 | | | 526,023 | | | 41,079 | | | | — | | | 7,795 | | | 19,749 | | | 46,421 | | | 740,329 | | Net other operating income (expense) | | | (678,774 | ) | | (532,292 | ) | | 922,979 | | | (288,087 | ) | | (256,401 | ) | | 31,007 | | | (153,663 | ) | | 30,493 | | | (52,983 | ) | | (212,256 | ) | | (901,890 | ) | General and administrative expenses | | | (821,503 | ) | | | (1,739,768 | ) | | | (835,517 | ) | | | (3,396,788 | ) | | | (354,392 | ) | | | (96,345 | ) | | | (50,692 | ) | | | (141,668 | ) | | | 56,321 | | | | (3,983,564 | ) | | (974,096 | ) | | (1,946,640 | ) | | (745,086 | ) | | (3,665,822 | ) | | (734,024 | ) | | (629,469 | ) | | (370,508 | ) | | (72,423 | ) | | (291,240 | ) | | 134,822 | | | (5,628,664 | ) | Operating profit before provision for credit losses | | | 915,212 | | | | 622,115 | | | | 965,984 | | | | 2,503,311 | | | | 848,314 | | | | 23,889 | | | | 13,207 | | | | 126,424 | | | | (44,581 | ) | | | 3,470,564 | | | 1,136,370 | | | 764,158 | | | 863,829 | | | 2,764,357 | | | 339,184 | | | 509,678 | | | 712,128 | | | 36,575 | | | 225,259 | | | (23,663 | ) | | 4,563,518 | | Provision(reversal) for credit losses | | | (706,464 | ) | | | (358,150 | ) | | | (575 | ) | | | (1,065,189 | ) | | | (344,555 | ) | | | (5,425 | ) | | | (526 | ) | | | (28,235 | ) | | | 358 | | | | (1,443,572 | ) | | Provision (reversal) for credit losses | | | 6,918 | | | (122,107 | ) | | 23 | | | (115,166 | ) | | (23,080 | ) | | (8,987 | ) | | (336,884 | ) | | (1,692 | ) | | (62,894 | ) | | 459 | | | (548,244 | ) | | Net operating profit | | | 208,748 | | | | 263,965 | | | | 965,409 | | | | 1,438,122 | | | | 503,759 | | | | 18,464 | | | | 12,681 | | | | 98,189 | | | | (44,223 | ) | | | 2,026,992 | | | Share of profit of associates | | | — | | | | — | | | | (202,880 | ) | | | (202,880 | ) | | | — | | | | 7 | | | | — | | | | (38,134 | ) | | | 41,615 | | | | (199,392 | ) | | Net other non-operating revenue (expense) | | | 1,662 | | | | — | | | | (25,293 | ) | | | (23,631 | ) | | | (1,652 | ) | | | (1,728 | ) | | | (791 | ) | | | 31,256 | | | | (15,763 | ) | | | (12,309 | ) | | Net operating income (expense) | | | 1,143,288 | | | 642,051 | | | 863,852 | | | 2,649,191 | | | 316,104 | | | 500,691 | | | 375,244 | | | 34,883 | | | 162,365 | | | (23,204 | ) | | 4,015,274 | | Share of profit of associates and joint ventures | | | | — | | | | — | | | 37,571 | | | 37,571 | | | 535 | | | | — | | | (462 | ) | | | — | | | 6,076 | | | 40,554 | | | 84,274 | | Net othernon-operating income (expense) | | | 1,873 | | | | — | | | (75,340 | ) | | (73,467 | ) | | 1,794 | | | 11,167 | | | (6,882 | ) | | (289 | ) | | 6,582 | | | 99,971 | | | 38,876 | | Segment profits before income tax | | | 210,410 | | | | 263,965 | | | | 737,236 | | | | 1,211,611 | | | | 502,107 | | | | 16,743 | | | | 11,890 | | | | 91,311 | | | | (18,371 | ) | | | 1,815,291 | | | 1,145,161 | | | 642,051 | | | 826,083 | | | 2,613,295 | | | 318,433 | | | 511,858 | | | 367,900 | | | 34,594 | | | 175,023 | | | 117,321 | | | 4,138,424 | | Income tax expense | | | (53,195 | ) | | | (86,283 | ) | | | (241,421 | ) | | | (380,899 | ) | | | (117,696 | ) | | | (4,887 | ) | | | (2,792 | ) | | | (30,021 | ) | | | (4,298 | ) | | | (540,593 | ) | | Income tax benefit (expense) | | | (181,936 | ) | | (102,059 | ) | | (154,595 | ) | | (438,590 | ) | | (46,732 | ) | | (181,488 | ) | | (71,069 | ) | | (13,508 | ) | | (61,610 | ) | | 18,034 | | | (794,963 | ) | Profit for the year | | | 157,215 | | | | 177,682 | | | | 495,815 | | | | 830,712 | | | | 384,411 | | | | 11,856 | | | | 9,098 | | | | 61,290 | | | | (22,669 | ) | | | 1,274,698 | | | 963,225 | | | 539,992 | | | 671,488 | | | 2,174,705 | | | 271,701 | | | 330,370 | | | 296,831 | | | 21,086 | | | 113,413 | | | 135,355 | | | 3,343,461 | | Profit attributable to Shareholders of the parent company | | | 157,215 | | | | 177,682 | | | | 495,731 | | | | 830,628 | | | | 384,411 | | | | 11,856 | | | | 6,231 | | | | 61,290 | | | | (22,914 | ) | | | 1,271,502 | | | Profit attributable to Non-controlling interests | | | — | | | | — | | | | 84 | | | | 84 | | | | — | | | | — | | | | 2,867 | | | | — | | | | 245 | | | | 3,196 | | | Total assets(1) | | | 92,498,513 | | | | 103,202,391 | | | | 69,887,481 | | | | 265,588,385 | | | | 15,854,992 | | | | 2,525,070 | | | | 6,945,605 | | | | 21,504,989 | | | | (20,251,443 | ) | | | 292,167,598 | | | Total liabilities(1) | | | 81,008,201 | | | | 122,206,712 | | | | 41,426,715 | | | | 244,641,628 | | | | 12,385,131 | | | | 1,973,888 | | | | 6,396,477 | | | | 1,414,111 | | | | (625,911 | ) | | | 266,185,324 | | | Profit attributable to shareholders of the Parent Company | | | 963,225 | | | 539,992 | | | 671,488 | | | 2,174,705 | | | 271,701 | | | 330,286 | | | 296,831 | | | 21,086 | | | 113,798 | | | 103,031 | | | 3,311,438 | | Profit attributable tonon-controlling interests | | | | — | | | | — | | | | — | | | | — | | | | — | | | 84 | | | | — | | | | — | | | (385 | ) | | 32,324 | | | 32,023 | | Total assets1 | | | 117,904,269 | | | 129,438,168 | | | 82,423,490 | | | 329,765,927 | | | 37,351,680 | | | 32,351,778 | | | 17,658,310 | | | 9,125,741 | | | 37,439,753 | | | (26,907,580 | ) | | 436,785,609 | | Total liabilities1 | | | 102,224,405 | | | 147,870,309 | | | 54,347,779 | | | 304,442,493 | | | 32,936,024 | | | 29,128,747 | | | 13,616,481 | | | 8,586,328 | | | 15,137,421 | | | (1,106,714 | ) | | 402,740,780 | |
(1)1 | AmountsAssets and liabilities of the reporting segments are amounts before intra-groupintra-segment transaction adjustment.
|
Financial information by business segment for the year ended December 31, 2014, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Banking business | | | | | | | | | | | | | | | | | | | | | | Corporate Banking | | | Retail Banking | | | Other Banking Services | | | Sub-total | | | Credit Card | | | Investment & Securities | | | Life Insurance | | | Others | | | Intra-group Adjustments | | | Total | | | | (In millions of Korean won) | | Operating revenues from external customers | | ₩ | 1,710,416 | | | ₩ | 2,211,969 | | | ₩ | 1,480,838 | | | ₩ | 5,403,223 | | | ₩ | 1,280,628 | | | ₩ | 141,355 | | | ₩ | 105,255 | | | ₩ | 266,332 | | | ₩ | — | | | ₩ | 7,196,793 | | Segment operating revenues(expenses) | | | 70,271 | | | | (48,256 | ) | | | 211,993 | | | | 234,008 | | | | (223,878 | ) | | | 5,218 | | | | (30,498 | ) | | | 166,503 | | | | (151,353 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | ₩ | 1,780,687 | | | ₩ | 2,163,713 | | | ₩ | 1,692,831 | | | ₩ | 5,637,231 | | | ₩ | 1,056,750 | | | ₩ | 146,573 | | | ₩ | 74,757 | | | ₩ | 432,835 | | | ₩ | (151,353 | ) | | ₩ | 7,196,793 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income | | | 2,448,966 | | | | 2,079,834 | | | | 442,646 | | | | 4,971,446 | | | | 993,806 | | | | 18,136 | | | | 227,344 | | | | 203,443 | | | | 1,600 | | | | 6,415,775 | | Interest income | | | 4,008,584 | | | | 4,432,760 | | | | 1,261,283 | | | | 9,702,627 | | | | 1,353,704 | | | | 45,404 | | | | 227,372 | | | | 326,366 | | | | (20,177 | ) | | | 11,635,296 | | Interest expense | | | (1,559,618 | ) | | | (2,352,926 | ) | | | (818,637 | ) | | | (4,731,181 | ) | | | (359,898 | ) | | | (27,268 | ) | | | (28 | ) | | | (122,923 | ) | | | 21,777 | | | | (5,219,521 | ) | Net fee and commission income | | | 237,229 | | | | 524,784 | | | | 316,032 | | | | 1,078,045 | | | | 95,132 | | | | 76,268 | | | | 253 | | | | 134,154 | | | | (1,123 | ) | | | 1,382,729 | | Fee and commission income | | | 277,196 | | | | 597,072 | | | | 397,070 | | | | 1,271,338 | | | | 1,408,749 | | | | 82,531 | | | | 253 | | | | 157,924 | | | | (254,610 | ) | | | 2,666,185 | | Fee and commission expense | | | (39,967 | ) | | | (72,288 | ) | | | (81,038 | ) | | | (193,293 | ) | | | (1,313,617 | ) | | | (6,263 | ) | | | — | | | | (23,770 | ) | | | 253,487 | | | | (1,283,456 | ) | Net gains(losses) on financial assets/ liabilities at fair value through profit or loss | | | 179 | | | | (20,238 | ) | | | 376,350 | | | | 356,291 | | | | — | | | | 46,999 | | | | 10,338 | | | | 25,595 | | | | (25 | ) | | | 439,198 | | Net other operating income(loss) | | | (905,687 | ) | | | (420,667 | ) | | | 557,803 | | | | (768,551 | ) | | | (32,188 | ) | | | 5,170 | | | | (163,178 | ) | | | 69,643 | | | | (151,805 | ) | | | (1,040,909 | ) | General and administrative expenses | | | (711,029 | ) | | | (1,695,563 | ) | | | (966,266 | ) | | | (3,372,858 | ) | | | (340,606 | ) | | | (102,526 | ) | | | (59,994 | ) | | | (188,510 | ) | | | 54,800 | | | | (4,009,694 | ) | Operating profit before provision for credit losses | | | 1,069,658 | | | | 468,150 | | | | 726,565 | | | | 2,264,373 | | | | 716,144 | | | | 44,047 | | | | 14,763 | | | | 244,325 | | | | (96,553 | ) | | | 3,187,099 | | Provision(reversal) for credit losses | | | (566,942 | ) | | | (304,116 | ) | | | (16,596 | ) | | | (887,654 | ) | | | (277,662 | ) | | | (4,422 | ) | | | (1,112 | ) | | | (57,350 | ) | | | 224 | | | | (1,227,976 | ) | | | | | | | | | | | | Net operating profit | | | 502,716 | | | | 164,034 | | | | 709,969 | | | | 1,376,719 | | | | 438,482 | | | | 39,625 | | | | 13,651 | | | | 186,975 | | | | (96,329 | ) | | | 1,959,123 | | Share of profit of associates | | | — | | | | — | | | | 17,555 | | | | 17,555 | | | | — | | | | 81 | | | | — | | | | (13,778 | ) | | | 9,570 | | | | 13,428 | | Net other non-operating revenue (expense) | | | 1,242 | | | | — | | | | (35,241 | ) | | | (33,999 | ) | | | (5,076 | ) | | | (1,025 | ) | | | (1,383 | ) | | | (24,877 | ) | | | (4,766 | ) | | | (71,126 | ) | Segment profits before income tax | | | 503,958 | | | | 164,034 | | | | 692,283 | | | | 1,360,275 | | | | 433,406 | | | | 38,681 | | | | 12,268 | | | | 148,320 | | | | (91,525 | ) | | | 1,901,425 | | Income tax expense | | | (120,504 | ) | | | (53,967 | ) | | | (156,763 | ) | | | (331,234 | ) | | | (100,705 | ) | | | (13,057 | ) | | | (5,731 | ) | | | (33,602 | ) | | | (1,985 | ) | | | (486,314 | ) | Profit for the year | | | 383,454 | | | | 110,067 | | | | 535,520 | | | | 1,029,041 | | | | 332,701 | | | | 25,624 | | | | 6,537 | | | | 114,718 | | | | (93,510 | ) | | | 1,415,111 | | Profit attributable to Shareholders of the parent company | | | 383,454 | | | | 110,067 | | | | 535,520 | | | | 1,029,041 | | | | 332,701 | | | | 25,624 | | | | 6,537 | | | | 100,329 | | | | (93,510 | ) | | | 1,400,722 | | Profit attributable to Non-controlling interests | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 14,389 | | | | — | | | | 14,389 | | Total assets(1) | | | 94,313,469 | | | | 111,074,156 | | | | 70,066,039 | | | | 275,453,664 | | | | 15,886,769 | | | | 4,131,568 | | | | 7,680,184 | | | | 25,965,518 | | | | (20,761,995 | ) | | | 308,355,708 | | Total liabilities(1) | | | 83,780,834 | | | | 123,792,699 | | | | 45,939,658 | | | | 253,513,191 | | | | 12,406,314 | | | | 3,554,828 | | | | 7,096,459 | | | | 5,347,261 | | | | (1,075,017 | ) | | | 280,843,036 | |
(1) | Amounts before intra-group transaction adjustment.
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5.2 Services and Geographical Segments 5.2.1 Services information Operating revenues from external customers by servicesfor each service for the yearsyear ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows: | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Banking service | | ₩ | 6,290,999 | | | ₩ | 5,672,100 | | | ₩ | 5,403,223 | | | ₩ | 5,398,554 | | | ₩ | 5,454,100 | | | ₩ | 6,245,316 | | Securities service | | | | 184,880 | | | | 184,856 | | | | 1,074,365 | | Non-life insurance service | | | | — | | | | — | | | | 1,121,108 | | Credit card service | | | 1,286,719 | | | | 1,420,937 | | | | 1,280,628 | | | | 1,310,628 | | | | 1,269,573 | | | | 1,276,803 | | Investment & securities service | | | 142,617 | | | | 115,054 | | | | 141,355 | | | Life insurance service | | | 131,188 | | | | 102,226 | | | | 105,255 | | | | 142,885 | | | | 139,847 | | | | 129,513 | | Other service | | | 32,988 | | | | 143,811 | | | | 266,332 | | | | 345,002 | | | | 396,566 | | | | 345,077 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 7,884,511 | | | ₩ | 7,454,128 | | | ₩ | 7,196,793 | | | ₩ | 7,381,949 | | | ₩ | 7,444,942 | | | ₩ | 10,192,182 | | | | | | | | | | | | | | | | | | | | |
5.2.2 Geographical information Geographical operating revenues from external customers for the yearsyear ended December 31, 2012, 20132015, 2016 and 2014,2017, and majornon-current assets as of December 31, 2012, 20132015, 2016 and 2014,2017, are as follows: | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | 2016 | | 2017 | | | | Revenues from external customers | | | Major non-current assets | | | Revenues from external customers | | Major non-current assets | | | Revenues from external customers | | | Major non-current assets | | | Revenues from external customers | | Major non-current assets | | Revenues from external customers | | Major non-current assets | | Revenues From external customers | | Major non-current assets | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Domestic | | ₩ | 7,785,586 | | | ₩ | 3,574,205 | | | ₩ | 7,399,906 | | | ₩ | 3,600,424 | | | ₩ | 7,093,068 | | | ₩ | 3,807,792 | | | ₩ | 7,305,697 | | | ₩ | 3,821,634 | | | ₩ | 7,354,698 | | | ₩ | 4,952,552 | | | ₩ | 10,078,253 | | | ₩ | 7,472,597 | | United States | | | 11,438 | | | | 35 | | | | 12,730 | | | | 21 | | | | 11,655 | | | | 256 | | | 11,847 | | | 276 | | | 10,522 | | | 299 | | | 17,596 | | | 363,330 | | New Zealand | | | 8,268 | | | | 35 | | | | 8,581 | | | | 20 | | | | 6,684 | | | | 193 | | | 5,143 | | | 209 | | | 5,422 | | | 128 | | | 5,855 | | | 57 | | China | | | 30,800 | | | | 11,349 | | | | 32,190 | | | | 10,488 | | | | 46,892 | | | | 7,518 | | | 30,590 | | | 6,949 | | | 47,360 | | | 5,038 | | | 44,531 | | | 4,585 | | Japan | | | 30,810 | | | | 2,653 | | | | (17,182 | ) | | | 1,722 | | | | 19,842 | | | | 1,391 | | | Argentina | | | 10 | | | | — | | | | 6 | | | | — | | | | 573 | | | | — | | | Vietnam | | | 1,172 | | | | 429 | | | | 3,268 | | | | 316 | | | | 3,130 | | | | 287 | | | Cambodia | | | 4,151 | | | | 546 | | | | 5,741 | | | | 898 | | | | 5,364 | | | | 564 | | | 5,072 | | | 350 | | | 6,109 | | | 1,216 | | | 7,475 | | | 1,753 | | United Kingdom | | | 12,276 | | | | 16 | | | | 8,888 | | | | 9 | | | | 9,585 | | | | 108 | | | 9,533 | | | 130 | | | 10,987 | | | 149 | | | 11,547 | | | 319 | | Intra-group adjustment | | | — | | | | 57,230 | | | | — | | | | 56,408 | | | | — | | | | 131,342 | | | Others | | | 14,067 | | | 1,786 | | | 9,844 | | | 2,242 | | | 26,925 | | | 78,142 | | Adjustment | | | | — | | | 134,692 | | | | — | | | 72,971 | | | | — | | | 72,455 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 7,884,511 | | | ₩ | 3,646,498 | | | ₩ | 7,454,128 | | | ₩ | 3,670,306 | | | ₩ | 7,196,793 | | | ₩ | 3,949,451 | | | ₩ | 7,381,949 | | | ₩ | 3,966,026 | | | ₩ | 7,444,942 | | | ₩ | 5,034,595 | | | ₩ | 10,192,182 | | | ₩ | 7,993,238 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
6. Financial Assets and Financial Liabilities 6.1 Classification and Fair valueValue of financial instrumentsFinancial Instruments Carrying amount and fair value of financial assets and liabilities as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | Carrying amount | | | Fair value | | | Carrying amount | | | Fair value | | | Carrying amount | | | Fair value | | | Carrying amount | | | Fair value | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | Cash and due from financial institutions | | ₩ | 14,792,654 | | | ₩ | 14,793,603 | | | ₩ | 15,423,847 | | | ₩ | 15,425,123 | | | ₩ | 17,884,863 | | | ₩ | 17,878,714 | | | ₩ | 19,817,825 | | | ₩ | 19,805,138 | | Financial assets held for trading | | | 8,967,006 | | | | 8,967,006 | | | | 10,121,570 | | | | 10,121,570 | | | | 26,099,518 | | | | 26,099,518 | | | | 30,177,293 | | | | 30,177,293 | | Debt securities | | | 7,825,785 | | | | 7,825,785 | | | | 9,712,208 | | | | 9,712,208 | | | | 22,986,570 | | | | 22,986,570 | | | | 25,168,338 | | | | 25,168,338 | | Equity securities | | | 1,100,969 | | | | 1,100,969 | | | | 358,017 | | | | 358,017 | | | | 3,040,599 | | | | 3,040,599 | | | | 4,935,100 | | | | 4,935,100 | | Others | | | 40,252 | | | | 40,252 | | | | 51,345 | | | | 51,345 | | | | 72,349 | | | | 72,349 | | | | 73,855 | | | | 73,855 | | Financial assets designated at fair value through profit or loss | | | 361,736 | | | | 361,736 | | | | 636,340 | | | | 636,340 | | | | 1,758,846 | | | | 1,758,846 | | | | 2,050,052 | | | | 2,050,052 | | Debt securities | | | | 331,664 | | | | 331,664 | | | | 368,820 | | | | 368,820 | | Equity securities | | | 115,778 | | | | 115,778 | | | | 134,172 | | | | 134,172 | | | | 65,591 | | | | 65,591 | | | | 67,828 | | | | 67,828 | | Derivative linked securities | | | 245,958 | | | | 245,958 | | | | 502,168 | | | | 502,168 | | | Derivative-linked securities | | | | 1,361,591 | | | | 1,361,591 | | | | 1,613,404 | | | | 1,613,404 | | Derivatives held for trading | | | 1,680,880 | | | | 1,680,880 | | | | 1,858,637 | | | | 1,858,637 | | | | 3,298,328 | | | | 3,298,328 | | | | 2,998,042 | | | | 2,998,042 | | Derivatives held for hedging | | | 138,529 | | | | 138,529 | | | | 109,553 | | | | 109,553 | | | | 83,607 | | | | 83,607 | | | | 312,124 | | | | 312,124 | | Loans | | | 219,001,356 | | | | 219,319,406 | | | | 231,449,653 | | | | 232,084,413 | | | | 265,486,134 | | | | 265,144,250 | | | | 290,122,838 | | | | 289,807,038 | | Available-for-sale financial assets | | | 21,832,104 | | | | 21,832,104 | | | | 22,391,466 | | | | 22,391,466 | | | | 33,970,293 | | | | 33,970,293 | | | | 48,116,263 | | | | 48,116,263 | | Debt securities | | | 18,933,288 | | | | 18,933,288 | | | | 19,359,822 | | | | 19,359,822 | | | | 27,445,752 | | | | 27,445,752 | | | | 38,959,401 | | | | 38,959,401 | | Equity securities | | | 2,898,816 | | | | 2,898,816 | | | | 3,031,644 | | | | 3,031,644 | | | | 6,524,541 | | | | 6,524,541 | | | | 9,156,862 | | | | 9,156,862 | | Held-to-maturity financial assets | | | 13,016,991 | | | | 13,386,962 | | | | 12,569,154 | | | | 13,050,574 | | | | 11,177,504 | | | | 11,400,616 | | | | 18,491,980 | | | | 18,483,065 | | Other financial assets | | | 6,251,679 | | | | 6,251,679 | | | | 7,559,631 | | | | 7,559,631 | | | | 7,322,335 | | | | 7,322,335 | | | | 10,195,015 | | | | 10,195,015 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 286,042,935 | | | | 286,731,905 | | | | 302,119,851 | | | | 303,237,307 | | | ₩ | 367,081,428 | | | ₩ | 366,956,507 | | | ₩ | 422,281,432 | | | ₩ | 421,944,030 | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | Financial liabilities held for trading | | | 236,637 | | | | 236,637 | | | | 836,542 | | | | 836,542 | | | ₩ | 1,143,510 | | | ₩ | 1,143,510 | | | ₩ | 1,944,770 | | | ₩ | 1,944,770 | | Financial liabilities designated at fair value through profit or loss | | | 878,565 | | | | 878,565 | | | | 982,426 | | | | 982,426 | | | | 10,979,326 | | | | 10,979,326 | | | | 10,078,288 | | | | 10,078,288 | | Derivatives held for trading | | | 1,580,029 | | | | 1,580,029 | | | | 1,775,341 | | | | 1,775,341 | | | | 3,717,819 | | | | 3,717,819 | | | | 3,054,614 | | | | 3,054,614 | | Derivatives held for hedging | | | 215,310 | | | | 215,310 | | | | 22,049 | | | | 22,049 | | | | 89,309 | | | | 89,309 | | | | 88,151 | | | | 88,151 | | Deposits | | | 200,882,064 | | | | 201,128,271 | | | | 211,549,121 | | | | 211,946,808 | | | | 239,729,695 | | | | 240,223,353 | | | | 255,800,048 | | | | 256,222,490 | | Debts | | | 14,101,331 | | | | 14,098,569 | | | | 15,864,500 | | | | 15,944,770 | | | | 26,251,486 | | | | 26,247,768 | | | | 28,820,928 | | | | 28,814,801 | | Debentures | | | 27,039,534 | | | | 28,221,196 | | | | 29,200,706 | | | | 29,752,202 | | | | 34,992,057 | | | | 35,443,751 | | | | 44,992,724 | | | | 44,400,325 | | Other financial liabilities | | | 13,262,914 | | | | 13,262,946 | | | | 11,918,820 | | | | 11,918,865 | | | | 16,286,578 | | | | 16,257,142 | | | | 18,330,004 | | | | 18,328,276 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 258,196,384 | | | ₩ | 259,621,523 | | | ₩ | 272,149,505 | | | ₩ | 273,179,003 | | | ₩ | 333,189,780 | | | ₩ | 334,101,978 | | | ₩ | 363,109,527 | | | ₩ | 362,931,715 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. For each class of financial assets and financial liabilities, the Group discloses the fair value of that class of assets and liabilities in a way that permits it to be compared with its carrying amount at the end of each reporting period. The best evidence of fair value of financial instruments is a quoted price in an active market. Methods of determining fair value for financial instruments are as follows: | | | Cash and due from financial institutions | | The carrying amounts of cash and demand due from financial institutions and payment due from financial institutions are a reasonable approximation of fair values. These financial instruments do not have a fixed maturity and are receivable on demand. Fair value of ordinary due from financial institutions is measured using a DCF model.model (Discounted Cash Flow Model). | | | Investment securities | | The fair value of financial instruments that are quoted in active markets is determined using the quoted prices. Fair value is determined through the use of independent third-party pricing servicesexternal professional valuation institution where quoted prices are not available. Pricing servicesThe institutions use one or more of the following valuation techniques including Discounted Cash Flow (DCF) Model, Imputed Market ValueDCF Model, Free Cash Flow to Equity Model, Comparable Company Analysis, Dividend Discount Model, Risk Adjusted Discount Rate Method, and Net Asset Value Method. | | | Loans | | DCF model is used to determine the fair value of loans. Fair value is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at appropriate discount rate. | | | Derivatives and Financial assets at fair value through profit or loss | | For exchange traded derivatives, quoted price in an active market is used to determine fair value and for OTC derivatives, fair value is determined using valuation techniques. The Group uses internally developed valuation models that are widely used by market participants to determine fair values of plain vanilla OTC derivatives including options, interest rate swaps, and currency swaps, based on observable market parameters. However, some complex financial instruments are valued using appropriate models developed from generally accepted market valuation models including the Finite Difference Method, and the Monte Carlo Simulation, Black-Scholes Model, Hull and White Model, Closed Form and Tree Model or valuation results from independent third-partyexternal professional valuation service.institution. | | | Deposits | | Carrying amount of demand deposits is regarded as representative of fair value because they do not have a fixed maturity and are payable on demand. Fair value of time deposits is determined using a DCF model. Fair value is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at an appropriate discount rate. | | | Debts | | Carrying amount of overdraft in foreign currency is regarded as representative of fair value because they do not have a fixed maturity and are payable on demand. Fair value of other debts is determined using a DCF model discounting contractual future cash flows at an appropriate discount rate. | | | Debentures | | Fair value is determined by using the valuations of independent third-party pricing services,external professional valuation institution, which are calculated using market inputs. | | | Other financial assets and liabilities | | The carrying amounts are reasonable approximation of fair values. These financial instruments are temporary accounts used for other various transactions and their maturities are relatively short or not defined. However, fair value of finance lease liabilities is measured using a DCF model. |
Fair value hierarchy The Group believes that valuation methods used for measuring the fair values of financial instruments are reasonable and that the fair values recognized in the statements of financial position are appropriate. However, the fair values of the financial instruments recognized in the statements of financial position may be different if other valuation methods or assumptions are used. Additionally, as there is a variety of valuation techniques and assumptions used in measuring fair value, it may be difficult to reasonably compare the fair value with that of other financial institutions. The Group classifies and discloses fair value of the financial instruments into the following three-level hierarchy:hierarchy as follows: Level 1: The fair values are based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: The fair values are based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: The fair values are based on unobservable inputs for the asset or liability. The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Fair value hierarchy of financial assets and liabilities measured at fair value in the statements of financial position
The fair value hierarchy of financial assets and liabilities measured at fair value in the statements of financial position as of December 31, 20132016 and 2014,2017, is as follows: | | | 2013 | | | 2016 | | | | Fair value hierarchy | | | | | Fair value hierarchy | | | | | | | Level 1 | | Level 2 | | Level 3 | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | Financial assets held for trading | | | | | | | | | | | | | | | | | Debt securities | | ₩ | 3,160,592 | | | ₩ | 4,665,193 | | | ₩ | — | | | ₩ | 7,825,785 | | | ₩ | 7,426,480 | | | ₩ | 15,560,090 | | | ₩ | — | | | ₩ | 22,986,570 | | Equity securities | | | 327,260 | | | | 773,709 | | | | — | | | | 1,100,969 | | | | 1,137,531 | | | | 1,903,068 | | | | — | | | | 3,040,599 | | Others | | | 40,252 | | | | — | | | | — | | | | 40,252 | | | | 72,349 | | | | — | | | | — | | | | 72,349 | | | | | | | | | | | | | | | | Sub-total | | | | 8,636,360 | | | | 17,463,158 | | | | — | | | | 26,099,518 | | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | | | | | | | | | | | | Equity securities | | | — | | | | 115,778 | | | | — | | | | 115,778 | | | Derivative linked securities | | | — | | | | 12,030 | | | | 233,928 | | | | 245,958 | | | Derivatives held for trading | | | 744 | | | | 1,630,940 | | | | 49,196 | | | | 1,680,880 | | | Derivatives held for hedging | | | — | | | | 138,077 | | | | 452 | | | | 138,529 | | | Available-for-sale financial assets(1) | | | | | | | | | | Debt securities | | | 9,754,737 | | | | 9,175,742 | | | | 2,809 | | | | 18,933,288 | | | | — | | | | 237,595 | | | | 94,069 | | | | 331,664 | | Equity securities | | | 985,108 | | | | 254,464 | | | | 1,659,244 | | | | 2,898,816 | | | | — | | | | — | | | | 65,591 | | | | 65,591 | | Derivative-linked securities | | | | — | | | | 757,979 | | | | 603,612 | | | | 1,361,591 | | | | | | | | | | | | | | | | Sub-total | | | | — | | | | 995,574 | | | | 763,272 | | | | 1,758,846 | | | | | | | | | | | | | | | | Derivatives held for trading | | | | 128,236 | | | | 3,033,156 | | | | 136,936 | | | | 3,298,328 | | | | | | | | | | | | | | | | Derivatives held for hedging | | | | — | | | | 82,144 | | | | 1,463 | | | | 83,607 | | | | | | | | | | | | | | | | Available-for-sale financial assets1 | | | | | | | | | | Debt securities | | | | 10,456,882 | | | | 16,978,619 | | | | 10,251 | | | | 27,445,752 | | Equity securities | | | | 1,112,502 | | | | 2,349,998 | | | | 3,062,041 | | | | 6,524,541 | | | | | | | | | | | | | | | | Sub-total | | | | 11,569,384 | | | | 19,328,617 | | | | 3,072,292 | | | | 33,970,293 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 14,268,693 | | | ₩ | 16,765,933 | | | ₩ | 1,945,629 | | | ₩ | 32,980,255 | | | ₩ | 20,333,980 | | | ₩ | 40,902,649 | | | ₩ | 3,973,963 | | | ₩ | 65,210,592 | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | Financial liabilities held for trading | | ₩ | 236,637 | | | ₩ | — | | | ₩ | — | | | ₩ | 236,637 | | | ₩ | 1,143,510 | | | ₩ | — | | | ₩ | — | | | ₩ | 1,143,510 | | Financial liabilities designated at fair value through profit or loss | | | — | | | | — | | | | 878,565 | | | | 878,565 | | | | 566 | | | | 3,181,621 | | | | 7,797,139 | | | | 10,979,326 | | Derivatives held for trading | | | 261 | | | | 1,538,374 | | | | 41,394 | | | | 1,580,029 | | | | 474,921 | | | | 3,041,052 | | | | 201,846 | | | | 3,717,819 | | Derivatives held for hedging | | | — | | | | 206,468 | | | | 8,842 | | | | 215,310 | | | | — | | | | 89,123 | | | | 186 | | | | 89,309 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 236,898 | | | ₩ | 1,744,842 | | | ₩ | 928,801 | | | ₩ | 2,910,541 | | | ₩ | 1,618,997 | | | ₩ | 6,311,796 | | | ₩ | 7,999,171 | | | ₩ | 15,929,964 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Fair value hierarchy | | | | | | Fair value hierarchy | | | | | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | Financial assets held for trading | | | | | | | | | | | | | | | | | Debt securities | | ₩ | 4,371,105 | | | ₩ | 5,341,103 | | | ₩ | — | | | ₩ | 9,712,208 | | | ₩ | 7,814,921 | | | ₩ | 17,353,417 | | | ₩ | — | | | ₩ | 25,168,338 | | Equity securities | | | 248,689 | | | | 109,328 | | | | — | | | | 358,017 | | | | 2,340,497 | | | | 2,594,603 | | | | — | | | | 4,935,100 | | Others | | | 51,345 | | | | — | | | | — | | | | 51,345 | | | | 73,855 | | | | — | | | | — | | | | 73,855 | | | | | | | | | | | | | | | | Sub-total | | | | 10,229,273 | | | | 19,948,020 | | | | — | | | | 30,177,293 | | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | | | | | | | | | | | | Equity securities | | | — | | | | 134,172 | | | | — | | | | 134,172 | | | Derivative linked securities | | | — | | | | — | | | | 502,168 | | | | 502,168 | | | Derivatives held for trading | | | 348 | | | | 1,793,894 | | | | 64,395 | | | | 1,858,637 | | | Derivatives held for hedging | | | — | | | | 109,293 | | | | 260 | | | | 109,553 | | | Available-for-sale financial assets(1) | | | | | | | | | | Debt securities | | | 6,982,339 | | | | 12,377,142 | | | | 341 | | | | 19,359,822 | | | | — | | | | 66,969 | | | | 301,851 | | | | 368,820 | | Equity securities | | | 1,052,269 | | | | 178,377 | | | | 1,800,998 | | | | 3,031,644 | | | | — | | | | — | | | | 67,828 | | | | 67,828 | | Derivative-linked securities | | | | — | | | | 668,739 | | | | 944,665 | | | | 1,613,404 | | | | | | | | | | | | | | | | Sub-total | | | | — | | | | 735,708 | | | | 1,314,344 | | | | 2,050,052 | | | | | | | | | | | | | | | | Derivatives held for trading | | | | 80,678 | | | | 2,720,285 | | | | 197,079 | | | | 2,998,042 | | | | | | | | | | | | | | | | Derivatives held for hedging | | | | — | | | | 311,349 | | | | 775 | | | | 312,124 | | | | | | | | | | | | | | | | Available-for-sale financial assets1 | | | | | | | | | | Debt securities | | | | 10,446,001 | | | | 28,464,019 | | | | 49,381 | | | | 38,959,401 | | Equity securities | | | | 1,550,766 | | | | 1,789,501 | | | | 5,816,595 | | | | 9,156,862 | | | | | | | | | | | | | | | | Sub-total | | | | 11,996,767 | | | | 30,253,520 | | | | 5,865,976 | | | | 48,116,263 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 12,706,095 | | | ₩ | 20,043,309 | | | ₩ | 2,368,162 | | | ₩ | 35,117,566 | | | ₩ | 22,306,718 | | | ₩ | 53,968,882 | | | ₩ | 7,378,174 | | | ₩ | 83,653,774 | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | Financial liabilities held for trading | | ₩ | 836,542 | | | ₩ | — | | | ₩ | — | | | ₩ | 836,542 | | | ₩ | 1,944,770 | | | ₩ | — | | | ₩ | — | | | ₩ | 1,944,770 | | Financial liabilities designated at fair value through profit or loss | | | — | | | | — | | | | 982,426 | | | | 982,426 | | | | 843 | | | | 1,389,553 | | | | 8,687,892 | | | | 10,078,288 | | Derivatives held for trading | | | 1,146 | | | | 1,751,617 | | | | 22,578 | | | | 1,775,341 | | | | 272,766 | | | | 2,717,862 | | | | 63,986 | | | | 3,054,614 | | Derivatives held for hedging | | | — | | | | 19,768 | | | | 2,281 | | | | 22,049 | | | | — | | | | 88,081 | | | | 70 | | | | 88,151 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 837,688 | | | ₩ | 1,771,385 | | | ₩ | 1,007,285 | | | ₩ | 3,616,358 | | | ₩ | 2,218,379 | | | ₩ | 4,195,496 | | | ₩ | 8,751,948 | | | ₩ | 15,165,823 | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)1 | The amounts of equity securities carried at cost in “Level 3”, which do not have a quoted market price in an active market and cannot be measured reliably at fair value, are ₩117,750₩223,398 million and ₩93,435₩116,629 million as of December 31, 20132016 and 2014,2017, respectively. These equity securities are carried at cost because it is practically difficult to quantify the intrinsic values of the equity securities issued by unlisted public andnon-profit entities. In addition, probabilities and range ofdue to significant fluctuations in estimated cash flows of thearising from entities being in its initial stages, which further results in varying and unpredictable probabilities, unlisted equity securities which are issued by project financing companies cannot be reliably and reasonably assessed. Therefore, these equity securities are carried at cost. The Group has no plan to sell these instruments in the near future. |
Valuation techniques and the inputs used in the fair value measurement classified as Level 2 Valuation techniques and inputs of financialFinancial assets and liabilities measured at fair value in the statement of financial position and classified as Level 2 in the statements of financial position as of December 31, 20132016 and 2014,2017, are as follows:
| | | Fair value | | | Valuation techniques | | Inputs | | Fair value | | Valuation techniques | | Inputs | | | 2013 | | | 2014 | | | | 2016 | | 2017 | | | | (In millions of Korean won) | | | | | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | Financial assets held for trading | | ₩ | 5,438,902 | | | ₩ | 5,450,431 | | | | | | | | | | | | | | Debt securities | | | 4,665,193 | | | | 5,341,103 | | | DCF Model | | Discount rate | | ₩ | 15,560,090 | | | ₩ | 17,353,417 | | | DCF Model, Option model | | Underlying asset Index, Discount rate, Volatility | Equity securities | | | 773,709 | | | | 109,328 | | | DCF Model, Net Asset Value | | Discount rate, Fair value of underlying asset | | | 1,903,068 | | | | 2,594,603 | | | DCF Model, Net Asset Value, Option Model | | Underlying asset Index, Volatility, Discount rate, Fair value of underlying asset | | | | | | | | | | | | | Sub-total | | | 17,463,158 | | | 19,948,020 | | | | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | 127,808 | | | | 134,172 | | | | | | | | | | | | | | Equity securities | | | 115,778 | | | | 134,172 | | | DCF Model | | Discount rate | | Derivative linked securities | | | 12,030 | | |
| — | | | Monte Carlo Simulation | | Price of the underlying asset, Interest rates, Volatility of the underlying asset, Correlation of the underlying assets | | Debt securities | | | | 237,595 | | | | 66,969 | | | DCF Model, Hull and White Model | | Discount rate, Volatility | Derivative-linked securities | | | | 757,979 | | | | 668,739 | | | DCF Model, Closed Form, Monte Carlo Simulation, Option Model | | Underlying asset Index, Discount rate, Volatility | | | | | | | | | | | | | Sub-total | | | 995,574 | | | 735,708 | | | | | | | | | | | | | | | | | | Derivatives held for trading | | | 1,630,940 | | | | 1,793,894 | | | DCF Model, Closed Form, FDM | | Discount rate, Volatility, Foreign exchange rate, Stock price and others | | | 3,033,156 | | | | 2,720,285 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Black-Scholes Model, Hull and White Model and Others | | Underlying asset Index, Discount rate, Volatility, Foreign exchange rate, Stock price, Dividend rate and others | Derivatives held for hedging | | | 138,077 | | | | 109,293 | | | DCF Model, Closed Form, FDM | | Discount rate, Volatility, Foreign exchange rate and others | | | 82,144 | | | | 311,349 | | | DCF Model, Closed Form, FDM | | Discount rate, Volatility, Foreign exchange rate and others | Available-for-sale financial assets | | | 9,430,206 | | | | 12,555,519 | | | | | | | | | | | | | | Debt securities | | | 9,175,742 | | | | 12,377,142 | | | DCF Model | | Discount rate | | | 16,978,619 | | | | 28,464,019 | | | DCF Model, Option model, Net Asset Value | | Discount rate | Equity securities | | | 254,464 | | | | 178,377 | | | DCF Model, Net Asset Value | | Discount rate, Fair value of underlying asset | | | 2,349,998 | | | | 1,789,501 | | | DCF Model, Option Model, Net Asset Value | | Discount rate, Fair value of underlying asset | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 19,328,617 | | | 30,253,520 | | | | | | | | | | | | | | | | | | Total | | ₩ | 16,765,933 | | | ₩ | 20,043,309 | | | | | | | ₩ | 40,902,649 | | | ₩ | 53,968,882 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | Financial liabilities designated at fair value through profit or loss | | | | | | | | | | Derivative-linked securities | | | ₩ | 3,181,621 | | | ₩ | 1,389,553 | | | DCF Model, Closed Form, Monte Carlo Simulation, Black-Scholes Model, Hull and White Model and others | | Price of Underlying asset, Discount rate, Dividend rate, Volatility | | | | | | | | | | | | | Sub-total | | | 3,181,621 | | | 1,389,553 | | | | | | | | | | | | | | | | | | Derivatives held for trading | | ₩ | 1,538,374 | | | ₩ | 1,751,617 | | | DCF Model, Closed Form, FDM | | Discount rate, Volatility, Foreign exchange rate, Stock price and others | | | 3,041,052 | | | | 2,717,862 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Black-Scholes Model, Hull and White Model, Option Valuation Model and others | | Discount rate, Price of Underlying asset, Volatility, Foreign exchange rate, Credit Spread, Stock price and others | Derivatives held for hedging | | | 206,468 | | | | 19,768 | | | DCF Model, Closed Form, FDM | | Discount rate, Volatility, Foreign exchange rate and others | | | 89,123 | | | | 88,081 | | | DCF Model, Closed Form, FDM | | Discount rate, Volatility, Foreign exchange rate and others | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 1,744,842 | | | ₩ | 1,771,385 | | | | | | | ₩ | 6,311,796 | | | ₩ | 4,195,496 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair value hierarchy of financial assets and liabilities whose fair values are disclosed The fair value hierarchy of financial assets and liabilities whose the fair values are disclosed The fair value hierarchy of financial assets and liabilities which the fair value is disclosed as of December 31, 20132016 and 2014, is2017, are as follows:
| | | 2013 | | | 2016 | | | | Fair value hierarchy | | | | | | Fair value hierarchy | | | | | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | Cash and due from financial institutions(1) | | ₩ | 2,698,018 | | | ₩ | 10,555,993 | | | ₩ | 1,539,592 | | | ₩ | 14,793,603 | | | Cash and due from financial institutions1 | | | ₩ | 2,625,516 | | | ₩ | 13,390,534 | | | ₩ | 1,862,664 | | | ₩ | 17,878,714 | | Loans | | | — | | | | — | | | | 219,319,406 | | | | 219,319,406 | | | | — | | | | — | | | | 265,144,250 | | | | 265,144,250 | | Held-to-maturity financial assets | | | 3,535,217 | | | | 9,851,745 | | | | — | | | | 13,386,962 | | | | 1,505,288 | | | | 9,895,328 | | | | — | | | | 11,400,616 | | Other financial assets(2) | | | — | | | | — | | | | 6,251,679 | | | | 6,251,679 | | | Other financial assets2 | | | | — | | | | — | | | | 7,322,335 | | | | 7,322,335 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 6,233,235 | | | ₩ | 20,407,738 | | | ₩ | 227,110,677 | | | ₩ | 253,751,650 | | | ₩ | 4,130,804 | | | ₩ | 23,285,862 | | | ₩ | 274,329,249 | | | ₩ | 301,745,915 | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | Deposits(1) | | ₩ | — | | | ₩ | 72,839,365 | | | ₩ | 128,288,906 | | | ₩ | 201,128,271 | | | Debts(1) | | | — | | | | 156,349 | | | | 13,942,220 | | | | 14,098,569 | | | Deposits1 | | | ₩ | — | | | ₩ | 116,068,290 | | | ₩ | 124,155,063 | | | ₩ | 240,223,353 | | Debts3 | | | | — | | | | 1,444,983 | | | | 24,802,785 | | | | 26,247,768 | | Debentures | | | — | | | | 27,752,493 | | | | 468,703 | | | | 28,221,196 | | | | — | | | | 33,504,039 | | | | 1,939,712 | | | | 35,443,751 | | Other financial liabilities(3) | | | — | | | | — | | | | 13,262,946 | | | | 13,262,946 | | | Other financial liabilities4 | | | | — | | | | — | | | | 16,257,142 | | | | 16,257,142 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | — | | | ₩ | 100,748,207 | | | ₩ | 155,962,775 | | | ₩ | 256,710,982 | | | ₩ | — | | | ₩ | 151,017,312 | | | ₩ | 167,154,702 | | | ₩ | 318,172,014 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Fair value hierarchy | | | | | | Fair value hierarchy | | | | | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | Cash and due from financial institutions(1) | | ₩ | 2,588,407 | | | ₩ | 10,879,916 | | | ₩ | 1,956,800 | | | ₩ | 15,425,123 | | | Cash and due from financial institutions1 | | | ₩ | 2,754,086 | | | ₩ | 15,281,705 | | | ₩ | 1,769,347 | | | ₩ | 19,805,138 | | Loans | | | — | | | | — | | | | 232,084,413 | | | | 232,084,413 | | | | — | | | | 569,625 | | | | 289,237,413 | | | | 289,807,038 | | Held-to-maturity financial assets | | | 2,639,552 | | | | 10,411,022 | | | | — | | | | 13,050,574 | | | | 4,825,393 | | | | 13,653,429 | | | | 4,243 | | | | 18,483,065 | | Other financial assets(2) | | | — | | | | — | | | | 7,559,631 | | | | 7,559,631 | | | Other financial assets2 | | | | — | | | | — | | | | 10,195,015 | | | | 10,195,015 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 5,227,959 | | | ₩ | 21,290,938 | | | ₩ | 241,600,844 | | | ₩ | 268,119,741 | | | ₩ | 7,579,479 | | | ₩ | 29,504,759 | | | ₩ | 301,206,018 | | | ₩ | 338,290,256 | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | Deposits(1) | | ₩ | — | | | ₩ | 82,709,205 | | | ₩ | 129,237,603 | | | ₩ | 211,946,808 | | | Debts(1) | | | — | | | | 48,984 | | | | 15,895,786 | | | | 15,944,770 | | | Deposits1 | | | ₩ | — | | | ₩ | 125,154,284 | | | ₩ | 131,068,206 | | | ₩ | 256,222,490 | | Debts3 | | | | — | | | | 853,615 | | | | 27,961,186 | | | | 28,814,801 | | Debentures | | | — | | | | 29,256,810 | | | | 495,392 | | | | 29,752,202 | | | | — | | | | 41,058,076 | | | | 3,342,249 | | | | 44,400,325 | | Other financial liabilities(3) | | | — | | | | — | | | | 11,918,865 | | | | 11,918,865 | | | Other financial liabilities4 | | | | — | | | | — | | | | 18,328,276 | | | | 18,328,276 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | — | | | ₩ | 112,014,999 | | | ₩ | 157,547,646 | | | ₩ | 269,562,645 | | | ₩ | — | | | ₩ | 167,065,975 | | | ₩ | 180,699,917 | | | ₩ | 347,765,892 | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)1 | The amounts included in Level 2 are the carrying amounts which are reasonable approximationapproximations of the fair values. |
(2)2 | The ₩6,251,679Other financial assets of ₩7,322,335 million and ₩7,559,631₩10,195,015 million are included in Level 3, the carrying amounts that are reasonable approximations of otherfair values as of December 31, 2016 and 2017, respectively.
|
3 | Debts of ₩70,624 million and ₩19,820 million included in Level 2 are the carrying amounts which are reasonable approximations of fair values as of December 31, 2016 and 2017, respectively. |
4 | Other financial assetsliabilities of ₩15,890,765 million and ₩17,882,909 million included in Level 3 are the carrying amounts which are reasonable approximationapproximations of fair values as of December 31, 20132016 and 2014. |
(3) | The ₩13,261,041 million and ₩11,905,579 million of other financial liabilities included in Level 3 are the carrying amounts which are reasonable approximation of fair values as of December 31, 2013 and 2014. 2017, respectively. |
Valuation techniques and the inputs used in the fair value measurement The valuation techniques and the inputs of financialFinancial assets and liabilities which are disclosed by thewhose carrying amounts because itamount is a reasonable approximation of fair value are not subject to be disclosed.
Thedisclose valuation techniques and theinputs.
Valuation techniques and inputs of financial assets and liabilities whose the fair values are disclosed and classified as Level 2 as of December 31, 20132016 and 2014,2017, are as follows: | | | Fair value | | | Valuation technique | | Inputs | | Fair value | | | Valuation technique | | Inputs | | | 2013 | | | 2014 | | | | 2016 | | | 2017 | | | | | (In millions of Korean won) | | | | | | | (In millions of Korean won) | | | | | | Financial assets | | | | | | | | | | | | | | | | | Loans | | | ₩ | — | | | ₩ | 569,625 | | | DCF Model | | Discount rate | Held-to-maturity financial assets | | ₩ | 9,851,745 | | | ₩ | 10,411,022 | | | DCF Model | | Discount rate | | | 9,895,328 | | | | 13,653,429 | | | DCF Model | | Discount rate | Financial liabilities | | | | | | | | | | | | | | | | | Debts | | | | 1,374,359 | | | | 833,795 | | | DCF Model | | Discount rate | Debentures | | ₩ | 27,752,493 | | | ₩ | 29,256,810 | | | DCF Model | | Discount rate | | | 33,504,039 | | | | 41,058,076 | | | DCF Model | | Discount rate |
The valuationValuation techniques and the inputs of financial assets and liabilities whose the fair values are disclosed and classified as Level 3 as of December 31, 20132016 and 2014,2017, are as follows:
| | | Fair value | | | Valuation technique | | Inputs | | Unobservable Inputs | | Fair value | | Valuation technique | | Inputs | | | 2013 | | | 2014 | | | | 2016 | | 2017 | | | | (In millions of Korean won) | | | | | | | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | | | Cash and due from financial institutions | | ₩ | 1,539,592 | | | ₩ | 1,956,800 | | | DCF Model | | Credit spread, Other spread, Interest rate | | Credit spread, Other spread | | ₩ | 1,862,664 | | | ₩1,769,347 | | DCF Model | | Credit spread, Other spread, Interest rates | Loans | | | 219,319,406 | | | | 232,084,413 | | | DCF Model | | Credit spread, Other spread, Prepayment rate, Interest rate | | Credit spread, Other spread, Prepayment rate | | | 265,144,250 | | | 289,237,413 | | DCF Model | | Credit spread, Other spread, Prepayment rate, Interest rates | Held-to-maturity financial assets | | | | — | | | 4,243 | | DCF Model | | Interest rates | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 220,858,998 | | | ₩ | 234,041,213 | | | | | | | | | ₩ | 267,006,914 | | | ₩291,011,003 | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | | | Deposits | | ₩ | 128,288,906 | | | ₩ | 129,237,603 | | | DCF Model | | Other spread, Prepayment rate, Interest rate | | Other spread, Prepayment rate | | ₩ | 124,155,063 | | | ₩131,068,206 | | DCF Model | | Other spread, Prepayment rate, Interest rates | Debts | | | 13,942,220 | | | | 15,895,786 | | | DCF Model | | Other spread, Interest rate | | Other spread | | | 24,802,785 | | | 27,961,186 | | DCF Model | | Other spread, Interest rates | Debentures | | | 468,703 | | | | 495,392 | | | DCF Model | | Other spread, Implied default probability, Interest rate | | Other spread, Implied default probability | | | 1,939,712 | | | 3,342,249 | | DCF Model | | Other spread, Implied default probability, Interest rates | Other financial liabilities | | | 1,905 | | | | 13,286 | | | DCF Model | | Other spread, Interest rate | | Other spread | | | 366,377 | | | 445,367 | | DCF Model | | Other spread, Interest rates | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 142,701,734 | | | ₩ | 145,642,067 | | | | | | | | | ₩ | 151,263,937 | | | ₩162,817,008 | | | | | | | | | | | | | | | | | | | | | | | | | | |
6.2 Level 3 of the fair value hierarchy disclosureFair Value Hierarchy Disclosure 6.2.1 Valuation policyPolicy and process ofProcess for Fair Value Measurement Categorized Within Level 3 Fair value3. The Group uses external, independent and qualified independent third-partyprofessional valuer’s valuation service in addition to internal valuation models to determine the fair value of the Group’s assets at the end of every reporting period. Where a reclassification between the levels of the fair value hierarchy occurs for a financial asset or liability, the Group’s policy is to recognize such transfers as having occurred at the beginning of the reporting period. 6.2.2 Changes in fair valueFair Value (Level 3) measured using valuation technique basedMeasured Using Valuation Technique Based on unobservableUnobservable in marketMarket ChangesDetails of changes in Level 3 of the fair value hierarchy for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Financial assets at fair value through profit or loss | | Financial investments | | Financial liabilities at fair value through profit or loss | | Net derivatives | | | Financial assets at fair value through profit or loss | | Financial investments | | Financial liabilities at fair value through profit or loss | | Net derivatives financial instruments | | | | Designate at fair value through profit or loss | | Available-for-sale financial assets | | Designate at fair value through profit or loss | | Derivatives held for trading | | Derivatives held for hedging | | | Designated at fair value through profit or loss | | Available-for-sale financial assets | | Designated at fair value through profit or loss | | Derivatives held for trading | | Derivatives held for hedging | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Beginning balance | | ₩ | 177,624 | | | ₩ | 1,478,339 | | | ₩ | (469,138 | ) | | ₩ | (1,158 | ) | | ₩ | (6,535 | ) | | ₩ | 386,838 | | | ₩ | 1,888,439 | | | ₩ | (1,819,379 | ) | | ₩ | (89,042 | ) | | ₩ | 714 | | Total gains or losses | | | | | | | | | | | | | | | | | | | | | Profit or loss | | | 7,138 | | | | (10,180 | ) | | | (31,379 | ) | | | (2,007 | ) | | | (1,229 | ) | | Other comprehensive income | | | — | | | | 41,204 | | | | — | | | | — | | | | — | | | —Profit or loss | | | | 62,717 | | | (12,038 | ) | | (382,798 | ) | | 25,649 | | | 676 | | —Other comprehensive income | | | | — | | | 86,320 | | | | — | | | | — | | | | — | | Purchases | | | 415,876 | | | | 519,140 | | | | — | | | | 96 | | | | — | | | | 278,743 | | | 744,221 | | | | — | | | 33,664 | | | | — | | Sales | | | (366,710 | ) | | | (85,191 | ) | | | — | | | | (2,058 | ) | | | — | | | | (345,846 | ) | | (288,082 | ) | | | — | | | (178,670 | ) | | | — | | Issues | | | — | | | | — | | | | (1,076,965 | ) | | | (4,080 | ) | | | — | | | | — | | | | — | | | (4,085,714 | ) | | (26,049 | ) | | | — | | Settlements | | | — | | | | — | | | | 698,917 | | | | 17,009 | | | | (626 | ) | | | (118,913 | ) | | | — | | | 4,182,978 | | | 282,671 | | | (113 | ) | Transfers into Level 3 | | | — | | | | 26,979 | | | | — | | | | — | | | | — | | | Transfers out of Level 3 | | | — | | | | (308,238 | ) | | | — | | | | — | | | | — | | | Transfers into Level 31 | | | | — | | | | — | | | | — | | | 8,815 | | | | — | | Transfers out of Level 31 | | | | (337,217 | ) | | (24,816 | ) | | 2,388,485 | | | (72,571 | ) | | | — | | Business combination | | | | 836,950 | | | 678,248 | | | (8,080,711 | ) | | (49,377 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending balance | | ₩ | 233,928 | | | ₩ | 1,662,053 | | | ₩ | (878,565 | ) | | ₩ | 7,802 | | | ₩ | (8,390 | ) | | ₩ | 763,272 | | | ₩ | 3,072,292 | | | ₩ | (7,797,139 | ) | | ₩ | (64,910 | ) | | ₩ | 1,277 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Financial assets at fair value through profit or loss | | Financial investments | | Financial liabilities at fair value through profit or loss | | Net derivatives | | | Financial assets at fair value through profit or loss | | Financial investments | | Financial liabilities at fair value through profit or loss | | Net derivatives financial instruments | | | | Designate at fair value through profit or loss | | Available-for-sale financial assets | | Designate at fair value through profit or loss | | Derivatives held for trading | | Derivatives held for hedging | | | Designated at fair value through profit or loss | | Available-for-sale financial assets | | Designated at fair value through profit or loss | | Derivatives held for trading | | Derivatives held for hedging | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Beginning balance | | ₩ | 233,928 | | | ₩ | 1,662,053 | | | ₩ | (878,565 | ) | | ₩ | 7,802 | | | ₩ | (8,390 | ) | | ₩ | 763,272 | | | ₩ | 3,072,292 | | | ₩ | (7,797,139 | ) | | ₩ | (64,910 | ) | | ₩ | 1,277 | | Total gains or losses | | | | | | | | | | | | | | | | | | | | | Profit or loss | | | 11,350 | | | | (131,057 | ) | | | (26,232 | ) | | | 27,124 | | | | 6,579 | | | Other comprehensive income | | | — | | | | 141,422 | | | | — | | | | — | | | | — | | | —Profit or loss | | | | 52,936 | | | (20,827 | ) | | (846,704 | ) | | 504,627 | | | (408 | ) | —Other comprehensive income | | | | — | | | 6,356 | | | | — | | | | — | | | | — | | Purchases | | | 678,750 | | | | 225,272 | | | | — | | | | 7,130 | | | | — | | | | 1,315,500 | | | 1,713,098 | | | | — | | | 35,649 | | | | — | | Sales | | | (421,860 | ) | | | (116,194 | ) | | | — | | | | (3,771 | ) | | | — | | | | (1,076,928 | ) | | (916,778 | ) | | | — | | | (270,435 | ) | | | — | | Issues | | | — | | | | — | | | | (1,417,513 | ) | | | (4,829 | ) | | | — | | | | — | | | | — | | | (11,528,433 | ) | | (67,958 | ) | | | — | | Settlements | | | — | | | | — | | | | 1,339,884 | | | | (14,290 | ) | | | (210 | ) | | | (264,816 | ) | | | — | | | 11,484,384 | | | (3,760 | ) | | (164 | ) | Transfers into Level 3 | | | — | | | | 25,146 | | | | — | | | | 22,651 | | | | — | | | Transfers out of Level 3 | | | — | | | | (12,137 | ) | | | — | | | | — | | | | — | | | Transfers into Level 31 | | | | — | | | 14,168 | | | | — | | | | — | | | | — | | Transfers out of Level 31 | | | | — | | | (922 | ) | | | — | | | (642 | ) | | | — | | Business combination | | | — | | | | 6,834 | | | | — | | | | — | | | | — | | | | 524,380 | | | 2,038,779 | | | | — | | | 522 | | | | — | | Changes from replacement of assets Of disposal group as held for sale | | | | — | | | (40,190 | ) | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending balance | | ₩ | 502,168 | | | ₩ | 1,801,339 | | | ₩ | (982,426 | ) | | ₩ | 41,817 | | | ₩ | (2,021 | ) | | ₩ | 1,314,344 | | | ₩ | 5,865,976 | | | ₩ | (8,687,892 | ) | | ₩ | 133,093 | | | ₩ | 705 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1 | The changes in levels for the financial instruments occurred due to change in the availability of observable market data. |
In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss for the year,period, and total gains or losses for the yearperiod included in profit or loss for financial instruments held at the end of the reporting period in the statements of comprehensive income for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows: | | | | | | | | | | | 2012 | | | | Net income from financial investments at fair value through profit or loss | | | Other operating income | | | | (In millions of Korean won) | | Total losses included in profit or loss for the year | | ₩ | (47,152 | ) | | ₩ | (80,259 | ) | Total losses for the year included in profit or loss for financial instruments held at the end of the reporting period | | | (18,063 | ) | | | (83,533 | ) |
| | | | | | | | | | | | | | | 2015 | | | | Net income(loss) from financial investments at fair value through profit or loss | | | Other operating income(loss) | | | Net interest income | | | | (In millions of Korean won) | | Total gains or losses included in profit or loss for the period | | ₩ | 8,699 | | | ₩ | 125,331 | | | ₩ | 7 | | Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period | | | 30,926 | | | | (24,143 | ) | | | 7 | |
| | | | | | | | | | | 2013 | | | | Net income from financial investments at fair value through profit or loss | | | Other operating income | | | | (In millions of Korean won) | | Total gains or losses included in profit or loss for the year | | ₩ | (26,248 | ) | | ₩ | (11,409 | ) | Total gains or losses for the year included in profit or loss for financial instruments held at the end of the reporting period | | | (3,285 | ) | | | (23,948 | ) |
| | | | | | | | | | | | | | | 2016 | | | | Net income(loss) from financial investments at fair value through profit or loss | | | Other operating income(loss) | | | Net interest income | | | | (In millions of Korean won) | | Total gains or losses included in profit or loss for the period | | ₩ | (294,432 | ) | | ₩ | (11,375 | ) | | ₩ | 13 | | Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period | | | (89,797 | ) | | | (15,306 | ) | | | — | |
| | | | | | | | | | | | | | | 2014 | | | | Net income from financial investments at fair value through profit or loss | | | Other operating income | | | Net Interest Income | | | | (In millions of Korean won) | | Total gains or losses included in profit or loss for the year | | ₩ | 12,242 | | | ₩ | (124,559 | ) | | ₩ | 81 | | Total gains or losses for the year included in profit or loss for financial instruments held at the end of the reporting period | | | 35,573 | | | | (119,657 | ) | | | 81 | |
| | | | | | | | | | | | | | | 2017 | | | | Net income(loss) from financial investments at fair value through profit or loss | | | Other operating income(loss) | | | Net interest income | | | | (In millions of Korean won) | | Total gains or losses included in profit or loss for the period | | ₩ | (289,141 | ) | | ₩ | (21,235 | ) | | ₩ | — | | Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period | | | 48,333 | | | | (90,103 | ) | | | — | |
6.2.3 Sensitivity analysisAnalysis of changesChanges in unobservable inputsUnobservable Inputs Information about fair value measurements using unobservable inputs as of December 31, 2016 and 2017, are as follows: | | | 2013 | | 2016 | | | Fair value | | Valuation technique | | Inputs | | Unobservable inputs | | Range of unobservable inputs(%) | | Relationship of unobservable inputs to fair value | | Fair value | | Valuation technique | | Unobservable inputs | | Range of unobservable inputs(%) | | Relationship of unobservable inputs to fair value | | | (In millions of Korean won) | | | (In millions of Korean won) | | | | Financial assets | | | | | | | | | Financial assets | | | | | | | | | | Financial assets designated at fair value through profit or loss | Financial assets designated at fair value through profit or loss | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | Derivative linked securities | | ₩ | 233,928 | | | Monte Carlo Simulation, Closed Form, Hull and White model | | Price of the underlying asset, Interest rates, Dividend yield, Volatility of the underlying asset, Correlation between underlying asset, Volatility of interest rate, Discount rate | | Volatility of the underlying asset | | 10.99~40.28 | | The higher the volatility, the higher the fair value fluctuation | | | | | Correlation between underlying asset | | -3.28~57.89 | | The higher the correlation between underlying asset, the higher the fair value fluctuation | | | | | Volatility of interest rate | | 0.48 | | The higher the volatility, the higher the fair value fluctuation | | | | | Discount rate | | 2.54~5.32 | | The lower the discount rate, the higher the fair value | | Debt securities | | | ₩ | 94,069 | | | Black-Scholes Model | | Volatility of the underlying asset | | | 10.51~27.70 | | | The higher the volatility, the higher the fair value fluctuation | Equity securities | | | | 65,591 | | | Black-Scholes Model | | Volatility of the underlying asset | | | 10.51~30.97 | | | The higher the volatility, the higher the fair value fluctuation | Derivative-linked securities | | | | 603,612 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model | | Volatility of the underlying asset | | | 15.00~49.00 | | | The higher the volatility, the higher the fair value fluctuation | | | | | | | Correlation between underlying assets | | | 4.00~73.07 | | | The higher the correlation, the higher the fair value fluctuation | Derivatives held for trading | Derivatives held for trading | | | | | | | | | | | | | | | | | | | Stock and index | | | 42,706 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation | | Price of the underlying asset, Interest rates, Volatility of the underlying asset, Correlation between underlying asset, Dividend yield, Discount rate | | Volatility of the underlying asset | | 7.10~45.64 | | The higher the volatility, the higher the fair value fluctuation | | | 124,888 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Tree Model | | Volatility of the underlying asset | | | 5.60~55.00 | | | The higher the volatility, the higher the fair value fluctuation | | | | Correlation between underlying asset | | 11.43~79.26 | | The higher the correlation between underlying asset, the higher the fair value fluctuation | | | | | Discount rate | | 3.46 | | The lower the discount rate, the higher the fair value | | | | | | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Tree Model | | Correlation between underlying assets | | | 4.00~69.00 | | | The higher the correlation, the higher the fair value fluctuation | Currency | | | 6,490 | | | DCF Model | | Interest rates, Foreign exchange rate, Loss given default | | Loss given default | | 88.24~94.12 | | The higher the loss given default, the lower the fair value | | Currency, interest rate and others | | | | 12,048 | | | DCF Model, Hull and White Model, Closed Form, Monte Carlo Simulation, Tree Model | | Loss given default | | | 0.80~0.84 | | | The higher the loss given default, the lower the fair value | | | | | | Volatility of the stock price | | | 14.82~30.97 | | | The higher the volatility, the higher the fair value fluctuation | | | | | | Volatility of the interest rate | | | 0.57 | | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | Volatility of the underlying asset | | | 18.00~59.00 | | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | | Correlation between underlying assets | | | -5.00~47.00 | | | The higher the absolute value of correlation, the higher the fair value fluctuation | Derivatives held for hedging | Derivatives held for hedging | | | | | | | | | | | | | | | Interest rate | | | 452 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation | | Interest rates, Correlation between underlying asset (Interest rates), Foreign exchange rate | | Correlation between underlying asset(Interest rates) | | 0.03 | | The higher the correlation between underlying asset, the higher the fair value fluctuation | | | 1,463 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Tree Model | | Volatility of the underlying asset | | | 5.04 | | | The higher the volatility, the higher the fair value fluctuation | | Available-for-sale financial assets | | | | | | | | | | Debt securities | | | 2,809 | | | DCF Model | | Discount rate | | Discount rate | | 8.85 | | The lower the discount rate, the higher the fair value | |
| | | | | | | | | | | | | | | | | 2013 | | | Fair value | | | Valuation
technique
| | Inputs
| | Unobservable inputs
| | Range of
unobservable
inputs(%) | | Relationship of unobservable inputs to
fair value
| | | (In millions of
Korean won) | | | | | | | | | | | | Equity securities
| | | 1,659,244 | | | DCF Model, Comparable company analysis, Adjusted discount rate method, Binomial trees, Hull and White model, Net asset value method, Dividend discount model, Discounted cash flows to equity, | | Growth rate, Discount rate, Volatility of interest rate, Volatilities of real estate selling price, Liquidation value, Net asset value, Stock price index of the comparative company | | Growth rate | | 0.00~1.00 | | The higher the growth rate, the higher the fair value | | | | | Discount rate | | 2.86~58.69 | | The lower the discount rate, the higher the fair value | | | | | Volatility of interest rate | | 12.37~16.26 | | The higher the volatility, the higher the fair value fluctuation | | | | | Volatilities of real estate selling price | | 0.74~0.96 | | The higher the real estate selling price, the higher the fair value | | | | | Liquidation value | | 0.00 | | The higher the liquidation value, the higher the fair value | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total
| | ₩ | 1,945,629 | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities
| | | | | | | | | | | | | | | Financial liabilities designated at fair value through profit or loss
| | | | | | | | | | | | | | Derivative linked securities
| | ₩
| 878,565
| | | Closed Form, Monte Carlo Simulation
| | Price of the underlying asset, Interest rates, Volatility of the underlying asset, Correlation between underlying asset, Dividend yield
| | Volatility of the underlying asset
| | 10.99~44.71
| | The higher the volatility, the higher the fair value fluctuation
| | | | | Correlation between underlying asset | | -3.28~58.28 | | The higher the correlation between underlying asset, the higher the fair value fluctuation | Derivatives held for trading
| | | | | | | | | Stock and index
| | | 41,394 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation | | Price of the underlying asset, Interest rates, Volatility of the underlying asset, Correlation between underlying asset, Dividend yield, Volatility of interest rate | | Volatility of the underlying asset | | 10.99~45.64 | | The higher the volatility, the higher the fair value fluctuation | | | | | Correlation between underlying asset | | 16.20~79.26 | | The higher the correlation between underlying asset, the higher the fair value fluctuation | | | | | Volatility of interest rate | | 12.37~16.26 | | The higher the volatility, the higher the fair value fluctuation | Derivatives held for hedging
| | | | | | | | | Interest rate
| | | 8,842 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation | | Price of the underlying asset, Interest rates, Volatility of the underlying asset | | Volatility of the underlying asset | | 3.00~5.28 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | | | | | | | | | Total
| | ₩ | 928,801 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2016 | | | Fair value | | | Valuation technique | | Unobservable inputs | | Range of unobservable inputs(%) | | Relationship of unobservable inputs to fair value | | | (In millions of Korean won) | | | | | | | | | | Available-for-sale financial assets | | | | | | | | | | | | | Debt securities | | | 10,251 | | | DCF Model | | Discount rate | | 6.55 | | The lower the discount rate, the higher the fair value | Equity securities | | | 3,062,041 | | | DCF Model, Comparable Company Analysis, Adjusted discount rate method, Net asset value method, Dividend discount model, Hull and White model, Discounted cash flows to equity, Income approach | | Growth rate | | 0.00~1.00 | | The higher the growth rate, the higher the fair value | | | | | | | | Discount rate | | 1.49~22.01 | | The lower the discount rate, the higher the fair value | | | | | | | | Liquidation value | | 0.00 | | The higher the liquidation value, the higher the fair value | | | | | | | | Recovery rate of receivables’ acquisition cost | | 155.83 | | The higher the recovery rate of receivables’ acquisition cost, the higher the fair value | | | | | | | | | | | | | | Total | | ₩ | 3,973,963 | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | Financial liabilities designated at fair value through profit or loss | | | | | Derivative-linked securities | | ₩ | 7,797,139 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black Scholes-Model | | Volatility of the underlying asset | | 1.00~49.00 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | Correlation between underlying assets | | -5.00~77.00 | | The higher the absolute value of correlation, the higher the fair value fluctuation | Derivatives held for trading | | | | | | | | | | | | | Stock and index | | | 153,419 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation | | Volatility of the underlying asset | | 17.00~43.00 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | Correlation between underlying assets | | 4.00~59.00 | | The higher the correlation, the higher the fair value fluctuation | Others | | | 48,427 | | | DCF Model, Closed Form, Monte Carlo Simulation, Hull and White Model, Tree Model | | Volatility of the stock price | | 14.82 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | Volatility of the interest rate | | 0.57~37.15 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | Discount rate | | 2.09 | | The lower the discount rate, the higher the fair value | | | | | | | | Volatility of the underlying asset | | 18.00~30.15 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | Correlation between underlying assets | | -5.00~47.00 | | The higher the absolute value of correlation, the higher the fair value fluctuation |
| | | | 2016 | | | | Fair value | | Valuation technique | | Unobservable inputs | | Range of unobservable inputs(%) | | Relationship of unobservable inputs to fair value | | | | (In millions of Korean won) | | | | Derivatives held for hedging | | | | | | | | | | | | Interest rate | | | | 186 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Tree Model | | Volatility of the underlying asset | | | 2.74 | | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | | | | | | | Total | | | ₩ | 7,999,171 | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | 2017 | | | Fair value | | Valuation technique | | Inputs | | Unobservable inputs | | Range of unobservable inputs(%) | | Relationship of unobservable inputs to fair value | | Fair value | | Valuation technique | | Unobservable inputs | | Range of unobservable inputs(%) | | Relationship of unobservable inputs to fair value | | | (In millions of Korean won) | | | (In millions of Korean won) | | | | Financial assets | | | | | | | | | Financial assets | | | | | | | | | | Financial assets designated at fair value through profit or loss | Financial assets designated at fair value through profit or loss | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | Derivative linked securities | | ₩ | 502,168 | | | Monte Carlo Simulation, Closed Form, DCF Model, Black-Derman-Toy Model | | Price of the underlying asset, Interest rates, Dividend yield, Discount rate, Volatility of the underlying asset, Correlation between underlying asset, Probability of Default, Volatility of interest rate | | Volatility of the underlying asset | | 2.82~48.96 | | The higher the volatility, the higher the fair value fluctuation | | | | | | Correlation between underlying asset | | -7.75~59.13 | | The higher the correlation between underlying asset, the higher the fair value fluctuation | | | | | | Probability of Default | | 0.17~4.42 | | The higher the probability of default, the lower the fair value | | Debt securities | | | ₩ | 301,851 | | | Tree Model, DCF Model, Hull and White Model | | Volatility of the underlying asset | | | 9.96~29.53 | | | The higher the volatility, the higher the fair value fluctuation | Equity securities | | | | 67,828 | | | Tree Model | | Volatility of the underlying asset | | | 11.45~24.01 | | | The higher the volatility, the higher the fair value fluctuation | Derivative-linked securities | | | | 944,665 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Option Model, Tree Model | | Volatility of the underlying asset | | | 10.00~30.07 | | | The higher the volatility, the higher the fair value fluctuation | | | | | Monte Carlo Simulation, Closed Form, DCF Model, Black-Derman-Toy Model | | Price of the underlying asset, Interest rates, Dividend yield, Discount rate, Volatility of the underlying asset, Correlation between underlying asset, Probability of Default, Volatility of interest rate | | Volatility of interest rate | | 4.48 | | The higher volatility of interest rate, the higher the fair value fluctuation | | | | Recovery rate | | | 40.00 | | | The higher the recovery rate, the higher the fair value | | | | | | | Correlation between underlying assets | | | 8.27~90.00 | | | The higher the correlation, the higher the fair value fluctuation | Derivatives held for trading | Derivatives held for trading | | | | | | | | | | | | | | | | | Stock and index | | | 61,400 | | | Volatility of the underlying asset | | 4.80~45.82 | | The higher the volatility, the higher the fair value fluctuation | | | 138,972 | | | DCF Model, FDM, Closed Form, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Tree Model | | Volatility of the underlying asset | | | 1.00~39.00 | | | The higher the volatility, the higher the fair value fluctuation | | | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Binomial trees, Black-Scholes Model | | Price of the underlying asset, Interest rates, Dividend yield, Discount rate, Volatility of the underlying asset, Correlation between underlying asset | | Correlation between underlying asset | | -3.27~59.13 | | The higher the correlation between underlying asset, the higher the fair value fluctuation | | | | Correlation between underlying assets | | | 3.00~67.00 | | | The higher the value of correlation, the higher the fair value fluctuation | Currency, Interest rate and others | | | | 58,107 | | | DCF Model, Closed Form, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Tree Model, Option Model | | Loss given default | | | 0.56 | | | The higher the loss given default, the lower the fair value | | | | | | | Volatility of the interest rate | | | 0.47 | | | The higher the volatility, the higher the fair value fluctuation | Currency | | | 2,995 | | | DCF Model, | | Interest rates, Foreign exchange rate, Loss given default | | Loss given default | | 6.78~90.56 | | The higher the loss given default, the lower the fair value | | | | | | | | Volatility of the underlying asset | | | 3.00~51.00 | | | The higher the volatility, the higher the fair value fluctuation | Derivatives held for hedging | | | | | | Interest rate | | | 260 | | | DCF Model, Closed Form, FDM, MonteCarlo Simulation | | Price of the underlying asset, Interest rates, Volatility of the underlying asset | | Volatility of the underlying asset | | 3.91 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | DCF Model, Closed Form, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Tree Model, Option Model | | Correlation between underlying assets | | | -13.00~90.00 | | | The higher the absolute value of correlation, the higher the fair value fluctuation | Available-for-sale financial assets | | | | | | | | | | Debt securities | | | 341 | | | DCF Model | | Discount rate | | Discount rate | | 9.21 | | The lower the discount rate, the higher the fair value | |
| | | | | | | | | | | | | | | | | 2014 | | | Fair value | | | Valuation
technique
| | Inputs
| | Unobservable inputs
| | Range of
unobservable
inputs(%) | | Relationship of unobservable inputs to
fair value
| | | (In millions of
Korean won) | | | | | | | | | | | | Equity securities
| | | 1,800,998 | | | DCF Model, Comparable Company Analysis, Adjusted discount rate method, Binomial trees, Discounted cash flows to equity, Net asset value method, Dividend discount model | | Growth rate, Discount rate, Volatility of interest rate, Volatilities of real estate selling price, Liquidation value, Recovery rate of receivables’ acquisition cost | | Growth rate | | 0.00~3.00 | | The higher the growth rate, the higher the fair value | | | | | Discount rate | | 2.29~23.25 | | The lower the discount rate, the higher the fair value | | | | | Volatility of interest rate | | 16.25~21.45 | | The higher the volatility, the higher the fair value fluctuation | | | | | Volatilities of real estate selling price | | 1.10 | | The higher the real estate selling price, the higher the fair value | | | | | Liquidation value | | 0.00 | | The higher the liquidation value, the higher the fair value | | | | | Recovery rate of receivables’ acquisition cost | | 155.83 | | The higher the recovery rate of receivables’ acquisition cost, the higher the fair value | | | | | | | | | | | | | | | | Total
| | ₩ | 2,368,162 | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities
| | | | | | | | | Financial liabilities designated at fair value through profit or loss
| | | | | | | | | | | | | | Derivative linked securities
| | ₩
| 982,426
| | | Closed Form, MonteCarlo Simulation
| | Price of the underlying asset, Interest rates, Dividend yield, Volatility of the underlying asset, Correlation between underlying asset
| | Volatility of the underlying asset
| | 3.42~48.89
| | The higher the volatility, the higher the fair value fluctuation
| | | | | Correlation between underlying asset | | -7.75~59.13 | | The higher the correlation between underlying asset, the higher the fair value fluctuation | Derivatives held for trading
| | | | | | | | | Stock and index
| | | 22,578 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model | | Price of the underlying asset, Interest rates, Volatility of the underlying asset, Correlation between underlying asset, Dividend yield, Volatility of interest rate | | Volatility of the underlying asset | | 11.15~41.79 | | The higher the volatility, the higher the fair value fluctuation | | | | | Correlation between underlying asset | | -3.83~68.20 | | The higher the correlation between underlying asset, the higher the fair value fluctuation | | | | | Volatility of interest rate | | 16.25~21.45 | | The higher the volatility, the higher the fair value fluctuation | Derivatives held for hedging
| | | | | | | | | Interest rate
| | | 2,281 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation | | Price of the underlying asset, Interest rates, Volatility of the underlying asset | | Volatility of the underlying asset | | 2.35~3.91 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | | | | | | | | | Total
| | ₩ | 1,007,285 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | 2017 | | | Fair value | | | Valuation technique | | Unobservable inputs | | Range of unobservable inputs(%) | | Relationship of unobservable inputs to fair value | | | (In millions of Korean won) | | | | | | | | | | Derivatives held for hedging | | | | | | | | | | | | | Interest rate | | | 775 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation | | Volatility of the underlying asset | | 3.02 | | The higher the volatility, the higher the fair value fluctuation | Available-for-sale financial assets | | | | | | | | | | | | | Debt securities | | | 49,381 | | | DCF Model, Option Model, Net asset value method, Market approach | | Discount rate | | 2.57~11.08 | | The lower the discount rate, the higher the fair value | | | | | | | | Volatility | | 15.26~30.07 | | The Volatility is different for each item | | | | | | | | Correlation between underlying assets | | 48.82~82.16 | | The coefficient of correlation is different for each item | | | | | | | | Growth rate | | 0.00~2.20 | | The higher the growth rate, the higher the fair value | Equity securities | | | 5,816,595 | | | DCF Model, Comparable Company Analysis, Adjusted discount rate method, Dividend Discount Model, Net asset value method, Discounted cash flows to equity, Income approach, Market approach, One Factor Hull-White Model, Usage of past transactions, Cost methods, Asset value approach, Tree Model and others | | Growth rate | | -1.00~1.00 | | The higher the growth rate, the higher the fair value | | | | | | | | Discount rate | | -1.00~52.68 | | The lower the discount rate, the higher the fair value | | | | | | | | Asset value | | -1.00~1.00 | | The higher the asset value, the higher the fair value | | | | | | | | Correlation between underlying assets | | 48.82~82.16 | | The coefficient of correlation is different for each item | | | | | | | | Volatility | | 15.26~30.07 | | The Volatility is different for each item | | | | | | | | | | | | | | Total | | ₩ | 7,378,174 | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | Financial liabilities designated at fair value through profit or loss | | | | | Derivative-linked securities | | ₩ | 8,687,892 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black Scholes-Model | | Volatility of the underlying asset | | 1.00~52.00 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | Correlation between underlying assets | | -13.42~90.24 | | The higher the absolute value of correlation, the higher the fair value fluctuation | Derivatives held for trading | | | | | | | | | | | | | Stock and index | | | 14,796 | | | DCF Model, Closed Form, Monte Carlo Simulation, FDM | | Volatility of the underlying asset | | 1.00~33.00 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | Correlation between underlying assets | | 7.00~67.00 | | The higher the correlation, the higher the fair value fluctuation |
| | | | | | | | | | | | | | | | | 2017 | | | Fair value | | | Valuation technique | | Unobservable inputs | | Range of unobservable inputs(%) | | Relationship of unobservable inputs to fair value | | | (In millions of Korean won) | | | | | | | | | | Others | | | 49,190 | | | DCF Model, Closed Form, Monte Carlo Simulation, Hull and White Model, Option Model | | Volatility of the stock price | | 15.84 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | Volatility of the interest rate | | 0.47 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | Discount rate | | 2.57~2.69 | | The lower the discount rate, the higher the fair value | | | | | | | | Volatility of the underlying asset | | 1.00~49.00 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | | Correlation between underlying assets | | 25.00~90.00 | | The higher the correlation, the higher the fair value fluctuation | Derivatives held for hedging | | | | | | | | | | | | | Interest rate | | | 70 | | | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Tree Model | | Volatility of the underlying asset | | 2.64 | | The higher the volatility, the higher the fair value fluctuation | | | | | | | | | | | | | | Total | | ₩ | 8,751,948 | | | | | | | | | | | | | | | | | | | | | | |
Sensitivity analysis of changes in unobservable inputs Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable changes in the fair value of financial instruments which are affected by the unobservable parameters, using a statistical technique. When the fair value is affected by more than two input parameters, the amounts represent the most favorable or most unfavorable. Amongst Level 3 financial instruments subject to sensitivity analysis are equity-related derivatives, currency-related derivatives and interest rate-related derivatives whose fair value changes are recognized in profit or loss as well as debt securities and unlisted equity securities (including private equity funds) whose fair value changes are recognized in profit or loss or other comprehensive income and loss.income. Sensitivity analyses by typeThe results of instrument as a result of varying input parametersthe sensitivity analysis from changes in inputs are as follows:
| | | | | | | | | | | | | | | | | | | 2013 | | | | Recognition in profit or loss | | | Other comprehensive income or loss | | | | Favorable changes | | | Unfavorable changes | | | Favorable changes | | | Unfavorable changes | | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | | | | | | | | | | | | Derivative linked securities(1) | | ₩ | 6,188 | | | ₩ | (8,834 | ) | | ₩ | — | | | ₩ | — | | Derivatives held for trading(2) | | | 6,653 | | | | (6,299 | ) | | | — | | | | — | | Derivatives held for hedging(2) | | | — | | | | — | | | | — | | | | — | | Available-for-sale financial assets | | | | | | | | | | | | | | | | | Debt securities(3) | | | — | | | | — | | | | 61 | | | | (58 | ) | Equity securities(4) | | | — | | | | — | | | | 322,444 | | | | (121,192 | ) | | | | | | | | | | | | | | | | | | Total | | ₩ | 12,841 | | | ₩ | (15,133 | ) | | ₩ | 322,505 | | | ₩ | (121,250 | ) | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | Financial liabilities designated at fair value through profit or loss(1) | | ₩ | 15,467 | | | ₩ | (10,330 | ) | | ₩ | — | | | ₩ | — | | Derivatives held for trading(2) | | | 4,596 | | | | (4,968 | ) | | | — | | | | — | | Derivatives held for hedging(2) | | | 345 | | | | (333 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | Total | | ₩ | 20,408 | | | ₩ | (15,631 | ) | | ₩ | — | | | ₩ | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2016 | | | | Recognition in profit or loss | | | Other comprehensive income | | | | Favorable changes | | | Unfavorable changes | | | Favorable changes | | | Unfavorable changes | | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss1 | | | | | | | | | | | | | | | | | Debt securities | | ₩ | 1,029 | | | ₩ | (866 | ) | | ₩ | — | | | ₩ | — | | Equity securities | | | 840 | | | | (521 | ) | | | — | | | | — | | Derivative-linked securities | | | 5,666 | | | | (5,463 | ) | | | — | | | | — | | Derivatives held for trading2 | | | 28,334 | | | | (29,486 | ) | | | — | | | | — | | Derivatives held for hedging2 | | | 9 | | | | (6 | ) | | | — | | | | — | | Available-for-sale financial assets | | | | | | | | | | | | | | | | | Debt securities3 | | | — | | | | — | | | | 69 | | | | (45 | ) | Equity securities4 | | | — | | | | — | | | | 168,225 | | | | (87,529 | ) | | | | | | | | | | | | | | | | | | Total | | ₩ | 35,878 | | | ₩ | (36,342 | ) | | ₩ | 168,294 | | | ₩ | (87,574 | ) | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | Financial liabilities designated at fair value through profit or loss1 | | ₩ | 97,429 | | | ₩ | (97,571 | ) | | ₩ | — | | | ₩ | — | | Derivatives held for trading2 | | | 31,759 | | | | (33,715 | ) | | | — | | | | — | | Derivatives held for hedging2 | | | 3 | | | | (3 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | Total | | ₩ | 129,191 | | | ₩ | (131,289 | ) | | ₩ | — | | | ₩ | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Recognition in profit or loss | | | Other comprehensive income or loss | | | | Favorable changes | | | Unfavorable changes | | | Favorable changes | | | Unfavorable changes | | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | | | | | | | | | | | | Derivative linked securities(1) | | ₩ | 6,006 | | | ₩ | (10,768 | ) | | ₩ | — | | | ₩ | — | | Derivatives held for trading(2) | | | 9,851 | | | | (8,194 | ) | | | — | | | | — | | Derivatives held for hedging(2) | | | 17 | | | | (15 | ) | | | — | | | | — | | Available-for-sale financial assets | | | | | | | | | | | | | | | | | Debt securities(3) | | | — | | | | — | | | | 20 | | | | (18 | ) | Equity securities(4) | | | — | | | | — | | | | 388,278 | | | | (147,164 | ) | | | | | | | | | | | | | | | | | | Total | | ₩ | 15,874 | | | ₩ | (18,977 | ) | | ₩ | 388,298 | | | ₩ | (147,182 | ) | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | Financial liabilities designated at fair value through profit or loss(1) | | ₩ | 23,283 | | | ₩ | (15,248 | ) | | ₩ | — | | | ₩ | — | | Derivatives held for trading(2) | | | 4,211 | | | | (6,812 | ) | | | — | | | | — | | Derivatives held for hedging(2) | | | 86 | | | | (76 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | Total | | ₩ | 27,580 | | | ₩ | (22,136 | ) | | ₩ | — | | | ₩ | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2017 | | | | Recognition in profit or loss | | | Other comprehensive income | | | | Favorable changes | | | Unfavorable changes | | | Favorable changes | | | Unfavorable changes | | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss1 | | | | | | | | | | | | | | | | | Debt securities | | ₩ | 3,220 | | | ₩ | (2,563 | ) | | ₩ | — | | | ₩ | — | | Equity securities | | | 654 | | | | (626 | ) | | | — | | | | — | | Derivative-linked securities | | | 6,906 | | | | (6,820 | ) | | | — | | | | — | | Derivatives held for trading2 | | | 25,616 | | | | (28,488 | ) | | | — | | | | — | | Derivatives held for hedging2 | | | — | | | | — | | | | — | | | | — | | Available-for-sale financial assets | | | | | | | | | | | | | | | | | Debt securities3 | | | — | | | | — | | | | 205 | | | | (51 | ) | Equity securities4 | | | — | | | | — | | | | 126,916 | | | | (71,396 | ) | | | | | | | | | | | | | | | | | | Total | | ₩ | 36,396 | | | ₩ | (38,497 | ) | | ₩ | 127,121 | | | ₩ | (71,447 | ) | | | | | | | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | | | | | | | Financial liabilities designated at fair value through profit or loss1 | | ₩ | 40,020 | | | ₩ | (36,757 | ) | | ₩ | — | | | ₩ | — | | Derivatives held for trading2 | | | 11,091 | | | | (10,827 | ) | | | — | | | | — | | Derivatives held for hedging2 | | | 2 | | | | (2 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | Total | | ₩ | 51,113 | | | ₩ | (47,586 | ) | | ₩ | — | | | ₩ | — | | | | | | | | | | | | | | | | | | |
(1)1 | For financial assets designated at fair value through profit or loss, the changes in fair value are calculated by shifting principal unobservable input parameters such asvolatility of the underlying asset or correlation between underlying asset by ± 10%. |
2 | For stock price fluctuation range of underlying assets by +/- 10%. |
(2) | For equity-relatedand index-related derivatives, the changes in fair value are calculated by shifting principal unobservable input parameters such as correlation betweenof the stock pricerates of return on stocks and volatility of the underlying asset by +/-± 10%. For currency-related derivatives, changes in fair value are calculated by shifting unobservable input parameters, such as loss given default ratio by ± 1%. For interest rate-related derivatives, correlation of the interest rates or volatility of the underlying asset is shifted by ± 10% to calculate fair value changes.
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3 | For debt securities,changes in fair value are calculated by shifting principal unobservable input parameters such as loss given default by ± 1%. For interest rate-related derivatives, coefficient of correlation between long-term and short-term interest rates or the volatilities of the underlying assets are shifted by +/- 10% to calculate the fair value changes. |
(3) | For debt securities, the changes in fair value are calculated by shifting principal unobservable input parametersparameters; such as, discount rate by +/-± 1%.
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(4)4 | For equity securities, the changes in fair value are calculated by shifting principal unobservable input parameters such as correlation between growth rate (0~0.5%) and discount rate, liquidation value(-1~1%) and discount rate, or recovery rate of receivables’ acquisition cost(-1~1%). Sensitivity of fair values to unobservable parameters of private equity fund is practically impossible, but in the case of equity fund composed of real estates, the changes in fair value are calculated by shifting correlation between discount rate(-1~1%) and volatilities of real estate price(-1~1%) . |
6.2.4 Day one gainOne Gain or lossLoss If the Group uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of financial instruments, there could be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the fair value of financial instruments is recognized as the transaction price, and the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. IfWhen the fair value of the financial instruments is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss. The aggregate difference yet to be recognized in profit or loss at the beginning and end of the period and a reconciliation of changes in the balance of this difference for the years ended December 31, 2016 and 2017, are as follows: | | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Balance at the beginning of the year | | ₩ | 8,652 | | | ₩ | 4,190 | | New transactions | | | 3,449 | | | | (853 | ) | Amounts recognized in profit or loss during the year | | | | | | | | | Amortization | | | (3,484 | ) | | | (891 | ) | Settlement | | | (4,427 | ) | | | (1,070 | ) | | | | | | | | | | Balance at the end of the year | | ₩ | 4,190 | | | ₩ | 1,376 | | | | | | | | | | |
| | | | | | | | | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Balance at the beginning of the period | | ₩ | 4,055 | | | ₩ | 39,033 | | New transactions and others | | | 37,819 | | | | 58,445 | | Changes during the period | | | (2,841 | ) | | | (74,664 | ) | | | | | | | | | | Balance at the end of the year | | ₩ | 39,033 | | | ₩ | 22,814 | | | | | | | | | | |
6.3 Carrying amountsAmounts of financial instrumentsFinancial Instruments by categoryCategory Financial assets and liabilities are measured at fair value or amortized cost. Measurement policies for each class of financial assets and liabilities are disclosed in Note 3, ‘Significant accounting policies’. The carrying amounts of financial assets and liabilities by category as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Financial assets at fair value through profit or loss | | | | | | | | | | | | | Financial assets at fair value through profit or loss | | | | | | | | | | | | | | Held for trading | | Designated at fair value through profit or loss | | Loans and receivables | | Available- for-sale financial assets | | Held-to- Maturity financial assets | | Derivatives held for hedging | | Total | | | Held for trading | | Designated at fair value through profit or loss | | Loans and receivables | | Available- for-sale financial assets | | Held-to- Maturity financial assets | | Derivatives held for hedging | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and due from financial institutions | | ₩ | — | | | ₩ | — | | | ₩ | 14,792,654 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 14,792,654 | | | ₩ | — | | | ₩ | — | | | ₩ | 17,884,863 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 17,884,863 | | Financial assets at fair value through profit or loss | | | 8,967,006 | | | | 361,736 | | | | — | | | | — | | | | — | | | | — | | | | 9,328,742 | | | 26,099,518 | | | 1,758,846 | | | | — | | | | — | | | | — | | | | — | | | 27,858,364 | | Derivatives | | | 1,680,880 | | | | — | | | | — | | | | — | | | | — | | | | 138,529 | | | | 1,819,409 | | | 3,298,328 | | | | — | | | | — | | | | — | | | | — | | | 83,607 | | | 3,381,935 | | Loans | | | — | | | | — | | | | 219,001,356 | | | | — | | | | — | | | | — | | | | 219,001,356 | | | | — | | | | — | | | 265,486,134 | | | | — | | | | — | | | | — | | | 265,486,134 | | Financial investments | | | — | | | | — | | | | — | | | | 21,832,104 | | | | 13,016,991 | | | | — | | | | 34,849,095 | | | | — | | | | — | | | | — | | | 33,970,293 | | | 11,177,504 | | | | — | | | 45,147,797 | | Other financial assets | | | — | | | | — | | | | 6,251,679 | | | | — | | | | — | | | | — | | | | 6,251,679 | | | | — | | | | — | | | 7,322,335 | | | | — | | | | — | | | | — | | | 7,322,335 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 10,647,886 | | | ₩ | 361,736 | | | ₩ | 240,045,689 | | | ₩ | 21,832,104 | | | ₩ | 13,016,991 | | | ₩ | 138,529 | | | ₩ | 286,042,935 | | | ₩ | 29,397,846 | | | ₩ | 1,758,846 | | | ₩ | 290,693,332 | | | ₩ | 33,970,293 | | | ₩ | 11,177,504 | | | ₩ | 83,607 | | | ₩ | 367,081,428 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2013 | | | 2016 | | | | Financial liabilities at fair value through profit or loss | | | | | | | | | | | | Financial liabilities at fair value through profit or loss | | | | | | | | | | Held for trading | | | Designated at fair value through profit or loss | | | Financial liabilities at amortized cost | | | Derivatives held for hedging | | | Total | | | Held for trading | | Designated at fair value through profit or loss | | Financial liabilities at amortized cost | | Derivatives held for hedging | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial liabilities | | | | | | | | | | | | | | | | | | | | | Financial liabilities at fair value through profit or loss | | ₩ | 236,637 | | | ₩ | 878,565 | | | ₩ | — | | | ₩ | — | | | ₩ | 1,115,202 | | | ₩ | 1,143,510 | | | ₩ | 10,979,326 | | | ₩ | — | | | ₩ | — | | | ₩ | 12,122,836 | | Derivatives | | | 1,580,029 | | | | — | | | | — | | | | 215,310 | | | | 1,795,339 | | | 3,717,819 | | | | — | | | | — | | | 89,309 | | | 3,807,128 | | Deposits | | | — | | | | — | | | | 200,882,064 | | | | — | | | | 200,882,064 | | | | — | | | | — | | | 239,729,695 | | | | — | | | 239,729,695 | | Debts | | | — | | | | — | | | | 14,101,331 | | | | — | | | | 14,101,331 | | | | — | | | | — | | | 26,251,486 | | | | — | | | 26,251,486 | | Debentures | �� | | — | | | | — | | | | 27,039,534 | | | | — | | | | 27,039,534 | | | | — | | | | — | | | 34,992,057 | | | | — | | | 34,992,057 | | Other financial liabilities | | | — | | | | — | | | | 13,262,914 | | | | — | | | | 13,262,914 | | | | — | | | | — | | | 16,286,578 | | | | — | | | 16,286,578 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 1,816,666 | | | ₩ | 878,565 | | | ₩ | 255,285,843 | | | ₩ | 215,310 | | | ₩ | 258,196,384 | | | ₩ | 4,861,329 | | | ₩ | 10,979,326 | | | ₩ | 317,259,816 | | | ₩ | 89,309 | | | ₩ | 333,189,780 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Financial assets at fair value through profit or loss | | | | | | | | | | | | | Financial assets at fair value through profit or loss | | | | | | | | | | | | | | Held for trading | | Designated at fair value through profit or loss | | Loans and receivables | | Available- for-sale financial assets | | Held-to- Maturity financial assets | | Derivatives held for hedging | | Total | | | Held for trading | | Designated at fair value through profit or loss | | Loans and receivables | | Available- for-sale financial assets | | Held-to- Maturity financial assets | | Derivatives held for hedging | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and due from financial institutions | | ₩ | — | | | ₩ | — | | | ₩ | 15,423,847 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 15,423,847 | | | ₩ | — | | | ₩ | — | | | ₩ | 19,817,825 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 19,817,825 | | Financial assets at fair value through profit or loss | | | 10,121,570 | | | | 636,340 | | | | — | | | | — | | | | — | | | | — | | | | 10,757,910 | | | 30,177,293 | | | 2,050,052 | | | | — | | | | — | | | | — | | | | — | | | 32,227,345 | | Derivatives | | | 1,858,637 | | | | — | | | | — | | | | — | | | | — | | | | 109,553 | | | | 1,968,190 | | | 2,998,042 | | | | — | | | | — | | | | — | | | | — | | | 312,124 | | | 3,310,166 | | Loans | | | — | | | | — | | | | 231,449,653 | | | | — | | | | — | | | | — | | | | 231,449,653 | | | | — | | | | — | | | 290,122,838 | | | | — | | | | — | | | | — | | | 290,122,838 | | Financial investments | | | — | | | | — | | | | — | | | | 22,391,466 | | | | 12,569,154 | | | | — | | | | 34,960,620 | | | | — | | | | — | | | | — | | | 48,116,263 | | | 18,491,980 | | | | — | | | 66,608,243 | | Other financial assets | | | — | | | | — | | | | 7,559,631 | | | | — | | | | — | | | | — | | | | 7,559,631 | | | | — | | | | — | | | 10,195,015 | | | | — | | | | — | | | | — | | | 10,195,015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 11,980,207 | | | ₩ | 636,340 | | | ₩ | 254,433,131 | | | ₩ | 22,391,466 | | | ₩ | 12,569,154 | | | ₩ | 109,553 | | | ₩ | 302,119,851 | | | ₩ | 33,175,335 | | | ₩ | 2,050,052 | | | ₩ | 320,135,678 | | | ₩ | 48,116,263 | | | ₩ | 18,491,980 | | | ₩ | 312,124 | | | ₩ | 422,281,432 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Financial liabilities at fair value through profit or loss | | | | | | | | | | | | Financial liabilities at fair value through profit or loss | | | | | | | | | | Held for trading | | | Designated at fair value through profit or loss | | | Financial liabilities at amortized cost | | | Derivatives held for hedging | | | Total | | | Held for trading | | Designated at fair value through profit or loss | | Financial liabilities at amortized cost | | Derivatives held for hedging | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial liabilities | | | | | | | | | | | | | | | | | | | | | Financial liabilities at fair value through profit or loss | | ₩ | 836,542 | | | ₩ | 982,426 | | | ₩ | — | | | ₩ | — | | | ₩ | 1,818,968 | | | ₩ | 1,944,770 | | | ₩ | 10,078,288 | | | ₩ | — | | | ₩ | — | | | ₩ | 12,023,058 | | Derivatives | | | 1,775,341 | | | | — | | | | — | | | | 22,049 | | | | 1,797,390 | | | 3,054,614 | | | | — | | | | — | | | 88,151 | | | 3,142,765 | | Deposits | | | — | | | | — | | | | 211,549,121 | | | | — | | | | 211,549,121 | | | | — | | | | — | | | 255,800,048 | | | | — | | | 255,800,048 | | Debts | | | — | | | | — | | | | 15,864,500 | | | | — | | | | 15,864,500 | | | | — | | | | — | | | 28,820,928 | | | | — | | | 28,820,928 | | Debentures | | | — | | | | — | | | | 29,200,706 | | | | — | | | | 29,200,706 | | | | — | | | | — | | | 44,992,724 | | | | — | | | 44,992,724 | | Other financial liabilities | | | — | | | | — | | | | 11,918,820 | | | | — | | | | 11,918,820 | | | | — | | | | — | | | 18,330,004 | | | | — | | | 18,330,004 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 2,611,883 | | | ₩ | 982,426 | | | ₩ | 268,533,147 | | | ₩ | 22,049 | | | ₩ | 272,149,505 | | | ₩ | 4,999,384 | | | ₩ | 10,078,288 | | | ₩ | 347,943,704 | | | ₩ | 88,151 | | | ₩ | 363,109,527 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
6.4 Transfer of financial assetsFinancial Assets 6.4.1 Transferred financial assets that are derecognized in their entiretyentirety. The Group transferred loans and other financial assets that are derecognized in their entirety to SPEs, while the maximum exposure to loss (carryingloss(carrying amount) from its continuing involvement in the derecognized financial assets as of December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | 2013 | | | | Type of continuing involvement | | Classification of financial instruments | | Carrying amount of continuing involvement in statement of financial position | | | Fair value of continuing involvement | | | | | | | | (In millions of Korean won) | | KR ABS Co., Ltd. | | Mezzanine/ subordinate debt | | Available-for-sale financial assets | | ₩ | 11,434 | | | ₩ | 11,434 | | KR ABS Second Co., Ltd.(1) | | Senior debt | | Loans and receivables | | | 26,065 | | | | 26,227 | | | | Subordinate debt | | Available-for-sale financial assets | | | 33,017 | | | | 33,017 | | EAK ABS Co., Ltd.(2) | | Subordinate debt | | Available-for-sale financial assets | | | 35,020 | | | | 35,020 | | AP ABS First Co., Ltd.(3) | | Senior debt | | Loans and receivables | | | 67,326 | | | | 67,353 | | | | Subordinate debt | | Available-for-sale financial assets | | | 16,669 | | | | 16,669 | | Discovery ABS First Co., Ltd.(4) | | Senior debt | | Loans and receivables | | | 23,494 | | | | 23,547 | | | | Subordinate debt | | Available-for-sale financial assets | | | 21,454 | | | | 21,454 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 234,479 | | | ₩ | 234,721 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2016 | | | | Type of continuing involvement | | Classification of financial instruments | | Carrying amount of continuing involvement in statement of financial position | | | Fair value of continuing involvement | | | | | | | | (In millions of Korean won) | | EAK ABS Co., Ltd. | | Subordinate debt | | Available-for-sale financial assets | | ₩ | 7 | | | ₩ | 7 | | AP ABS First Co., Ltd. | | Subordinate debt | | Available-for-sale financial assets | | | 1,393 | | | | 1,393 | | Discovery ABS First Co., Ltd. | | Subordinate debt | | Available-for-sale financial assets | | | 6,876 | | | | 6,876 | | EAK ABS Second Co., Ltd. | | Subordinate debt | | Available-for-sale financial assets | | | 12,302 | | | | 12,302 | | FK1411 Co., Ltd. | | Subordinate debt | | Available-for-sale financial assets | | | 15,212 | | | | 15,212 | | AP 3B ABS Ltd. | | Subordinate debt | | Available-for-sale financial assets | | | 14,374 | | | | 14,374 | | AP 4D ABS Ltd.1 | | Senior debt | | Loans and receivables | | | 13,626 | | | | 13,689 | | | | Subordinated debt | | Available-for-sale financial assets | | | 14,450 | | | | 14,450 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 78,240 | | | ₩ | 78,303 | | | | | | | | | | | | | | |
(1)1 | Recognized net lossgain from transferring loans to the SPEs amounts to ₩24,589₩6,705 million. |
(2)2 | Recognized net loss from transferring loans to the SPEs amounts to ₩2,480 million.
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(3) | Recognized net loss from transferring loans to the SPEs amounts to ₩18,556 million.
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(4) | Recognized net loss from transferring loans to the SPEs amounts to ₩37,975 million.
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(5) | In addition to the above, there were gains from the transfer of non-performing loans to the National Happiness Fund (‘the Fund’) amounting to ₩57,826 million. According to the agreement with the Fund, where the recovered amounts exceedportion in excess of the consideration paid by the Fund for the non-performing loans, the excess amount is to be reimbursed to the Group. |
| | | | | | | | | | | | | | | 2014 | | | | Type of continuing involvement | | Classification of financial instruments | | Carrying amount of continuing involvement in statement of financial position | | | Fair value of continuing involvement | | | | | | | | (In millions of Korean won) | | KR ABS Co., Ltd. | | Subordinate debt | | Available-for-sale financial assets | | ₩ | 4,921 | | | ₩ | 4,921 | | KR ABS Second Co., Ltd. | | Subordinate debt | | Available-for-sale financial assets | | | 22,219 | | | | 22,219 | | EAK ABS Co., Ltd. | | Subordinate debt | | Available-for-sale financial assets | | | 11,211 | | | | 11,211 | | AP ABS First Co., Ltd. | | Senior debt | | Loans and receivables | | | 9,762 | | | | 9,842 | | | | Subordinate debt | | Available-for-sale financial assets | | | 17,346 | | | | 17,346 | | Discovery ABS First Co., Ltd. | | Senior debt | | Loans and receivables | | | 1,175 | | | | 1,194 | | | | Subordinate debt | | Available-for-sale financial assets | | | 22,591 | | | | 22,591 | | EAK ABS Second Co., Ltd.(1) | | Senior debt | | Loans and receivables | | | 19,806 | | | | 20,026 | | | | Subordinate debt | | Available-for-sale financial assets | | | 38,207 | | | | 38,207 | | FK1411 Co., Ltd. (2) | | Senior debt | | Loans and receivables | | | 44,966 | | | | 44,917 | | | | Subordinate debt | | Available-for-sale financial assets | | | 47,600 | | | | 47,600 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 239,804 | | | ₩ | 240,074 | | | | | | | | | | | | | | |
(1) | Recognized net loss from transferring loans to the SPEs amounts to ₩6,924 million.
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(2) | Recognized net loss from transferring loans to the SPEs amounts to ₩27,365 million.
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(3) | In addition to the above, there were gains on sale of loans attributable to true-up adjustments based on the transfer agreement with the National Happiness Fund (‘the Fund’) amountingfornon-performing loans amounts to ₩3,762 million. ₩4,394 million during 2016. |
| | | | | | | | | | | | | | | 2017 | | | | Type of continuing involvement | | Classification of financial instruments | | Carrying amount of continuing involvement in statement of financial position | | | Fair value of continuing involvement | | | | | | | | (In millions of Korean won) | | Discovery ABS Second Co., Ltd. | | Subordinate debt | | Available-for-sale financial assets | | ₩ | 6,022 | | | ₩ | 6,022 | | EAK ABS Second Co., Ltd. | | Subordinate debt | | Available-for-sale financial assets | | | 5,339 | | | | 5,339 | | FK1411 Co., Ltd. | | Subordinate debt | | Available-for-sale financial assets | | | 9,601 | | | | 9,601 | | AP 3B ABS Ltd. | | Subordinate debt | | Available-for-sale financial assets | | | 9,902 | | | | 9,902 | | AP 4D ABS Ltd. | | Senior debt | | Loans and receivables | | | 2,248 | | | | 2,251 | | | | Subordinated debt | | Available-for-sale financial assets | | | 14,160 | | | | 14,160 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 47,272 | | | ₩ | 47,275 | | | | | | | | | | | | | | |
1 | In addition to the above, the recovered portion in excess of the consideration paid attributable to adjustments based on the agreement with the National Happiness Fund fornon-performing loans amounts to ₩2,989 million as of December 31, 2017. |
6.4.2 Transferred financial assets that are not derecognized in their entirety The Group securitized the loans and receivedissued the subordinated debts as part of consideration related to the securitization to provide credit enhancements to otherasset-backed debentures. The senior debtors, and this transaction was recognized by the Group as collateralized debts. The liabilitiesdebentures and related securitized assets as of December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | | | | | | | Liabilities arising from asset-backed securities | | | | Carrying amount of assets (Underlying assets) | | | Carrying amount of the associated liabilities (Senior debentures) | | | Fair value of assets (Underlying assets) | | | Fair value of the associated liabilities (Senior debentures) | | | Net Position | | | | (In millions of Korean won) | | KB Mortgage Loan First Securitization Specialty Co., Ltd. | | ₩ | 295,679 | | | ₩ | 193,062 | | | ₩ | 295,679 | | | ₩ | 192,972 | | | ₩ | 102,707 | | KAMCO Value Recreation Third Securitization Specialty Co., Ltd. | | | 8,291 | | | | 1,958 | | | | 8,291 | | | | 1,958 | | | | 6,333 | | KH First Co., Ltd.(3) | | | 99,763 | | | | 100,900 | | | | — | | | | — | | | | — | | KB Kookmin Card First Securitization Co., Ltd.(1) | | | 568,916 | | | | 315,845 | | | | — | | | | — | | | | — | | Wise Mobile First Securitization Specialty(2) | | | 339,222 | | | | 329,785 | | | | — | | | | — | | | | — | | Wise Mobile Second Securitization Specialty(2) | | | 384,473 | | | | 374,733 | | | | — | | | | — | | | | — | | Wise Mobile Third Securitization Specialty(2) | | | 350,822 | | | | 343,736 | | | | — | | | | — | | | | — | | Wise Mobile Fourth Securitization Specialty(2) | | | 202,038 | | | | 199,802 | | | | — | | | | — | | | | — | | Wise Mobile Fifth Securitization Specialty(2) | | | 344,047 | | | | 339,631 | | | | — | | | | — | | | | — | | Wise Mobile Sixth Securitization Specialty(2) | | | 362,975 | | | | 359,534 | | | | — | | | | — | | | | — | | Wise Mobile Seventh Securitization Specialty(2) | | | 351,905 | | | | 349,486 | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | | | | | | | Liabilities arising from asset-backed securities | | | | Carrying amount of assets (Underlying assets) | | | Carrying amount of the associated liabilities (Senior debentures) | | | Fair value of assets (Underlying assets) | | | Fair value of the associated liabilities (Senior debentures) | | | Net Position | | | | (In millions of Korean won) | | KB Kookmin Card First Securitization Co., Ltd.(1) | | ₩ | 546,770 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | — | | KB Kookmin Card Second Securitization Co., Ltd.(1) | | | 622,573 | | | | 327,553 | | | | — | | | | — | | | | — | | Wise Mobile First Securitization Specialty(2) | | | 122,528 | | | | 109,972 | | | | — | | | | — | | | | — | | Wise Mobile Second Securitization Specialty(2) | | | 158,396 | | | | 144,958 | | | | — | | | | — | | | | — | | Wise Mobile Third Securitization Specialty(2) | | | 169,609 | | | | 158,957 | | | | — | | | | — | | | | — | | Wise Mobile Fourth Securitization Specialty(2) | | | 99,952 | | | | 94,959 | | | | — | | | | — | | | | — | | Wise Mobile Fifth Securitization Specialty(2) | | | 179,703 | | | | 169,926 | | | | — | | | | — | | | | — | | Wise Mobile Sixth Securitization Specialty(2) | | | 204,095 | | | | 194,896 | | | | — | | | | — | | | | — | | Wise Mobile Seventh Securitization Specialty(2) | | | 207,387 | | | | 199,878 | | | | — | | | | — | | | | — | | Wise Mobile Eighth Securitization Specialty(2) | | | 202,745 | | | | 194,862 | | | | — | | | | — | | | | — | | Wise Mobile Ninth Securitization Specialty(2) | | | 143,666 | | | | 139,889 | | | | — | | | | — | | | | — | | Wise Mobile Tenth Securitization Specialty(2) | | | 193,959 | | | | 189,827 | | | | — | | | | — | | | | — | | Wise Mobile Eleventh Securitization Specialty(2) | | | 182,281 | | | | 179,781 | | | | — | | | | — | | | | — | | Wise Mobile Twelfth Securitization Specialty(2) | | | 191,329 | | | | 189,719 | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | (In millions of Korean won) | | 2016 | | | 2017 | | | | Carrying amount of underlying assets | | | Carrying amount of senior debentures | | | Carrying amount of underlying assets | | | Carrying amount of senior debentures | | | | (In millions of Korean won) | | KB Kookmin Card Second Securitization Co., Ltd.1 | | ₩ | 605,958 | | | ₩ | 361,769 | | | ₩ | 495,545 | | | ₩ | 107,093 | | KB Kookmin Card Third Securitization Co., Ltd.1 | | | — | | | | — | | | | 600,813 | | | | 324,425 | | KB Kookmin Card Fourth Securitization Co., Ltd.1 | | | — | | | | — | | | | 561,495 | | | | 320,892 | | Wise Mobile Eighth Securitization Specialty2 | | | 11,209 | | | | — | | | | — | | | | — | | Wise Mobile Ninth Securitization Specialty2 | | | 6,027 | | | | — | | | | — | | | | — | | Wise Mobile Tenth Securitization Specialty2 | | | 17,485 | | | | 9,999 | | | | — | | | | — | | Wise Mobile Eleventh Securitization Specialty2 | | | 16,830 | | | | 9,998 | | | | — | | | | — | | Wise Mobile Twelfth Securitization Specialty2 | | | 27,107 | | | | 19,995 | | | | — | | | | — | | Wise Mobile Thirteenth Securitization Specialty2 | | | 31,873 | | | | 24,996 | | | | 7,284 | | | | — | | Wise Mobile Fourteenth Securitization Specialty2 | | | 52,583 | | | | 44,991 | | | | 8,504 | | | | — | | Wise Mobile Fifteenth Securitization Specialty2 | | | 68,270 | | | | 64,983 | | | | 4,105 | | | | — | | Wise Mobile Sixteenth Securitization Specialty2 | | | 114,213 | | | | 109,966 | | | | 5,500 | | | | — | | Wise Mobile Seventeenth Securitization Specialty2 | | | 118,767 | | | | 114,955 | | | | 10,407 | | | | 4,999 | | Wise Mobile Eighteenth Securitization Specialty2 | | | 97,910 | | | | 94,950 | | | | 9,340 | | | | 4,999 | | | | | | | | | | | | | | | | | | | | | ₩ | 1,168,232 | | | ₩ | 856,602 | | | ₩ | 1,702,993 | | | ₩ | 762,408 | | | | | | | | | | | | | | | | | | |
(1)1 | They have theThe Company has an obligation to early redeem the asset-backed debentures upon occurrence of an event specified in the agreement such as trust type asset securitization.when the outstanding balance of the eligible asset-backed securitization (ABS), a trust-type ABS, is below the solvency margin ratio (minimum rate: 104.5%) of the beneficiary interest in the trust. In addition, the Company can entrust additional eligible card transaction accounts and deposits. To avoid such early redemption, they entrust supplementarythe Company entrusts accounts and deposits in addition to the previously entrusted card accounts, deposits and others.accounts. Accordingly, as asset-backed debenture holders’ recourse is not limited to the underlying assets, the fair value is not disclosed.
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(2)2 | IfAccording to the liquidity facility agreement entered between the Special Purpose Companies (SPC) could not redeemand Woori Bank and NH Bank, if the senior debentures cannot be redeemed by collection ofthe underlying assets, the SPCsenior debentures should be redeemredeemed by borrowings from the creditliquidity facilities. Accordingly, as senior debenture holders’ recourse is not limited to the underlying assets, the fair value is not disclosed.
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(3) | Pursuant to the Purchase Agreement of the liabilities, the fair value is not disclosed as the counterparty has both a right of recourse for the securitized assets and a right to request to purchase the liabilities.
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6.4.3 Securities under repurchase agreements and loaned securities The Group continues to recognize the financial assets related to repurchase agreements and securities lending transactions on the statements of financial position since those transactions are not qualified for derecognition even though the Group transfers the financial assets. A financial asset is sold under ana repurchase agreement to repurchase the same asset at a fixed price, or loaned under a securities lending agreement to be returned as the same asset. Thus, the Group retains substantially all the risks and rewards of ownership of the financial asset. The amounts of transferred assets and related liabilities as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Carrying amount of transferred assets | | | Carrying amount of related liabilities | | | Carrying amount of transferred assets | | | Carrying amount of related liabilities | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Securities under repurchase agreements | | ₩ | 649,309 | | | ₩ | 608,156 | | | Repurchase agreements | | | ₩ | 9,302,087 | | | ₩ | 8,815,027 | | Loaned securities | | | | | | | | | Government bond | | | 527,427 | | | | — | | | | 108,062 | | | | — | | Stock | | | 14,296 | | | | — | | | | 552,872 | | | | — | | Others | | | | 16,250 | | | | — | | | | | | | | | | | | | | | Total | | ₩ | 1,191,032 | | | ₩ | 608,156 | | | ₩ | 9,979,271 | | | ₩ | 8,815,027 | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Carrying amount of transferred assets | | | Carrying amount of related liabilities | | | Carrying amount of transferred assets | | | Carrying amount of related liabilities | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Securities under repurchase agreements | | ₩ | 1,080,804 | | | ₩ | 1,019,071 | | | Repurchase agreements | | | ₩ | 10,111,732 | | | ₩ | 10,666,315 | | Loaned securities | | | | | | | | | Government bond | | | 162,408 | | | | — | | | | 418,966 | | | | — | | Stock | | | 2,378 | | | | — | | | | 729,702 | | | | — | | Others | | | | — | | | | — | | | | | | | | | | | | | | | Total | | ₩ | 1,245,590 | | | ₩ | 1,019,071 | | | ₩ | 11,260,400 | | | ₩ | 10,666,315 | | | | | | | | | | | | | | |
6.5 Offsetting financial assetsFinancial Assets and financial liabilitiesFinancial Liabilities The Group enters into International Derivatives Swaps and DealersDerivatives Association (“ISDA”) master netting agreements and other similar arrangements with the Group’s derivative and spot exchange counterparties. Similar netting agreements are also entered into with the Group’s reverse repurchase, securities and others. Pursuant to these agreements, in the event of default by one party, contracts are to be terminated and receivables and payables are to be offset. Further, as the law allows for the right to offset, domestic uncollected receivables balances and domestic accrued liabilities balances are shown in its net settlement balance in the consolidated statement of consolidated financial position. The detailsDetails of financial assets subject to offsetting, enforceable master netting arrangements or similar agreementsagreement as of December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Gross amounts of recognized financial assets | | | Gross amounts of recognized financial liabilities offset in the statement of financial position | | | Net amounts of financial assets presented in the statement of financial position | | | Non-offsetting amount | | | Net amount | | | | | | | Financial instruments | | | Cash collateral received | | | | | (In millions of Korean won) | | Derivatives held for trading | | ₩ | 1,593,909 | | | ₩ | — | | | ₩ | 1,593,909 | | | ₩ | (1,190,301 | ) | | ₩ | (1,850 | ) | | ₩ | 401,758 | | Derivatives held for hedging | | | 138,028 | | | | — | | | | 138,028 | | | | (36,133 | ) | | | — | | | | 101,895 | | Receivable spot exchange | | | 2,256,532 | | | | — | | | | 2,256,532 | | | | (2,255,085 | ) | | | — | | | | 1,447 | | Reverse repurchase, securities borrowing and similar agreements(1) | | | 4,173,200 | | | | — | | | | 4,173,200 | | | | (4,173,200 | ) | | | — | | | | — | | Other financial instruments | | | 16,475,869 | | | | (15,637,526 | ) | | | 838,343 | | | | — | | | | — | | | | 838,343 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 24,637,538 | | | ₩ | (15,637,526 | ) | | ₩ | 9,000,012 | | | ₩ | (7,654,719 | ) | | ₩ | (1,850 | ) | | ₩ | 1,343,443 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Gross amounts of recognized financial assets | | | Gross amounts of recognized financial liabilities offset in the statement of financial position | | | Net amounts of financial assets presented in the statement of financial position | | | Non-offsetting amount | | | Net amount | | | | | | | Financial instruments | | | Cash collateral received | | | | | (In millions of Korean won) | | Derivatives held for trading | | ₩ | 1,806,087 | | | ₩ | — | | | ₩ | 1,806,087 | | | ₩ | (1,477,495 | ) | | ₩ | (1,635 | ) | | ₩ | 326,957 | | Derivatives held for hedging | | | 109,553 | | | | — | | | | 109,553 | | | | (15,688 | ) | | | — | | | | 93,865 | | Receivable spot exchange | | | 2,343,308 | | | | — | | | | 2,343,308 | | | | (2,342,116 | ) | | | — | | | | 1,192 | | Reverse repurchase, securities borrowing and similar agreements(1) | | | 3,529,900 | | | | — | | | | 3,529,900 | | | | (3,529,900 | ) | | | — | | | | — | | Other financial instruments | | | 18,680,680 | | | | (16,483,341 | ) | | | 2,197,339 | | | | — | | | | — | | | | 2,197,339 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 26,469,528 | | | ₩ | (16,483,341 | ) | | ₩ | 9,986,187 | | | ₩ | (7,365,199 | ) | | ₩ | (1,635 | ) | | ₩ | 2,619,353 | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes a portion of the securities loaned.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | Gross assets | | | Gross liabilities offset | | | Net amounts presented in the statement of financial position | | | Non-offsetting amount | | | Net amount | | | | | | Financial instruments | | | Cash collateral | | | | | (In millions of Korean won) | | Derivatives held for trading and Derivatives linked securities | | ₩ | 3,800,978 | | | ₩ | — | | | ₩ | 3,800,978 | | | ₩ | (2,390,096 | ) | | ₩ | (2,711 | ) | | ₩ | 1,408,171 | | Derivatives held for hedging | | | 80,718 | | | | — | | | | 80,718 | | | | (10,980 | ) | | | — | | | | 69,738 | | Receivable spot exchange | | | 2,557,424 | | | | — | | | | 2,557,424 | | | | (2,555,485 | ) | | | — | | | | 1,939 | | Reverse repurchase agreements | | | 2,926,515 | | | | — | | | | 2,926,515 | | | | (2,926,515 | ) | | | — | | | | — | | Domestic exchange settlement debits | | | 19,854,611 | | | | (19,323,418 | ) | | | 531,193 | | | | — | | | | — | | | | 531,193 | | Other financial instruments | | | 1,055,379 | | | | (829,137 | ) | | | 226,242 | | | | (7,222 | ) | | | — | | | | 219,020 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 30,275,625 | | | ₩ | (20,152,555 | ) | | ₩ | 10,123,070 | | | ₩ | (7,890,298 | ) | | ₩ | (2,711 | ) | | ₩ | 2,230,061 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Gross assets | | | Gross liabilities offset | | | Net amounts presented in the statement of financial position | | | Non-offsetting amount | | | Net amount | | | | | | | Financial instruments | | | Cash collateral | | | | | (In millions of Korean won) | | Derivatives held for trading and Derivatives linked securities | | ₩ | 2,981,437 | | | ₩ | — | | | ₩ | 2,981,437 | | | ₩ | (2,195,210 | ) | | ₩ | (191,349 | ) | | ₩ | 594,878 | | Derivatives held for hedging | | | 312,124 | | | | — | | | | 312,124 | | | | (21,990 | ) | | | (21,830 | ) | | | 268,304 | | Receivable spot exchange | | | 3,443,674 | | | | — | | | | 3,443,674 | | | | (3,443,298 | ) | | | — | | | | 376 | | Reverse repurchase agreements | | | 2,617,700 | | | | — | | | | 2,617,700 | | | | (2,617,700 | ) | | | — | | | | — | | Domestic exchange settlement debits | | | 30,904,611 | | | | (29,959,914 | ) | | | 944,697 | | | | — | | | | — | | | | 944,697 | | Other financial instruments | | | 1,542,035 | | | | (1,531,622 | ) | | | 10,413 | | | | (9,525 | ) | | | — | | | | 888 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 41,801,581 | | | ₩ | (31,491,536 | ) | | ₩ | 10,310,045 | | | ₩ | (8,287,723 | ) | | ₩ | (213,179 | ) | | ₩ | 1,809,143 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The detailsDetails of financial liabilities subject to offsetting, enforceable master netting arrangements or similar agreementsagreement as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Gross amounts of recognized financial liabilities | | | Gross amounts of recognized financial assets offset in the statement of financial position | | | Net amounts of financial liabilities presented in the statement of financial position | | | Non-offsetting amount | | Net amount | | | Gross liabilities | | | Gross assets offset | | | Net amounts presented in the statement of financial position | | | Non-offsetting amount | | Net amount | | | | Financial instruments | | Cash collateral received | | | Financial instruments | | Cash collateral | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Derivatives held for trading | | ₩ | 1,579,878 | | | ₩ | — | | | ₩ | 1,579,878 | | | ₩ | (992,164 | ) | | ₩ | — | | | ₩ | 587,714 | | | Derivatives held for trading and Derivatives linked securities | | | ₩ | 4,622,729 | | | ₩ | — | | | ₩ | 4,622,729 | | | ₩ | (3,005,000 | ) | | ₩ | (207,797 | ) | | ₩ | 1,409,932 | | Derivatives held for hedging | | | 204,642 | | | | — | | | | 204,642 | | | | (16,320 | ) | | | — | | | | 188,322 | | | 88,506 | | | | — | | | 88,506 | | | (22,795 | ) | | (11,922 | ) | | 53,789 | | Payable spot exchange | | | 2,256,147 | | | | — | | | | 2,256,147 | | | | (2,255,085 | ) | | | — | | | | 1,062 | | | 2,556,009 | | | | — | | | 2,556,009 | | | (2,555,485 | ) | | | — | | | 524 | | Repurchase agreements, securities lending and similar agreements(1),(2) | | | 804,726 | | | | — | | | | 804,726 | | | | (804,726 | ) | | | — | | | | — | | | Repurchase agreements1 | | | 8,815,027 | | | | — | | | 8,815,027 | | | (8,815,027 | ) | | | — | | | | — | | Securities borrowing agreements | | | 1,063,056 | | | | — | | | 1,063,056 | | | (1,063,056 | ) | | | — | | | | — | | Domestic exchange settlement credits | | | 20,655,999 | | | (19,323,418 | ) | | 1,332,581 | | | (1,332,503 | ) | | | — | | | 78 | | Other financial instruments | | | 16,754,401 | | | | (15,637,526 | ) | | | 1,116,875 | | | | (946,800 | ) | | | — | | | | 170,075 | | | 953,137 | | | (829,137 | ) | | 124,000 | | | (7,252 | ) | | | — | | | 116,748 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 21,599,794 | | | ₩ | (15,637,526 | ) | | ₩ | 5,962,268 | | | ₩ | (5,015,095 | ) | | ₩ | — | | | ₩ | 947,173 | | | ₩ | 38,754,463 | | | ₩ | (20,152,555 | ) | | ₩ | 18,601,908 | | | ₩ | (16,801,118 | ) | | ₩ | (219,719 | ) | | ₩ | 1,581,071 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Gross amounts of recognized financial liabilities | | | Gross amounts of recognized financial assets offset in the statement of financial position | | | Net amounts of financial liabilities presented in the statement of financial position | | | Non-offsetting amount | | Net amount | | | Gross liabilities | | | Gross asset offset | | | Net amounts presented in the statement of financial position | | | Non-offsetting amount | | | | | | Financial instruments | | Cash collateral received | | | Financial instruments | | Cash collateral | | Net amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Derivatives held for trading | | ₩ | 1,765,781 | | | ₩ | — | | | ₩ | 1,765,781 | | | ₩ | (1,323,749 | ) | | ₩ | — | | | ₩ | 442,032 | | | Derivatives held for trading and Derivatives linked securities | | | ₩ | 3,193,238 | | | ₩ | — | | | ₩ | 3,193,238 | | | ₩ | (1,540,336 | ) | | ₩ | (32,585 | ) | | ₩ | 1,620,317 | | Derivatives held for hedging | | | 21,147 | | | | — | | | | 21,147 | | | | (3,013 | ) | | | — | | | | 18,134 | | | 88,151 | | | | — | | | 88,151 | | | (11,770 | ) | | (9,139 | ) | | 67,242 | | Payable spot exchange | | | 2,343,234 | | | | — | | | | 2,343,234 | | | | (2,342,116 | ) | | | — | | | | 1,118 | | | 3,445,098 | | | | — | | | 3,445,098 | | | (3,443,298 | ) | | | — | | | 1,800 | | Repurchase agreements, securities lending and similar agreements(1),(2) | | | 1,803,963 | | | | — | | | | 1,803,963 | | | | (1,803,963 | ) | | | — | | | | — | | | Repurchase agreements1 | | | 10,666,315 | | | | — | | | 10,666,315 | | | (10,666,315 | ) | | | — | | | | — | | Securities borrowing agreements | | | 1,870,579 | | | | — | | | 1,870,579 | | | (1,870,579 | ) | | | — | | | | — | | Domestic exchange settlement credits | | | 29,999,359 | | | (29,959,914 | ) | | 39,445 | | | (39,445 | ) | | | — | | | | — | | Other financial instruments | | | 16,724,449 | | | | (16,483,341 | ) | | | 241,108 | | | | (122,797 | ) | | | — | | | | 118,311 | | | 1,721,862 | | | (1,530,488 | ) | | 191,374 | | | (194 | ) | | | — | | | 191,180 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 22,658,574 | | | ₩ | (16,483,341 | ) | | ₩ | 6,175,233 | | | ₩ | (5,595,638 | ) | | ₩ | — | | | ₩ | 579,595 | | | ₩ | 50,984,602 | | | ₩ | (31,490,402 | ) | | ₩ | 19,494,200 | | | ₩ | (17,571,937 | ) | | ₩ | (41,724 | ) | | ₩ | 1,880,539 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)1 | Includes repurchase agreements sold to customers. |
(2) | Includes a portion of securities sold.
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7. Due from financial institutionsFinancial Institutions The detailsDetails of due from financial institutions as of December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | | | | | | | | | | | Financial Institutions | | Interest rate(%) | | | 2013 | | | 2014 | | | | | | | | | | | (In millions of Korean won) | | Due from financial institutions in Korean won | | Due from Bank of Korea | | Bank of Korea | | | 0.00~2.03 | | | ₩ | 6,717,697 | | | ₩ | 6,283,230 | | | | Due from banking institutions | | Hana Bank and others | | | 0.00~7.15 | | | | 636,837 | | | | 1,191,877 | | | | Due from others | | DaiShin Investment & Securities Co., Ltd. and others | | | 0.10~3.20 | | | | 3,203,452 | | | | 3,750,163 | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | | | | | 10,557,986 | | | | 11,225,270 | | | | | | | | | | | | | | | | | | | Due from financial institutions in foreign currencies | | Due from banks in foreign currencies | | Bank of Korea and others | | | — | | | | 855,388 | | | | 899,080 | | | | Time deposits in foreign currencies | | Bank of Communications and others | | | 0.11~6.70 | | | | 657,408 | | | | 708,926 | | | | Due from others | | Woori Investment & Securities Co., Ltd. and others | | | — | | | | 23,321 | | | | 45,154 | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | | | | | 1,536,117 | | | | 1,653,160 | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | ₩ | 12,094,103 | | | ₩ | 12,878,430 | | | | | | | | | | | | | | | | | | |
Due from financial institutions, classified by type of financial institution as of December 31, 2013 and 2014, are as follows:
| | | | | | | | | | | | | | | 2013 | | | | In Korean won | | | In foreign currencies | | | Total | | | | (In millions of Korean won) | | Bank of Korea | | ₩ | 6,717,697 | | | ₩ | 410,328 | | | ₩ | 7,128,025 | | Other banking institutions | | | 636,837 | | | | 1,105,842 | | | | 1,742,679 | | Other financial institutions | | | 3,203,452 | | | | 19,947 | | | | 3,223,399 | | | | | | | | | | | | | | | Total | | ₩ | 10,557,986 | | | ₩ | 1,536,117 | | | ₩ | 12,094,103 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2014 | | | | In Korean won | | | In foreign currencies | | | Total | | | | (In millions of Korean won) | | Bank of Korea | | ₩ | 6,283,230 | | | ₩ | 225,393 | | | ₩ | 6,508,623 | | Other banking institutions | | | 1,191,877 | | | | 1,399,586 | | | | 2,591,463 | | Other financial institutions | | | 3,750,163 | | | | 28,181 | | | | 3,778,344 | | | | | | | | | | | | | | | Total | | ₩ | 11,225,270 | | | ₩ | 1,653,160 | | | ₩ | 12,878,430 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Financial institutions | | Interest rate(%) | | | 2016 | | | 2017 | | | | | | | | | | (In millions of Korean won) | Due from financial institutions in Korean won | | Due from Bank of Korea | | Bank of Korea | | | 0.00~1.53 | | | ₩ | 7,259,264 | | | ₩8,511,295 | | | Due from banks | | KEB Hana Bank and others | | | 0.00~1.86 | | | | 1,233,368 | | | 2,267,778 | | | Due from others | | Kyobo Securities Co., Ltd. and others | | | 0.00~1.64 | | | | 3,276,913 | | | 3,377,102 | | | | | | | | | | | | | | | | | | | | Sub-total | | | | | | | 11,769,545 | | | 14,156,175 | | | | | | | | | | | | | | | | Due from financial institutions in foreign currencies | | Due from banks in foreign currencies | | Bank of Korea and others | | | — | | | | 2,025,373 | | | 1,670,935 | | | Time deposits in foreign currencies | | AOZORA BANK and others | | | 0.11~6.40 | | | | 808,253 | | | 775,917 | | | Due from others | | Societe Generale and others | | | 0.00~5.02 | | | | 723,002 | | | 616,634 | | | | | | | | | | | | | | | | | | | | Sub-total | | | | | | | 3,556,628 | | | 3,063,486 | | | | | | | | | | | | | | | | | | | | Total | | | | | | ₩ | 15,326,173 | | | ₩17,219,661 | | | | | | | | | | | | | | | |
Restricted duecash from financial institutions as of December 31, 20132016 and 2014,2017, are as follows: | | | Financial Institutions | | 2013 | | 2014 | | Reason for restriction | | Financial Institutions | | 2016 | | | 2017 | | | Reason for restriction | | | | (in millions of Korean won) | | | | (In millions of Korean won) | | | | Due from financial institutions in Korean won | | Due from Bank of Korea | | Bank of Korea | | ₩ | 6,717,697 | | | ₩ | 6,283,230 | | | Bank of Korea Act | | Due from Bank of Korea | | Bank of Korea | | ₩ | 7,259,264 | | | ₩ | 8,511,295 | | | Bank of Korea Act | | Due from Banking institution | | Hana Bank and others | | | 342,469 | | | | 393,824 | | | Agreement for allocation of deposit | | | Due from others | | The Korea Exchange and others | | | 102,460 | | | | 137,327 | | | Market entry deposit and others | | | | | | | | | | | | | | | | Due from banks | | Citibank Korea Inc. and others | | | 209,676 | | | | 572,132 | | | Deposits related to securitization and others | | | | | Sub-total | | | 7,162,626 | | | | 6,814,381 | | | | | Due from others | | NH Investment Securities and others | | | 580,655 | | | | 371,398 | | | Derivatives margin account and others | | | | | | | | | | | | | | | | | | | | | | | | | | Due from financial institutions in foreign currencies | | Due from banks in foreign currencies | | Bank of Korea and others | | | 482,296 | | | | 293,067 | | | Bank of Korea Act and others | | | Time deposit in foreign currencies | | Bank of communications and others | | | 10,553 | | | | 16,488 | | | Bank Act of the State of New York | | | | | | Sub-total | | | 8,049,595 | | | | 9,454,825 | | | | | | | | | | | | | | | | | | Due from financial institutions in foreign currencies | | Due from others | | Woori Investment & Securities Co., Ltd. and others | | | 10,428 | | | | 8,158 | | | Derivatives margin account and others | | Due from banks in foreign currencies | | Bank of Korea and others | | | 564,099 | | | | 619,130 | | | Bank of Korea Act and others | | | | | | | | | | | | | | Time deposit in foreign currencies | | China Construction Bank NY Branch and others | | | 24,170 | | | | 29,650 | | | Bank Act of the State of New York and others | | | | Sub-total | | | 503,277 | | | | 317,713 | | | | | Due from others | | Societe Generale and others | | | 664,082 | | | | 509,484 | | | Derivatives margin account and others | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 7,665,903 | | | ₩ | 7,132,094 | | | | | | | Sub-total | | | 1,252,351 | | | | 1,158,264 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 9,301,946 | | | ₩ | 10,613,089 | | | | | | | | | | | | | | | | | |
8. Assets pledged as collateral
The detailsDetails of assets pledged as collateral as of December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | | | | | | | 2013 | Assets pledged | | Pledgee | | Carrying amount | | | Collateralized amount | | | Reason of pledge | | | | | (In millions of Korean won) | | | | Due from financial institutions | | Korea Federation of Savings Banks and others | | ₩ | 238,901 | | | ₩ | 238,901 | | | Borrowings from Bank and others | | | | | | | | | | | | | | Financial assets held for trading | | Korea Securities Depository and others | | | 336,154 | | | | 329,391 | | | Repurchase agreements and similar agreements | | | Korea Securities Depository and others | | | 446,126 | | | | 393,981 | | | Securities lending transactions | | | Samsung Futures Inc. and others | | | 15,570 | | | | 14,589 | | | Derivatives transactions | | | | | | | | | | | | | | | | Sub-total | | | 797,850 | | | | 737,961 | | | | | | | | | | | | | | | | | Available-for-sale financial assets | | Korea Securities Depository and others | | | 45,771 | | | | 45,145 | | | Securities lending transactions | | | Samsung Futures Inc. and others | | | 33,317 | | | | 31,746 | | | Derivatives transactions | | | Others | | | 15,100 | | | | 14,370 | | | Others | | | | | | | | | | | | | | | | Sub-total | | | 94,188 | | | | 91,261 | | | | | | | | | | | | | | | | | Held-to-maturity financial assets | | Korea Securities Depository and others | | | 3,577,052 | | | | 3,572,000 | | | Repurchase agreements and similar agreements | | | Bank of Korea | | | 617,250 | | | | 610,000 | | | Borrowings from Bank of Korea | | | Bank of Korea | | | 956,284 | | | | 946,800 | | | Settlement risk of Bank of Korea | | | Samsung Futures Inc. and others | | | 325,616 | | | | 325,521 | | | Derivatives transactions | | | Others | | | 258,615 | | | | 258,500 | | | Others | | | | | | | | | | | | | | | | Sub-total | | | 5,734,817 | | | | 5,712,821 | | | | | | | | | | | | | | | | | Mortgage loans | | Others | | | 846,000 | | | | 843,127 | | | Covered Bond | | | | | | | | | | | | | | | | Total | | ₩ | 7,711,756 | | | ₩ | 7,624,071 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | 2016 | Assets pledged | | Pledgee | | Carrying amount | | | Reason of pledge | | | | | (In millions of Korean won) | | | | Due from financial institutions | | Korea Federation of Savings Banks and others | | ₩ | 159,736 | | | Borrowings from Bank and others | Financial assets held for trading | | Korea Securities Depository and others | | | 5,977,536 | | | Repurchase agreements | | | Korea Securities Depository and others | | | 2,392,945 | | | Securities borrowing transactions | | | Korea Exchange, Inc. and others | | | 2,170,588 | | | Derivatives transactions | | | | | | | | | | | | Sub-total | | | 10,541,069 | | | | | | | | | | | | | Available-for-sale financial assets | | Korea Securities Depository and others | | | 3,314,106 | | | Repurchase agreements | | | Korea Securities Depository and others | | | 193,028 | | | Securities borrowing transactions | | | Bank of Korea | | | 490,297 | | | Borrowings from Bank of Korea | | | Bank of Korea | | | 493,896 | | | Settlement risk of Bank of Korea | | | KEB Hana Bank and others | | | 1,084,500 | | | Derivatives transactions | | | Others | | | 19,956 | | | Others | | | | | | | | | | | | Sub-total | | | 5,595,783 | | | | | | | | | | | | | Held-to-maturity financial assets | | Korea Securities Depository and others | | | 44,988 | | | Repurchase agreements | | | Bank of Korea | | | 1,251,011 | | | Borrowings from Bank of Korea | | | Bank of Korea | | | 1,185,267 | | | Settlement risk of Bank of Korea | | | Samsung Futures Inc. and others | | | 209,022 | | | Derivatives transactions | | | Others | | | 296,632 | | | Others | | | | | | | | | | | | Sub-total | | | 2,986,920 | | | | | | | | | | | | | Mortgage loans | | Others | | | 2,252,315 | | | Covered bond | | | | | | | | | | Real estate | | Natixis Real Estate Capital LLC and others | | | 791,873 | | | Borrowings from Bank and others | | | | | | | | | | | | Total | | ₩ | 22,327,696 | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | 2014 | Assets pledged | | Pledgee | | Carrying amount | | | Collateralized amount | | | Reason of pledge | | | | | (In millions of Korean won) | Due from financial institutions | | Korea Federation of Savings Banks and others | | ₩ | 166,344 | | | ₩ | 166,344 | | | Borrowings from Bank and others | Financial assets held for trading | | Korea Securities Depository and others | | | 999,412 | | | | 960,368 | | | Repurchase agreements and similar agreements | | | Korea Securities Depository and others | | | 959,858 | | | | 869,279 | | | Securities lending transactions | | | Samsung Futures Inc. and others | | | 17,521 | | | | 16,033 | | | Derivatives transactions | | | Others | | | 17,864 | | | | 17,721 | | | Others | | | | | | | | | | | | | | | | Sub-total | | | 1,994,655 | | | | 1,863,401 | | | | | | | | | | | | | | | | | Available-for-sale financial assets | | Korea Securities Depository and others | | | 120,081 | | | | 90,576 | | | Securities lending transactions | | | Samsung Futures Inc. and others | | | 24,856 | | | | 22,634 | | | Derivatives transactions | | | Others | | | 39,100 | | | | 37,132 | | | Others | | | | | | | | | | | | | | | | Sub-total | | | 184,037 | | | | 150,342 | | | | | | | | | | | | | | | | | Held-to-maturity financial assets | | Korea Securities Depository and others | | | 1,460,932 | | | | 1,452,000 | | | Repurchase agreements and similar agreements | | | Bank of Korea | | | 993,853 | | | | 990,000 | | | Borrowings from Bank of Korea | | | Bank of Korea | | | 1,440,821 | | | | 1,416,800 | | | Settlement risk of Bank of Korea | | | Samsung Futures Inc. and others | | | 285,023 | | | | 284,492 | | | Derivatives transactions | | | Others | | | 238,654 | | | | 238,500 | | | Others | | | | | | | | | | | | | | | | Sub-total | | | 4,419,283 | | | | 4,381,792 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 6,764,319 | | | ₩ | 6,561,879 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | 2017 | Assets pledged | | Pledgee | | Carrying amount | | | Reason of pledge | | | | | (In millions of Korean won) | | | | Due from financial institutions | | Korea Federation of Savings Banks and others | | ₩ | 165,026 | | | Borrowings from Bank and others | Financial assets held for trading | | Korea Securities Depository and others | | | 7,699,857 | | | Repurchase agreements | | | Korea Securities Depository and others | | | 4,941,912 | | | Securities borrowing transactions | | | Samsung Futures Inc. and others | | | 1,047,758 | | | Derivatives transactions | | | | | | | | | | | | Sub-total | | | 13,689,527 | | | | | | | | | | | | | Available-for-sale financial assets | | Korea Securities Depository and others | | | 2,401,388 | | | Repurchase agreements | | | Korea Securities Depository and others | | | 838,149 | | | Securities borrowing transactions | | | Bank of Korea | | | 651,284 | | | Borrowings from Bank of Korea | | | Bank of Korea | | | 750,254 | | | Settlement risk of Bank of Korea | | | Samsung Futures Inc. and others | | | 221,004 | | | Derivatives transactions | | | | | | | | | | | | Sub-total | | | 4,862,079 | | | | | | | | | | | | | Held-to-maturity financial assets | | Korea Securities Depository and others | | | 35,026 | | | Repurchase agreements | | | Bank of Korea | | | 1,326,558 | | | Borrowings from Bank of Korea | | | Bank of Korea | | | 1,204,990 | | | Settlement risk of Bank of Korea | | | Samsung Futures Inc. and others | | | 330,316 | | | Derivatives transactions | | | Others | | | 163,960 | | | Others | | | | | | | | | | | | Sub-total | | | 3,060,850 | | | | | | | | | | | | | Mortgage loans | | Others | | | 4,950,490 | | | Covered bond | | | | | | | | | | Real estate | | Natixis Real Estate Capital LLC and others | | | 778,789 | | | Borrowings from Bank and others | | | | | | | | | | | | Total | | ₩ | 27,506,761 | | | | | | | | | | | | |
The Group provides ₩3,185,601 million of its borrowing securities and securities held as collateral with Korea Securities Finance Corporation (“KSFC”) and others as at December 31, 2017 The fair valuevalues of collateral available to sell or repledge, and collateral sold or repledged, regardless of debtor’s default, as of December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | 2013 | | | | Fair value of collateral held | | | Fair value of collateral sold or repledged | | | Total | | | | (In millions of Korean won) | | Securities | | ₩ | 4,258,909 | | | ₩ | — | | | ₩ | 4,258,909 | | | | | | | | | | | | | | | Total | | ₩ | 4,258,909 | | | ₩ | — | | | ₩ | 4,258,909 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2016 | | | | Fair value of collateral held | | | Fair value of collateral sold or repledged | | | Total | | | | (In millions of Korean won) | | Securities | | ₩ | 2,990,908 | | | ₩ | — | | | ₩ | 2,990,908 | |
| | | | | | | | | | | | | | | 2014 | | | | Fair value of collateral held | | | Fair value of collateral sold or repledged | | | Total | | | | (In millions of Korean won) | | Securities | | ₩ | 3,601,032 | | | ₩ | — | | | ₩ | 3,601,032 | | | | | | | | | | | | | | | Total | | ₩ | 3,601,032 | | | ₩ | — | | | ₩ | 3,601,032 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2017 | | | | Fair value of collateral held | | | Fair value of collateral sold or repledged | | | Total | | | | (In millions of Korean won) | | Securities | | ₩ | 2,677,878 | | | ₩ | — | | | ₩ | 2,677,878 | |
9. Derivative financial instrumentsFinancial Instruments and hedge accounting Hedge Accounting
The Group’s derivative operations focus on addressing the needs of the Group’s corporate clients to hedge their risk exposure and to hedge the Group’s risk exposure that results from such client contracts. The Group also engages in derivative trading activities to hedge the interest rate and foreign currency risk exposures that arise from the Group’s own assets and liabilities. In addition, the Group engages in proprietary trading of derivatives within the Group’s regulated open position limits. The Group provides and trades a range of derivatives products, including: Interest rate swaps, relating to interest rate risks in Korean won; won Cross-currency swaps, forwards and options relating to foreign exchange rate risks, Stock price index options linked with the KOSPI index. In particular, the Group uses cross currency swaps,applies fair value hedge accounting using interest rate swaps, currency forwards and others to hedge the risk of changes in fair values and in cash flows due to the changes in interest rates and foreign exchange rates of subordinated debtsstructured debentures in Korean won, structured debts and financial debentures in foreign currencies.currencies, structured deposits in foreign currencies and others. And the Group applies cash flow hedge using interest rate swaps, cross currency swaps and others to hedge the risk of changes in cash flows of floating rate notes in Korean won, borrowings in foreign currencies and others. In addition, the Group applies net investment hedge accounting using currency forwards and designating financial debentures in foreign currencies as hedging instruments to hedge foreign exchange risks on net investments in foreign operations. The detailsDetails of derivative financial instruments held for trading as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Notional amount | | | Assets | | | Liabilities | | | Notional amount | | | Assets | | | Liabilities | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Interest rate | | | | | | | | | | | | | Futures(1) | | ₩ | 928,684 | | | ₩ | — | | | ₩ | — | | | Futures1 | | | ₩ | 4,352,216 | | | ₩ | 130 | | | ₩ | 620 | | Swaps | | | 141,275,150 | | | | 582,544 | | | | 639,695 | | | | 138,697,962 | | | | 695,474 | | | | 676,887 | | Options | | | 8,285,091 | | | | 45,063 | | | | 85,906 | | | | 6,376,707 | | | | 48,323 | | | | 161,747 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 150,488,925 | | | | 627,607 | | | | 725,601 | | | | 149,426,885 | | | | 743,927 | | | | 839,254 | | | | | | | | | | | | | | | | | | | | | Currency | | | | | | | | | | | | | Forwards | | | 23,055,704 | | | | 241,804 | | | | 289,629 | | | | 58,662,586 | | | | 1,343,953 | | | | 1,206,539 | | Futures(1) | | | 415,560 | | | | 219 | | | | 15 | | | Futures1 | | | | 482,323 | | | | 1,210 | | | | — | | Swaps | | | 17,414,405 | | | | 693,116 | | | | 503,663 | | | | 30,929,704 | | | | 756,936 | | | | 919,549 | | Options | | | 273,745 | | | | 2,428 | | | | 1,492 | | | | 487,937 | | | | 4,955 | | | | 4,557 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 41,159,414 | | | | 937,567 | | | | 794,799 | | | | 90,562,550 | | | | 2,107,054 | | | | 2,130,645 | | | | | | | | | | | | | | | | | | | | | Stock and index | | | | | | | | | | | | | Futures(1) | | | 136,624 | | | | — | | | | 95 | | | Futures1 | | | | 823,202 | | | | 9,438 | | | | 170 | | Swaps | | | 477,143 | | | | 17,565 | | | | 15,168 | | | | 6,276,026 | | | | 105,437 | | | | 175,679 | | Options | | | 1,982,455 | | | | 30,006 | | | | 35,118 | | | | 10,641,997 | | | | 259,896 | | | | 511,218 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 2,596,222 | | | | 47,571 | | | | 50,381 | | | | 17,741,225 | | | | 374,771 | | | | 687,067 | | | | | | | | | | | | | | | | | | | | | Commodity | | | | | | | | Futures(1) | | | 2,024 | | | | 121 | | | | — | | | Credit | | | | | | | | Swaps | | | | 5,219,740 | | | | 55,207 | | | | 49,653 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 2,024 | | | | 121 | | | | — | | | | 5,219,740 | | | | 55,207 | | | | 49,653 | | | | | | | | | | | | | | | | | | | | | Other | | | 60,000 | | | | 68,014 | | | | 9,248 | | | | | | | | | | | | | | Total | | ₩ | 194,306,585 | | | ₩ | 1,680,880 | | | ₩ | 1,580,029 | | | | | | | | | | | | | |
| | | 2014 | | | 2016 | | | | Notional amount | | | Assets | | | Liabilities | | | Notional amount | | | Assets | | | Liabilities | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Interest rate | | | | | | | | Futures(1) | | ₩ | 678,798 | | | ₩ | — | | | ₩ | — | | | Commodity | | | | | | | | Futures1 | | | | 320 | | | | — | | | | 7 | | Swaps | | | 101,610,724 | | | | 924,189 | | | | 957,504 | | | | 12,240 | | | | 766 | | | | 4,765 | | Options | | | 8,398,000 | | | | 86,277 | | | | 128,185 | | | | 2,168 | | | | 20 | | | | — | | | | | | | | | | | | | Sub-total | | | 110,687,522 | | | | 1,010,466 | | | | 1,085,689 | | | | | | | | | | | | | | Currency | | | | | | | | Forwards | | | 21,363,840 | | | | 340,339 | | | | 217,357 | | | Futures(1) | | | 632,430 | | | | 46 | | | | 289 | | | Swaps | | | 18,430,843 | | | | 415,842 | | | | 441,696 | | | Options | | | 616,977 | | | | 6,057 | | | | 6,078 | | | | | | | | | | | | | | Sub-total | | | 41,044,090 | | | | 762,284 | | | | 665,420 | | | | | | | | | | | | | | Stock and index | | | | | | | | Forwards | | | 685,000 | | | | — | | | | — | | | Futures(1) | | | 162,766 | | | | 90 | | | | 753 | | | Swaps | | | 431,709 | | | | 30,091 | | | | 6,222 | | | Options | | | 1,860,561 | | | | 31,632 | | | | 8,199 | | | | | | | | | | | | | | Sub-total | | | 3,140,036 | | | | 61,813 | | | | 15,174 | | | | | | | | | | | | | | Commodity | | | | | | | | Futures(1) | | | 765 | | | | 7 | | | | 9 | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 765 | | | | 7 | | | | 9 | | | | 14,728 | | | | 786 | | | | 4,772 | | | | | | | | | | | | | | | | | | | | | Other | | | — | | | | 24,067 | | | | 9,049 | | | | 1,145,195 | | | | 16,583 | | | | 6,428 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 154,872,413 | | | ₩ | 1,858,637 | | | ₩ | 1,775,341 | | | ₩ | 264,110,323 | | | ₩ | 3,298,328 | | | ₩ | 3,717,819 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2017 | | | | Notional amount | | | Assets | | | Liabilities | | | | (In millions of Korean won) | | Interest rate | | | | | | | | | | | | | Futures1 | | ₩ | 4,770,568 | | | ₩ | 4,952 | | | ₩ | 528 | | Swaps | | | 190,186,189 | | | | 434,316 | | | | 399,674 | | Options | | | 13,560,861 | | | | 137,958 | | | | 234,474 | | | | | | | | | | | | | | | Sub-total | | | 208,517,618 | | | | 577,226 | | | | 634,676 | | | | | | | | | | | | | | | Currency | | | | | | | | | | | | | Forwards | | | 64,308,472 | | | | 1,261,491 | | | | 1,233,633 | | Futures1 | | | 622,711 | | | | 52 | | | | 1,163 | | Swaps | | | 29,769,290 | | | | 847,506 | | | | 759,757 | | Options | | | 695,617 | | | | 4,099 | | | | 6,994 | | | | | | | | | | | | | | | Sub-total | | | 95,396,090 | | | | 2,113,148 | | | | 2,001,547 | | | | | | | | | | | | | | | Stock and index | | | | | | | | | | | | | Futures1 | | | 1,013,846 | | | | 3,599 | | | | 1,132 | | Swaps | | | 5,623,391 | | | | 112,929 | | | | 96,894 | | Options | | | 6,408,019 | | | | 116,215 | | | | 274,544 | | | | | | | | | | | | | | | Sub-total | | | 13,045,256 | | | | 232,743 | | | | 372,570 | | | | | | | | | | | | | | | Credit | | | | | | | | | | | | | Swaps | | | 5,799,606 | | | | 42,000 | | | | 36,963 | | | | | | | | | | | | | | | Sub-total | | | 5,799,606 | | | | 42,000 | | | | 36,963 | | | | | | | | | | | | | | | Commodity | | | | | | | | | | | | | Futures1 | | | 4,791 | | | | 112 | | | | 19 | | Swaps | | | 67,008 | | | | 4,221 | | | | 118 | | Options | | | 245 | | | | 1 | | | | — | | | | | | | | | | | | | | | Sub-total | | | 72,044 | | | | 4,334 | | | | 137 | | | | | | | | | | | | | | | Other | | | 1,955,581 | | | | 28,591 | | | | 8,721 | | | | | | | | | | | | | | | Total | | ₩ | 324,786,195 | | | ₩ | 2,998,042 | | | ₩ | 3,054,614 | | | | | | | | | | | | | | |
(1)1 | A gainGain or loss arising from futures daily mark-to-market futuressettlement is reflected in the margin accounts.
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Fair value hedgeValue Hedge
The detailsDetails of derivativesderivative instruments designated as fair value hedging instrumentshedge as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Notional amount | | | Assets | | | Liabilities | | | Notional amount | | | Assets | | | Liabilities | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Interest rate | | | | | | | | | | | | | Swaps | | ₩ | 1,951,013 | | | ₩ | 137,445 | | | ₩ | — | | | ₩ | 3,130,646 | | | ₩ | 48,424 | | | ₩ | 63,634 | | Currency | | | | | | | | | | | | | Forwards | | | 42,048 | | | | 502 | | | | — | | | | 433,831 | | | | 1,912 | | | | 17,454 | | Swaps | | | 1,055,300 | | | | — | | | | 195,800 | | | Other | | | 140,000 | | | | — | | | | 8,842 | | | | 140,000 | | | | 1,463 | | | | 186 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 3,188,361 | | | ₩ | 137,947 | | | ₩ | 204,642 | | | ₩ | 3,704,477 | | | ₩ | 51,799 | | | ₩ | 81,274 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2017 | | | | Notional amount | | | Assets | | | Liabilities | | | | (In millions of Korean won) | | Interest rate | | | | | | | | | | | | | Swaps | | ₩ | 2,919,935 | | | ₩ | 47,856 | | | ₩ | 49,962 | | Currency | | | | | | | | | | | | | Forwards | | | 2,818,527 | | | | 108,144 | | | | 872 | | Other | | | 50,000 | | | | 775 | | | | 70 | | | | | | | | | | | | | | | Total | | ₩ | 5,788,462 | | | ₩ | 156,775 | | | ₩ | 50,904 | | | | | | | | | | | | | | |
The fair value ofnon-derivative financial instruments designated as hedging instruments is as follows: | | | | | | | | | | | | | | | 2014 | | | | Notional amount | | | Assets | | | Liabilities | | | | (In millions of Korean won) | | Interest rate | | | | | | | | | | | | | Swaps | | ₩ | 2,179,779 | | | ₩ | 109,293 | | | ₩ | 1,144 | | Other | | | 140,000 | | | | 260 | | | | 2,281 | | | | | | | | | | | | | | | Total | | ₩ | 2,319,779 | | | ₩ | 109,553 | | | ₩ | 3,425 | | | | | | | | | | | | | | |
| | | | | | | | | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Deposits in foreign currencies | | ₩ | — | | | ₩ | 32,051 | |
Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | 2012 | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Losses on hedging instruments | | ₩ | (14,654 | ) | | ₩ | (48,545 | ) | | ₩ | (26,320 | ) | Gains on the hedged item attributable to the hedged risk | | | 37,641 | | | | 81,428 | | | | 52,721 | | | | | | | | | | | | | | | Total | | ₩ | 22,987 | | | ₩ | 32,883 | | | ₩ | 26,401 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Gains(losses) on hedging instruments | | ₩ | (47,491 | ) | | ₩ | (88,999 | ) | | ₩ | 93,112 | | Gains(losses) on the hedged items attributable to the hedged risk | | | 48,265 | | | | 91,167 | | | | (56,461 | ) | | | | | | | | | | | | | | Total | | ₩ | 774 | | | ₩ | 2,168 | | | ₩ | 36,651 | | | | | | | | | | | | | | |
Cash flow hedgeFlow Hedge
The detailsDetails of derivativesderivative instruments designated as cash flow hedging instrumentshedge as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Notional amount | | | Assets | | | Liabilities | | | Notional amount | | Assets | | Liabilities | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Interest rate | | | | | | | | | | | | | Swaps | | ₩ | 1,403,000 | | | ₩ | 582 | | | ₩ | 4,902 | | | ₩ | 1,078,000 | | | ₩ | 907 | | | ₩ | 8,035 | | Currency | | | | | | | | | | | | | Swaps | | | 316,590 | | | | — | | | | 5,766 | | | | 362,550 | | | 29,888 | | | | — | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 1,719,590 | | | ₩ | 582 | | | ₩ | 10,668 | | | ₩ | 1,440,550 | | | ₩ | 30,795 | | | ₩ | 8,035 | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | | Notional amount | | Assets | | Liabilities | | | | | (In millions of Korean won) | | Interest rate | | | | | | | | Swaps | | | ₩ | 2,393,491 | | | ₩ | 15,796 | | | ₩ | 3,905 | | Currency | | | | | | | | Swaps | | | | 2,396,957 | | | 117,597 | | | 33,342 | | | | | | | | | | | | | Total | | | ₩ | 4,790,448 | | | ₩ | 133,393 | | | ₩ | 37,247 | | | | | | | | | | | | | | Gains and losses from hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2015, 2016 and 2017, are as follows: | | Gains and losses from hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2015, 2016 and 2017, are as follows: | | | | | | 2015 | | 2016 | | 2017 | | | | | (In millions of Korean won) | | Gains(losses) on hedging instruments | | | ₩ | 24,047 | | | ₩ | 16,759 | | | ₩ | (112,513 | ) | Effective gains(losses) from cash flow hedging instruments | | | | 23,368 | | | 16,238 | | | (100,949 | ) | | | | | | | | | | | | Ineffective gains(losses) from cash flow hedging instruments | | | ₩ | 679 | | | ₩ | 521 | | | ₩ | (11,564 | ) | | | | | | | | | | | | | Amounts recognized in other comprehensive income and reclassified from equity to profit or loss for the years ended December 31, 2015, 2016 and 2017, are as follows: | | Amounts recognized in other comprehensive income and reclassified from equity to profit or loss for the years ended December 31, 2015, 2016 and 2017, are as follows: | | | | | | 2015 | | 2016 | | 2017 | | | | | (In millions of Korean won) | | Amount recognized in other comprehensive income | | | ₩ | 23,368 | | | ₩ | 16,238 | | | ₩ | (100,949 | ) | Amount reclassified from equity to profit or loss | | | | (22,118 | ) | | | (10,447 | ) | | | 126,239 | | Tax effect | | | | (525 | ) | | | (1,488 | ) | | | (4,331 | ) | | | | | | | | | | | | Total | | | ₩ | 725 | | | ₩ | 4,303 | | | ₩ | 20,959 | | | | | | | | | | | | |
Hedge on Net Investments in Foreign Operations | | | | | | | | | | | | | | | 2014 | | | | Notional amount | | | Assets | | | Liabilities | | | | (In millions of Korean won) | | Interest rate | | | | | | | | | | | | | Swaps | | ₩ | 1,033,000 | | | ₩ | — | | | ₩ | 16,073 | | Currency | | | | | | | | | | | | | Swaps | | | 329,760 | | | | — | | | | 2,551 | | | | | | | | | | | | | | | Total | | ₩ | 1,362,760 | | | ₩ | — | | | ₩ | 18,624 | | | | | | | | | | | | | | |
Gains and losses from cash flow hedgingDetails of derivative instruments and hedged items attributable to the hedged risk for the years endeddesignated as foreign operations net investments hedge as of December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | | | | | 2012 | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Losses on hedging instruments | | ₩ | (27,006 | ) | | ₩ | (3,068 | ) | | ₩ | (7,976 | ) | Losses on the hedged item attributable to the hedged risk | | | (26,838 | ) | | | (2,990 | ) | | | (7,452 | ) | | | | | | | | | | | | | | Ineffectiveness recognized in loss | | ₩ | (168 | ) | | ₩ | (78 | ) | | ₩ | (524 | ) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2016 | | | | Notional amount | | | Assets | | | Liabilities | | | | (In millions of Korean won) | | Currency | | | | | | | | | | | | | Forwards | | ₩ | 12,502 | | | ₩ | 1,013 | | | ₩ | — | | | | | | 2017 | | | | Notional amount | | | Assets | | | Liabilities | | | | (In millions of Korean won) | | Currency | | | | | | | | | | | | | Forwards | | ₩ | 484,033 | | | ₩ | 21,956 | | | ₩ | — | | | Gain or loss from hedging instruments in hedge of net investments in foreign operations and hedged items attributable to the hedged risk for the years ended December 31, 2015, 2016 and 2017, are as follows: | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Effective portion of gain(loss) on hedges of net investments in foreign operations | | ₩ | (33,611 | ) | | ₩ | (9,360 | ) | | ₩ | 34,800 | | Ineffective portion of gain on hedges of net investments in foreign operations | | | — | | | | — | | | | 1,129 | | | | | | | | | | | | | | | Gains(losses) on hedging instruments | | ₩ | (33,611 | ) | | ₩ | (9,360 | ) | | ₩ | 35,929 | | | | | | | | | | | | | | | | The effective portion of gain (loss) on hedging instruments recognized in other comprehensive income for the years ended December 31, 2015, 2016 and 2017, are as follows: | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Amount recognized in other comprehensive income | | ₩ | (33,611 | ) | | ₩ | (9,360 | ) | | ₩ | 34,800 | | Tax effect | | | 8,134 | | | | 2,265 | | | | (8,186 | ) | | | | | | | | | | | | | | Amount recognized in other comprehensive income, net of tax | | ₩ | (25,477 | ) | | ₩ | (7,095 | ) | | ₩ | 26,614 | | | | | | | | | | | | | | |
The fair value ofnon-derivative financial instruments designated as hedging instruments is as follows: | | | | | | | | | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Financial debentures in foreign currencies | | ₩ | 199,478 | | | ₩ | 99,994 | |
Amounts recognized in other comprehensive income and reclassified from equity to profit or loss for the years ended10. Loans
Details of loans as of December 31, 2012, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | 2012 | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Amount recognized in other comprehensive income | | ₩ | (26,838 | ) | | ₩ | (2,990 | ) | | ₩ | (7,452 | ) | Amount reclassified from equity to profit or loss | | | 25,000 | | | | 5,227 | | | | (5,426 | ) | Tax effect | | | 1,025 | | | | (619 | ) | | | 2,619 | | | | | | | | | | | | | | | Total | | ₩ | (813 | ) | | ₩ | 1,618 | | | ₩ | (10,259 | ) | | | | | | | | | | | | | |
| | | | | | | | | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Loans | | ₩ | 267,045,265 | | | ₩ | 291,513,253 | | Deferred loan origination fees and costs | | | 718,625 | | | | 719,816 | | Less: Allowances for loan losses | | | (2,277,756 | ) | | | (2,110,231 | ) | | | | | | | | | | Carrying amount | | ₩ | 265,486,134 | | | ₩ | 290,122,838 | | | | | | | | | | | | Details of loans for other banks as of December 31, 2016 and 2017, are as follows: | | | | | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Loans | | ₩ | 5,542,989 | | | ₩ | 5,314,577 | | Less: Allowances for loan losses | | | (66 | ) | | | (77 | ) | | | | | | | | | | Carrying amount | | ₩ | 5,542,923 | | | ₩ | 5,314,500 | | | | | | | | | | |
10. Loans
Loans asDetails of December 31, 2013loan types and 2014, are as follows:
| | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Loans | | ₩ | 221,439,295 | | | ₩ | 233,300,563 | | Deferred loan origination fees and costs | | | 423,245 | | | | 601,142 | | Less: Allowances for loan losses | | | (2,861,184 | ) | | | (2,452,052 | ) | | | | | | | | | | Carrying amount | | ₩ | 219,001,356 | | | ₩ | 231,449,653 | | | | | | | | | | |
Loanscustomer types of loans to banks as of December 31, 2013 and 2014, are as follows:
| | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Loans | | ₩ | 6,335,056 | | | ₩ | 6,208,391 | | Less: Allowances for loan losses | | | (25 | ) | | | — | | | | | | | | | | | Carrying amount | | ₩ | 6,335,031 | | | ₩ | 6,208,391 | | | | | | | | | | |
Loans to customerscustomer, other than banks, as of December 31, 20132016 and 2014, consist of:2017, are as follows:
| | | 2013 | | | 2016 | | | | Retail | | Corporate | | Credit card | | Total | | | Retail | | Corporate | | Credit card | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Loans in Korean won | | ₩ | 104,920,187 | | | ₩ | 84,596,181 | | | ₩ | — | | | ₩ | 189,516,368 | | | ₩ | 130,381,597 | | | ₩ | 101,541,864 | | | ₩ | — | | | ₩ | 231,923,461 | | Loans in foreign currencies | | | 98,614 | | | | 2,956,418 | | | | — | | | | 3,055,032 | | | | 72,329 | | | 2,685,932 | | | | — | | | 2,758,261 | | Domestic import usance bills | | | — | | | | 2,978,478 | | | | — | | | | 2,978,478 | | | | — | | | 2,962,676 | | | | — | | | 2,962,676 | | Off-shore funding loans | | | — | | | | 669,603 | | | | — | | | | 669,603 | | | | — | | | 559,915 | | | | — | | | 559,915 | | Call loans | | | — | | | | 696,929 | | | | — | | | | 696,929 | | | | — | | | 263,831 | | | | — | | | 263,831 | | Bills bought in Korean won | | | — | | | | 14,243 | | | | — | | | | 14,243 | | | | — | | | 5,568 | | | | — | | | 5,568 | | Bills bought in foreign currencies | | | — | | | | 1,588,066 | | | | — | | | | 1,588,066 | | | | — | | | 2,834,171 | | | | — | | | 2,834,171 | | Guarantee payments under payment guarantee | | | — | | | | 38,318 | | | | — | | | | 38,318 | | | | 172 | | | 11,327 | | | | — | | | 11,499 | | Credit card receivables in Korean won | | | — | | | | — | | | | 11,782,005 | | | | 11,782,005 | | | | — | | | | — | | | 13,525,992 | | | 13,525,992 | | Credit card receivables in foreign currencies | | | — | | | | — | | | | 2,453 | | | | 2,453 | | | | — | | | | — | | | 4,251 | | | 4,251 | | Reverse repurchase agreements | | | — | | | | 1,683,200 | | | | — | | | | 1,683,200 | | | | — | | | 1,244,200 | | | | — | | | 1,244,200 | | Privately placed bonds | | | — | | | | 731,706 | | | | — | | | | 731,706 | | | | — | | | 1,468,179 | | | | — | | | 1,468,179 | | Factored receivables | | | 2,724,413 | | | | 46,670 | | | | — | | | | 2,771,083 | | | | 810,582 | | | 17,898 | | | | — | | | 828,480 | | Lease receivables | | | | 1,470,503 | | | 66,764 | | | | — | | | 1,537,267 | | Loans for installment credit | | | | 2,293,150 | | | | — | | | | — | | | 2,293,150 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 107,743,214 | | | | 95,999,812 | | | | 11,784,458 | | | | 215,527,484 | | | | 135,028,333 | | | 113,662,325 | | | 13,530,243 | | | 262,220,901 | | | | | | | | | | | | | | | | | | | | | | | | | | | Proportion (%) | | | 49.99 | | | | 44.54 | | | | 5.47 | | | | 100.00 | | | | 51.49 | | | 43.35 | | | 5.16 | | | 100.00 | | Allowances | | | (580,510 | ) | | | (1,870,849 | ) | | | (409,800 | ) | | | (2,861,159 | ) | | Less: Allowances | | | | (481,289 | ) | | (1,382,106 | ) | | (414,295 | ) | | (2,277,690 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 107,162,704 | | | ₩ | 94,128,963 | | | ₩ | 11,374,658 | | | ₩ | 212,666,325 | | | ₩ | 134,547,044 | | | ₩ | 112,280,219 | | | ₩ | 13,115,948 | | | ₩ | 259,943,211 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Retail | | Corporate | | Credit card | | Total | | | Retail | | Corporate | | Credit card | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Loans in Korean won | | ₩ | 114,712,199 | | | ₩ | 85,633,171 | | | ₩ | — | | | ₩ | 200,345,370 | | | ₩ | 140,630,735 | | | ₩ | 112,014,669 | | | ₩ | — | | | ₩ | 252,645,404 | | Loans in foreign currencies | | | 50,047 | | | | 2,574,041 | | | | — | | | | 2,624,088 | | | 121,166 | | | 3,078,907 | | | | — | | | 3,200,073 | | Domestic import usance bills | | | — | | | | 3,693,951 | | | | — | | | | 3,693,951 | | | | — | | | 2,128,868 | | | | — | | | 2,128,868 | | Off-shore funding loans | | | — | | | | 664,794 | | | | — | | | | 664,794 | | | | — | | | 730,817 | | | | — | | | 730,817 | | Call loans | | | — | | | | 292,043 | | | | — | | | | 292,043 | | | | — | | | 335,200 | | | | — | | | 335,200 | | Bills bought in Korean won | | | — | | | | 6,678 | | | | — | | | | 6,678 | | | | — | | | 4,168 | | | | — | | | 4,168 | | Bills bought in foreign currencies | | | — | | | | 1,958,251 | | | | — | | | | 1,958,251 | | | | — | | | 3,875,550 | | | | — | | | 3,875,550 | | Guarantee payments under payment guarantee | | | 418 | | | | 12,975 | | | | — | | | | 13,393 | | | 105 | | | 6,373 | | | | — | | | 6,478 | | Credit card receivables in Korean won | | | — | | | | — | | | | 11,629,215 | | | | 11,629,215 | | | | — | | | | — | | | 15,200,843 | | | 15,200,843 | | Credit card receivables in foreign currencies | | | — | | | | — | | | | 3,081 | | | | 3,081 | | | | — | | | | — | | | 4,004 | | | 4,004 | | Reverse repurchase agreements | | | — | | | | 1,082,200 | | | | — | | | | 1,082,200 | | | | — | | | 1,197,700 | | | | — | | | 1,197,700 | | Privately placed bonds | | | — | | | | 743,348 | | | | — | | | | 743,348 | | | | — | | | 1,994,932 | | | | — | | | 1,994,932 | | Factored receivables | | | 2,741,789 | | | | 50,435 | | | | — | | | | 2,792,224 | | | 51,401 | | | 1,419 | | | | — | | | 52,820 | | Lease receivables | | | 808,866 | | | | 50,973 | | | | — | | | | 859,839 | | | 1,773,901 | | | 60,527 | | | | — | | | 1,834,428 | | Loans for installment credit | | | 984,839 | | | | — | | | | — | | | | 984,839 | | | 3,693,672 | | | 13,535 | | | | — | | | 3,707,207 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 119,298,158 | | | | 96,762,860 | | | | 11,632,296 | | | | 227,693,314 | | | 146,270,980 | | | 125,442,665 | | | 15,204,847 | | | 286,918,492 | | | | | | | | | | | | | | | | | | | | | | | | | | | Proportion (%) | | | 52.39 | | | | 42.50 | | | | 5.11 | | | | 100.00 | | | 50.98 | | | 43.72 | | | 5.30 | | | 100.00 | | Allowances | | | (536,959 | ) | | | (1,525,152 | ) | | | (389,941 | ) | | | (2,452,052 | ) | | Less: Allowances | | | (429,299 | ) | | (1,231,589 | ) | | (449,266 | ) | | (2,110,154 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 118,761,199 | | | ₩ | 95,237,708 | | | ₩ | 11,242,355 | | | ₩ | 225,241,262 | | | ₩ | 145,841,681 | | | ₩ | 124,211,076 | | | ₩ | 14,755,581 | | | ₩ | 284,808,338 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The changesChanges in deferred loan origination fees and costs for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Beginning | | | Increase | | | Decrease | | Others | | Ending | | | Beginning | | | Increase | | | Decrease | | Business combination | | | Others | | Ending | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Deferred loan origination costs | | | | | | | | | | | | | | | | | | | | | | | Loans in Korean won | | ₩ | 502,512 | | | ₩ | 330,202 | | | ₩ | 288,683 | | | ₩ | (33,130 | ) | | ₩ | 510,901 | | | ₩ | 659,553 | | | ₩ | 368,551 | | | ₩ | (383,926 | ) | | ₩ | 18,863 | | | ₩ | — | | | ₩ | 663,041 | | Other origination costs | | | 344 | | | | 635 | | | | 602 | | | | — | | | | 377 | | | | 77,908 | | | | 80,535 | | | | (58,565 | ) | | | — | | | | — | | | 99,878 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 502,856 | | | | 330,837 | | | | 289,285 | | | | (33,130 | ) | | | 511,278 | | | | 737,461 | | | | 449,086 | | | | (442,491 | ) | | 18,863 | | | | — | | | 762,919 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deferred loan origination fees | | | | | | | | | | | | | | | | | | | | | | | Loans in Korean won | | | 69,994 | | | | 72,822 | | | | 62,383 | | | | (70 | ) | | | 80,363 | | | | 43,720 | | | | 13,204 | | | | (37,442 | ) | | 363 | | | | — | | | 19,845 | | Other origination fees | | | 6,526 | | | | 3,872 | | | | 2,709 | | | | (19 | ) | | | 7,670 | | | | 17,465 | | | | 23,371 | | | | (16,389 | ) | | | — | | | | 2 | | | 24,449 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 76,520 | | | | 76,694 | | | | 65,092 | | | | (89 | ) | | | 88,033 | | | | 61,185 | | | | 36,575 | | | | (53,831 | ) | | 363 | | | | 2 | | | 44,294 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 426,336 | | | ₩ | 254,143 | | | ₩ | 224,193 | | | ₩ | (33,041 | ) | | ₩ | 423,245 | | | ₩ | 676,276 | | | ₩ | 412,511 | | | ₩ | (388,660 | ) | | ₩ | 18,500 | | | ₩ | (2 | ) | | ₩ | 718,625 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | | | 2017 | | | | Beginning | | | Increase | | | Decrease | | | Business Combination | | | Others | | Ending | | | Beginning | | | Increase | | | Decrease | | Business combination | | | Others | | Ending | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Deferred loan origination costs | | | | | | | | | | | | | | | | | | | | | | | | | Loans in Korean won | | ₩ | 510,901 | | | ₩ | 402,415 | | | ₩ | 310,681 | | | ₩ | 24,656 | | | ₩ | — | | | ₩ | 627,291 | | | ₩ | 663,041 | | | ₩ | 334,438 | | | ₩ | (358,721 | ) | | ₩ | 12,532 | | | ₩ | (18,610 | ) | | ₩ | 632,680 | | Other origination costs | | | 377 | | | | 40,693 | | | | 63,486 | | | | 79,907 | | | | — | | | | 57,491 | | | | 99,878 | | | | 101,656 | | | | (75,267 | ) | | | — | | | | (2 | ) | | 126,265 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 511,278 | | | | 443,108 | | | | 374,167 | | | | 104,563 | | | | — | | | | 684,782 | | | | 762,919 | | | | 436,094 | | | | (433,988 | ) | | 12,532 | | | | (18,612 | ) | | 758,945 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deferred loan origination fees | | | | | | | | | | | | | | | | | | | | | | | | | Loans in Korean won | | | 80,363 | | | | 51,216 | | | | 71,495 | | | | 2,272 | | | | — | | | | 62,356 | | | | 19,845 | | | | 7,904 | | | | (16,188 | ) | | | — | | | | — | | | 11,561 | | Other origination fees | | | 7,670 | | | | 10,526 | | | | 25,564 | | | | 28,645 | | | | 7 | | | | 21,284 | | | | 24,449 | | | | 19,356 | | | | (16,228 | ) | | | — | | | | (9 | ) | | 27,568 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 88,033 | | | | 61,742 | | | | 97,059 | | | | 30,917 | | | | 7 | | | | 83,640 | | | | 44,294 | | | | 27,260 | | | | (32,416 | ) | | | — | | | | (9 | ) | | 39,129 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 423,245 | | | ₩ | 381,366 | | | ₩ | 277,108 | | | ₩ | 73,646 | | | ₩ | (7 | ) | | ₩ | 601,142 | | | ₩ | 718,625 | | | ₩ | 408,834 | | | ₩ | (401,572 | ) | | ₩ | 12,532 | | | ₩ | (18,603 | ) | | ₩ | 719,816 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
11. Allowances for Loan Losses The changesChanges in the allowances for loan losses for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Retail | | Corporate | | Credit card | | Total | | | Retail | | Corporate | | Credit card | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Beginning | | ₩ | 687,851 | | | ₩ | 2,251,318 | | | ₩ | 329,490 | | | ₩ | 3,268,659 | | | ₩ | 491,352 | | | ₩ | 1,692,352 | | | ₩ | 398,350 | | | ₩ | 2,582,054 | | Written-off | | | (581,100 | ) | | | (1,146,767 | ) | | | (404,199 | ) | | | (2,132,066 | ) | | | (295,459 | ) | | (747,151 | ) | | (356,705 | ) | | (1,399,315 | ) | Recoveries from written-off loans | | | 126,651 | | | | 147,110 | | | | 141,452 | | | | 415,213 | | | | 167,033 | | | 214,915 | | | 133,456 | | | 515,404 | | Sale | | | (8,483 | ) | | | (76,413 | ) | | | 435 | | | | (84,461 | ) | | Provision(1) | | | 361,253 | | | | 720,136 | | | | 346,064 | | | | 1,427,453 | | | Sale and repurchase | | | | (23,046 | ) | | (55,151 | ) | | | — | | | (78,197 | ) | Provision1 | | | | 82,035 | | | 252,195 | | | 244,569 | | | 578,799 | | Business combination | | | | 59,615 | | | 76,755 | | | | — | | | 136,370 | | Other changes | | | (5,662 | ) | | | (24,510 | ) | | | (3,442 | ) | | | (33,614 | ) | | | (241 | ) | | (51,743 | ) | | (5,375 | ) | | (57,359 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Ending | | ₩ | 580,510 | | | ₩ | 1,870,874 | | | ₩ | 409,800 | | | ₩ | 2,861,184 | | | ₩ | 481,289 | | | ₩ | 1,382,172 | | | ₩ | 414,295 | | | ₩ | 2,277,756 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Retail | | Corporate | | Credit card | | Total | | | Retail | | Corporate | | Credit card | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Beginning | | ₩ | 580,510 | | | ₩ | 1,870,874 | | | ₩ | 409,800 | | | ₩ | 2,861,184 | | | ₩ | 481,289 | | | ₩ | 1,382,172 | | | ₩ | 414,295 | | | ₩ | 2,277,756 | | Written-off | | | (576,084 | ) | | | (1,087,897 | ) | | | (427,059 | ) | | | (2,091,040 | ) | | | (341,506 | ) | | (395,272 | ) | | (400,385 | ) | | (1,137,163 | ) | Recoveries from written-off loans | | | 139,131 | | | | 260,574 | | | | 131,046 | | | | 530,751 | | | | 145,606 | | | 280,324 | | | 132,665 | | | 558,595 | | Sale | | | (6,736 | ) | | | (65,163 | ) | | | — | | | | (71,899 | ) | | Provision(1) | | | 341,783 | | | | 589,913 | | | | 279,413 | | | | 1,211,109 | | | Sale and repurchase | | | | (40,267 | ) | | (26,105 | ) | | | — | | | (66,372 | ) | Provision1 | | | | 233,262 | | | 38,644 | | | 312,248 | | | 584,154 | | Business combination | | | 58,346 | | | | 24,294 | | | | — | | | | 82,640 | | | | 9,679 | | | 50,227 | | | | — | | | 59,906 | | Other changes | | | 9 | | | | (67,443 | ) | | | (3,259 | ) | | | (70,693 | ) | | | (58,764 | ) | | (98,324 | ) | | (9,557 | ) | | (166,645 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Ending | | ₩ | 536,959 | | | ₩ | 1,525,152 | | | ₩ | 389,941 | | | ₩ | 2,452,052 | | | ₩ | 429,299 | | | ₩ | 1,231,666 | | | ₩ | 449,266 | | | ₩ | 2,110,231 | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)1 | Provision for credit losses in statements of comprehensive income also include provision (reversal) for unused commitments and guarantees (Note 23)23.(2)), reversalprovision (reversal) for financial guarantees contracts (Note 23)23.(3)), and provision (reversal) for other financial assets (Note 18)18.(2)). |
The amounts of written-off loans, over which the Group still has a right to claim against the borrowers and guarantors due to unexpired statute of limitations, are ₩15,061,182 million and ₩16,686,972 million as of December 31, 2013 and 2014, respectively.
The coverage ratio of allowances for loan losses as of December 31, 2013 and 2014, is as follows:
| | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Loans | | ₩ | 221,862,540 | | | ₩ | 233,901,705 | | Allowances for loan losses | | | 2,861,184 | | | | 2,452,052 | | Ratio (%) | | | 1.29 | | | | 1.05 | |
12. Financial assetsAssets at fair valueFair Value through profitProfit or lossLoss and Financial investmentsInvestments The detailsDetails of financial assets at fair value through profit or loss and financial investments as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial assets held for trading | | | | | | | | | Debt securities: | | | | | | | | | Government and public bonds | | ₩ | 2,085,450 | | | ₩ | 3,067,490 | | | ₩ | 5,389,757 | | | ₩ | 6,232,514 | | Financial bonds | | | 3,265,960 | | | | 4,049,449 | | | | 11,186,427 | | | | 11,324,330 | | Corporate bonds | | | 1,759,993 | | | | 1,826,682 | | | | 4,594,741 | | | | 5,133,226 | | Asset-backed securities | | | 510,159 | | | | 318,893 | | | | 222,076 | | | | 161,991 | | Others | | | 204,223 | | | | 449,694 | | | | 1,593,569 | | | | 2,316,277 | | Equity securities: | | | | | | | | | Stocks | | | 145,163 | | | | 69,736 | | | Stocks and others | | | | 424,637 | | | | 1,009,190 | | Beneficiary certificates | | | 955,806 | | | | 288,281 | | | | 2,615,962 | | | | 3,925,910 | | Others | | | 40,252 | | | | 51,345 | | | | 72,349 | | | | 73,855 | | | | | | | | | | | | | | | Sub-total | | | 8,967,006 | | | | 10,121,570 | | | | 26,099,518 | | | | 30,177,293 | | | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | | | | | | | Debt securities: | | | | | | Corporate bonds | | | | 237,595 | | | | 66,969 | | Equity securities: | | | | | | | | | Beneficiary certificates | | | 115,778 | | | | 134,172 | | | Derivative linked securities | | | 245,958 | | | | 502,168 | | | Stocks and others | | | | 65,591 | | | | 67,828 | | Derivative-linked securities | | | | 1,361,591 | | | | 1,613,404 | | Privately placed bonds | | | | 94,069 | | | | 301,851 | | | | | | | | | | | | | | | Sub-total | | | 361,736 | | | | 636,340 | | | | 1,758,846 | | | | 2,050,052 | | | | | | | | | | | | | | | Total financial assets at fair value through profit or loss | | ₩ | 9,328,742 | | | ₩ | 10,757,910 | | | ₩ | 27,858,364 | | | ₩ | 32,227,345 | | | | | | | | | | | | | | | Available-for-sale financial assets | | | | | | | | | Debt securities: | | | | | | | | | Government and public bonds | | ₩ | 6,925,617 | | | ₩ | 4,702,036 | | | ₩ | 7,110,899 | | | ₩ | 3,629,479 | | Financial bonds | | | 5,782,234 | | | | 6,980,846 | | | | 11,172,159 | | | | 20,946,100 | | Corporate bonds | | | 4,997,788 | | | | 6,119,889 | | | | 5,904,414 | | | | 10,570,501 | | Asset-backed securities | | | 1,208,241 | | | | 1,211,343 | | | | 2,729,749 | | | | 2,402,437 | | Others | | | 19,408 | | | | 345,708 | | | | 528,531 | | | | 1,410,884 | | Equity securities: | | | | | | | | | Stocks | | | 2,366,887 | | | | 2,402,675 | | | | 2,590,989 | | | | 3,077,748 | | Equity investments and others | | | 97,937 | | | | 74,596 | | | | 402,659 | | | | 459,808 | | Beneficiary certificates | | | 433,992 | | | | 554,373 | | | | 3,530,893 | | | | 5,619,306 | | | | | | | | | | | | | | | Sub-total | | | 21,832,104 | | | | 22,391,466 | | | | 33,970,293 | | | | 48,116,263 | | | | | | | | | | | | | | | Held-to-maturity financial assets | | | | | | | | | Debts securities: | | | | | | | | | Government and public bonds | | | 4,357,623 | | | | 3,556,913 | | | | 2,218,274 | | | | 5,448,471 | | Financial bonds | | | 892,509 | | | | 1,262,187 | | | | 1,868,928 | | | | 2,474,841 | | Corporate bonds | | | 7,400,085 | | | | 7,277,779 | | | | 3,487,787 | | | | 6,218,723 | | Asset-backed securities | | | 366,774 | | | | 472,275 | | | | 3,602,515 | | | | 4,305,678 | | Others | | | | — | | | | 44,267 | | | | | | | | | | | | | | | Sub-total | | | 13,016,991 | | | | 12,569,154 | | | | 11,177,504 | | | | 18,491,980 | | | | | | | | | | | | | | | Total financial investments | | ₩ | 34,849,095 | | | ₩ | 34,960,620 | | | ₩ | 45,147,797 | | | ₩ | 66,608,243 | | | | | | | | | | | | | | |
The impairment losses and the reversal of impairment losses in financial investments for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | 2012 | | | | Impairment | | | Reversal | | | Net | | | | (In millions of Korean won) | | Available-for-sale financial assets | | ₩ | 280,610 | | | ₩ | — | | | ₩ | 280,610 | | Held-to-maturity financial assets | | | 154 | | | | — | | | | 154 | | | | | | | | | | | | | | | Total | | ₩ | 280,764 | | | ₩ | — | | | ₩ | 280,764 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2015 | | | | Impairment | | | Reversal | | | Net | | | | (In millions of Korean won) | | Available-for-sale financial assets | | ₩ | (227,588 | ) | | ₩ | 265 | | | ₩ | (227,323 | ) | | | | | 2016 | | | | Impairment | | | Reversal | | | Net | | | | (In millions of Korean won) | | Available-for-sale financial assets | | ₩ | (35,216 | ) | | ₩ | 328 | | | ₩ | (34,888 | ) | | | | | 2017 | | | | Impairment | | | Reversal | | | Net | | | | (In millions of Korean won) | | Available-for-sale financial assets | | ₩ | (47,917 | ) | | ₩ | — | | | ₩ | (47,917 | ) |
| | | | | | | | | | | | | | | 2013 | | | | Impairment | | | Reversal | | | Net | | | | (In millions of Korean won) | | Available-for-sale financial assets | | ₩ | 163,464 | | | ₩ | — | | | ₩ | 163,464 | | Held-to-maturity financial assets | | | 5 | | | | — | | | | 5 | | | | | | | | | | | | | | | Total | | ₩ | 163,469 | | | ₩ | — | | | ₩ | 163,469 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2014 | | | | Impairment | | | Reversal | | | Net | | | | (In millions of Korean won) | | Available-for-sale financial assets | | ₩ | 195,929 | | | ₩ | 260 | | | ₩ | 195,669 | | Held-to-maturity financial assets | | | — | | | | — | | | | — | | | | | | | | | | | | | | | Total | | ₩ | 195,929 | | | ₩ | 260 | | | ₩ | 195,669 | | | | | | | | | | | | | | |
13. Investments in associatesAssociates and Joint Ventures Investments in associates and joint ventures as of December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | Ownership
| | | Acquisition cost | | | Share of net asset amount | | | Carrying amount | | | Industry | | Location | | | (%) | | | (in millions of Korean won) | | | Associates | | | | | | | | | | | | | | | | | | | | | Balhae Infrastructure Fund(1) | | | 12.61 | | | ₩ | 121,817 | | | ₩ | 124,968 | | | ₩ | 124,968 | | | Investment finance | | Korea | Korea Credit Bureau Co., Ltd.(1) | | | 9.00 | | | | 4,500 | | | | 4,185 | | | | 4,185 | | | Credit Information | | Korea | UAMCO., Ltd.(1) | | | 17.50 | | | | 85,050 | | | | 139,286 | | | | 150,826 | | | Other finance | | Korea | JSC Bank CenterCredit | | | | | | | | | | | | | | | | | | | | | Ordinary share(2),(3) | | | 29.56 | | | | 954,104 | | | | 51,989 | | | | 68,110 | | | Banking | | Kazakhstan | Preference share(2) | | | 93.15 | | | | | | | KoFC KBIC Frontier Champ 2010-5(PEF) | | | 50.00 | | | | 47,580 | | | | 46,496 | | | | 45,393 | | | Investment finance | | Korea | Semiland Co., Ltd | | | 21.32 | | | | 1,470 | | | | 2,639 | | | | 2,639 | | | Manufacture | | Korea | United PF 1st Recovery Private Equity Fund(1) | | | 17.72 | | | | 191,617 | | | | 203,618 | | | | 197,941 | | | Other finance | | Korea | CH Engineering Co., Ltd | | | 41.73 | | | | — | | | | 64 | | | | — | | | Specialty construction | | Korea | Shinla Construction Co., Ltd | | | 20.24 | | | | — | | | | — | | | | — | | | Specialty construction | | Korea | Kores Co., Ltd.(8) | | | 10.39 | | | | 634 | | | | 1,925 | | | | 1,505 | | | Manufacture of automobile parts | | Korea | KB GwS Private Securities Investment Trust | | | 26.74 | | | | 113,880 | | | | 126,556 | | | | 123,085 | | | Investment finance | | Korea | Incheon Bridge Co., Ltd.(1) | | | 14.99 | | | | 24,677 | | | | (429 | ) | | | — | | | Operation of Highways and Related facilities | | Korea | Ssangyong Engineering & Construction Co., Ltd.(8) | | | 15.64 | | | | 28,779 | | | | 2,490 | | | | — | | | Office and Commercial Building Construction | | Korea | KB Star office Private real estate Investment Trust No.1 | | | 21.05 | | | | 20,000 | | | | 20,347 | | | | 19,934 | | | Investment finance | | Korea | KoFC POSCO HANHWA KB shared growth Private Equity Fund | | | 25.00 | | | | 14,025 | | | | 11,620 | | | | 10,329 | | | Investment finance | | Korea | NPS KBIC Private Equity Fund No. 1(1) | | | 2.56 | | | | 3,393 | | | | 4,238 | | | | 4,238 | | | Investment finance | | Korea | KBIC Private Equity Fund No.3(1) | | | 2.00 | | | | 2,050 | | | | 2,223 | | | | 2,223 | | | Investment finance | | Korea | KB-Glenwood Private Equity Fund(1) | | | 0.03 | | | | 10 | | | | 10 | | | | 10 | | | Investment finance | | Korea | Terra Co., Ltd | | | 24.06 | | | | — | | | | 20 | | | | 4 | | | Manufacture of Hand-Operated Kitchen Appliances and Metal Ware | | Korea | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | ₩ | 1,613,586 | | | ₩ | 742,245 | | | ₩ | 755,390 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 2016 | | | Ownership (%) | | | Acquisition cost | | | Share of net asset amount | | | Carrying amount | | | Industry | | Location | | | (In millions of Korean won) | Associates | | | | | | | | | | | | | | | | | | | | | JSC Bank CenterCredit | | | | | | | | | | | | | | | | | | | | | Ordinary share10 | | | 29.56 | | | ₩ | 954,104 | | | ₩ | (32,191 | ) | | ₩ | — | | | Banking | | Kazakhstan | Preference share10 | | | 93.15 | | | | | | | KB GwS Private Securities Investment Trust | | | 26.74 | | | | 113,880 | | | | 133,150 | | | | 129,678 | | | Investment finance | | Korea | KB-Glenwood Private Equity Fund2,11 | | | 0.03 | | | | 10 | | | | 10 | | | | 10 | | | Investment finance | | Korea | KB Star office Private real estate Investment Trust No.1 | | | 21.05 | | | | 20,000 | | | | 20,220 | | | | 19,807 | | | Investment finance | | Korea | Doosung Metal Co., Ltd.7 | | | 26.52 | | | | — | | | | (51 | ) | | | — | | | Manufacture of metal products | | Korea | RAND Bio Science Co., Ltd. | | | 24.24 | | | | 2,000 | | | | 2,000 | | | | 2,000 | | | Research and experimental development on medical sciences and pharmacy | | Korea | Balhae Infrastructure Company2 | | | 12.61 | | | | 130,189 | | | | 133,200 | | | | 133,200 | | | Investment finance | | Korea | IMM Investment 5th PRIVATE EQUITY FUND8 | | | 98.88 | | | | 10,000 | | | | 9,999 | | | | 9,999 | | | Private equity fund | | Korea | Aju Good Technology Venture Fund | | | 38.46 | | | | 1,998 | | | | 1,949 | | | | 1,998 | | | Investment finance | | Korea | SY Auto Capital Co., Ltd. | | | 49.00 | | | | 9,800 | | | | 26,311 | | | | 5,693 | | | Installment loan | | Korea | Wise Asset Management Co., Ltd.9 | | | 33.00 | | | | — | | | | — | | | | — | | | Asset management | | Korea | isMedia Co., Ltd. | | | 22.87 | | | | 3,978 | | | | 3,978 | | | | 3,978 | | | Semiconductor instrument manufacture | | Korea | Incheon Bridge Co., Ltd.2 | | | 14.99 | | | | 24,677 | | | | 728 | | | | 728 | | | Operation of highways and related facilities | | Korea | Jungdong Steel Co., Ltd.7 | | | 42.88 | | | | — | | | | (423 | ) | | | — | | | Wholesale of primary metal | | Korea | KB Insurance Co., Ltd. 1 | | | 39.81 | | | | 1,052,759 | | | | 1,393,320 | | | | 1,392,194 | | | Non-life insurance | | Korea | Kendae Co., Ltd.7 | | | 41.01 | | | | — | | | | (351 | ) | | | — | | | Screen printing | | Korea | Dpaps Co., Ltd.7 | | | 38.62 | | | | — | | | | 151 | | | | — | | | Wholesale of paper products | | Korea | Shinla Construction Co., Ltd.7 | | | 20.24 | | | | — | | | | (545 | ) | | | — | | | Specialty construction | | Korea |
| | | | | | | | | | | | | | | | | | | | | | | 2014 | | | Ownership | | | Acquisition cost | | | Share of net asset amount | | | Carrying amount | | | Industry | | Location | | | (%) | | | (in millions of Korean won) | | | Associates | | | | | | | | | | | | | | | | | | | | | Balhae Infrastructure Fund(1) | | | 12.61 | | | ₩ | 122,623 | | | ₩ | 125,119 | | | ₩ | 125,119 | | | Investment finance | | Korea | Korea Credit Bureau Co., Ltd.(1) | | | 9.00 | | | | 4,500 | | | | 4,222 | | | | 4,222 | | | Credit Information | | Korea | UAMCO., Ltd.(1) | | | 17.50 | | | | 85,050 | | | | 114,240 | | | | 121,182 | | | Other finance | | Korea | JSC Bank CenterCredit | | | | | | | | | | | | | | | | | | | | | Ordinary share(2),(3) | | | 29.56 | | | | 954,104 | | | | 36,763 | | | | 29,279 | | | Banking | | Kazakhstan | Preference share(2) | | | 93.15 | | | | | | | KoFC KBIC Frontier Champ 2010-5(PEF) | | | 50.00 | | | | 31,635 | | | | 26,176 | | | | 23,559 | | | Investment finance | | Korea | United PF 1st Recovery Private Equity Fund(1) | | | 17.72 | | | | 191,617 | | | | 203,270 | | | | 198,089 | | | Other finance | | Korea | CH Engineering Co., Ltd | | | 41.73 | | | | — | | | | 178 | | | | 20 | | | Specialty construction | | Korea | Shinla Construction Co., Ltd | | | 20.24 | | | | — | | | | (504 | ) | | | — | | | Specialty construction | | Korea | KB GwS Private Securities Investment Trust | | | 26.74 | | | | 113,880 | | | | 127,525 | | | | 124,074 | | | Investment finance | | Korea | Incheon Bridge Co., Ltd.(1) | | | 14.99 | | | | 24,677 | | | | (1,716 | ) | | | — | | | Operation of Highways and Related facilities | | Korea | KB Star office Private real estate Investment Trust No.1 | | | 21.05 | | | | 20,000 | | | | 20,402 | | | | 19,989 | | | Investment finance | | Korea | KoFC POSCO HANHWA KB shared growth Private Equity Fund | | | 25.00 | | | | 26,250 | | | | 23,204 | | | | 22,329 | | | Investment finance | | Korea | NPS KBIC Private Equity Fund No. 1(1) | | | 2.56 | | | | 3,393 | | | | — | | | | — | | | Investment finance | | Korea | KBIC Private Equity Fund No. 3(1) | | | 2.00 | | | | 2,050 | | | | 2,287 | | | | 2,287 | | | Investment finance | | Korea | KB-Glenwood Private Equity Fund(1) | | | 0.03 | | | | 10 | | | | 10 | | | | 10 | | | Investment finance | | Korea | Terra Co., Ltd | | | 24.06 | | | | — | | | | (99 | ) | | | — | | | Manufacture of Hand-Operated Kitchen Appliances and Metal Ware | | Korea | KB No.3 Special Purpose Acquition Company(1),(4) | | | 0.19 | | | | 20 | | | | 39 | | | | 39 | | | SPAC | | Korea | KB No.4 Special Purpose Acquition Company(1),(5) | | | 0.19 | | | | 30 | | | | 38 | | | | 38 | | | SPAC | | Korea | KB No.5 Special Purpose Acquition Company(1),(6) | | | 0.19 | | | | 10 | | | | 19 | | | | 19 | | | SPAC | | Korea | KB No.6 Special Purpose Acquition Company(1),(7) | | | 0.25 | | | | 40 | | | | 77 | | | | 77 | | | SPAC | | Korea | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | ₩ | 1,579,889 | | | ₩ | 681,250 | | | ₩ | 670,332 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | Ownership (%) | | | Acquisition cost | | | Share of net asset amount | | | Carrying amount | | | Industry | | Location | | | | (In millions of Korean won) | | Shinhwa Underwear Co., Ltd.7 | | | 26.24 | | | | — | | | | (138 | ) | | | 103 | | | Manufacture of underwears and sleepwears | | | Korea | | MJT&I Co., Ltd.7 | | | 22.89 | | | | — | | | | (542 | ) | | | 232 | | | Wholesale of other goods | | | Korea | | Inno Lending Co., Ltd.2 | | | 19.90 | | | | 398 | | | | 378 | | | | 378 | | | Credit rating model development | | | Korea | | Ejade Co., Ltd.7 | | | 25.81 | | | | — | | | | (523 | ) | | | — | | | Wholesale of underwears | | | Korea | | Jaeyang Industry Co., Ltd.7 | | | 20.86 | | | | — | | | | (522 | ) | | | — | | | Manufacture of luggage and other protective cases | | | Korea | | Terra Co., Ltd.7 | | | 24.06 | | | | — | | | | 44 | | | | 28 | | | Manufacture of hand-operated kitchen appliances and metal ware | | | Korea | | KBIC Private Equity Fund No. 32 | | | 2.00 | | | | 2,050 | | | | 2,396 | | | | 2,396 | | | Investment finance | | | Korea | | KB No.8 Special Purpose Acquisition Company2,3 | | | 0.10 | | | | 10 | | | | 19 | | | | 19 | | | SPAC | | | Korea | | KB No.9 Special Purpose Acquisition Company2,4 | | | 0.11 | | | | 24 | | | | 31 | | | | 31 | | | SPAC | | | Korea | | KB No.10 Special Purpose Acquisition Company2,5 | | | 0.19 | | | | 10 | | | | 20 | | | | 20 | | | SPAC | | | Korea | | KB No.11 Special Purpose Acquisition Company2 | | | 4.76 | | | | 10 | | | | 13 | | | | 13 | | | SPAC | | | Korea | | KB Private Equity Fund III2 | | | 15.68 | | | | 8,000 | | | | 8,000 | | | | 8,000 | | | Investment finance | | | Korea | | Korea Credit Bureau Co., Ltd.2 | | | 9.00 | | | | 4,500 | | | | 4,853 | | | | 4,853 | | | Credit information | | | Korea | | KoFC KBIC Frontier Champ2010-5(PEF) | | | 50.00 | | | | 23,985 | | | | 25,105 | | | | 24,719 | | | Investment finance | | | Korea | | KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 | | | 25.00 | | | | 22,701 | | | | 24,789 | | | | 24,789 | | | Investment finance | | | Korea | | Keystone-Hyundai Securities No. 1 Private Equity Fund2 | | | 5.64 | | | | 1,842 | | | | 1,850 | | | | 1,850 | | | Investment finance | | | Korea | | Hyundai-Tongyang Agrifood Private Equity Fund | | | 25.47 | | | | 4,645 | | | | 3,957 | | | | 3,957 | | | Investment finance | | | Korea | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | ₩ | 2,391,570 | | | ₩ | 1,761,185 | | | ₩ | 1,770,673 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Ownership (%) | | | Acquisition cost | | | Share of net asset amount | | | Carrying amount | | | Industry | | Location | | | | (In millions of Korean won) | | Associates and Joint ventures | | | | | | | | | | | | | | | | | | | | | | | KB Pre IPO Secondary Venture Fund 1st2 | | | 15.19 | | | ₩ | 1,671 | | | ₩ | 1,601 | | | ₩ | 1,601 | | | Investment finance | | | Korea | | KB GwS Private Securities Investment Trust | | | 26.74 | | | | 113,880 | | | | 134,891 | | | | 131,420 | | | Investment finance | | | Korea | | KB-KDBC New Technology Business Fund12 | | | 66.66 | | | | 5,000 | | | | 4,972 | | | | 4,972 | | | Investment finance | | | Korea | | KB Star office Private real estate Investment Trust No.1 | | | 21.05 | | | | 20,000 | | | | 20,122 | | | | 19,709 | | | Investment finance | | | Korea | | Sun Surgery Center Inc. | | | 28.00 | | | | 2,682 | | | | 2,682 | | | | 2,682 | | | Hospital | |
| United States of America | | Dae-A Leisure Co., Ltd.7 | | | 49.36 | | | | — | | | | 1,017 | | | | — | | | Earth works | | | Korea | | Doosung Metal Co., Ltd.7 | | | 26.52 | | | | — | | | | (20 | ) | | | — | | | Manufacture of metal products | | | Korea | | RAND Bio Science Co., Ltd. | | | 24.24 | | | | 2,000 | | | | 2,000 | | | | 2,000 | | | Research and experimental development on medical sciences and pharmacy | | | Korea | | Balhae Infrastructure Company2 | | | 12.61 | | | | 101,794 | | | | 105,190 | | | | 105,190 | | | Investment finance | | | Korea | |
| | | | | | | | | | | | | | | | | | | | | | | 2017 | | | Ownership (%) | | | Acquisition cost | | | Share of net asset amount | | | Carrying amount | | | Industry | | Location | | | (In millions of Korean won) | Bungaejangter Inc. | | | 22.69 | | | | 3,484 | | | | 3,484 | | | | 3,484 | | | Portals and other internet information media service activities | | | Aju Good Technology Venture Fund | | | 38.46 | | | | 8,230 | | | | 7,856 | | | | 8,230 | | | Investment finance | | Korea | Acts Co., Ltd. | | | 27.78 | | | | 500 | | | | 500 | | | | 500 | | | Manufacture of optical lens and elements | | Korea | SY Auto Capital Co., Ltd. | | | 49.00 | | | | 9,800 | | | | 14,099 | | | | 8,070 | | | Installment loan | | Korea | Wise Asset Management Co., Ltd.9 | | | 33.00 | | | | — | | | | — | | | | — | | | Asset management | | Korea | Incheon Bridge Co., Ltd.2 | | | 14.99 | | | | 9,158 | | | | (16,202 | ) | | | — | | | Operation of highways and related facilities | | Korea | Jungdong Steel Co., Ltd.7 | | | 42.88 | | | | — | | | | (436 | ) | | | — | | | Wholesale of primary metal | | Korea | Kendae Co., Ltd.7 | | | 41.01 | | | | — | | | | (223 | ) | | | 127 | | | Screen printing | | Korea | Daesang Techlon Co., Ltd.7 | | | 47.73 | | | | — | | | | 97 | | | | — | | | Manufacture of plastic wires, bars, pipes, tubes and hoses | | Korea | Dongjo Co., Ltd.7 | | | 29.29 | | | | — | | | | 691 | | | | — | | | Wholesale of agricultural and forestry machinery and equipment | | Korea | Dpaps Co., Ltd.7 | | | 38.62 | | | | — | | | | 155 | | | | — | | | Wholesale of paper products | | Korea | Big Dipper Co., Ltd. | | | 29.33 | | | | 440 | | | | 325 | | | | 440 | | | Big data consulting | | | Builton Co., Ltd. | | | 22.22 | | | | 800 | | | | 800 | | | | 800 | | | Software development and supply | | Korea | Shinla Construction Co., Ltd.7 | | | 20.24 | | | | — | | | | (553 | ) | | | — | | | Specialty construction | | Korea | Shinhwa Underwear Co., Ltd.7 | | | 26.24 | | | | — | | | | (103 | ) | | | 138 | | | Manufacture of underwears and sleepwears | | Korea | A-PRO Co., Ltd.2 | | | 12.61 | | | | 1,500 | | | | 1,500 | | | | 1,500 | | | Manufacture of electric power storage system | | | MJT&I Co., Ltd.7 | | | 22.89 | | | | — | | | | (601 | ) | | | 127 | | | Wholesale of other goods | | Korea | Inno Lending Co., Ltd.2 | | | 19.90 | | | | 398 | | | | 230 | | | | 230 | | | Credit rating model development | | Korea | Jaeyang Industry Co., Ltd.7 | | | 20.86 | | | | — | | | | (522 | ) | | | — | | | Manufacture of luggage and other protective cases | | Korea | Jungdo Co., Ltd.7 | | | 25.53 | | | | — | | | | 1,664 | | | | — | | | Office, commercial and institutional building construction | | Korea | Jinseung Tech Co., Ltd.7 | | | 30.04 | | | | — | | | | (173 | ) | | | — | | | Manufacture of other general-purpose machinery n.e.c. | | Korea | Terra Co., Ltd.7 | | | 24.06 | | | | — | | | | 36 | | | | 20 | | | Manufacture of hand-operated kitchen appliances and metal ware | | Korea | Paycoms Co., Ltd. | | | 24.06 | | | | 800 | | | | 800 | | | | 800 | | | System software publishing | | Korea | Food Factory Co., Ltd. | | | 30.00 | | | | 1,000 | | | | 1,000 | | | | 1,000 | | | Farm product distribution industry | | Korea | Korea NM Tech Co., Ltd.7 | | | 22.41 | | | | — | | | | 580 | | | | — | | | Manufacture of motor vehicles, trailers and semitrailers | | Korea | KB IGen Private Equity Fund No.12,11 | | | 0.03 | | | | 3 | | | | 3 | | | | 3 | | | Investment finance | | Korea | KB No.8 Special Purpose Acquisition Company2 3 | | | 0.10 | | | | 10 | | | | 20 | | | | 20 | | | SPAC | | Korea | KB No.9 Special Purpose Acquisition Company2,4 | | | 0.11 | | | | 24 | | | | 31 | | | | 31 | | | SPAC | | Korea | KB No.10 Special Purpose Acquisition Company2,5 | | | 0.19 | | | | 10 | | | | 20 | | | | 20 | | | SPAC | | Korea | KB No.11 Special Purpose Acquisition Company2,6 | | | 0.31 | | | | 10 | | | | 19 | | | | 19 | | | SPAC | | Korea |
| | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Ownership (%) | | | Acquisition cost | | | Share of net asset amount | | | Carrying amount | | | Industry | | Location | | | | (In millions of Korean won) | | KB Private Equity Fund III2 | | | 15.68 | | | | 8,000 | | | | 7,899 | | | | 7,899 | | | Investment finance | | | Korea | | Korea Credit Bureau Co., Ltd.2 | | | 9.00 | | | | 4,500 | | | | 5,056 | | | | 5,056 | | | Credit information | | | Korea | | KoFC KBIC Frontier Champ2010-5(PEF) | | | 50.00 | | | | 6,485 | | | | 7,506 | | | | 7,120 | | | Investment finance | | | Korea | | KoFC POSCO HANHWA KB shared growth Private Equity Fund No.2 | | | 25.00 | | | | 12,970 | | | | 17,213 | | | | 17,213 | | | Investment finance | | | Korea | | Keystone-Hyundai Securities No. 1 Private Equity Fund2 | | | 5.64 | | | | 1,842 | | | | 1,761 | | | | 1,761 | | | Investment finance | | | Korea | | POSCO-KB Shipbuilding Fund | | | 31.25 | | | | 2,500 | | | | 2,345 | | | | 2,345 | | | Investment finance | | | Korea | | Hyundai-Tongyang Agrifood Private Equity Fund | | | 25.47 | | | | 82 | | | | 543 | | | | 543 | | | Investment finance | | | Korea | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | ₩ | 319,573 | | | ₩ | 329,875 | | | ₩ | 335,070 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)1 | The market value of KB Insurance Co., Ltd., reflecting the quoted market price, as of December 31, 2016, amounts to ₩522,288 million. |
2 | As of December 31, 20132016 and 2014,2017, the Group is represented in the governing bodies of its associates. Therefore, the Group has a significant influence over the decision-making process relating to their financial and business policies. |
3 | The market value of KB No.8 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2016, and 2017 amounts to ₩20 million and ₩20 million. |
4 | The market value of KB No.9 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2016 and 2017, amounts to ₩31 million and ₩31 million, respectively. |
5 | The market value of KB No.10 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2016 and 2017, amounts to ₩20 million and ₩20 million, respectively. |
6 | The market value of KB No.11 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2017, amounts to ₩20 million. |
7 | The investment in associates was reclassified fromavailable-for-sale financial assets due to termination of rehabilitation procedures. |
(2)8 | Although the Group holds a majority of the investee’s voting rights, other limited partners have a right to replace general partners. Therefore, the Group has been classified the entity as investment in associates. |
9 | Carrying amount of the investment has been recognized as a loss from the date Hyundai Securities Co., Ltd. was included in the consolidation scope. |
10 | Market values of ordinary shares of JSC Bank CenterCredit, reflecting the published market price, as of December 31, 2016, are ₩29,358 million. The Group determined that ordinary shares and convertible preference shares issued by JSC Bank CenterCredit are the same in economic substance except for the voting rights, and therefore, the equity method of accounting is applied on the basis of single ownership ratio of 41.93%, which is calculated based on ordinary and convertible preference shares held by the Group against the total outstanding ordinary and convertible preference shares issued by JSC Bank CenterCredit. |
(3) | Fair value of ordinary On April 18, 2017, the Group transferred the entire shares of JSC Bank CenterCredit reflectingheld by the published market price, as of December 31, 2013 and 2014, are ₩57,476 million and ₩42,945 million. Group. |
(4)11 | The fair value ofKB-Glenwood Private Equity Fund changed the name to KB No.3 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2014, amounts to ₩40 million. IGen Private Equity Fund No. 1. |
(5)12 | The fair value of KB No.4 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2014, amountsIn order to ₩40 million.
|
(6) | The fair value of KB No.5 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2014, amounts to ₩20 million.
|
(7) | The fair value of KB No.6 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2014, amounts to ₩84 million.
|
(8) | Where the Group has acquired shares of entities through debt-for-equity swaps, the Group is represented in the creditor council. Therefore, the Group has significant influencetake control over the decision-making process relating to their financialrelated operations, the agreement from two operative members are required. As such, the group cannot control the investee alone, and business policies. the equity method is applied. |
Summarized financial information on associates:major associates, adjustments to carrying amount of investment in associates and joint ventures and dividends received from the associates and joint ventures are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2013(1) | | | | Total assets | | | Total liabilities | | | Share capital | | | Equity | | | Share of net asset amount | | | Unrealized gains | | | Consolidated carrying amount | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balhae Infrastructure Fund | | ₩ | 993,571 | | | ₩ | 2,157 | | | ₩ | 993,030 | | | ₩ | 991,414 | | | ₩ | 124,968 | | | ₩ | — | | | ₩ | 124,968 | | Korea Credit Bureau Co., Ltd | | | 63,043 | | | | 16,542 | | | | 10,000 | | | | 46,501 | | | | 4,185 | | | | — | | | | 4,185 | | UAMCO., Ltd | | | 4,365,097 | | | | 3,567,972 | | | | 2,430 | | | | 797,125 | | | | 139,286 | | | | 11,540 | | | | 150,826 | | JSC Bank CenterCredit | | | 7,083,662 | | | | 6,903,416 | | | | 546,794 | | | | 180,246 | | | | 51,989 | | | | 16,121 | | | | 68,110 | | KoFC KBIC Frontier Champ 2010-5(PEF) | | | 93,367 | | | | 375 | | | | 95,160 | | | | 92,992 | | | | 46,496 | | | | (1,103 | ) | | | 45,393 | | Semiland Co., Ltd | | | 20,753 | | | | 14,608 | | | | 1,970 | | | | 6,145 | | | | 2,639 | | | | — | | | | 2,639 | | United PF 1st Recovery Private Equity Fund | | | 1,159,220 | | | | 10,092 | | | | 1,081,400 | | | | 1,149,128 | | | | 203,618 | | | | (5,677 | ) | | | 197,941 | | CH Engineering Co., Ltd.(2) | | | 917 | | | | 763 | | | | 158 | | | | 154 | | | | 64 | | | | (64 | ) | | | — | | Kores Co., Ltd.(3) | | | 92,937 | | | | 80,914 | | | | 11,099 | | | | 12,023 | | | | 1,925 | | | | (420 | ) | | | 1,505 | | Terra Co., Ltd.(3) | | | 1,659 | | | | 1,576 | | | | 254 | | | | 83 | | | | 20 | | | | (16 | ) | | | 4 | | KB GwS Private Securities Investment Trust | | | 473,946 | | | | 738 | | | | 425,814 | | | | 473,208 | | | | 126,556 | | | | (3,471 | ) | | | 123,085 | | Incheon Bridge Co., Ltd. | | | 740,321 | | | | 743,182 | | | | 164,621 | | | | (2,861 | ) | | | (429 | ) | | | 429 | | | | — | | Ssangyong Engineering & Construction Co., Ltd.(3) | | | 1,359,658 | | | | 1,343,734 | | | | 73,045 | | | | 15,924 | | | | 2,490 | | | | (2,490 | ) | | | — | | KB Star office Private real estate Investment Trust No.1 | | | 217,557 | | | | 120,910 | | | | 95,000 | | | | 96,647 | | | | 20,347 | | | | (413 | ) | | | 19,934 | | KoFC POSCO HANHWA KB shared growth Private Equity Fund | | | 48,192 | | | | 1,712 | | | | 56,100 | | | | 46,480 | | | | 11,620 | | | | (1,291 | ) | | | 10,329 | | NPS KBIC Private Equity Fund No. 1 | | | 174,469 | | | | 8,911 | | | | 132,541 | | | | 165,558 | | | | 4,238 | | | | — | | | | 4,238 | | KBIC Private Equity Fund No. 3 | | | 111,270 | | | | 79 | | | | 102,500 | | | | 111,191 | | | | 2,223 | | | | — | | | | 2,223 | | KB-Glenwood Private Equity Fund | | | 30,558 | | | | 1,794 | | | | 31,100 | | | | 28,764 | | | | 10 | | | | — | | | | 10 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | | | | | | | | ₩ | 742,245 | | | ₩ | 13,145 | | | ₩ | 755,390 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20161 | | | | Total assets | | | Total liabilities | | | Share capital | | | Equity | | | Share of net asset amount | | | Unrealized gains (losses) | | | Consolidated carrying amount | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | KB Insurance Co., Ltd. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (initial acquisition 22.59%) | | ₩ | 30,949,859 | | | ₩ | 27,357,084 | | | ₩ | 33,250 | | | ₩ | 3,592,775 | | | ₩ | 810,704 | | | ₩ | (1,126 | ) | | ₩ | 1,392,194 | | (additional acquisition 10.70%) | | | 31,071,846 | | | | 27,386,605 | | | | 33,250 | | | | 3,685,241 | | | | 393,678 | | | | (additional acquisition 6.52%)3 | | | 30,038,426 | | | | 27,136,518 | | | | 33,250 | | | | 2,901,908 | | | | 188,938 | | | | | | | | | | Balhae Infrastructure Fund | | | 1,059,008 | | | | 2,288 | | | | 1,061,216 | | | | 1,056,720 | | | | 133,200 | | | | — | | | | 133,200 | | Korea Credit Bureau Co., Ltd. | | | 71,245 | | | | 17,322 | | | | 10,000 | | | | 53,923 | | | | 4,853 | | | | — | | | | 4,853 | | JSC Bank CenterCredit | | | 4,510,673 | | | | 4,578,854 | | | | 546,794 | | | | (68,181 | ) | | | (32,191 | ) | | | 32,191 | | | | — | | KoFC KBIC Frontier Champ2010-5(PEF) | | | 50,213 | | | | 2 | | | | 47,970 | | | | 50,211 | | | | 25,105 | | | | (386 | ) | | | 24,719 | | KB GwS Private Securities Investment Trust | | | 498,606 | | | | 741 | | | | 425,814 | | | | 497,865 | | | | 133,150 | | | | (3,472 | ) | | | 129,678 | | Incheon Bridge Co., Ltd. | | | 660,858 | | | | 656,000 | | | | 164,621 | | | | 4,858 | | | | 728 | | | | — | | | | 728 | | KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 | | | 100,252 | | | | 1,094 | | | | 90,800 | | | | 99,158 | | | | 24,789 | | | | — | | | | 24,789 | | Aju Good Technology Venture Fund | | | 5,249 | | | | 181 | | | | 5,200 | | | | 5,068 | | | | 1,949 | | | | 49 | | | | 1,998 | | KB Star office Private real estate Investment Trust No.1 | | | 216,988 | | | | 120,943 | | | | 95,000 | | | | 96,045 | | | | 20,220 | | | | (413 | ) | | | 19,807 | | KBIC Private Equity Fund No. 3 | | | 119,885 | | | | 76 | | | | 102,500 | | | | 119,809 | | | | 2,396 | | | | — | | | | 2,396 | | RAND Bio Science Co., Ltd. | | | 2,720 | | | | 5 | | | | 83 | | | | 2,715 | | | | 2,000 | | | | — | | | | 2,000 | | isMedia Co., Ltd.2 | | | 41,192 | | | | 20,925 | | | | 2,520 | | | | 20,267 | | | | 3,978 | | | | — | | | | 3,978 | | KB No.8 Special Purpose Acquisition Company | | | 22,743 | | | | 2,265 | | | | 1,031 | | | | 20,478 | | | | 19 | | | | — | | | | 19 | | KB No.9 Special Purpose Acquisition Company | | | 29,677 | | | | 2,503 | | | | 1,382 | | | | 27,174 | | | | 31 | | | | — | | | | 31 | | KB No.10 Special Purpose Acquisition Company | | | 11,795 | | | | 1,628 | | | | 521 | | | | 10,167 | | | | 20 | | | | — | | | | 20 | | KB No.11 Special Purpose Acquisition Company | | | 991 | | | | 714 | | | | 21 | | | | 277 | | | | 13 | | | | — | | | | 13 | | KB-Glenwood Private Equity Fund | | | 30,558 | | | | 3,204 | | | | 31,100 | | | | 27,354 | | | | 10 | | | | — | | | | 10 | | IMM Investment 5th PRIVATE EQUITY FUND | | | 10,114 | | | | 1 | | | | 10,114 | | | | 10,113 | | | | 9,999 | | | | — | | | | 9,999 | | Hyundai-Tongyang Agrifood Private Equity Fund | | | 15,910 | | | | 375 | | | | 15,360 | | | | 15,535 | | | | 3,957 | | | | — | | | | 3,957 | | Keystone-Hyundai Securities No. 1 Private Equity Fund | | | 112,865 | | | | 73,429 | | | | 34,114 | | | | 39,436 | | | | 1,850 | | | | — | | | | 1,850 | | KB Private Equity Fund III2 | | | 51,000 | | | | — | | | | 51,000 | | | | 51,000 | | | | 8,000 | | | | — | | | | 8,000 | | Inno Lending Co., Ltd. | | | 1,903 | | | | 1 | | | | 2,000 | | | | 1,902 | | | | 378 | | | | — | | | | 378 | | SY Auto Capital Co., Ltd. | | | 65,292 | | | | 38,981 | | | | 20,000 | | | | 26,311 | | | | 26,311 | | | | (20,618 | ) | | | 5,693 | |
| | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Operating income | | | Profit (Loss) | | | Other comprehensive income(loss) | | | Total comprehensive income(loss) | | | Dividends | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | Balhae Infrastructure Fund | | ₩ | 57,754 | | | ₩ | 49,685 | | | ₩ | — | | | ₩ | 49,685 | | | ₩ | 6,299 | | Korea Credit Bureau Co., Ltd | | | 51,571 | | | | 4,909 | | | | — | | | | 4,909 | | | | — | | UAMCO., Ltd | | | 708,035 | | | | 105,085 | | | | — | | | | 105,085 | | | | — | | JSC Bank CenterCredit | | | 532,768 | | | | (497,885 | ) | | | (5,732 | ) | | | (503,617 | ) | | | 3 | | KoFC KBIC Frontier Champ 2010-5(PEF) | | | 3,368 | | | | (2,454 | ) | | | 7,064 | | | | 4,610 | | | | — | | Semiland Co., Ltd | | | 11,513 | | | | 649 | | | | — | | | | 649 | | | | 11 | | United PF 1st Recovery Private Equity Fund | | | 152,315 | | | | 13,769 | | | | — | | | | 13,769 | | | | — | | CH Engineering Co., Ltd.(2) | | | 681 | | | | (102 | ) | | | — | | | | (102 | ) | | | — | | Kores Co., Ltd.(3) | | | 100,769 | | | | 565 | | | | 2,472 | | | | 3,037 | | | | — | | Terra Co., Ltd.(3) | | | 1,422 | | | | 17 | | | | — | | | | 17 | | | | — | | KB GwS Private Securities Investment Trust | | | 76,201 | | | | 41,247 | | | | — | | | | 41,247 | | | | 8,894 | | Incheon Bridge Co., Ltd | | | 77,311 | | | | (13,533 | ) | | | — | | | | (13,533 | ) | | | — | | Ssangyong Engineering & Construction Co., Ltd.(3) | | | 1,724,742 | | | | (314,105 | ) | | | (8,615 | ) | | | (322,720 | ) | | | — | | KB Star office Private real estate Investment Trust No.1 | | | 16,672 | | | | 8,490 | | | | — | | | | 8,490 | | | | 1,751 | | KoFC POSCO HANHWA KB shared growth Private Equity Fund | | | 1,685 | | | | (8,803 | ) | | | 1,759 | | | | (7,044 | ) | | | — | | NPS KBIC Private Equity Fund No. 1 | | | 10,206 | | | | 9,301 | | | | (2,113 | ) | | | 7,188 | | | | 106 | | KBIC Private Equity Fund No. 3 | | | 3,702 | | | | 3,385 | | | | — | | | | 3,385 | | | | — | | KB-Glenwood Private Equity Fund | | | — | | | | (627 | ) | | | — | | | | (627 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | 20161 | | | | Operating income | | | Profit (loss) | | | Other comprehensive income | | | Total comprehensive income | | | Dividends | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | KB Insurance Co., Ltd. | | | | | | | | | | | | | | | | | | | | | (initial acquisition 22.59%) | | ₩ | 11,229,942 | | | ₩ | 253,362 | | | ₩ | (19,150 | ) | | ₩ | 234,212 | | | ₩ | 7,989 | | (additional acquisition 10.70%) | | | 11,247,685 | | | | 274,678 | | | | (39,203 | ) | | | 235,475 | | | Balhae Infrastructure Fund | | | 55,541 | | | | 46,428 | | | | — | | | | 46,428 | | | | 5,654 | | Korea Credit Bureau Co., Ltd. | | | 59,868 | | | | 3,517 | | | | — | | | | 3,517 | | | | 135 | | JSC Bank CenterCredit | | | 157,996 | | | | (13,912 | ) | | | (15,374 | ) | | | (29,286 | ) | | | 1 | | KoFC KBIC Frontier Champ2010-5(PEF) | | | 3,045 | | | | 2,001 | | | | 2,390 | | | | 4,391 | | | | — | | KB GwS Private Securities Investment Trust | | | 36,502 | | | | 35,513 | | | | — | | | | 35,513 | | | | 7,355 | | Incheon Bridge Co., Ltd. | | | 98,341 | | | | 17,449 | | | | — | | | | 17,449 | | | | — | | KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 | | | 22,411 | | | | 15,002 | | | | 872 | | | | 15,874 | | | | — | | KB Star office Private real estate Investment Trust No.1 | | | 16,314 | | | | 7,460 | | | | — | | | | 7,460 | | | | 1,679 | | KBIC Private Equity Fund No. 3 | | | 2,641 | | | | 2,361 | | | | — | | | | 2,361 | | | | — | | RAND Bio Science Co., Ltd. | | | — | | | | (112 | ) | | | — | | | | (112 | ) | | | — | | KB No.8 Special Purpose Acquisition Company | | | — | | | | 317 | | | | 276 | | | | 593 | | | | — | | KB No.9 Special Purpose Acquisition Company | | | — | | | | 129 | | | | 25,392 | | | | 25,521 | | | | — | | KB No.10 Special Purpose Acquisition Company | | | — | | | | (22 | ) | | | — | | | | (22 | ) | | | — | | KB No.11 Special Purpose Acquisition Company | | | — | | | | (12 | ) | | | — | | | | (12 | ) | | | — | | KB-Glenwood Private Equity Fund | | | — | | | | (542 | ) | | | — | | | | (542 | ) | | | — | | IMM Investment 5th PRIVATE EQUITY FUND | | | — | | | | (1 | ) | | | — | | | | (1 | ) | | | — | | Hyundai-Tongyang Agrifood Private Equity Fund | | | 519 | | | | (5,258 | ) | | | — | | | | (5,258 | ) | | | — | | Keystone-Hyundai Securities No. 1 Private Equity Fund | | | 197 | | | | (626 | ) | | | — | | | | (626 | ) | | | — | | Inno Lending Co., Ltd. | | | — | | | | (98 | ) | | | — | | | | (98 | ) | | | — | | SY Auto Capital Co., Ltd. | | | 20,340 | | | | 6,962 | | | | — | | | | 6,962 | | | | — | | Aju Good Technology Venture Fund | | | 50 | | | | (128 | ) | | | — | | | | (128 | ) | | | — | |
(1)1 | The amounts included in the financial statements of the associates are adjusted to reflect adjustments made by the entity,entity; such as fair value adjustments made at the time of acquisition and adjustments for differences in accounting policies. |
(2)2 | AsDetails of profit or loss are not disclosed as the financial statementsentity is classified as of December 31, 2013, were not available,an associate during the Group applied the equity method by using the financial statements as of November 30, 2013, and adjusted for the effects of significant transactions or events that occurred between the date of those financial statements and the date of the consolidated financial statements. fourth quarter. |
(3)3 | AsDetails of profit or loss are not disclosed as the financial statements as3rd share acquisition of KB Insurance Co., Ltd. occurred on December 31, 2013 were not available, the Group applied the equity method by using the financial statements as of September 30, 2013, and adjusted for the effects of significant transactions or events that occurred between the date of those financial statements and the date of the consolidated financial statements. 29, 2016. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2014(1) | | | | Total assets | | | Total liabilities | | | Share capital | | | Equity | | | Share of net asset amount | | | Unrealized gains | | | Consolidated carrying amount | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balhae Infrastructure Fund | | ₩ | 994,768 | | | ₩ | 2,158 | | | ₩ | 999,430 | | | ₩ | 992,610 | | | ₩ | 125,119 | | | ₩ | — | | | ₩ | 125,119 | | Korea Credit Bureau Co., Ltd | | | 54,717 | | | | 7,806 | | | | 10,000 | | | | 46,911 | | | | 4,222 | | | | — | | | | 4,222 | | UAMCO., Ltd | | | 4,357,490 | | | | 3,688,589 | | | | 2,430 | | | | 668,901 | | | | 114,240 | | | | 6,942 | | | | 121,182 | | JSC Bank CenterCredit | | | 6,278,391 | | | | 6,156,255 | | | | 546,794 | | | | 122,136 | | | | 36,763 | | | | (7,484 | ) | | | 29,279 | | KoFC KBIC Frontier Champ 2010-5(PEF) | | | 52,499 | | | | 148 | | | | 63,270 | | | | 52,351 | | | | 26,176 | | | | (2,617 | ) | | | 23,559 | | United PF 1st Recovery Private Equity Fund | | | 1,187,406 | | | | 40,240 | | | | 1,081,400 | | | | 1,147,166 | | | | 203,270 | | | | (5,181 | ) | | | 198,089 | | CH Engineering Co., Ltd.(2) | | | 1,086 | | | | 659 | | | | 158 | | | | 427 | | | | 178 | | | | (158 | ) | | | 20 | | KB GwS Private Securities Investment Trust | | | 477,646 | | | | 738 | | | | 425,814 | | | | 476,908 | | | | 127,525 | | | | (3,451 | ) | | | 124,074 | | Incheon Bridge Co., Ltd | | | 727,659 | | | | 739,105 | | | | 164,621 | | | | (11,446 | ) | | | (1,716 | ) | | | 1,716 | | | | — | | KB Star office Private real estate Investment Trust No.1 | | | 218,250 | | | | 121,341 | | | | 95,000 | | | | 96,909 | | | | 20,402 | | | | (413 | ) | | | 19,989 | | KoFC POSCO HANHWA KB shared growth Private Equity Fund | | | 94,731 | | | | 1,917 | | | | 105,000 | | | | 92,814 | | | | 23,204 | | | | (875 | ) | | | 22,329 | | NPS KBIC Private Equity Fund No. 1 | | | 151 | | | | 146 | | | | — | | | | 5 | | | | — | | | | — | | | | — | | KBIC Private Equity Fund No. 3 | | | 114,575 | | | | 162 | | | | 102,500 | | | | 114,413 | | | | 2,287 | | | | — | | | | 2,287 | | KB-Glenwood Private Equity Fund | | | 30,558 | | | | 1,804 | | | | 31,100 | | | | 28,754 | | | | 10 | | | | — | | | | 10 | | KB No.3 Special Purpose Acquition Company | | | 21,904 | | | | 1,531 | | | | 1,052 | | | | 20,373 | | | | 39 | | | | — | | | | 39 | | KB No.4 Special Purpose Acquition Company | | | 22,567 | | | | 2,382 | | | | 1,052 | | | | 20,185 | | | | 38 | | | | — | | | | 38 | | KB No.5 Special Purpose Acquition Company | | | 12,399 | | | | 2,382 | | | | 522 | | | | 10,017 | | | | 19 | | | | — | | | | 19 | | KB No.6 Special Purpose Acquition Company | | | 34,434 | | | | 3,515 | | | | 1,600 | | | | 30,919 | | | | 77 | | | | — | | | | 77 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | | | | | | | | ₩ | 681,853 | | | ₩ | (11,521 | ) | | ₩ | 670,332 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20171 | | | | Total assets | | | Total liabilities | | | Share capital | | | Equity | | | Share of net asset amount | | | Unrealized gains (losses) | | | Consolidated carrying amount | | | | (In millions of Korean won) | | Associates and Joint ventures | | | | | | | | | | | | | | | | | | | | | | | | | | | | | KB Pre IPO Secondary Venture Fund 1st | | ₩ | 10,908 | | | ₩ | 30 | | | ₩ | 11,000 | | | ₩ | 10,878 | | | ₩ | 1,601 | | | ₩ | — | | | ₩ | 1,601 | | KB GwS Private Securities Investment Trust | | | 505,115 | | | | 741 | | | | 425,814 | | | | 504,374 | | | | 134,891 | | | | (3,471 | ) | | | 131,420 | | KB-KDBC New Technology Business Investment Fund | | | 7,503 | | | | 45 | | | | 7,500 | | | | 7,458 | | | | 4,972 | | | | — | | | | 4,972 | | KB Star office Private real estate Investment Trust No.1 | | | 216,041 | | | | 120,462 | | | | 95,000 | | | | 95,579 | | | | 20,122 | | | | (413 | ) | | | 19,709 | | Sun Surgery Center Inc | | | 9,579 | | | | — | | | | 43 | | | | 9,579 | | | | 2,682 | | | | — | | | | 2,682 | | RAND Bio Science Co., Ltd. | | | 1,876 | | | | 7 | | | | 71 | | | | 1,869 | | | | 2,000 | | | | — | | | | 2,000 | | Balhae Infrastructure Company | | | 836,309 | | | | 1,800 | | | | 807,567 | | | | 834,509 | | | | 105,190 | | | | — | | | | 105,190 | | Bungaejangter Inc. | | | 5,592 | | | | 3,450 | | | | 43 | | | | 2,142 | | | | 3,484 | | | | — | | | | 3,484 | | Aju Good Technology Venture Fund | | | 20,676 | | | | 250 | | | | 21,400 | | | | 20,426 | | | | 7,856 | | | | 374 | | | | 8,230 | | Acts Co., Ltd. | | | 6,741 | | | | 6,894 | | | | 117 | | | | (153 | ) | | | 500 | | | | — | | | | 500 | | SY Auto Capital Co., Ltd. | | | 79,845 | | | | 51,071 | | | | 20,000 | | | | 28,774 | | | | 14,099 | | | | (6,029 | ) | | | 8,070 | | Incheon Bridge Co., Ltd. | | | 646,811 | | | | 754,900 | | | | 61,096 | | | | (108,089 | ) | | | (16,202 | ) | | | 16,202 | | | | — | | Big Dipper Co., Ltd. | | | 1,138 | | | | 30 | | | | 1,500 | | | | 1,108 | | | | 325 | | | | 115 | | | | 440 | | Builton Co., Ltd. | | | 1,418 | | | | 808 | | | | 321 | | | | 610 | | | | 800 | | | | — | | | | 800 | | A-PRO Co., Ltd. | | | 8,692 | | | | 5,681 | | | | 43 | | | | 3,011 | | | | 1,500 | | | | — | | | | 1,500 | | Inno Lending Co., Ltd. | | | 1,184 | | | | 28 | | | | 2,000 | | | | 1,156 | | | | 230 | | | | — | | | | 230 | | Paycoms Co., Ltd. | | | 1,898 | | | | 1,374 | | | | 810 | | | | 524 | | | | 800 | | | | — | | | | 800 | | Food Factory Co., Ltd. | | | 3,501 | | | | 3,552 | | | | — | | | | (51 | ) | | | 1,000 | | | | — | | | | 1,000 | | KB IGen Private Equity Fund No. 1 | | | 7,666 | | | | 9 | | | | 11,230 | | | | 7,657 | | | | 3 | | | | — | | | | 3 | | KB No.8 Special Purpose Acquisition Company | | | 22,920 | | | | 2,369 | | | | 1,031 | | | | 20,551 | | | | 20 | | | | — | | | | 20 | | KB No.9 Special Purpose Acquisition Company | | | 29,963 | | | | 2,566 | | | | 1,382 | | | | 27,397 | | | | 31 | | | | — | | | | 31 | | KB No.10 Special Purpose Acquisition Company | | | 11,858 | | | | 1,675 | | | | 521 | | | | 10,183 | | | | 20 | | | | — | | | | 20 | | KB No.11 Special Purpose Acquisition Company | | | 6,730 | | | | 717 | | | | 321 | | | | 6,013 | | | | 19 | | | | — | | | | 19 | | KB Private Equity Fund III | | | 50,357 | | | | — | | | | 51,000 | | | | 50,357 | | | | 7,899 | | | | — | | | | 7,899 | | Korea Credit Bureau Co., Ltd. | | | 75,504 | | | | 19,323 | | | | 10,000 | | | | 56,181 | | | | 5,056 | | | | — | | | | 5,056 | | KoFC KBIC Frontier Champ2010-5(PEF) | | | 15,017 | | | | 3 | | | | 12,970 | | | | 15,014 | | | | 7,506 | | | | (386 | ) | | | 7,120 | | KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 | | | 70,166 | | | | 1,315 | | | | 51,880 | | | | 68,851 | | | | 17,213 | | | | — | | | | 17,213 | | Keystone-Hyundai Securities No. 1 Private Equity Fund | | | 170,155 | | | | 133,034 | | | | 34,114 | | | | 37,121 | | | | 1,761 | | | | — | | | | 1,761 | | POSCO-KB Shipbuilding Fund | | | 7,752 | | | | 247 | | | | 8,000 | | | | 7,505 | | | | 2,345 | | | | — | | | | 2,345 | | Hyundai-Tongyang Agrifood Private Equity Fund | | | 2,466 | | | | 339 | | | | 320 | | | | 2,127 | | | | 543 | | | | — | | | | 543 | |
| | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Operating income | | | Profit (Loss) | | | Other comprehensive income(loss) | | | Total comprehensive income(loss) | | | Dividends | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | Balhae Infrastructure Fund | | ₩ | 53,100 | | | ₩ | 44,616 | | | ₩ | — | | | ₩ | 44,616 | | | ₩ | 6,280 | | Korea Credit Bureau Co., Ltd | | | 46,111 | | | | 114 | | | | — | | | | 114 | | | | — | | UAMCO., Ltd | | | 548,990 | | | | 57,438 | | | | — | | | | 57,438 | | | | 35,041 | | JSC Bank CenterCredit | | | 425,506 | | | | (22,973 | ) | | | (26,987 | ) | | | (49,960 | ) | | | 2 | | KoFC KBIC Frontier Champ 2010-5(PEF) | | | 16,942 | | | | 957 | | | | (3,249 | ) | | | (2,292 | ) | | | 3,230 | | United PF 1st Recovery Private Equity Fund | | | 105,369 | | | | (1,962 | ) | | | — | | | | (1,962 | ) | | | — | | CH Engineering Co., Ltd.(2) | | | 787 | | | | 251 | | | | — | | | | 251 | | | | — | | KB GwS Private Securities Investment Trust | | | 39,207 | | | | 38,207 | | | | — | | | | 38,207 | | | | 9,229 | | Incheon Bridge Co., Ltd | | | 83,578 | | | | (8,185 | ) | | | — | | | | (8,185 | ) | | | — | | KB Star office Private real estate Investment Trust No.1 | | | 17,413 | | | | 8,585 | | | | — | | | | 8,585 | | | | 1,752 | | KoFC POSCO HANHWA KB shared growth Private Equity Fund | | | 9,228 | | | | 3,771 | | | | (6,337 | ) | | | (2,566 | ) | | | — | | NPS KBIC Private Equity Fund No. 1 | | | 59,068 | | | | 55,241 | | | | (53,847 | ) | | | 1,394 | | | | 4,274 | | KBIC Private Equity Fund No. 3 | | | 3,539 | | | | 3,222 | | | | — | | | | 3,222 | | | | — | | KB-Glenwood Private Equity Fund | | | — | | | | (10 | ) | | | — | | | | (10 | ) | | | — | | KB No.3 Special Purpose Acquition Company | | | — | | | | (392 | ) | | | — | | | | (392 | ) | | | — | | KB No.4 Special Purpose Acquition Company | | | — | | | | (313 | ) | | | — | | | | (313 | ) | | | — | | KB No.5 Special Purpose Acquition Company | | | — | | | | (193 | ) | | | — | | | | (193 | ) | | | — | | KB No.6 Special Purpose Acquition Company | | | — | | | | (555 | ) | | | — | | | | (555 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | 20171 | | | | Operating income | | | Profit (loss) | | | Other comprehensive income | | | Total comprehensive income | | | Dividends | | | | (In millions of Korean won) | | Associates and Joint ventures | | | | | | | | | | | | | | | | | | | | | KB Pre IPO Secondary Venture Fund 1st | | ₩ | 394 | | | ₩ | (60 | ) | | ₩ | (62 | ) | | ₩ | (122 | ) | | ₩ | — | | KB GwS Private Securities Investment Trust | | | 35,002 | | | | 34,004 | | | | — | | | | 34,004 | | | | 7,350 | | KB-KDBC New Technology Business Investment Fund | | | 3 | | | | (42 | ) | | | — | | | | (42 | ) | | | — | | KB Star office Private real estate Investment Trust No.1 | | | 13,071 | | | | 5,684 | | | | — | | | | 5,684 | | | | 1,295 | | Sun Surgery Center Inc. | | | — | | | | — | | | | — | | | | — | | | | — | | RAND Bio Science Co., Ltd. | | | — | | | | (607 | ) | | | — | | | | (607 | ) | | | — | | Balhae Infrastructure Company | | | 113,441 | | | | 104,942 | | | | — | | | | 104,942 | | | | 12,842 | | Bungaejangter Inc. | | | 406 | | | | 48 | | | | — | | | | 48 | | | | — | | Aju Good Technology Venture Fund | | | 660 | | | | (841 | ) | | | — | | | | (841 | ) | | | — | | Acts Co., Ltd. | | | 3,537 | | | | (578 | ) | | | — | | | | (578 | ) | | | — | | SY Auto Capital Co., Ltd. | | | 15,783 | | | | 2,490 | | | | (27 | ) | | | 2,463 | | | | — | | Incheon Bridge Co., Ltd. | | | 90,691 | | | | (8,719 | ) | | | — | | | | (8,719 | ) | | | — | | Big Dipper Co., Ltd. | | | 140 | | | | (392 | ) | | | — | | | | (392 | ) | | | — | | Builton Co., Ltd. | | | 1,433 | | | | 58 | | | | — | | | | 58 | | | | — | | A-PRO Co., Ltd. | | | 12,226 | | | | 661 | | | | — | | | | 661 | | | | — | | Inno Lending Co., Ltd. | | | (751 | ) | | | (749 | ) | | | — | | | | (749 | ) | | | — | | Paycoms Co., Ltd. | | | 303 | | | | (170 | ) | | | — | | | | (170 | ) | | | — | | Food Factory Co., Ltd. | | | 3,324 | | | | (1,036 | ) | | | — | | | | (1,036 | ) | | | — | | KB IGen Private Equity Fund No. 1 | | | — | | | | 172 | | | | — | | | | 172 | | | | — | | KB No.8 Special Purpose Acquisition Company | | | — | | | | 73 | | | | — | | | | 73 | | | | — | | KB No.9 Special Purpose Acquisition Company | | | — | | | | 223 | | | | — | | | | 223 | | | | — | | KB No.10 Special Purpose Acquisition Company | | | — | | | | 29 | | | | — | | | | 29 | | | | — | | KB No.11 Special Purpose Acquisition Company | | | — | | | | (262 | ) | | | — | | | | (262 | ) | | | — | | KB Private Equity Fund III | | | — | | | | (545 | ) | | | — | | | | (545 | ) | | | — | | Korea Credit Bureau Co., Ltd. | | | 68,750 | | | | 3,580 | | | | — | | | | 3,580 | | | | 149 | | KoFC KBIC Frontier Champ2010-5(PEF) | | | 2,728 | | | | (294 | ) | | | 142 | | | | (152 | ) | | | — | | KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 | | | 21,916 | | | | 8,624 | | | | 129 | | | | 8,753 | | | | — | | Keystone-Hyundai Securities No. 1 Private Equity Fund | | | 5,391 | | | | (1,507 | ) | | | — | | | | (1,507 | ) | | | — | | POSCO-KB Shipbuilding Fund | | | 23 | | | | (495 | ) | | | — | | | | (495 | ) | | | — | | Hyundai-Tongyang Agrifood Private Equity Fund | | | 4,159 | | | | 3,231 | | | | — | | | | 3,231 | | | | 407 | |
(1)1 | The amounts included in the financial statements of the associates and joint ventures are adjusted to reflect adjustments made by the entity,entity; such as, fair value adjustments made at the time of acquisition and adjustments for differences in accounting policies. |
(2) | As the financial statements as of December 31, 2014, were not available, the Group applied the equity method by using the financial statements as of November 30, 2014, and adjusted for the effects of significant transactions or events that occurred between the date of those financial statements and the date of the consolidated financial statements.
|
As Shinla Construction Co., Ltd. is capital deficient as of December 31, 2014, its reliable financial information was not available. Therefore, financial information of this associate is not included in the summarized financial information.
The changesChanges in investments in associates and joint ventures for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Beginning | | | Acquisition | | | Disposal | | | Dividends | | | Gains (losses) | | | Other compre- hensive income | | | Impairment | | | Others | | | Ending | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balhae Infrastructure Fund | | ₩ | 125,004 | | | ₩ | — | | | ₩ | — | | | ₩ | (6,299 | ) | | ₩ | 6,263 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 124,968 | | Korea Credit Bureau Co., Ltd | | | 3,790 | | | | — | | | | — | | | | — | | | | 395 | | | | — | | | | — | | | | — | | | | 4,185 | | UAMCO., Ltd | | | 139,760 | | | | — | | | | — | | | | — | | | | 11,066 | | | | — | | | | — | | | | — | | | | 150,826 | | JSC Bank CenterCredit | | | 281,889 | | | | — | | | | — | | | | (3 | ) | | | (204,312 | ) | | | (9,464 | ) | | | — | | | | — | | | | 68,110 | | KoFC KBIC Frontier Champ 2010-5(PEF) | | | 25,539 | | | | 15,565 | | | | (135 | ) | | | — | | | | 4,227 | | | | 197 | | | | — | | | | — | | | | 45,393 | | KB Global Star Game & Apps SPAC | | | 48 | | | | — | | | | — | | | | — | | | | 1 | | | | — | | | | — | | | | (49 | ) | | | — | | Semiland Co., Ltd | | | 2,513 | | | | — | | | | — | | | | (11 | ) | | | 137 | | | | — | | | | — | | | | — | | | | 2,639 | | Serit Platform Co., Ltd. | | | 1,517 | | | | — | | | | (1,518 | ) | | | — | | | | 1 | | | | — | | | | — | | | | — | | | | — | | Sehwa Electronics Co., Ltd | | | 2,955 | | | | — | | | | (1,577 | ) | | | — | | | | (360 | ) | | | (71 | ) | | | — | | | | (947 | ) | | | — | | Testian Co., Ltd | | | 1,041 | | | | — | | | | (260 | ) | | | — | | | | (587 | ) | | | — | | | | — | | | | (194 | ) | | | — | | United PF 1st Recovery Private Equity Fund | | | 195,425 | | | | — | | | | — | | | | — | | | | 2,516 | | | | — | | | | — | | | | — | | | | 197,941 | | Kores Co., Ltd | | | 1,384 | | | | — | | | | — | | | | — | | | | 91 | | | | 450 | | | | (420 | ) | | | — | | | | 1,505 | | KB GwS Private Securities Investment Trust | | | 120,939 | | | | — | | | | — | | | | (8,894 | ) | | | 11,040 | | | | — | | | | — | | | | — | | | | 123,085 | | Incheon Bridge Co., Ltd | | | 1,630 | | | | — | | | | — | | | | — | | | | (1,630 | ) | | | — | | | | — | | | | — | | | | — | | Ssangyong Engineering & Construction Co., Ltd.(1) | | | — | | | | 28,779 | | | | — | | | | — | | | | (8,200 | ) | | | (1,176 | ) | | | (19,403 | ) | | | — | | | | — | | KB Star office Private real estate Investment Trust No.1 | | | 19,898 | | | | — | | | | — | | | | (1,751 | ) | | | 1,787 | | | | — | | | | — | | | | — | | | | 19,934 | | KoFC POSCO HANHWA KB shared growth Private Equity Fund | | | 4,983 | | | | 7,775 | | | | — | | | | — | | | | (2,703 | ) | | | 274 | | | | — | | | | — | | | | 10,329 | | NPS KBIC Private Equity Fund No. 1 | | | 4,160 | | | | — | | | | — | | | | (106 | ) | | | 238 | | | | (54 | ) | | | — | | | | — | | | | 4,238 | | KBIC Private Equity Fund No. 3 | | | 2,156 | | | | — | | | | — | | | | — | | | | 67 | | | | — | | | | — | | | | — | | | | 2,223 | | KB-Glenwood Private Equity Fund | | | 10 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10 | | Terra Co., Ltd | | | — | | | | — | | | | — | | | | — | | | | 4 | | | | — | | | | — | | | | — | | | | 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 934,641 | | | ₩ | 52,119 | | | ₩ | (3,490 | ) | | ₩ | (17,064 | ) | | ₩ | (179,959 | ) | | ₩ | (9,844 | ) | | ₩ | (19,823 | ) | | ₩ | (1,190 | ) | | ₩ | 755,390 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Beginning | | | Acquisition | | | Disposal | | | Dividends | | | Gains (losses) | | | Other compre- hensive income | | | Impairment | | | Others | | | Ending | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balhae Infrastructure Fund | | ₩ | 124,968 | | | ₩ | 807 | | | ₩ | — | | | ₩ | (6,280 | ) | | ₩ | 5,624 | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 125,119 | | Korea Credit Bureau Co., Ltd | | | 4,185 | | | | — | | | | — | | | | — | | | | 37 | | | | — | | | | — | | | | — | | | | 4,222 | | UAMCO., Ltd | | | 150,826 | | | | — | | | | — | | | | (35,041 | ) | | | 5,397 | | | | — | | | | — | | | | — | | | | 121,182 | | JSC Bank CenterCredit | | | 68,110 | | | | — | | | | — | | | | (2 | ) | | | (6,278 | ) | | | (32,551 | ) | | | — | | | | — | | | | 29,279 | | KoFC KBIC Frontier Champ 2010-5(PEF) | | | 45,393 | | | | 50 | | | | (15,995 | ) | | | (3,230 | ) | | | (5,877 | ) | | | 3,586 | | | | (368 | ) | | | — | | | | 23,559 | | Semiland Co., Ltd | | | 2,639 | | | | — | | | | (1,638 | ) | | | (11 | ) | | | 104 | | | | — | | | | — | | | | (1,094 | ) | | | — | | United PF 1st Recovery Private Equity Fund | | | 197,941 | | | | — | | | | — | | | | — | | | | 148 | | | | — | | | | — | | | | — | | | | 198,089 | | CH Engineering Co., Ltd | | | — | | | | — | | | | — | | | | — | | | | 20 | | | | — | | | | — | | | | — | | | | 20 | | Kores Co., Ltd | | | 1,505 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,505 | ) | | | — | | KB GwS Private Securities Investment Trust | | | 123,085 | | | | — | | | | — | | | | (9,229 | ) | | | 10,218 | | | | — | | | | — | | | | — | | | | 124,074 | | KB Star office Private real estate Investment Trust No.1 | | | 19,934 | | | | — | | | | — | | | | (1,752 | ) | | | 1,807 | | | | — | | | | — | | | | — | | | | 19,989 | | KoFC POSCO HANHWA KB shared growth Private Equity Fund | | | 10,329 | | | | 12,225 | | | | — | | | | — | | | | 1,880 | | | | (2,105 | ) | | | — | | | | — | | | | 22,329 | | NPS KBIC Private Equity Fund No. 1 | | | 4,238 | | | | — | | | | — | | | | (4,274 | ) | | | 1,414 | | | | (1,378 | ) | | | — | | | | — | | | | — | | KBIC Private Equity Fund No. 3 | | | 2,223 | | | | — | | | | — | | | | — | | | | 64 | | | | — | | | | — | | | | — | | | | 2,287 | | KB-Glenwood Private Equity Fund | | | 10 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10 | | Terra Co., Ltd | | | 4 | | | | — | | | | — | | | | — | | | | (4 | ) | | | — | | | | — | | | | — | | | | — | | KB No.2 Special Purpose Acquition Company | | | — | | | | 15 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (15 | ) | | | — | | KB No.3 Special Purpose Acquition Company | | | — | | | | 20 | | | | — | | | | — | | | | 19 | | | | — | | | | — | | | | — | | | | 39 | | KB No.4 Special Purpose Acquition Company | | | — | | | | 4,483 | | | | (4,453 | ) | | | — | | | | 8 | | | | — | | | | — | | | | — | | | | 38 | | KB No.5 Special Purpose Acquition Company | | | — | | | | 10 | | | | — | | | | — | | | | 9 | | | | — | | | | — | | | | — | | | | 19 | | KB No.6 Special Purpose Acquition Company | | | — | | | | 40 | | | | — | | | | — | | | | 37 | | | | — | | | | — | | | | — | | | | 77 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 755,390 | | | ₩ | 17,650 | | | ₩ | (22,086 | ) | | ₩ | (59,819 | ) | | ₩ | 14,627 | | | ₩ | (32,448 | ) | | ₩ | (368 | ) | | ₩ | (2,614 | ) | | ₩ | 670,332 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | Beginning | | | Acquisition and others | | | Disposal and others | | | Dividends | | | Gains (losses) on equity- method accounting | | | Other- comprehensive income | | | Others | | | Ending | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | KB Insurance Co., Ltd.1 | | ₩ | 1,077,014 | | | ₩ | 170,625 | | | ₩ | — | | | ₩ | (7,989 | ) | | ₩ | 160,954 | | | ₩ | (8,410 | ) | | ₩ | — | | | ₩ | 1,392,194 | | Hyundai Securities Co., Ltd.6 | | | — | | | | 1,349,150 | | | | (1,459,604 | ) | | | — | | | | 112,931 | | | | (2,477 | ) | | | — | | | | — | | Balhae Infrastructure Fund | | | 128,275 | | | | 4,727 | | | | — | | | | (5,654 | ) | | | 5,852 | | | | — | | | | — | | | | 133,200 | | Korea Credit Bureau Co., Ltd. | | | 4,580 | | | | — | | | | — | | | | (135 | ) | | | 408 | | | | — | | | | — | | | | 4,853 | | UAMCO., Ltd. | | | 129,707 | | | | — | | | | (101,740 | ) | | | (26,961 | ) | | | (1,006 | ) | | | — | | | | — | | | | — | | JSC Bank CenterCredit | | | — | | | | — | | | | — | | | | (1 | ) | | | 1 | | | | — | | | | — | | | | — | | KoFC KBIC Frontier Champ2010-5(PEF) | | | 25,508 | | | | — | | | | (2,900 | ) | | | — | | | | 916 | | | | 1,195 | | | | — | | | | 24,719 | | United PF 1st Recovery Private Equity Fund | | | 183,117 | | | | — | | | | (190,863 | ) | | | — | | | | 7,746 | | | | — | | | | — | | | | — | | KB GwS Private Securities Investment Trust | | | 127,539 | | | | — | | | | — | | | | (7,355 | ) | | | 9,494 | | | | — | | | | — | | | | 129,678 | | KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 | | | 28,470 | | | | 3,751 | | | | (12,000 | ) | | | — | | | | 4,578 | | | | (10 | ) | | | — | | | | 24,789 | | Incheon Bridge Co., Ltd. | | | — | | | | — | | | | — | | | | — | | | | 728 | | | | — | | | | — | | | | 728 | | Terra Co., Ltd. | | | 21 | | | | — | | | | — | | | | — | | | | 7 | | | | — | | | | — | | | | 28 | | MJT&I Co., Ltd. | | | 149 | | | | — | | | | — | | | | — | | | | 83 | | | | — | | | | — | | | | 232 | | Jungdong Steel Co., Ltd. | | | 33 | | | | — | | | | — | | | | — | | | | (33 | ) | | | — | | | | — | | | | — | | Shinhwa Underwear Co., Ltd. | | | 56 | | | | — | | | | — | | | | — | | | | 47 | | | | — | | | | — | | | | 103 | | Aju Good Technology Venture Fund | | | — | | | | 2,000 | | | | (2 | ) | | | — | | | | — | | | | — | | | | — | | | | 1,998 | | KB Star office Private real estate Investment Trust No.1 | | | 19,915 | | | | — | | | | — | | | | (1,679 | ) | | | 1,571 | | | | — | | | | — | | | | 19,807 | | KBIC Private Equity Fund No. 3 | | | 2,348 | | | | — | | | | — | | | | — | | | | 48 | | | | — | | | | — | | | | 2,396 | | Sawnics Co., Ltd. | | | 1,397 | | | | — | | | | (1,223 | ) | | | — | | | | (174 | ) | | | — | | | | — | | | | — | | RAND Bio Science Co., Ltd. | | | — | | | | 2,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,000 | | isMedia Co. Ltd | | | — | | | | 3,978 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,978 | | KB No.5 Special Purpose Acquisition Company | | | 20 | | | | — | | | | (20 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | KB No.6 Special Purpose Acquisition Company | | | 78 | | | | — | | | | (78 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | KB No.7 Special Purpose Acquisition Company | | | 88 | | | | — | | | | (88 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | KB No.8 Special Purpose Acquisition Company | | | 19 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 19 | | KB No.9 Special Purpose Acquisition Company2 | | | 15 | | | | 4,082 | | | | (4,074 | ) | | | — | | | | — | | | | — | | | | 8 | | | | 31 | | KB No.10 Special Purpose Acquisition Company3 | | | — | | | | 10 | | | | — | | | | — | | | | — | | | | — | | | | 10 | | | | 20 | | KB No.11 Special Purpose Acquisition Company | | | — | | | | 10 | | | | — | | | | — | | | | (1 | ) | | | 4 | | | | — | | | | 13 | | KB-Glenwood Private Equity Fund | | | 10 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10 | | IMM Investment 5th PRIVATE EQUITY FUND | | | — | | | | 10,000 | | | | — | | | | — | | | | (1 | ) | | | — | | | | — | | | | 9,999 | | KB Private Equity Fund III | | | — | | | | 8,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 8,000 | | Hyundai-Tongyang Agrifood Private Equity Fund5 | | | — | | | | — | | | | — | | | | — | | | | (688 | ) | | | — | | | | 4,645 | | | | 3,957 | | Keystone-Hyundai Securities No. 1 Private Equity Fund4 | | | — | | | | — | | | | — | | | | — | | | | (3 | ) | | | 11 | | | | 1,842 | | | | 1,850 | | Inno Lending Co., Ltd. | | | — | | | | 398 | | | | — | | | | — | | | | (20 | ) | | | — | | | | — | | | | 378 | | SY Auto Capital Co., Ltd. | | | 9,481 | | | | — | | | | — | | | | — | | | | (3,788 | ) | | | — | | | | — | | | | 5,693 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 1,737,840 | | | ₩ | 1,558,731 | | | ₩ | (1,772,592 | ) | | ₩ | (49,774 | ) | | ₩ | 299,650 | | | ₩ | (9,687 | ) | | ₩ | 6,505 | | | ₩ | 1,770,673 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)1 | Among the gain on valuation of equity method investments, ₩75,097 million includes the gains on bargain purchase |
2 | Other gain of KB No.9 Special Purpose Acquisition Company amounting to ₩8 million represents the changes in interests due to unequal share capital increase in the associate. |
3 | Other gain of KB No.10 Special Purpose Acquisition Company amounting to ₩10 million represents the changes in interests due to unequal share capital increase in the associate. |
4 | Other gain of Keystone-Hyundai Securities No. 1 Private Equity Fund amounting ₩1,842 million represents the Hyundai Securities Co., Ltd.’s inclusion of the consolidation scope. |
5 | Other gain of Hyundai-Tongyang Agrifood Private Equity Fund amounting ₩4,645 million represents the Hyundai Securities Co., Ltd.’s inclusion of the consolidation scope. |
6 | Hyundai Securities Co., Ltd. is included as a subsidiary in fourth quarter, 2016. |
7 | Loss on disposal of investments in associates for the year ended December 31, 2016, amounts to ₩18,812 million. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Beginning | | | Acquisition and others | | | Disposal and others | | | Dividends | | | Gains (losses) on equity- method accounting | | | Other- comprehen- sive income | | | Others | | | Ending | | | | (In millions of Korean won) | | Associates and Joint ventures | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | KB Pre IPO Secondary Venture Fund 1st | | ₩ | — | | | ₩ | 1,671 | | | ₩ | — | | | ₩ | — | | | ₩ | (60 | ) | | ₩ | (10 | ) | | ₩ | — | | | ₩ | 1,601 | | KB GwS Private Securities Investment Trust | | | 129,678 | | | | — | | | | — | | | | (7,350 | ) | | | 9,092 | | | | — | | | | — | | | | 131,420 | | KB-KDBC New Technology Business Investment Fund | | | — | | | | 5,000 | | | | — | | | | — | | | | (28 | ) | | | — | | | | — | | | | 4,972 | | KB Star office Private real estate Investment Trust No.1 | | | 19,807 | | | | — | | | | — | | | | (1,295 | ) | | | 1,197 | | | | — | | | | — | | | | 19,709 | | Sun Surgery Center Inc. | | | — | | | | 2,682 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,682 | | Kyobo 7 Special Purpose Acquisition Co., Ltd. | | | — | | | | 10 | | | | (10 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | RAND Bio Science Co., Ltd. | | | 2,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,000 | | Balhae Infrastructure Company | | | 133,200 | | | | 806 | | | | (29,202 | ) | | | (12,842 | ) | | | 13,228 | | | | — | | | | — | | | | 105,190 | | Bungaejanter Inc. | | | — | | | | 3,484 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,484 | | IMM Investment 5th PRIVATE EQUITY FUND | | | 9,999 | | | | 25,200 | | | | (35,185 | ) | | | — | | | | (14 | ) | | | — | | | | — | | | | — | | Aju Good Technology Venture Fund | | | 1,998 | | | | 6,232 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 8,230 | | Acts Co., Ltd. | | | — | | | | 500 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 500 | | SY Auto Capital Co., Ltd. | | | 5,693 | | | | — | | | | — | | | | — | | | | 2,390 | | | | (13 | ) | | | — | | | | 8,070 | | isMedia Co. Ltd | | | 3,978 | | | | — | | | | (5,409 | ) | | | — | | | | 1,431 | | | | — | | | | — | | | | — | | Incheon Bridge Co., Ltd. | | | 728 | | | | — | | | | (728 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | KB Insurance Co., Ltd.1 | | | 1,392,194 | | | | — | | | | (1,417,397 | ) | | | (15,884 | ) | | | 38,873 | | | | 2,214 | | | | — | | | | — | | Kendae Co., Ltd. | | | — | | | | — | | | | — | | | | — | | | | 127 | | | | — | | | | — | | | | 127 | | Big Dipper Co., Ltd. | | | — | | | | 440 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 440 | | Builton Co., Ltd. | | | — | | | | 800 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 800 | | Shinhwa Underwear Co., Ltd. | | | 103 | | | | — | | | | — | | | | — | | | | 35 | | | | — | | | | — | | | | 138 | | A-PRO Co., Ltd. | | | — | | | | 1,500 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,500 | | MJT&I Co., Ltd. | | | 232 | | | | — | | | | — | | | | — | | | | (105 | ) | | | — | | | | — | | | | 127 | | Inno Lending Co., Ltd. | | | 378 | | | | — | | | | — | | | | — | | | | (148 | ) | | | — | | | | — | | | | 230 | | Korbi Co., Ltd. | | | — | | | | 750 | | | | (750 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | Terra Co., Ltd. | | | 28 | | | | — | | | | — | | | | — | | | | (8 | ) | | | — | | | | — | | | | 20 | | Paycoms Co., Ltd. | | | — | | | | 800 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 800 | | Food Factory Co., Ltd. | | | — | | | | 1,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,000 | | KBIC Private Equity Fund No. 3 | | | 2,396 | | | | — | | | | (2,763 | ) | | | — | | | | 367 | | | | — | | | | — | | | | — | | KB IGen Private Equity Fund No. 1 | | | 10 | | | | — | | | | (7 | ) | | | — | | | | — | | | | — | | | | — | | | | 3 | | KB No.8 Special Purpose Acquisition Company | | | 19 | | | | — | | | | — | | | | — | | | | 1 | | | | — | | | | — | | | | 20 | | KB No.9 Special Purpose Acquisition Company | | | 31 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 31 | | KB No.10 Special Purpose Acquisition Company | | | 20 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 20 | | KB No.11 Special Purpose Acquisition Company2 | | | 13 | | | | — | | | | — | | | | — | | | | (2 | ) | | | (3 | ) | | | 11 | | | | 19 | | KB Private Equity Fund III | | | 8,000 | | | | — | | | | — | | | | — | | | | (101 | ) | | | — | | | | — | | | | 7,899 | | Korea Credit Bureau Co., Ltd. | | | 4,853 | | | | — | | | | — | | | | (149 | ) | | | 352 | | | | — | | | | — | | | | 5,056 | | KoFC KBIC Frontier Champ2010-5(PEF) | | | 24,719 | | | | — | | | | (17,500 | ) | | | — | | | | (170 | ) | | | 71 | | | | — | | | | 7,120 | | KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 | | | 24,789 | | | | — | | | | (9,730 | ) | | | — | | | | 2,121 | | | | 33 | | | | — | | | | 17,213 | | Keystone-Hyundai Securities No. 1 Private Equity Fund | | | 1,850 | | | | — | | | | — | | | | — | | | | (85 | ) | | | (4 | ) | | | — | | | | 1,761 | | POSCO-KB Shipbuilding Fund | | | — | | | | 2,500 | | | | — | | | | — | | | | (155 | ) | | | — | | | | — | | | | 2,345 | | Hyundai-Tongyang Agrifood Private Equity Fund | | | 3,957 | | | | — | | | | (3,830 | ) | | | (407 | ) | | | 823 | | | | — | | | | — | | | | 543 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 1,770,673 | | | ₩ | 53,375 | | | ₩ | (1,522,511 | ) | | ₩ | (37,927 | ) | | ₩ | 69,161 | | | ₩ | 2,288 | | | ₩ | 11 | | | ₩ | 335,070 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1 | KB Insurance Co., Ltd. is included as a subsidiary in the second quarter of 2017. |
2 | Impairment recognizedOther gain of KB No.11 Special Purpose Acquisition Company amounting to ₩11 million represents the changes in interests due to unequal share capital increase in the associate.
|
3 | Gain on reorganization proceedings filed ondisposal of investments in associates and joint ventures for year ended December 30, 2013.31, 2017, amounts to ₩15,113 million. |
Accumulated unrecognized share of losses in investments in associates and joint ventures due to discontinuation of applying the equity method as offor the years ended December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | 2013 | | | | Unrecognized loss | | | Unrecognized change in equity | | | | (In millions of Korean won) | | Incheon Bridge Co., Ltd | | ₩ | 429 | | | ₩ | 429 | | CH Engineering Co., Ltd | | | 43 | | | | 94 | | Shinla Construction Co., Ltd | | | 41 | | | | 101 | |
| | | | | | | | | | | | | | | | | | | 2016 | | | 2017 | | | | Unrecognized loss | | | Accumulated unrecognized loss | | | Unrecognized loss | | | Accumulated unrecognized loss | | | | (In millions of Korean won) | | Doosung Metal Co., Ltd | | ₩ | 5 | | | ₩ | 54 | | | ₩ | (31 | ) | | ₩ | 23 | | Incheon Bridge Co., Ltd. | | | (1,879 | ) | | | — | | | | 16,202 | | | | 16,202 | | Jungdong Steel Co., Ltd. | | | 476 | | | | 476 | | | | 13 | | | | 489 | | Dpaps Co., Ltd. | | | 188 | | | | 188 | | | | (4 | ) | | | 184 | | Shinla Construction Co., Ltd. | | | 27 | | | | 175 | | | | 7 | | | | 183 | | Ejade Co., Ltd. | | | 1,112 | | | | 1,112 | | | | (1,118 | ) | | | — | | JSC Bank CenterCredit | | | 5,308 | | | | 108,761 | | | | (108,761) | | | | — | | Myeongwon Tech Co., Ltd | | | (43 | ) | | | — | | | | — | | | | — | |
| | | | | | | | | | | 2014 | | | | Unrecognized loss | | | Unrecognized change in equity | | | | (In millions of Korean won) | | Incheon Bridge Co., Ltd | | ₩ | 1,287 | | | ₩ | 1,716 | | Shinla Construction Co., Ltd | | | 34 | | | | 134 | | Terra Co., Ltd | | | 115 | | | | 115 | |
14. Property and Equipment, and Investment PropertyProperties The detailsDetails of property and equipment as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Acquisition cost | | | Accumulated depreciation | | Accumulated impairment losses | | Carrying amount | | | Acquisition cost | | | Accumulated depreciation | | Accumulated impairment losses | | Carrying amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Land | | ₩ | 1,991,831 | | | ₩ | — | | | ₩ | — | | | ₩ | 1,991,831 | | | ₩ | 2,325,568 | | | ₩ | — | | | ₩ | (1,018 | ) | | ₩ | 2,324,550 | | Buildings | | | 1,219,806 | | | | (353,140 | ) | | | (2,117 | ) | | | 864,549 | | | | 1,469,894 | | | | (482,319 | ) | | (5,859 | ) | | 981,716 | | Leasehold improvements | | | 567,231 | | | | (511,207 | ) | | | — | | | | 56,024 | | | | 711,316 | | | | (637,588 | ) | | | — | | | 73,728 | | Equipment and vehicles | | | 1,642,796 | | | | (1,503,257 | ) | | | — | | | | 139,539 | | | | 1,591,143 | | | | (1,353,935 | ) | | (6,938 | ) | | 230,270 | | Construction in progress | | | | 4,205 | | | | — | | | | — | | | 4,205 | | Financial lease assets | | | 66,641 | | | | (57,741 | ) | | | — | | | | 8,900 | | | | 34,111 | | | | (21,312 | ) | | | — | | | 12,799 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 5,488,305 | | | ₩ | (2,425,345 | ) | | ₩ | (2,117 | ) | | ₩ | 3,060,843 | | | ₩ | 6,136,237 | | | ₩ | (2,495,154 | ) | | ₩ | (13,815 | ) | | ₩ | 3,627,268 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Acquisition cost | | | Accumulated depreciation | | Accumulated impairment losses | | Carrying amount | | | Acquisition cost | | | Accumulated depreciation | | Accumulated impairment losses | | Carrying amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Land | | ₩ | 1,970,010 | | | ₩ | — | | | ₩ | — | | | ₩ | 1,970,010 | | | ₩ | 2,475,372 | | | ₩ | — | | | ₩ | (1,018 | ) | | ₩ | 2,474,354 | | Buildings | | | 1,231,645 | | | | (373,306 | ) | | | (2,117 | ) | | | 856,222 | | | | 2,061,717 | | | | (684,705 | ) | | (5,859 | ) | | 1,371,153 | | Leasehold improvements | | | 602,438 | | | | (549,942 | ) | | | — | | | | 52,496 | | | | 783,446 | | | | (693,717 | ) | | | — | | | 89,729 | | Equipment and vehicles | | | 1,725,901 | | | | (1,561,480 | ) | | | — | | | | 164,421 | | | | 1,699,563 | | | | (1,456,358 | ) | | | — | | | 243,205 | | Construction in-progress | | | 7,946 | | | | — | | | | — | | | | 7,946 | | | Construction in progress | | | | 14,808 | | | | — | | | | — | | | 14,808 | | Financial lease assets | | | 32,965 | | | | (1,075 | ) | | | — | | | | 31,890 | | | | 34,789 | | | | (26,341 | ) | | | — | | | 8,448 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 5,570,905 | | | ₩ | (2,485,803 | ) | | ₩ | (2,117 | ) | | ₩ | 3,082,985 | | | ₩ | 7,069,695 | | | ₩ | (2,861,121 | ) | | ₩ | (6,877 | ) | | ₩ | 4,201,697 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The changes in property and equipment for the years ended December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Beginning | | Acquisition | | Transfers(1) | | Disposal | | Depreciation(2) | | Business Combination | | Others | | Ending | | | Beginning | | Acquisition | | Transfers1 | | Disposal | | Depreciation2 | | Business combination | | Others | | Ending | | | | (In millions of Korean won) | | | | | (In millions of Korean won) | | Land | | ₩ | 2,012,265 | | | ₩ | 1,405 | | | ₩ | (21,551 | ) | | ₩ | (214 | ) | | ₩ | — | | | ₩ | — | | | ₩ | (74 | ) | | ₩ | 1,991,831 | | | ₩ | 2,080,686 | | | ₩ | 98,566 | | | ₩ | 71,086 | | | ₩ | (127 | ) | | ₩ | — | | | ₩ | 74,319 | | | ₩ | 20 | | | ₩ | 2,324,550 | | Buildings | | | 879,878 | | | | 3,234 | | | | 11,056 | | | | (281 | ) | | | (29,094 | ) | | | — | | | | (244 | ) | | | 864,549 | | | 936,813 | | | 4,008 | | | 34,811 | | | (545 | ) | | (33,385 | ) | | 39,950 | | | 64 | | | 981,716 | | Leasehold improvement | | | 55,658 | | | | 2,687 | | | | 32,702 | | | | (332 | ) | | | (46,057 | ) | | | 299 | | | | 11,067 | | | | 56,024 | | | 54,844 | | | 7,843 | | | 48,504 | | | (1,033 | ) | | (50,200 | ) | | 3,431 | | | 10,339 | | | 73,728 | | Equipment and vehicles | | | 141,932 | | | | 94,875 | | | | — | | | | (434 | ) | | | (97,119 | ) | | | 247 | | | | 38 | | | | 139,539 | | | 194,492 | | | 141,546 | | | | — | | | (1,553 | ) | | (131,926 | ) | | 21,196 | | | 6,515 | | | 230,270 | | Construction in-progress | | | 893 | | | | 51,268 | | | | (52,161 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | 635 | | | 144,589 | | | (141,020 | ) | | | — | | | | — | | | | — | | | 1 | | | 4,205 | | Financial lease assets | | | 9,767 | | | | 10,734 | | | | — | | | | — | | | | (11,601 | ) | | | — | | | | — | | | | 8,900 | | | 19,913 | | | 605 | | | | — | | | | — | | | (7,719 | ) | | | — | | | | — | | | 12,799 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 3,100,393 | | | ₩ | 164,203 | | | ₩ | (29,954 | ) | | ₩ | (1,261 | ) | | ₩ | (183,871 | ) | | ₩ | 546 | | | ₩ | 10,787 | | | ₩ | 3,060,843 | | | ₩ | 3,287,383 | | | ₩ | 397,157 | | | ₩ | 13,381 | | | ₩ | (3,258 | ) | | ₩ | (223,230 | ) | | ₩ | 138,896 | | | ₩ | 16,939 | | | ₩ | 3,627,268 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Beginning | | Acquisition | | Transfers(1) | | Disposal | | Depreciation(2) | | Business Combination | | Others | | Ending | | | Beginning | | Acquisition | | Transfers1 | | Disposal | | Depreciation2 | | Business combination | | Others | | Ending | | | | (In millions of Korean won) | | | | | (In millions of Korean won) | | Land | | ₩ | 1,991,831 | | | ₩ | 11,371 | | | ₩ | (37,017 | ) | | ₩ | — | | | ₩ | — | | | ₩ | 3,850 | | | ₩ | (25 | ) | | ₩ | 1,970,010 | | | ₩ | 2,324,550 | | | ₩ | 35,242 | | | ₩ | (89,338 | ) | | ₩ | (11,203 | ) | | ₩ | — | | | ₩ | 215,274 | | | ₩ | (171 | ) | | ₩ | 2,474,354 | | Buildings | | | 864,549 | | | | 12,884 | | | | 2,044 | | | | — | | | | (29,335 | ) | | | 6,159 | | | | (79 | ) | | | 856,222 | | | 981,716 | | | 14,611 | | | 31,608 | | | (12,314 | ) | | (48,280 | ) | | 403,816 | | | (4 | ) | | 1,371,153 | | Leasehold improvement | | | 56,024 | | | | 3,854 | | | | 30,420 | | | | (605 | ) | | | (40,570 | ) | | | 791 | | | | 2,582 | | | | 52,496 | | | 73,728 | | | 10,973 | | | 57,663 | | | (858 | ) | | (66,279 | ) | | 497 | | | 14,005 | | | 89,729 | | Equipment and vehicles | | | 139,539 | | | | 110,269 | | | | 1,947 | | | | (333 | ) | | | (90,200 | ) | | | 2,285 | | | | 914 | | | | 164,421 | | | 230,270 | | | 124,702 | | | (16,695 | ) | | (452 | ) | | (138,317 | ) | | 42,703 | | | 994 | | | 243,205 | | Construction in-progress | | | — | | | | 63,629 | | | | (55,683 | ) | | | — | | | | — | | | | — | | | | — | | | | 7,946 | | | 4,205 | | | 112,840 | | | (102,352 | ) | | | — | | | | — | | | 127 | | | (12 | ) | | 14,808 | | Financial lease assets | | | 8,900 | | | | 40,873 | | | | (1,947 | ) | | | — | | | | (15,936 | ) | | | — | | | | — | | | | 31,890 | | | 12,799 | | | 679 | | | | — | | | | — | | | (5,030 | ) | | | — | | | | — | | | 8,448 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 3,060,843 | | | ₩ | 242,880 | | | ₩ | (60,236 | ) | | ₩ | (938 | ) | | ₩ | (176,041 | ) | | ₩ | 13,085 | | | ₩ | 3,392 | | | ₩ | 3,082,985 | | | ₩ | 3,627,268 | | | ₩ | 299,047 | | | ₩ | (119,114 | ) | | ₩ | (24,827 | ) | | ₩ | (257,906 | ) | | ₩ | 662,417 | | | ₩ | 14,812 | | | ₩ | 4,201,697 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)1 | Including transfers with investment property and assets held for sale. |
(2)2 | Including depreciation cost ₩71and others ₩212 million and ₩82₩157 million recorded in other operating expenses in the statements of comprehensive income for the years ended December 31, 20132016 and 2014,2017, respectively. |
The changes in accumulated impairment losses of property and equipment for the years ended December 31, 20132016 and 2014,2017, are as follows: | 2013 | | | 2016 | | 2016 | | Beginning | Beginning | | | Impairment | | | Reversal | | | Others | | | Ending | | Beginning | | | Impairment | | | Reversal | | | Business combination | | Others | | | Ending | | (In millions of Korean won) | (In millions of Korean won) | | (In millions of Korean won) | | ₩ | (3,242) | | | ₩ | — | | | ₩ | — | | | ₩ | 1,125 | | | ₩ | (2,117 | ) | (6,877) | | | ₩ | — | | | ₩ | 3,383 | | | ₩ | (10,321 | ) | | ₩ | — | | | ₩ | (13,815 | ) |
| 2014 | | | 2017 | | 2017 | | Beginning | Beginning | | | Impairment | | | Reversal | | | Others | | | Ending | | Beginning | | | Impairment | | | Reversal | | | Business combination | | | Disposal and others | | | Ending | | (In millions of Korean won) | (In millions of Korean won) | | (In millions of Korean won) | | ₩ | (2,117) | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | (2,117) | | (13,815) | | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 6,938 | | | ₩ | (6,877 | ) |
The details
Details of investment property as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Acquisition cost | | | Accumulated depreciation | | Carrying amount | | | Acquisition cost | | | Accumulated depreciation | | Accumulated impairment losses | | Carrying amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Land | | ₩ | 94,708 | | | ₩ | — | | | ₩ | 94,708 | | | ₩ | 203,795 | | | ₩ | — | | | ₩ | (1,404 | ) | | ₩ | 202,391 | | Buildings | | | 78,526 | | | | (6,975 | ) | | | 71,551 | | | | 616,085 | | | | (63,465 | ) | | | — | | | 552,620 | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 173,234 | | | ₩ | (6,975 | ) | | ₩ | 166,259 | | | ₩ | 819,880 | | | ₩ | (63,465 | ) | | ₩ | (1,404 | ) | | ₩ | 755,011 | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Acquisition cost | | | Accumulated depreciation | | Accumulated impairment losses | | Carrying amount | | | Acquisition cost | | | Accumulated depreciation | | Accumulated impairment losses | | Carrying amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Land | | ₩ | 229,437 | | | ₩ | — | | | ₩ | (738 | ) | | ₩ | 228,699 | | | ₩ | 252,234 | | | ₩ | — | | | ₩ | (738 | ) | | ₩ | 251,496 | | Buildings | | | 157,885 | | | | (9,040 | ) | | | — | | | | 148,845 | | | | 719,920 | | | | (122,935 | ) | | | — | | | 596,985 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 387,322 | | | ₩ | (9,040 | ) | | ₩ | (738 | ) | | ₩ | 377,544 | | | ₩ | 972,154 | | | ₩ | (122,935 | ) | | ₩ | (738 | ) | | ₩ | 848,481 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The valuation technique and input variables that are used to measure the fair value of investment property as of December 31, 2014,2017, are as follows: | | | | | | | | | | | 20142017 | | | Fair value | | | Valuation technique | | Inputs | | | (In millions of Korean won) | Land and buildings | | ₩ | 379,81235,886 | | | Cost Approach Method | | - Price per square meter - Replacement cost | | | | | | | | 178,083 | | | Market comparison method | | - Price per square meter | | | | | | | | 679,614 | | | Income approach | | - Discount rate - Capitalization rate - Vacancy rate |
As of December 31, 20132016 and 2014,2017, fair values of the investment properties amount to ₩189,534₩786,506 million and ₩379,812₩893,583 million, respectively. The investment properties were measured by qualified independent appraisers with experience in valuing similar properties in the same area. In addition, per the fair value hierarchy on Note 6.1, the fair value hierarchy of all investment properties has been categorized and classified as Level 3. Rental income from the above investment properties for the years ended December 31, 20132016 and 2014,2017, amounts to ₩4,889₩12,884 million and ₩7,107₩59,259 million, respectively. The changes in investment property for the years ended December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Beginning | | | Acquisition | | | Transfers | | | Depreciation | | | Ending | | | | (In millions of Korean won) | | Land | | ₩ | 38,653 | | | ₩ | 56,055 | | | ₩ | — | | | ₩ | — | | | ₩ | 94,708 | | Buildings | | | 14,321 | | | | 58,554 | | | | 257 | | | | (1,581 | ) | | | 71,551 | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 52,974 | | | ₩ | 114,609 | | | ₩ | 257 | | | ₩ | (1,581 | ) | | ₩ | 166,259 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Beginning | | | Acquisition | | | Transfers | | | Depreciation | | | Business combination | | | Ending | | | | (In millions of Korean won) | | Land | | ₩ | 94,708 | | | ₩ | 132,924 | | | ₩ | (262 | ) | | ₩ | — | | | ₩ | 1,329 | | | ₩ | 228,699 | | Buildings | | | 71,551 | | | | 79,071 | | | | 288 | | | | (2,065 | ) | | | — | | | | 148,845 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 166,259 | | | ₩ | 211,995 | | | ₩ | 26 | | | ₩ | (2,065 | ) | | ₩ | 1,329 | | | ₩ | 377,544 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Property and equipment insured as of December 31, 2013 and 2014, are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | Beginning | | | Acquisition | | | Transfers | | | Depreciation | | | Business combination | | | Others | | | Ending | | | | (In millions of Korean won) | | Land | | ₩ | 124,553 | | | ₩ | — | | | ₩ | (17,184 | ) | | ₩ | — | | | ₩ | 92,826 | | | ₩ | 2,196 | | | ₩ | 202,391 | | Buildings | | | 87,262 | | | | 1,254 | | | | (8,108 | ) | | | (2,531 | ) | | | 441,905 | | | | 32,838 | | | | 552,620 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 211,815 | | | ₩ | 1,254 | | | ₩ | (25,292 | ) | | ₩ | (2,531 | ) | | ₩ | 534,731 | | | ₩ | 35,034 | | | ₩ | 755,011 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Insurance coverage | | | Insurance company | Type | | Assets insured | | 2013 | | | 2014 | | | | | | | (In millions of Korean won) | | | | General property insurance | | Buildings(1) | | ₩ | 1,027,420 | | | ₩ | 1,134,840 | | | Samsung Fire & Marine Insurance Co., Ltd. and others | | | Leasehold improvements | | | 121,188 | | | | 142,163 | | | | | Equipment and vehicles and others | | | 139,544 | | | | 164,106 | | | | | | | | | | | | | | | | Total | | ₩ | 1,288,152 | | | ₩ | 1,441,109 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Beginning | | | Acquisition | | | Transfers | | | Disposal | | | Depreciation | | | Business combination | | | Others | | | Ending | | | | (In millions of Korean won) | | Land | | ₩ | 202,391 | | | ₩ | — | | | ₩ | (39,533 | ) | | ₩ | (330 | ) | | ₩ | — | | | ₩ | 91,618 | | | ₩ | (2,650 | ) | | ₩ | 251,496 | | Buildings | | | 552,620 | | | | 262 | | | | (33,737 | ) | | | (1,263 | ) | | | (20,096 | ) | | | 141,106 | | | | (41,907 | ) | | | 596,985 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 755,011 | | | ₩ | 262 | | | ₩ | (73,270 | ) | | ₩ | (1,593 | ) | | ₩ | (20,096 | ) | | ₩ | 232,724 | | | ₩ | (44,557 | ) | | ₩ | 848,481 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Buildings include office buildings, investment properties and assets held for sale.
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15. Intangible Assets The detailsDetails of intangible assets as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Acquisition cost | | | Accumulated amortization | | Accumulated impairment losses | | Carrying amount | | | Acquisition cost | | | Accumulated amortization | | Accumulated impairment losses | | Carrying Amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Goodwill | | ₩ | 252,098 | | | ₩ | — | | | ₩ | (46,533 | ) | | ₩ | 205,565 | | | ₩ | 331,707 | | | ₩ | — | | | ₩ | (69,315 | ) | | ₩ | 262,392 | | Other intangible assets | | | 851,406 | | | | (590,550 | ) | | | (23,217 | ) | | | 237,639 | | | | 1,312,732 | | | | (877,881 | ) | | (44,927 | ) | | 389,924 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 1,103,504 | | | ₩ | (590,550 | ) | | ₩ | (69,750 | ) | | ₩ | 443,204 | | | ₩ | 1,644,439 | | | ₩ | (877,881 | ) | | ₩ | (114,242 | ) | | ₩ | 652,316 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Acquisition cost | | | Accumulated amortization | | | Accumulated impairment losses | | | Carrying amount | | | | (In millions of Korean won) | | Goodwill | | ₩ | 331,707 | | | ₩ | — | | | ₩ | (69,315 | ) | | ₩ | 262,392 | | Other intangible assets | | | 900,951 | | | | (649,723 | ) | | | (24,698 | ) | | | 226,530 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 1,232,658 | | | ₩ | (649,723 | ) | | ₩ | (94,013 | ) | | ₩ | 488,922 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Acquisition cost | | | Accumulated amortization | | | Accumulated impairment losses | | | Others | | | Carrying Amount | | | | (In millions of Korean won) | | Goodwill | | ₩ | 344,799 | | | ₩ | — | | | ₩ | (70,517 | ) | | ₩ | (832 | ) | | ₩ | 273,450 | | Other intangible assets | | | 4,012,563 | | | | (1,299,879 | ) | | | (43,074 | ) | | | — | | | | 2,669,610 | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 4,357,362 | | | ₩ | (1,299,879 | ) | | ₩ | (113,591 | ) | | ₩ | (832 | ) | | ₩ | 2,943,060 | | | | | | | | | | | | | | | | | | | | | | |
The detailsDetails of goodwill as of December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | | | | | | | | | 2013 | | | 2014 | | | | Acquisition cost | | | Carrying amount | | | Acquisition cost | | | Carrying amount | | | | (In millions of Korean won) | | Housing & Commercial Bank | | ₩ | 65,288 | | | ₩ | 65,288 | | | ₩ | 65,288 | | | ₩ | 65,288 | | KB Cambodia Bank | | | 1,202 | | | | 1,202 | | | | 1,202 | | | | 1,202 | | KB Investment Securities | | | 70,265 | | | | 58,889 | | | | 70,265 | | | | 58,889 | | KB Capital Co., Ltd | | | — | | | | — | | | | 79,609 | | | | 79,609 | | KB Savings Bank Co., Ltd | | | 108,000 | | | | 72,843 | | | | 115,343 | | | | 57,404 | | Yehansoul Savings Bank Co., Ltd | | | 7,343 | | | | 7,343 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | Total | | ₩ | 252,098 | | | ₩ | 205,565 | | | ₩ | 331,707 | | | ₩ | 262,392 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2016 | | | 2017 | | | | Acquisition cost | | | Carrying amount | | | Acquisition cost | | | Carrying amount | | | | (In millions of Korean won) | | Housing & Commercial Bank | | ₩ | 65,288 | | | ₩ | 65,288 | | | ₩ | 65,288 | | | ₩ | 65,288 | | KB Cambodia Bank | | | 1,202 | | | | 1,202 | | | | 1,202 | | | | — | | KB Securities Co., Ltd.1 | | | 70,265 | | | | 58,889 | | | | 70,265 | | | | 58,889 | | KB Capital Co., Ltd. | | | 79,609 | | | | 79,609 | | | | 79,609 | | | | 79,609 | | KB Savings Bank Co., Ltd. | | | 115,343 | | | | 57,404 | | | | 115,343 | | | | 57,404 | | KB Securities Vietnam joint stock company2 | | | — | | | | — | | | | 13,092 | | | | 12,260 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 331,707 | | | ₩ | 262,392 | | | ₩ | 344,799 | | | ₩ | 273,450 | | | | | | | | | | | | | | | | | | |
1 | The amount occurred from formerly known as KB Investment & Securities Co., Ltd. |
2 | MARITIME SECURITIES INCORPORATION changed the name to KB Securities Vietnam joint stock company. |
The changes in accumulated impairment losses of goodwill for the years ended December 31, 20132016 and 2014,2017, are as follows: | 2013 | | | 2016 | | 2016 | | Beginning | Beginning | | | Impairment | | | Others | | | Ending | | Beginning | | | Impairment | | | Others | | | Ending | | (In millions of Korean won) | (In millions of Korean won) | | (In millions of Korean won) | | ₩ | 35,157 | | | ₩ | 11,376 | | | ₩ | — | | | ₩ | 46,533 | | (69,315) | | | ₩ | — | | | ₩ | — | | | ₩ | (69,315 | ) |
| 2014 | | | 2017 | | 2017 | | Beginning | Beginning | | | Impairment | | | Others | | | Ending | | Beginning | | | Impairment | | Others | | | Ending | | (In millions of Korean won) | (In millions of Korean won) | | (In millions of Korean won) | | ₩ | 46,533 | | | ₩ | 22,782 | | | ₩ | — | | | ₩ | 69,315 | | (69,315) | | | ₩ | (1,202 | ) | | ₩ | — | | | ₩ | (70,517 | ) |
The details of allocating goodwill to cash-generating units and related information for impairment testing as of December 31, 2014,2017, are as follows: | | | Housing & Commercial Bank | | | | | | | | | | | | | Housing & Commercial Bank | | KB Cambodia Bank | | | KB Securities Co., Ltd.1 | | | KB Capital Co., Ltd. | | | KB Savings Bank Co., Ltd. and Yehansoul Savings Bank Co., Ltd. | | | Total | | | Retail Banking | | Corporate Banking | | KB Cambodia Bank | | KB Investment Securities | | KB Capital Co., Ltd. | | KB Savings Bank Co., Ltd. and Yehansoul Savings Bank Co., Ltd. | | Total | | | Retail Banking | | Corporate Banking | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Carrying amounts | | ₩ | 49,315 | | | ₩ | 15,973 | | | ₩ | 1,202 | | | ₩ | 58,889 | | | ₩ | 79,609 | | | ₩ | 57,404 | | | ₩ | 262,392 | | | ₩ | 49,315 | | | ₩ | 15,973 | | | ₩ | — | | | ₩ | 58,889 | | | ₩ | 79,609 | | | ₩ | 57,404 | | | ₩ | 261,190 | | Recoverable amount exceeded carrying amount | | | 1,090,789 | | | | 1,058,505 | | | | 735 | | | | 38,772 | | | | 210,379 | | | | — | | | | 2,399,180 | | | 8,957,260 | | | 3,448,191 | | | | — | | | 145,177 | | | 623,381 | | | 51,402 | | | 13,225,411 | | Discount rate (%) | | | 17.13 | | | | 17.49 | | | | 33.45 | | | | 16.53 | | | | 13.67 | | | | 17.01 | | | | | 20.47 | | | 20.81 | | | 27.57 | | | 25.71 | | | 13.00 | | | 14.91 | | | | Permanent growth rate (%) | | | 2.00 | | | | 2.00 | | | | 2.00 | | | | 2.00 | | | | 2.00 | | | | 2.00 | | | | | 1.00 | | | 1.00 | | | 1.00 | | | 1.00 | | | 1.00 | | | 1.00 | | | |
1 | The amount occurred from formerly known as KB Investment & Securities Co., Ltd. |
2 | Goodwill occurred from a business combination during 2017 has not been tested for impairment. |
Goodwill is allocated to cash-generating units, based on management’s analysis, that are expected to benefit from the synergies of the combination for impairment testing, and cash-generating units consist of an operating segment or units which are not larger than an operating segment. The Group recognized the amount of ₩65,288 million related to goodwill acquired in the merger of Housing & Commercial Bank. Of those respective amounts, the amounts of ₩49,315 million and ₩15,973 million were allocated to the Retail Banking and Corporate Banking, respectively. Cash-generating units to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit. The recoverable amount of a cash-generating unit is measured at the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell is the amount obtainable from the sale in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. If it is difficult to measure the amount obtainable from the sale, the Group measures the fair value less costs to sell by reflecting the characteristics of the measured cash-generating unit. If it is not possible to obtain reliable information to measure the fair value less costs to sell, the Group uses the asset’s value in use as its recoverable amount. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit.unit The projections of the future cash flows are based on the most recent financial budget approved by management and generally cover a period of five years. The future cash flows after projection period are estimated on the assumption that the future cash flows will increase 2.0%by 1.0% for every year.all other cash-generating units. The key assumptions used for the estimation of the future cash flows are the market size and the Group’s market share. The discount rate is apre-tax rate that reflects assumptions regarding risk-free interest rate, market risk premium and the risks specific to the asset for which the future cash flow estimates have not been adjusted. The details
Details of intangible assets, excluding goodwill, as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Acquisition cost | | | Accumulated amortization | | Accumulated impairment losses | | Carrying amount | | | Acquisition cost | | | Accumulated amortization | | Accumulated impairment losses | | Carrying amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Industrial property rights | | ₩ | 1,405 | | | ₩ | (936 | ) | | ₩ | — | | | ₩ | 469 | | | ₩ | 4,617 | | | ₩ | (1,612 | ) | | ₩ | — | | | ₩ | 3,005 | | Software | | | 614,124 | | | | (500,327 | ) | | | — | | | | 113,797 | | | | 887,098 | | | | (749,997 | ) | | | — | | | 137,101 | | Other intangible assets | | | 206,427 | | | | (67,892 | ) | | | (23,217 | ) | | | 115,318 | | | | 378,608 | | | | (111,814 | ) | | (44,927 | ) | | 221,867 | | Finance leases assets | | | 29,450 | | | | (21,395 | ) | | | — | | | | 8,055 | | | | 42,409 | | | | (14,458 | ) | | | — | | | 27,951 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 851,406 | | | ₩ | (590,550 | ) | | ₩ | (23,217 | ) | | ₩ | 237,639 | | | ₩ | 1,312,732 | | | ₩ | (877,881 | ) | | ₩ | (44,927 | ) | | ₩ | 389,924 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Acquisition cost | | | Accumulated amortization | | Accumulated impairment losses | | Carrying amount | | | Acquisition cost | | | Accumulated amortization | | Accumulated impairment losses | | Carrying amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Industrial property rights | | ₩ | 1,470 | | | ₩ | (1,079 | ) | | ₩ | — | | | ₩ | 391 | | | ₩ | 9,497 | | | ₩ | (2,399 | ) | | ₩ | — | | | ₩ | 7,098 | | Software | | | 644,485 | | | | (564,887 | ) | | | — | | | | 79,598 | | | | 1,062,699 | | | | (885,133 | ) | | | — | | | 177,566 | | Other intangible assets | | | 213,927 | | | | (83,190 | ) | | | (24,698 | ) | | | 106,039 | | | | 501,874 | | | | (211,321 | ) | | (43,074 | ) | | 247,479 | | Value of Business Acquired (VOBA) | | | | 2,395,291 | | | | (179,193 | ) | | | — | | | 2,216,098 | | Finance leases assets | | | 41,069 | | | | (567 | ) | | | — | | | | 40,502 | | | | 43,202 | | | | (21,833 | ) | | | — | | | 21,369 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 900,951 | | | ₩ | (649,723 | ) | | ₩ | (24,698 | ) | | ₩ | 226,530 | | | ₩ | 4,012,563 | | | ₩ | (1,299,879 | ) | | ₩ | (43,074 | ) | | ₩ | 2,669,610 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The changes in intangible assets, excluding goodwill, for the years ended December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Beginning | | Acquisition | | Disposal | | Amortization(1) | | Business combination | | Others | | Ending | | | Beginning | | Acquisition | | Disposal | | Transfer | | Amortization1 | | Business combination | | | Others | | Ending | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Industrial property rights | | ₩ | 418 | | | ₩ | 190 | | | ₩ | — | | | ₩ | (137 | ) | | ₩ | — | | | ₩ | (2 | ) | | ₩ | 469 | | | ₩ | 320 | | | ₩ | 3,073 | | | ₩ | — | | | ₩ | — | | | ₩ | (388 | ) | | ₩ | — | | | ₩ | — | | | ₩ | 3,005 | | Software | | | 168,032 | | | | 33,649 | | | | — | | | | (87,078 | ) | | | — | | | | (806 | ) | | | 113,797 | | | 75,009 | | | 91,631 | | | | — | | | | — | | | (41,540 | ) | | 11,998 | | | | 3 | | | 137,101 | | Other intangible assets(2) | | | 107,994 | | | | 34,252 | | | | (5,177 | ) | | | (9,122 | ) | | | 38 | | | | (12,667 | ) | | | 115,318 | | | Other intangible assets2 | | | 94,816 | | | 16,900 | | | (7,234 | ) | | 1,926 | | | (14,701 | ) | | 132,461 | | | | (2,301 | ) | | 221,867 | | Finance leases assets | | | 7,089 | | | | 6,036 | | | | — | | | | (5,070 | ) | | | — | | | | — | | | | 8,055 | | | 34,291 | | | 708 | | | | — | | | | — | | | (7,048 | ) | | | — | | | | — | | | 27,951 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 283,533 | | | ₩ | 74,127 | | | ₩ | (5,177 | ) | | ₩ | (101,407 | ) | | ₩ | 38 | | | ₩ | (13,475 | ) | | ₩ | 237,639 | | | ₩ | 204,436 | | | ₩ | 112,312 | | | ₩ | (7,234 | ) | | ₩ | 1,926 | | | ₩ | (63,677 | ) | | ₩ | 144,459 | | | ₩ | (2,298 | ) | | ₩ | 389,924 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Beginning | | Acquisition | | Disposal | | Transfer | | Amortization(1) | | Business combination | | Others | | Ending | | | Beginning | | Acquisition | | Disposal | | Transfer | | Amortization1 | | Business combination | | Others | | Ending | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Industrial property rights | | ₩ | 469 | | | ₩ | 74 | | | ₩ | — | | | ₩ | — | | | ₩ | (151 | ) | | ₩ | — | | | ₩ | (1 | ) | | ₩ | 391 | | | ₩ | 3,005 | | | ₩ | 4,772 | | | ₩ | (8 | ) | | ₩ | — | | | ₩ | (683 | ) | | ₩ | — | | | ₩ | 12 | | | ₩ | 7,098 | | Software | | | 113,797 | | | | 24,516 | | | | — | | | | 4,528 | | | | (62,805 | ) | | | 364 | | | | (802 | ) | | | 79,598 | | | 137,101 | | | 86,768 | | | (48 | ) | | 1,404 | | | (66,655 | ) | | 20,396 | | | (1,400 | ) | | 177,566 | | Other intangible assets(2) | | | 115,318 | | | | 6,165 | | | | (4,455 | ) | | | — | | | | (11,805 | ) | | | 2,050 | | | | (1,234 | ) | | | 106,039 | | | Other intangible assets2 | | | 221,867 | | | 20,354 | | | (7,054 | ) | | 14,401 | | | (18,437 | ) | | 18,362 | | | (2,014 | ) | | 247,479 | | Value of Business Acquired (VOBA)3 | | | | — | | | | — | | | | — | | | | — | | | (179,193 | ) | | 2,395,291 | | | | — | | | 2,216,098 | | Finance leases assets | | | 8,055 | | | | 45,305 | | | | — | | | | (4,528 | ) | | | (8,330 | ) | | | — | | | | — | | | | 40,502 | | | 27,951 | | | 792 | | | | — | | | | — | | | (7,374 | ) | | | — | | | | — | | | 21,369 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 237,639 | | | ₩ | 76,060 | | | ₩ | (4,455 | ) | | ₩ | — | | | ₩ | (83,091 | ) | | ₩ | 2,414 | | | ₩ | (2,037 | ) | | ₩ | 226,530 | | | ₩ | 389,924 | | | ₩ | 112,686 | | | ₩ | (7,110 | ) | | ₩ | 15,805 | | | ₩ | (272,342 | ) | | ₩ | 2,434,049 | | | ₩ | (3,402 | ) | | ₩ | 2,669,610 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)1 | Including ₩31₩607 million and ₩59₩179,809 million recorded in insurance expenses and other operating expenses and others in the statements of comprehensive income for the years ended December 31, 20132016 and 2014. 2017. |
(2)2 | Membership rightsImpairment loss for membership right of other intangible assetsasset with indefinite useful liveslife was recognized impairment losses because theirwhen its recoverable amount is lower than theirits carrying amount, and reversal of impairment loss was recognized when its recoverable amount is higher than its carrying amount.
|
3 | See Note 44 for details on business combination. |
The changes in accumulated impairment losses on intangible assets excluding goodwill, for the years ended December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Beginning | | | Impairment | | | Reversal | | | Disposal and others | | | Ending | | | | (In millions of Korean won) | | Accumulated impairment losses on intangible assets | | ₩ | (17,845 | ) | | ₩ | (5,763 | ) | | ₩ | 24 | | | ₩ | 367 | | | ₩ | (23,217 | ) |
| | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | Beginning | | | Impairment | | | Reversal | | | Disposal and others | | | Ending | | | | (In millions of Korean won) | | Accumulated impairment losses on intangible assets | | ₩ | (26,211 | ) | | ₩ | (2,704 | ) | | ₩ | 482 | | | ₩ | (16,494 | ) | | ₩ | (44,927 | ) |
| | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Beginning | | | Impairment | | | Reversal | | | Disposal and others | | | Ending | | | | (In millions of Korean won) | | Accumulated impairment losses on intangible assets | | ₩ | (23,217 | ) | | ₩ | (1,888 | ) | | ₩ | 411 | | | ₩ | (4 | ) | | ₩ | (24,698 | ) |
| | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Beginning | | | Impairment | | | Reversal | | | Disposal and others | | | Ending | | | | (In millions of Korean won) | | Accumulated impairment losses on intangible assets | | ₩ | (44,927 | ) | | ₩ | (601 | ) | | ₩ | 954 | | | ₩ | 1,500 | | | ₩ | (43,074 | ) |
The changes in emissions rights for year ended December 31, 2016 and 2017, are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Applicable under 2015 | | | Applicable under 2016 | | | Applicable under 2017 | | | Total | | | | Quantity | | | Carrying amount | | | Quantity | | | Carrying amount | | | Quantity | | | Carrying amount | | | Quantity | | | Carrying amount | | | | (KAU) | | | (In millions of Korean won) | | | (KAU) | | | (In millions of Korean won) | | | (KAU) | | | (In millions of Korean won) | | | (KAU) | | | (In millions of Korean won) | | Beginning | | | 116,799 | | | ₩ | — | | | | 112,137 | | | ₩ | — | | | | 109,140 | | | ₩ | — | | | | 338,076 | | | ₩ | — | | Borrowing | | | 8,518 | | | | — | | | | (8,518 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | Surrendered to government | | | (121,261 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (121,261 | ) | | | — | | Cancel | | | (4,056 | ) | | | — | | | | (4,336 | ) | | | — | | | | (4,220 | ) | | | — | | | | (12,612 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending | | | — | | | ₩ | — | | | | 99,283 | | | ₩ | — | | | | 104,920 | | | ₩ | — | | | | 204,203 | | | ₩ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Applicable under 2016 | | | Applicable under 2017 | | | Total | | | | Quantity | | | Carrying amount | | | Quantity | | | Carrying amount | | | Quantity | | | Carrying amount | | | | (KAU) | | | (In millions of Korean won) | | | (KAU) | | | (In millions of Korean won) | | | (KAU) | | | (In millions of Korean won) | | Beginning | | | 99,283 | | | ₩ | — | | | | 104,920 | | | ₩ | — | | | | 204,203 | | | ₩ | — | | Additional Allocation | | | 578 | | | | — | | | | 17,046 | | | | — | | | | 17,624 | | | | — | | Borrowing | | | 18,306 | | | | — | | | | (18,306 | ) | | | — | | | | — | | | | — | | Surrendered to government | | | (117,484 | ) | | | — | | | | — | | | | — | | | | (117,484 | ) | | | — | | Cancel | | | (683 | ) | | | — | | | | (398 | ) | | | — | | | | (1,081 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending | | | — | | | ₩ | — | | | | 103,262 | | | ₩ | — | | | | 103,262 | | | ₩ | — | | | | | | | | | | | | | | | | | | | | | | | | | | |
16. Deferred income tax assetsIncome Tax Assets and liabilitiesLiabilities The detailsDetails of deferred income tax assets and liabilities as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Assets | | Liabilities | | Net amount | | | Assets | | Liabilities | | Net amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Other provisions | | ₩ | 113,685 | | | ₩ | — | | | ₩ | 113,685 | | | ₩ | 91,201 | | | ₩ | — | | | ₩ | 91,201 | | Allowances for loan losses | | | 171 | | | | (2,118 | ) | | | (1,947 | ) | | | 7,297 | | | | — | | | 7,297 | | Impairment losses on property and equipment | | | 2,873 | | | | — | | | | 2,873 | | | | 7,920 | | | (359 | ) | | 7,561 | | Interest on equity index-linked deposits | | | 340 | | | | — | | | | 340 | | | | 41 | | | | — | | | 41 | | Share-based payments | | | 8,512 | | | | — | | | | 8,512 | | | | 13,709 | | | | — | | | 13,709 | | Provisions for guarantees | | | 50,463 | | | | — | | | | 50,463 | | | | 30,569 | | | | — | | | 30,569 | | Losses(gains) from valuation on derivative financial instruments | | | 1,045 | | | | (15,119 | ) | | | (14,074 | ) | | | 9,761 | | | (46,765 | ) | | (37,004 | ) | Present value discount | | | 2,554 | | | | (6,812 | ) | | | (4,258 | ) | | | 11,358 | | | (6,160 | ) | | 5,198 | | Losses(gains) from fair value hedged item | | | 16,670 | | | | (111 | ) | | | 16,559 | | | | — | | | (14,335 | ) | | (14,335 | ) | Accrued interest | | | — | | | | (79,656 | ) | | | (79,656 | ) | | | — | | | (84,676 | ) | | (84,676 | ) | Deferred loan origination fees and costs | | | 13,263 | | | | (97,532 | ) | | | (84,269 | ) | | | 1,247 | | | (158,914 | ) | | (157,667 | ) | Gains from revaluation | | | — | | | | (276,057 | ) | | | (276,057 | ) | | | 803 | | | (286,119 | ) | | (285,316 | ) | Investments in subsidiaries and others | | | 74,324 | | | | (63,407 | ) | | | 10,917 | | | | 12,014 | | | (109,925 | ) | | (97,911 | ) | Derivative linked securities | | | 265,477 | | | | (264,024 | ) | | | 1,453 | | | Gains on valuation of security investment | | | | 109,071 | | | (8,279 | ) | | 100,792 | | Defined benefit liabilities | | | | 319,467 | | | | — | | | 319,467 | | Accrued expenses | | | | 273,092 | | | | — | | | 273,092 | | Retirement insurance expense | | | | — | | | (283,771 | ) | | (283,771 | ) | Adjustments to the prepaid contributions | | | | — | | | (15,142 | ) | | (15,142 | ) | Derivative-linked securities | | | | 30,102 | | | (42,825 | ) | | (12,723 | ) | Others | | | 546,499 | | | | (337,434 | ) | | | 209,065 | | | | 365,616 | | | (195,856 | ) | | 169,760 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 1,095,876 | | | | (1,142,270 | ) | | | (46,394 | ) | | | 1,283,268 | | | (1,253,126 | ) | | 30,142 | | | | | | | | | | | | | Offsetting of deferred income tax assets and liabilities | | | (1,080,454 | ) | | | 1,080,454 | | | | — | | | | (1,149,644 | ) | | 1,149,644 | | | | — | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 15,422 | | | ₩ | (61,816 | ) | | ₩ | (46,394 | ) | | ₩ | 133,624 | | | ₩ | (103,482 | ) | | ₩ | 30,142 | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Assets | | Liabilities | | Net amount | | | Assets | | Liabilities | | Net amount | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Other provisions | | ₩ | 99,369 | | | ₩ | — | | | ₩ | 99,369 | | | ₩ | 115,518 | | | ₩ | — | | | ₩ | 115,518 | | Allowances for loan losses | | | 2,416 | | | | (1,900 | ) | | | 516 | | | | 1,142 | | | | — | | | 1,142 | | Impairment losses on property and equipment | | | 5,590 | | | | (358 | ) | | | 5,232 | | | | 36,598 | | | (407 | ) | | 36,191 | | Interest on equity index-linked deposits | | | 183 | | | | — | | | | 183 | | | | 43 | | | | — | | | 43 | | Share-based payments | | | 8,134 | | | | — | | | | 8,134 | | | | 23,238 | | | | — | | | 23,238 | | Provisions for guarantees | | | 50,115 | | | | — | | | | 50,115 | | | | 24,341 | | | | — | | | 24,341 | | Losses(gains) from valuation on derivative financial instruments | | | 3,714 | | | | (52,714 | ) | | | (49,000 | ) | | | 6,258 | | | (17,479 | ) | | (11,221 | ) | Present value discount | | | 8,078 | | | | (10,694 | ) | | | (2,616 | ) | | | 25,332 | | | (4,498 | ) | | 20,834 | | Losses(gains) from fair value hedged item | | | 12,834 | | | | — | | | | 12,834 | | | | — | | | (15,698 | ) | | (15,698 | ) | Accrued interest | | | — | | | | (79,385 | ) | | | (79,385 | ) | | | 243 | | | (111,514 | ) | | (111,271 | ) | Deferred loan origination fees and costs | | | 9,265 | | | | (132,815 | ) | | | (123,550 | ) | | | 332 | | | (180,401 | ) | | (180,069 | ) | Advanced depreciation provision | | | | — | | | (1,703 | ) | | (1,703 | ) | Gains from revaluation | | | — | | | | (274,947 | ) | | | (274,947 | ) | | | 648 | | | (350,801 | ) | | (350,153 | ) | Investments in subsidiaries and others | | | 12,635 | | | | (74,504 | ) | | | (61,869 | ) | | | 24,834 | | | (103,268 | ) | | (78,434 | ) | Derivative linked securities | | | 336,025 | | | | (338,587 | ) | | | (2,562 | ) | | Gains on valuation of security investment | | | | 86,290 | | | (225,158 | ) | | (138,868 | ) | Defined benefit liabilities | | | | 436,706 | | | | — | | | 436,706 | | Accrued expenses | | | | 194,399 | | | | — | | | 194,399 | | Retirement insurance expense | | | | — | | | (369,300 | ) | | (369,300 | ) | Adjustments to the prepaid contributions | | | | — | | | (16,236 | ) | | (16,236 | ) | Derivative-linked securities | | | | 27,992 | | | (5,679 | ) | | 22,313 | | Others | | | 703,497 | | | | (363,600 | ) | | | 339,897 | | | | 321,453 | | | (452,303 | ) | | (130,850 | ) | | | | | | | | | | | | | | | | | | | | Sub-total | | | 1,251,855 | | | | (1,329,504 | ) | | | (77,649 | ) | | | 1,325,367 | | | (1,854,445 | ) | | (529,078 | ) | | | | | | | | | | | | Offsetting of deferred income tax assets and liabilities | | | (1,236,293 | ) | | | 1,236,293 | | | | — | | | | (1,321,376 | ) | | 1,321,376 | | | | — | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 15,562 | | | ₩ | (93,211 | ) | | ₩ | (77,649 | ) | | ₩ | 3,991 | | | ₩ | (533,069 | ) | | ₩ | (529,078 | ) | | | | | | | | | | | | | | | | | | | |
Unrecognized deferred income tax assets No deferred income tax assets have been recognized for the deductible temporary difference of ₩563,040₩49,179 million associated with investments in subsidiaries and others as of December 31, 2014,2017, because it is not probable that the temporary differences will be reversed in the foreseeable future. No deferred income tax assets have been recognized for deductible temporary differences of ₩199₩80,204 million ₩80,204million and ₩172,199million₩112,030 million associated with loss on other provisions, SPE repurchase and others, respectively, as of December 31, 2014,2017, due to the uncertainty that these will be realized in the future. Unrecognized deferred income tax liabilities No deferred income tax liabilities have been recognized for the taxable temporary difference of ₩27,367₩28,407 million associated with investment in subsidiaries and associates as of December 31, 2014,2017, due to the following reasons: ��
The Group is able to control the timing of the reversal of the temporary difference. It is probable that the temporary difference will not be reversed in the foreseeable future. No deferred income tax liabilities have been recognized as of December 31, 2014,2017, for the taxable temporary difference of ₩65,288 million arising from the initial recognition of goodwill from the merger of Housing and Commercial Bank.Bank in 2001. The changes in cumulative temporary differences for the years ended December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Beginning | | Decrease | | Increase | | Ending | | | Beginning | | Decrease | | Increase | | Ending | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Deductible temporary differences | | | | | | | | | | | | | | | | | Losses(gains) from fair value hedged item | | ₩ | 127,281 | | | ₩ | 127,281 | | | ₩ | 68,884 | | | ₩ | 68,884 | | | ₩ | 11,882 | | | ₩ | 11,882 | | | ₩ | — | | | ₩ | — | | Other provisions | | | 576,999 | | | | 553,376 | | | | 446,706 | | | | 470,329 | | | | 449,239 | | | 466,913 | | | 398,537 | | | 380,863 | | Allowances for loan losses | | | 4,727 | | | | 4,221 | | | | 199 | | | | 705 | | | | 5,079 | | | 26,492 | | | 51,567 | | | 30,154 | | Impairment losses on property and equipment | | | 8,723 | | | | 8,723 | | | | 11,873 | | | | 11,873 | | | | 21,476 | | | 31,914 | | | 43,164 | | | 32,726 | | Deferred loan origination fees and costs | | | 36,136 | | | | 35,720 | | | | 54,200 | | | | 54,616 | | | | 23,491 | | | 24,937 | | | 6,600 | | | 5,154 | | Interest on equity index-linked deposits | | | 2,985 | | | | 2,985 | | | | 1,407 | | | | 1,407 | | | | 287 | | | 287 | | | 168 | | | 168 | | Share-based payments | | | 25,591 | | | | 25,591 | | | | 35,174 | | | | 35,174 | | | | 44,922 | | | 39,600 | | | 51,328 | | | 56,650 | | Provisions for guarantees | | | 208,255 | | | | 208,255 | | | | 208,524 | | | | 208,524 | | | | 157,954 | | | 157,954 | | | 126,319 | | | 126,319 | | Gains(losses) from valuation on derivative financial instruments | | | 6,581 | | | | 6,581 | | | | 4,319 | | | | 4,319 | | | | 118,745 | | | 180,332 | | | 101,921 | | | 40,334 | | Present value discount | | | 9,655 | | | | 9,658 | | | | 10,558 | | | | 10,555 | | | | 42,288 | | | 14,693 | | | 19,366 | | | 46,961 | | Loss on SPE repurchase | | | 80,204 | | | | — | | | | — | | | | 80,204 | | | | 80,204 | | | | — | | | | — | | | 80,204 | | Investments in subsidiaries and others | | | 2,687,622 | | | | 2,099,827 | | | | 302,836 | | | | 890,631 | | | | 821,059 | | | 59,354 | | | 49,014 | | | 810,719 | | Gains on valuation of security investment | | | | 298,796 | | | 394,580 | | | 543,172 | | | 447,388 | | Defined benefit liabilities | | | | 1,153,686 | | | 75,269 | | | 241,718 | | | 1,320,135 | | Accrued expenses | | | | 271,463 | | | 358,583 | | | 1,215,612 | | | 1,128,492 | | Derivative linked securities | | | 667,942 | | | | 667,942 | | | | 1,097,012 | | | | 1,097,012 | | | | 3,090,264 | | | 3,098,449 | | | 132,573 | | | 124,388 | | Others | | | 2,004,536 | | | | 947,787 | | | | 1,300,751 | | | | 2,357,500 | | | | 1,220,133 | | | 557,068 | | | 739,581 | | | 1,402,646 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 6,447,237 | | | ₩ | 4,697,947 | | | ₩ | 3,542,443 | | | | 5,291,733 | | | | 7,810,968 | | | ₩ | 5,498,307 | | | ₩ | 3,720,640 | | | 6,033,301 | | | | | | | | | | | | | | | | | | | | | | | | | | | Unrecognized deferred income tax assets: | | | | | | | | | | | | | | | | | Share-based payments | | | 10 | | | | | | | | — | | | Other provisions | | | 817 | | | | | | | | 250 | | | | 67 | | | | | | | | — | | Loss on SPE repurchase | | | 80,204 | | | | | | | | 80,204 | | | | 80,204 | | | | | | | 80,204 | | Investments in subsidiaries and others | | | 2,492,775 | | | | | | | | 603,097 | | | | 797,862 | | | | | | | 774,259 | | Others | | | 87,342 | | | | | | | | 94,786 | | | | 170,214 | | | | | | | 119,334 | | | | | | | | | | | | | | | | | | | | | | | Total | | | 3,786,089 | | | | | | | | 4,513,396 | | | | 6,762,621 | | | | | | | 5,059,504 | | Tax rate (%) | | | 24.2 | | | | | | | | 24.2 | | | Tax rate (%)1 | | | | 24.2 | | | | | | | 24.2 | | | | | | | | | | | | | | | | | | | | | | | Total deferred income tax assets from deductible temporary difference | | ₩ | 919,214 | | | | | | | ₩ | 1,095,876 | | | Total deferred income tax assets from deductible temporary differences | | | ₩ | 1,636,968 | | | | | | | ₩ | 1,283,268 | | | | | | | | | | | | | | | | | | | | | | | Taxable temporary differences | | | | | | | | | | | | | | | | | Losses(gains) from fair value hedged item | | ₩ | — | | | ₩ | — | | | ₩ | (502 | ) | | ₩ | (502 | ) | | ₩ | — | | | ₩ | — | | | ₩ | (59,235 | ) | | ₩ | (59,235 | ) | Accrued interest | | | (339,126 | ) | | | (220,320 | ) | | | (217,970 | ) | | | (336,776 | ) | | | (338,402 | ) | | (333,121 | ) | | (344,618 | ) | | (349,899 | ) | Allowances for loans losses | | | (10,654 | ) | | | (1,902 | ) | | | — | | | | (8,752 | ) | | Impairment losses on property and equipment | | | | (1,481 | ) | | | — | | | | — | | | (1,481 | ) | Deferred loan origination fees and costs | | | (389,017 | ) | | | (389,017 | ) | | | (403,026 | ) | | | (403,026 | ) | | | (629,161 | ) | | (649,107 | ) | | (680,891 | ) | | (660,945 | ) | Gains(losses) from valuation on derivative financial instruments | | | (163,225 | ) | | | (162,935 | ) | | | (62,287 | ) | | | (62,577 | ) | | | (128,985 | ) | | (457,371 | ) | | (521,629 | ) | | (193,243 | ) | Present value discount | | | (32,185 | ) | | | (1,221 | ) | | | — | | | | (30,964 | ) | | | (37,741 | ) | | (38,009 | ) | | (25,722 | ) | | (25,454 | ) | Goodwill | | | (65,288 | ) | | | — | | | | — | | | | (65,288 | ) | | | (65,288 | ) | | | — | | | | — | | | (65,288 | ) | Gains on revaluation | | | (1,142,234 | ) | | | (1,504 | ) | | | — | | | | (1,140,730 | ) | | | (1,136,143 | ) | | (61,094 | ) | | (107,261 | ) | | (1,182,310 | ) | Investments in subsidiaries and others | | | (5,959,490 | ) | | | (5,644,900 | ) | | | (53,127 | ) | | | (367,717 | ) | | | (408,490 | ) | | (68,158 | ) | | (46,935 | ) | | (387,267 | ) | Gains on valuation of security investment | | | | (93,510 | ) | | (114,227 | ) | | (57,969 | ) | | (37,252 | ) | Retirement insurance expense | | | | (996,448 | ) | | (63,979 | ) | | (238,045 | ) | | (1,170,514 | ) | Adjustments to the prepaid contributions | | | | (90,653 | ) | | (90,653 | ) | | (62,569 | ) | | (62,569 | ) | Derivative linked securities | | | (661,700 | ) | | | (661,700 | ) | | | (1,091,009 | ) | | | (1,091,009 | ) | | | (3,222,110 | ) | | (3,401,273 | ) | | (356,125 | ) | | (176,962 | ) | Others | | | (1,307,717 | ) | | | (581,961 | ) | | | (660,956 | ) | | | (1,386,712 | ) | | | (426,328 | ) | | (663,284 | ) | | (1,031,097 | ) | | (794,141 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | (10,070,636 | ) | | ₩ | (7,665,460 | ) | | ₩ | (2,488,877 | ) | | | (4,894,053 | ) | | | (7,574,740 | ) | | ₩ | (5,940,276 | ) | | ₩ | (3,532,096 | ) | | (5,166,560 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Unrecognized deferred income tax assets: | | | | | | | | | | | | | | | | | Goodwill | | | (65,288 | ) | | | | | | | (65,288 | ) | | | (65,288 | ) | | | | | | (65,288 | ) | Investments in subsidiaries and others | | | (83,745 | ) | | | | | | | (118,749 | ) | | | (66,345 | ) | | | | | | (17,205 | ) | Others | | | | (1,914 | ) | | | | | | (906 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | | (9,921,603 | ) | | | | | | | (4,710,016 | ) | | | (7,441,193 | ) | | | | | | (5,083,161 | ) | Tax rate (%) | | | 24.2 | | | | | | | | 24.2 | | | Tax rate (%)1 | | | | 24.2 | | | | | | | 24.2 | | | | | | | | | | | | | | | | | | | | | | | Total deferred income tax assets from deductible temporary differences | | ₩ | (1,055,085 | ) | | | | | | ₩ | (1,142,270 | ) | | ₩ | (1,807,838 | ) | | | | | | ₩ | (1,253,126 | ) | | | | | | | | | | | | | | | | | | | | | |
1 | The rate of 24.2% has been applied for the deferred tax assets and liabilities expected to be utilized. |
| | | 2014 | | | 2017 | | | | Beginning | | Decrease | | Increase | | Ending | | | Beginning | | Business Combination | | Decrease | | Increase | | Ending | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Deductible temporary differences | | | | | | | | | | | | | | | | | | | Losses(gains) from fair value hedged item | | ₩ | 68,884 | | | ₩ | 68,884 | | | ₩ | 53,033 | | | ₩ | 53,033 | | | Other provisions | | | 470,329 | | | | 445,632 | | | | 386,116 | | | | 410,813 | | | ₩ | 380,863 | | | ₩ | 30,180 | | | ₩ | 395,138 | | | ₩ | 407,923 | | | ₩ | 423,828 | | Allowances for loan losses | | | 705 | | | | 292 | | | | 5,720 | | | | 6,133 | | | | 30,154 | | | | — | | | 26,134 | | | 202 | | | 4,222 | | Impairment losses on property and equipment | | | 11,873 | | | | 11,873 | | | | 22,363 | | | | 22,363 | | | | 32,726 | | | 107,755 | | | 139,743 | | | 132,346 | | | 133,084 | | Deferred loan origination fees and costs | | | 54,616 | | | | 54,772 | | | | 37,529 | | | | 37,373 | | | | 5,154 | | | | — | | | 5,154 | | | 1,207 | | | 1,207 | | Interest on equity index-linked deposits | | | 1,407 | | | | 1,325 | | | | 676 | | | | 758 | | | | 168 | | | | — | | | 168 | | | 155 | | | 155 | | Share-based payments | | | 35,174 | | | | 35,174 | | | | 33,613 | | | | 33,613 | | | | 56,650 | | | | — | | | 49,333 | | | 77,185 | | | 84,502 | | Provisions for guarantees | | | 208,524 | | | | 208,524 | | | | 225,414 | | | | 225,414 | | | | 126,319 | | | | — | | | 126,319 | | | 88,512 | | | 88,512 | | Gains(losses) from valuation on derivative financial instruments | | | 4,319 | | | | 4,319 | | | | 15,171 | | | | 15,171 | | | | 40,334 | | | | — | | | 40,334 | | | 22,758 | | | 22,758 | | Present value discount | | | 10,555 | | | | 10,555 | | | | 11,762 | | | | 11,762 | | | | 46,961 | | | | — | | | 18,417 | | | 63,573 | | | 92,117 | | Loss on SPE repurchase | | | 80,204 | | | | — | | | | — | | | | 80,204 | | | | 80,204 | | | | — | | | | — | | | | — | | | 80,204 | | Investments in subsidiaries and others | | | 890,631 | | | | 310,123 | | | | 18,691 | | | | 599,199 | | | | 810,719 | | | | — | | | 753,918 | | | 76,902 | | | 133,703 | | Gains on valuation of security investment | | | | 447,388 | | | | — | | | 447,388 | | | 299,082 | | | 299,082 | | Defined benefit liabilities | | | | 1,320,135 | | | 255,375 | | | 256,580 | | | 271,857 | | | 1,590,787 | | Accrued expenses | | | | 1,128,492 | | | | — | | | 1,123,713 | | | 701,756 | | | 706,535 | | Derivative linked securities | | | 1,097,012 | | | | 1,097,012 | | | | 1,388,534 | | | | 1,388,534 | | | | 124,388 | | | | — | | | 124,388 | | | 101,789 | | | 101,789 | | Others | | | 2,357,500 | | | | 1,349,309 | | | | 2,099,534 | | | | 3,107,725 | | | | 1,402,646 | | | | — | | | 629,002 | | | 501,901 | | | 1,275,545 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 5,291,733 | | | ₩ | 3,597,794 | | | ₩ | 4,298,156 | | | | 5,992,095 | | | | 6,033,301 | | | 393,310 | | | ₩ | 4,135,729 | | | ₩ | 2,747,148 | | | 5,038,030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unrecognized deferred income tax assets: | | | | | | | | | | | | | | | | | | | Share-based payments | | | — | | | | | | | | — | | | Other provisions | | | 250 | | | | | | | | 199 | | | | — | | | | — | | | | | | | 2,879 | | Loss on SPE repurchase | | | 80,204 | | | | | | | | 80,204 | | | | 80,204 | | | | — | | | | | | | 80,204 | | Investments in subsidiaries and others | | | 603,097 | | | | | | | | 563,040 | | | | 774,259 | | | | — | | | | | | | 49,179 | | Others | | | 94,786 | | | | | | | | 172,199 | | | | 119,334 | | | | — | | | | | | | 112,030 | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 4,513,396 | | | | | | | | 5,176,453 | | | | 5,059,504 | | | 393,310 | | | | | | | 4,793,738 | | Tax rate (%) | | | 24.2 | | | | | | | | 24.2 | | | Tax rate (%)1 | | | | 24.2 | | | 24.2 | | | | | | | 27.5 | | | | | | | | | | | | | | | | | | | | | | | | | | Total deferred income tax assets from deductible temporary differences | | ₩ | 1,095,876 | | | | | | | ₩ | 1,251,855 | | | ₩ | 1,283,268 | | | ₩ | 95,181 | | | | | | | ₩ | 1,325,367 | | | | | | | | | | | | | | | | | | | | | | | | | | Taxable temporary differences | | | | | | | | | | | | | | | | | | | Losses(gains) from fair value hedged item | | ₩ | (502 | ) | | ₩ | (502 | ) | | ₩ | — | | | ₩ | — | | | ₩ | (59,235 | ) | | ₩ | — | | | ₩ | (59,235 | ) | | ₩ | (57,083 | ) | | ₩ | (57,083 | ) | Accrued interest | | | (336,776 | ) | | | (220,808 | ) | | | (213,071 | ) | | | (329,039 | ) | | | (349,899 | ) | | (72,117 | ) | | (377,010 | ) | | (360,536 | ) | | (405,542 | ) | Allowances for loans losses | | | (8,752 | ) | | | (902 | ) | | | — | | | | (7,850 | ) | | Impairment losses on property and equipment | | | | (1,481 | ) | | | — | | | | — | | | | — | | | (1,481 | ) | Deferred loan origination fees and costs | | | (403,026 | ) | | | (403,026 | ) | | | (548,978 | ) | | | (548,978 | ) | | | (660,945 | ) | | (15,846 | ) | | (665,209 | ) | | (657,081 | ) | | (668,663 | ) | advanced depreciation provision | | | | — | | | (6,192 | ) | | | — | | | | — | | | (6,192 | ) | Gains(losses) from valuation on derivative financial instruments | | | (62,577 | ) | | | (61,187 | ) | | | (216,436 | ) | | | (217,826 | ) | | | (193,243 | ) | | | — | | | (192,491 | ) | | (61,077 | ) | | (61,829 | ) | Present value discount | | | (30,964 | ) | | | — | | | | (13,226 | ) | | | (44,190 | ) | | | (25,454 | ) | | (8,766 | ) | | (34,220 | ) | | (16,357 | ) | | (16,357 | ) | Goodwill | | | (65,288 | ) | | | — | | | | — | | | | (65,288 | ) | | | (65,288 | ) | | | — | | | | — | | | | — | | | (65,288 | ) | Gains on revaluation | | | (1,140,730 | ) | | | (4,587 | ) | | | — | | | | (1,136,143 | ) | | | (1,182,310 | ) | | (99,244 | ) | | (59,030 | ) | | (53,117 | ) | | (1,275,641 | ) | Investments in subsidiaries and others | | | (367,717 | ) | | | (60,223 | ) | | | (15,199 | ) | | | (322,693 | ) | | | (387,267 | ) | | | — | | | (72,284 | ) | | (72,484 | ) | | (387,467 | ) | Gains on valuation of security investment | | | | (37,252 | ) | | (236,137 | ) | | (273,171 | ) | | (764,891 | ) | | (765,109 | ) | Retirement insurance expense | | | | (1,170,514 | ) | | (168,714 | ) | | (200,722 | ) | | (203,506 | ) | | (1,342,012 | ) | Adjustments to the prepaid contributions | | | | (62,569 | ) | | | — | | | (61,034 | ) | | (57,505 | ) | | (59,040 | ) | Derivative linked securities | | | (1,091,009 | ) | | | (1,091,009 | ) | | | (1,399,118 | ) | | | (1,399,118 | ) | | | (176,962 | ) | | | — | | | (176,962 | ) | | (20,650 | ) | | (20,650 | ) | Others | | | (1,386,712 | ) | | | (562,646 | ) | | | (677,763 | ) | | | (1,501,829 | ) | | | (794,141 | ) | | (1,215,733 | ) | | (429,645 | ) | | (95,568 | ) | | (1,675,797 | ) | | | | | | | | | | | | | | | Sub-total | | | (4,894,053 | ) | | ₩ | (2,404,890 | ) | | ₩ | (3,083,791 | ) | | | (5,572,954 | ) | | | (5,166,560 | ) | | (1,822,749 | ) | | ₩ | (2,601,013 | ) | | ₩ | (2,419,855 | ) | | (6,808,151 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unrecognized deferred income tax assets: | | | | | | | | | | | | | | | | | | | Goodwill | | | (65,288 | ) | | | | | | | (65,288 | ) | | | (65,288 | ) | | | — | | | | | | | (65,288 | ) | Investments in subsidiaries and others | | | (118,749 | ) | | | | | | | (27,367 | ) | | | (17,205 | ) | | (4,546 | ) | | | | | | (28,407 | ) | Others | | | | (906 | ) | | | — | | | | | | | (677 | ) | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | (4,710,016 | ) | | | | | | | (5,480,299 | ) | | | (5,083,161 | ) | | (1,818,203 | ) | | | | | | (6,713,779 | ) | Tax rate (%) | | | 24.2 | | | | | | | | 24.2 | | | Tax rate (%)1 | | | | 24.2 | | | 24.2 | | | | | | | 27.5 | | | | | | | | | | | | | | | | | | | | | | | | | | Total deferred income tax assets from deductible temporary differences | | ₩ | (1,142,270 | ) | | | | | | ₩ | (1,329,504 | ) | | ₩ | (1,253,126 | ) | | ₩ | (442,206 | ) | | | | | | ₩ | (1,854,445 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
1 | The corporate tax rate was changed due to the amendment of corporate tax law in 2017. Accordingly, the rate of 27.5% has been applied for the deferred tax assets and liabilities expected to be utilized in periods after December 31, 2017. |
17. Assets heldHeld for saleSale The detailsDetails of assets held for sale as of December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | | | | | | | | | 2013 | | | | Acquisition cost(1) | | | Accumulated impairment | | | Carrying amount | | | Fair value less costs to sell | | | | (In millions of Korean won) | | Land | | ₩ | 21,380 | | | ₩ | (5,109 | ) | | ₩ | 16,271 | | | ₩ | 16,271 | | Buildings | | | 39,777 | | | | (18,330 | ) | | | 21,447 | | | | 21,447 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 61,157 | | | ₩ | (23,439 | ) | | ₩ | 37,718 | | | ₩ | 37,718 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2016 | | | | Acquisition cost1 | | | Accumulated impairment | | | Carrying amount | | | Fair value less costs to sell | | | | (In millions of Korean won) | | Land held for sale | | ₩ | 31,310 | | | ₩ | (8,179 | ) | | ₩ | 23,131 | | | ₩ | 24,704 | | Buildings held for sale | | | 50,086 | | | | (21,069 | ) | | | 29,017 | | | | 29,300 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 81,396 | | | ₩ | (29,248 | ) | | ₩ | 52,148 | | | ₩ | 54,004 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Acquisition cost(1) | | | Accumulated impairment | | | Carrying amount | | | Fair value less costs to sell | | | | (In millions of Korean won) | | Land | | ₩ | 47,418 | | | ₩ | (9,442 | ) | | ₩ | 37,976 | | | ₩ | 40,530 | | Buildings | | | 57,005 | | | | (24,624 | ) | | | 32,381 | | | | 33,752 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 104,423 | | | ₩ | (34,066 | ) | | ₩ | 70,357 | | | ₩ | 74,282 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2017 | | | | Acquisition cost1 | | | Accumulated impairment | | | Carrying amount | | | Fair value less costs to sell | | | | (In millions of Korean won) | | Land held for sale | | ₩ | 133,445 | | | ₩ | (1,492 | ) | | ₩ | 131,953 | | | ₩ | 251,520 | | Buildings held for sale | | | 34,862 | | | | (11,309 | ) | | | 23,553 | | | | 24,548 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 168,307 | | | ₩ | (12,801 | ) | | ₩ | 155,506 | | | ₩ | 276,068 | | | | | | | | | | | | | | | | | | |
(1)1 | Acquisition cost of buildings held for sale is net of accumulated depreciation. |
The valuation technique and input variables that are used to measure the fair value of assets held for sale as of December 31, 2014,2017, are as follows: | | | | | | | | | | | | | | | 20142017 | | | Fair value | | | Valuation technique(1)1 | | Unobservable input(2)2 | | Range of unobservable inputs
(%) | | Relationship of unobservable inputs to fair value | | | (In millions of Korean won) | | | | | | | Land and buildings | | ₩ | 57,982276,068 | | | Market comparison approach model and others | | Adjustment index | | 0.17~2.000.20~1.10 | | Fair value increases as the adjustment index rises. | | | | | | | | | | | | | | | Adjustment ratio | | -20.00~0.00 | | Fair value decreases as the absolute value of adjustment index rises. | | | | | | | Land and buildings
| | | 16,323 | | | Market comparison approach model
| | Unit price per area of exclusive possession, Time point adjustment, Individual factor and others
| | Unit price per area of exclusive possession: About ₩4.9 million
Time point adjustment: 0.9987
Individual factor: 0.85
| | Fair value increases as the unit price per area of exclusive possess and others rise.
| | | | | | | | | | | | | | Total
| | ₩ | 74,305 | | | | | | | | | | | | | | | | | | | | | | |
(1)1 | The Group adjusted the appraisal value by the adjustment ratio in the event the public sale is unsuccessful. |
(2)2 | Adjustment index is calculated using the real estate index or the producer price index, or land price volatility. |
The fair values of assets held for sale were measured by qualified independent appraisers with experience in valuing similar properties in the same area. In addition, per the fair value hierarchy on Note 6.1, the fair value hierarchy of all investment properties has been categorized and classified as Level 3. The changes in accumulated impairment losses of assets held for sale for the years ended December 31, 20132016 and 2014,2017, are as follows: | 2013 | | | 2016 | | 2016 | | Beginning | Beginning | | | Provision | | Reversal | | | Others | | | Ending | | Beginning | | Provision | | Reversal | | | Others | | | Ending | | (In millions of Korean won) | (In millions of Korean won) | | (In millions of Korean won) | | ₩ | (5,759) | | | ₩ | (22,365 | ) | | ₩ | — | | | ₩ | 4,685 | | | ₩ | (23,439 | ) | (24,484 | ) | | ₩ | (5,269 | ) | | ₩ | 96 | | | ₩ | 409 | | | ₩ | (29,248 | ) | | 2017 | | 2017 | | Beginning | | Beginning | | Provision1 | | Reversal | | | Disposal and others1 | | | Ending | | (In millions of Korean won) | | (In millions of Korean won) | | ₩ | | (29,248 | ) | | ₩ | (24,192 | ) | | ₩ | 5,138 | | | ₩ | 35,501 | | | ₩ | (12,801 | ) |
| | | | | | | | | | | | | | | | | | | 2014 | | Beginning | | | Provision | | | Reversal | | | Others | | | Ending | | (In millions of Korean won) | | ₩ | (23,439) | | | ₩ | (16,592 | ) | | ₩ | — | | | ₩ | 5,965 | | | ₩ | (34,066 | ) |
1 | Including the amount of assets of disposal group as held for sale sold during 2017 |
As of December 31, 2014, buildings and land classified as2017, assets held for sale consist of 15 pieces of real estate ofKookmin bank Myeongdong head office and ten properties that had been owned by closed branches and KB Wellyan Private Equity Real Estate Fund No. 6 and 7, which were acquired from the litigation of KB Asset Management Co., Ltd. The management of the Group decided to sell the assets, and accordingly, the assetsbank. These were classifiedreclassified as assets held for sale. Assale by management’s decision and were not disposed of December 31, 2014,as at the reporting date. The sales of Myeongdong head office is scheduled to be completed in 2018 as sales contract was entered into during 2017. Negotiations with buyers are underway for three assets out of above assets heldthe other ten properties. The Group is also actively seeking sales opportunities for sale are under negotiation for sale and the remaining assets are also being actively marketed.seven properties. 18. Other Assets The detailsDetails of other assets as of December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Other financial assets | | | | | | | | | Other receivables | | ₩ | 3,494,745 | | | ₩ | 3,185,783 | | Accrued income | | | 1,018,907 | | | | 1,166,555 | | Guarantee deposits | | | 1,395,359 | | | | 1,339,572 | | Domestic exchange settlement debits | | | 735,807 | | | | 2,096,804 | | Others | | | 188,540 | | | | 119,733 | | Allowances for loan losses | | | (580,651 | ) | | | (347,918 | ) | Present value discount | | | (1,028 | ) | | | (898 | ) | | | | | | | | | | Sub-total | | | 6,251,679 | | | | 7,559,631 | | | | | | | | | | | Other non-financial assets | | | | | | | | | Other receivables | | | 663 | | | | 1,469 | | Prepaid expenses(1) | | | 379,854 | | | | 327,633 | | Guarantee deposits | | | 3,941 | | | | 4,081 | | Insurance assets | | | 157,154 | | | | 127,493 | | Separate account assets | | | 696,909 | | | | 689,701 | | Others | | | 76,798 | | | | 96,759 | | Allowances on other asset | | | (16,402 | ) | | | (23,294 | ) | | | | | | | | | | Sub-total | | | 1,298,917 | | | | 1,223,842 | | | | | | | | | | | Total | | ₩ | 7,550,596 | | | ₩ | 8,783,473 | | | | | | | | | | |
(1) | Prepaid income tax expenses amounting to ₩17,467 million for KB Life Insurance Co., Ltd as of December 31, 2013 were reclassified from other assets into deferred income tax assets.
|
| | | | | | | | | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Other financial assets | | | | | | | | | Other receivables | | ₩ | 4,326,183 | | | ₩ | 6,447,405 | | Accrued income | | | 1,305,680 | | | | 1,594,455 | | Guarantee deposits | | | 1,230,400 | | | | 1,211,841 | | Domestic exchange settlement debits | | | 535,237 | | | | 949,897 | | Others | | | 25,226 | | | | 101,909 | | Less: Allowances for loan losses | | | (95,629 | ) | | | (104,813 | ) | Less: Present value discount | | | (4,762 | ) | | | (5,679 | ) | | | | | | | | | | Sub-total | | | 7,322,335 | | | | 10,195,015 | | | | | | | | | | | Othernon-financial assets | | | | | | | | | Other receivables | | | 17,727 | | | | 3,640 | | Prepaid expenses | | | 188,135 | | | | 153,650 | | Guarantee deposits | | | 3,934 | | | | 4,904 | | Insurance assets | | | 128,146 | | | | 1,180,980 | | Separate account assets | | | 866,310 | | | | 4,119,203 | | Others | | | 356,380 | | | | 578,795 | | Less: Allowances on other asset | | | (25,182 | ) | | | (32,018 | ) | | | | | | | | | | Sub-total | | | 1,535,450 | | | | 6,009,154 | | | | | | | | | | | Total | | ₩ | 8,857,785 | | | ₩ | 16,204,169 | | | | | | | | | | |
The changesChanges in allowances for loan losses on other assets for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Other financial assets | | Other non-financial assets | | Total | | | Other financial assets | | Othernon-financial assets | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Beginning | | ₩ | 590,110 | | | ₩ | 7,988 | | | ₩ | 598,098 | | | ₩ | 308,699 | | | ₩ | 23,977 | | | ₩ | 332,676 | | Written-off | | | (37,382 | ) | | | (6,715 | ) | | | (44,097 | ) | | | (271,522 | ) | | (540 | ) | | (272,062 | ) | Provision | | | 29,229 | | | | 15,129 | | | | 44,358 | | | | 2,445 | | | 1,745 | | | 4,190 | | Business combination | | | | 13,537 | | | | — | | | 13,537 | | Others | | | (1,306 | ) | | | — | | | | (1,306 | ) | | | 42,470 | | | | — | | | 42,470 | | | | | | | | | | | | | | | | | | | | | Ending | | ₩ | 580,651 | | | ₩ | 16,402 | | | ₩ | 597,053 | | | ₩ | 95,629 | | | ₩ | 25,182 | | | ₩ | 120,811 | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | | Other financial assets | | Othernon-financial assets | | Total | | | | | (In millions of Korean won) | | Beginning | | | ₩ | 95,629 | | | ₩ | 25,182 | | | ₩ | 120,811 | | Written-off | | | | (14,546 | ) | | (1,970 | ) | | (16,516 | ) | Provision | | | | 9,840 | | | 1,410 | | | 11,250 | | Business combination | | | | 21,293 | | | | — | | | 21,293 | | Others | | | | (7,403 | ) | | 7,396 | | | (7 | ) | | | | | | | | | | | | Ending | | | ₩ | 104,813 | | | ₩ | 32,018 | | | ₩ | 136,831 | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2014 | | | | Other financial assets | | | Other non-financial assets | | | Total | | | | (In millions of Korean won) | | Beginning | | ₩ | 580,651 | | | ₩ | 16,402 | | | ₩ | 597,053 | | Written-off | | | (293,614 | ) | | | (2,436 | ) | | | (296,050 | ) | Provision | | | 38,091 | | | | 3,930 | | | | 42,021 | | Business combination | | | 1,085 | | | | — | | | | 1,085 | | Others | | | 21,705 | | | | 5,398 | | | | 27,103 | | | | | | | | | | | | | | | Ending | | ₩ | 347,918 | | | ₩ | 23,294 | | | ₩ | 371,212 | | | | | | | | | | | | | | |
19. Financial liabilitiesLiabilities at fair valueFair Value through profitProfit or lossLoss The detailsDetails of financial liabilities at fair value through profit or loss as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial liabilities held for trading | | | | | | | | | Securities sold | | ₩ | 196,570 | | | ₩ | 784,892 | | | ₩ | 1,070,272 | | | ₩ | 1,870,579 | | Other | | | 40,067 | | | | 51,650 | | | | 73,238 | | | | 74,191 | | | | | | | | | | | | | | | Sub-total | | | 236,637 | | | | 836,542 | | | | 1,143,510 | | | | 1,944,770 | | | | | | | | | | | | | | | Financial liabilities designated at fair value through profit or loss | | | | | | | | | Derivative linked securities | | | 878,565 | | | | 982,426 | | | | | | | | | | | Sub-total | | | 878,565 | | | | 982,426 | | | Derivative-linked securities | | | | 10,979,326 | | | | 10,078,288 | | | | | | | | | | | | | | | Total financial liabilities at fair value through profit or loss | | ₩ | 1,115,202 | | | ₩ | 1,818,968 | | | ₩ | 12,122,836 | | | ₩ | 12,023,058 | | | | | | | | | | | | | | |
The details of credit risk of financial liabilities designated at fair value through profit or loss as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | 2014 | | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial liabilities designated at fair value through profit or loss | | ₩ | 878,565 | | | ₩ | 982,426 | | | ₩ | 10,979,326 | | | ₩ | 10,078,288 | | Changes in fair value resulting from changes in the credit risk | | | (4,032 | ) | | | (4,848 | ) | | | 12,131 | | | 12,236 | | Accumulated changes in fair value resulting from changes in the credit risk | | | (9,662 | ) | | | (14,510 | ) | | | (17,981 | ) | | (5,745 | ) |
20. Deposits The detailsDetails of deposits as of December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Demand deposits | | | | | | | | | Demand deposits in Korean won | | | | | | | | | Checking deposits | | ₩ | 122,296 | | | ₩ | 183,748 | | Household checking deposits | | | 467,229 | | | | 495,268 | | Special deposits | | | 2,706,609 | | | | 3,018,524 | | Ordinary deposits | | | 24,533,701 | | | | 28,049,893 | | Public fund deposits | | | 75,127 | | | | 81,899 | | Treasury deposits | | | 5,148 | | | | 5,012 | | General savings deposits | | | 28,077,274 | | | | 30,195,868 | | Corporate savings deposits | | | 10,715,746 | | | | 13,549,740 | | Nonresident’s deposit in Korean won | | | 32,355 | | | | 53,079 | | Nonresident’s free deposit in Korean won | | | 15,001 | | | | 16,761 | | Others | | | 163,262 | | | | 186,055 | | | | | | | | | | | Sub-total | | | 66,913,748 | | | | 75,835,847 | | | | | | | | | | | Demand deposits in foreign currencies | | | | | | | | | Checking deposits | | | 251,072 | | | | 114,531 | | Ordinary deposits | | | 2,461,685 | | | | 2,808,835 | | Special deposits | | | 5,325 | | | | 1,678 | | Others | | | 14,142 | | | | 94,019 | | | | | | | | | | | Sub-total | | | 2,732,224 | | | | 3,019,063 | | | | | | | | | | | Total demand deposits | | | 69,645,972 | | | | 78,854,910 | | | | | | | | | | | Time deposits | | | | | | | | | Time deposits in Korean won | | | | | | | | | Time deposits | | | 108,216,861 | | | | 110,822,758 | | Installment savings deposits | | | 11,097,205 | | | | 10,133,900 | | Good-sum formation savings | | | 425,090 | | | | 846,172 | | Nonresident’s deposit in Korean won | | | 186,966 | | | | 137,578 | | Workers’ savings for housing | | | 1,543 | | | | 1,488 | | Nonresident’s free deposit in Korean won | | | 41,085 | | | | 26,361 | | Long-term housing savings deposits | | | 2,061,129 | | | | 1,429,659 | | Long-term savings for households | | | 190 | | | | 163 | | Preferential savings deposits for workers | | | 245 | | | | 143 | | Mutual installment deposits | | | 1,478,299 | | | | 1,265,869 | | Mutual installment for housing | | | 853,392 | | | | 755,764 | | Trust deposits | | | 3,093,949 | | | | 3,207,318 | | Fair value adjustments on valuation of fair value hedged items (current period portion) | | | — | | | | (958 | ) | | | | | | | | | | Sub-total | | | 127,455,954 | | | | 128,626,215 | | | | | | | | | | | Time deposits in foreign currencies | | | | | | | | | Time deposits | | | 2,082,865 | | | | 2,456,599 | | Installment savings deposits | | | 4,035 | | | | 3,053 | | Others | | | 68,960 | | | | 25,297 | | | | | | | | | | | Sub-total | | | 2,155,860 | | | | 2,484,949 | | | | | | | | | | | Total time deposits | | | 129,611,814 | | | | 131,111,164 | | | | | | | | | | | Certificates of deposits | | | 1,624,278 | | | | 1,583,047 | | | | | | | | | | | Total deposits | | ₩ | 200,882,064 | | | ₩ | 211,549,121 | | | | | | | | | | |
| | | | | | | | | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Demand deposits | | | | | | | | | Demand deposits in Korean won | | ₩ | 104,758,222 | | | ₩ | 113,676,999 | | Demand deposits in foreign currencies | | | 5,305,313 | | | | 6,911,782 | | | | | | | | | | | Total demand deposits | | | 110,063,535 | | | | 120,588,781 | | | | | | | | | | | Time deposits | | | | | | | | | Time deposits in Korean won | | | 122,532,476 | | | | 127,562,153 | | Time deposits in foreign currencies | | | 4,314,783 | | | | 4,481,607 | | Fair value adjustments on valuation of fair value hedged items | | | (61,657 | ) | | | (51,033 | ) | | | | | | | | | | Sub-total | | | 4,253,126 | | | | 4,430,574 | | | | | | | | | | | Total time deposits | | | 126,785,602 | | | | 131,992,727 | | | | | | | | | | | Certificates of deposits | | | 2,880,558 | | | | 3,218,540 | | | | | | | | | | | Total deposits | | ₩ | 239,729,695 | | | ₩ | 255,800,048 | | | | | | | | | | |
21. Debts The detailsDetails of debts as of December 31, 20132016 and 2014,2017, consist of:
| | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Borrowings | | ₩ | 10,767,737 | | | ₩ | 11,908,698 | | | ₩ | 14,485,789 | | | ₩ | 16,846,072 | | Bonds sold under repurchase agreements and others | | | 685,626 | | | | 1,074,146 | | | Repurchase agreements and others | | | | 8,825,564 | | | | 10,676,219 | | Call money | | | 2,647,968 | | | | 2,881,656 | | | | 2,940,133 | | | | 1,298,637 | | | | | | | | | | | | | | | Total | | ₩ | 14,101,331 | | | ₩ | 15,864,500 | | | ₩ | 26,251,486 | | | ₩ | 28,820,928 | | | | | | | | | | | | | | |
The details
Details of borrowings as of December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | | | | | Lender | | Annual interest rate (%) | | 2013 | | | 2014 | | | | | | | | | | (In millions of Korean won) | | Borrowings in Korean won | | Borrowings from the Bank of Korea | | Bank of Korea | | 0.50~1.00 | | ₩ | 557,998 | | | ₩ | 1,002,796 | | | | Borrowings from the government | | KEMCO and others | | 0.00~5.00 | | | 626,593 | | | | 611,378 | | | | Borrowings from banking institutions | | Industrial Bank of Korea and others | | 1.97~4.04 | | | 61,877 | | | | 37,874 | | | | Borrowings fromnon-banking financial institutions | | The Korea Development Bank and others | | 0.71~2.70 | | | 142,511 | | | | 212,452 | | | | Other borrowings | | The Korea Finance Corporation and others | | 0.00~7.50 | | | 3,527,292 | | | | 3,980,812 | | | | | | | | | | | | | | | | | | | Sub-total | | | | | | | 4,916,271 | | | | 5,845,312 | | | | | | | | | | | | | | | | | Borrowings in foreign currencies | | Due to banks | | Royal Bank of Canada and others | | — | | | 158,180 | | | | 3,313 | | | | Borrowings from banking institutions | | Wells Fargo Securities. and others | | 0.21~1.70 | | | 3,831,929 | | | | 3,522,159 | | | | Other borrowings | | The Korea Finance Corporation | | 0.61~1.36 | | | 3,166 | | | | 34,460 | | | | Other borrowings | | JP Morgan Chase Bank N.A. and others | | — | | | 1,858,191 | | | | 2,503,454 | | | | | | | | | | | | | | | | | | | Sub-total | | | | | | | 5,851,466 | | | | 6,063,386 | | | | | | | | | | | | | | | | | | | Total | | | | | | ₩ | 10,767,737 | | | ₩ | 11,908,698 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Lender | | Annual interest rate (%) | | 2016 | | | 2017 | | | | | | | | | | (In millions of Korean won) | | Borrowings in Korean won | | Borrowings from the Bank of Korea | | Bank of Korea | | 0.50~0.75 | | ₩ | 1,644,260 | | | ₩ | 1,888,880 | | | | Borrowings from the government | | SEMAS and others | | 0.00~3.00 | | | 1,331,688 | | | | 1,726,543 | | | | Borrowings from banks | | Industrial & Commercial Bank of China and others | | 2.56~3.11 | | | — | | | | 36,806 | | | | Borrowings fromnon-banking financial institutions | | The Korea Development Bank and others | | 0.20~2.70 | | | 889,433 | | | | 1,631,376 | | | | Other borrowings | | The Korea Development Bank and others | | 0.00~3.90 | | | 4,284,108 | | | | 4,409,261 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | | | 8,149,489 | | | | 9,692,866 | | | | | | | | | | | | | | | | | Borrowings in foreign currencies | | Due to banks | | Commerzbank AG and Others | | — | | | 70,624 | | | | 19,820 | | | | Borrowings from banks | | Central Bank of Uzbekistan and Others | | 0.15~2.30 | | | 3,949,376 | | | | 5,470,569 | | | | Borrowings from other financial institutions | | The Export-Import Bank of Korea and others | | 1.90~2.83 | | | 121,104 | | | | 76,134 | | | | Other borrowings | | Standard Chartered Bank and others | | 0.00~7.00 | | | 2,195,196 | | | | 1,586,683 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | | | 6,336,300 | | | | 7,153,206 | | | | | | | | | | | | | | | | | | | | | Total | | | | ₩ | 14,485,789 | | | ₩ | 16,846,072 | | | | | | | | | | | | | | | | |
The details of bonds sold under repurchase agreements and others as of December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | | | Lenders | | Annual interest rate (%) | | | 2013 | | | 2014 | | | | | | | | | (In millions of Korean won) | | Bonds sold under repurchase agreements | | Individuals, Groups and Corporations | | | 1.25~3.63 | | | ₩ | 608,156 | | | ₩ | 1,019,071 | | Bills sold | | Counter sale | | | 1.09~2.62 | | | | 77,470 | | | | 55,075 | | | | | | | | | | | | | | | | | Total | | | | | | ₩ | 685,626 | | | ₩ | 1,074,146 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Lenders | | Annual interest rate (%) | | | 2016 | | | 2017 | | | | | | | | | (In millions of Korean won) | | Repurchase agreements | | Individuals, Groups and Corporations | | | 1.19~2.22 | | | ₩ | 8,815,027 | | | ₩ | 10,666,315 | | Bills sold | | Counter sale | | | 0.40~1.00 | | | | 10,537 | | | | 9,904 | | | | | | | | | | | | | | | | | | | Total | | | | | | ₩ | 8,825,564 | | | ₩ | 10,676,219 | | | | | | | | | | | | | | | | |
The details of call money as of December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | | | Lenders | | Annual interest rate (%) | | | 2013 | | | 2014 | | | | | | | | | (In millions of Korean won) | | Call money in Korean won | | Woori Bank and others | | | 1.83~2.15 | | | ₩ | 1,649,400 | | | ₩ | 1,882,000 | | Call money in foreign currencies | | Central bank Uzbekistan and others | | | 0.10~3.61 | | | | 998,568 | | | | 999,656 | | | | | | | | | | | | | | | | | Total | | | | | | ₩ | 2,647,968 | | | ₩ | 2,881,656 | | | | | | | | | | | | | | | | |
Call money and borrowings from financial institutions as of December 31, 2013 and 2014, are as follows:
| | | | | | | | | | | | | | | | | | | 2013 | | | | Bank of Korea | | | Other Banks | | | Others | | | Total | | | | (In millions of Korean won) | | Call money | | ₩ | 1,001 | | | ₩ | 1,970,567 | | | ₩ | 676,400 | | | ₩ | 2,647,968 | | Borrowings | | | 557,998 | | | | 5,901,018 | | | | 630,733 | | | | 7,089,749 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 558,999 | | | ₩ | 7,871,585 | | | ₩ | 1,307,133 | | | ₩ | 9,737,717 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Bank of Korea | | | Other Banks | | | Others | | | Total | | | | (In millions of Korean won) | | Call money | | ₩ | — | | | ₩ | 1,983,656 | | | ₩ | 898,000 | | | ₩ | 2,881,656 | | Borrowings | | | 1,277,596 | | | | 6,131,496 | | | | 867,674 | | | | 8,276,766 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 1,277,596 | | | ₩ | 8,115,152 | | | ₩ | 1,765,674 | | | ₩ | 11,158,422 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Lenders | | Annual interest rate (%) | | | 2016 | | | 2017 | | | | | | | | | (In millions of Korean won) | | Call money in Korean won | | Deutsche Bank AG, Seoul and others | | | 1.33~1.75 | | | ₩ | 1,755,200 | | | ₩ | 890,000 | | Call money in foreign currencies | | Central Bank of Uzbekistan and others | | | 1.20~2.20 | | | | 1,184,933 | | | | 408,637 | | | | | | | | | | | | | | | | | | | Total | | | | | | ₩ | 2,940,133 | | | ₩ | 1,298,637 | | | | | | | | | | | | | | | | |
22. Debentures The detailsDetails of debentures as of December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | | | | | Annual Interest rate (%) | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Debentures in Korean won | | | | | | | | | | | | | Structured debentures | | | 0.40~8.62 | | | ₩ | 1,499,238 | | | ₩ | 1,239,238 | | Subordinated fixed rate debentures in Korean won | | | 3.08~8.00 | | | | 8,648,474 | | | | 4,761,124 | | Fixed rate debentures in Korean won | | | 2.11~5.04 | | | | 12,057,142 | | | | 18,839,553 | | Floating rate debentures in Korean won | | | 2.17~2.93 | | | | 1,505,858 | | | | 1,133,000 | | | | | | | | | | | | | | | Sub total | | | | | | | 23,710,712 | | | | 25,972,915 | | | | | | | | | | | | | | | Fair value adjustments on fair value hedged financial debentures in Korean won | | | | | | | | | | | | | Fair value adjustments on valuation of fair value hedged items (current period portion) | | | | | | | (31,577 | ) | | | 5,733 | | Fair value adjustments on valuation of fair value hedged items (prior year portion) | | | | | | | 81,369 | | | | 48,183 | | | | | | | | | | | | | | | Sub total | | | | | | | 49,792 | | | | 53,916 | | | | | | | | | | | | | | | Discount or premium on debentures in Korean won | | | | | | | | | | | | | Discount on debentures | | | | | | | (16,615 | ) | | | (43,291 | ) | | | | | | | | | | | | | | Sub total | | | | | | | 23,743,889 | | | | 25,983,540 | | | | | | | | | | | | | | | Debentures in foreign currencies | | | | | | | | | | | | | Floating rate debentures | | | 0.38~1.48 | | | | 1,143,360 | | | | 1,648,175 | | Fixed rate debentures | | | 0.60~3.63 | | | | 2,335,059 | | | | 1,578,980 | | | | | | | | | | | | | | | Sub total | | | | | | | 3,478,419 | | | | 3,227,155 | | | | | | | | | | | | | | | Fair value adjustments on fair value hedged debentures in foreign currencies | | | | | | | | | | | | | Fair value adjustments on valuation of fair value hedged items (current period portion) | | | | | | | (42,195 | ) | | | (10,309 | ) | Fair value adjustments on valuation of fair value hedged items (prior year portion) | | | | | | | (130,011 | ) | | | 10,384 | | | | | | | | | | | | | | | Sub total | | | | | | | (172,206 | ) | | | 75 | | | | | | | | | | | | | | | Discount or premium on debentures in foreign currencies | | | | | | | | | | | | | Discount on debentures | | | | | | | (10,568 | ) | | | (10,064 | ) | | | | | | | | | | | | | | Sub total | | | | | | | 3,295,645 | | | | 3,217,166 | | | | | | | | | | | | | | | Total | | | | | | ₩ | 27,039,534 | | | ₩ | 29,200,706 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Annual interest rate (%) | | | 2016 | | | 2017 | | | | | | | (In millions of Korean won) | | Debentures in Korean won | | | | | | | | | | | | | Structured debentures | | | 0.29~6.00 | | | ₩ | 1,146,300 | | | ₩ | 869,294 | | Subordinated fixed rate debentures in Korean won | | | 3.08~5.70 | | | | 3,271,693 | | | | 2,913,411 | | Fixed rate debentures in Korean won | | | 1.29~3.79 | | | | 25,627,695 | | | | 36,823,365 | | Floating rate debentures in Korean won | | | 1.74~2.37 | | | | 1,108,000 | | | | 728,000 | | | | | | | | | | | | | | | Sub-total | | | | | | | 31,153,688 | | | | 41,334,070 | | | | | | | | | | | | | | | Fair value adjustments on fair value hedged financial debentures in Korean won | | | | | | | 26,724 | | | | 19,891 | | Less: Discount on debentures in Korean won | | | | | | | (19,064 | ) | | | (53,897 | ) | | | | | | | | | | | | | | Sub-total | | | | | | | 31,161,348 | | | | 41,300,064 | | | | | | | | | | | | | | | Debentures in foreign currencies | | | | | | | | | | | | | Floating rate debentures | | | 1.79~2.49 | | | | 1,063,480 | | | | 1,371,392 | | Fixed rate debentures | | | 1.63~2.88 | | | | 2,803,720 | | | | 2,363,486 | | | | | | | | | | | | | | | Sub-total | | | | | | | 3,867,200 | | | | 3,734,878 | | | | | | | | | | | | | | | Fair value adjustments on fair value hedged debentures in foreign currencies | | | | | | | (24,302 | ) | | | (25,941 | ) | Less: Discount on debentures in foreign currencies | | | | | | | (12,189 | ) | | | (16,277 | ) | | | | | | | | | | | | | | Sub-total | | | | | | | 3,830,709 | | | | 3,692,660 | | | | | | | | | | | | | | | Total | | | | | | ₩ | 34,992,057 | | | ₩ | 44,992,724 | | | | | | | | | | | | | | |
The changesChanges in debentures based on face value for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Beginning | | | Issues | | | Repayments | | | Others | | | Ending | | | | (In millions of Korean won) | | Debentures in Korean won | | | | | | | | | | | | | | | | | | | | | Hybrid capital instrument | | ₩ | 100,000 | | | ₩ | — | | | ₩ | (100,000 | ) | | ₩ | — | | | ₩ | — | | Structured debentures | | | 1,699,238 | | | | 100,000 | | | | (300,000 | ) | | | — | | | | 1,499,238 | | Subordinated fixed rate debentures in Korean won | | | 7,921,510 | | | | 1,000,000 | | | | (248,286 | ) | | | (24,750 | ) | | | 8,648,474 | | Fixed rate debentures in Korean won | | | 10,145,218 | | | | 7,716,400 | | | | (5,791,683 | ) | | | (12,793 | ) | | | 12,057,142 | | Floating rate debentures in Korean won | | | 1,169,158 | | | | 760,600 | | | | (423,900 | ) | | | — | | | | 1,505,858 | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 21,035,124 | | | | 9,577,000 | | | | (6,863,869 | ) | | | (37,543 | ) | | | 23,710,712 | | | | | | | | | | | | | | | | | | | | | | | Debentures in foreign currencies | | | | | | | | | | | | | | | | | | | | | Floating rate debentures | | | 759,783 | | | | 537,850 | | | | (176,050 | ) | | | 21,777 | | | | 1,143,360 | | Fixed rate debentures | | | 2,553,814 | | | | 657,465 | | | | (772,364 | ) | | | (103,856 | ) | | | 2,335,059 | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 3,313,597 | | | | 1,195,315 | | | | (948,414 | ) | | | (82,079 | ) | | | 3,478,419 | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 24,348,721 | | | ₩ | 10,772,315 | | | ₩ | (7,812,283 | ) | | ₩ | (119,622 | ) | | ₩ | 27,189,131 | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2016 | | | | Beginning | | Issues | | Repayments | | Business combination | | Others | | Ending | | | Beginning | | Issues | | Repayments | | Business combination | | Others | | Ending | | | | (In millions of Korean won) | | | (In millions of Korean won) | | | | Debentures in Korean won | | | | | | | | | | | | | | | | | | | | | | | | | Structured debentures | | ₩ | 1,499,238 | | | ₩ | 80,000 | | | ₩ | (340,000 | ) | | ₩ | — | | | ₩ | — | | | ₩ | 1,239,238 | | | ₩ | 909,788 | | | ₩ | 892,100 | | | ₩ | (1,540,488 | ) | | ₩ | 884,900 | | | ₩ | — | | | ₩ | 1,146,300 | | Subordinated fixed rate debentures in Korean won | | | 8,648,474 | | | | — | | | | (4,082,350 | ) | | | 195,000 | | | | — | | | | 4,761,124 | | | 4,586,829 | | | | — | | | (1,314,836 | ) | | | — | | | (300 | ) | | 3,271,693 | | Fixed rate debentures in Korean won | | | 12,057,142 | | | | 40,912,000 | | | | (36,674,589 | ) | | | 2,545,000 | | | | — | | | | 18,839,553 | | | 22,500,223 | | | 96,455,800 | | | (93,898,928 | ) | | 570,600 | | | | — | | | 25,627,695 | | Floating rate debentures in Korean won | | | 1,505,858 | | | | 353,200 | | | | (726,058 | ) | | | — | | | | — | | | | 1,133,000 | | | 448,000 | | | 760,000 | | | (100,000 | ) | | | — | | | | — | | | 1,108,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 23,710,712 | | | | 41,345,200 | | | | (41,822,997 | ) | | | 2,740,000 | | | | — | | | | 25,972,915 | | | 28,444,840 | | | 98,107,900 | | | (96,854,252 | ) | | 1,455,500 | | | (300 | ) | | 31,153,688 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Debentures in foreign currencies | | | | | | | | | | | | | | | | | | | | | | | | | Floating rate debentures | | | 1,143,360 | | | | 1,084,303 | | | | (641,957 | ) | | | — | | | | 62,469 | | | | 1,648,175 | | | 1,829,124 | | | 35,595 | | | (806,459 | ) | | | — | | | 5,220 | | | 1,063,480 | | Fixed rate debentures | | | 2,335,059 | | | | 803,503 | | | | (1,633,588 | ) | | | — | | | | 74,006 | | | | 1,578,980 | | | 2,325,537 | | | 1,185,480 | | | (817,096 | ) | | | — | | | 109,799 | | | 2,803,720 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 3,478,419 | | | | 1,887,806 | | | | (2,275,545 | ) | | | — | | | | 136,475 | | | | 3,227,155 | | | 4,154,661 | | | 1,221,075 | | | (1,623,555 | ) | | | — | | | 115,019 | | | 3,867,200 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 27,189,131 | | | ₩ | 43,233,006 | | | ₩ | (44,098,542 | ) | | ₩ | 2,740,000 | | | ₩ | 136,475 | | | ₩ | 29,200,070 | | | ₩ | 32,599,501 | | | ₩ | 99,328,975 | | | ₩ | (98,477,807 | ) | | ₩ | 1,455,500 | | | ₩ | 114,719 | | | ₩ | 35,020,888 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Beginning | | | Issues | | | Repayments | | | Others | | | Ending | | | | (In millions of Korean won) | | Debentures in Korean won | | | | | | | | | | | | | | | | | | | | | Structured debentures | | ₩ | 1,146,300 | | | ₩ | 3,876,080 | | | ₩ | (4,153,086) | | | ₩ | — | | | ₩ | 869,294 | | Subordinated fixed rate debentures in Korean won | | | 3,271,693 | | | | — | | | | (358,282 | ) | | | — | | | | 2,913,411 | | Fixed rate debentures in Korean won | | | 25,627,695 | | | | 133,283,400 | | | | (122,087,730 | ) | | | — | | | | 36,823,365 | | Floating rate debentures in Korean won | | | 1,108,000 | | | | 410,000 | | | | (790,000 | ) | | | — | | | | 728,000 | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 31,153,688 | | | | 137,569,480 | | | | (127,389,098 | ) | | | — | | | | 41,334,070 | | | | | | | | | | | | | | | | | | | | | | | Debentures in foreign currencies | | | | | | | | | | | | | | | | | | | | | Floating rate debentures | | | 1,063,480 | | | | 1,338,239 | | | | (911,936 | ) | | | (118,391 | ) | | | 1,371,392 | | Fixed rate debentures | | | 2,803,720 | | | | 795,150 | | | | (945,394 | ) | | | (289,990 | ) | | | 2,363,486 | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 3,867,200 | | | | 2,133,389 | | | | (1,857,330 | ) | | | (408,381 | ) | | | 3,734,878 | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 35,020,888 | | | ₩ | 139,702,869 | | | ₩ | (129,246,428 | ) | | ₩ | (408,381 | ) | | ₩ | 45,068,948 | | | | | | | | | | | | | | | | | | | | | | |
23. Provisions The detailsDetails of provisions as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Provisions for unused loan commitments | | ₩ | 226,110 | | | ₩ | 209,964 | | | ₩ | 189,349 | | | ₩ | 178,202 | | Provisions for acceptances and guarantees | | | 209,118 | | | | 207,927 | | | Provisions for payment guarantees | | | | 126,428 | | | | 88,809 | | Provisions for financial guarantee contracts | | | 2,699 | | | | 2,718 | | | | 4,333 | | | | 2,682 | | Provisions for asset retirement obligation | | | 76,608 | | | | 73,442 | | | Other | | | 163,538 | | | | 120,296 | | | Provisions for restoration cost | | | | 84,854 | | | | 95,194 | | Others | | | | 132,753 | | | | 203,146 | | | | | | | | | | | | | | | Total | | ₩ | 678,073 | | | ₩ | 614,347 | | | ₩ | 537,717 | | | ₩ | 568,033 | | | | | | | | | | | | | | |
Provisions for unused loan commitments as of December 31, 2013 and 2014, are as follows:
| | | | | | | | | | | | | | | 2013 | | | | Commitments outstanding | | | Provision | | | Ratio (%) | | | | (In millions of Korean won) | | Corporate loan commitments | | ₩ | 42,446,365 | | | ₩ | 101,455 | | | | 0.24 | | Retail loan commitments | | | 13,976,426 | | | | 38,385 | | | | 0.27 | | Credit line on credit cards | | | 37,112,333 | | | | 86,270 | | | | 0.23 | | | | | | | | | | | | | | | Total | | ₩ | 93,535,124 | | | ₩ | 226,110 | | | | 0.24 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2014 | | | | Commitments outstanding | | | Provision | | | Ratio (%) | | | | (In millions of Korean won) | | Corporate loan commitments | | ₩ | 42,977,471 | | | ₩ | 90,315 | | | | 0.21 | | Retail loan commitments | | | 13,886,999 | | | | 34,927 | | | | 0.25 | | Credit line on credit cards | | | 37,584,381 | | | | 84,722 | | | | 0.23 | | | | | | | | | | | | | | | Total | | ₩ | 94,448,851 | | | ₩ | 209,964 | | | | 0.22 | | | | | | | | | | | | | | |
Provisions for acceptances and guarantees as of December 31, 2013 and 2014, are as follows:
| | | | | | | | | | | | | | | 2013 | | | | Acceptances and guarantees | | | Provision | | | Ratio (%) | | | | (In millions of Korean won) | | Confirmed acceptances and guarantees in Korean won | | ₩ | 1,231,569 | | | ₩ | 42,604 | | | | 3.46 | | Confirmed acceptances and guarantees in foreign currencies | | | 4,532,036 | | | | 96,077 | | | | 2.12 | | Unconfirmed acceptances and guarantees | | | 4,041,087 | | | | 70,437 | | | | 1.74 | | | | | | | | | | | | | | | Total | | ₩ | 9,804,692 | | | ₩ | 209,118 | | | | 2.13 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2014 | | | | Acceptances and guarantees | | | Provision | | | Ratio (%) | | | | (In millions of Korean won) | | Confirmed acceptances and guarantees in Korean won | | ₩ | 1,098,048 | | | ₩ | 37,507 | | | | 3.42 | | Confirmed acceptances and guarantees in foreign currencies | | | 4,061,444 | | | | 79,966 | | | | 1.97 | | Unconfirmed acceptances and guarantees | | | 3,886,332 | | | | 90,454 | | | | 2.33 | | | | | | | | | | | | | | | Total | | ₩ | 9,045,824 | | | ₩ | 207,927 | | | | 2.30 | | | | | | | | | | | | | | |
The changesChanges in provisions for unused loan commitments, acceptances andpayment guarantees for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Provisions for unused loan commitments | | Provisions for acceptances and guarantees | | Total | | | Provisions for unused loan commitments | | Provisions for payment guarantees | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Beginning | | ₩ | 236,026 | | | ₩ | 208,753 | | | ₩ | 444,779 | | | ₩ | 195,385 | | | ₩ | 158,454 | | | ₩ | 353,839 | | Effects of changes in foreign exchange rate | | | (164 | ) | | | (961 | ) | | | (1,125 | ) | | | 204 | | | 737 | | | 941 | | Provision(reversal) | | | (9,752 | ) | | | 1,326 | | | | (8,426 | ) | | | (6,240 | ) | | (32,763 | ) | | (39,003 | ) | | | | | | | | | | | | | | | | | | | | Ending | | ₩ | 226,110 | | | ₩ | 209,118 | | | ₩ | 435,228 | | | ₩ | 189,349 | | | ₩ | 126,428 | | | ₩ | 315,777 | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Provisions for unused loan commitments | | Provisions for acceptances and guarantees | | Total | | | Provisions for unused loan commitments | | Provisions for payment guarantees | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Beginning | | ₩ | 226,110 | | | ₩ | 209,118 | | | ₩ | 435,228 | | | ₩ | 189,349 | | | ₩ | 126,428 | | | ₩ | 315,777 | | Effects of changes in foreign exchange rate | | | 548 | | | | 3,358 | | | | 3,906 | | | | (1,316 | ) | | (3,369 | ) | | (4,685 | ) | Provision(reversal) | | | (16,694 | ) | | | (4,549 | ) | | | (21,243 | ) | | | (9,850 | ) | | (34,250 | ) | | (44,100 | ) | Business combination | | | | 19 | | | | — | | | 19 | | | | | | | | | | | | | | | | | | | | | Ending | | ₩ | 209,964 | | | ₩ | 207,927 | | | ₩ | 417,891 | | | ₩ | 178,202 | | | ₩ | 88,809 | | | ₩ | 267,011 | | | | | | | | | | | | | | | | | | �� | | |
The changesChanges in provisions for financial guarantee contracts for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | 2014 | | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Beginning | | ₩ | 7,383 | | | ₩ | 2,699 | | | ₩ | 3,809 | | | ₩ | 4,333 | | Provision(reversal) | | | (4,684 | ) | | | 19 | | | Provision (Reversal) | | | | (2,958 | ) | | (1,651 | ) | Business combination | | | | 3,482 | | | | — | | | | | | | | | | | | | | | Ending | | ₩ | 2,699 | | | ₩ | 2,718 | | | ₩ | 4,333 | | | ₩ | 2,682 | | | | | | | | | | | | | | |
The changesChanges in provisions for asset retirement obligationrestoration cost for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | 2014 | | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Beginning | | ₩ | 65,226 | | | ₩ | 76,608 | | | ₩ | 75,351 | | | ₩ | 84,854 | | Provision | | | 3,334 | | | | 5,231 | | | | 3,886 | | | 5,150 | | Reversal | | | (226 | ) | | | (6,047 | ) | | | (967 | ) | | (1,211 | ) | Used | | | (2,475 | ) | | | (5,701 | ) | | | (5,940 | ) | | (7,049 | ) | Unwinding of discount | | | 2,203 | | | | 2,936 | | | | 1,890 | | | 2,078 | | Effects of changes in discount rate | | | 7,908 | | | | 70 | | | | 6,941 | | | 10,510 | | Business combination | | | 638 | | | | 345 | | | | 3,693 | | | 862 | | | | | | | | | | | | | | | Ending | | ₩ | 76,608 | | | ₩ | 73,442 | | | ₩ | 84,854 | | | ₩ | 95,194 | | | | | | | | | | | | | | |
Provisions for asset retirement obligationsrestoration cost are the present value of estimated costs to be incurred for the restoration of the leased properties. Actual expenses are expected to be incurred at the end of each lease contract. Three-year historical data of expired leases were used to estimate the average lease period. Also, the average restoration expense based on actual three-year historical data and the three-year historical average inflation rate were used to estimate the present value of estimated costs. The details of other provisions as of December 31, 2013 and 2014, are as follows:
| | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Membership rewards program | | ₩ | 5,402 | | | ₩ | 11,274 | | Dormant accounts | | | 16,839 | | | | 33,996 | | Litigations | | | 23,455 | | | | 24,506 | | Others | | | 117,842 | | | | 50,520 | | | | | | | | | | | Total | | ₩ | 163,538 | | | ₩ | 120,296 | | | | | | | | | | |
The changesChanges in other provisions for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Membership rewards program | | Dormant accounts | | Litigations | | Others | | Total | | | Membership rewards program | | Dormant accounts | | Litigations | | Greenhouse gas emission liabilities1 | | Others | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Beginning | | ₩ | 11,108 | | | ₩ | 16,028 | | | ₩ | 21,215 | | | ₩ | 103,990 | | | ₩ | 152,341 | | | ₩ | 8,630 | | | ₩ | 41,091 | | | ₩ | 71,240 | | | ₩ | 69 | | | ₩ | 53,831 | | | ₩ | 174,861 | | Increase | | | 13,473 | | | | 10,596 | | | | 4,800 | | | | 18,026 | | | | 46,895 | | | | 26,336 | | | 32,464 | | | 1,589 | | | 434 | | | 9,007 | | | 69,830 | | Decrease | | | (19,179 | ) | | | (9,785 | ) | | | (2,560 | ) | | | (4,174 | ) | | | (35,698 | ) | | | (26,176 | ) | | (23,159 | ) | | (52,206 | ) | | (145 | ) | | (10,252 | ) | | (111,938 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending | | ₩ | 5,402 | | | ₩ | 16,839 | | | ₩ | 23,455 | | | ₩ | 117,842 | | | ₩ | 163,538 | | | ₩ | 8,790 | | | ₩ | 50,396 | | | ₩ | 20,623 | | | ₩ | 358 | | | ₩ | 52,586 | | | ₩ | 132,753 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | | Membership rewards program | | Dormant accounts | | Litigations | | Others | | Total | | | | | (In millions of Korean won) | | | Beginning | | ₩ | 5,402 | | | ₩ | 16,839 | | | ₩ | 23,455 | | | ₩ | 117,842 | | | ₩ | 163,538 | | | Increase | | | 21,442 | | | | 49,040 | | | | 2,965 | | | | 3,352 | | | | 76,799 | | | Decrease | | | (15,570 | ) | | | (31,883 | ) | | | (1,914 | ) | | | (70,947 | ) | | | (120,314 | ) | | Business combination | | | — | | | | — | | | | — | | | | 273 | | | | 273 | | | | | | | | | | | | | | | | | | | | Ending | | ₩ | 11,274 | | | ₩ | 33,996 | | | ₩ | 24,506 | | | ₩ | 50,520 | | | ₩ | 120,296 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Membership rewards program | | | Dormant accounts | | | Litigations | | | Greenhouse gas emission liabilities1 | | | Others2 | | | Total | | | | (In millions of Korean won) | | Beginning | | ₩ | 8,790 | | | ₩ | 50,396 | | | ₩ | 20,623 | | | ₩ | 358 | | | ₩ | 52,586 | | | ₩ | 132,753 | | Increase | | | 81,171 | | | | 5,133 | | | | 6,046 | | | | — | | | | 45,164 | | | | 137,514 | | Decrease | | | (74,849 | ) | | | (50,479 | ) | | | (2,906 | ) | | | (181 | ) | | | (10,469 | ) | | | (138,884 | ) | Business Combination | | | — | | | | — | | | | — | | | | — | | | | 71,763 | | | | 71,763 | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending | | ₩ | 15,112 | | | ₩ | 5,050 | | | ₩ | 23,763 | | | ₩ | 177 | | | ₩ | 159,044 | | | ₩ | 203,146 | | | | | | | | | | | | | | | | | | | | | | | | | | |
1 | As of December 31, 2016 and 2017, the estimated greenhouse gas emission is 117,831 tons 112,121 tons, respectively. |
2 | As of December 31, 2017, the group’s provision on incomplete sales on cardssurance are ₩26,926 million. |
24. Net Defined benefit liabilities Benefit Liabilities (Assets)
Defined benefit plan The Group operates defined benefit plans which have the following characteristics: The Group has the obligation to pay the agreed benefits to all its current and former employees. Actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, on the Group. The defined benefit liability recognized in the statements of financial position is calculated annually by independent actuaries in accordance with actuarial valuation methods. The net defined benefit obligation is calculated using the Projected Unit Credit method (the ‘PUC’). Data used in the PUC such as interest rates, future salary increase rate, mortality rate and consumer price index are based on observable market data and historical data which are updated annually. Actuarial assumptions may differ from actual results, due to changes in the market, economic trends and mortality trends which may impact defined benefit liabilities and future payments. Actuarial gains and losses arising from changes in actuarial assumptions are recognized in the period incurred through other comprehensive income (loss).income. The changesChanges in the net defined benefit liabilities for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Present value of defined benefit obligation | | Fair value of plan assets | | Net defined benefit liabilities | | | Present value of defined benefit obligation | | Fair value of plan assets | | Net defined benefit liabilities | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Beginning | | ₩ | 942,333 | | | ₩ | (858,610 | ) | | ₩ | 83,723 | | | ₩ | 1,413,600 | | | ₩ | (1,340,403 | ) | | ₩ | 73,197 | | Current service cost | | | 172,857 | | | | — | | | | 172,857 | | | | 192,010 | | | | — | | | 192,010 | | Interest cost(income) | | | 33,282 | | | | (30,321 | ) | | | 2,961 | | | Interest cost (income) | | | | 34,885 | | | (33,211 | ) | | 1,674 | | Past service cost | | | 1,005 | | | | — | | | | 1,005 | | | | 4,408 | | | | — | | | 4,408 | | Gain or loss on settlement | | | (4,244 | ) | | | — | | | | (4,244 | ) | | | (396 | ) | | | — | | | (396 | ) | Remeasurements | | | | | | | | Remeasurements: | | | | | | | | Actuarial gains and losses by changes in demographic assumptions | | | 563 | | | | — | | | | 563 | | | | 2,281 | | | | — | | | 2,281 | | Actuarial gains and losses by changes in financial assumptions | | | (62,793 | ) | | | — | | | | (62,793 | ) | | | (37,085 | ) | | | — | | | (37,085 | ) | Actuarial gains and losses by experience adjustments | | | 7,066 | | | | — | | | | 7,066 | | | | 7,017 | | | | — | | | 7,017 | | Return on plan assets (excluding amounts included in interest income) | | | — | | | | 1,096 | | | | 1,096 | | | | — | | | 11,071 | | | 11,071 | | Contributions | | | — | | | | (132,870 | ) | | | (132,870 | ) | | Payments from plans (settlement) | | | (65,493 | ) | | | 65,212 | | | | (281 | ) | | Contributions: | | | | | | | | The Group | | | | — | | | (162,547 | ) | | (162,547 | ) | Employees | | | | — | | | (3,106 | ) | | (3,106 | ) | Payments from plans (benefit payments) | | | (34,814 | ) | | | 34,772 | | | | (42 | ) | | | (52,508 | ) | | 52,508 | | | | — | | Payments from the Group | | | (4,590 | ) | | | — | | | | (4,590 | ) | | | (9,837 | ) | | | — | | | (9,837 | ) | Transfer in | | | 2,551 | | | | (2,315 | ) | | | 236 | | | | 4,408 | | | (4,325 | ) | | 83 | | Transfers out | | | (2,551 | ) | | | 2,314 | | | | (237 | ) | | Transfer out | | | | (4,897 | ) | | 4,880 | | | (17 | ) | Effect of exchange rate changes | | | (94 | ) | | | — | | | | (94 | ) | | | 18 | | | | — | | | 18 | | Business combination | | | 117 | | | | — | | | | 117 | | | Effect of business combination and disposal of business | | | | 22,099 | | | (4,571 | ) | | 17,528 | | | | | | | | | | | | | | | | | | | | | Ending | | ₩ | 985,195 | | | ₩ | (920,722 | ) | | ₩ | 64,473 | | | ₩ | 1,576,003 | | | ₩ | (1,479,704 | ) | | ₩ | 96,299 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2017 | | | Present value of defined benefit obligation | | | Fair value of plan assets | | | Net defined benefit liabilities | | | | (In millions of Korean won) | | Beginning | | ₩ | 1,576,003 | | | ₩ | (1,479,704 | ) | | ₩ | 96,299 | | Current service cost | | | 208,037 | | | | — | | | | 208,037 | | Past service cost | | | 21,356 | | | | — | | | | 21,356 | | Interest cost (income) | | | 40,351 | | | | (36,243 | ) | | | 4,108 | | Remeasurements: | | | | | | | | | | | | | Actuarial gains and losses by changes in demographic assumptions | | | 22,878 | | | | — | | | | 22,878 | | Actuarial gains and losses by changes in financial assumptions | | | (86,459 | ) | | | — | | | | (86,459 | ) | Actuarial gains and losses by experience adjustments | | | 17,541 | | | | — | | | | 17,541 | | Return on plan assets (excluding amounts included in interest income) | | | — | | | | 16,220 | | | | 16,220 | | Contributions: | | | | | | | | | | | | | The Group | | | — | | | | (230,785 | ) | | | (230,785 | ) | Payments from plans (benefit payments) | | | (216,817 | ) | | | 216,698 | | | | (119 | ) | Payments from the Group | | | (23,779 | ) | | | — | | | | (23,779 | ) | Transfer in | | | 8,604 | | | | (8,383 | ) | | | 221 | | Transfer out | | | (8,712 | ) | | | 8,672 | | | | (40 | ) | Effect of exchange rate changes | | | (25 | ) | | | — | | | | (25 | ) | Effect of business combination and disposal of business | | | 282,988 | | | | (177,832 | ) | | | 105,156 | | Others | | | 25 | | | | 3,174 | | | | 3,199 | | | | | | | | | | | | | | | Ending1 | | ₩ | 1,841,991 | | | ₩ | (1,688,183 | ) | | ₩ | 153,808 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2014 | | | | Present value of defined benefit obligation | | | Fair value of plan assets | | | Net defined benefit liabilities | | | | (In millions of Korean won) | | Beginning | | ₩ | 985,195 | | | ₩ | (920,722 | ) | | ₩ | 64,473 | | Current service cost | | | 163,997 | | | | — | | | | 163,997 | | Interest cost(income) | | | 39,208 | | | | (36,545 | ) | | | 2,663 | | Past service cost | | | 11 | | | | — | | | | 11 | | Remeasurements | | | | | | | | | | | | | Actuarial gains and losses by changes in demographic assumptions | | | (36 | ) | | | — | | | | (36 | ) | Actuarial gains and losses by changes in financial assumptions | | | 112,550 | | | | — | | | | 112,550 | | Actuarial gains and losses by experience adjustments | | | 6,303 | | | | — | | | | 6,303 | | Return on plan assets (excluding amounts included in interest income) | | | — | | | | 12,576 | | | | 12,576 | | Contributions | | | — | | | | (288,212 | ) | | | (288,212 | ) | Payments from plans (settlement) | | | (43,108 | ) | | | 43,054 | | | | (54 | ) | Payments from the Group | | | (3,567 | ) | | | — | | | | (3,567 | ) | Transfer in | | | 3,788 | | | | (3,788 | ) | | | — | | Transfers out | | | (3,788 | ) | | | 3,661 | | | | (127 | ) | Effect of exchange rate changes | | | (27 | ) | | | — | | | | (27 | ) | Business combination | | | 10,552 | | | | (5,418 | ) | | | 5,134 | | | | | | | | | | | | | | | Ending | | ₩ | 1,271,078 | | | ₩ | (1,195,394 | ) | | ₩ | 75,684 | | | | | | | | | | | | | | |
1 | The net defined benefit liabilities of ₩153,808 million is calculated by subtracting ₩894 million net defined benefit assets from ₩154,702 million net defined benefit liabilities |
The detailsDetails of the net defined benefit liabilities as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | 2014 | | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Present value of defined benefit obligation | | ₩ | 985,195 | | | ₩ | 1,271,078 | | | ₩ | 1,576,003 | | | ₩ | 1,841,991 | | Fair value of plan assets | | | (920,722 | ) | | | (1,195,394 | ) | | | (1,479,704 | ) | | (1,688,183 | ) | | | | | | | | | | | | | | Net Defined benefit liabilities | | ₩ | 64,473 | | | ₩ | 75,684 | | | Net defined benefit liabilities | | | ₩ | 96,299 | | | ₩ | 153,808 | | | | | | | | | | | | | | |
The detailsDetails of post-employment benefits recognized in profit or loss as employee compensation and benefits for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows:
| | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Current service cost | | ₩ | 154,552 | | | ₩ | 172,857 | | | ₩ | 163,997 | | | ₩ | 185,710 | | | ₩ | 192,010 | | | ₩ | 208,037 | | Past service cost | | | 12,855 | | | | 1,005 | | | | 11 | | | | (47 | ) | | 4,408 | | | 21,356 | | Net interest expenses of net defined benefit liabilities | | | | 2,219 | | | 1,674 | | | 4,108 | | Gain or loss on settlement | | | (389 | ) | | | (4,244 | ) | | | — | | | | — | | | (396 | ) | | | — | | Net interest expenses of net defined benefit liabilities | | | 5,373 | | | | 2,961 | | | | 2,663 | | | | | | | | | | | | | | | | | | | | | | Post-employment benefits(1) | | ₩ | 172,391 | | | ₩ | 172,579 | | | ₩ | 166,671 | | | Post-employment benefits1 | | | ₩ | 187,882 | | | ₩ | 197,696 | | | ₩ | 233,501 | | | | | | | | | | | | | | | | | | | | |
(1)1 | Post-employment benefits amounting to ₩883 million, ₩1,471₩1,143 million and ₩971₩1,577 million for the years ended December 31, 2012, 20132015 and 2014,2016, respectively, are recognized as other operating expense in the statements of |
| comprehensive income, and post-employment benefits amounting to ₩1,755 million and ₩42 million for the years ended December 31, 2017 are recognized as other operating expense and advance payments in the statements of comprehensive income. |
Remeasurements of the net defined benefit liabilities recognized as other comprehensive income for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows: | | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Remeasurements | | | | | | | | Remeasurements: | | | | | | | | Return on plan assets (excluding amounts included in interest income) | | ₩ | 1,243 | | | ₩ | (1,096 | ) | | ₩ | (12,576 | ) | | ₩ | (12,051 | ) | | ₩ | (11,071 | ) | | ₩ | (16,220 | ) | Actuarial gains and losses | | | (41,184 | ) | | | 55,165 | | | | (118,817 | ) | | | (18,167 | ) | | 27,787 | | | 46,040 | | Income tax effects | | | 9,669 | | | | (13,085 | ) | | | 31,799 | | | | 7,312 | | | (4,045 | ) | | (7,215 | ) | | | | | | | | | | | | | | | | | | | | Remeasurements after income tax | | ₩ | (30,272 | ) | | ₩ | 40,984 | | | ₩ | (99,594 | ) | | ₩ | (22,906 | ) | | ₩ | 12,671 | | | ₩ | 22,605 | | | | | | | | | | | | | | | | | | | | |
The details of fair value of plan assets as of December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | 2016 | | | | 2013 | | | Assets quoted in an active market | | | Assets not quoted in an active market | | | Total | | | | Assets quoted in an active market | | | Assets not quoted in an active market | | | Total | | | (In millions of Korean won) | | | | (In millions of Korean won) | | | Cash and due from financial institutions | | ₩ | — | | | ₩ | 915,584 | | | ₩ | 915,584 | | | ₩ | — | | | ₩ | 1,479,419 | | | ₩ | 1,479,419 | | Repurchase agreements | | | — | | | | 5,138 | | | | 5,138 | | | | Investment fund | | | | — | | | | 285 | | | | 285 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | — | | | ₩ | 920,722 | | | ₩ | 920,722 | | | ₩ | — | | | ₩ | 1,479,704 | | | ₩ | 1,479,704 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2014 | | | Assets quoted in an active market | | | Assets not quoted in an active market | | | Total | | | | (In millions of Korean won) | | | | | | Cash and due from financial institutions | | ₩ | — | | | ₩ | 1,195,394 | | | ₩ | 1,195,394 | | | | | | | | | | | | | | | Total | | ₩ | — | | | ₩ | 1,195,394 | | | ₩ | 1,195,394 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2017 | | | Assets quoted in an active market | | | Assets not quoted in an active market | | | Total | | | | (In millions of Korean won) | | | | | | Cash and due from financial institutions | | ₩ | — | | | ₩ | 1,686,012 | | | ₩ | 1,686,012 | | | | | | Investment fund | | | — | | | | 2,171 | | | | 2,171 | | | | | | | | | | | | | | | Total | | ₩ | — | | | ₩ | 1,688,183 | | | ₩ | 1,688,183 | | | | | | | | | | | | | | |
Key actuarial assumptions used as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | 2014 | | 2016 | | 2017 | Discount rate (%) | | 2.90 ~ 4.00 | | 2.20 ~ 3.10 | | 1.80 ~ 3.46 | | 2.10 ~ 2.90 | Salary increase rate (%) | | 0.00 ~ 8.90 | | 0.00 ~ 8.50 | | 0.00 ~ 7.50 | | 0.00 ~ 7.50 | Turnover (%) | | 0.00 ~ 32.00 | | 0.00 ~ 32.00 | | 0.00 ~ 29.00 | | 0.00 ~ 50.00 |
Mortality assumptions are based on the 7thexperience-based mortality table (retirement pension) of Korea Insurance Development Institute of 2012.2015. The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions as of December 31, 2014, is2017, are as follows: | | | | | | | | | | | Changes in principal assumption | | | Effect on net defined benefit obligation | | | | Increase in principal assumption | | Decrease in principal assumption | Discount rate (%) | | | 0.5 p. | | | 4.493.96 decrease | | 4.774.19 increase | Salary increase rate (%) | | | 0.5 p. | | | 4.393.00 increase | | 4.274.58 decrease | Turnover (%) | | | 0.5 p. | | | 0.530.46 decrease | | 0.420.43 increase |
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to changes in principal actuarial assumptions is calculated using the projected unit credit method, the same method applied when calculating the defined benefit obligations recognized on the statement of financial position. Expected maturity analysis of undiscounted pension benefits (including expected future benefit) as of December 31, 2014,2017, is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | Up to 1 year | | | 1~2 years | | | 2~5 years | | | 5~10 years | | | Over 10 years | | | Total | | | | (In millions of Korean won) | | Pension benefits1 | | ₩ | 74,145 | | | ₩ | 143,846 | | | ₩ | 545,808 | | | ₩ | 1,158,892 | | | ₩ | 3,316,815 | | | ₩ | 5,239,506 | |
1 | | | | | | | | | | | | | | | | | | | | | | | | | UpExcluded payments settled according to 1 year
| | 1~2 years | | | 2~5 years | | | 5~10 years | | | Over
10 years | | | Total | | | | (In millions of Korean won) | | Pension benefits
| | ₩26,981 | | | ₩87,525 | | | | ₩326,571 | | | | ₩902,146 | | | | ₩1,188,644 | | | | ₩2,531,867 | pension equity plan. |
The weighted average duration of the defined benefit obligation is 1.0 ~ 14.411.1 years. Expected contribution to plan assets for periods after December 31, 2014,2017, is estimated to be 195,236₩202,738 million. 25. Other liabilitiesLiabilities The detailsDetails of other liabilities as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Other financial liabilities | | | | | | | | | Other payables | | ₩ | 4,582,344 | | | ₩ | 4,712,587 | | | ₩ | 6,526,330 | | | ₩ | 8,806,967 | | Prepaid card and debit card | | | 18,527 | | | | 19,578 | | | | 19,076 | | | | 21,767 | | Accrued expenses | | | 4,053,809 | | | | 3,123,144 | | | | 2,613,445 | | | | 2,654,345 | | Financial guarantee liabilities | | | 11,797 | | | | 13,237 | | | | 26,449 | | | | 34,114 | | Deposits for letter of guarantees and others | | | 108,786 | | | | 351,041 | | | | 561,664 | | | | 798,207 | | Domestic exchange settlement credits | | | 998,928 | | | | 128,739 | | | | 1,338,103 | | | | 48,133 | | Foreign exchanges settlement credits | | | 83,237 | | | | 69,440 | | | | 116,226 | | | | 124,728 | | Borrowings from other business account | | | 7,911 | | | | 40,383 | | | Borrowings from other business accounts | | | | 5,204 | | | | 5,408 | | Other payables from trust accounts | | | 2,423,675 | | | | 2,548,577 | | | | 4,430,508 | | | | 5,018,031 | | Liability Incurred by agency relationship | | | 532,157 | | | | 505,664 | | | Liability incurred from agency relationships | | | | 386,670 | | | | 518,955 | | Account for agency businesses | | | 384,921 | | | | 340,062 | | | | 248,257 | | | | 257,761 | | Dividend payables | | | 485 | | | | 477 | | | | 475 | | | | 474 | | Other payables from factored receivables | | | 42,924 | | | | 37,734 | | | Others | | | 13,413 | | | | 28,157 | | | | 14,171 | | | | 41,114 | | | | | | | | | | | | | | | Sub-total | | | 13,262,914 | | | | 11,918,820 | | | | 16,286,578 | | | | 18,330,004 | | | | | | | | | | | | | | | | Other non-financial liabilities | | | | | | | | | Other payables | | | 44,982 | | | | 72,370 | | | | 842,902 | | | | 196,142 | | Unearned revenue | | | 123,033 | | | | 154,066 | | | | 226,096 | | | | 271,787 | | Accrued expenses | | | 191,513 | | | | 208,226 | | | | 395,933 | | | | 634,236 | | Deferred revenue on credit card points | | | 117,659 | | | | 115,658 | | | | 145,457 | | | | 176,840 | | Withholding taxes | | | 111,975 | | | | 106,291 | | | | 140,258 | | | | 179,903 | | Insurance liabilities | | | 5,599,043 | | | | 6,265,198 | | | Separate account liabilities | | | 702,757 | | | | 698,832 | | | | 875,015 | | | | 4,463,687 | | Others | | | 82,353 | | | | 57,741 | | | | 126,658 | | | | 217,709 | | | | | | | | | | | | | | | Sub-total | | | 6,973,315 | | | | 7,678,382 | | | | 2,752,319 | | | | 6,140,304 | | | | | | | | | | | | | | | Total | | ₩ | 20,236,229 | | | ₩ | 19,597,202 | | | ₩ | 19,038,897 | | | ₩ | 24,470,308 | | | | | | | | | | | | | | |
26. Equity 26.1 Share Capital Stock The detailsDetails of outstandingshare capital and number of issued shares of the Parent Company as of December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | Ordinary shares | | | | 2013 | | | 2014 | | Number of shares authorized | | | 1,000,000,000 | | | | 1,000,000,000 | | Number of shares | | | 386,351,693 | | | | 386,351,693 | | Par value per share | | ₩ | 5,000 | | | ₩ | 5,000 | | Share capital stock(1) | | ₩ | 1,931,758 | | | ₩ | 1,931,758 | |
| | | | | | | | | | | 2016 | | | 2017 | | Type of share | | Ordinary shares | | | Ordinary shares | | Number of authorized shares | | | 1,000,000,000 | | | | 1,000,000,000 | | Par value per share | | ₩ | 5,000 | | | ₩ | 5,000 | | Number of issued shares | | | 418,111,537 | | | | 418,111,537 | | Share capital1 | | ₩ | 2,090,558 | | | ₩ | 2,090,558 | |
(1)1 | In millions of Korean won. |
Changes in outstanding shares for the years ended December 31, 2016 and 2017, are as follows: | | | | | | | | | | | 2016 | | | 2017 | | | | (In number of shares) | | Beginning | | | 386,351,693 | | | | 398,285,437 | | Increase | | | 31,759,844 | | | | 4,513,969 | | Decrease | | | (19,826,100 | ) | | | (3,761,823 | ) | Ending | | | 398,285,437 | | | | 399,037,583 | |
26.2 Capital surplusSurplus The detailsDetails of capital surplus as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | 2014 | | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Share premium | | ₩ | 12,226,596 | | | ₩ | 12,226,596 | | | ₩ | 13,190,274 | | | ₩ | 13,190,274 | | Loss on sale of treasury shares | | | (568,544 | ) | | | (568,544 | ) | | Loss on sales of treasury shares | | | | (568,544 | ) | | (481,332 | ) | Other capital surplus | | | 4,196,553 | | | | 4,196,458 | | | | 4,373,172 | | | 4,413,286 | | | | | | | | | | | | | | | Total | | ₩ | 15,854,605 | | | ₩ | 15,854,510 | | | ₩ | 16,994,902 | | | ₩ | 17,122,228 | | | | | | | | | | | | | | |
26.3 Accumulated other comprehensive incomeOther Comprehensive Income The detailsDetails of accumulated other comprehensive income as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | 2014 | | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Remeasurements of net defined benefit liabilities | | ₩ | (12,523 | ) | | ₩ | (110,814 | ) | | ₩ | (121,055 | ) | | ₩ | (96,385 | ) | Exchange differences on translating foreign operations | | | (29,433 | ) | | | (12,153 | ) | | | 53,138 | | | (56,589 | ) | Change in value of available-for-sale financial assets | | | 430,976 | | | | 680,900 | | | | 601,620 | | | 694,321 | | Change in value of held-to-maturity financial assets | | | 4,904 | | | | 3,823 | | | | 6,447 | | | (78 | ) | Shares of other comprehensive income of associates | | | (57,097 | ) | | | (89,303 | ) | | Shares of other comprehensive income of associates and joint ventures | | | | (96,174 | ) | | 1,069 | | Cash flow hedges | | | (515 | ) | | | (10,774 | ) | | | (6,075 | ) | | 14,980 | | Hedges of net investments in foreign operations | | | | (32,572 | ) | | (5,958 | ) | Other comprehensive income of separate account | | | | — | | | (13,692 | ) | | | | | | | | | | | | | | Total | | ₩ | 336,312 | | | ₩ | 461,679 | | | ₩ | 405,329 | | | ₩ | 537,668 | | | | | | | | | | | | | | |
26.4 Retained earningsEarnings The detailsDetails of retained earnings as of December 31, 20132016 and 2014, consist of:2017, are as follows:
| | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Legal reserves(1) | | ₩ | 188,638 | | | ₩ | 208,221 | | | Legal reserves1 | | | ₩ | 275,860 | | | ₩ | 334,873 | | Voluntary reserves | | | 982,000 | | | | 982,000 | | | | 982,000 | | | | 982,000 | | Unappropriated retained earnings(2) | | | 6,688,961 | | | | 7,876,924 | | | | 10,971,368 | | | | 13,727,331 | | | | | | | | | | | | | | | Total | | ₩ | 7,859,599 | | | ₩ | 9,067,145 | | | ₩ | 12,229,228 | | | ₩ | 15,044,204 | | | | | | | | | | | | | | |
(1)1 | With respect to the allocation of net profit earned in a fiscal term, the Parent Company must set aside in its legal reserve an amount equal to at least 10% of its net income after tax as reported in the separate statement of comprehensive income each time it pays dividends on its net profits earned until its legal reserve reaches |
| at least the aggregate amount of its share capital in accordance with Article 53 of the Financial Holding Company Act. The reserve is not available for the payment of cash dividends, but may be transferred to share capital, or used to reduce accumulated deficit. |
(2)2 | Retained earnings restricted for dividend at subsidiaries level pursuant to law and regulations amounts to ₩2,456,352₩3,148,332 million as of December 31, 2014. 2017. |
26.5 Treasury Shares Changes in treasury shares outstanding for the year ended December 31, 2016 and 2017 are as follows: | | | | | | | | | | | | | | | | | | | 2016 | | | | Beginning | | | Acquisition | | | Disposal | | | Ending | | | | (In number of shares and millions of Korean won) | | Number of treasury shares1 | | | — | | | | 19,826,100 | | | | — | | | | 19,826,100 | | Carrying amount1 | | ₩ | — | | | ₩ | 721,973 | | | ₩ | — | | | ₩ | 721,973 | | | | | | 2017 | | | | Beginning | | | Acquisition | | | Disposal | | | Ending | | | | (In number of shares and millions of Korean won) | | Number of treasury shares1 | | | 19,826,100 | | | | 3,761,823 | | | | (4,513,969 | ) | | | 19,073,954 | | Carrying amount1 | | ₩ | 721,973 | | | ₩ | 202,051 | | | ₩ | (168,051 | ) | | ₩ | 755,973 | |
1 | For the year ended December 31, 2017, the treasury stock trust agreement of ₩800,000 million with Samsung Securities Co., Ltd., which was signed in previous year, was terminated. In order to increase shareholder value, the Group entered in to another treasury stock trust agreement of ₩300,000 million with Samsung Securities Co., Ltd. for the year ended December 31, 2017. |
27. Net Interest Income The detailsDetails of interest income and interest expense for the years ended December 31, 2012, 20132015, 2016 and 2014,2017 are as follows:
| | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Interest income | | | | | | | | | | | | | Due from financial institutions | | ₩ | 160,400 | | | ₩ | 146,105 | | | ₩ | 190,302 | | | ₩ | 151,681 | | | ₩ | 111,433 | | | ₩ | 127,434 | | Loans | | | 12,310,713 | | | | 10,778,258 | | | | 10,168,304 | | | | 9,102,433 | | | | 8,905,769 | | | | 9,990,792 | | Financial investments | | | | | | | | | | | | | Available-for-sale financial assets | | | 799,020 | | | | 694,218 | | | | 571,755 | | | | 497,476 | | | | 426,762 | | | | 678,716 | | Held-to-maturity financial assets | | | 626,763 | | | | 574,586 | | | | 548,361 | | | | 491,429 | | | | 463,200 | | | | 480,595 | | Other | | | 313,210 | | | | 163,763 | | | | 156,574 | | | | 132,804 | | | | 114,718 | | | | 104,915 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 14,210,106 | | | | 12,356,930 | | | | 11,635,296 | | | | 10,375,823 | | | | 10,021,882 | | | | 11,382,452 | | | | | | | | | | | | | | | | | | | | | Interest expenses | | | | | | | | | | | | | Deposits | | | 5,450,781 | | | | 4,279,153 | | | | 3,845,468 | | | | 3,035,425 | | | | 2,476,579 | | | | 2,345,885 | | Debts | | | 394,812 | | | | 289,652 | | | | 265,773 | | | | 195,021 | | | | 229,475 | | | | 367,587 | | Debentures | | | 1,261,542 | | | | 1,190,446 | | | | 1,032,111 | | | | 866,801 | | | | 853,430 | | | | 880,709 | | Other | | | 65,188 | | | | 74,847 | | | | 76,169 | | | | 75,377 | | | | 59,869 | | | | 78,262 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 7,172,323 | | | | 5,834,098 | | | | 5,219,521 | | | | 4,172,624 | | | | 3,619,353 | | | | 3,672,443 | | | | | | | | | | | | | | | | | | | | | Net interest income | | ₩ | 7,037,783 | | | ₩ | 6,522,832 | | | ₩ | 6,415,775 | | | ₩ | 6,203,199 | | | ₩ | 6,402,529 | | | ₩ | 7,710,009 | | | | | | | | | | | | | | | | | | | | |
Interest income recognized on impaired loans and financial investments amounts to ₩108,968is ₩54,235 million (2013: ₩127,120(2016: ₩60,212 million, 2012: ₩124,1832015: ₩73,290 million) and ₩242 million (2013: ₩569 million, 2012: ₩200 million), respectively, for the year ended December 31, 2012, 2013 and 2014.2017. Interest income recognized on impaired financial investments does not exist (2016: ₩226 million, 2015: ₩235 million) for the year ended December 31, 2017. 28. Net Fee and Commission incomeIncome The detailsDetails of fee and commission income, and fee and commission expense for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows:
| | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Fee and commission income | | | | | | | | | | | | | Banking activity fees | | ₩ | 169,244 | | | ₩ | 167,507 | | | ₩ | 167,452 | | | ₩ | 168,389 | | | ₩ | 176,968 | | | ₩ | 188,405 | | Lending activity fees | | | 89,964 | | | | 90,413 | | | | 74,133 | | | | 87,790 | | | | 79,287 | | | | 74,858 | | Credit card related fees and commissions | | | 1,179,618 | | | | 1,126,944 | | | | 1,106,601 | | | | 1,223,221 | | | | 1,258,704 | | | | 1,447,560 | | Debit card related fees and commissions | | | 217,870 | | | | 255,742 | | | | 291,723 | | | | 340,509 | | | | 369,329 | | | | 400,183 | | Agent activity fees | | | 285,183 | | | | 207,036 | | | | 158,022 | | | | 168,135 | | | | 172,220 | | | | 152,028 | | Trust and other fiduciary fees | | | 148,672 | | | | 160,521 | | | | 230,839 | | | | 270,664 | | | | 219,215 | | | | 353,903 | | Fund management related fees | | | 81,477 | | | | 93,494 | | | | 89,264 | | | | 104,924 | | | | 119,745 | | | | 132,889 | | Guarantee fees | | | 33,594 | | | | 34,173 | | | | 29,811 | | | | 30,121 | | | | 40,710 | | | | 49,546 | | Foreign currency related fees | | | 108,611 | | | | 102,047 | | | | 96,018 | | | | 97,146 | | | | 99,022 | | | | 106,038 | | Commissions from transfer agent services | | | 174,829 | | | | 177,793 | | | | 148,583 | | | | 164,916 | | | | 166,371 | | | | 195,556 | | Other business account commission on consignment | | | 30,354 | | | | 29,799 | | | | 25,311 | | | | 30,525 | | | | 33,707 | | | | 33,793 | | Securities brokerage fees | | | 67,858 | | | | 68,158 | | | | 68,249 | | | Lease fee | | | — | | | | — | | | | 16,050 | | | Other | | | 166,602 | | | | 143,738 | | | | 164,129 | | | Commissions received on securities business | | | | 88,111 | | | | 154,966 | | | | 450,199 | | Lease fees | | | | 38,403 | | | | 75,737 | | | | 144,221 | | Others | | | | 158,241 | | | | 184,896 | | | | 259,071 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 2,753,876 | | | | 2,657,365 | | | | 2,666,185 | | | | 2,971,095 | | | | 3,150,877 | | | | 3,988,250 | | | | | | | | | | | | | | | | | | | | | Fee and commission expense | | | | | | | | | | | | | Trading activity related fees(1) | | | 14,963 | | | | 9,358 | | | | 7,938 | | | Trading activity related fees1 | | | | 11,050 | | | | 15,555 | | | | 29,547 | | Lending activity fees | | | 20,466 | | | | 18,791 | | | | 9,958 | | | | 20,507 | | | | 15,010 | | | | 23,253 | | Credit card and debit card related fees and commissions | | | 997,368 | | | | 934,114 | | | | 979,913 | | | Credit card related fees and commissions | | | | 1,093,538 | | | | 1,209,553 | | | | 1,482,221 | | Outsourcing related fees | | | 62,546 | | | | 74,516 | | | | 76,604 | | | | 87,875 | | | | 91,700 | | | | 127,542 | | Foreign currency related fees | | | 11,638 | | | | 12,561 | | | | 12,812 | | | | 12,419 | | | | 17,205 | | | | 27,394 | | Management fees of written-off loans | | | 3,284 | | | | 4,065 | | | | 9,853 | | | | 4,065 | | | | 4,456 | | | | 4,176 | | Other | | | 76,905 | | | | 124,721 | | | | 186,378 | | | | 206,658 | | | | 212,506 | | | | 244,093 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 1,187,170 | | | | 1,178,126 | | | | 1,283,456 | | | | 1,436,112 | | | | 1,565,985 | | | | 1,938,226 | | | | | | | | | | | | | | | | | | | | | Net fee and commission income | | ₩ | 1,566,706 | | | ₩ | 1,479,239 | | | ₩ | 1,382,729 | | | ₩ | 1,534,983 | | | ₩ | 1,584,892 | | | ₩ | 2,050,024 | | | | | | | | | | | | | | | | | | | | |
(1)1 | The fees from financial assets/liabilities at fair value through profit or loss. |
29. Net gainsGains or lossesLosses on financial assets/liabilitiesFinancial Assets/Liabilities at fair value through profitFair Value Through Profit or lossLoss 29.1 Net gainsGains or lossesLosses on financial instruments heldFinancial Instruments Held for tradingTrading Net gain or loss from financial instruments held for trading includes interest income, dividend income and gains or losses arising from changes in the fair values, sales and redemptions. The detailsDetails of net gain or loss from financial instruments held for trading for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows: | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Gains related to financial instruments held for trading | | | | | | | | | | | | | Financial assets held for trading | | | | | | | | | | | | | Debt securities | | ₩ | 462,456 | | | ₩ | 340,601 | | | ₩ | 471,048 | | | ₩ | 376,738 | | | ₩ | 457,570 | | | ₩ | 717,006 | | Equity securities | | | 117,103 | | | | 109,698 | | | | 68,024 | | | | 62,326 | | | | 120,289 | | | | 546,169 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 579,559 | | | | 450,299 | | | | 539,072 | | | | 439,064 | | | | 577,859 | | | | 1,263,175 | | | | | | | | | | | | | | | | | | | | | Derivatives held for trading | | | | | | | | | | | | | Interest rate | | | 948,426 | | | | 1,090,262 | | | | 1,327,839 | | | | 1,007,933 | | | | 1,162,058 | | | | 1,753,449 | | Currency | | | 2,718,568 | | | | 2,524,173 | | | | 1,919,287 | | | | 2,326,371 | | | | 3,751,706 | | | | 5,777,818 | | Stock or stock index | | | 685,454 | | | | 218,509 | | | | 153,863 | | | | 179,570 | | | | 899,185 | | | | 2,094,667 | | Credit | | | | 25,402 | | | | 52,988 | | | | 76,700 | | Commodity | | | 486 | | | | 1,336 | | | | 568 | | | | 1,279 | | | | 4,284 | | | | 17,278 | | Other | | | 20,668 | | | | 20,825 | | | | 6,894 | | | | 1,752 | | | | 4,808 | | | | 23,397 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 4,373,602 | | | | 3,855,105 | | | | 3,408,451 | | | | 3,542,307 | | | | 5,875,029 | | | | 9,743,309 | | | | | | | | | | | | | | | | | | | | | Financial liabilities held for trading | | | 69,866 | | | | 95,382 | | | | 35,645 | | | | 69,844 | | | | 100,246 | | | | 29,726 | | | | | | | | | | | | | | | | | | | | | Other financial instruments | | | 48 | | | | 70 | | | | 47 | | | | 2,167 | | | | 238 | | | | 109 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 5,023,075 | | | ₩ | 4,400,856 | | | ₩ | 3,983,215 | | | ₩ | 4,053,382 | | | ₩ | 6,553,372 | | | ₩ | 11,036,319 | | | | | | | | | | | | | | | | | | | | | Losses related to financial instruments held for trading | | | | | | | | | | | | | Financial assets held for trading | | | | | | | | | | | | | Debt securities | | ₩ | 72,078 | | | ₩ | 118,362 | | | ₩ | 38,888 | | | ₩ | 65,939 | | | ₩ | 265,760 | | | ₩ | 315,506 | | Equity securities | | | 70,852 | | | | 81,733 | | | | 85,808 | | | | 44,699 | | | | 114,052 | | | | 353,864 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 142,930 | | | | 200,095 | | | | 124,696 | | | | 110,638 | | | | 379,812 | | | | 669,370 | | | | | | | | | | | | | | | | | | | | | Derivatives held for trading | | | | | | | | | | | | | Interest rate | | | 962,738 | | | | 1,076,647 | | | | 1,411,540 | | | | 1,036,573 | | | | 1,164,423 | | | | 1,625,541 | | Currency | | | 2,274,799 | | | | 2,007,454 | | | | 1,796,605 | | | | 2,224,261 | | | | 3,827,928 | | | | 5,661,323 | | Stock or stock index | | | 665,037 | | | | 224,019 | | | | 101,267 | | | | 269,401 | | | | 658,832 | | | | 1,445,714 | | Credit | | | | 21,974 | | | | 46,251 | | | | 76,483 | | Commodity | | | 506 | | | | 182 | | | | 547 | | | | 1,127 | | | | 3,545 | | | | 8,481 | | Other | | | 14,651 | | | | 2,343 | | | | 841 | | | | 339 | | | | 1,291 | | | | 20,053 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 3,917,731 | | | | 3,310,645 | | | | 3,310,800 | | | | 3,553,675 | | | | 5,702,270 | | | | 8,837,595 | | | | | | | | | | | | | | | | | | | | | Financial liabilities held for trading | | | 113,929 | | | | 110,114 | | | | 97,621 | | | | 131,125 | | | | 99,024 | | | | 58,267 | | | | | | | | | | | | | | | | | | | | | Other financial instruments | | | 35 | | | | 29 | | | | 50 | | | | 2,214 | | | | 173 | | | | 117 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 4,174,625 | | | ₩ | 3,620,883 | | | ₩ | 3,533,167 | | | ₩ | 3,797,652 | | | ₩ | 6,181,279 | | | ₩ | 9,565,349 | | | | | | | | | | | | | | | | | | | | | Net gains or losses on financial instruments held for trading | | ₩ | 848,450 | | | ₩ | 779,973 | | | ₩ | 450,048 | | | ₩ | 255,730 | | | ₩ | 372,093 | | | ₩ | 1,470,970 | | | | | | | | | | | | | | | | | | | | |
29.2 Net gainsGains or lossesLosses on financial instruments designatedFinancial Instruments Designated at fair value through profitFair Value Through Profit or lossLoss Net gain or loss from financial instruments designated at fair value through profit or loss includes interest income, dividend income and gains or losses arising from changes in the fair values, sales and redemptions. The detailsDetails of net gain or loss from financial instruments designated at fair value through profit or loss for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows: | | | 2012 | | 2013 | | 2014 | | | 2015 | | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Gains related to financial instruments designated at fair value through profit or loss | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | ₩ | 117,213 | | | ₩ | 23,760 | | | ₩ | 28,496 | | | ₩ | 46,051 | | | ₩ | 118,721 | | | ₩ | 139,515 | | Financial liabilities designated at fair value through profit or loss | | | 5,230 | | | | 20,846 | | | | 34,468 | | | | 188,392 | | | | 91,357 | | | 474,736 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 122,443 | | | | 44,606 | | | | 62,964 | | | | 234,443 | | | | 210,078 | | | 614,251 | | | | | | | | | | | | | | | | | | | | | Losses related to financial instruments designated at fair value through profit or loss | | | | | | | | | | | | | Financial assets designated at fair value through profit or loss | | | 6,753 | | | | 14,754 | | | | 22,521 | | | | 42,690 | | | | 8,447 | | | 78,113 | | Financial liabilities designated at fair value through profit or loss | | | 152,176 | | | | 53,003 | | | | 51,293 | | | | 87,756 | | | | 582,492 | | | 1,266,779 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 158,929 | | | | 67,757 | | | | 73,814 | | | | 130,446 | | | | 590,939 | | | 1,344,892 | | | | | | | | | | | | | | | | | | | | | Net gains or losses on financial instruments designated at fair value through profit or loss | | ₩ | (36,486 | ) | | ₩ | (23,151 | ) | | ₩ | (10,850 | ) | | ₩ | 103,997 | | | ₩ | (380,861 | ) | | ₩ | (730,641 | ) | | | | | | | | | | | | | | | | | | | |
30. Other operating incomeOperating Income and expensesExpenses The detailsDetails of other operating income and expenses for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows:
| | | | | | | | | | | | | | | 2012 | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Other operating income | | | | | | | | | | | | | Revenue related to available-for-sale financial assets | | | | | | | | | | | | | Gains on redemption of available-for-sale financial assets | | ₩ | 480 | | | ₩ | 867 | | | ₩ | — | | Gains on sale of available-for-sale financial assets | | | 149,925 | | | | 189,011 | | | | 91,925 | | Reversal for Impairment on available-for-sale financial assets | | | — | | | | — | | | | 260 | | | | | | | | | | | | | | | Sub-total | | | 150,405 | | | | 189,878 | | | | 92,185 | | | | | | | | | | | | | | | Revenue related to available-for-sale held-to-maturity investments | | | | | | | | | | | | | Gains on sale of available-for- sale held-to-maturity investments | | | — | | | | — | | | | 1,668 | | | | | | | | | | | | | | | Sub-total | | | — | | | | — | | | | 1,668 | | | | | | | | | | | | | | | Gains on foreign exchange transactions | | | 1,093,904 | | | | 1,387,450 | | | | 1,490,797 | | Income related to insurance | | | 1,730,466 | | | | 1,233,773 | | | | 1,215,031 | | Dividend income | | | 69,023 | | | | 64,441 | | | | 78,298 | | Others | | | 242,169 | | | | 261,886 | | | | 221,745 | | | | | | | | | | | | | | | Total other operating income | | | 3,285,967 | | | | 3,137,428 | | | | 3,099,724 | | | | | | | | | | | | | | | Other operating expenses | | | | | | | | | | | | | Expense related to available-for-sale financial assets | | | | | | | | | | | | | Loss on redemption of available-for-sale financial assets | | | 11 | | | | 65 | | | | 7 | | Loss on sale of available-for-sale financial assets | | | 16,884 | | | | 25,157 | | | | 7,381 | | Impairment on available-for-sale financial assets | | | 280,610 | | | | 163,464 | | | | 195,929 | | | | | | | | | | | | | | | Sub-total | | | 297,505 | | | | 188,686 | | | | 203,317 | | | | | | | | | | | | | | | Expense related to held-to-maturity financial assets | | | | | | | | | | | | | Impairment on held-to-maturity financial assets | | | 154 | | | | 5 | | | | — | | | | | | | | | | | | | | | Sub-total | | | 154 | | | | 5 | | | | — | | | | | | | | | | | | | | | Loss on foreign exchanges transactions | | | 1,410,525 | | | | 1,667,335 | | | | 1,456,918 | | Expense related to insurance | | | 1,822,178 | | | | 1,358,830 | | | | 1,352,384 | | Others | | | 1,287,547 | | | | 1,227,337 | | | | 1,128,014 | | | | | | | | | | | | | | | Total other operating expenses | | | 4,817,909 | | | | 4,442,193 | | | | 4,140,633 | | | | | | | | | | | | | | | Net other operating income (expenses) | | ₩ | (1,531,942 | ) | | ₩ | (1,304,765 | ) | | ₩ | (1,040,909 | ) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Other operating income | | | | | | | | | | | | | Revenue related toavailable-for-sale financial assets | | | | | | | | | | | | | Gain on redemption ofavailable-for-sale financial assets | | ₩ | 312 | | | ₩ | 226 | | | ₩ | 884 | | Gain on sale ofavailable-for-sale financial assets | | | 404,144 | | | | 236,344 | | | | 113,001 | | Reversal for impairment onavailable-for-sale financial assets | | | 265 | | | | 328 | | | | — | | | | | | | | | | | | | | | Sub-total | | | 404,721 | | | | 236,898 | | | | 113,885 | | | | | | | | | | | | | | | Revenue related toheld-to-maturity financial assets | | | | | | | | | | | | | Gain on redemption ofheld-to-maturity financial assets | | | — | | | | — | | | | 374 | | | | | | | | | | | | | | | Sub-total | | | — | | | | — | | | | 374 | | | | | | | | | | | | | | | Gain on foreign exchange transactions | | | 2,464,723 | | | | 3,567,560 | | | | 2,520,168 | | Dividend income | | | 96,829 | | | | 134,989 | | | | 276,829 | | Others | | | 258,888 | | | | 278,827 | | | | 325,745 | | | | | | | | | | | | | | | Total other operating income | | | 3,225,161 | | | | 4,218,274 | | | | 3,237,001 | | | | | | | | | | | | | | | Other operating expenses | | | | | | | | | | | | | Expense related toavailable-for-sale financial assets | | | | | | | | | | | | | Loss on redemption ofavailable-for-sale financial assets | | | 114 | | | | — | | | | 1,403 | | Loss on sale ofavailable-for-sale financial assets | | | 10,108 | | | | 44,360 | | | | 174,543 | | Impairment onavailable-for-sale financial assets | | | 227,588 | | | | 35,216 | | | | 47,917 | | | | | | | | | | | | | | | Sub-total | | | 237,810 | | | | 79,576 | | | | 223,863 | | | | | | | | | | | | | | | Loss on foreign exchanges transactions | | | 2,406,683 | | | | 3,303,205 | | | | 2,472,657 | | Others | | | 1,191,014 | | | | 1,251,401 | | | | 1,442,371 | | | | | | | | | | | | | | | Total other operating expenses | | | 3,835,507 | | | | 4,634,182 | | | | 4,138,891 | | | | | | | | | | | | | | | Net other operating income (expenses) | | ₩ | (610,346 | ) | | ₩ | (415,908 | ) | | ₩ | (901,890 | ) | | | | | | | | | | | | | |
31. General and administrative expensesAdministrative Expenses 31.1 General and administrative expensesAdministrative Expenses The detailsDetails of general and administrative expenses for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows:
| | | 2012 | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Employee Benefits | | | | | | | | | | | | | Salaries and short-term employee benefits—salaries | | ₩ | 1,598,045 | | | ₩ | 1,641,326 | | | ₩ | 1,700,120 | | | ₩ | 1,764,459 | | | ₩ | 1,874,396 | | | ₩ | 2,465,132 | | Salaries and short-term employee benefits—others | | | 657,473 | | | | 677,107 | | | | 706,309 | | | | 755,829 | | | | 734,119 | | | | 822,536 | | Post-employment benefits—defined benefit plans | | | 171,508 | | | | 171,108 | | | | 165,700 | | | | 186,739 | | | | 196,119 | | | | 231,704 | | Post-employment benefits—defined contribution plans | | | 5,463 | | | | 7,094 | | | | 8,821 | | | | 10,262 | | | | 9,361 | | | | 15,046 | | Termination benefits | | | (3,960 | ) | | | 19,714 | | | | 1,124 | | | | 391,549 | | | | 903,435 | | | | 160,798 | | Share-based payments | | | 13,871 | | | | 17,289 | | | | 11,422 | | | | 17,429 | | | | 38,190 | | | | 73,370 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 2,442,400 | | | | 2,533,638 | | | | 2,593,496 | | | | 3,126,267 | | | | 3,755,620 | | | | 3,768,586 | | | | | | | | | | | | | | | | | | | | | Depreciation and amortization | | | 328,152 | | | | 286,756 | | | | 261,056 | | | | 257,306 | | | | 288,620 | | | | 370,378 | | | | | | | | | | | | | | | | | | | | | Other general and administrative expenses | | | | | | | | | | | | | Rental expense | | | 276,769 | | | | 290,886 | | | | 297,656 | | | | 273,531 | | | | 280,888 | | | | 320,920 | | Tax and dues | | | 72,111 | | | | 141,274 | | | | 150,443 | | | | 142,272 | | | | 134,892 | | | | 195,965 | | Communication | | | 53,549 | | | | 55,549 | | | | 38,661 | | | | 37,136 | | | | 37,114 | | | | 44,516 | | Electricity and utilities | | | 24,898 | | | | 26,315 | | | | 27,988 | | | | 28,752 | | | | 29,921 | | | | 31,158 | | Publication | | | 20,764 | | | | 19,259 | | | | 19,642 | | | | 18,337 | | | | 17,300 | | | | 17,383 | | Repairs and maintenance | | | 13,426 | | | | 14,615 | | | | 16,892 | | | | 15,777 | | | | 15,722 | | | | 20,524 | | Vehicle | | | 12,114 | | | | 11,816 | | | | 11,579 | | | | 10,291 | | | | 9,624 | | | | 11,587 | | Travel | | | 5,526 | | | | 5,722 | | | | 5,489 | | | | 6,784 | | | | 8,059 | | | | 17,407 | | Training | | | 22,443 | | | | 19,498 | | | | 17,362 | | | | 23,544 | | | | 23,426 | | | | 26,664 | | Service fees | | | 105,972 | | | | 104,210 | | | | 106,403 | | | | 115,919 | | | | 129,032 | | | | 179,311 | | Electronic data processing expenses | | | | 163,160 | | | | 160,863 | | | | 172,007 | | Advertising | | | | 124,546 | | | | 142,186 | | | | 199,676 | | Others | | | 467,486 | | | | 474,026 | | | | 463,027 | | | | 179,962 | | | | 195,444 | | | | 252,582 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 1,075,058 | | | | 1,163,170 | | | | 1,155,142 | | | | 1,140,011 | | | | 1,184,471 | | | | 1,489,700 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 3,845,610 | | | ₩ | 3,983,564 | | | ₩ | 4,009,694 | | | ₩ | 4,523,584 | | | ₩ | 5,228,711 | | | ₩ | 5,628,664 | | | | | | | | | | | | | | | | | | | | |
31.2 Share-based paymentsPayments 31.2.1 Share options The details of the share options as of December 31, 2014, are as follows:
| | | | | | | | | | | | | | | | | Grant date | | | Exercise period | | | Granted shares(1) | | | Vesting conditions | | | | | | (Years) | | | (In number of shares) | | | | Series 22 | | | 2007.02.08 | | | | 8 | | | | 855,000 | | | Service period: 1, 3 years | Series 23 | | | 2007.03.23 | | | | 8 | | | | 30,000 | | | Service period: 3 years | | | | | | | | | | | | | | | | Total | | | | 885,000 | | | | | | | | | | | | | | | | | | |
(1) | Granted shares represent the total number of shares initially granted to directors and employees whose options have not been exercised at the end of the reporting period.
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The changes in the number of granted share options and the weighted average exercise price for the years ended December 31, 2013 and 2014, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Number of granted shares | | | Number of exercisable shares | | | Exercise price per share | | | Remaining contractual life(Years) | | | | Beginning | | | Expired | | | Ending | | | | | | | (In Korean won, except shares) | | | | | Series 15-1 | | | 125,362 | | | | 125,362 | | | | — | | | | — | | | | — | | | | — | | Series 15-2 | | | 440,928 | | | | 440,928 | | | | — | | | | — | | | | — | | | | — | | Series 17 | | | 29,441 | | | | 29,441 | | | | — | | | | — | | | | — | | | | — | | Series 18 | | | 7,212 | | | | 7,212 | | | | — | | | | — | | | | — | | | | — | | Series 19 | | | 751,651 | | | | — | | | | 751,651 | | | | 751,651 | | | | 77,063 | | | | 0.23 | | Series 20 | | | 25,613 | | | | — | | | | 25,613 | | | | 25,613 | | | | 81,900 | | | | 0.32 | | Series 21 | | | 18,987 | | | | — | | | | 18,987 | | | | 18,987 | | | | 76,600 | | | | 0.82 | | Series 22 | | | 657,498 | | | | — | | | | 657,498 | | | | 657,498 | | | | 77,100 | | | | 1.11 | | Series 23 | | | 15,246 | | | | — | | | | 15,246 | | | | 15,246 | | | | 84,500 | | | | 1.22 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 2,071,938 | | | | 602,943 | | | | 1,468,995 | | | | 1,468,995 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted average exercise price | | ₩ | 68,909 | | | ₩ | 48,625 | | | ₩ | 77,235 | | | ₩ | 77,235 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Number of granted shares | | | Number of exercisable shares | | | Exercise price per share | | | Remaining contractual life(Years) | | | | Beginning | | | Expired | | | Ending | | | | | | | (In Korean won, except shares) | | | | | Series 19 | | | 751,651 | | | | 751,651 | | | | — | | | | — | | | | — | | | | — | | Series 20 | | | 25,613 | | | | 25,613 | | | | — | | | | — | | | | — | | | | — | | Series 21 | | | 18,987 | | | | 18,987 | | | | — | | | | — | | | | — | | | | — | | Series 22 | | | 657,498 | | | | — | | | | 657,498 | | | | 657,498 | | | | 77,100 | | | | 0.11 | | Series 23 | | | 15,246 | | | | — | | | | 15,246 | | | | 15,246 | | | | 84,500 | | | | 0.22 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,468,995 | | | | 796,251 | | | | 672,744 | | | | 672,744 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted average exercise price | | ₩ | 77,235 | | | ₩ | 77,207 | | | ₩ | 77,268 | | | ₩ | 77,268 | | | | | | | | | |
The fair value of each option granted is estimated using a Black-Scholes option pricing model based on the assumptions in the table below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share price | | | Weighted average exercise price | | | Expected volatility (%) | | | Option’s expected life (Years) | | | Expected dividends | | | Risk free interest rate (%) | | | Fair value | | | | (In Korean won) | | Series 22 (Directors) | | ₩ | 38,200 | | | ₩ | 77,100 | | | | 11.15 | | | | 0.05 | | | ₩ | 32 | | | | 2.07 | | | | — | | Series 22 (Employees) | | | 38,200 | | | | 77,100 | | | | 11.15 | | | | 0.05 | | | | 32 | | | | 2.07 | | | | — | | Series 23 (Non-executive directors) | | | 38,200 | | | | 84,500 | | | | 8.01 | | | | 0.11 | | | | 67 | | | | 2.07 | | | | — | |
The option’s expected life is separately estimated for employees and directors using actual historical behavior and projected future behavior to reflect the effects of expected early exercise. Expected volatility is based on the historical volatility of the share price over the most recent period that is generally commensurate with the expected term of the option. To reflect the changes in exercise price which is indexed to the sum of the major competitors’ total market capitalization, cross volatility is used in calculating the expected volatility.
31.2.2 Share GrantsStock grants
The Group changed the scheme of share-based payment from sharestock options to sharestock grants in November 2007. The sharestock grant award program is an incentive plan that sets, on grant date, the maximum amount of shares that can be awarded. Actual sharesstock granted at the end of the vesting period is determined in accordance with achievement ofpre-specified targets over the vesting period. The detailsDetails of the sharestock grants linked to long-term performance as of December 31, 2014,2017, are as follows:
| | | | | | | | | | | | | Grant date | | | Number of granted shares(1) | | | Vesting conditions | | | | | | (In number of shares) | | | | (KB Financial Group Inc.) | | | | | | | | | | | Series 4 | | | 2010.07.13 | | | | 180,707 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(3) | Series 8 | | | 2012.01.01 | | | | 13,471 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(4) | Series 9 | | | 2013.07.17 | | | | 82,699 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(4) | Series 10 | | | 2014.01.01 | | | | 37,732 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(4) | Series 11 | | | 2013.07.13 | | | | 69,892 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(3) | Deferred grant in 2010 | | | — | | | | 6,583 | | | Satisfied | Deferred grant in 2011 | | | — | | | | 1,435 | | | Satisfied | Deferred grant in 2012 | | | — | | | | 7,975 | | | Satisfied | Deferred grant in 2013 | | | — | | | | 2,617 | | | Satisfied | | | | | | | | | | | | Sub-total | | | | | | | 403,111 | | | | | | | | | | | | | | | (Kookmin Bank) | | | | | | | | | | | Series 41 | | | 2012.08.02 | | | | 23,521 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(5) | Series 43 | | | 2012.11.26 | | | | 13,918 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(5) | Series 44 | | | 2013.01.01 | | | | 17,242 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(5) | Series 45... | | | 2013.01.01 | | | | 9,698 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(5) | Series 46 | | | 2013.01.01 | | | | 103,440 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(5) | Series 48 | | | 2013.07.23 | | | | 74,666 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(6) | Series 49 | | | 2013.07.24 | | | | 101,828 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(6) | Series 50 | | | 2013.07.24 | | | | 82,926 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(6) | Series 51 | | | 2013.07.25 | | | | 9,899 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(6) | Series 52 | | | 2013.08.01 | | | | 10,278 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(6) | Series 53 | | | 2013.07.19 | | | | 69,256 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(7) | Series 54 | | | 2013.07.23 | | | | 26,689 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(7) | Series 55 | | | 2014.01.03 | | | | 11,060 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(8) | Series 56 | | | 2013.12.30 | | | | 17,798 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(6) | Series 57 | | | 2014.01.01 | | | | 44,265 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(6) | Series 58 | | | 2014.01.01 | | | | 78,700 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(6) | Series 59 | | | 2014.08.26 | | | | 9,106 | | | Services fulfillment, Achievements of targets on the basis of market and non-market performance (2),(6) | Deferred grant in 2010 | | | — | | | | 171 | | | Satisfied | Deferred grant in 2011 | | | — | | | | 8,454 | | | Satisfied | Deferred grant in 2012 | | | — | | | | 31,348 | | | Satisfied | Deferred grant in 2013 | | | — | | | | 92,316 | | | Satisfied | | | | | | | | | | | | Sub-total | | | | | | | 836,579 | | | | | | | | | | | | | | |
| | | | | | | | | | | Grant date | | Number of granted shares(1)1 | | | Vesting conditions | | | | | (In number of shares) | | | | (Other subsidiaries)KB Financial Group Inc.
| | | | | | | | | Share granted in 2010Series 14
| | July 17, 2015 | | | 3,48511,363 | | | Services fulfillment, AchievementsAchievement of targets on the basis of market andnon-market performance (9)2,6 | Share granted in 2011Series 15
| | Jan. 01, 2016 | | | 7,64872,843 | | | Services fulfillment, AchievementsAchievement of targets on the basis of market andnon-market performance (9)2,7 | Share granted in 2012Series 17
| | Jan. 01, 2017 | | | 63,97642,032 | | | Services fulfillment, AchievementsAchievement of targets on the basis of market andnon-market performance (9)2,7 | Share granted in 2013Series 18
| | July. 17, 2017 | | | 104,3947,444 | | | Services fulfillment, AchievementsAchievement of targets on the basis of market andnon-market performance (9)2,7 | Share grantedDeferred grant in 2012
| | — | | | 5,415 | | | Satisfied | Deferred grant in 2013 | | — | | | 588 | | | Satisfied | Deferred grant in 2014 | | — | | | 82,7593,769 | | | Satisfied | Services fulfillment, Achievements of targets on the basis of market and non-market performance (9)Deferred grant in 2015
| | — | | | 21,780 | | | Satisfied | Deferred grant in 2016 | | — | | | 15,338 | | | Satisfied | Deferred grant in 2017 | | — | | | 36,054 | | | Satisfied | | | | | | | | | | Sub-total | | | | | 262,262216,626 | | | | | | | | | | | | | Kookmin Bank | | | | | | | | | Series 64 | | July 24, 2015 | | | 11,133 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,3 | Series 65 | | Aug. 26, 2015 | | | 11,587 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,3 | Series 67 | | Jan. 01, 2016 | | | 135,934 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,4 | Series 68 | | July 05, 2016 | | | 9,621 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,4 | Series 69 | | Jan. 01, 2017 | | | 323,777 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,5 | Series 70 | | July 24, 2017 | | | 1,449 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,5 | Series 71 | | Aug. 26, 2017 | | | 4,372 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,5 | Series 72 | | Aug. 28, 2017 | | | 5,601 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,5 | Deferred grant in 2014 | | — | | | 35,312 | | | Satisfied | Deferred grant in 2015 | | — | | | 61,328 | | | Satisfied | Deferred grant in 2016 | | — | | | 155,407 | | | Satisfied | Deferred grant in 2017 | | — | | | 31,547 | | | Satisfied | | | | | | | | | | Sub-total | | | | | 787,068 | | | | | | | | | | | | |
| | | | | | | | | | | Grant date | | Number of granted shares1 | | | Vesting conditions | | | (In number of shares) | | | | Other subsidiaries | | | | | | | Stock granted in 2010 | | — | | | 2,096 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance8,9 | Stock granted in 2011 | | — | | | 2,633 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance8,9 | Stock granted in 2012 | | — | | | 7,788 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance8,9 | Stock granted in 2013 | | — | | | 21,289 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance8,9 | Stock granted in 2014 | | — | | | 45,426 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance8,9 | Stock granted in 2015 | | — | | | 197,689 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance8,9 | Stock granted in 2016 | | — | | | 187,066 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance8,9 | Stock granted in 2017 | | — | | | 289,348 | | | Services fulfillment, Achievement of targets on the basis of market andnon-market performance8,9 | | | | | | | | | | Sub-total | | | | | 753,335 | | | | | | | | | | | | | Total | | | | | 1,501,9521,757,029 | | | | | | | | | | | | |
(1)1 | Granted shares represent the total number of shares initially granted to directors and employees that have residual shares at the end of reporting period. period (Deferred grants are residual shares as of December 31, 2017). |
(2)2 | Certain portionDuring the year, executives and employees were given the option of deferring payment of the granted shares (after the date of retirement), payment ratio, and payment period. Accordingly, a certain percentage of the granted amount is compensated over a maximum perioddeferred for up to five years after the date of three years. retirement when the deferred grant has been confirmed. |
(3)3 | The 37.5%30%, 37.5%40% and 25%30% of the number of granted shares to be compensated are determined upon the accomplishment of relative TSR, Performance Results and financial results of Kookmin Bank, respectively. 50% of the number of certain granted shares to be compensated areis determined based onupon the accomplishment of targeted relative TSR, targeted EPSwhile 50% is determined upon the accomplishment of Performance Results.
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4 | 30%, 40% and qualitative indicators, respectively. The 30%, 30% and 40% of the number of other granted shares to be compensated are determined based onupon the accomplishment of the targeted Value-up Index, targeted financial resultsrelative TSR, Performance Results and Evaluation of the Company and its subsidiaries (Group) and targeted relative TSR,Bank president’s performance, respectively. The 40%, 40% and 20%50% of the number of certain granted shares to be compensated is determined upon the remainingaccomplishment of relative TSR, while 50% is determined upon the accomplishment of Performance Results. |
5 | 30%, 40% and 30% of the number of granted shares to be compensated are determined based onupon the accomplishment of the targeted relative TSR, Performance Results and Evaluation of the targeted EPS and qualitative indicators,Bank president’s performance, respectively. 30% of the number of certain granted shares to be compensated is determined upon the accomplishment of relative TSR, while 70% is determined upon the accomplishment of Performance Results. |
(4)6 | The 40%, 30% and 30% of the number of granted shares to be compensated are determined upon the accomplishment of Performance Results, financial results of the Group and relative TSR, respectively. 50% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 50% is determined upon the accomplishment of relative TSR.
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7 | 40%, 30% and 30% of the number of granted shares to be compensated are determined upon the accomplishment of Performance Results, financial results of the Group and relative TSR, respectively. 50% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 50% is determined upon the accomplishment of relative TSR. |
8 | 30%, 30% and 40% of the number of granted shares to be compensated are determined upon the accomplishment of the targeted Value-up Index, targeted financial results of the CompanyPerformance Results, subsidiaries’ performance and its subsidiaries (Group) and the targeted relative TSR, respectively. However, 50% and 50%60% of the number of certain granted shares willto be compensated based onis determined upon the accomplishment of the targeted Value-up Index andsubsidiaries’ performance, while 40% is determined upon the accomplishment of targeted relative TSR. |
(5) | The 40%, 30% and 30% of the number of certain granted shares to be compensated are determined based onupon accomplishment of Performance Results, subsidiaries’ performance and relative TSR, respectively. 50% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries’ performance, while 50% is determined upon the targetedaccomplishment of relative TSR, the targeted Value-up Index and the targeted financial resultsTSR. 70% of the Bank, respectively. number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries’ performance, while 30% is determined upon the accomplishment of relative TSR. |
(6)9 | The 30%50%, 30% and 40%20% of the number of granted shares to be compensated are determined upon the accomplishment of the targeted financial results of the Bank, the targeted relative TSR and the targeted Value-up Index, respectively. However, as for certain number of shares, half of the number of granted shares to be compensated is determined based on the accomplishment of the targeted relative TSR, while the other half is determined by the targeted Value-up Index.
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(7) | The 30%, 45% and 25% of the number of granted shares to be compensated are determined based on the accomplishment of the targeted relative TSR, the ROA and the growth rate of total assets, respectively.
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(8) | The number of granted shares to be compensated is not linked to performance, but fixed.
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(9) | The 30%, 30% and 40% of the number of granted shares to be compensated are determined based on the accomplishment of the targeted Value-up Index, the respectivePerformance Results, subsidiaries’ performance and the targeted relative TSR, respectively. The 60% and 40%80% of the number of certain granted shares to be compensated is determined based onupon the accomplishment of the respective subsidiaries’ performance, andwhile 20% is determined upon the accomplishment of the targeted relative TSR, respectively. The 40%, 30% and 30%TSR. 80% of the number of certain granted shares to be compensated is determined based onupon the accomplishment of Performance Results, while 20% is determined upon the targeted Value-up Index,accomplishment of relative TSR. 60%, 30% and 10% of the respectivenumber of granted shares to be compensated are determined upon the accomplishment of Performance Results, subsidiaries’ performance and the targeted relative TSR, respectively. 90% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries’ performance, while 10% is determined upon the accomplishment of relative TSR. 90% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 10% is determined upon the accomplishment of relative TSR. |
The share grant award program is an incentive plan that sets, on grant date, the maximum amount
Details of shares that can be awarded. Actual shares granted at the end of the vesting period is determined in accordance with achievement of pre-specified targets over the vesting period. The details of sharestock grants linked to short-term performance as of December 31, 2014,2017, are as follows:
| | | | | | | | | | | | | Grant date | | | Number of vested shares(1) | | | Vesting Conditions | (KB Financial Group Inc.) | | | | | | | | | | | Share granted in 2010 | | | 2010.01.01 | | | | 322 | | | Satisfied | Share granted in 2011 | | | 2011.01.01 | | | | 7,295 | | | Satisfied | Share granted in 2012 | | | 2012.01.01 | | | | 15,782 | | | Satisfied | Share granted in 2013 | | | 2013.01.01 | | | | 16,560 | | | Satisfied | Share granted in 2014 | | | 2014.01.01 | | | | 25,174 | | | Proportion to service period | (Kookmin Bank) | | | | | | | | | | | Share granted in 2010 | | | 2010.01.01 | | | | 363 | | | Satisfied | Share granted in 2011 | | | 2011.01.01 | | | | 46,845 | | | Satisfied | Share granted in 2012 | | | 2012.01.01 | | | | 103,177 | | | Satisfied | Share granted in 2013 | | | 2013.01.01 | | | | 102,343 | | | Satisfied | Share granted in 2014 | | | 2014.01.01 | | | | 173,132 | | | Proportion to service period | (Other subsidiaries) | | | | | | | | | | | Share granted in 2013 | | | 2013.01.01 | | | | 9,823 | | | Satisfied | Share granted in 2014 | | | 2014.01.01 | | | | 28,149 | | | Proportion to service period |
| | | | | | | | | | | | | Grant date | | | Estimated number of vested shares1 | | | Vesting conditions | | | (In number of shares) | | | | KB Financial Group Inc. | | | | | | | | | | | Stock granted in 2010 | | | Jan. 01, 2010 | | | | 322 | | | Satisfied | Stock granted in 2011 | | | Jan. 01, 2011 | | | | 1,728 | | | Satisfied | Stock granted in 2012 | | | Jan. 01, 2012 | | | | 2,642 | | | Satisfied | Stock granted in 2013 | | | Jan. 01, 2013 | | | | 448 | | | Satisfied | Stock granted in 2014 | | | Jan. 01, 2014 | | | | 7,079 | | | Satisfied | Stock granted in 2015 | | | Jan. 01, 2015 | | | | 16,730 | | | Satisfied | Stock granted in 2016 | | | Jan. 01, 2016 | | | | 20,523 | | | Satisfied | Stock granted in 2017 | | | Jan. 01, 2017 | | | | 17,470 | | | Proportional to service period | Kookmin Bank | | | | | | | | | | | Stock granted in 2014 | | | Jan. 01, 2014 | | | | 53,771 | | | Satisfied | Stock granted in 2015 | | | Jan. 01, 2015 | | | | 100,548 | | | Satisfied | Stock granted in 2016 | | | Jan. 01, 2016 | | | | 141,707 | | | Satisfied | Stock granted in 2017 | | | Jan. 01, 2017 | | | | 99,185 | | | Proportional to service period | Other subsidiaries | | | | | | | | | | | Stock granted in 2014 | | | — | | | | 24,976 | | | Satisfied | Stock granted in 2015 | | | — | | | | 117,127 | | | Satisfied | Stock granted in 2016 | | | — | | | | 204,978 | | | Satisfied | Stock granted in 2017 | | | — | | | | 194,927 | | | Proportional to service period |
(1)1 | The numberDuring the year, executives and employees were given the option of deferred payment of the granted shares which are exercisable,(after the date of retirement), payment ratio, and payment period. Accordingly, a certain percentage of the granted amount is determined bydeferred for up to five years after the resultsdate of performance. The share grants are settled over three years. retirement after the deferred grant has been confirmed. |
Share grants are measured at fair value using the Monte Carlo Simulation Model and assumptions used in determining the fair value as of December 31, 2014,2017, are as follows: | | | | | | | | | | | | | | | | | | | Expected exercise period (Years) | | | Risk free rate (%) | | | Fair value (Market performance condition) | | | Fair value (Non-market performance condition) | | Linked to long term performance | | | | | | | | | | (KB Financial Group Inc.) | | | | | | | | | | | | | | | | | Series 4 | | | 0.00~1.53 | | | | 2.07 | | | | — | | | | 35,315~36,425 | | Series 4-1 | | | 0.00~1.53 | | | | 2.07 | | | | — | | | | 35,315~36,425 | | Series 4-2 | | | 0.00~1.00 | | | | 2.07 | | | | — | | | | 36,389~40,662 | | Series 8 | | | 0.00~2.00 | | | | 2.07 | | | | — | | | | 36,389~40,662 | | Series 9 | | | 0.00~3.00 | | | | 2.07 | | | | 38,617 | | | | 36,389~38,111 | | Series 9-1 | | | 0.00~3.00 | | | | 2.07 | | | | 39,437 | | | | 36,389~38,111 | | Series 9-2 | | | 1.00~4.00 | | | | 2.07 | | | | 33,363 | | | | 35,653~36,835 | | Series 9-3 | | | 0.00~3.00 | | | | 2.07 | | | | 39,223 | | | | 36,389~38,111 | | Series 9-4 | | | 0.00~3.00 | | | | 2.07 | | | | 37,036 | | | | 36,389~38,111 | | Series 10 | | | 0.00~3.00 | | | | 2.07 | | | | 38,617 | | | | 36,389~38,111 | | Series 10-1 | | | 1.00~4.00 | | | | 2.07 | | | | 32,645 | | | | 35,653~36,835 | | Series 10-2 | | | 1.00~4.00 | | | | 2.07 | | | | 33,110 | | | | 35,653~36,835 | | Series 11 | | | 1.53~4.53 | | | | 2.08 | | | | 35,335 | | | | 36,639~36,858 | | Deferred grant in 2010 | | | 0.00~1.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Deferred grant in 2011 | | | 0.00~2.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Deferred grant in 2012 | | | 0.00~2.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Deferred grant in 2013 | | | 0.00~2.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | |
| | | | | | | | | | | | | | | | | | | Expected exercise period (Years) | | | Risk free rate (%) | | | Fair value (Market performance condition) | | | Fair value (Non-market performance condition) | | Linked to long term performance | | | | | | | | | | | | | | | | | (KB Financial Group Inc.) | | | | | | | | | | | | | | | | | Series 14 | | | 0.00~7.00 | | | | 1.87~2.39 | | | | 61,139 | | | | 52,873~61,139 | | Series 15 | | | 0.00~3.00 | | | | 1.87~2.14 | | | | 61,139 | | | | 58,516~61,791 | | Series 17 | | | 1.00~6.00 | | | | 1.87~2.37 | | | | 61,607 | | | | 54,116~61,791 | | Series 18 | | | 1.54~7.00 | | | | 1.94~2.39 | | | | 60,517 | | | | 52,873~62,419 | | Deferred grant in 2012 | | | — | | | | — | | | | — | | | | 34,180~40,662 | | Deferred grant in 2013 | | | — | | | | — | | | | — | | | | 34,180~42,824 | | Deferred grant in 2014 | | | — | | | | 1.87 | | | | — | | | | 61,294 | | Deferred grant in 2015 | | | 0.00~5.00 | | | | 1.87~2.34 | | | | — | | | | 55,745~61,791 | | Deferred grant in 2016 | | | 0.00~6.00 | | | | 1.87~2.37 | | | | — | | | | 54,116~61,791 | | Deferred grant in 2017 | | | 0.00~3.00 | | | | 1.87~2.14 | | | | — | | | | 58,516~61,791 | |
| | | | | | | | | | | | | | | | | | | Expected exercise period (Years) | | | Risk free rate (%) | | | Fair value (Market performance condition) | | | Fair value (Non-market performance condition) | | (Kookmin Bank) | | | | | | | | | | | | | | | | | Series 41-1 | | | 0.00~3.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Series 41-2 | | | 0.00~3.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Series 43 | | | 0.00~3.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Series 44 | | | 0.00~2.00 | | | | 2.07 | | | | — | | | | 36,389~40,662 | | Series 45 | | | 0.00~3.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Series 46 | | | 0.00~3.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Series 48 | | | 0.56~4.00 | | | | 2.07 | | | | 35,029 | | | | 36,389~36,835 | | Series 48-1 | | | 0.00~3.00 | | | | 2.07 | | | | 36,734 | | | | 36,389~38,111 | | Series 48-2 | | | 0.00~3.00 | | | | 2.07 | | | | 38,617 | | | | 36,389~38,111 | | Series 49 | | | 0.56~4.00 | | | | 2.07 | | | | 34,972 | | | | 36,389~36,835 | | Series 49-1 | | | 0.65~4.00 | | | | 2.07 | | | | 34,906 | | | | 36,389~36,835 | | Series 49-2 | | | 0.00~3.00 | | | | 2.07 | | | | 38,617 | | | | 36,389~38,111 | | Series 50 | | | 0.56~4.00 | | | | 2.07 | | | | 34,972 | | | | 36,389~36,835 | | Series 50-1 | | | 0.00~3.00 | | | | 2.07 | | | | 38,617 | | | | 36,389~38,111 | | Series 51 | | | 0.00~3.00 | | | | 2.07 | | | | 38,617 | | | | 36,389~38,111 | | Series 52 | | | 0.58~4.00 | | | | 2.07 | | | | 34,977 | | | | 36,389~36,835 | | Series 53 | | | 0.00~2.68 | | | | 2.07 | | | | 38,284 | | | | 36,317~40,991 | | Series 54 | | | 0.00~3.00 | | | | 2.07 | | | | 38,617 | | | | 36,389~38,111 | | Series 55 | | | 2.01~5.01 | | | | 2.08 | | | | — | | | | 36,551~37,053 | | Series 56 | | | 0.00~3.00 | | | | 2.07 | | | | 32,595 | | | | 36,389~36,835 | | Series 56-1 | | | 0.00~3.00 | | | | 2.07 | | | | 36,854 | | | | 36,389~38,111 | | Series 57 | | | 1.00~4.00 | | | | 2.07 | | | | 32,645 | | | | 36,389~36,835 | | Series 57-1 | | | 0.00~3.00 | | | | 2.07 | | | | 38,617 | | | | 36,389~38,111 | | Series 58 | | | 1.00~4.00 | | | | 2.07 | | | | 32,645 | | | | 36,389~36,835 | | Series 59 | | | 0.00~3.00 | | | | 2.07 | | | | 38,617 | | | | 36,389~38,111 | | Grant deferred in 2012 | | | 0.00~1.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Grant deferred in 2013 | | | 0.00~2.00 | | | | 2.07 | | | | — | | | | 36,205~38,111 | | | | | | | (Other subsidiaries) | | | | | | | | | | | | | | | | | Share granted in 2012 | | | 0.00~0.54 | | | | 2.07 | | | | 0~21,928 | | | | 35,968~38,617 | | Share granted in 2013 | | | 0.00~1.75 | | | | 2.07~2.08 | | | | 0~33,505 | | | | 35,115~40,662 | | Share granted in 2014 | | | 1.00~2.67 | | | | 2.07~2.10 | | | | 30,801~33,312 | | | | 34,676~36,835 | | | | | | | Linked to short-term performance | | | | | | | | | | | | | | | | | (KB Financial Group Inc.) | | | | | | | | | | | | | | | | | Share granted in 2012 | | | 0.00~1.00 | | | | 2.07 | | | | — | | | | 36,389~40,662 | | Share granted in 2013 | | | 0.00~2.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Share granted in 2014 | | | 1.00~3.00 | | | | 2.07 | | | | — | | | | 36,389~36,684 | | | | | | | (Kookmin Bank) | | | | | | | | | | | | | | | | | Share granted in 2012 | | | 0.00~1.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Share granted in 2013 | | | 0.00~2.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Share granted in 2014 | | | 1.00~3.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | | | | | | (Other subsidiaries) | | | | | | | | | | | | | | | | | Share granted in 2013 | | | 0.00~2.00 | | | | 2.07 | | | | — | | | | 36,389~38,111 | | Share granted in 2014 | | | 2.00~4.00 | | | | 2.07 | | | | — | | | | 36,498~36,835 | |
| | | | | | | | | | | | | | | | | | | Expected exercise period (Years) | | | Risk free rate (%) | | | Fair value (Market performance condition) | | | Fair value (Non-market performance condition) | | | | | | | (Kookmin Bank) | | | | | | | | | | | | | | | | | Series 64 | | | 0.00~3.00 | | | | 1.87~2.14 | | | | 57,602 | | | | 58,516~61,791 | | Series 65 | | | 0.00~3.00 | | | | 1.87~2.14 | | | | 57,625 | | | | 58,516~61,791 | | Series 67 | | | 0.00~5.00 | | | | 1.87~2.34 | | | | 61,139 | | | | 55,745~61,791 | | Series 68 | | | 0.51~4.00 | | | | 1.87~2.24 | | | | 61,570 | | | | 57,009~61,791 | | Series 69 | | | 0.00~6.00 | | | | 1.87~2.37 | | | | 61,607 | | | | 54,116~61,791 | | Series 70 | | | 0.00~3.00 | | | | 1.87~2.14 | | | | 59,783 | | | | 58,516~61,791 | | Series 71 | | | 2.00~5.00 | | | | 2.00~2.34 | | | | 60,107 | | | | 55,745~60,194 | | Series 72 | | | 2.00~5.00 | | | | 2.00~2.34 | | | | 60,112 | | | | 55,745~60,194 | | Grant deferred in 2014 | | | — | | | | 1.87 | | | | — | | | | 61,294 | | Grant deferred in 2015 | | | 0.00~4.00 | | | | 1.87~2.24 | | | | — | | | | 57,009~61,791 | | Grant deferred in 2016 | | | 0.00~6.00 | | | | 1.87~2.37 | | | | — | | | | 54,116~61,791 | | Grant deferred in 2017 | | | 0.00~2.89 | | | | 1.87~2.14 | | | | — | | | | 57,581~62,053 | | | | | | | (Other subsidiaries) | | | | | | | | | | | | | | | | | Share granted in 2010 | | | — | | | | 1.87 | | | | — | | | | 61,294 | | Share granted in 2011 | | | — | | | | 1.87 | | | | — | | | | 61,294 | | Share granted in 2012 | | | — | | | | 1.87 | | | | 40,544 | | | | 40,831~61,294 | | Share granted in 2013 | | | 0.00~1.00 | | | | 1.87 | | | | 35,710 | | | | 35,710~61,791 | | Share granted in 2014 | | | 0.00~5.00 | | | | 1.87~2.34 | | | | 43,672~57,388 | | | | 43,672~61,791 | | Share granted in 2015 | | | 0.00~6.00 | | | | 1.87~2.37 | | | | 42,824~63,009 | | | | 42,824~63,033 | | Share granted in 2016 | | | 0.00~6.00 | | | | 1.87~2.37 | | | | 42,824~61,811 | | | | 42,824~62,738 | | Share granted in 2017 | | | 0.00~6.00 | | | | 1.87~2.37 | | | | 57,625~61,607 | | | | 54,116~61,791 | | | | | | | Linked to short-term performance | | | | | | | | | | | | | | | | | (KB Financial Group Inc.) | | | | | | | | | | | | | | | | | Share granted in 2010 | | | — | | | | 1.87 | | | | — | | | | 40,662 | | Share granted in 2011 | | | — | | | | 1.87 | | | | — | | | | 38,111~40,662 | | Share granted in 2012 | | | — | | | | 1.87 | | | | — | | | | 34,180~40,662 | | Share granted in 2013 | | | — | | | | 1.87 | | | | — | | | | 34,180~40,662 | | Share granted in 2014 | | | — | | | | 1.87 | | | | — | | | | 61,294 | | Share granted in 2015 | | | 0.00~7.01 | | | | 1.87~2.39 | | | | — | | | | 52,873~61,791 | | Share granted in 2016 | | | 0.00~7.01 | | | | 1.87~2.39 | | | | — | | | | 52,873~61,791 | | Share granted in 2017 | | | 1.00~7.01 | | | | 1.87~2.39 | | | | — | | | | 52,873~61,791 | | | | | | | (Kookmin Bank) | | | | | | | | | | | | | | | | | Share granted in 2014 | | | — | | | | 1.87 | | | | — | | | | 61,294 | | Share granted in 2015 | | | 0.00~5.00 | | | | 1.87~2.34 | | | | — | | | | 55,745~61,791 | | Share granted in 2016 | | | 0.00~6.00 | | | | 1.87~2.37 | | | | — | | | | 54,116~61,791 | | Share granted in 2017 | | | 1.00~6.00 | | | | 1.87~2.37 | | | | | | | | 54,116~61,791 | | | | | | | (Other subsidiaries) | | | | | | | | | | | | | | | | | Share granted in 2014 | | | — | | | | 1.87 | | | | — | | | | 61,294 | | Share granted in 2015 | | | 0.00~5.00 | | | | 1.87~2.34 | | | | — | | | | 55,745~61,791 | | Share granted in 2016 | | | 0.00~6.00 | | | | 1.87~2.37 | | | | — | | | | 54,116~61,791 | | Share granted in 2017 | | | 0.00~6.00 | | | | 1.87~2.37 | | | | — | | | | 54,116~61,791 | |
Expected volatility is based on the historical volatility of the share price over the most recent period that is generally commensurate with the expected term of the grant. And the current stock price of December 31, 2014,2017 was used for the underlying asset price. Additionally the average three-yearthree year historical dividend rate was used as the expected dividend rate. As of December 31, 20132016 and 2014,2017, the accrued expenses related to share-based payments including share options and share grants amounted to ₩48,423₩79,742 million and ₩48,734₩133,496 million, respectively, and the compensation costs from share options and share grants amounting to ₩17,289₩38,190 million and ₩11,422₩73,370 million were incurred during the years ended December 31, 20132016 and 2014,2017, respectively. There is no intrinsic value Details of the vested share optionsMileage stock as of December 31, 20132017, are as follows: | | | | | | | | | | | | | | | Grant date | | Number of granted shares1 | | | Expected exercise period (years)1 | | Remaining shares2 | | | | (In number of shares) | | | | | | | Stock granted in 2016 | | Jan. 23, 2016 | | | 33,829 | | | 0.00~1.06 | | | 18,196 | | | | Apr. 29, 2016 | | | 60 | | | 0.00~1.33 | | | 39 | | | | July 07, 2016 | | | 280 | | | 0.00~1.52 | | | 125 | | | | July 18, 2016 | | | 767 | | | 0.00~1.55 | | | — | | | | Aug. 03, 2016 | | | 107 | | | 0.00~1.59 | | | 53 | | | | Aug. 17, 2016 | | | 51 | | | 0.00~1.63 | | | 44 | | | | Aug. 30, 2016 | | | 256 | | | 0.00~1.66 | | | 219 | | | | Sept. 06, 2016 | | | 206 | | | 0.00~1.68 | | | 120 | | | | Oct. 07, 2016 | | | 105 | | | 0.00~1.77 | | | 97 | | | | Nov. 01, 2016 | | | 118 | | | 0.00~1.84 | | | 95 | | | | Dec. 07, 2016 | | | 211 | | | 0.00~1.93 | | | 150 | | | | Dec. 08, 2016 | | | 43 | | | 0.00~1.94 | | | 43 | | | | Dec. 15, 2016 | | | 12 | | | 0.00~1.96 | | | 12 | | | | Dec. 20, 2016 | | | 309 | | | 0.00~1.97 | | | 307 | | | | Dec. 28, 2016 | | | 76 | | | 0.00~1.99 | | | 64 | | | | Dec. 30, 2016 | | | 210 | | | 0.00~2.00 | | | 159 | | | | | | | Stock granted in 2017 | | Jan. 09, 2017 | | | 28,925 | | | 0.00~2.02 | | | 25,521 | | | | Feb. 03, 2017 | | | 43 | | | 0.00~2.09 | | | 43 | | | | Apr. 03, 2017 | | | 82 | | | 0.00~2.25 | | | 82 | | | | May 22, 2017 | | | 20 | | | 0.00~2.39 | | | 20 | | | | July 03, 2017 | | | 52 | | | 0.00~2.50 | | | 52 | | | | Aug. 16, 2017 | | | 204 | | | 0.00~2.62 | | | 204 | | | | Aug. 17, 2017 | | | 40 | | | 0.00~2.63 | | | 40 | | | | Aug. 22, 2017 | | | 33 | | | 0.00~2.64 | | | 33 | | | | Aug. 25, 2017 | | | 387 | | | 0.00~2.65 | | | 387 | | | | Sept. 14, 2017 | | | 82 | | | 0.00~2.70 | | | 82 | | | | Oct. 20, 2017 | | | 9 | | | 0.00~2.80 | | | 9 | | | | Nov. 01, 2017 | | | 120 | | | 0.00~2.84 | | | 120 | | | | Nov. 06, 2017 | | | 106 | | | 0.00~2.85 | | | 106 | | | | Dec. 06, 2017 | | | 77 | | | 0.00~2.93 | | | 77 | | | | Dec. 08, 2017 | | | 28 | | | 0.00~2.94 | | | 28 | | | | Dec. 26, 2017 | | | 254 | | | 0.00~2.99 | | | 254 | | | | Dec. 29, 2017 | | | 114 | | | 0.00~2.99 | | | 114 | | | | | | | | | | | | | | | | | Total | | | 67,216 | | | Total | | | 46,895 | | | | | | | | | | | | | | |
1 | Mileage stock is exercisable for two years after one year from the grant date. When the mileage stock is exercised, the closing price of prior month is applied. However, in case of transfer or retirement during the vesting period, mileage stock is exercisable at the closing price of the last month prior to transfer or retirement. |
2 | The remaining shares are assessed based on the stock price as of December 31, 2017. These shares are vested immediately at grant date. |
As of December 31, 2016 and 2014.2017, the accrued expenses for share-based payments in regards to mileage stock amounted to ₩1,533 million and ₩2,973 million, respectively, and the compensation costs amounting to ₩1,563 million and ₩2,378 million were incurred during the 2016 and 2017, respectively. 32. Net Other non-operating incomeNon-operating Income and expenses Expenses
The detailsDetails of othernon-operating income and expenses for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows:
| | | 2012 | | 2013 | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Other non-operating income | | | | | | | | | | | | | Gains of disposal in property and equipment | | ₩ | 5,840 | | | ₩ | 819 | | | ₩ | 491 | | | Gain on disposal in property and equipment | | | ₩ | 514 | | | ₩ | 669 | | | ₩ | 10,867 | | Rent received | | | 4,349 | | | | 8,615 | | | | 10,035 | | | | 24,366 | | | | 15,847 | | | | 32,254 | | Gain on bargain purchase | | | | — | | | | 628,614 | | | | 122,986 | | Gain on sales of disposal group held for sale | | | | — | | | | — | | | | 22,371 | | Others | | | 50,666 | | | | 101,848 | | | | 62,041 | | | | 266,278 | | | | 100,409 | | | | 72,248 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 60,855 | | | | 111,282 | | | | 72,567 | | | | 291,158 | | | | 745,539 | | | | 260,726 | | | | | | | | | | | | | | | | | | | | | Other non-operating expenses | | | | | | | | | | | | | Losses of disposal in property and equipment | | | 426 | | | | 928 | | | | 1,297 | | | Loss on disposal in property and equipment | | | | 1,128 | | | | 1,835 | | | | 2,500 | | Donation | | | 80,446 | | | | 59,760 | | | | 52,330 | | | | 47,602 | | | | 37,705 | | | | 54,419 | | Restoration cost | | | 945 | | | | 909 | | | | 2,242 | | | | 514 | | | | 2,255 | | | | 3,465 | | Management cost for special bonds | | | | 3,099 | | | | 2,024 | | | | 3,279 | | Loss on sales of disposal group held for sale | | | | — | | | | — | | | | 45,764 | | Impairment loss on disposition of disposal group held for sale | | | | — | | | | — | | | | 7,198 | | Impairment loss for goodwill | | | | — | | | | — | | | | 1,202 | | Others | | | 97,310 | | | | 61,994 | | | | 87,824 | | | | 98,351 | | | | 30,851 | | | | 104,023 | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 179,127 | | | | 123,591 | | | | 143,693 | | | | 150,694 | | | | 74,670 | | | | 221,850 | | | | | | | | | | | | | | | | | | | | | Net other non-operating income(expense) | | ₩ | (118,272 | ) | | ₩ | (12,309 | ) | | ₩ | (71,126 | ) | | Net othernon-operating income | | | ₩ | 140,464 | | | ₩ | 670,869 | | | ₩ | 38,876 | | | | | | | | | | | | | | | | | | | | |
33. Income tax expensesTax Expense Income tax expense for the years ended December 31, 2012, 20132015, 2016 and 2014, consist of:2017, are as follows: | | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Tax payable | | | | | | | | | | | | | Current tax expense | | ₩ | 695,135 | | | ₩ | 569,449 | | | ₩ | 512,536 | | | ₩ | 342,066 | | | ₩ | 607,175 | | | ₩ | 700,597 | | Adjustments recognized in the period for current tax of prior years | | | (20,517 | ) | | | 75,938 | | | | (11,721 | ) | | | (17,939 | ) | | 27,217 | | | (39,445 | ) | Changes in deferred income tax assets (liabilities) | | | (87,494 | ) | | | (89,477 | ) | | | 31,255 | | | | | | | | | | | | | | Sub-total | | | | 324,127 | | | 634,392 | | | 661,152 | | | | | | | | | | | | | Changes in deferred income tax assets (liabilities)1 | | | | 93,221 | | | (201,012 | ) | | 212,195 | | | | | | | | | | | | | Income tax recognized directly in equity | | | | | | | | | | | | | Exchange difference in foreign operation | | | | — | | | (11,338 | ) | | 25,674 | | Remeasurements of net defined benefit liabilities | | | 9,663 | | | | (13,085 | ) | | | 31,386 | | | | 7,363 | | | (4,093 | ) | | (7,240 | ) | Change in value of available-for-sale financial assets | | | (77,956 | ) | | | 7,942 | | | | (79,473 | ) | | | 5,177 | | | 20,754 | | | (84,781 | ) | Change in value of held-to-maturity financial assets | | | (240 | ) | | | (1,787 | ) | | | 198 | | | | 349 | | | (1,186 | ) | | (3,789 | ) | Share of other comprehensive income of associates | | | 390 | | | | 9 | | | | (6 | ) | | Share of other comprehensive loss of associates | | | | (816 | ) | | 116 | | | 20,975 | | Cash flow hedges | | | 1,025 | | | | (618 | ) | | | 2,619 | | | | (486 | ) | | (1,423 | ) | | (4,368 | ) | Others | | | (29 | ) | | | — | | | | — | | | Hedges of a net investment in a foreign operation | | | | 8,134 | | | 2,265 | | | (8,186 | ) | Other comprehensive income for assets held for sale | | | | — | | | | — | | | (21,498 | ) | Other comprehensive income for separate accounts | | | | — | | | | — | | | 4,829 | | | | | | | | | | | | | Sub-total | | | | 19,721 | | | 5,095 | | | (78,384 | ) | | | | | | | | | | | | Others | | | — | | | | (7,778 | ) | | | (480 | ) | | | 320 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | Tax expense | | ₩ | 519,977 | | | ₩ | 540,593 | | | ₩ | 486,314 | | | ₩ | 437,389 | | | ₩ | 438,475 | | | ₩ | 794,963 | | | | | | | | | | | | | | | | | | | | |
1 | The corporate tax rate was changed due to the amendment of corporate tax law in 2017. Accordingly, the expected rate has been applied for the deferred tax assets and liabilities that are expected to be utilized in periods after 2018. Amended income tax rate for ₩200 million and below is 11%, for ₩200 million to ₩20 billion is 22%, for ₩20 billion to ₩300 billion is 24.2% and for over ₩300 billion is 27.5%. |
An analysis of the net profit before income tax and income tax expense for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, follows: | | | | | | | | | 2015 | | 2016 | | 2017 | | | | 2012 | | 2013 | | 2014 | | | Tax rate | | Amount | | Tax rate | | Amount | | Tax rate | | Amount | | | | (In millions of Korean won) | | | (%) | | (In millions of Korean won) | | (%) | | (In millions of Korean won) | | (%) | | (In millions of Korean won) | | Net profit before income tax | | ₩ | 2,298,644 | | | ₩ | 1,815,291 | | | ₩ | 1,901,425 | | | | | ₩ | 2,164,695 | | | | | ₩ | 2,628,655 | | | | | ₩ | 4,138,424 | | | | | | | | | | | | | | | | | | | | | | | | | | | Tax at the applicable tax rate(1) | | | 555,810 | | | | 438,838 | | | | 459,683 | | | Tax at the applicable tax rate1 | | | | 24.18 | | | 523,394 | | | 24.18 | | | 635,673 | | | 24.19 | | | 1,001,037 | | Non-taxable income | | | (6,291 | ) | | | (17,716 | ) | | | (11,171 | ) | | | (3.92 | ) | | (84,835 | ) | | (7.15 | ) | | (188,062 | ) | | (5.02 | ) | | (207,777 | ) | Non-deductible expense | | | 13,263 | | | | 33,489 | | | | 14,916 | | | | 0.75 | | | 16,186 | | | 0.64 | | | 16,711 | | | 0.26 | | | 10,706 | | Tax credit and tax exemption | | | (187 | ) | | | (1,417 | ) | | | (1,192 | ) | | | (0.02 | ) | | (427 | ) | | (0.04 | ) | | (1,079 | ) | | (0.04 | ) | | (1,658 | ) | Temporary difference for which no deferred tax is recognized | | | 1,633 | | | | 47,138 | | | | 24,682 | | | | 0.27 | | | 5,772 | | | 0.10 | | | 2,749 | | | (0.16 | ) | | (6,484 | ) | Deferred tax relating to changes in recognition and measurement | | | (7,289 | ) | | | 2,828 | | | | (1,593 | ) | | | (0.01 | ) | | (251 | ) | | (0.03 | ) | | (828 | ) | | (0.12 | ) | | (4,894 | ) | Income tax refund for tax of prior years | | | (58,404 | ) | | | 30,329 | | | | (6,654 | ) | | | (0.92 | ) | | (19,894 | ) | | (0.48 | ) | | (12,612 | ) | | (0.12 | ) | | (4,854 | ) | Income tax expense of overseas branch | | | 16,929 | | | | 4,796 | | | | 6,202 | | | | 0.18 | | | 3,827 | | | 0.13 | | | 3,447 | | | 0.04 | | | 1,549 | | Effects from change in tax rate | | | 941 | | | | (871 | ) | | | 1,642 | | | | (0.03 | ) | | (671 | ) | | (0.03 | ) | | (739 | ) | | 0.42 | | | 17,367 | | Others | | | 3,572 | | | | 3,179 | | | | (201 | ) | | | (0.26 | ) | | (5,712 | ) | | (0.64 | ) | | (16,785 | ) | | (0.24 | ) | | (10,029 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Tax expense | | ₩ | 519,977 | | | ₩ | 540,593 | | | ₩ | 486,314 | | | Average effective tax rate and tax expense | | | | 20.22 | | | ₩ | 437,389 | | | 16.68 | | | ₩ | 438,475 | | | 19.21 | | | ₩ | 794,963 | | | | | | | | | | | | | | | | | | | | | | | | | | | Average effective tax rate (Income tax expense / Profit before tax) (%) | | | 22.62 | | | | 29.78 | | | | 25.58 | | |
(1)1 | Applicable income tax rate for ₩200 million and below is 11%, for ₩200 million to ₩20 billion is 22% and for over ₩20 billion is 24.2% as of December 31, 2012, 20132015, 2016 and 2014. 2017. |
The detailsDetails of current tax assets (income tax refund receivables) and current tax liabilities (income tax payables), as of December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Tax payables (receivables) before offsetting | | | Offsetting | | | Tax payables (receivables) after offsetting | | | Tax payables (receivables) before offsetting | | | Offsetting | | | Tax payables (receivables) after offsetting | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Income tax refund receivables(1), (2) | | ₩ | (99,524 | ) | | ₩ | 82,057 | | | ₩ | (17,467 | ) | | Income tax refund receivables1 | | | ₩ | (226,560 | ) | | ₩ | 226,560 | | | ₩ | — | | Income tax payables | | | 293,320 | | | | (82,057 | ) | | | 211,263 | | | | 668,372 | | | | (226,560 | ) | | | 441,812 | |
| | | 2014 | | | 2017 | | | | Tax payables (receivables) before offsetting | | | Offsetting | | | Tax payables (receivables) after offsetting | | | Tax payables (receivables) before offsetting | | | Offsetting | | | Tax payables (receivables) after offsetting | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Income tax refund receivables(1) | | ₩ | (693,018 | ) | | ₩ | 693,018 | | | ₩ | — | | | Income tax refund receivables1 | | | ₩ | 215,702 | | | ₩ | (215,702 | ) | | ₩ | — | | Income tax payables | | | 924,925 | | | | (693,018 | ) | | | 231,907 | | | | 218,168 | | | | 215,702 | | | | 433,870 | |
(1)1 | Excludes current tax assets of ₩306,313₩6,324 million (2013: ₩329,443(2016: ₩65,738 million) by uncertain tax position and others, which do not qualify for offsetting. |
(2) | Prepaid income tax expenses amounting to ₩17,467 million for KB Life Insurance Co., Ltd, which separately paid tax in 2013, were reclassified from other assets into current income tax assets.
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34. Dividends The dividends paid to the shareholders of the Parent Company in 20132016 and 20142017 were ₩231,811₩378,625 million (₩600980 per share) and ₩193,176₩497,969 million (₩5001,250 per share), respectively. The dividends to the shareholders of the Parent Company in respect of the year ended December 31, 2014,2017, of ₩780₩1,920 per share, amounting to total dividends of ₩301,354₩766,728 million, is to be proposed at the annual general shareholders’ meeting on March 27, 2015.23, 2018. The Group’s consolidated financial statements as of December 31, 2014,2017, do not reflect this dividend payable. 35. Accumulated other comprehensive incomeOther Comprehensive Income The detailsDetails of accumulated other comprehensive income for the years ended December 31, 20132016 and 2014,2017, are as follows:
| | | 2013 | | | 2016 | | | | Beginning | | Changes except for reclassification | | Reclassification to profit or loss | | Tax effect | | Ending | | | Beginning | | Changes except for reclassification | | Reclassification to profit or loss | | Tax effect | | Ending | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Remeasurements of net defined benefit liabilities | | ₩ | (53,507 | ) | | ₩ | 54,069 | | | ₩ | — | | | ₩ | (13,085 | ) | | ₩ | (12,523 | ) | | ₩ | (133,876 | ) | | ₩ | 16,914 | | | ₩ | — | | | ₩ | (4,093 | ) | | ₩ | (121,055 | ) | Exchange differences on translating foreign operations | | | (27,061 | ) | | | (2,372 | ) | | | — | | | | — | | | | (29,433 | ) | | | 32,990 | | | 31,486 | | | | — | | | (11,338 | ) | | 53,138 | | Change in value of available-for-sale financial assets | | | 426,354 | | | | 198,798 | | | | (202,118 | ) | | | 7,942 | | | | 430,976 | | | | 653,130 | | | 30,877 | | | (103,141 | ) | | 20,754 | | | 601,620 | | Change in value of held-to-maturity financial assets | | | (1,225 | ) | | | 1,005 | | | | 6,911 | | | | (1,787 | ) | | | 4,904 | | | | 2,731 | | | (1,448 | ) | | 6,350 | | | (1,186 | ) | | 6,447 | | Shares of other comprehensive income of associates | | | (47,286 | ) | | | (9,765 | ) | | | (55 | ) | | | 9 | | | | (57,097 | ) | | | (89,081 | ) | | (7,209 | ) | | | — | | | 116 | | | (96,174 | ) | Cash flow hedges | | | (2,133 | ) | | | (2,991 | ) | | | 5,227 | | | | (618 | ) | | | (515 | ) | | | (10,173 | ) | | 16,238 | | | (10,717 | ) | | (1,423 | ) | | (6,075 | ) | Hedges of a net investment in a foreign operation | | | | (25,477 | ) | | (9,360 | ) | | | — | | | 2,265 | | | (32,572 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 295,142 | | | ₩ | 238,744 | | | ₩ | (190,035 | ) | | ₩ | (7,539 | ) | | ₩ | 336,312 | | | ₩ | 430,244 | | | ₩ | 77,498 | | | ₩ | (107,508 | ) | | ₩ | 5,095 | | | ₩ | 405,329 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Beginning | | | Changes except for reclassification | | | Reclassification to profit or loss | | | Tax effect | | | Ending | | | | (In millions of Korean won) | | Remeasurements of net defined benefit liabilities | | ₩ | (12,523 | ) | | ₩ | (129,677 | ) | | ₩ | — | | | ₩ | 31,386 | | | ₩ | (110,814 | ) | Exchange differences on translating foreign operations | | | (29,433 | ) | | | 17,280 | | | | — | | | | — | | | | (12,153 | ) | Change in value of available-for-sale financial assets | | | 430,976 | | | | 403,828 | | | | (74,431 | ) | | | (79,473 | ) | | | 680,900 | | Change in value of held-to-maturity financial assets | | | 4,904 | | | | (1,276 | ) | | | (3 | ) | | | 198 | | | | 3,823 | | Shares of other comprehensive income of associates | | | (57,097 | ) | | | (32,448 | ) | | | 248 | | | | (6 | ) | | | (89,303 | ) | Cash flow hedges | | | (515 | ) | | | (7,452 | ) | | | (5,426 | ) | | | 2,619 | | | | (10,774 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 336,312 | | | ₩ | 250,255 | | | ₩ | (79,612 | ) | | ₩ | (45,276 | ) | | ₩ | 461,679 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Beginning | | | Changes except for reclassification | | | Reclassification to profit or loss | | | Tax effect | | | Replaced by retained earnings | | | Replaced by assets held for sale | | | Replaced by disposal group held for sale | | | Ending | | | | (In millions of Korean won) | | Remeasurements of net defined benefit liabilities | | ₩ | (121,055 | ) | | ₩ | 29,925 | | | ₩ | — | | | ₩ | (7,240 | ) | | ₩ | — | | | ₩ | — | | | ₩ | 1,985 | | | ₩ | (96,385 | ) | Exchange differences on translating foreign operations | | | 53,138 | | | | (135,401 | ) | | | — | | | | 25,674 | | | | — | | | | — | | | | — | | | | (56,589 | ) | Change in the fair value ofavailable-for-sale financial assets | | | 601,620 | | | | 200,700 | | | | (22,357 | ) | | | (84,781 | ) | | | — | | | | — | | | | (861 | ) | | | 694,321 | | Change in value ofheld-to-maturity financial assets | | | 6,447 | | | | (2,868 | ) | | | 132 | | | | (3,789 | ) | | | — | | | | — | | | | — | | | | (78 | ) | Shares of other comprehensive income of associates and joint ventures | | | (96,174 | ) | | | 2,288 | | | | 10,135 | | | | 20,975 | | | | (3,492 | ) | | | 67,337 | | | | — | | | | 1,069 | | Cash flow hedges | | | (6,075 | ) | | | (100,816 | ) | | | 126,239 | | | | (4,368 | ) | | | — | | | | — | | | | — | | | | 14,980 | | Hedges of net investments in foreign operations | | | (32,572 | ) | | | 34,800 | | | | — | | | | (8,186 | ) | | | — | | | | — | | | | — | | | | (5,958 | ) | Other comprehensive income of separate account | | | — | | | | (97,001 | ) | | | 78,480 | | | | 4,829 | | | | — | | | | — | | | | — | | | | (13,692 | ) | Other comprehensive income of disposal group held for sale | | | — | | | | — | | | | (861 | ) | | | — | | | | 1,985 | | | | — | | | | (1,124 | ) | | | — | | Other comprehensive income of assets held for sale | | | — | | | | — | | | | 88,835 | | | | (21,498 | ) | | | — | | | | (67,337 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ₩ | 405,329 | | | ₩ | (68,373 | ) | | ₩ | 280,603 | | | ₩ | (78,384 | ) | | ₩ | (1,507 | ) | | ₩ | — | | | ₩ | — | | | ₩ | 537,668 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
36. Earnings per shareShare 36.1 Basic earnings per shareEarnings Per Share Basic earnings per share is calculated by dividing profit and loss attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding, excluding the treasury shares, during the years ended December 31, 2012, 20132015, 2016 and 2014.2017. Weighted average number of ordinary shares outstanding: | | | 2012 | | | | | | | | | | Number of shares (a) | | | Days outstanding (b) | | | Total outstanding shares [(a) x (b)] | | | 2015 | | | 2016 | | 2017 | | | | (In number of shares) | | | (In number of shares) | | Beginning (A) | | | 386,351,693 | | | | 366 | | | | 141,404,719,638 | | | | 386,351,693 | | | | 386,351,693 | | | 418,111,537 | | Issue of ordinary shares related to business combination (B) | | | | — | | | | 6,421,389 | | | | — | | Acquisition of treasury shares (C) | | | | — | | | | (9,153,437 | ) | | (21,618,520 | ) | Sales of treasury shares (D) | | | | — | | | | — | | | 2,231,945 | | | | | | | | | | | | | | | | | | | Weighted average number of ordinary shares outstanding [(B) =(A)/366] | | | | | | | 386,351,693 | | | Weighted average number of ordinary shares outstanding (E=A+B+C+D) | | | | 386,351,693 | | | | 383,619,645 | | | 398,724,962 | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 2013 | | | | Number of shares (a) | | | Days outstanding (b) | | | Total outstanding shares [(a) x (b)] | | | | (In number of shares) | | Beginning (A) | | | 386,351,693 | | | | 365 | | | | 141,018,367,945 | | | | | | | | | | | | | | | Weighted average number of ordinary shares outstanding [(B) =(A)/365] | | | | | | | | | | | 386,351,693 | |
| | | | | | | | | | | | | | | 2014 | | | | Number of shares (a) | | | Days outstanding (b) | | | Total outstanding shares [(a) x (b)] | | | | (In number of shares) | | Beginning (A) | | | 386,351,693 | | | | 365 | | | | 141,018,367,945 | | | | | | | | | | | | | | | Weighted average number of ordinary shares outstanding [(B) =(A)/365] | | | | | | | | | | | 386,351,693 | |
Basic earnings per share: | | | | | | | 2012 | | | | (in Korean won and in number of shares) | | | | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | (in Korean won and in number of shares) | | Profit attributable to ordinary shares (F) | | ₩ | 1,698,317,850,139 | | | ₩ | 2,143,744,271,801 | | | ₩ | 3,311,437,880,186 | | Weighted average number of ordinary shares outstanding (G) | | | 386,351,693 | | | | 383,619,645 | | | | 398,724,962 | | Basic earnings per share (H = F / G) | | ₩ | 4,396 | | | ₩ | 5,588 | | | ₩ | 8,305 | |
Profit attributable to ordinary shares (C)
| | ₩ | 1,769,566,917,759 | | Weighted average number of ordinary shares outstanding (D)
| | | 386,351,693 | | Basic earnings per share [(E)=(C)/(D)]
| | ₩ | 4,580 | |
| | | | | | | 2013 | | | | (in Korean won and in number of shares) | | Profit attributable to ordinary shares (C)
| | ₩ | 1,271,502,597,550 | | Weighted average number of ordinary shares outstanding (D)
| | | 386,351,693 | | Basic earnings per share [(E)=(C)/(D)]
| | ₩ | 3,291 | |
| | | | | | | 2014 | | | | (in Korean won and in number of shares) | | Profit attributable to ordinary shares (C)
| | ₩ | 1,400,722,065,239 | | Weighted average number of ordinary shares outstanding (D)
| | | 386,351,693 | | Basic earnings per share [(E)=(C)/(D)]
| | ₩ | 3,626 | |
36.2 Diluted earningsEarnings per shareShare Diluted earnings per share is calculated using the weighted average number of ordinary shares outstanding which is adjusted by the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. The Group’s dilutive potential ordinary shares include sharestock grants. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average market share price of the Group’s outstanding shares for the period) based on the monetary value of the subscription rights attached to the share options. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of sharestock grants. Adjusted profit for diluted earnings per share:share for the years ended December 31, 2015, 2016 and 2017, are as follows: | | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | (In Korean won) | | Profit attributable to ordinary shares | | ₩ | 1,698,317,850,139 | | | ₩ | 2,143,744,271,801 | | | ₩ | 3,311,437,880,186 | | Adjustment | | | — | | | | — | | | | — | | | | | | | | | | | | | | | Adjusted profit for diluted earnings | | ₩ | 1,698,317,850,139 | | | ₩ | 2,143,744,271,801 | | | ₩ | 3,311,437,880,186 | | | | | | | | | | | | | | |
Adjusted weighted average number of ordinary shares outstanding to calculate diluted earnings per share for the years ended December 31, 2015, 2016 and 2017, are as follows: | | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | (in number of shares) | | Weighted average number of ordinary shares outstanding | | | 386,351,693 | | | | 383,619,645 | | | | 398,724,962 | | Adjustment: | | | | | | | | | | | | | Stock grants | | | 1,741,558 | | | | 2,013,044 | | | | 2,319,533 | | Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share | | | 388,093,251 | | | | 385,632,689 | | | | 401,044,495 | |
Diluted earnings per share for the years ended December 31, 2015, 2016 and 2017, are as follows: | | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | (in Korean won and in number of shares) | | Adjusted profit for diluted earnings per share | | ₩ | 1,698,317,850,139 | | | ₩ | 2,143,744,271,801 | | | ₩ | 3,311,437,880,186 | | Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share | | | 388,093,251 | | | | 385,632,689 | | | | 401,044,495 | | Diluted earnings per share | | ₩ | 4,376 | | | ₩ | 5,559 | | �� | ₩ | 8,257 | |
37. Insurance Contracts 37.1 Insurance Assets Details of deferred acquisition costs included in other assets as of December 31, 2016 and 2017, are as follows: | | | | | | | | | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Non-life insurance | | ₩ | — | | | ₩ | 267,602 | | Life insurance | | | 122,151 | | | | 130,393 | | | | | | | | | | | Total | | ₩ | 122,151 | | | ₩ | 397,995 | | | | | | | | | | |
Changes in the deferred acquisition costs for the years ended December 31, 2016 and 2017, are as follows: | | | | | | | | | | | | | | | | | | | 2016 | | | | Beginning | | | Increase | | | Decrease | | | Ending | | | | (In millions of Korean won) | | Life insurance | | ₩ | 106,645 | | | ₩ | 116,433 | | | ₩ | (100,927 | ) | | ₩ | 122,151 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 106,645 | | | ₩ | 116,433 | | | ₩ | (100,927 | ) | | ₩ | 122,151 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2017 | | | | Beginning | | | Increase | | | Decrease | | | Ending | | | | (In millions of Korean won) | | Non-life insurance | | ₩ | — | | | ₩ | 521,090 | | | ₩ | (253,488 | ) | | ₩ | 267,602 | | Life insurance | | | 122,151 | | | | 116,826 | | | | (108,584 | ) | | | 130,393 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 122,151 | | | ₩ | 637,916 | | | ₩ | (362,072 | ) | | ₩ | 397,995 | | | | | | | | | | | | | | | | | | |
Details of reinsurance assets included in other assets as of December 31, 2016 and 2017, are as follows: | | | | | | | | | | | | | | | 2016 | | | 2017 | | | | | | (In millions of Korean won) | | Non-life insurance | | Reserve for outstanding claims | | | | | | | | | | General insurance | | ₩ | — | | | ₩ | 480,760 | | | Automobile insurance | | | — | | | | 13,320 | | | Long-term insurance | | | — | | | | 89,317 | | | Unearned premium reserve | | | | | | | | | | General insurance | | | — | | | | 178,586 | | | Automobile insurance | | | — | | | | 14,986 | | | | | | | | | | | | | | | Sub-total | | | — | | | | 776,969 | | | | | | | | | | | | | Life insurance | | Reserve for outstanding claims | | | 1,301 | | | | 1,410 | | | Unearned premium reserve | | | 473 | | | | 490 | | | | | | | | | | | | | | | Sub-total | | | 1,774 | | | | 1,900 | | | | | | | | | | | | | Others | | Reserve for outstanding claims | | | 3,041 | | | | 3,670 | | | Unearned premium reserve | | | 1,180 | | | | 1,075 | | | | | | | | | | | | | | | Sub-total | | | 4,221 | | | | 4,745 | | | | | | | | | | | | | Total reinsurance assets | | | 5,995 | | | | 783,614 | | Allowance for impairment | | | — | | | | 629 | | | | | | | | | | | Total reinsurance assets, net | | ₩ | 5,995 | | | ₩ | 782,985 | | | | | | | | | | |
The changes in reinsurance assets included in other assets as of December 31, 2016 and 2017, are as follows: | | | | | | | | | | | | | | | | | | | 2016 | | | | | | Beginning | | | Net increase (decrease) | | | Ending | | | | | | (In millions of Korean won) | | Life insurance | | Reserve for outstanding claims | | ₩ | 1,511 | | | ₩ | (210 | ) | | ₩ | 1,301 | | | | Unearned premium reserve | | | 492 | | | | (19 | ) | | | 473 | | | | | | | | | | | | | | | | | | | Sub-total | | | 2,003 | | | | (229 | ) | | | 1,774 | | | | | | | | | | | | | | | | | Others | | Reserve for outstanding claims | | | 2,114 | | | | 927 | | | | 3,041 | | | | Unearned premium reserve | | | 1,727 | | | | (547 | ) | | | 1,180 | | | | | | | | | | | | | | | | | | | Sub-total | | | 3,841 | | | | 380 | | | | 4,221 | | | | | | | | | | | | | | | | | Total reinsurance assets | | | 5,844 | | | | 151 | | | | 5,995 | | Allowance for impairment | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | Total reinsurance assets, net | | ₩ | 5,844 | | | ₩ | 151 | | | ₩ | 5,995 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | | | Beginning | | | Business combination | | | Net increase (decrease) | | | Ending | | | | | | (In millions of Korean won) | | Non-life insurance | | Reserve for outstanding claims | | | | | | | | | | | | | | | | | | | General insurance | | ₩ | — | | | ₩ | 391,305 | | | ₩ | 89,455 | | | ₩ | 480,760 | | | | Automobile insurance | | | — | | | | 15,943 | | | | (2,623 | ) | | | 13,320 | | | | Long-term insurance | | | — | | | | 87,887 | | | | 1,430 | | | | 89,317 | | | | Unearned premium reserve | | | | | | | | | | | | | | | | | | | General insurance | | | — | | | | 218,479 | | | | (39,893 | ) | | | 178,586 | | | | Automobile insurance | | | — | | | | 17,373 | | | | (2,387 | ) | | | 14,986 | | | | Long-term insurance | | | — | | | | 2 | | | | (2 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | — | | | | 730,989 | | | | 45,980 | | | | 776,969 | | | | | | | | | | | | | | | | | | | | | Life insurance | | Reserve for outstanding claims | | | 1,301 | | | | — | | | | 109 | | | | 1,410 | | | | Unearned premium reserve | | | 473 | | | | — | | | | 17 | | | | 490 | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 1,774 | | | | — | | | | 126 | | | | 1,900 | | | | | | | | | | | | | | | | | | | | | Others | | Reserve for outstanding claims | | | 3,041 | | | | — | | | | 629 | | | | 3,670 | | | | Unearned premium reserve | | | 1,180 | | | | — | | | | (105 | ) | | | 1,075 | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 4,221 | | | | — | | | | 524 | | | | 4,745 | | | | | | | | | | | | | | | | | | | | | Total reinsurance assets | | | 5,995 | | | | 730,989 | | | | 46,630 | | | | 783,614 | | Allowance for impairment | | | — | | | | 738 | | | | (109 | ) | | | 629 | | | | | | | | | | | | | | | | | | | | | Total reinsurance assets, net | | ₩ | 5,995 | | | ₩ | 730,251 | | | ₩ | 46,739 | | | ₩ | 782,985 | | | | | | | | | | | | | | | | | | | | |
37.2 Insurance Liabilities Details of insurance liabilities as of December 31, 2016 and 2017 are as follows: | | | | | | | | | | | | | | | 2016 | | | | Life insurance | | | Others | | | Total | | | | (In millions of Korean won) | | Long-term insurance premium reserve | | ₩ | 7,161,698 | | | ₩ | — | | | ₩ | 7,161,698 | | Reserve for outstanding claims | | | 69,659 | | | | 3,041 | | | | 72,700 | | Unearned premium reserve | | | 869 | | | | 1,180 | | | | 2,049 | | Reserve for participating policyholders’ dividends on long-term insurance | | | 25,923 | | | | — | | | | 25,923 | | Unallocated Divisible Surplus to Future Policyholders | | | 9,273 | | | | — | | | | 9,273 | | Reserve for compensation for losses on dividend-paying insurance contracts | | | 8,544 | | | | — | | | | 8,544 | | Guarantee reserve | | | 10,657 | | | | — | | | | 10,657 | | | | | | | | | | | | | | | Total | | ₩ | 7,286,623 | | | ₩ | 4,221 | | | ₩ | 7,290,844 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2017 | | | | Non-life insurance | | | Life insurance | | | Others | | | Total | | | | (In millions of Korean won) | | Long-term insurance premium reserve | | ₩ | 20,697,290 | | | ₩ | 7,278,112 | | | ₩ | — | | | ₩ | 27,975,402 | | Reserve for outstanding claims | | | 2,148,923 | | | | 78,423 | | | | 3,670 | | | | 2,231,016 | | Unearned premium reserve | | | 1,392,211 | | | | 1,511 | | | | 1,075 | | | | 1,394,797 | | Reserve for participating policyholders’ dividends on long-term insurance | | | 94,005 | | | | 29,150 | | | | — | | | | 123,155 | | Unallocated Divisible Surplus to Future Policyholders | | | 24,304 | | | | 6,264 | | | | — | | | | 30,568 | | Reserve for compensation for losses on dividend-paying insurance contracts | | | 25,730 | | | | 7,920 | | | | — | | | | 33,650 | | Guarantee reserve | | | — | | | | 12,687 | | | | — | | | | 12,687 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 24,382,463 | | | ₩ | 7,414,067 | | | ₩ | 4,745 | | | ₩ | 31,801,275 | | | | | | | | | | | | | | | | | | |
The changes in insurance liabilities for the years ended December 31, 2016 and 2017, are as follows: | | | | | | | | | | | | | | | | | | | 2016 | | | | | | Beginning | | | Net increase (decrease)2 | | | Ending | | | | | | (In millions of Korean won) | | Life insurance | | Pure endowment insurance | | ₩ | 4,840,555 | | | ₩ | 310,391 | | | ₩ | 5,150,946 | | | | Death insurance | | | 156,179 | | | | 86,829 | | | | 243,008 | | | | Joint insurance | | | 1,906,777 | | | | (34,071 | ) | | | 1,872,706 | | | | Group insurance | | | 1,895 | | | | 252 | | | | 2,147 | | | | Other | | | 15,452 | | | | 2,364 | | | | 17,816 | | Others1 | | | 3,841 | | | | 380 | | | | 4,221 | | | | | | | | | | | | | | | | | Total | | ₩ | 6,924,699 | | | ₩ | 366,145 | | | ₩ | 7,290,844 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | | | Beginning | | | Business combination | | | Net increase (decrease)2 | | | Ending | | | | | | (In millions of Korean won) | | Non-life insurance | | General insurance | | ₩ | — | | | ₩ | 1,161,059 | | | ₩ | 33,201 | | | ₩ | 1,194,260 | | | | Automobile insurance | | | — | | | | 1,448,313 | | | | 29,256 | | | | 1,477,569 | | | | Long-term insurance | | | — | | | | 20,166,857 | | | | 1,431,268 | | | | 21,598,125 | | | | Long-term investment contract | | | — | | | | 113,210 | | | | (701 | ) | | | 112,509 | | Life insurance | | Pure endowment insurance | | | 5,150,946 | | | | — | | | | 98,681 | | | | 5,249,627 | | | | Death insurance | | | 243,008 | | | | — | | | | 123,295 | | | | 366,303 | | | | Joint insurance | | | 1,872,706 | | | | — | | | | (89,821 | ) | | | 1,782,885 | | | | Group insurance | | | 2,147 | | | | — | | | | (1,078 | ) | | | 1,069 | | | | Other | | | 17,816 | | | | — | | | | (3,633 | ) | | | 14,183 | | Others1 | | | 4,221 | | | | — | | | | 524 | | | | 4,745 | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 7,290,844 | | | ₩ | 22,889,439 | | | ₩ | 1,620,992 | | | ₩ | 31,801,275 | | | | | | | | | | | | | | | | | | | | |
1 | Consists of contractor’s profit dividend reserve and loss on dividend insurance reserve |
2 | Including currency translation effect and decrease in liability related to investment contract |
37.3 Liability adequacy test 37.3.1Non-life insurance (a) Assumptions and basis for the insurance liability adequacy test as of December 31, 2017, is as follows | | | | | | | Assumptions (%) | | Basis | Long-term insurance | | | | | Discount rate | | 2.57~8.59 | | Applied regulator’s scenario requiring use of liquidity premium over risk-free rate | Expense ratio | | 6.51 | | Reflected parent’s future expense cost based on last2012one-year data | Lapse ratio | | 1.30~34.80 | | Based on recent 5 year data | Mortality | | 12.00~633.00 | | Rate of risk to the anticipated risk premium of the insurer for the last 5 years | General insurance | | | | | Expense ratio | | 13.21 | | Expense ratio divided by most last 1 year accrued insurance premium | Appraisal cost ratio | | 4.73 | | Appraisal cost divided by most last 3 year accrued insurance premium | Claim settlement ratio | | 67.23 | | Claim payment divided by most last 5 year accrued insurance premium | Automobile insurance | | | | | Expense ratio | | 11.00 | | Expense ratio divided by most last 1 year accrued insurance premium | Appraisal cost ratio | | 9.33 | | Appraisal cost divided by most last 3 year accrued insurance premium | Claim settlement ratio | | 77.02 | | Claim payment divided by most last 5 year accrued insurance premium |
The results of liability adequacy test as of December 31, 2017, are as follows: | | | | | | | | | | | | | | | 2017 | | | | Recognized liabilities1 | | | Estimated adequate liabilities | | | Shortfall(surplus) | | | | (In millions of Korean won) | | Long-term insurance | | ₩ | 16,975,710 | | | ₩ | 8,736,966 | | | ₩ | (8,238,744 | ) | General insurance | | | 424,800 | | | | 376,305 | | | | (48,495 | ) | Automobile insurance | | | 1,050,576 | | | | 1,004,551 | | | | (46,025 | ) | | | | | | | | | | | | | | Total | | ₩ | 18,451,086 | | | ₩ | 10,117,822 | | | ₩ | (8,333,264 | ) | | | | | | | | | | | | | |
1 | For long-term insurance, it is an amount after deduction of the deferred acquisition costs from insurance premium reserve. For general insurance and automobile insurance, it is an amount including the unearned premium based on original insurance. |
On the other hand, as a result of adequacy test, the Group did not set additional reserve as the surplus exceeds the deficit amount. As such, there was no amount recorded as a result of liability adequacy test. 37.3.2 Life insurance Assumptions and basis for the insurance liability adequacy test as of December 31, 2016 and 2017, are as follows: | | | | | | | | | Assumptions(%) | | Basis | | | 2016 | | 2017 | | | Rate of surrender value | | 0.48~85.55 | | 0.44~60.30 | | Rate of surrender value for the last 5 years | Rate of claim | | 6~140 | | 6~118 | | Rate of claim payment for the last 7 years | Discount rate | | -2.74~16.14 | | -1.76~14.37 | | Estimated investment assets profit ratio based on the interest rate scenario provided by the Financial Supervisory Service |
Indirect costs included in commission and operating expenses were calculated based on unit cost of the expense allocation standards of the last year in accordance with the Regulation on Insurance Supervision. Direct costs included in commission and operating expenses were calculated based on estimates of future expense according to the Group’s regulations. The results of liability adequacy test as of December 31, 2016 and 2017, are as follows: | | | | | | | | | | | | | | | | | 2016 | | | | Recognized liabilities | | | Estimated adequate liabilities | | | Shortfall(surplus) | | | | (In millions of Korean won) | | Fixed interest type | | Participating | | ₩ | 31,248 | | | ₩ | 51,016 | | | ₩ | 19,768 | | | Non-participating | | | 60,860 | | | | 14,121 | | | | (46,739 | ) | | | | | | | | | | | | | | | | Variable interest type | | Participating | | | 1,136,049 | | | | 1,115,129 | | | | (20,920 | ) | | Non-participating | | | 5,514,847 | | | | 5,032,493 | | | | (482,354 | ) | | | | | | | | | | | | | | | | Variable type | | | (29,025 | ) | | | (84,881 | ) | | | (55,856 | ) | | | | | | | | | | | | | | | | Total | | ₩ | 6,713,979 | | | ₩ | 6,127,878 | | | ₩ | (586,101 | ) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2017 | | | | Recognized liabilities | | | Estimated adequate liabilities | | | Shortfall(surplus) | | | | (In millions of Korean won) | | Fixed interest type | | Participating | | ₩ | 30,702 | | | ₩ | 49,259 | | | ₩ | 18,557 | | | Non-participating | | | 97,093 | | | | 11,372 | | | | (85,721 | ) | | | | | | | | | | | | | | | | Variable interest type | | Participating | | | 1,136,444 | | | | 1,116,410 | | | | (20,034 | ) | | Non-participating | | | 5,581,698 | | | | 4,896,433 | | | | (685,265 | ) | | | | | | | | | | | | | | | | Variable type | | | (28,699 | ) | | | (106,835 | ) | | | (78,136 | ) | | | | | | | | | | | | | | | | Total | | ₩ | 6,817,238 | | | ₩ | 5,966,639 | | | ₩ | (850,599 | ) | | | | | | | | | | | | | |
On the other hand, as a result of adequacy test, the group did not set additional reserve as the surplus exceeds the deficit amount. As such, there was no amount recorded as a result of liability adequacy test. 37.4 Insurance Income and Expenses | | | | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Insurance income | | Premium income | | ₩ | 1,363,005 | | | ₩ | 1,190,422 | | | ₩ | 8,234,731 | | | Reinsurance income | | | 10,368 | | | | 10,930 | | | | 564,894 | | | Separate account income | | | — | | | | — | | | | 118,080 | | | Income of change in reinsurance assets | | | — | | | | — | | | | 49,466 | | | Other insurance income | | | — | | | | — | | | | 3,821 | | | | | | | | | | | | | | | | | | | Sub-total | | | 1,373,373 | | | | 1,201,352 | | | | 8,970,992 | | | | | | | | | | | | | | | | | Insurance expenses | | Insurance claims paid | | | 100,581 | | | | 158,789 | | | | 2,945,158 | | | Dividend expenses | | | 607 | | | | 910 | | | | 6,233 | | | Refunds of surrender value | | | 634,168 | | | | 690,207 | | | | 2,193,843 | | | Reinsurance expenses | | | 12,757 | | | | 12,286 | | | | 652,910 | | | Provision of policy reserves | | | 659,501 | | | | 366,145 | | | | 1,644,389 | | | Separate account expenses | | | (377 | ) | | | (207 | ) | | | 65,773 | | | Insurance operating expenses | | | (3,348 | ) | | | (9,903 | ) | | | 293,591 | | | Deferred acquisition costs | | | 75,098 | | | | 100,928 | | | | 361,909 | | | Expenses of change in reinsurance assets | | | — | | | | — | | | | (126 | ) | | Claim survey expenses paid | | | — | | | | — | | | | 20,564 | | | Other insurance expenses | | | — | | | | — | | | | 193,038 | | | | | | | | | | | | | | | | | | | Sub-total | | | 1,478,987 | | | | 1,319,155 | | | | 8,377,282 | | | �� | | | | | | | | | | | | | | Net insurance income(expenses) | | ₩ | (105,614 | ) | | ₩ | (117,803 | ) | | ₩ | 593,710 | | | | | | | | | | | | | | | | |
37.5 Risk management ofnon-life insurance 37.5.1 Overview Insurance risk is the risk that arises from a primary operation of insurance companies that is associated with acceptance of insurance contract and payment of claims, and is classified as the insurance price risk and the reserves risk. The insurance price risk is the risk of loss that might occur when the actual risk exceeds the expected risk rate or expected insurance operating expenses ratios in calculation of premiums. It is the risk of loss that arises from differences between actual payment of claims and premiums received from policyholders. The reserves risk is the risk that arises due to a deficit in reserves at the date of assessment, making the Group unable to cover the actual claims payment in the future. 37.5.2 Purposes, policies and procedures to manage risk arising from insurance contracts The risks associated with insurance contract that the Group faces are the insurance actuarial risk and the acceptance risk. Each risk occurs due to insurance contract’s pricing and conditions of acceptance. In order to minimize acceptance risk, the Group establishes guidelines and procedure for acceptance and out lines specific conditions for acceptance by product. In addition, expected risk level at the date of pricing is compared with actual risk of contracts after acceptance and the interest rate is adjusted accordingly, conditions of sale is changed, sale of goods is interrupted and other measures are taken in order to reduce insurance actuarial risk. The Group has a committee to discuss status of product acceptance risk and interest rate policy. The committee decides important matters to set the processes that allow minimizing the insurance actuarial risk, the acceptance risk and other business related risk. In addition, according to reinsurance operating standards, the Group establishes an operating strategy of reinsurance for large claims expense due to unexpected catastrophic events. The Group supports so that policyholders are safe and the Group’s stable profit can be achieved. For the long-term goal, the Group manages risk at a comprehensive level to keep its value at the maximum. The Group’s entire risk is calculated by using RBC method. The Group sets the risk appetite limits in order that the calculated risk level is maintained at an appropriate level compared to available capital. Portfolio of assets and products are monitored to improve profit compared to risk. 37.5.3 Exposure to insurance price risk According to RBC standard, exposure to insurance price risk is defined as net written premiums for prior 1 year that is calculated by adding and subtracting original insurance premium, assumed reinsurance premium and ceded reinsurance premium. The Group’s exposure to insurance price risk as of December 31, 2017 as follows: | | | | | | | | | | | | | | | | | | | 2017 | | | | Direct insurance | | | Inward reinsurance | | | Outward reinsurance | | | Total | | | | (In millions of Korean won) | | General | | ₩ | 906,603 | | | ₩ | 84,056 | | | ₩ | (518,099 | ) | | ₩ | 472,560 | | Automobile | | | 2,000,232 | | | | — | | | | (34,579 | ) | | | 1,965,653 | | Long-term | | | 2,020,782 | | | | — | | | | (276,325 | ) | | | 1,744,457 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 4,927,617 | | | ₩ | 84,056 | | | ₩ | (829,003 | ) | | ₩ | 4,182,670 | | | | | | | | | | | | | | | | | | |
37.5.4 Concentration of Insurance risk The Group is selling generalnon-life insurances (fire, maritime, injury, technology, liability, package, title, guarantee and special type insurances), automobile insurances (for private use, for hire, for business, bicycle and other), long-term insurances (long-termnon-life, property damage, injury, driver, savings, illness, nursing and pension) and various other insurances. The Group’s risk is distributed through reinsurance, joint acceptance and diversified selling. In addition, insurances that cover serious damage of risk, although with rare possibility of the occurrence of disaster, such as storm and flood insurance are limited, and the Group controls the risk through joint acquisition. Loss development tables The Group uses claim development of payments and the estimated ultimate claims for the accident years in order to maintain overall reserve adequacy in respect of general, automobile and long-term insurance. When the estimated ultimate claims are greater than claim payments, the Group establishes additional reserves. Loss development tables as of December 31, 2017, are as follows: General Insurance | | | | | | | | | | | | | | | | | | | | | | | Payment year | | Accident year | | After 1 year | | | After 2 years | | | After 3 years | | | After 4 years | | | After 5 years | | | | (In millions of Korean won) | | Estimate of gross ultimate claims (A) | | | | | | | | | | | | | | | | | | | | | 2013.1.1~2013.12.31 | | ₩ | 170,587 | | | ₩ | 203,250 | | | ₩ | 208,100 | | | ₩ | 207,329 | | | ₩ | 206,450 | | 2014.1.1~2014.12.31 | | | 127,903 | | | | 144,915 | | | | 146,430 | | | | 146,533 | | | | — | | 2015.1.1~2015.12.31 | | | 125,170 | | | | 145,637 | | | | 148,165 | | | | — | | | | — | | 2016.1.1~2016.12.31 | | | 145,618 | | | | 168,127 | | | | — | | | | — | | | | — | | 2017.1.1~2017.12.31 | | | 168,409 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | 737,687 | | | | 661,929 | | | | 502,695 | | | | 353,862 | | | | 206,450 | | | | | | | | | | | | | | | | | | | | | | | Gross cumulative claim payments (B) | | | | | | | | | | | | | | | | | | | | | 2013.1.1~2013.12.31 | | | 133,479 | | | | 184,209 | | | | 198,286 | | | | 200,931 | | | | 202,093 | | 2014.1.1~2014.12.31 | | | 94,901 | | | | 129,652 | | | | 136,689 | | | | 141,170 | | | | — | | 2015.1.1~2015.12.31 | | | 93,443 | | | | 130,430 | | | | 137,854 | | | | — | | | | — | | 2016.1.1~2016.12.31 | | | 108,098 | | | | 151,583 | | | | — | | | | — | | | | — | | 2017.1.1~2017.12.31 | | | 132,430 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | 562,351 | | | | 595,874 | | | | 472,829 | | | | 342,101 | | | | 202,093 | | | | | | | | | | | | | | | | | | | | | | | Difference(A-B) | | ₩ | 175,336 | | | ₩ | 66,055 | | | ₩ | 29,866 | | | ₩ | 11,761 | | | ₩ | 4,357 | | | | | | | | | | | | | | | | | | | | | | |
Automobile Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (In millions of Korean won) | | Payment year | | Accident year | | After 1 year | | | After 2 years | | | After 3 years | | | After 4 years | | | After 5 years | | | After 6 years | | | After 7 years | | | | (In millions of Korean won) | | Estimate of gross ultimate claims (A) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2011.1.1~2011.12.31 | | ₩ | 1,088,801 | | | ₩ | 1,105,501 | | | ₩ | 1,115,281 | | | ₩ | 1,119,872 | | | ₩ | 1,122,637 | | | ₩ | 1,124,045 | | | ₩ | 1,125,203 | | 2012.1.1~2012.12.31 | | | 1,117,650 | | | | 1,146,779 | | | | 1,155,529 | | | | 1,162,075 | | | | 1,164,774 | | | | 1,166,470 | | | | — | | 2013.1.1~2013.12.31 | | | 1,131,945 | | | | 1,156,535 | | | | 1,170,968 | | | | 1,179,458 | | | | 1,179,323 | | | | — | | | | — | | 2014.1.1~2014.12.31 | | | 1,174,611 | | | | 1,193,832 | | | | 1,205,524 | | | | 1,212,025 | | | | — | | | | — | | | | — | | 2015.1.1~2015.12.31 | | | 1,227,106 | | | | 1,245,780 | | | | 1,256,058 | | | | — | | | | — | | | | — | | | | — | | 2016.1.1~2016.12.31 | | | 1,276,939 | | | | 1,281,381 | | | | — | | | | — | | | | — | | | | — | | | | — | | 2017.1.1~2017.12.31 | | | 1,342,998 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 8,360,050 | | | | 7,129,808 | | | | 5,903,360 | | | | 4,673,430 | | | | 3,466,734 | | | | 2,290,515 | | | | 1,125,203 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross cumulative claim payments(B) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2011.1.1~2011.12.31 | | | 929,491 | | | | 1,066,885 | | | | 1,093,589 | | | | 1,109,202 | | | | 1,117,381 | | | | 1,119,765 | | | | 1,120,687 | | 2012.1.1~2012.12.31 | | | 939,239 | | | | 1,105,672 | | | | 1,135,064 | | | | 1,149,585 | | | | 1,156,150 | | | | 1,159,614 | | | | — | | 2013.1.1~2013.12.31 | | | 939,569 | | | | 1,114,063 | | | | 1,145,110 | | | | 1,161,624 | | | | 1,168,617 | | | | — | | | | — | | 2014.1.1~2014.12.31 | | | 969,211 | | | | 1,150,462 | | | | 1,180,953 | | | | 1,196,387 | | | | — | | | | — | | | | — | | 2015.1.1~2015.12.31 | | | 1,020,975 | | | | 1,198,241 | | | | 1,228,357 | | | | — | | | | — | | | | — | | | | — | | 2016.1.1~2016.12.31 | | | 1,052,830 | | | | 1,235,656 | | | | — | | | | — | | | | — | | | | — | | | | — | | 2017.1.1~2017.12.31 | | | 1,104,158 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 6,955,473 | | | | 6,870,979 | | | | 5,783,073 | | | | 4,616,798 | | | | 3,442,148 | | | | 2,279,379 | | | | 1,120,687 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Difference(A-B) | | ₩ | 1,404,577 | | | ₩ | 258,829 | | | ₩ | 120,287 | | | ₩ | 56,632 | | | ₩ | 24,586 | | | ₩ | 11,136 | | | ₩ | 4,516 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Long-term Insurance | | | | | | | | | | | | | | | | | | | | | | | Payment year | | Accident year | | After 1 year | | | After 2 years | | | After 3 years | | | After 4 years | | | After 5 years | | | | | (In millions of Korean won) | | Estimate of ultimate claims (A) | | | | | | | | | | | | | | | | | | | | | 2013.1.1~2013.12.31 | | ₩ | 709,602 | | | ₩ | 965,587 | | | ₩ | 997,607 | | | ₩ | 1,003,646 | | | ₩ | 1,006,025 | | 2014.1.1~2014.12.31 | | | 789,087 | | | | 1,083,048 | | | | 1,114,821 | | | | 1,119,206 | | | | — | | 2015.1.1~2015.12.31 | | | 885,476 | | | | 1,219,393 | | | | 1,256,051 | | | | — | | | | — | | 2016.1.1~2016.12.31 | | | 1,064,744 | | | | 1,437,573 | | | | — | | | | — | | | | — | | 2017.1.1~2017.12.31 | | | 1,184,224 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | 4,633,133 | | | | 4,705,601 | | | | 3,368,479 | | | | 2,122,852 | | | | 1,006,025 | | | | | | | | | | | | | | | | | | | | | | | Gross cumulative claim payments (B) | | | | | | | | | | | | | | | | | | | | | 2013.1.1~2013.12.31 | | | 671,500 | | | | 953,494 | | | | 989,957 | | | | 999,944 | | | | 1,003,715 | | 2014.1.1~2014.12.31 | | | 744,944 | | | | 1,065,792 | | | | 1,104,468 | | | | 1,114,341 | | | | — | | 2015.1.1~2015.12.31 | | | 836,471 | | | | 1,205,130 | | | | 1,248,475 | | | | — | | | | — | | 2016.1.1~2016.12.31 | | | 1,017,243 | | | | 1,424,948 | | | | — | | | | — | | | | — | | 2017.1.1~2017.12.31 | | | 1,130,868 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | 4,401,026 | | | | 4,649,364 | | | | 3,342,900 | | | | 2,114,285 | | | | 1,003,715 | | | | | | | | | | | | | | | | | | | | | | | Difference(A-B) | | ₩ | 232,107 | | | ₩ | 56,237 | | | ₩ | 25,579 | | | ₩ | 8,567 | | | ₩ | 2,310 | | | | | | | | | | | | | | | | | | | | | | |
37.5.5 Sensitivity analysis of insurance risk The Group manages insurance risk by performing sensitivity analysis based on discount rate, loss ratio and insurance operating expenses ratio which are considered to have significant influence on future cash flow, timing and uncertainty. According to result of sensitivity analysis there is no material influence on the equity and net profit before tax. | | | | | | | | | | | Assumption change | | | 2017 Effect on LAT | | | | | | | (In millions of Korean won) | | Surrenders and termination rates | | | 10 | % | | ₩ | 373,772 | | | | | -10 | % | | | (334,351 | ) | Loss ratio | | | 10 | % | | | 3,146,419 | | | | | -10 | % | | | (3,146,419 | ) | Insurance operating expenses ratio | | | 10 | % | | | 276,741 | | | | | -10 | % | | | (276,741 | ) | Discount rate | | | +0.5 | % | | | (1,087,451 | ) | | | | -0.5 | % | | | 1,367,045 | |
37.5.6 Liquidity risk of insurance contracts Liquidity risk arising from insurance contracts is the increase in refunds at maturity caused by concentrations of maturity, the increase in surrender values caused by unexpected amounts in cancellation and the increase in payments of claims caused by catastrophic events. The Group manages payment of refunds payable at maturity by analyzing maturity of insurance. Premium reserve’s maturity structure as of December 31, 2017 as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | 20171 | | | | Within 1 year | | | 1~5 years | | | 5~10 years | | | 10~20 years | | | More 20 years | | | Total | | | | (In millions of Korean won) | | Long-term insurancenon-participating | | | | | | | | | | | | | | | | | | | | | | | | | Non-linked | | ₩ | 26,239 | | | ₩ | 297,196 | | | ₩ | 117,610 | | | ₩ | 40,229 | | | ₩ | 94,477 | | | ₩ | 575,751 | | Linked | | | 458,340 | | | | 2,723,485 | | | | 2,135,336 | | | | 926,591 | | | | 10,269,931 | | | | 16,513,683 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 484,579 | | | | 3,020,681 | | | | 2,252,946 | | | | 966,820 | | | | 10,364,408 | | | | 17,089,434 | | | | | | | | | | | | | | | | | | | | | | | | | | | Annuity | | | | | | | | | | | | | | | | | | | | | | | | | Non-linked | | | 19 | | | | 92 | | | | 2,117 | | | | 3,956 | | | | 1,401 | | | | 7,585 | | Linked | | | 153 | | | | 46,987 | | | | 307,455 | | | | 1,089,983 | | | | 2,141,589 | | | | 3,586,167 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 172 | | | | 47,079 | | | | 309,572 | | | | 1,093,939 | | | | 2,142,990 | | | | 3,593,752 | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset-linked | | | | | | | | | | | | | | | | | | | | | | | | | Linked | | | — | | | | 27,499 | | | | — | | | | — | | | | — | | | | 27,499 | | Total | | | | | | | | | | | | | | | | | | | | | | | | | Non-linked | | | 26,258 | | | | 297,288 | | | | 119,727 | | | | 44,185 | | | | 95,878 | | | | 583,336 | | Linked | | | 458,493 | | | | 2,797,971 | | | | 2,442,791 | | | | 2,016,574 | | | | 12,411,520 | | | | 20,127,349 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 484,751 | | | ₩ | 3,095,259 | | | ₩ | 2,562,518 | | | ₩ | 2,060,759 | | | ₩ | 12,507,398 | | | ₩ | 20,710,685 | | | | | | | | | | | | | | | | | | | | | | | | | | |
1 | Includes long-term investment contract amounting to ₩112,510 million. |
37.5.7 Credit risk of insurance contract Credit risk of insurance contract is the economic loss arising fromnon-performing contractual obligations due to decline in credit ratings or default. Through strict internal review, the Group cedes insurance contracts to the insurers rated aboveBBB- of S&P rating. As of December 31, 2017, there are 219 reinsurance companies that deal with the Group, and the top three reinsurance companies’ concentration and credit ratings are as follows: | | | | | | | | | Reinsurance company | | Ratio | | | Credit rating | | KOREAN RE | | | 65.45 | % | | | AA | | SWISSRE | | | 4.61 | % | | | AAA | | HDIgerling | | | 3.69 | % | | | AA+ | |
Exposures to credit risk related to reinsurance as of December 31, 2017 as follows: | | | | | | | 2017 | | | | (In millions of Korean won) | | Profit attributable to ordinary sharesReinsurance assets1
| | ₩ | 1,769,566,917,759776,340 | | AdjustmentNet receivables from reinsurers2
| | | — 237,750 | | | | | | | Adjusted profit for diluted earnings per shareTotal
| | ₩ | 1,769,566,917,7591,014,090 | | | | | | |
1 | Net carrying amounts after impairment loss |
2 | Net carrying amounts of each reinsurance company that offsets reinsurance accounts receivable and reinsurance accounts payable and after allowance for loan losses |
37.5.8 Interest risk of insurance contract The interest rate risk exposure from the Group’s insurance contracts is the risk of unexpected losses in net interest income or net assets arising from changes in interest rates and it is managed to minimize the loss experienced. For long-term,non-life insurance contracts, the Group calculates exposure of interest-bearing assets and interest-bearing liabilities. Liabilities exposure is premium reserves after subtracting costs of termination deductions. Asset exposure is interest-bearing assets. Assets that receive only fees without interest are excluded from interest bearing assets. Exposures to interest rate risk as of December 31, 2017 are as follows: i) Exposure to interest rate risk | | | | | | | 20132017 | | | | | (In millions of Korean won)won | ) | Profit attributable to ordinary sharesLiabilities
| | | | | Fixed interest rate | | ₩ | 1,271,502,597,550582,345 | | AdjustmentVariable interest rate
| | | — 18,548,946 | | | | | | | Adjusted profit for diluted earnings per share
| | ₩ | 1,271,502,597,550 | | | | | | |
| | | | | | | 2014 | | | | (In Korean won) | | Profit attributable to ordinary shares
| | ₩ | 1,400,722,065,239 | | AdjustmentTotal
| | | — 19,131,291 | | | | | | | AdjustedAssets
| | | | | Due from banks | | | 167,312 | | Financial assets at fair value through profit for diluted earnings per shareor loss | | | 325,844 | | Available-for-sale financial assets | | | 6,066,290 | | Held-to-maturity financial assets | | | 6,501,529 | | Loans | | | 6,338,470 | | | | | | | Total | | ₩ | 1,400,722,065,23919,399,445 | | | | | | |
Adjusted weighted average numberii) Measurement and recognition method
Duration is used to measure interest rate risk within risk based solvency test. ALM system for risk based solvency test is utilized to manage interest rate risk internally. In addition, Risk Management Committee sets ALM strategy every year to manage interest rate risk. iii) Sensitivity to changes in interest rates Generally, when interest rates rise, the value and duration of ordinary shares outstanding to calculate diluted earnings per share:assets and liabilities fall, when interest rates fall, value and duration of assets and liabilities increase. When duration of assets is shorter than duration of liabilities, the interest risk is increased if the interest rates fall since increased asset value is smaller than liabilities increase. | | | | | | | | | | | | | | | 2012 | | | 2013 | | | 2014 | | | | (in number of shares) | | Weighted average number of ordinary shares outstanding | | | 386,351,693 | | | | 386,351,693 | | | | 386,351,693 | | Adjustment | | | | | | | | | | | | | Share grants | | | 1,193,606 | | | | 1,639,306 | | | | 1,589,706 | | | | | | | | | | | | | | | Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share | | | 387,545,299 | | | | 387,990,999 | | | | 387,941,399 | | | | | | | | | | | | | | |
Diluted earnings per share:iv) Negative spread risk control
| | | | | | | 2012 | | | | (in Korean won and in number of shares) | | Adjusted profit for diluted earnings per share
| | ₩ | 1,769,566,917,759 | | Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share
| | | 387,545,299 | | Diluted earnings per share
| | ₩ | 4,567 | |
| | | | | | | 2013 | | | | (in Korean won and in number of shares) | | Adjusted profit for diluted earnings per share
| | ₩ | 1,271,502,597,550 | | Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share
| | | 387,990,999 | | Diluted earnings per share
| | ₩ | 3,277 | |
| | | | | | | 2014 | | | | (in Korean won and in number of shares) | | Adjusted profit for diluted earnings per share
| | ₩ | 1,400,722,065,239 | | Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share
| | | 387,941,399 | | Diluted earnings per share
| | ₩ | 3,611 | |
37. Insurance Contracts
37.1 Insurance liabilities
The details of insurance liabilities presented withinTo control interest expenses from other liabilities as of December 31, 2013 and 2014, are as follows:
| | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Individual insurance | | | | | | | | | Pure Endowment insurance | | ₩ | 3,861,364 | | | ₩ | 4,334,823 | | Death insurance | | | 85,123 | | | | 112,858 | | Joint insurance | | | 1,634,590 | | | | 1,800,468 | | Group insurance | | | 1,339 | | | | 1,417 | | Other | | | 16,627 | | | | 15,632 | | | | | | | | | | | Total | | ₩ | 5,599,043 | | | ₩ | 6,265,198 | | | | | | | | | | |
The changes in insurance liabilities forinvestment incomes from assets, the years ended December 31, 2013Group publicizes its interest rate considering market interest rate and 2014, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Individual insurance | | | Group insurance | | | Others(1) | | | Total | | | | Pure Endowment insurance | | | Death insurance | | | Joint insurance | | | | | | | (In millions of Korean won) | | Beginning | | ₩ | 3,281,701 | | | ₩ | 63,821 | | | ₩ | 1,470,755 | | | ₩ | 1,285 | | | ₩ | 19,604 | | | ₩ | 4,837,166 | | Provision (Reversal) | | | 579,663 | | | | 21,302 | | | | 163,835 | | | | 54 | | | | (2,977 | ) | | | 761,877 | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending | | ₩ | 3,861,364 | | | ₩ | 85,123 | | | ₩ | 1,634,590 | | | ₩ | 1,339 | | | ₩ | 16,627 | | | ₩ | 5,599,043 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Individual insurance | | | Group insurance | | | Others(1) | | | Total | | | | Pure Endowment insurance | | | Death insurance | | | Joint insurance | | | | | | | (In millions of Korean won) | | Beginning | | ₩ | 3,861,364 | | | ₩ | 85,123 | | | ₩ | 1,634,590 | | | ₩ | 1,339 | | | ₩ | 16,627 | | | ₩ | 5,599,043 | | Provision (Reversal) | | | 473,459 | | | | 27,735 | | | | 165,878 | | | | 78 | | | | (995 | ) | | | 666,155 | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending | | ₩ | 4,334,823 | | | ₩ | 112,858 | | | ₩ | 1,800,468 | | | ₩ | 1,417 | | | ₩ | 15,632 | | | ₩ | 6,265,198 | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Consists of policyholders’ profit dividend reserve, reserve for compensation for losses on dividend-paying insurance contracts and others.
|
37.2 Insurance assets
The details ofreturn on invested insurance assets presented within other assets as of December 31, 2013 and 2014, are as follows:the Group.
| | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Reinsurance assets | | ₩ | 5,245 | | | ₩ | 4,482 | | Deferred acquisition costs | | | 151,909 | | | | 123,011 | | | | | | | | | | | Total | | ₩ | 157,154 | | | ₩ | 127,493 | | | | | | | | | | |
37.6 Risk management of life insuranceThe changes in reinsurance assets for the years ended December 31, 2013 and 2014, are as follows:
| | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Beginning | | ₩ | 3,751 | | | ₩ | 5,245 | | Increase (decrease) | | | 1,494 | | | | (763 | ) | | | | | | | | | | Ending | | ₩ | 5,245 | | | ₩ | 4,482 | | | | | | | | | | |
The changes in deferred acquisition costs for the years ended December 31, 2013 and 2014, are as follows:
| | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Beginning | | ₩ | 151,925 | | | ₩ | 151,909 | | Increase | | | 102,702 | | | | 52,386 | | Amortization | | | (102,718 | ) | | | (81,284 | ) | | | | | | | | | | Ending | | ₩ | 151,909 | | | ₩ | 123,011 | | | | | | | | | | |
37.3 Insurance premiums and reinsurance
The details of insurance premiums for the years ended December 31, 2012, 2013 and 2014, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2012 | | | | Pure endowment insurance | | | Death insurance | | | Joint insurance | | | Group insurance | | | Others | | | Total | | | | (In millions of Korean won) | | Insurance premiums earned | | ₩ | 1,307,974 | | | ₩ | 19,547 | | | ₩ | 352,482 | | | ₩ | 3,967 | | | ₩ | 39,081 | | | ₩ | 1,723,051 | | Reinsurance premiums paid | | | (196 | ) | | | (2,637 | ) | | | (133 | ) | | | (892 | ) | | | (8,354 | ) | | | (12,212 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net premiums earned | | ₩ | 1,307,778 | | | ₩ | 16,910 | | | ₩ | 352,349 | | | ₩ | 3,075 | | | ₩ | 30,727 | | | ₩ | 1,710,839 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Pure endowment insurance | | | Death insurance | | | Joint insurance | | | Group insurance | | | Others | | | Total | | | | (In millions of Korean won) | | Insurance premiums earned | | ₩ | 795,031 | | | ₩ | 41,389 | | | ₩ | 336,540 | | | ₩ | 5,019 | | | ₩ | 42,474 | | | ₩ | 1,220,453 | | Reinsurance premiums paid | | | (480 | ) | | | (3,854 | ) | | | (278 | ) | | | (2,177 | ) | | | (7,302 | ) | | | (14,091 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net premiums earned | | ₩ | 794,551 | | | ₩ | 37,535 | | | ₩ | 336,262 | | | ₩ | 2,842 | | | ₩ | 35,172 | | | ₩ | 1,206,362 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Pure endowment insurance | | | Death insurance | | | Joint insurance | | | Group insurance | | | Others | | | Total | | | | (In millions of Korean won) | | Insurance premiums earned | | ₩ | 756,697 | | | ₩ | 55,035 | | | ₩ | 350,076 | | | ₩ | 5,271 | | | ₩ | 37,481 | | | ₩ | 1,204,560 | | Reinsurance premiums paid | | | (502 | ) | | | (2,674 | ) | | | (306 | ) | | | (2,366 | ) | | | (7,072 | ) | | | (12,920 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net premiums earned | | ₩ | 756,195 | | | ₩ | 52,361 | | | ₩ | 349,770 | | | ₩ | 2,905 | | | ₩ | 30,409 | | | ₩ | 1,191,640 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The details of reinsurance transactions for the years ended December 31, 2012, 2013 and 2014, are as follows:
| | | | | | | | | | | | | | | | | | | 2012 | | | | Reinsurance expense | | | Reinsurance revenue | | | | Reinsurance premium paid | | | Reinsurance claims | | | Reinsurance commission | | | Total | | | | (In millions of Korean won) | | Individual | | ₩ | 2,966 | | | ₩ | 1,150 | | | ₩ | 1,000 | | | ₩ | 2,150 | | Group | | | 892 | | | | 1,138 | | | | — | | | | 1,138 | | Others | | | 8,354 | | | | 4,127 | | | | — | | | | 4,127 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 12,212 | | | ₩ | 6,415 | | | ₩ | 1,000 | | | ₩ | 7,415 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2013 | | | | Reinsurance expense | | | Reinsurance revenue | | | | Reinsurance premium paid | | | Reinsurance claims | | | Reinsurance commission | | | Total | | | | (In millions of Korean won) | | Individual | | ₩ | 4,612 | | | ₩ | 3,850 | | | ₩ | 466 | | | ₩ | 4,316 | | Group | | | 2,177 | | | | 2,124 | | | | 220 | | | | 2,344 | | Others | | | 7,302 | | | | 6,660 | | | | — | | | | 6,660 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 14,091 | | | ₩ | 12,634 | | | ₩ | 686 | | | ₩ | 13,320 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Reinsurance expense | | | Reinsurance revenue | | | | Reinsurance premium paid | | | Reinsurance claims | | | Reinsurance commission | | | Total | | | | (In millions of Korean won) | | Individual | | ₩ | 3,482 | | | ₩ | 2,461 | | | ₩ | 555 | | | ₩ | 3,016 | | Group | | | 2,366 | | | | 2,652 | | | | 47 | | | | 2,699 | | Others | | | 7,072 | | | | 4,756 | | | | — | | | | 4,756 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 12,920 | | | ₩ | 9,869 | | | ₩ | 602 | | | ₩ | 10,471 | | | | | | | | | | | | | | | | | | |
Insurance expenses for the years ended December 31, 2012, 2013 and 2014, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2012 | | | | Pure endowment insurance | | | Death insurance | | | Joint insurance | | | Group insurance | | | Others | | | Total | | | | (In millions of Korean won) | | Insurance expense | | ₩ | 2,659 | | | ₩ | 1,637 | | | ₩ | 6,232 | | | ₩ | 2,775 | | | ₩ | 2,423 | | | ₩ | 15,726 | | Dividend expense | | | 154 | | | | 12 | | | | — | | | | — | | | | — | | | | 166 | | Refund expense | | | 202,965 | | | | 4,043 | | | | 183,061 | | | | 215 | | | | — | | | | 390,284 | | Provision | | | 1,122,167 | | | | 9,813 | | | | 169,616 | | | | 1,019 | | | | 3,115 | | | | 1,305,730 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 1,327,945 | | | | 15,505 | | | | 358,909 | | | | 4,009 | | | | 5,538 | | | | 1,711,906 | | | | | | | | | | | | | | | | | | | | | | | | | | | Reinsurance claims | | | (184 | ) | | | (898 | ) | | | (68 | ) | | | (1,138 | ) | | | (4,127 | ) | | | (6,415 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net insurance expense | | ₩ | 1,327,761 | | | ₩ | 14,607 | | | ₩ | 358,841 | | | ₩ | 2,871 | | | ₩ | 1,411 | | | ₩ | 1,705,491 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Pure endowment insurance | | | Death insurance | | | Joint insurance | | | Group insurance | | | Others | | | Total | | | | (In millions of Korean won) | | Insurance expense | | ₩ | 6,557 | | | ₩ | 2,287 | | | ₩ | 1,085 | | | ₩ | 4,922 | | | ₩ | 5,645 | | | ₩ | 20,496 | | Dividend expense | | | 295 | | | | 13 | | | | — | | | | — | | | | — | | | | 308 | | Refund expense | | | 259,710 | | | | 5,257 | | | | 185,286 | | | | 351 | | | | — | | | | 450,604 | | Provision | | | 579,663 | | | | 21,302 | | | | 163,835 | | | | 54 | | | | (2,977 | ) | | | 761,877 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 846,225 | | | | 28,859 | | | | 350,206 | | | | 5,327 | | | | 2,668 | | | | 1,233,285 | | | | | | | | | | | | | | | | | | | | | | | | | | | Reinsurance claims | | | (204 | ) | | | (3,592 | ) | | | (54 | ) | | | (2,124 | ) | | | (6,660 | ) | | | (12,634 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net insurance expense | | ₩ | 846,021 | | | ₩ | 25,267 | | | ₩ | 350,152 | | | ₩ | 3,203 | | | ₩ | (3,992 | ) | | ₩ | 1,220,651 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Pure endowment insurance | | | Death insurance | | | Joint insurance | | | Group insurance | | | Others | | | Total | | | | (In millions of Korean won) | | Insurance expense | | ₩ | 6,078 | | | ₩ | 3,006 | | | ₩ | 10,837 | | | ₩ | 5,006 | | | ₩ | 4,757 | | | ₩ | 29,684 | | Dividend expense | | | 417 | | | | 21 | | | | — | | | | — | | | | — | | | | 438 | | Refund expense | | | 346,740 | | | | 7,588 | | | | 201,029 | | | | 238 | | | | — | | | | 555,595 | | Provision(Reversal) | | | 473,459 | | | | 27,735 | | | | 165,878 | | | | 78 | | | | (995 | ) | | | 666,155 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 826,694 | | | | 38,350 | | | | 377,744 | | | | 5,322 | | | | 3,762 | | | | 1,251,872 | | | | | | | | | | | | | | | | | | | | | | | | | | | Reinsurance claims | | | (202 | ) | | | (2,205 | ) | | | (55 | ) | | | (2,651 | ) | | | (4,756 | ) | | | (9,869 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net insurance expense | | ₩ | 826,492 | | | ₩ | 36,145 | | | ₩ | 377,689 | | | ₩ | 2,671 | | | ₩ | (994 | ) | | ₩ | 1,242,003 | | | | | | | | | | | | | | | | | | | | | | | | | | |
37.4 Insurance risk
Summary of insurance risk37.6.1 Overview
Insurance risk is the risk of loss arising from the actual risk at the time of claims exceeding the estimated risk at the time of underwriting. Insurance risk is classified by insurance price risk and policy reserve risk. Insurance price risk is the risk of loss arising from differences between premiums from policyholders and actual claims paid. Policy reserve risk is the risk of loss arising from differences between policy reserves the Group holds and actual claims to be paid. The Group measures only insurance price risk under RBC requirement because life insurance claim payout is mainly in a fixed amount with less volatility in policy reserve and shorter waiting period before payment 37.6.2 Concentration of insurance risk and reinsurance policy The Group uses reinsurance with the intent to expand the abilitymitigate concentration of underwriting insurance contracts through mitigating the exposure to insurance risk and generates synergy by joint development of products, management discipline and collecting information on foreign markets. seeking an enhanced capital management. The Group cedescategorized reinsurance for mortality, illnessinto group and other risks arising from insuranceindividual contracts, where the Group has little experience for a necessary period of time required to accumulate experience. The Group’s Reinsuranceand reinsurance is ceded through the following process:
i. In the decision-making process of launching a new product, the Group makes a decision on ceding reinsurance. Subsequently, a reinsurer is selected through bidding, agreements with the relevant departments and final approval by the executive management.
| i. | In the decision-making process of launching a new product, the Group makes a decision on ceding reinsurance. Subsequently, a reinsurer is selected through bidding, agreements with the relevant departments and final approval by the executive management. |
| ii. | The reinsurance department analyzes the object of reinsurance, the maximum limit of reinsurance and the loss ratio with the relevant departments. |
ii. The reinsurance department analyzes the object of reinsurance, the maximum limit of reinsurance and the loss ratio with the relevant departments.
37.6.3 The characteristic and exposure of insurance price risk The Group measures the exposure of insurance price risk as the shortfall of the risk premiums received compared to the claims paid on all insurance contracts for the last one year preceding the reporting date. The insurance risk of a life insurance company is measured by insurance price risk. As the life insurance coverage is in the form of a fixed payment, the fluctuation of policy reserve is small and the period from insured event to claims payment is not long. The policy reserve risk is managed by assessments of adequacy of the policy reserve. The Group measures the exposure of insurance price risk as the shortfall of theis managed through insurance risk premiums received compared to the claims paid on all insurance contracts for the last one year preceding the reporting date.management regulation established by Risk Management Committee. The maximum exposure of premiumexposures to insurance price risk as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Before reinsurance mitigation | | | After reinsurance mitigation | | | Before reinsurance mitigation | | | After reinsurance mitigation | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Mortality | | ₩ | 10,969 | | | ₩ | 5,430 | | | Death | | | ₩ | 13,662 | | | ₩ | 9,272 | | Disability | | | 660 | | | | 370 | | | | 1,341 | | | | 947 | | Hospitalization | | | 861 | | | | 600 | | | | 1,022 | | | | 777 | | Operation and diagnosis | | | 1,731 | | | | 1,164 | | | | 2,341 | | | | 1,856 | | Actual losses for medical expense | | | 243 | | | | 132 | | | | 468 | | | | 299 | | Others | | | 89 | | | | 21 | | | | 581 | | | | 544 | | | | | | | | | | | | | | | Total | | ₩ | 14,553 | | | ₩ | 7,717 | | | ₩ | 19,415 | | | ₩ | 13,695 | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Before reinsurance mitigation | | | After reinsurance mitigation | | | Before reinsurance mitigation | | | After reinsurance mitigation | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Mortality | | ₩ | 10,736 | | | ₩ | 6,321 | | | Death | | | ₩ | 14,356 | | | ₩ | 10,279 | | Disability | | | 950 | | | | 545 | | | | 1,331 | | | | 899 | | Hospitalization | | | 767 | | | | 490 | | | | 1,233 | | | | 747 | | Operation and diagnosis | | | 1,516 | | | | 998 | | | | 3,326 | | | | 1,977 | | Actual losses for medical expense | | | 279 | | | | 89 | | | | 817 | | | | 403 | | Others | | | 232 | | | | 189 | | | | 753 | | | | 376 | | | | | | | | | | | | | | | Total | | ₩ | 14,480 | | | ₩ | 8,632 | | | ₩ | 21,816 | | | ₩ | 14,681 | | | | | | | | | | | | | | |
Average ratios of claims paid per risk premium received on the basis of exposure before mitigation for the past three years as of December 31, 20132016 and 2014,2017, were 69%68.9% and 70%65.9%, respectively. The exposure of market risk arising from embedded derivatives included in host insurance contracts as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | Policy holders reserve | | | Guarantee reserve | | | Policy holders reserve | | | Guarantee reserve | | | Policyholders reserve1 | | | Guarantee reserve | | | Policyholders reserve1 | | | Guarantee reserve | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Variable annuity | | ₩ | 540,797 | | | ₩ | 4,058 | | | ₩ | 535,749 | | | ₩ | 5,153 | | | ₩ | 491,137 | | | ₩ | 3,702 | | | ₩ | 461,309 | | | ₩ | 3,485 | | Variable universal | | | 132,413 | | | | 135 | | | | 110,766 | | | | 458 | | | | 105,218 | | | | 4,855 | | | | 97,893 | | | | 3,572 | | Others | | | 1,443 | | | | — | | | | 26,573 | | | | 118 | | | Variable saving | | | | 256,262 | | | | 179 | | | | 429,985 | | | | 316 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 674,653 | | | ₩ | 4,193 | | | ₩ | 673,088 | | | ₩ | 5,729 | | | ₩ | 852,617 | | | ₩ | 8,736 | | | ₩ | 989,187 | | | ₩ | 7,373 | | | | | | | | | | | | | | | | | | | | | | | | | | |
1 | Excluding the amount of the lapsed reserve |
37.6.4 Assumptions used in measuring insurance liabilities The Group applies assumed rates defined in the premium and liability reserve calculation manual under regulation on supervision of insurance business when measuring insurance liabilities at every reporting period. For interest sensitive insurance, credit rate stated in the premium and liabilities reserve calculation manual, which is calculated based on adjusted external base rate and return rate of asset management according to Article6-12 of the Regulation on Supervision of Insurance Business. Reserve amount should exceed the standard reserve which is calculated using the standard interest rate and standard risk rate under regulation on supervision of insurance business. 37.6.5 Premium reserves and unearned premium reserves residual maturity Premium reserves and unearned premium reserves classified based on each residual maturity as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Less than 3 years | | 3-5 years | | 5-10 years | | 10-15 years | | 15-20 years | | 20 years or more | | Total | | | Less than 3 years | | 3-5 years | | 5-10 years | | 10-15 years | | 15-20 years | | 20 years or more | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Premium reserves | | ₩ | 259,324 | | | ₩ | 324,305 | | | ₩ | 1,570,009 | | | ₩ | 294,058 | | | ₩ | 426,287 | | | ₩ | 2,653,510 | | | ₩ | 5,527,493 | | | ₩ | 730,903 | | | ₩ | 597,166 | | | ₩ | 1,207,513 | | | ₩ | 558,322 | | | ₩ | 348,269 | | | ₩ | 3,719,525 | | | ₩ | 7,161,698 | | Unearned premium reserves | | | 642 | | | | 1 | | | | 3 | | | | — | | | | 2 | | | | 3 | | | | 651 | | | 803 | | | | — | | | 1 | | | 1 | | | | — | | | 64 | | | 869 | |
| | | 2014 | | | 2017 | | | | Less than 3 years | | 3-5 years | | 5-10 years | | 10-15 years | | 15-20 years | | 20 years or more | | Total | | | Less than 3 years | | 3-5 years | | 5-10 years | | 10-15 years | | 15-20 years | | 20 years or more | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Premium reserves | | ₩ | 381,413 | | | ₩ | 548,410 | | | ₩ | 1,385,847 | | | ₩ | 352,039 | | | ₩ | 440,581 | | | ₩ | 3,076,824 | | | ₩ | 6,185,114 | | | ₩ | 971,517 | | | ₩ | 660,139 | | | ₩ | 829,157 | | | ₩ | 591,689 | | | ₩ | 333,031 | | | ₩ | 3,892,579 | | | ₩ | 7,278,112 | | Unearned premium reserves | | | 690 | | | | 1 | | | | 2 | | | | 1 | | | | 1 | | | | 3 | | | | 698 | | | 161 | | | | — | | | 2 | | | 1 | | | | — | | | 1,347 | | | 1,511 | |
38. Supplemental Cash Flow Information
Cash and cash equivalents as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | 2014 | | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Cash | | ₩ | 1,963,977 | | | ₩ | 2,019,965 | | | ₩ | 2,158,268 | | | ₩ | 2,167,911 | | Checks with other banks | | | 734,574 | | | | 525,452 | | | | 400,422 | | | 430,253 | | Due from Bank of Korea | | | 7,128,025 | | | | 6,508,623 | | | | 7,676,491 | | | 8,981,665 | | Due from other financial institutions | | | 4,966,078 | | | | 6,369,807 | | | | 7,649,682 | | | 8,237,996 | | | | | | | | | | | | | | | Sub-total | | | 14,792,654 | | | | 15,423,847 | | | | 17,884,863 | | | 19,817,825 | | | | | | | | | | | | | | | Restricted due from financial institutions | | | (7,665,903 | ) | | | (7,132,094 | ) | | Due from financial institutions with original maturities over three-months | | | (957,565 | ) | | | (1,272,957 | ) | | Restricted cash from financial institutions | | | | (9,301,946 | ) | | (10,613,089 | ) | Due from financial institutions with original maturities over three months | | | | (1,168,081 | ) | | (799,838 | ) | | | | | | | | | | | | | | Sub-total | | | (8,623,468 | ) | | | (8,405,051 | ) | | | (10,470,027 | ) | | (11,412,927 | ) | | | | | | | | | | | | | | Total | | ₩ | 6,169,186 | | | ₩ | 7,018,796 | | | ₩ | 7,414,836 | | | ₩ | 8,404,898 | | | | | | | | | | | | | | |
Significantnon-cash transactions for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | 2012 | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Decrease in loans due to the write-offs | | ₩ | 2,197,135 | | | ₩ | 2,132,066 | | | ₩ | 2,091,040 | | Changes in accumulated other comprehensive income due to valuation of financial investments | | | 245,757 | | | | (3,591 | ) | | | 248,880 | | Increase in investment in associates due to debt-for-equity swap with Ssangyong Engineering & Construction Co., Ltd | | | — | | | | 28,779 | | | | — | | Increase in financial investments due to debt-for-equity swap with Hyundai Cement Wire Co., Ltd | | | — | | | | — | | | | 25,178 | | Increase in financial investments due to debt-for-equity swap with Taihan Electric Wire Co., Ltd | | | — | | | | 115,716 | | | | — | | Decrease in Accumulated other comprehensive income from measurement of investment securities in associates | | | (44,263 | ) | | | (9,811 | ) | | | (32,206 | ) |
| | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Decrease in loans due to the write-offs | | ₩ | 1,418,960 | | | ₩ | 1,399,315 | | | ₩ | 1,033,056 | | Changes in accumulated other comprehensive income due to valuation of financial investments | | | (28,969 | ) | | | (47,871 | ) | | | 89,117 | | Decrease in accumulated other comprehensive income from measurement of investment securities in associates | | | 222 | | | | (7,093 | ) | | | 100,735 | | Change in shares of investment in associate due to KB Insurance Co., Ltd.’s inclusion of the consolidation scope | | | — | | | | — | | | | (1,417,397 | ) | Change in shares of investment in associate due to Hyundai Securities Co., Ltd.’s inclusion of the consolidation scope | | | — | | | | (1,459,604 | ) | | | — | | Increase in financial investments due todebt-for-equity swap with Taihan Electric Wire Co., Ltd. | | | 14,729 | | | | — | | | | — | |
Cash inflowinflows and outflowoutflows from income tax, interests and dividends for the years endedyear December 31, 2012, 20132015, 2016 and 2014,2017, are as follows: | | | Activity | | | 2012 | | | 2013 | | | 2014 | | | Activity | | | 2015 | | | 2016 | | | 2017 | | | | | | | (In millions of Korean won) | | | | | | (In millions of Korean won) | | Income tax paid(refund) | | | Operating | | | ₩ | 838,073 | | | ₩ | 504,900 | | | ₩ | 205,130 | | | Income tax paid | | | | Operating | | | ₩ | 218,215 | | | ₩ | 231,786 | | | ₩ | 646,802 | | Interest received | | | Operating | | | | 14,494,389 | | | | 12,749,214 | | | | 12,250,845 | | | | Operating | | | | 10,976,847 | | | | 10,208,678 | | | | 11,243,363 | | Interest paid | | | Operating | | | | 7,247,429 | | | | 6,407,081 | | | | 5,342,297 | | | | Operating | | | | 4,569,076 | | | | 3,707,653 | | | | 3,444,715 | | Dividends received | | | Operating | | | | 96,587 | | | | 98,579 | | | | 124,021 | | | | Operating | | | | 160,562 | | | | 132,654 | | | | 229,289 | | Dividends paid | | | Financing | | | | 278,173 | | | | 231,811 | | | | 193,176 | | | | Financing | | | | 301,354 | | | | 378,625 | | | | 497,969 | |
Changes in liabilities arising from financing activities Changes in liabilities and assets that hedge liabilities arising from financing activities for the year ended December 31, 2017 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | | | | | | | Non-cash changes | | | | | | | Beginning | | | Net cash flows | | | Acquisition (Disposal) | | | Changes in foreign exchange rates | | | Changes in fair value | | | Business Combination | | | Other changes | | | Ending | | | | (In millions of Korean won) | | Derivatives held for hedging1 | | ₩ | 6,715 | | | ₩ | 63,827 | | | ₩ | — | | | ₩ | — | | | ₩ | (159,530 | ) | | ₩ | (132,843 | ) | | ₩ | 19,814 | | | ₩ | (202,017 | ) | Debts | | | 26,251,486 | | | | 4,272,011 | | | | — | | | | (996,029 | ) | | | (34,800 | ) | | | (584,245 | ) | | | (87,495 | ) | | | 28,820,928 | | Debentures | | | 34,992,057 | | | | 10,465,410 | | | | — | | | | (429,880 | ) | | | (11,931 | ) | | | (34,600 | ) | | | 11,668 | | | | 44,992,724 | | Other payables from trust accounts | | | 4,430,508 | | | | 587,523 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,018,031 | | Others | | | 147,946 | | | | 150,012 | | | | 678 | | | | 12 | | | | — | | | | 24,061 | | | | 2,728 | | | | 325,437 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ₩ | 65,828,712 | | | ₩ | 15,538,783 | | | ₩ | 678 | | | ₩ | (1,425,897 | ) | | ₩ | (206,261 | ) | | ₩ | (727,627 | ) | | ₩ | (53,285 | ) | | ₩ | 78,955,103 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1 | Derivatives held for hedging purposes are the net amount after offsetting liabilities from assets |
The net cash outflow associated with the change of the subsidiaries for the year ended December 31, 2017 was ₩405,817 million. The net cash outflow related to the KB Insurance Co., Ltd business combination was ₩647,953 million.
39. Contingent liabilitiesLiabilities and commitmentsCommitments Acceptances andDetails of payment guarantees as of December 31, 20132016 and 2014,2017, are as follows:
| | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Confirmed acceptances and guarantees | | | | | | | | | Confirmed acceptances and guarantees in Korean won | | | | | | | | | Acceptances and guarantees for corporate purchasing card | | ₩ | 17 | | | ₩ | — | | Acceptances and guarantees for KB purchasing loan | | | 448,906 | | | | 428,815 | | Other acceptances and guarantees | | | 782,646 | | | | 669,233 | | | | | | | | | | | Sub-total | | | 1,231,569 | | | | 1,098,048 | | | | | | | | | | | Confirmed acceptances and guarantees in foreign currency | | | | | | | | | Acceptances of letter of credit | | | 281,049 | | | | 327,963 | | Letter of guarantees | | | 57,596 | | | | 61,081 | | Bid bond | | | 24,212 | | | | 43,362 | | Performance bond | | | 999,872 | | | | 1,175,330 | | Refund guarantees | | | 2,263,202 | | | | 1,494,023 | | Other acceptances and guarantees | | | 906,105 | | | | 959,685 | | | | | | | | | | | Sub-total | | | 4,532,036 | | | | 4,061,444 | | | | | | | | | | | Financial guarantees | | | | | | | | | Guarantees for Debenture-Issuing | | | 20,200 | | | | 51,200 | | Acceptances and guarantees for mortgage | | | 43,272 | | | | 75,651 | | Overseas debt guarantees | | | 319,080 | | | | 392,021 | | International financing guarantees in foreign currencies | | | 41,896 | | | | 35,949 | | | | | | | | | | | Other financial guarantees | | | — | | | | 21,846 | | | | | | | | | | | Sub-total | | | 424,448 | | | | 576,667 | | | | | | | | | | | Total Confirmed acceptances and guarantees | | | 6,188,053 | | | | 5,736,159 | | | | | | | | | | | Unconfirmed acceptances and guarantees | | | | | | | | | Guarantees of letter of credit | | | 3,265,906 | | | | 2,825,919 | | Refund guarantees | | | 775,181 | | | | 1,060,413 | | | | | | | | | | | Total Unconfirmed acceptances and guarantees | | | 4,041,087 | | | | 3,886,332 | | | | | | | | | | | Total | | ₩ | 10,229,140 | | | ₩ | 9,622,491 | | | | | | | | | | |
| | | | | | | | | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Confirmed payment guarantees | | | | | | | | | Confirmed payment guarantees in Korean won | | | | | | | | | Payment guarantees for KB purchasing loan | | ₩ | 329,051 | | | ₩ | 252,817 | | Other payment guarantees | | | 858,951 | | | | 530,272 | | | | | | | | | | | Sub-total | | | 1,188,002 | | | | 783,089 | | | | | | | | | | | Confirmed payment guarantees in foreign currency | | | | | | | | | Acceptances of letter of credit | | | 234,125 | | | | 147,987 | | Letter of guarantees | | | 64,189 | | | | 60,853 | | Bid bond | | | 64,242 | | | | 46,984 | | Performance bond | | | 703,076 | | | | 563,506 | | Refund guarantees | | | 1,689,343 | | | | 778,779 | | Other payment guarantees in foreign currency | | | 1,593,770 | | | | 1,960,769 | | | | | | | | | | | Sub-total | | | 4,348,745 | | | | 3,558,878 | | | | | | | | | | | Financial guarantees | | | | | | | | | Guarantees for Debenture-Issuing | | | 31,000 | | | | — | | Payment guarantees for mortgage | | | 25,994 | | | | 57,446 | | Overseas debt guarantees | | | 272,255 | | | | 285,576 | | International financing guarantees in foreign currencies | | | 52,961 | | | | 46,953 | | Other financing payment guarantees | | | 334 | | | | 270,029 | | | | | | | | | | | Sub-total | | | 382,544 | | | | 660,004 | | | | | | | | | | | Total Confirmed acceptances and guarantees | | | 5,919,291 | | | | 5,001,971 | | | | | | | | | | | Unconfirmed acceptances and guarantees | | | | | | | | | Guarantees of letter of credit | | | 2,068,105 | | | | 2,250,542 | | Refund guarantees | | | 217,272 | | | | 384,959 | | | | | | | | | | | Total Confirmed acceptances and guarantees | | | 2,285,377 | | | | 2,635,501 | | | | | | | | | | | Total | | ₩ | 8,204,668 | | | ₩ | 7,637,472 | | | | | | | | | | |
Acceptances and guarantees by counterparty as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Confirmed guarantees | | | Unconfirmed guarantees | | | Total | | | Proportion (%) | | | Confirmed guarantees | | | Unconfirmed guarantees | | | Total | | | Proportion (%) | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Corporations | | ₩ | 4,998,062 | | | ₩ | 2,723,162 | | | ₩ | 7,721,224 | | | | 75.48 | | | ₩ | 5,129,393 | | | ₩ | 1,644,556 | | | ₩ | 6,773,949 | | | | 82.56 | | Small companies | | | 1,029,039 | | | | 623,803 | | | | 1,652,842 | | | | 16.16 | | | | 623,424 | | | | 479,514 | | | | 1,102,938 | | | | 13.44 | | Public and others | | | 160,952 | | | | 694,122 | | | | 855,074 | | | | 8.36 | | | | 166,474 | | | | 161,307 | | | | 327,781 | | | | 4.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 6,188,053 | | | ₩ | 4,041,087 | | | ₩ | 10,229,140 | | | | 100.00 | | | ₩ | 5,919,291 | | | ₩ | 2,285,377 | | | ₩ | 8,204,668 | | | | 100.00 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | 2017 | | | | Confirmed guarantees | | | Unconfirmed guarantees | | | Total | | | Proportion (%) | | | Confirmed guarantees | | | Unconfirmed guarantees | | | Total | | | Proportion (%) | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Corporations | | ₩ | 4,699,777 | | | ₩ | 2,936,635 | | | ₩ | 7,636,412 | | | | 79.36 | | | ₩ | 4,185,975 | | | ₩ | 1,913,114 | | | ₩ | 6,099,089 | | | | 79.86 | | Small companies | | | 857,004 | | | | 562,655 | | | | 1,419,659 | | | | 14.75 | | | | 621,834 | | | | 492,369 | | | | 1,114,203 | | | | 14.59 | | Public and others | | | 179,378 | | | | 387,042 | | | | 566,420 | | | | 5.89 | | | | 194,162 | | | | 230,018 | | | | 424,180 | | | | 5.55 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 5,736,159 | | | ₩ | 3,886,332 | | | ₩ | 9,622,491 | | | | 100.00 | | | ₩ | 5,001,971 | | | ₩ | 2,635,501 | | | ₩ | 7,637,472 | | | | 100.00 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Acceptances and guarantees by industry as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2016 | | | | Confirmed guarantees | | | Unconfirmed guarantees | | | Total | | | Proportion (%) | | | Confirmed guarantees | | | Unconfirmed guarantees | | | Total | | | Proportion (%) | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Financial institutions | | ₩ | 145,197 | | | ₩ | 3,924 | | | ₩ | 149,121 | | | | 1.46 | | | ₩ | 74,282 | | | ₩ | 3,710 | | | ₩ | 77,992 | | | | 0.95 | | Manufacturing | | | 3,867,870 | | | | 2,270,254 | | | | 6,138,124 | | | | 60.01 | | | | 3,315,257 | | | | 1,141,571 | | | | 4,456,828 | | | | 54.32 | | Service | | | 523,698 | | | | 115,710 | | | | 639,408 | | | | 6.25 | | | | 765,051 | | | | 63,847 | | | | 828,898 | | | | 10.10 | | Whole sale & Retail | | | 1,083,264 | | | | 745,658 | | | | 1,828,922 | | | | 17.88 | | | | 1,171,151 | | | | 779,163 | | | | 1,950,314 | | | | 23.77 | | Construction | | | 484,764 | | | | 244,727 | | | | 729,491 | | | | 7.13 | | | | 509,329 | | | | 129,111 | | | | 638,440 | | | | 7.78 | | Public sector | | | 72,583 | | | | 635,326 | | | | 707,909 | | | | 6.92 | | | | 82,646 | | | | 92,445 | | | | 175,091 | | | | 2.13 | | Others | | | 10,677 | | | | 25,488 | | | | 36,165 | | | | 0.35 | | | | 1,575 | | | | 75,530 | | | | 77,105 | | | | 0.95 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 6,188,053 | | | ₩ | 4,041,087 | | | ₩ | 10,229,140 | | | | 100.00 | | | ₩ | 5,919,291 | | | ₩ | 2,285,377 | | | ₩ | 8,204,668 | | | | 100.00 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Confirmed guarantees | | | Unconfirmed guarantees | | | Total | | | Proportion (%) | | | | (In millions of Korean won) | | Financial institutions | | ₩ | 229,086 | | | ₩ | 3,573 | | | ₩ | 232,659 | | | | 2.42 | | Manufacturing | | | 3,179,368 | | | | 2,410,472 | | | | 5,589,840 | | | | 58.09 | | Service | | | 583,302 | | | | 114,645 | | | | 697,947 | | | | 7.25 | | Whole sale & Retail | | | 932,283 | | | | 788,804 | | | | 1,721,087 | | | | 17.89 | | Construction | | | 709,582 | | | | 215,382 | | | | 924,964 | | | | 9.61 | | Public sector | | | 72,964 | | | | 336,484 | | | | 409,448 | | | | 4.26 | | Others | | | 29,574 | | | | 16,972 | | | | 46,546 | | | | 0.48 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 5,736,159 | | | ₩ | 3,886,332 | | | ₩ | 9,622,491 | | | | 100.00 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2017 | | | | Confirmed guarantees | | | Unconfirmed guarantees | | | Total | | | Proportion (%) | | | | (In millions of Korean won) | | Financial institutions | | ₩ | 23,317 | | | ₩ | 7,353 | | | ₩ | 30,670 | | | | 0.40 | | Manufacturing | | | 2,799,593 | | | | 1,270,721 | | | | 4,070,314 | | | | 53.29 | | Service | | | 655,057 | | | | 100,004 | | | | 755,061 | | | | 9.89 | | Whole sale & Retail | | | 935,647 | | | | 837,230 | | | | 1,772,877 | | | | 23.21 | | Construction | | | 335,156 | | | | 198,996 | | | | 534,152 | | | | 6.99 | | Public sector | | | 165,249 | | | | 129,944 | | | | 295,193 | | | | 3.87 | | Others | | | 87,952 | | | | 91,253 | | | | 179,205 | | | | 2.35 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 5,001,971 | | | ₩ | 2,635,501 | | | ₩ | 7,637,472 | | | | 100.00 | | | | | | | | | | | | | | | | | | |
Commitments as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Commitments | | | | | | | | | Corporate loan commitments | | ₩ | 42,446,365 | | | ₩ | 42,977,471 | | | ₩ | 35,723,627 | | | ₩ | 32,857,616 | | Retail loan commitments | | | 13,976,426 | | | | 13,886,999 | | | | 15,789,809 | | | | 16,074,323 | | Credit line on credit cards | | | 37,112,333 | | | | 37,584,381 | | | | 43,937,899 | | | | 49,299,924 | | Private placement commitments | | | 80,000 | | | | 121,300 | | | Purchase of other security investment | | | 1,806,908 | | | | 1,746,430 | | | Purchase of other security investment and others | | | | 1,554,221 | | | | 3,951,304 | | | | | | | | | | | | | | | Sub-total | | | 95,422,032 | | | | 96,316,581 | | | | 97,005,556 | | | | 102,183,167 | | | | | | | | | | | | | | | Financial Guarantees | | | | | | | | | Credit line | | | 2,572,424 | | | | 3,809,478 | | | | 3,334,648 | | | | 2,669,071 | | Purchase of security investment | | | 100,500 | | | | 73,500 | | | | 1,029,100 | | | | 354,800 | | | | | | | | | | | | | | | Sub-total | | | 2,672,924 | | | | 3,882,978 | | | | 4,363,748 | | | | 3,023,871 | | | | | | | | | | | | | | | Total | | ₩ | 98,094,956 | | | ₩ | 100,199,559 | | | ₩ | 101,369,304 | | | ₩ | 105,207,038 | | | | | | | | | | | | | | |
Other Matters (including litigation) a) The Group has filed 122121 lawsuits (excluding minor lawsuits in relation to the collection or management of loans), involving aggregate claims of ₩834,440₩510,954 million, and faces 374288 lawsuits (asas the defendant)defendant (excluding minor lawsuits in relation to the collection or management of loans) involving aggregate damages of ₩523,099₩220,957 million, which arose in the normal course of the business and are still pending as of December 31, 2014.2017. Meanwhile, certain customers ofb) During 2017, Kookmin Bank have filed lawsuits against Kookmin Bank in connection with fees paid for the registration of fixed collateral. The firsthas entered into construction contracts amounting to ₩150,051 million and second trials are in progress as of December 31, 2014. The Court ruled in favor and partially in favor of Kookmin Bank in the first trial and ruled in favor of Kookmin Bank in the second and third trials. There is a low probability of potential losses₩105,175 million related to the aforementioned lawsuits.
b) According toconstruction of integrated headquarter building and integrated IT center, respectively, and no expenditures were made during the shareholders’ agreement on September 25, 2009, between Kookmin Bank, the International Finance Corporation (“IFC”) and the remaining shareholders, Kookmin Bank granted a put option to IFC with the right to sell shares of JSC Bank Center Credit to itself or its designee. The exercise price is determined at its fair value by mutual agreement between Kookmin Bank and IFC. If the price is not agreed by the designated date, it is determined by the value measured by the selected independent external valuation institution. The put option may be exercised by IFC at any time from February 24, 2013, to February 24,year ended December 31, 2017.
c) The face value of the securities which Kookmin Bank sold to general customers through the bank tellers amounts to ₩57,159₩5,731 million and ₩26,487₩372 million as of December 31, 20132016 and 2014,2017, respectively. d) Kookmin Bank underwent a tax investigation by the Seoul Regional Tax Office and in early 2007 was assessed additional corporate tax including local income tax of ₩482,755 million. Kookmin Bank paid this amount to the tax authorities. Subsequently, Kookmin Bank filed a claim for adjudication in August 2007 for repayment of the amount of ₩482,643 million. The case was closed with a favorable final judgment by the Supreme Court in January 2015. e) For the year ended December 31, 2013, Kookmin Bank underwent a tax investigation for the fiscal years 2008 to 2012 by the Seoul Regional Tax Office. As a result, Kookmin Bank was fined a total of ₩124,357 million for income taxes (including local income taxes) and paid ₩123,330 million, excluding local income tax amounting to ₩1,027 million, and recognized as non-trade payable as of December 31, 2014. Meanwhile, the appeal to the tax tribunal over the ₩114,283 million is currently pending as of December 31, 2014.
f) While setting up a fraud detection system, a computer contractor employed by the personal credit ratings firm Korea Credit Bureau caused a widespread data breach in June 2013, resulting in the theft of cardholders’ personal information. As a result of the leakage of customer personal information, the KB Kookmin Card received a notification from the Financial Services Commission that the KB Kookmin Card iswas subject to a temporary three-month operating suspension.suspension as of February 16, 2014. In respect of the incident, the Group faces 101120 legal claims filed as the defendant, with an aggregate claim of ₩52,421₩10,291 million as of December 31, 2014.2017. A provision liability of ₩11,078 million has been recognized for these pending lawsuits. In addition, the Groupadditional lawsuits may be subject to additional fines, penalties or judgments, reimbursement to affected clients.filed against the Group. Meanwhile, the final outcome of the cases cannot be reasonably ascertained.
g) In relation to a tax credit for research and human resource development expenses, Kookmin Bank filed an administrative litigation (the aggregate amount in 2007 and 2008) and received a refund in the amount of ₩16,371 million from National Tax Service based on a recent Supreme Court precedent. However, the appeal to the tax tribunal (the aggregate amount in 2009 is ₩13,827 million) is currently pending as of December 31, 2014.
h) The Group entered into a purchase agreement to acquire 11,682,580 common shares of LIG Insurance Co., Ltd. (19.47% of outstanding shares with an expected price of ₩685,000 million) in June 2014. The Financial Services Commission approved LIG Insurance Co., Ltd. to be included as a subsidiary of the Group in December 2014.
40. Subsidiaries The detailsDetails of subsidiaries as of December 31, 2013,2017, are as follows:
| | | | | | | | | | | | | | | Investor | | Investee | | Ownership
interests(%interests (%) | | | Location | | Date of
financial
information | | | Location | | Date of financial statements | | Industry | KB Financial GroupInc. | | Kookmin Bank | | | 100.00 | | | Korea | | | Dec. 31 | | | Banking and domestic, foreign exchange transaction | | | KB Securities Co., Ltd. | | | 100.00 | | | Korea | | Dec. 31 | | Financial investment | | | KB Insurance Co., Ltd.5 | | | 100.00 | | | Korea | | Dec. 31 | | Non-life insurance | | | KB Kookmin Card Co., Ltd. | | | 100.00 | | | Korea | | | Dec. 31 | | | Credit card and installment finance | | | KB Investment & SecuritiesLife Insurance Co., Ltd. | | | 100.00 | | | Korea | | | Dec. 31 | | | Financial investment
| | | KB Life Insurance
Co., Ltd.
| | | 100.00 | | | Korea | | | Dec. 31 | | | Life insurance | | | KB Asset Management Co., Ltd. | | | 100.00 | | | Korea | | | Dec. 31 | | | Security investment trust management and advisory | | | KB Real Estate Trust Capital Co., Ltd.5 | | | 100.00 | | | Korea | | Dec. 31 | | Financial Leasing | | | KB Savings Bank Co., Ltd. | | | 100.00 | | | Korea | | Dec. 31 | | Savings banking | | | KB Real Estate Trust Co., Ltd. | | | 100.00 | | | Korea | | Dec. 31 | | | Real estate trust management | | | KB Investment Co., Ltd. | | | 100.00 | | | Korea | | | Dec. 31 | | | Capital Investmentinvestment | | | KB Credit Information Co., Ltd. | | | 100.00 | | | Korea | | | Dec. 31 | | | Collection of receivables or credit investigation | | | KB Data System Co., Ltd. | | | 100.00 | | | Korea | | | Dec. 31 | | | Software advisory, development, and supply | | | KB Savings Bank
Co., Ltd.
| | | 100.00 | | | Korea | | | Dec. 31 | | | Savings banking
| | | Yehansoul Savings Bank Co., Ltd.
| | | 100.00 | | | Korea | | | Dec. 31 | | | Savings banking
|
| | | | | | | | | | | | | | | Investor
| | Investee
| | Ownership
interests(%) | | | Location | | Date of
financial
information | | | Industry
| Kookmin Bank | | Kookmin Bank Int’l Ltd.(London) | | | 100.00 | | | United Kingdom | | | Dec. 31 | | | Banking and foreign exchange transaction | | | Kookmin Bank Hong Kong Ltd. | | | 100.00 | | | Hong
KongChina | | | Dec. 31 | | | Banking and foreign exchange transaction | | | Kookmin Bank Cambodia PLC. | | | 100.00 | | | Cambodia | | | Dec. 31 | | | Banking and foreign exchange transaction | | | Kookmin Bank (China) Ltd. | | | 100.00 | | | China | | | Dec. 31 | | | Banking and foreign exchange transaction | | | Personal pension trustsKB Microfinance Myanmer Co., Ltd.
| | | 100.00 | | | Myanmer | | Dec. 31 | | Other credit granting n.e.c. |
| | | | | | | | | | | | | Investor | | Investee | | Ownership interests (%) | | | Location | | Date of financial statements | | Industry | KB Securities Co.,Ltd. | | KBFG Securities America Inc. | | | 100.00 | | | United States of America | | Dec. 31 | | Investment advisory and 10 other trustssecurities dealing activities | | | KBFG Securities Hong Kong Ltd. | | | 100.00 | | | China | | Dec. 31 | | Investment advisory and securities dealing activities | | | KB SECURITIES VIETNAM JOINT STOCK COMPANY | | | 99.40 | | | Vietnam | | Dec. 31 | | Investment advisory and securities dealing activities | KB Insurance Co.,Ltd. | | KB Claims Survey & Adjusting | | | 100.00 | | | Korea | | Dec. 31 | | Claim service | | | KB Sonbo CNS | | | 100.00 | | | Korea | | Dec. 31 | | Management service | | | Leading Insurance Services, Inc. | | | 100.00 | | | United States of America | | Dec. 31 | | Management service | | | LIG Insurance (China) Co., Ltd. | | | 100.00 | | | China | | Dec. 31 | | Non-life insurance | | | PT. KB Insurance Indonesia | | | 70.00 | | | Indonesia | | Dec. 31 | | Non-life insurance | | | KB Golden Life Care Co., Ltd. | | | 100.00 | | | Korea | | Dec. 31 | | Service | KB Capital Co., Ltd., KB Kookmin Card Co., Ltd. | | KB KOLAO LEASING Co., Ltd. | | | 80.00 | | | Laos | | Dec. 31 | | Financial Leasing | Kookmin Bank | | KL 1st Inc. and 27 others(1)2 | | | — | | | Korea | | Dec. 31 | | Asset-backed securitization and others | KB Kookmin Card Co., Ltd. | | KB Kookmin Card Third Securitization Co., Ltd., and 9 others2 | | | Dec. 310.50 | | | TrustKorea
| | | Dec. 31 | | Asset-backed securitization | KB Mortgage Loan First Securitization SpecialtySecurities Co., Ltd | | MS Sejong 4th Co., Ltd. and 1043 others(2)2 | | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization and others | | | KB Evergreen Private Securities 82 and 28 others
| | | 100.00 | | | Korea | | | Dec. 31 | | | Private equity fund
| Kookmin Bank, KB Investment Co., Ltd. | | KB06-1 Venture Investment
| | | 75.00 | | | Korea | | | Dec. 31 | | | Capital investment
| | KB08-1KB12-1 Venture Investment
| | | 100.00 | | | Korea | | | Dec. 31 | | | Capital investment
| | | KB12-1 Venture Investment
| | | 100.00 | | | Korea | | | Dec. 31 | | | Capital investment | | | KBStart-up Creation Fund | | | 100.0062.50 | | | Korea | | | Dec. 31 | | | Capital investment | KB Asset ManagementInvestment Co., Ltd. | | KB Wellyan Private Equity Real Estate Fund No. 6
| | | 95.67 | | | Korea | | | Dec. 31 | | | Capital investment
| | | KB Wellyan Private Equity Real Estate Fund No. 7(3)
| | | 47.97 | | | Korea | | | Dec. 31 | | | Capital investment
| KB Wellyan Private Equity Real Estate Fund No. 6, 7
| | Boyoung construction09-5(4)
| | | — | | | Korea | | | Dec. 31 | | | Construction
| KB Investment Co., Ltd.
| | NPS 07-5 KB Venture Fund(5)4
| | | 20.00 | | | Korea | | | Dec. 31 | | | Capital investment
| | | 09-5 KB Venture Fund(5)
| | | 33.33 | | | Korea | | | Dec. 31 | | | Capital investment
| | | KoFC-KB Pioneer Champ No.2010-8 Investment Partnership
| | | 50.00 | | | Korea | | | Dec. 31 | | | Capital investment
| | | 2011 KIF-KB IT Venture Fund(5)
| | | 43.33 | | | Korea | | | Dec. 31 | | | Capital investment | | | KoFC-KB Pioneer ChampNo.2010-8 Investment Partnership4 | | | 50.00 | | | Korea | | Dec. 31 | | Capital investment | | | 2011KIF-KB IT Venture Fund4 | | | 43.33 | | | Korea | | Dec. 31 | | Capital investment | | | KoFC-KB Young Pioneer 1st Fund(5)4 | | | 33.33 | | | Korea | | Dec. 31 | | Capital investment | Kookmin Bank, KB Investment Co., Ltd. | | KB Intellectual Property Fund4 | | | 34.00 | | | Korea | | Dec. 31 | | Capital investment | Kookmin Bank, KB Insurance Co., Ltd., KB life Insurance, KB Investment Co., Ltd. | | KB High-tech Company Investment Fund | | | 100.00 | | | Korea | | Dec. 31 | | Capital investment |
| | | | | | | | | | | | | | | Investor | | Investee | | Ownership interests(%) | | | Location | | Date of
financial
information | | | Industry
| KB Kookmin Card Co., LtdLocation
| | Date of financial statements | | Industry | KB Kookmin Card First Securitization Securities Co., Ltd., KB Investment Co., Ltd. | | KB KONEX Market Vitalization Fund(2)4 | | | 0.90 | | | Korea | | | Dec. 3146.88 | | | Asset-backed securitizationKorea
| | Dec. 31 | | Capital investment | | | Wise Mobile First Securitization SpecialtyKB Neo Paradigm Agriculture Venture Fund(2)4
| | | — | | | Korea | | | Dec. 3150.00 | | | Asset-backed securitizationKorea
| | Dec. 31 | | Capital investment | KB Investment Co., Ltd. | | KB NEW CONTENTS Venture Fund4 | | | 20.00 | | | Korea | | Dec. 31 | | Capital investment | | | KB Young Pioneer 3.0 Venture Fund4 | | | 40.00 | | | Korea | | Dec. 31 | | Capital investment | KB Life Insurance Co., Ltd. | | KB Haeoreum Private Securities Investment Trust 1st and 3 others | | �� | 100.00 | | | Korea | | Dec. 31 | | Investment trust | Kookmin Bank | | KB Multi-Asset Private Securities Fund (BondWise Mobile Second Securitization Specialty(2)Mixed-ETF) | | | — | | | Korea | | | Dec. 3199.27 | | | Asset-backed securitization
| | | Wise Mobile third Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization
| | | Wise Mobile fourth Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization
| | | Wise Mobile fifth Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization
| | | Wise Mobile sixth Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization
| | | Wise Mobile seventh Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization
| KB Life Insurance Co., Ltd.
| | Dream Smart TurnDec. 31
| | Investment trust | KB Multi-Asset Private Securities 3rd(Mixed) and 5 othersFund (BondMixed-ETF) | | Global Diversified Multi-AssetSub-Trust Class I A | | | 100.00 | | | Korea | United Kingdom | | Dec. 31 | | | Private equity fundInvestment trust
| Kookmin Bank | | KB Multi-Asset Private Securities FundS-1(Bond Mixed) | | | 96.00 | | | Korea | | Dec. 31 | | Investment trust | | | KB Multi-Asset Private Securities FundP-1(Bond Mixed) | | | 99.96 | | | Korea | | Dec. 31 | | Investment trust | KB Multi-Asset Private Securities FundP-1(Bond Mixed) | | KB Multi-Asset Private Securities MasterFund P-1(Bond Mixed) | | | 100.00 | | | Korea | | Dec. 31 | | Investment trust | Kookmin Bank, KB Investment & Securities Co., Ltd., KB life Insurance Co., Ltd., KB Real Estate Trust Co., LtdLtd. | | KB Wise Star Private Real Estate Feeder Fund 1st. | | | 100.00 | | | Korea | | | Dec. 31 | | | Investment trust | Kookmin Bank
| | Hanbando BTL Private Special Asset Fund 1st(3)
| | | 39.74 | | | Korea | | | Dec. 31 | | | Capital investment
| Kookmin Bank, KB life Insurance
| | KB Hope Sharing BTL Private Special Asset(3)
| | | 40.00 | | | Korea | | | Dec. 31 | | | Capital investment
| Kookmin Bank
| | KB Mezzanine Private Securities Fund 1st(Mixed)(3)
| | | 46.51 | | | Korea | | | Dec. 31 | | | Capital investment
| | | K Star KTB ETF(Bond)(3)
| | | 48.20 | | | Korea | | | Dec. 31 | | | Capital investment
| | | Global Logistics Infra Private
Fund 1 and 2(3)
| | | 40.00 | | | Korea | | | Dec. 31 | | | Capital investment
| KB Wise Star Private Real Estate Feeder Fund 1st. | | KB Star Retail Private Master Real Estate Feeder Fund 1st.(6)3 | | | 48.98 | | | Korea | | Dec. 31 | | Investment trust | | | KB Star Office Private Real Estate Investment Trust 2nd3 | | | 44.44 | | | Korea | | Dec. 31 | | Investment trust | Kookmin Bank, KB Insurance Co., Ltd. | | Hanbando BTL Private Special Asset Fund 1st3 | | | 46.36 | | | Korea | | Dec. 31 | | Investment trust | Kookmin Bank, KB Insurance Co., Ltd., KB life Insurance Co., Ltd. | | KB Hope Sharing BTL Private Special Asset3 | | | 46.00 | | | Korea | | Dec. 31 | | Investment trust | Kookmin Bank, KB life Insurance Co., Ltd. | | KB Mezzanine Private Securities Fund 2nd. (Mixed)3 | | | 40.74 | | | Korea | | Dec. 31 | | Investment trust |
| | | | | | | | | | | | | Investor | | Investee | | Ownership interests(%) | | | Location | | Date of financial statements | | Industry | Kookmin Bank, KB Insurance Co., Ltd., KB life Insurance Co., Ltd. | | KB Senior Loan Private Fund3 | | | 37.39 | | | Korea | | Dec. 31 | | Capital investment | KB Securities Co., Ltd. | | KB Vintage 16 Private Securities Investment Trust 1st3 | | | 50.00 | | | Korea | | Dec. 31 | | Investment trust | KB Kookmin Card Co., Ltd. | | Heungkuk Life Insurance Money Market Trust | | | 100.00 | | | Korea | | Dec. 31 | | Trust asset management | Kookmin Bank | | KB Haeoreum private securities investment trust 70 (Bond)3 | | | 33.35 | | | Korea | | Dec. 31 | | Investment trust | KB Insurance Co., Ltd. | | KB AMP Infra Private Special Asset Fund 1 (FoFs)3 | | | 41.67 | | | Korea | | Dec. 31 | | Investment trust | KB Insurance Co., Ltd. KB life Insurance Co., Ltd. KB Investment Co., Ltd. | | KB-Solidus Global Healthcare Fund4 | | | 43.33 | | | Korea | | Dec. 31 | | Capital investment | Kookmin Bank, KB Insurance Co., Ltd. | | KB KBSTAR Short Term KTB Active ETF | | | 77.72 | | | Korea | | Dec. 31 | | Investment trust | | | KB KBSTARMid-Long Term KTB Active ETF | | | 94.79 | | | Korea | | Dec. 31 | | Investment trust | Kookmin Bank | | Samsung KODEX 10YF-LKTB Inverse ETF (Bond-Derivatives) | | | 97.15 | | | Korea | | Dec. 31 | | Investment trust | | | KB Haeoreum private securities investment trust 83 (Bond) | | | 96.14 | | | Korea | | Dec. 31 | | Investment trust | | | KB KBSTAR KTB 3Y Futures Inverse ETF | | | 95.65 | | | Korea | | Dec. 31 | | Investment trust | KB Insurance Co., Ltd. | | KB Muni bond Private Securities Fund 1 (USD)(bond)3 | | | 33.33 | | | Korea | | Dec. 31 | | Investment trust | KB Securities Co., Ltd. | | Jueun Power Middle 7 and 7 others | | | 100.00 | | | Korea | | Dec. 31 | | Investment trust | | | Hyundai You First Private Real Estate Investment Trust No. 1 | | | 60.00 | | | Korea | | Dec. 31 | | Investment trust | | | Hyundai Smart Index Alpha Securities Feeder Investment Trust No.1 | | | 98.37 | | | Korea | | Dec. 31 | | Investment trust | | Hyundai Strong Korea Equity Trust No.1 | | | 99.73 | | | Korea | | Dec. 31 | | Investment trust | | Hyundai Kidzania Equity Feeder Trust No.1 | | | 78.44 | | | Korea | | Dec. 31 | | Investment trust | | Hyundai Value Plus Equity Feeder Trust No.1 | | | 99.84 | | | Korea | | Dec. 31 | | Investment trust | | Hyundai Strong-small Corporate Trust No.1 | | | 89.59 | | | Korea | | Dec. 31 | | Investment trust |
| | | | | | | | | | | | | Investor | | Investee | | Ownership interests(%) | | | Location | | Date of financial statements | | Industry | | | Hyundai You First Private Real Estate Investment Trust No. 153 | | | 35.00 | | | Korea | | Dec. 31 | | Investment trust | | | JB New Jersey Private Real Estate Investment Trust No. 1 | | | 98.15 | | | Korea | | Dec. 31 | | Investment trust | | | Hyundai Dynamic Mix Securities Feeder Investment Trust No.1 | | | 99.94 | | | Korea | | Dec. 31 | | Investment trust | | | Hyudai China Index Plus Securities Investment Trust No.1 | | | 79.95 | | | Korea | | Dec. 31 | | Investment trust | KB Securities Co., Ltd. | | HyundaiKon-tiki Specialized Privately Placed FundNo.1 | | | 98.12 | | | Korea | | Dec. 31 | | Investment trust | | DGB Private real estate Investment Trust No.8 | | | 98.77 | | | Korea | | Dec. 31 | | Investment trust | | LIME GLOBALEYE ALP PRIVATE EQUITY FUND 2 | | | 68.03 | | | Korea | | Dec. 31 | | Investment trust | | LIME ORANGE PRIVATE EQUITY FUND 6 | | | 98.04 | | | Korea | | Dec. 31 | | Investment trust | | DAEDUCK PARC1 PRIVATE EQUITY FUND 1 | | | 96.00 | | | Korea | | Dec. 31 | | Investment trust | | LIME PLUTO FI PRIVATE EQUITY FUNDD-1 | | | 99.84 | | | Korea | | Dec. 31 | | Investment trust | KB Securities Co., Ltd., KB Insurance Co., Ltd., KB Asset Management Co., Ltd. | | KB Star Fund_KB Value Focus Korea Equity | | | 97.51 | | | Luxembourg | | Dec. 31 | | Capital investment | KB Securities Co., Ltd. | | Aquila Global Real Assets Fund No.1 LP | | | 99.96 | | | Cayman islands | | Dec. 31 | | Capital investment | | Able Quant Asia Pacific Feeder Fund (T.E.) Limited | | | 100.00 | | | Cayman islands | | Dec. 31 | | Capital investment | Able Quant Asia Pacific Feeder Fund (T.E.) Limited | | Able Quant Asia Pacific Master Fund Limited | | | 100.00 | | | Cayman islands | | Dec. 31 | | Capital investment | KBFG Securities America Inc. | | Global Investment Opportunity Limited | | | 100.00 | | | Malaysia | | Dec. 31 | | Finance and Real Estate Activities | Hyundai Smart Index Alpha Securities Feeder Inv Trust 1 | | Hyundai Smart Index Alpha Securities Master Investment Trust | | | 99.53 | | | Korea | | Dec. 31 | | Investment trust | Hyundai Trust Securities Feeder Investment TrustNo.1- Bond | | Hyundai Trust Securities Master Investment Trust—Bond | | | 94.29 | | | Korea | | Dec. 31 | | Investment trust |
| | | | | | | | | | | | | Investor | | Investee | | Ownership interests(%) | | | Location | | Date of financial statements | | Industry | Hyundai Value Plus Securities Feeder Investment Trust 1 and others | | Hyundai Value Plus Securities Master Investment Trust | | | 100.00 | | | Korea | | Dec. 31 | | Investment trust | Hyundai Dynamic Mix Securities Feeder Investment Trust | | Hyundai Dynamic Mix Securities Master Investment Trust | | | 98.75 | | | Korea | | Dec. 31 | | Investment trust | Hyundai Quant Long Short Securities Feeder Investment Trust | | Hyundai Quant Long Short Securities Master Investment Trust | | | 100.00 | | | Korea | | Dec. 31 | | Investment trust | Aquila Global Real Assets Fund No.1 LP | | AGRAF Real Estate No.1, Senningerberg | | | 100.00 | | | Luxembourg | | Dec. 31 | | Asset-backed securitization | AGRAF Real Estate No.1, Senningerberg | | AGRAF Real Estate Holding No.1, Senningerberg | | | 100.00 | | | Luxembourg | | Dec. 31 | | Asset-backed securitization | AGRAF Real Estate Holding No.1, Senningerberg | | Vierte CasaLog GmbH & Co. KG and 2 others | | | 94.90 | | | Germany | | Dec. 31 | | Real Estate Activities | KB Asset Management Co., Ltd. | | KB Asset Management Singapore Pte, Ltd. | | | 100.00 | | | Singapore | | Dec. 31 | | Collective investment and others | JB New Jersey Private Real Estate Investment Trust No. 1 | | ABLE NJ DSM INVESTMENT REIT | | | 99.18 | | | United States of America | | Dec. 31 | | Real Estate Activities | ABLE NJ DSM INVESTMENT REIT | | ABLE NJ DSM, LLC | | | 100.00 | | | United States of America | | Dec. 31 | | Real Estate Activities | Heungkuk Global Highclass Private Real Estate Trust 23 | | HYUNDAI ABLE INVESTMENT REIT | | | 99.90 | | | United States of America | | Dec. 31 | | Real Estate Activities | HYUNDAI ABLE INVESTMENT REIT | | HYUNDAI ABLE PATRIOTS PARK, LLC | | | 100.00 | | | United States of America | | Dec. 31 | | Real Estate Activities | KB Insurance Co., Ltd. | | Dongbu Private Fund 16th | | | 89.52 | | | Korea | | Dec. 31 | | Investment trust | | | Hana Landchip Real estate Private Fund 58th | | | 99.99 | | | Korea | | Dec. 31 | | Investment trust | | | Hyundai Aviation Private Fund 3rd | | | 99.96 | | | Korea | | Dec. 31 | | Investment trust | | | Hyundai Power Private Fund 3rd | | | 99.90 | | | Korea | | Dec. 31 | | Investment trust | | | Hyundai Power Professional Investment Type Private Investment Fund No.4 | | | 99.78 | | | Korea | | Dec. 31 | | Investment trust | | | KB U.S. LongShort Private Securities Fund 1 | | | 99.44 | | | Korea | | Dec. 31 | | Investment trust | KB Insurance Co., Ltd. | | Hyundai Infra Professional Investment Type Private Investment Trust No.5 | | | 99.79 | | | Korea | | Dec. 31 | | Investment trust | | | KB SAUDI Private Special Asset Fund | | | 80.00 | | | Korea | | Dec. 31 | | Investment trust | | | Meritz Private Real Estate Fund 8 | | | 99.36 | | | Korea | | Dec. 31 | | Investment trust |
| | | | | | | | | | | | | Investor | | Investee | | Ownership interests (%) | | | Location | | Date of financial statements | | Industry | KB Asset Management Co., Ltd. | | KB Global Equity Solution Securities Feeder Fund (Equity-FoFs) | | | 74.47 | | | Korea | | Dec. 31 | | Investment trust | | | KB Global Multiasset Income Securities Feeder Fund (Bond Mixed-FoFs) | | | 95.26 | | | Korea | | Dec. 31 | | Investment trust | Kookmin Bank, KB Securities Co., Ltd., KB Asset Management Co., Ltd. | | KB Everyone TDF 2020 Securities Investment Trust - Bond Balanced-Fund of Funds | | | 52.28 | | | Korea | | Dec. 31 | | Investment trust | | KB Everyone TDF 2025 Securities Investment Trust - Bond Balanced-Fund of Funds3 | | | 45.08 | | | Korea | | Dec. 31 | | Investment trust | | | KB Everyone TDF 2030 Securities Investment Trust - Equity Balanced-Fund of Funds3 | | | 48.62 | | | Korea | | Dec. 31 | | Investment trust | | | KB Everyone TDF 2035 Securities Investment Trust - Equity Balanced-Fund of Funds | | | 60.74 | | | Korea | | Dec. 31 | | Investment trust | | | KB Everyone TDF 2040 Securities Investment Trust - Equity Balanced-Fund of Funds | | | 67.04 | | | Korea | | Dec. 31 | | Investment trust | | | KB Everyone TDF 2045 Securities Investment Trust - Equity Balanced-Fund of Funds | | | 76.84 | | | Korea | | Dec. 31 | | Investment trust | | | KB Everyone TDF 2050 Securities Investment Trust - Equity Balanced-Fund of Funds | | | 52.95 | | | Korea | | Dec. 31 | | Investment trust | Kookmin Bank | | Personal pension trusts and 10 other trusts1 | | | — | | | Korea | | Dec. 31 | | Trust |
(1)1 | The Group controls the trust because it has power that determines the management performance over the trust and is exposed to variable returns to absorb losses through the guarantees of payment of principal, or payment of principal and fixed rate of return. |
(2)2 | TheAlthough the Group holds less than a majority of the investee’s voting rights, the Group controls these investees becauseas it has power over relevant activities in case of default; is significantly exposed to variable returns from its involvement with the investeesby providing lines of credit or ABCP purchase commitments or due to acquisition of subordinated debt; and has ability to affect those returns through its power, even though it holds less than a majority of the voting rights of the investees. power. |
(3)3 | Although the Group holds less than a majority of the investee’s voting rights, the Group controls the investee as it has power over relevant activities by managing the fund; has significant percentage of ownership that is over 40%;ownership; is significantly exposed to variable returns which is affected by the performance of the investees,investees; and has ability to affect thosethe performance through its power. |
(4)4 | Boyoung Construction is included in the consolidation scope, since KB Wellyan Private Equity Real Estate Fund No. 7 is included in the consolidation scope.
|
(5) | Although the Group holds less than a majority of the investee’s voting rights, the Group controls the investee as it has power over relevant activities by taking the role of an operating manager and it is significantly exposed to variable returns which is affected by the performance of the investees, and has ability to affect thosethe performance through its power. |
(6)5 | KB Star Retail Real Estate Feeder Fund 1st is includedBecame wholly owned subsidiaries by acquiring additionalnon-controlling interest in the consolidation scope, since KB Wise Star Private Real Estate Feeder Fund 1st is included in the consolidation scope.
|
(7) | Although the Group holds less than a majority of the investee’s voting rights, the Group controls KB Private Real Estate Securities Fund1 (NPL) and Woori KA First Asset Securitization Specialty Co., Ltd. as it has power over relevant activities by taking the role of an operating manager; has significant percentage of ownership that is over 40%; is significantly exposed to variable returns which is affected by the performance of the investees; and has ability to affect those performance through its power. In accordance with the IFRS 10, KB Private Real Estate Securities Fund1 (NPL) and Woori KA First Asset Securitization Specialty Co., Ltd. were included in the consolidation scope. However, KB Private Real Estate Securities Fund1 (NPL) and Woori KA First Asset Securitization Specialty Co., Ltd. have been excluded from the consolidation scope due to the loss of control from changes in terms of the contract as of December 31, 2013.
|
The details of subsidiaries as of December 31, 2014, are as follows:
| | | | | | | | | | | | | Investor
| | Investee
| | Ownership
interests(%) | | | Location | | Date of
financial
information | | Industry
| KB Financial
Group Inc.
| | Kookmin Bank
| | | 100.00 | | | Korea | | Dec. 31 | | Banking and domestic, foreign exchange transaction
| | | KB Kookmin Card
Co., Ltd.
| | | 100.00 | | | Korea | | Dec. 31 | | Credit card
| | | KB Investment & Securities Co., Ltd.
| | | 100.00 | | | Korea | | Dec. 31 | | Financial investment
| | | KB Life Insurance
Co., Ltd.
| | | 100.00 | | | Korea | | Dec. 31 | | Life insurance
| | | KB Asset Management Co., Ltd.
| | | 100.00 | | | Korea | | Dec. 31 | | Security investment trust management and advisory
| | | KB Capital Co., Ltd.
| | | 52.02 | | | Korea | | Dec. 31 | | Financial Leasing
| | | KB Savings Bank
Co., Ltd.
| | | 100.00 | | | Korea | | Dec. 31 | | Savings banking
| | | KB Real Estate Trust
Co., Ltd.
| | | 100.00 | | | Korea | | Dec. 31 | | Real estate trust management
| | | KB Investment Co., Ltd.
| | | 100.00 | | | Korea | | Dec. 31 | | Capital Investment
| | | KB Credit Information Co., Ltd.
| | | 100.00 | | | Korea | | Dec. 31 | | Collection of receivables or credit investigation
| | | KB Data System
Co., Ltd.
| | | 100.00 | | | Korea | | Dec. 31 | | Software advisory, development, and supply
| Kookmin Bank
| | Kookmin Bank Int’l Ltd.(London)
| | | 100.00 | | | United
Kingdom | | Dec. 31 | | Banking and foreign exchange transaction
| | | Kookmin Bank Hong Kong Ltd.
| | | 100.00 | | | Hong
Kong | | Dec. 31 | | Banking and foreign exchange transaction
| | | Kookmin Bank Cambodia PLC.
| | | 100.00 | | | Cambodia | | Dec. 31 | | Banking and foreign exchange transaction
| | | Kookmin Bank (China) Ltd.
| | | 100.00 | | | China | | Dec. 31 | | Banking and foreign exchange transaction
| | | Personal pension trust and 10 others(1)
| | | — | | | Korea | | Dec. 31 | | Trust
| | | KAMCO Value Recreation 3rd Securitization Specialty Co., Ltd. and 6 othersquarter.(2)
| | | — | | | Korea and
others | | Dec. 31 | | Asset-backed securitization and others
| | | Heungkuk Multi Private Securities H-19 and 37 others
| | | 100.00 | | | Korea | | Dec. 31 | | Private equity fund
| Kookmin Bank & KB Investment
Co., Ltd.
| | KB12-1 Venture Investment
| | | 100.00 | | | Korea | | Dec. 31 | | Capital investment
| | KB Start-up Creation Fund
| | | 62.50 | | | Korea | | Dec. 31 | | Capital investment
| KB Investment & Securities
| | Ashley Investment First Co., Ltd.(2)
| | | — | | | Korea | | Dec. 31 | | Asset-backed securitization and others
| | | Growth Investment First Co., Ltd.(2)
| | | — | | | Korea | | Dec. 31 | | Asset-backed securitization and others
| KB Asset Management
Co., Ltd.
| | KB Wellyan Private Equity Real Estate Fund No. 6
| | | 95.67 | | | Korea | | Dec. 31 | | Capital investment
| | KB Wellyan Private Equity Real Estate Fund No. 7(3)
| | | 47.97 | | | Korea | | Dec. 31 | | Capital investment
| | | Boyoung construction(4)
| | | — | | | Korea | | Dec. 31 | | Construction
|
| | | | | | | | | | | | | | | Investor
| | Investee
| | Ownership
interests(%) | | | Location | | Date of
financial
information | | | Industry
| KB Investment
Co., Ltd.
| | 09-5 KB Venture Fund(5)
| | | 33.33 | | | Korea | | | Dec. 31 | | | Capital investment
| | KoFC-KB Pioneer Champ No.2010-8 Investment Partnership
| | | 50.00 | | | Korea | | | Dec. 31 | | | Capital investment
| | | 2011 KIF-KB IT Venture Fund(5)
| | | 43.33 | | | Korea | | | Dec. 31 | | | Capital investment
| | | KoFC-KB Young Pioneer
1st Fund(5)
| | | 33.33 | | | Korea | | | Dec. 31 | | | Capital investment
| KB Kookmin Card Co., Ltd
| | KB Kookmin Card First Securitization
Co., Ltd.(2)
| | | 0.90 | | | Korea | | | Dec. 31 | | | Asset-backed securitization
| | | KB Kookmin Card Second Securitization Co., Ltd.(2)
| | | 0.50 | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile First Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile Second Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile third Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile fourth Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile fifth Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile sixth Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile seventh Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile eighth Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile ninth Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile tenth Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile eleventh Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | | | Wise Mobile twelfth Securitization Specialty(2)
| | | — | | | Korea | | | Dec. 31 | | | Asset-backed securitization | KB Life Insurance Co., Ltd.
| | KB Haeoreum Private Securities Investment Trust 1st and 7 others
| | | 100.00 | | | Korea | | | Dec. 31 | | | Private equity fund |
| | | | | | | | | | | | | | | Investor
| | Investee
| | Ownership
interests(%) | | | Location | | Date of
financial
information | | | Industry
| Kookmin Bank, KB Life Insurance Co., Ltd., KB Investment & Securities, KB Real Estate Trust Co., Ltd
| | KB Wise Star Private Real Estate Feeder Fund 1st.
| | | 100.00 | | | Korea | | | Dec. 31 | | | Investment trust | Kookmin Bank
| | Hanbando BTL Private Special Asset Fund(3)
| | | 39.47 | | | Korea | | | Dec. 31 | | | Capital investment | Kookmin Bank, KB Life Insurance Co., Ltd., KB
| | KB Hope Sharing BTL Private Special Asset(3)
| | | 40.00 | | | Korea | | | Dec. 31 | | | Capital investment | Kookmin Bank
| | KB Mezzanine Private Securities Fund
1st(Mixed)(3)
| | | 46.51 | | | Korea | | | Dec. 31 | | | Capital investment | Kookmin Bank, KB Life Insurance Co., Ltd., KB
| | KB Mezzanine Private Securities Fund
2nd(Mixed)(3)
| | | 40.74 | | | Korea | | | Dec. 31 | | | Capital investment | Kookmin Bank
| | K-star KTB ETF(Bond)(3)
| | | 47.63 | | | Korea | | | Dec. 31 | | | Capital investment | KB Wise Star Private Real Estate Feeder Fund 1st.
| | KB Star Retail Private Master Real Estate 1(6)
| | | 48.98 | | | Korea | | | Dec. 31 | | | Capital investment | KB Wise Star Private Real Estate Feeder Fund 1st.
| | KB Star Office Private Real Estate Investment Trust 2nd(6)
| | | 44.44 | | | Korea | | | Dec. 31 | | | Capital investment
|
(1) | The Group controls the trust because it has power that determines the management performance over the trust and is exposed to variable returns to absorb losses through the guarantees of payment of principal or payment of principal and fixed rate of return.
|
(2) | The Group controls these investees because it is exposed to variable returns from its involvement with the investees and has ability to affect those returns through its power, even though it holds less than a majority of the voting rights of the investees.
|
(3) | Although the Group holds less than a majority of the investee’s voting rights, the Group controls the investee as it has power over relevant activities by managing the fund; has significant percentage of ownership that is over 40%; is significantly exposed to variable returns which is affected by the performance of the investees, and has ability to affect those performance through its power.
|
(4) | Boyoung Construction is included in the consolidation scope, since KB Wellyan Private Equity Real Estate Fund No. 7 is included in the consolidation scope.
|
(5) | Although the Group holds less than a majority of the investee’s voting rights, the Group controls the investee as it has power over relevant activities by taking the role of an operating manager and it is significantly exposed to variable returns which is affected by the performance of the investees, and has ability to affect those performance through its power.
|
(6) | KB Star Retail Private Master Real Estate 1 and KB Star Office Private Real Estate Investment Trust 2nd are included in the consolidation scope, since KB Wise Star Private Real Estate Feeder Fund 1st is included in the consolidation scope.
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The condensed financial information of major subsidiaries as of December 31, 20132016 and 2014, and for the years ended December 31, 2013 and 2014,2017, is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Assets | | | Liabilities | | | Equity | | | Operating income (revenue) | | | Profit attributable to Shareholders of the parent company | | | Total comprehensive income for the year attributable to Shareholders of the parent company | | | | (In millions of Korean won) | | Kookmin Bank(1) | | ₩ | 265,588,385 | | | ₩ | 244,641,628 | | | ₩ | 20,946,757 | | | ₩ | 17,461,406 | | | ₩ | 830,628 | | | ₩ | 894,093 | | KB Kookmin Card Co., Ltd.(1) | | | 15,854,992 | | | | 12,385,131 | | | | 3,469,861 | | | | 2,990,037 | | | | 384,411 | | | | 390,228 | | KB Investment & Securities Co., Ltd.(2) | | | 2,525,070 | | | | 1,973,888 | | | | 551,182 | | | | 577,649 | | | | 11,856 | | | | 5,436 | | KB Life Insurance Co., Ltd.(1) | | | 6,945,605 | | | | 6,396,477 | | | | 549,128 | | | | 1,457,365 | | | | 9,098 | | | | (23,209 | ) | KB Asset Management Co., Ltd.(1) | | | 237,907 | | | | 36,335 | | | | 201,572 | | | | 103,401 | | | | 74,685 | | | | 74,560 | | KB Real Estate Trust Co., Ltd. | | | 182,657 | | | | 13,612 | | | | 169,045 | | | | 46,524 | | | | 2,110 | | | | 2,835 | | KB Investment Co., Ltd.(1) | | | 241,227 | | | | 110,640 | | | | 130,587 | | | | 34,497 | | | | 6,078 | | | | 7,145 | | KB Credit Information Co., Ltd. | | | 30,142 | | | | 7,687 | | | | 22,455 | | | | 43,627 | | | | (336 | ) | | | (336 | ) | KB Data System Co., Ltd. | | | 21,753 | | | | 6,880 | | | | 14,873 | | | | 50,440 | | | | 19 | | | | 115 | | KB Savings Bank Co., Ltd. | | | 584,025 | | | | 449,087 | | | | 134,938 | | | | 47,865 | | | | (301 | ) | | | (1,482 | ) | Yehansoul Savings Bank Co., Ltd. | | | 189,243 | | | | 164,084 | | | | 25,159 | | | | 4,791 | | | | (5,331 | ) | | | (5,259 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | Assets | | | Liabilities | | | Equity | | | Operating income (revenue) | | | Profit(loss) for the period | | | Total comprehensive income for the period4 | | | | (In millions of Korean won) | | Kookmin Bank1 | | ₩ | 307,066,370 | | | ₩ | 283,741,368 | | | ₩ | 23,325,002 | | | ₩ | 17,866,478 | | | ₩ | 964,256 | | | ₩ | 958,312 | | KB Securities Co., Ltd.1,2,3 | | | 32,382,795 | | | | 28,198,439 | | | | 4,184,356 | | | | 2,444,185 | | | | (93,428 | ) | | | (65,689 | ) | KB Kookmin Card Co., Ltd.1 | | | 15,772,036 | | | | 11,807,038 | | | | 3,964,998 | | | | 3,017,568 | | | | 317,103 | | | | 331,023 | | KB Life Insurance Co., Ltd.1 | | | 8,887,413 | | | | 8,337,849 | | | | 549,564 | | | | 1,480,979 | | | | 12,714 | | | | (33,269 | ) | KB Asset Management Co., Ltd.1 | | | 170,781 | | | | 16,605 | | | | 154,176 | | | | 127,435 | | | | 58,756 | | | | 57,503 | | KB Capital Co., Ltd.2 | | | 7,428,372 | | | | 6,640,305 | | | | 788,067 | | | | 473,253 | | | | 96,785 | | | | 96,740 | | KB Savings Bank Co., Ltd. | | | 1,078,130 | | | | 895,921 | | | | 182,209 | | | | 65,938 | | | | 10,319 | | | | 9,897 | | KB Real Estate Trust Co., Ltd. | | | 216,687 | | | | 33,713 | | | | 182,974 | | | | 65,230 | | | | 29,270 | | | | 29,636 | | KB Investment Co., Ltd.1 | | | 315,878 | | | | 168,491 | | | | 147,387 | | | | 49,425 | | | | 6,170 | | | | 2,388 | | KB Credit Information Co., Ltd. | | | 27,973 | | | | 7,647 | | | | 20,326 | | | | 37,271 | | | | 43 | | | | 126 | | KB Data System Co., Ltd. | | | 27,037 | | | | 12,655 | | | | 14,382 | | | | 76,394 | | | | 613 | | | | 722 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2014 | | | | Assets | | | Liabilities | | | Equity | | | Operating income (revenue) | | | Profit attributable to Shareholders of the parent company | | | Total comprehensive income for the year attributable to Shareholders of the parent company | | | | (In millions of Korean won) | | Kookmin Bank(1) | | ₩ | 275,453,664 | | | ₩ | 253,513,191 | | | ₩ | 21,940,473 | | | ₩ | 16,283,978 | | | ₩ | 1,029,041 | | | ₩ | 1,152,233 | | KB Kookmin Card Co., Ltd.(1) | | | 15,886,769 | | | | 12,406,314 | | | | 3,480,455 | | | | 2,864,957 | | | | 332,701 | | | | 310,606 | | KB Investment & Securities Co., Ltd.(1),(2) | | | 4,131,568 | | | | 3,554,828 | | | | 576,740 | | | | 578,345 | | | | 25,624 | | | | 25,558 | | KB Life Insurance Co., Ltd.(1) | | | 7,680,184 | | | | 7,096,459 | | | | 583,725 | | | | 1,453,057 | | | | 6,537 | | | | 34,597 | | KB Asset Management Co., Ltd.(1) | | | 254,481 | | | | 52,541 | | | | 201,940 | | | | 105,234 | | | | 49,560 | | | | 50,368 | | KB Capital Co., Ltd(2) | | | 4,023,965 | | | | 3,612,150 | | | | 411,815 | | | | 250,042 | | | | 29,990 | | | | 26,859 | | KB Savings Bank Co., Ltd. | | | 772,676 | | | | 619,882 | | | | 152,794 | | | | 56,712 | | | | (15,079 | ) | | | (14,645 | ) | KB Real Estate Trust Co., Ltd. | | | 204,888 | | | | 20,930 | | | | 183,958 | | | | 50,283 | | | | 14,818 | | | | 14,913 | | KB Investment Co., Ltd.(1) | | | 225,353 | | | | 90,569 | | | | 134,784 | | | | 33,371 | | | | 1,382 | | | | 4,197 | | KB Credit Information Co., Ltd. | | | 28,805 | | | | 7,955 | | | | 20,850 | | | | 38,796 | | | | (1,605 | ) | | | (1,605 | ) | KB Data System Co., Ltd. | | | 31,397 | | | | 16,874 | | | | 14,523 | | | | 59,129 | | | | 367 | | | | (350 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Assets | | | Liabilities | | | Equity | | | Operating income (revenue) | | | Profit(loss) for the period | | | Total comprehensive income for the period4 | | | | (In millions of Korean won) | | Kookmin Bank1 | | ₩ | 329,765,927 | | | ₩ | 304,442,493 | | | ₩ | 25,323,434 | | | ₩ | 19,291,294 | | | ₩ | 2,174,705 | | | ₩ | 2,357,936 | | KB Securities Co., Ltd.1,2 | | | 37,351,680 | | | | 32,936,024 | | | | 4,415,656 | | | | 5,974,054 | | | | 271,701 | | | | 236,587 | | KB Insurance Co., Ltd.1,2 | | | 32,351,778 | | | | 29,128,747 | | | | 3,223,031 | | | | 8,740,682 | | | | 330,286 | | | | 320,756 | | KB Kookmin Card Co., Ltd.1 | | | 17,658,310 | | | | 13,616,481 | | | | 4,041,829 | | | | 3,326,048 | | | | 296,831 | | | | 326,887 | | KB Life Insurance Co., Ltd.1 | | | 9,125,741 | | | | 8,586,328 | | | | 539,413 | | | | 1,331,105 | | | | 21,086 | | | | (10,151 | ) | KB Asset Management Co., Ltd.1 | | | 201,481 | | | | 44,860 | | | | 156,621 | | | | 117,746 | | | | 52,022 | | | | 52,176 | | KB Capital Co., Ltd.1,2 | | | 8,743,672 | | | | 7,803,920 | | | | 939,752 | | | | 588,253 | | | | 120,797 | | | | 120,628 | | KB Savings Bank Co., Ltd. | | | 1,158,829 | | | | 960,812 | | | | 198,017 | | | | 79,428 | | | | 21,150 | | | | 21,329 | | KB Real Estate Trust Co., Ltd. | | | 246,685 | | | | 47,355 | | | | 199,330 | | | | 76,700 | | | | 36,408 | | | | 36,356 | | KB Investment Co., Ltd.1 | | | 355,763 | | | | 218,671 | | | | 137,092 | | | | 41,150 | | | | (4,954 | ) | | | (7,295 | ) | KB Credit Information Co., Ltd. | | | 26,121 | | | | 10,979 | | | | 15,142 | | | | 31,737 | | | | (5,316 | ) | | | (5,185 | ) | KB Data System Co., Ltd. | | | 41,945 | | | | 27,240 | | | | 14,705 | | | | 117,946 | | | | 945 | | | | 323 | |
(1)1 | Financial information is based on its consolidated financial statements. |
(2)2 | The amount includes the fair value adjustments due to the merger. |
3 | Profit(loss) is based on the amount of Hyundai Securities Co., Ltd. after it is included in the consolidation scope (October 2016) and the amount of KB Investment & Securities Co., Ltd. for the period |
4 | Attributable to shareholders of the Parent Company. |
Nature of the risks associated with interests in consolidated structured entities The terms of contractual arrangements require to provide financial support to a consolidated structured entity The Group has provided acceptances andpayment guarantees obligation of ₩68,000₩1,904,344 million to Ashley Investment First Co., Ltd.KL 1st Inc. and Growth Investment First Co., Ltd., the Group’s subsidiary, that had issued debentures. other subsidiaries.The Group provides capital commitment to KB Wise Star Private Real Estate Feeder Fund 1st. and nine8 other subsidiaries. The unexecuted amount of the investment agreement is ₩478,741₩316,966 million. Based on the capital commitment, the Group is subject to increase its investment byupon the request fromof the asset management company or the additional agreement among investors. The Group provides the guarantees of payment of principal, or principal and fixed rate of return in case the operating results of the trusts are less than the guaranteed principal, or principal and fixed rate of return. Changes in subsidiaries
KB Capital Co., Ltd., Ashley Investment First Co., Ltd., Growth Investment First Co., Ltd., KB Mezzanine Private Securities Fund 2nd, KB Star Office Private Real Estate Investment Trust No.2, KB Evergreen Private Securities 99(Bond) and 106 other private equity funds, KB Kookmin Card Second Securitization Co., Ltd. and Wise Mobile 8th ~12th Securitization wereThe subsidiaries newly consolidatedincluded in consolidation during the year ended December 31, 2014. KB Evergreen Private Securities 82(Bond) and 95 other private equity funds, Global Logistics Infra Private Fund 1st, 2nd, KB Covered Bond 1st Trust, KH First Co., Ltd., KB Mortgage Loan First Securitization Specialty Co., Ltd., KB Covered Bond First Securitization Specialty Co., Ltd and KB07-5, KB06-1,KB08-1 Venture Partnership Fund have been2017, are as follows:
| | | | | | | Company | | | | | Description | KB Insurance Co., Ltd. and 45 others | | | | | | Holds a majority of the ownership interests | Able Jungdong Co., Ltd. and 42 others | | | | | | Holds the power in the case of default and exposed to variable returns by providing lines of credit, ABCP purchase commitments or acquiring subordinated debt | KB Haeoreum private securities investment trust 70(Bond) and 3 others | | | | | | Holds the power to determine the operation of the trust and exposed to variable returns by holding significant amount of ownership interests | KB KONEX Market Vitalization Fund and 3 other | | | | | | Holds the power by taking the role of an operating manager and exposed to variable returns by holding significant amounts of ownership interests. |
The subsidiaries excluded from consolidation due to their liquidation. Also, Yehansoul Savings Bank Co., Ltd. has been excluded from consolidation due to its merger with KB Savings Bank Co., Ltd. Yehansoul Savings Bank Co., Ltd., KB Startup Investment, KB Evergreen Private Securities 63 and 46 other private equity funds, and Wise Mobile Second, Third, Fourth, Fifth, Sixth, Seventh Securitization and KB Star Retail Private Real Estate Feeder Fund First were newly consolidated during the year ended December 31, 2013. Yurie Select Private Securities Investment Trust 32 and 44 other private equity funds, KB K-Alpha private equity trust and New Star First Ltd. have been excluded from consolidation due to their liquidation. Also, KB Private Real Estate Securities Fund1 (NPL) and Woori KA First Asset Securitization Specialty Co., Ltd. have been excluded from consolidation due to the loss of control.
In accordance with the enactment of IFRS 10, the activities of KB-Glenwood Private Equity Fund, NPS KBIC Private Equity Fund No. 1 and KBIC Private Equity Fund No. 3 represent management and performance services and the terms of the contracts are the same as those in the ordinary service contracts between independent parties. These entities have been excluded from the consolidation scope since interests held are not material and therefore were considered as agents. In addition, Chungkang Co., Ltd. and Powernet Technologies Co., Ltd. have been excluded from the consolidation scope, since KB-Glenwood Private Equity Fund, the Parent Company, have been excluded from the consolidation scope.
For the year ended December 31, 2014, the following table summarizes the information relating to the Group’s subsidiaries that have material non-controlling interests, before any intra-group eliminations,2017, are as follows:
| | | | | | | 2014 | | | | (In millions of Korean won) | | Non-controlling interests percentage (%)Company
| | | 47.98 | Description | Non-controlling interests2014ABLEOPO 2ND Co., Ltd. and 44 others
| | | | Lost right for variable returns due to the release of debt | Assets of subsidiaries
| | ₩ | 4,023,965 | | Liabilities of subsidiaries
| | | 3,612,150 | | Equity of subsidiaries
| | | 411,815 | | Non-controlling interests
| | | 197,580 | | Profit attributable to non-controlling interestsWise Mobile Eighth Securitization Specialty Co., Ltd and 5 others
| | | | Liquidation | Operating profit of subsidiaries
| | | 39,666 | | Profit of subsidiaries
| | | 29,990 | | Profit attributable to non-controlling interests
| | | 14,389 | | Cash flows of subsidiariesHyundai Asset Management Co., Ltd. and 17 others
| | | | Disposal | Cash flows from operating activitiesKB Evergreen bond fund No.98 (Bond) and 1 other
| | | 71,813 | | Cash flows from investing activities
| | | (6,742 | ) | Cash flows from financing activities
| | | (33,312 | ) | | | Decrease of the interest to less than a majority | Hyundai Trust Securities Feeder Investment TrustNo.1- Bond | | Net increase in cash and cash equivalents
| | ₩ | 31,759 | | | | Lost the power from sale of Hyundai Asset Management Co., Ltd. | |
Set out below is summarized financial information for each subsidiary that hasnon-controlling interests that are material to the Group. The amounts disclosed for each subsidiary are before inter-company eliminations. | | | | | | | | | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Non-controlling interests percentage | | | 47.98 | % | | | — | | Non-controlling interests | | | | | | | | | Assets of subsidiaries | | ₩ | 7,428,372 | | | ₩ | — | | Liabilities of subsidiaries | | | 6,640,305 | | | | — | | Equity of subsidiaries | | | 788,067 | | | | — | | Non-controlling interests | | | 263,359 | | | | — | | Profit attributable tonon-controlling interests | | | | | | | | | Operating profit of subsidiaries | | | 127,550 | | | | — | | Profit of subsidiaries | | | 96,785 | | | | — | | Profit attributable tonon-controlling interests | | | 46,436 | | | | — | | Cash flows of subsidiaries | | | | | | | | | Cash flows from operating activities | | | (1,783,799 | ) | | | — | | Cash flows from investing activities | | | (7,023 | ) | | | — | | Cash flows from financing activities | | | 1,671,199 | | | | — | | | | | | | | | | | Net increase(decrease) in cash and cash equivalents | | ₩ | (119,623 | ) | | ₩ | — | | | | | | | | | | |
1 | As the Group acquired the entirenon-controlling interests of KB Capital during 2017, there are no subsidiaries with materialnon-controlling interests as of December 31, 2017. |
41. Unconsolidated Structured Entity As of December 31, 2014, theThe nature, purpose and activities of the unconsolidated structured entities and how the structured entities are financed, are as follows:
| | | | | | | Nature | | Purpose | | ActivitiesActivity
| | MethodsMethod of Financing
| | | | | Asset-backed securitization | | Early cash generation through transfer of securitization assets Fees earned as services to SPC, such as providing lines of credit and ABCP purchase commitments | | Fulfillment of Asset-backed securitization plan Purchase and transfer of securitization assets Issuance and repayment of ABS and ABCP | | Issuance of ABS and ABCP based on securitization assets | | | | | Project financingFinancing | | Granting PF loans to SOC and real estate Granting loans to ships/aircrafts SPC | | Construction of SOC and real estate Building ships/ construction and purchase of aircrafts | | Loan commitments through Credit Line, providing lines of credit and investment agreements | | | | | Trust | | Management of financial trusts; —Development trust —Mortgage trust —Management trust —Disposal trust —Distribution and management trust —Other trusts | | Development, management, and disposal of trusted real estate assets Payment of trust fees and allocation of trust profits. | | Distribution of trusted real estate assets and financing of trust company Public auction of trusted real estate assets and financing of trust company | | | | | Investment fundsFund
| | Investment in beneficiary certificates Investment in PEF and partnerships | | Management of fund assets Payment of fund fees and allocation of fund profits | | Sales of beneficiary certificate instruments Investment of managing partners and limited partners |
AsDetails of December 31, 2013 and 2014, the sizescale of the unconsolidated structured entities and nature of the risks associated with itsthe Group’s interests in unconsolidated structured entities as of December 31, 2016 and 2017, are as follows:
| | | Dec. 31, 2013 | | | 2016 | | | | Asset-backed securitization | | Project Financing | | Trusts | | Investment funds | | Others | | Total | | | Asset-backed securitization | | Project financing | | Trusts | | Investment funds | | Others | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Total assets of unconsolidated Structured Entity | | ₩ | 12,631,056 | | | ₩ | 24,605,331 | | | ₩ | 2,261,415 | | | ₩ | 12,618,790 | | | ₩ | 3,502,834 | | | ₩ | 55,619,426 | | | ₩ | 95,829,740 | | | ₩ | 22,529,407 | | | ₩ | 588,267 | | | ₩ | 33,606,036 | | | ₩ | 4,723,822 | | | ₩ | 157,277,272 | | Carrying amount on financial statements | | | | | | | | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets at fair value through profit or loss | | | 677,658 | | | 75,477 | | | | — | | | 25,253 | | | | — | | | 778,388 | | Derivative financial assets | | | 110 | | | | — | | | | — | | | | — | | | | — | | | 110 | | Loans | | | 382,478 | | | | 3,155,621 | | | | — | | | | — | | | | 291,599 | | | | 3,829,698 | | | 610,623 | | | 2,860,776 | | | 54,500 | | | 26,897 | | | 173,989 | | | 3,726,785 | | Financial investments | | | 1,121,676 | | | | 97,754 | | | | — | | | | 525,680 | | | | — | | | | 1,745,110 | | | 6,406,641 | | | 8,595 | | | 305 | | | 3,621,376 | | | 19,612 | | | 10,056,529 | | Investment in associates | | | — | | | | — | | | | — | | | | 403,153 | | | | — | | | | 403,153 | | | | — | | | 728 | | | | — | | | 227,203 | | | | — | | | 227,931 | | Other assets | | | — | | | | — | | | | 165,709 | | | | 1,909 | | | | — | | | | 167,618 | | | 6,945 | | | 3,002 | | | 9,350 | | | 859 | | | 57 | | | 20,213 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | ₩ | 1,504,154 | | | ₩ | 3,253,375 | | | ₩ | 165,709 | | | ₩ | 930,742 | | | ₩ | 291,599 | | | ₩ | 6,145,579 | | | Total | | | ₩ | 7,701,977 | | | ₩ | 2,948,578 | | | ₩ | 64,155 | | | ₩ | 3,901,588 | | | ₩ | 193,658 | | | ₩ | 14,809,956 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | Deposits | | ₩ | 306,931 | | | ₩ | 487,818 | | | ₩ | — | | | ₩ | 8,142 | | | ₩ | 5,473 | | | ₩ | 808,364 | | | ₩ | 528,041 | | | ₩ | 703,049 | | | ₩ | — | | | ₩ | 40,382 | | | ₩ | 6,895 | | | ₩ | 1,278,367 | | Other liabilities | | | — | | | | 14 | | | | — | | | | 144 | | | | — | | | | 158 | | | 658 | | | | — | | | | — | | | | — | | | | — | | | 658 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | ₩ | 306,931 | | | ₩ | 487,832 | | | ₩ | — | | | ₩ | 8,286 | | | ₩ | 5,473 | | | ₩ | 808,522 | | | Total | | | ₩ | 528,699 | | | ₩ | 703,049 | | | ₩ | — | | | ₩ | 40,382 | | | ₩ | 6,895 | | | ₩ | 1,279,025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maximum exposure to loss(1) | | ₩ | 4,672,378 | | | ₩ | 5,714,293 | | | ₩ | 294,043 | | | ₩ | 2,476,902 | | | ₩ | 386,000 | | | ₩ | 13,543,616 | | | Maximum exposure to loss1 | | | | | | | | | | | | | | Holding assets | | | ₩ | 7,701,977 | | | ₩ | 2,948,578 | | | ₩ | 64,155 | | | ₩ | 3,901,588 | | | ₩ | 193,658 | | | ₩ | 14,809,956 | | Purchase and investment commitments | | | 726,375 | | | | — | | | | — | | | 1,607,542 | | | | — | | | 2,333,917 | | Unused credit | | | 2,701,254 | | | | — | | | | — | | | | — | | | 33,500 | | | 2,734,754 | | Payment guarantee and loan commitments | | | 290,100 | | | 1,475,760 | | | | — | | | | — | | | | — | | | 1,765,860 | | | | | | | | | | | | | | | | | | | | | | Total | | | ₩ | 11,419,706 | | | ₩ | 4,424,338 | | | ₩ | 64,155 | | | ₩ | 5,509,130 | | | ₩ | 227,158 | | | ₩ | 21,644,487 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Methods of determining the maximum exposure to loss | | | Providing lines of credit and purchase commitments | | | | Investments / loans, loan commitments /investment agreements / purchase commitments and acceptances and guarantees | | | | Dividends by results trust: Total amount of trust explosure | | | | Investments /loans and capital commitments | | | | Loan commitments | | | | |
| Providing lines of credit and purchase commitments | | |
| Loan commitments / investment agreements / purchase commitments and acceptances and guarantees |
| |
| Dividends by results trust: Total amount of trust exposure | | |
| Investments / loans and capital commitments | | |
| Loan commitments | | | |
| | | Dec. 31, 2014 | | | 2017 | | | | Asset-backed securitization | | Project Financing | | Trusts | | Investment funds | | Others | | Total | | | Asset-backed securitization | | Project financing | | Trusts | | Investment funds | | Others | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Total assets of unconsolidated Structured Entity | | ₩ | 13,013,795 | | | ₩ | 21,102,639 | | | ₩ | 1,986,277 | | | ₩ | 17,919,480 | | | ₩ | 6,484,363 | | | ₩ | 60,506,554 | | | ₩ | 128,573,461 | | | ₩ | 33,153,741 | | | ₩ | 482,900 | | | ₩ | 101,598,227 | | | ₩ | 9,613,570 | | | ₩ | 273,421,899 | | Carrying amount on financial statements | | | | | | | | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets at fair value through profit or loss | | | 2,277,080 | | | 73,157 | | | | — | | | 547,258 | | | | — | | | 2,897,495 | | Derivative financial assets | | | 1,136 | | | | — | | | | — | | | 118 | | | | — | | | 1,254 | | Loans | | | 223,771 | | | | 2,965,239 | | | | — | | | | 1,609 | | | | 252,195 | | | | 3,442,814 | | | 833,380 | | | 3,366,675 | | | 54,500 | | | 266,653 | | | 393,664 | | | 4,914,872 | | Financial investments | | | 716,462 | | | | 93,505 | | | | — | | | | 627,554 | | | | 66,943 | | | | 1,504,464 | | | 6,826,097 | | | 13,104 | | | 300 | | | 5,788,925 | | | 20,619 | | | 12,649,045 | | Investment in associates | | | — | | | | — | | | | — | | | | 390,337 | | | | — | | | | 390,337 | | | Investment in associates and joint ventures | | | | — | | | | — | | | | — | | | 202,816 | | | | — | | | 202,816 | | Other assets | | | 47 | | | | 27 | | | | 92,678 | | | | 8,324 | | | | — | | | | 101,076 | | | 11,699 | | | 5,874 | | | 37,972 | | | 962 | | | 307 | | | 56,814 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | ₩ | 940,280 | | | ₩ | 3,058,771 | | | ₩ | 92,678 | | | ₩ | 1,027,824 | | | ₩ | 319,138 | | | ₩ | 5,438,691 | | | Total | | | ₩ | 9,949,392 | | | ₩ | 3,458,810 | | | ₩ | 92,772 | | | ₩ | 6,806,732 | | | ₩ | 414,590 | | | ₩ | 20,722,296 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | Deposits | | ₩ | 300,015 | | | ₩ | 500,538 | | | ₩ | — | | | ₩ | 6,067 | | | ₩ | 32,986 | | | ₩ | 839,606 | | | ₩ | 484,889 | | | ₩ | 755,242 | | | ₩ | — | | | ₩ | 38,657 | | | ₩ | 3,985 | | | ₩ | 1,282,773 | | Derivative financial liabilities | | | 1,487 | | | | — | | | | — | | | 2,792 | | | | — | | | 4,279 | | Other liabilities | | | 12 | | | | — | | | | — | | | | — | | | | — | | | | 12 | | | 11,292 | | | 44 | | | | — | | | 48 | | | | — | | | 11,384 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | ₩ | 300,027 | | | ₩ | 500,538 | | | ₩ | — | | | ₩ | 6,067 | | | ₩ | 32,986 | | | ₩ | 839,618 | | | Total | | | ₩ | 497,668 | | | ₩ | 755,286 | | | ₩ | — | | | ₩ | 41,497 | | | ₩ | 3,985 | | | ₩ | 1,298,436 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maximum exposure to loss(1) | | ₩ | 5,338,975 | | | ₩ | 5,403,409 | | | ₩ | 206,911 | | | ₩ | 3,203,351 | | | ₩ | 590,257 | | | ₩ | 14,742,903 | | | Maximum exposure to loss1 | | | | | | | | | | | | | | Holding assets | | | ₩ | 9,949,392 | | | ₩ | 3,458,810 | | | ₩ | 92,772 | | | ₩ | 6,806,732 | | | ₩ | 414,590 | | | ₩ | 20,722,296 | | Purchase and investment commitments | | | 964,106 | | | | — | | | | — | | | 1,301,784 | | | | — | | | 2,265,890 | | Unused credit | | | 2,299,236 | | | 10,000 | | | | — | | | 1,203,917 | | | 16,000 | | | 3,529,153 | | Payment guarantee and loan commitments | | | 382,300 | | | 1,385,722 | | | | — | | | | — | | | | — | | | 1,768,022 | | | | | | | | | | | | | | | | | | | | | | Total | | | ₩ | 13,595,034 | | | ₩ | 4,854,532 | | | ₩ | 92,772 | | | ₩ | 9,312,433 | | | ₩ | 430,590 | | | ₩ | 28,285,361 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Methods of determining the maximum exposure to loss | | | Providing lines of credit and purchase commitments | | | | Loan commitments /investment agreements / purchase commitments and acceptances and guarantees | | | | Dividends by results trust: Total amount of trust explosure | | | | Investments /loans and capital commitments | | | | Loan commitments | | | | |
| Providing lines of credit and purchase commitments | | |
| Loan commitments / investment agreements / purchase commitments and acceptances and guarantees |
| |
| Dividends by results trust: Total amount of trust exposure | | |
| Investments / loans and capital commitments | | |
| Loan commitments | | | |
(1)1 | Maximum exposure to loss includes the asset amounts, after deducting loss(provision for assets, impairment losses and others), recognized in the financial statements of the Group. |
42. Finance/Finance and Operating Lease 42.1 Finance lease 42.1.1 The Group as finance lessee The future minimum lease payments arising as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Net carrying amount of finance lease assets | | ₩ | 16,955 | | | ₩ | 72,392 | | | ₩ | 40,750 | | | ₩ | 29,817 | | | | | | | | | | | | | | | Minimum lease payment | | | | | | | | | Within 1 year | | | 1,927 | | | | 18,765 | | | | 2,424 | | | | 2,555 | | 1-5 years | | | — | | | | 5,472 | | | | 3,099 | | | | 2,150 | | Over 5 years | | | — | | | | 1,148 | | | | | | | | | | | | | | | | Total | | | 1,927 | | | | 25,385 | | | | 5,523 | | | | 4,705 | | | | | | | | | | | | | | | Present value of minimum lease payment | | | | | | | | | Within 1 year | | | 1,873 | | | | 18,367 | | | | 2,392 | | | | 2,510 | | 1-5 years | | | — | | | | 5,169 | | | | 2,907 | | | | 2,059 | | Over 5 years | | | — | | | | 996 | | | | | | | | | | | | | | | | Total | | | 1,873 | | | | 24,532 | | | | 5,299 | | | | 4,569 | | | | | | | | | | | | | | |
42.2.242.1.2 The Group as finance lessor
Total lease investment and the present value of minimum lease payments as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | Total lease investment | | | Present value of minimum lease payment | | | Total lease investment | | | Present value of minimum lease payment | | | Total lease investment | | | Present value of minimum lease payment | | | Total lease investment | | | Present value of minimum lease payment | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Within 1 year | | ₩ | — | | | ₩ | — | | | ₩ | 348,579 | | | ₩ | 294,643 | | | ₩ | 562,552 | | | ₩ | 478,312 | | | ₩ | 654,412 | | | ₩ | 557,188 | | 1-5 years | | | — | | | | — | | | | 577,998 | | | | 525,590 | | | | 1,096,614 | | | | 1,004,512 | | | | 1,330,610 | | | | 1,215,476 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | — | | | ₩ | — | | | ₩ | 926,577 | | | ₩ | 820,233 | | | ₩ | 1,659,166 | | | ₩ | 1,482,824 | | | ₩ | 1,985,022 | | | ₩ | 1,772,664 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unearned interest income of finance lease as of December 31, 20132016 and 2014,2017, is as follows: | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Total lease investment | | ₩ | — | | | ₩ | 926,577 | | | ₩ | 1,659,166 | | | ₩ | 1,985,022 | | Net lease investment | | | | | | | | | Present value of minimum lease payment | | | — | | | | 820,233 | | | | 1,482,824 | | | | 1,772,664 | | | | | | | | | | | | | | | Unearned interest income | | ₩ | — | | | ₩ | 106,344 | | | ₩ | 176,342 | | | ₩ | 212,358 | | | | | | | | | | | | | | |
42.2 Operating lease 42.2.1 The Group as operating lessee The future minimum lease payments arising from thenon-cancellable lease contracts as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | 2014 | | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Minimum lease payment | | | | | | | | | Within 1 year | | ₩ | 121,446 | | | ₩ | 124,183 | | | ₩ | 148,449 | | | ₩ | 168,707 | | 1-5 years | | | 108,962 | | | | 103,595 | | | | 174,232 | | | 196,050 | | Over 5 years | | | 67 | | | | 34,439 | | | | 34,488 | | | 34,128 | | | | | | | | | | | | | | | Total | | ₩ | 230,475 | | | ₩ | 262,217 | | | ₩ | 357,169 | | | ₩ | 398,885 | | | | | | | | | | | | | | | Minimum sublease payment | | ₩ | (367 | ) | | ₩ | (382 | ) | | ₩ | (1,109 | ) | | ₩ | (3,101 | ) |
The lease payment reflected in profit or loss for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows: | | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Lease payment reflected in profit or loss | | | | | | | | | | | Minimum lease payment | | ₩ | 201,450 | | | ₩ | 204,164 | | | ₩ | 218,635 | | | ₩ | 194,173 | | | ₩ | 197,444 | | | ₩ | 208,413 | | Sublease payment | | | (165 | ) | | | (118 | ) | | | (156 | ) | | | (167 | ) | | (1,026 | ) | | (2,441 | ) | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 201,285 | | | ₩ | 204,046 | | | ₩ | 218,479 | | | ₩ | 194,006 | | | ₩ | 196,418 | | | ₩ | 205,972 | | | | | | | | | | | | | | | | | | | | |
42.2.2 The Group as operating lessor The future minimum lease receipts arising from thenon-cancellable lease contracts as of December 31, 20132016 and 2014,2017, are as follows: | | | 2013 | | | 2014 | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Minimum lease receipts | | | | | | | | | Within 1 year | | ₩ | 8,327 | | | ₩ | 27,613 | | | ₩ | 129,870 | | | ₩ | 163,203 | | 1-5 years | | | 22,280 | | | | 52,621 | | | | 277,377 | | | | 375,344 | | Over 5 years | | | | 313,282 | | | | 282,470 | | | | | | | | | | | | | | | Total | | ₩ | 30,607 | | | ₩ | 80,234 | | | ₩ | 720,529 | | | ₩ | 821,017 | | | | | | | | | | | | | | |
43. Related Party Transactions IncomeProfit and expensesloss arising from transactions with related parties for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, are as follows:
| | | | | | | | | | | | | | | | | | | 2012 | | | 2013 | | | 2014 | | | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | Balhae Infrastructure Fund | | Fee and commission income | | ₩ | — | | | ₩ | 7,908 | | | ₩ | 7,851 | | Korea Credit Bureau Co., Ltd. | | Fee and commission income | | | 3 | | | | 3 | | | | 3 | | | Interest expense | | | 143 | | | | 139 | | | | 66 | | UAMCO., Ltd. | | Interest income | | | 297 | | | | 31 | | | | — | | | Fee and commission income | | | — | | | | — | | | | 14 | | | Reversal for credit loss | | | 68 | | | | — | | | | — | | | Interest expense | | | — | | | | — | | | | 12 | | | Other operating expense | | | 93,266 | | | | 7,626 | | | | — | | Incheon Bridge Co., Ltd. | | Interest income | | | — | | | | 14,592 | | | | 13,226 | | | Reversal for credit loss | | | — | | | | 2 | | | | — | | | Interest expense | | | — | | | | 909 | | | | 543 | | | Provision for credit loss | | | — | | | | — | | | | 2 | | KB No.2 Special Purpose Acquisition Company(1) | | Interest income | | | — | | | | — | | | | 27 | | | Fee and commission income | | | — | | | | — | | | | 518 | | | Gains on financial assets/liabilities at fair value through profit or loss | | | — | | | | — | | | | 1,440 | | | Other non-operating income | | | — | | | | — | | | | 20 | | | Interest expense | | | — | | | | — | | | | 1 | | KB No.3 Special Purpose Acquisition Company | | Interest income | | | — | | | | — | | | | 30 | | | Fee and commission income | | | — | | | | — | | | | 350 | | | Other non-operating income | | | — | | | | — | | | | 10 | | | Gains on financial assets/liabilities at fair value through profit or loss | | | — | | | | — | | | | 1,462 | | | Provision for credit loss | | | — | | | | — | | | | 14 | | | Interest expense | | | — | | | | — | | | | 6 | | KB No.4 Special Purpose Acquisition Company | | Interest income | | | — | | | | — | | | | 24 | | | Other non-operating income | | | — | | | | — | | | | 11 | | | Fee and commission income | | | — | | | | — | | | | 350 | | | Gains on financial assets/liabilities at fair value through profit or loss | | | — | | | | — | | | | 1,751 | | | Provision for credit loss | | | — | | | | — | | | | 14 | | | Interest expense | | | — | | | | — | | | | 9 | | KB No.5 Special Purpose Acquisition Company | | Interest income | | | — | | | | — | | | | 13 | | | Fee and commission income | | | — | | | | — | | | | 175 | | | Gains on financial assets/liabilities at fair value through profit or loss | | | — | | | | — | | | | 1,780 | | | Other non-operating income | | | — | | | | — | | | | 5 | | | Provision for credit loss | | | — | | | | — | | | | 14 | | | Interest expense | | | — | | | | — | | | | 4 | | KB No.6 Special Purpose Acquisition Company | | Interest income | | | — | | | | — | | | | 9 | | | Fee and commission income | | | — | | | | — | | | | 525 | | | Gains on financial assets/liabilities at fair value through profit or loss | | | — | | | | — | | | | 1,556 | | | Other non-operating income | | | — | | | | — | | | | 39 | | | Interest expense | | | — | | | | — | | | | 4 | |
| | | | | | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | | | (In millions of Korean won) | | Associates and Joint Ventures | | | | | | | | | | | | | | | KB Insurance Co., Ltd.1 | | Interest income | | ₩ | 50 | | | ₩ | 63 | | | ₩ | 12 | | | Interest expense | | | 164 | | | | 1,057 | | | | 202 | | | Fee and commission income | | | 5,329 | | | | 20,321 | | | | 8,994 | | | Fee and commission expense | | | — | | | | 508 | | | | 1,021 | | | Gains on financial assets/liabilities at fair value through profit or loss | | | 2,761 | | | | 4,822 | | | | 796 | | | Losses on financial assets/liabilities at fair value through profit or loss | | | 164 | | | | 3,701 | | | | 18,717 | | | Other operating income | | | 759 | | | | 12,972 | | | | 16,743 | | | Other operating expense | | | 1,233 | | | | 6,406 | | | | 633 | | | General and administrative expenses | | | 3,691 | | | | 14,244 | | | | 5,601 | | | Reversal for credit loss | | | — | | | | 119 | | | | — | | | Provision for credit loss | | | 14 | | | | — | | | | 12 | | | Othernon-operating income | | | 10 | | | | 110 | | | | 51 | | | Othernon-operating expense | | | (3,496 | ) | | | 74 | | | | — | | Balhae Infrastructure Fund | | Fee and commission income | | | 7,975 | | | | 8,440 | | | | 7,162 | | Korea Credit Bureau Co., Ltd. | | Interest expense | | | 73 | | | | 92 | | | | 132 | | | Fee and commission income | | | 1,822 | | | | 1,648 | | | | 1,374 | | | Fee and commission expense | | | 1,900 | | | | 1,948 | | | | 1,206 | | | General and administrative expenses | | | 2,199 | | | | 1,968 | | | | 2,202 | | | Provision for credit loss | | | — | | | | — | | | | 1 | | UAMCO., Ltd.1 | | Interest expense | | | 8 | | | | 1 | | | | — | | | Fee and commission income | | | 14 | | | | 5 | | | | — | | KoFC KBIC Frontier Champ2010-5(PEF) | | Fee and commission income | | | 548 | | | | 457 | | | | 216 | | United PF 1st Recovery Private Equity Fund1 | | Interest expense | | | 49 | | | | 1 | | | | — | | KB GwS Private Securities Investment Trust | | Fee and commission income | | | 894 | | | | 896 | | | | 851 | | IMM Investment 5th PRIVATE EQUITY FUND1 | | Othernon-operating expense | | | — | | | | 1 | | | | — | | Incheon Bridge Co., Ltd. | | Interest income | | | 12,843 | | | | 14,534 | | | | 25,511 | | | Interest expense | | | 436 | | | | 369 | | | | 292 | | | Insurance income | | | — | | | | — | | | | 162 | | | Reversal for credit loss | | | 2 | | | | — | | | | 43 | | | Provision for credit loss | | | 4 | | | | 31 | | | | — | | Jaeyang Industry Co., Ltd. | | Interest income | | | — | | | | — | | | | 98 | | | Reversal for credit loss | | | — | | | | 37 | | | | 6 | | HIMS Co., Ltd.1 | | Interest income | | | — | | | | 51 | | | | — | | KoFC POSCO HANHWA KB Shared Growth Private Equity Fund No. 2 | | Fee and commission income | | | 675 | | | | 212 | | | | 481 | | | Interest expense | | | — | | | | 10 | | | | — | | Aju Good Technology Venture Fund | | Interest expense | | | — | | | | 4 | | | | 14 | |
| | | | | | | | | | | | | | | | | | | 2012 | | | 2013 | | | 2014 | | | | | | (In millions of Korean won) | | United PF 1st Recovery Private Equity Fund | | Interest income | | | 500 | | | | 91 | | | | — | | | Other operating income | | | 1,900 | | | | — | | | | — | | | Interest expense | | | 28 | | | | — | | | | — | | | Reversal for credit loss | | | 7 | | | | 83 | | | | — | | KBIC Private Equity Fund No. 3 | | Fee and commission income | | | 300 | | | | 300 | | | | 300 | | | | Interest expense | | | — | | | | 91 | | | | 38 | | NPS KBIC Private Equity Fund No. 1 | | Fee and commission income | | | 474 | | | | 474 | | | | 236 | | | Provision for credit loss | | | — | | | | — | | | | 133 | | KoFC KBIC Frontier Champ 2010-5(PEF) | | Fee and commission income | | | 1,000 | | | | 1,014 | | | | 778 | | | Other operating expense | | | — | | | | — | | | | 534 | | KoFC POSCO HANHWA KB Shared Growth Private Equity Fund | | Fee and commission income | | | 303 | | | | 569 | | | | 634 | | | Other operating income | | | — | | | | — | | | | 3 | | | Other operating expense | | | — | | | | — | | | | 395 | | KB GwS Private Securities Investment Trust | | Fee and commission income | | | 12,978 | | | | 917 | | | | 926 | | | Other operating income | | | — | | | | 1,934 | | | | 2,006 | | KB Star Office Private Real Estate Investment Trust No.1 | | Interest income | | | — | | | | — | | | | 562 | | | Fee and commission income | | | — | | | | 435 | | | | 435 | | | Interest expense | | | 9 | | | | 75 | | | | 50 | | Semiland Co., Ltd.(1) | | Interest income | | | 17 | | | | 14 | | | | 8 | | | | Reversal for credit loss | | | 4 | | | | — | | | | 4 | | | | Other non-operating expense | | | — | | | | — | | | | 613 | | Kores Co., Ltd.(1) | | Interest income | | | 317 | | | | 386 | | | | — | | | | Fee and commission income | | | 9 | | | | — | | | | — | | | | Reversal for credit loss | | | — | | | | 36 | | | | — | | | | Provision for credit loss | | | 325 | | | | — | | | | — | | PyungJeon Industries Co., Ltd.(1) | | Reversal for credit loss | | | — | | | | 1,055 | | | | — | | | | Provision for credit loss | | | 343 | | | | — | | | | — | | Testian Co., Ltd.(1) | | Interest income | | | 104 | | | | 10 | | | | — | | | | Other operating income | | | 15 | | | | — | | | | — | | Sehwa Electronics Co., Ltd.(1) | | Fee and commission income | | | 33 | | | | — | | | | — | | | Gains on financial assets/liabilities at fair value through profit or loss | | | 2 | | | | 35 | | | | — | | | Fee and commission expense | | | — | | | | 7 | | | | — | | | Interest expense | | | 10 | | | | — | | | | — | | | Losses on financial assets/liabilities at fair value through profit or loss | | | 143 | | | | — | | | | — | | Serit Platform Co., Ltd.(1) | | Interest income | | | 78 | | | | 58 | | | | — | | | Fee and commission income | | | 27 | | | | 17 | | | | — | | | Provision for credit loss | | | 4 | | | | 74 | | | | — | | DS Plant Co., Ltd.(1) | | Interest income | | | 315 | | | | 211 | | | | — | | | | Fee and commission income | | | — | | | | 4 | | | | — | | | | Reversal for credit loss | | | 3 | | | | 10 | | | | — | | | | Other operation income | | | — | | | | 8 | | | | — | | | | Interest expense | | | 1 | | | | 2 | | | | — | | | | Fee and commission expense | | | 2 | | | | — | | | | — | | | | Losses on financial assets/liabilities at fair value through profit or loss | | | — | | | | 26 | | | | — | | DaiYang Metal Co., Ltd.(1) | | Interest income | | | — | | | | 3 | | | | — | | Ssangyong Engineering & Construction Co., Ltd.(1) | | Interest income | | | — | | | | 2,007 | | | | — | | | Reversal for credit loss | | | — | | | | 7,550 | | | | — | |
| | | | | | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | | | (In millions of Korean won) | | KB Star Office Private Real Estate Investment Trust No.1 | | Interest income | | | 370 | | | | 371 | | | | 370 | | | Interest expense | | | 92 | | | | 87 | | | | 63 | | | Fee and commission income | | | 435 | | | | 436 | | | | 435 | | | | Provision for credit loss | | | — | | | | — | | | | 3 | | RAND Bio Science Co., Ltd. | | Interest expense | | | — | | | | 14 | | | | 16 | | Inno Lending Co., Ltd. | | Fee and commission income | | | — | | | | — | | | | 3 | | | Interest expense | | | — | | | | — | | | | 1 | | | Othernon-operating expense | | | — | | | | 20 | | | | — | | KBIC Private Equity Fund No. 31 | | Interest expense | | | 23 | | | | 12 | | | | — | | | Fee and commission income | | | 300 | | | | 260 | | | | 38 | | E-clear International Co., Ltd. | | Interest income | | | 18 | | | | — | | | | — | | Sawnics Co., Ltd.1 | | Interest income | | | 1 | | | | — | | | | — | | SY Auto Capital Co., Ltd. | | Interest income | | | — | | | | 718 | | | | 828 | | | Interest expense | | | 24 | | | | 19 | | | | 22 | | | Fee and commission income | | | — | | | | — | | | | 47 | | | Fee and commission expense | | | — | | | | — | | | | 2,956 | | | Insurance income | | | — | | | | — | | | | 29 | | | Other operating income | | | 1,588 | | | | 1,606 | | | | 731 | | | Other operating expense | | | — | | | | 153 | | | | 128 | | | Reversal for credit losses | | | — | | | | — | | | | 32 | | | Provision for credit losses | | | 1 | | | | 61 | | | | — | | | Othernon-operating income | | | — | | | | 250 | | | | 51 | | Kyobo 7 Special Purpose Acquisition Co., Ltd.1 | | Interest expense | | | — | | | | — | | | | 1 | | Food Factory Co., Ltd. | | Interest income | | | — | | | | — | | | | 24 | | | Insurance income | | | — | | | | — | | | | 3 | | | Provision for credit losses | | | — | | | | — | | | | 44 | | KB Pre IPO Secondary Venture Fund 1st | | Fee and commission income | | | — | | | | — | | | | 83 | | Builton Co., Ltd | | Insurance income | | | — | | | | — | | | | 1 | | KB Private Equity Fund III | | Fee and commission income | | | — | | | | — | | | | 457 | | Wise Asset Management Co., Ltd. | | Interest expense | | | — | | | | — | | | | 5 | | Acts Co., Ltd. | | Interest income | | | — | | | | — | | | | 249 | | | Insurance income | | | — | | | | — | | | | 2 | | | Losses on financial assets/liabilities at fair value through profit or loss | | | — | | | | — | | | | 220 | | | Provision for credit losses | | | — | | | | — | | | | 66 | | | General and administrative expenses | | | — | | | | — | | | | 150 | | Korbi Co., Ltd.1 | | Interest income | | | — | | | | — | | | | 183 | | | Provision for credit losses | | | — | | | | — | | | | 89 | | Dongjo Co., Ltd. | | Reversal for credit losses | | | — | | | | — | | | | 2 | | POSCO-KB Shipbuilding Fund | | Fee and commission income | | | — | | | | — | | | | 257 | | | Interest expense | | | — | | | | — | | | | 3 | | Dae-A Leisure Co., Ltd. | | Interest expense | | | — | | | | — | | | | 1 | | Paycoms Co., Ltd. | | Interest income | | | — | | | | — | | | | 61 | | | Provision for credit losses | | | — | | | | — | | | | 32 | | Bungaejanter. Inc. | | Interest income | | | — | | | | — | | | | 31 | | | Provision for credit losses | | | — | | | | — | | | | 44 | | Faromancorporation Co., Ltd.1 | | Reverse for credit losses | | | — | | | | — | | | | 345 | | Daesang Techlon Co., Ltd. | | Insurance income | | | — | | | | — | | | | 1 | |
| | | | | | | | | | | | | | | | | | | 2012 | | | 2013 | | | 2014 | | | | | | (In millions of Korean won) | | Sunoo Co., Ltd.(1) | | Interest expense | | | — | | | | 1 | | | | — | | KB Global Star Game & Apps SPAC(1) | | Interest income | | | 77 | | | | 81 | | | | — | | | Gains on financial assets/liabilities at fair value through profit or loss | | | 158 | | | | 1,210 | | | | 1,215 | | | | Other operating income | | | 3 | | | | 7 | | | | — | | | | Interest expense | | | 430 | | | | 10 | | | | — | | | | Losses on financial assets/liabilities at fair value through profit or loss | | | — | | | | — | | | | 691 | | | | Provision for credit loss | | | — | | | | 4 | | | | — | | CH engineering Co., Ltd. | | Reversal for credit loss | | | 106 | | | | — | | | | — | | Evalley Co., Ltd. | | Reversal for credit loss | | | 77 | | | | — | | | | — | | Joam Housing Development Co., Ltd. | | Interest expense | | | 1 | | | | — | | | | — | | Other | | | | | | | | | | | | | | | Retirement pension | | Fee and commission income | | | 415 | | | | 386 | | | | 448 | | | | Interest expense | | | 1,699 | | | | 1,971 | | | | 788 | |
| | | | | | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | | | (In millions of Korean won) | | Big Dipper Co., Ltd. | | Provision for credit losses | | | — | | | | — | | | | 2 | | KB-KDBC New Technology Business Investment Fund | | Interest expense | | | — | | | | — | | | | 4 | | KB No.3 Special Purpose Acquisition Company1 | | Interest income | | | 62 | | | | — | | | | — | | | Interest expense | | | 5 | | | | — | | | | — | | | Gains on financial assets/liabilities at fair value through profit or loss | | | 4,077 | | | | — | | | | — | | | Reversal for credit loss | | | 14 | | | | — | | | | — | | KB No.4 Special Purpose Acquisition Company1 | | Interest income | | | 78 | | | | — | | | | — | | | Interest expense | | | 25 | | | | — | | | | — | | | Gains on financial assets/liabilities at fair value through profit or loss | | | 172 | | | | — | | | | — | | | Reversal for credit loss | | | 14 | | | | — | | | | — | | KB No.5 Special Purpose Acquisition Company1 | | Interest income | | | 68 | | | | 68 | | | | — | | | Interest expense | | | 44 | | | | 19 | | | | — | | | Fee and commission income | | | | | | | | | | | — | | | Gains on financial assets/liabilities at fair value through profit or loss | | | — | | | | 216 | | | | — | | | Losses on financial assets/liabilities at fair value through profit or loss | | | 119 | | | | — | | | | — | | | Reversal for credit loss | | | — | | | | 29 | | | | — | | | Provision for credit loss | | | 16 | | | | — | | | | — | | | Othernon-operating income | | | — | | | | 2 | | | | — | | KB No.6 Special Purpose Acquisition Company1 | | Interest income | | | 53 | | | | 55 | | | | — | | | Interest expense | | | 66 | | | | 14 | | | | — | | | Losses on financial assets/liabilities at fair value through profit or loss | | | 471 | | | | 65 | | | | — | | | Othernon-operating expense | | | — | | | | 4 | | | | — | | KB No.7 Special Purpose Acquisition Company1 | | Interest income | | | 34 | | | | 37 | | | | — | | | Interest expense | | | 38 | | | | 18 | | | | — | | | Fee and commission income | | | 150 | | | | — | | | | — | | | Gains on financial assets/liabilities at fair value through profit or loss | | | 998 | | | | 861 | | | | — | | | Othernon-operating income | | | — | | | | 40 | | | | — | | KB No.8 Special Purpose Acquisition Company | | Interest income | | | 41 | | | | 74 | | | | 75 | | | Interest expense | | | 21 | | | | 35 | | | | 36 | | | | Fee and commission income | | | 350 | | | | — | | | | — | | | | Gains on financial assets/liabilities at fair value through profit or loss | | | 1,951 | | | | — | | | | — | | | | Losses on financial assets/liabilities at fair value through profit or loss | | | — | | | | 41 | | | | 170 | | | | Reversal for credit loss | | | — | | | | 50 | | | | — | | | | Provision for credit loss | | | 50 | | | | — | | | | — | | KB No.9 Special Purpose Acquisition Company | | Interest income | | | 12 | | | | 73 | | | | 76 | | | Interest expense | | | 7 | | | | 40 | | | | 33 | | | | Fee and commission income | | | — | | | | 473 | | | | — | | | | Gains on financial assets/liabilities at fair value through profit or loss | | | — | | | | 1,665 | | | | — | | | | Losses on financial assets/liabilities at fair value through profit or loss | | | 6 | | | | 392 | | | | 200 | |
| | | | | | | | | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | | | (In millions of Korean won) | | | | Reversal for credit loss | | | — | | | | 49 | | | | — | | | | Provision for credit loss | | | 50 | | | | — | | | | — | | KB No.10 Special Purpose Acquisition Company | | Interest income | | | — | | | | 17 | | | | 48 | | | Interest expense | | | — | | | | 8 | | | | 24 | | | | Fee and commission income | | | — | | | | 175 | | | | — | | | | Losses on financial assets/liabilities at fair value through profit or loss | | | — | | | | — | | | | 103 | | | | Gains on financial assets/liabilities at fair value through profit or loss | | | — | | | | 1,497 | | | | — | | | | Othernon-operating income | | | — | | | | 5 | | | | — | | KB No.11 Special Purpose Acquisition Company | | Interest income | | | — | | | | 3 | | | | 22 | | | Fee and commission income | | | — | | | | — | | | | 150 | | | | Gains on financial assets/liabilities at fair value through profit or loss | | | — | | | | 16 | | | | 711 | | Hyundai-Tongyang Agrifood Private Equity Fund | | Fee and commission income | | | — | | | | — | | | | 187 | | KB IGen Private Equity Fund No. 1 | | Fee and commission income | | | — | | | | — | | | | 1,266 | | Keystone-Hyundai Securities No. 1 Private Equity Fund | | Fee and commission income | | | — | | | | 22 | | | | 94 | | MJT&I Co., Ltd. | | Interest income | | | — | | | | 2 | | | | — | | Doosung Metal Co., Ltd. | | Interest income | | | — | | | | 1 | | | | — | | | Insurance income | | | — | | | | — | | | | 1 | | Other | | | | | | | | | | | | | | | Retirement pension | | Interest expense | | | 955 | | | | 749 | | | | 3 | | | Fee and commission income | | | 611 | | | | 717 | | | | 795 | |
(1)1 | Not considered to beExcluded from the Group’s related party as atof December 31, 2014. 2017. |
The details
Details of receivables and payables, and related allowances for loans losses arising from the related party transactions as of December 31, 20132016 and 2014,2017 are as follows: | | | | | | | | | | | | | | | 2013 | | | 2014 | | | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | JSC Bank CenterCredit | | Cash and due from financial institutions | | ₩ | 353 | | | ₩ | 178 | | Balhae Infrastructure Fund | | Other assets | | | — | | | | 2,002 | | Korea Credit Bureau Co., Ltd. | | Loans and receivables (Gross amount) | | | — | | | | 19 | | | | Deposits | | | 20,200 | | | | 24,715 | | | | Other liabilities | | | 64 | | | | 17 | | UAMCO., Ltd. | | Loans and receivables (Gross amount) | | | — | | | | 2 | | | | Deposits | | | 5 | | | | 1,654 | | | | Provisions | | | 192 | | | | — | | Semiland Co., Ltd.(1) | | Loans and receivables (Gross amount) | | | 19 | | | | — | | | | Deposits | | | 1 | | | | — | | | | Provisions | | | 3 | | | | — | | Incheon Bridge Co., Ltd. | | Loans and receivables (Gross amount) | | | 249,362 | | | | 247,885 | | | | Allowances for loan losses | | | 300 | | | | 302 | | | | Other assets | | | 1,343 | | | | 1,144 | | | | Deposits | | | 30,991 | | | | 35,421 | | | | Other liabilities | | | 240 | | | | 249 | | Terra Co., Ltd. | | Deposits | | | 1 | | | | 1 | | KB No.3 Special Purpose Acquisition Company | | Derivative financial assets | | | — | | | | 1,793 | | | Loans and receivables (Gross amount) | | | — | | | | 1,465 | | | | Deposits | | | — | | | | 832 | | | | Other liabilities | | | — | | | | 6 | | KB No.4 Special Purpose Acquisition Company | | Derivative financial assets | | | — | | | | 2,167 | | | Loans and receivables (Gross amount) | | | — | | | | 1,876 | | | | Deposits | | | — | | | | 2,500 | | | | Other liabilities | | | — | | | | 1 | | KB No.5 Special Purpose Acquisition Company | | Derivative financial assets | | | — | | | | 2,143 | | | Loans and receivables (Gross amount) | | | — | | | | 1,816 | | | | Deposits | | | — | | | | 2,389 | | | | Other liabilities | | | — | | | | 1 | |
| | | | | | | | | | | | | | | 2016 | | | 2017 | | | | | | (In millions of Korean won) | | Associates and Joint Ventures | | | | | | | | | | | KB Insurance Co., Ltd.1 | | Derivative financial assets | | ₩ | 3,941 | | | ₩ | — | | | | Loans and receivables (Gross amount) | | | 6,791 | | | | — | | | | Allowances for loan losses | | | 9 | | | | — | | | | Other assets | | | 23,341 | | | | — | | | | Derivative financial liabilities | | | 13,545 | | | | — | | | | Deposits | | | 9,883 | | | | — | | | | Debts | | | 20,000 | | | | — | | | | Provisions | | | 8 | | | | — | | | | Other liabilities | | | 6,384 | | | | — | | Balhae Infrastructure Fund | | Other assets | | | 2,123 | | | | 1,669 | | Korea Credit Bureau Co., Ltd. | | Loans and receivables (Gross amount) | | | 14 | | | | 22 | | | | Deposits | | | 26,827 | | | | 25,513 | | | | Provisions | | | — | | | | 1 | | | | Other liabilities | | | 255 | | | | 469 | | JSC Bank CenterCredit | | Cash and due from financial institutions | | | 8 | | | | — | | KB GwS Private Securities Investment Trust | | Other assets | | | 673 | | | | 641 | | Incheon Bridge Co., Ltd. | | Loans and receivables (Gross amount) | | | 209,105 | | | | 200,414 | | | | Allowances for loan losses | | | 331 | | | | 288 | | | | Other assets | | | 821 | | | | 710 | | | | Deposits | | | 38,556 | | | | 48,795 | | | | Provisions | | | 3 | | | | 3 | | | | Insurance contract liabilities | | | — | | | | 189 | | | | Other liabilities | | | 166 | | | | 29 | | KoFC POSCO HANHWA KB Shared Growth Private Equity Fund No. 2 | | Other assets | | | 98 | | | | 176 | | Terra Co., Ltd. | | Deposits | | | — | | | | 10 | | Jaeyang Industry Co., Ltd. | | Loans and receivables (Gross amount) | | | 303 | | | | — | | | | Allowances for loan losses | | | 6 | | | | — | | | | Other assets | | | 7 | | | | — | | Jungdo Co., Ltd. | | Deposits | | | — | | | | 4 | | Dongjo Co., Ltd. | | Loans and receivables (Gross amount) | | | — | | | | 116 | | | | Allowances for loan losses | | | — | | | | 1 | | Dae-A Leisure Co., Ltd. | | Deposits | | | — | | | | 466 | | | | Other liabilities | | | — | | | | 14 | | Aju Good Technology Venture Fund | | Deposits | | | 1,201 | | | | 2,771 | | | | Other liabilities | | | 1 | | | | 1 | | Ejade Co., Ltd.1 | | Deposits | | | 2 | | | | — | | Jungdong Steel Co., Ltd. | | Deposits | | | 3 | | | | 3 | | Doosung Metal Co., Ltd. | | Insurance contract liabilities | | | — | | | | 1 | | KB Star Office Private Real Estate Investment Trust No.1 | | Loans and receivables (Gross amount) | | | 10,000 | | | | 10,000 | | | | Allowances for loan losses | | | — | | | | 3 | | | | Other assets | | | 136 | | | | 136 | | | | Deposits | | | 6,682 | | | | 6,962 | | | | Other liabilities | | | 50 | | | | 45 | | RAND Bio Science Co., Ltd. | | Deposits | | | 2,356 | | | | 1,032 | | | | Loans and receivables (Gross amount) | | | 1 | | | | 1 | | | | Other liabilities | | | 12 | | | | 4 | |
| | | | | | | | | | | | | | | 2013 | | | 2014 | | | | | | (In millions of Korean won) | | KB No.6 Special Purpose Acquisition Company | | Derivative financial assets | | | — | | | | 1,837 | | | Loans and receivables (Gross amount) | | | — | | | | 1,438 | | | | Deposits | | | — | | | | 4,406 | | | | Other liabilities | | | — | | | | 3 | | United PF 1st Recovery Private Equity Fund | | Provisions | | | 82 | | | | — | | KB-Glenwood Private Equity Fund | | Deposits | | | 1 | | | | — | | KBIC Private Equity Fund No. 3 | | Other assets | | | 76 | | | | 151 | | | | Deposits | | | 1,400 | | | | 1,400 | | | | Other liabilities | | | 25 | | | | 24 | | NPS KBIC Private Equity Fund No. 1 | | Other assets | | | 65 | | | | 9 | | | Other liabilities | | | 42 | | | | — | | KoFC KBIC Frontier Champ2010-5(PEF) | | Other assets | | | 266 | | | | 139 | | | Provisions | | | — | | | | 534 | | KoFC POSCO HANHWA KB Shared Growth Private Equity Fund | | Other assets | | | 569 | | | | 634 | | | Provisions | | | — | | | | 128 | | KB GwS Private Securities Investment Trust | | Other assets | | | — | | | | 673 | | KB Star Office Private Real Estate Investment Trust No.1 | | Loans and receivables (Gross amount) | | | — | | | | 10,000 | | | Other assets | | | — | | | | 155 | | | | Deposits | | | 8,142 | | | | 6,067 | | | | Other liabilities | | | 31 | | | | — | | Kores Co., Ltd.(1) | | Loans and receivables (Gross amount) | | | 7,854 | | | | — | | | | Allowances for loan losses | | | 3,836 | | | | — | | | | Other liabilities | | | 2 | | | | — | | Ssangyong Engineering & Construction Co., Ltd.(1) | | Loans and receivables (Gross amount) | | | 47,104 | | | | — | | | Allowances for loan losses | | | 38,784 | | | | — | | | | Deposits | | | 61 | | | | — | | | | Other liabilities | | | 14 | | | | — | | Key management | | | | | | | | | | | | | Loans and receivables (Gross amount) | | | 4,765 | | | | 2,527 | | | | Allowances for loan losses | | | 1 | | | | — | | | | Other assets | | | 6 | | | | 3 | | | | Deposits | | | 6,932 | | | | 18,462 | | | | Insurance contract liability | | | 770 | | | | 1,292 | | | | Other liabilities | | | 111 | | | | 173 | | | | Provisions | | | 2 | | | | — | | Other | | | | | | | | | | | Retirement pension | | Other assets | | | 166 | | | | 191 | | | | Deposits | | | 48,840 | | | | 41,412 | | | | Other liabilities | | | 908 | | | | 246 | |
| | | | | | | | | | | | | | | 2016 | | | 2017 | | | | | | (In millions of Korean won) | | Inno Lending Co., Ltd. | | Loans and receivables (Gross amount) | | | — | | | | 2 | | | Deposits | | | 1,902 | | | | 41 | | isMedia Co., Ltd. | | Provisions | | | 4 | | | | — | | KBIC Private Equity Fund No. 31 | | Other assets | | | 64 | | | | — | | | Deposits | | | 700 | | | | — | | | Other liabilities | | | 1 | | | | — | | SY Auto Capital Co., Ltd. | | Loans and receivables (Gross amount) | | | 30,049 | | | | 40,057 | | | Allowances for loan losses | | | 32 | | | | — | | | Other assets | | | 108 | | | | 51 | | | Deposits | | | 3,997 | | | | 6 | | | Provisions | | | 29 | | | | 29 | | | Insurance contract liabilities | | | — | | | | 8 | | | Other liabilities | | | 70 | | | | 349 | | Food Factory Co., Ltd. | | Loans and receivables (Gross amount) | | | — | | | | 679 | | | Allowances for loan losses | | | — | | | | 44 | | | Other assets | | | — | | | | 1 | | | Deposits | | | — | | | | 1 | | | Insurance contract liabilities | | | — | | | | 3 | | KB Pre IPO Secondary Venture Fund 1st | | Other assets | | | — | | | | 28 | | Builton Co., Ltd. | | Loans and receivables (Gross amount) | | | — | | | | 1 | | | Deposits | | | — | | | | 26 | | | Insurance contract liabilities | | | — | | | | 1 | | Wise Asset Management Co., Ltd. | | Deposits | | | — | | | | 340 | | | Other liabilities | | | — | | | | 1 | | Acts Co., Ltd. | | Loans and receivables (Gross amount) | | | — | | | | 1,927 | | | Allowances for loan losses | | | — | | | | 161 | | | Intangible assets | | | — | | | | 1,275 | | | Deposits | | | — | | | | 4 | | | Insurance contract liabilities | | | — | | | | 1 | | POSCO-KB Shipbuilding Fund | | Other assets | | | — | | | | 123 | | Bungaejanter. Inc. | | Loans and receivables (Gross amount) | | | — | | | | 425 | | | Allowances for loan losses | | | — | | | | 36 | | Paycoms Co., Ltd. | | Loans and receivables (Gross amount) | | | — | | | | 1,066 | | | Allowances for loan losses | | | — | | | | 89 | | Daesang Techlon Co., Ltd. | | Deposits | | | — | | | | 2 | | Big Dipper Co., Ltd. | | Loans and receivables (Gross amount) | | | — | | | | 6 | | | Provisions | | | — | | | | 2 | | KB-KDBC New Technology Business Investment Fund | | Deposits | | | — | | | | 7,500 | | | Other liabilities | | | — | | | | 4 | | KB No.8 Special Purpose Acquisition Company | | Derivative financial assets | | | 2,235 | | | | 2,122 | | | Loans and receivables (Gross amount) | | | 2,490 | | | | 2,296 | | | Deposits | | | 2,342 | | | | 2,339 | | | Other liabilities | | | 3 | | | | 19 | | KB No.9 Special Purpose Acquisition Company | | Derivative financial assets | | | 2,441 | | | | 2,241 | | | Loans and receivables (Gross amount) | | | 2,584 | | | | 2,356 | | | Deposits | | | 2,399 | | | | 2,309 | | | Other liabilities | | | 6 | | | | 38 | |
| | | | | | | | | | | | | | | 2016 | | | 2017 | | | | | | (In millions of Korean won) | | KB No.10 Special Purpose Acquisition Company | | Derivative financial assets | | | 1,698 | | | | 1,930 | | | Loans and receivables (Gross amount) | | | 1,495 | | | | 1,603 | | | Deposits | | | 1,754 | | | | 1,698 | | | Other liabilities | | | 8 | | | | 10 | | KB No.11 Special Purpose Acquisition Company | | Derivative financial assets | | | 135 | | | | 846 | | | Loans and receivables (Gross amount) | | | 790 | | | | 697 | | Key management | | Loans and receivables (Gross amount) | | | 1,982 | | | | 1,665 | | | Other assets | | | 2 | | | | 2 | | | Deposits | | | 8,217 | | | | 8,707 | | | Insurance contract liabilities | | | 413 | | | | 809 | | | Other liabilities | | | 139 | | | | 124 | | Other | | | | | | | | | | | Retirement pension | | Other assets | | | 304 | | | | 348 | | | | Deposits | | | 1,464 | | | | — | | | | Other liabilities | | | 16,497 | | | | 4,286 | |
(1)1 | Not considered to beThe amounts are not disclosed as these are excluded from the Group’s related party as atof December 31, 2014. 2017. |
In accordance withAccording to IAS 24, the Group includes parent, parent’s subsidiaries, associates, associates of parent’s subsidiaries, key management (including family members), and post-employment benefit plans of the Group and entities regarded as its related partiesparty companies in the scope of its related parties. Additionally, the Group discloses balances (receivables and payables) and other amounts arising from the related party transactions in the notes to the consolidated financial statements. Refer toSee Note 13 for details on investments in associates.
Key management includes the directors of the parent companyParent Company, and the executive directors (vice-presidents and above) of Kookmin Bank and companies where the directors and /orand/or their close family members have control or joint control. Significant loan transactions with related parties for the years ended December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | | | | | | | | | | | 2013(1) | | | | Beginning | | | Loans | | | Repayments | | | Others | | | Ending | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | United PF 1st Recovery Private Equity Fund | | ₩ | 2,805 | | | ₩ | 1,913 | | | ₩ | (4,718 | ) | | ₩ | — | | | ₩ | — | | UAMCO., Ltd | | | — | | | | 47,181 | | | | (47,181 | ) | | | — | | | | — | | Kores Co., Ltd.(2) | | | 7,854 | | | | 900 | | | | (900 | ) | | | — | | | | 7,854 | | Incheon Bridge Co., Ltd | | | 263,080 | | | | 8,777 | | | | (22,495 | ) | | | — | | | | 249,362 | | Ssangyong Engineering & Construction Co., Ltd.(2) | | | 46,275 | | | | 36,843 | | | | (36,014 | ) | | | — | | | | 47,104 | | Semiland Co., Ltd.(2) | | | — | | | | 86 | | | | (67 | ) | | | — | | | | 19 | |
| | | | | | | | | | | | | | | | | | | | | | | 20161 | | | | Beginning | | | Loans | | | Repayments | | | Others | | | Ending | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | KB Insurance Co., Ltd.2 | | ₩ | 5,013 | | | ₩ | 1,778 | | | ₩ | — | | | ₩ | — | | | ₩ | 6,791 | | Korea Credit Bureau Co., Ltd. | | | 19 | | | | — | | | | (5 | ) | | | — | | | | 14 | | UAMCO., Ltd.2 | | | 5 | | | | — | | | | (5 | ) | | | — | | | | — | | Incheon Bridge Co., Ltd. | | | 231,674 | | | | 4,000 | | | | (26,569 | ) | | | — | | | | 209,105 | | Jaeyang Industry Co., Ltd. | | | — | | | | — | | | | — | | | | 303 | | | | 303 | | HIMS Co., Ltd.2 | | | — | | | | 3,500 | | | | (3,500 | ) | | | — | | | | — | | KB Star Office Private Real Estate Investment Trust No.1 | | | 10,000 | | | | — | | | | — | | | | — | | | | 10,000 | | RAND Bio Science Co., Ltd. | | | — | | | | 1 | | | | — | | | | — | | | | 1 | | SY Auto Capital Co., Ltd. | | | 34 | | | | 30,067 | | | | (52 | ) | | | — | | | | 30,049 | | KB No.5 Special Purpose Acquisition Company2 | | | 2,180 | | | | — | | | | — | | | | (2,180 | ) | | | — | | KB No.6 Special Purpose Acquisition Company2 | | | 1,710 | | | | — | | | | — | | | | (1,710 | ) | | | — | | KB No.7 Special Purpose Acquisition Company2 | | | 1,250 | | | | — | | | | — | | | | (1,250 | ) | | | — | | KB No.8 Special Purpose Acquisition Company | | | 2,490 | | | | — | | | | — | | | | — | | | | 2,490 | | KB No.9 Special Purpose Acquisition Company | | | 2,584 | | | | — | | | | — | | | | — | | | | 2,584 | | KB No.10 Special Purpose Acquisition Company | | | — | | | | 1,495 | | | | — | | | | — | | | | 1,495 | | KB No.11 Special Purpose Acquisition Company | | | — | | | | 790 | | | | — | | | | — | | | | 790 | |
| | | | | | | | | | | | | | | | | | | | | | | 2014(1) | | | | Beginning | | | Loans | | | Repayments | | | Others | | | Ending | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | Incheon Bridge Co., Ltd | | ₩ | 249,362 | | | ₩ | 12,375 | | | ₩ | (13,852 | ) | | ₩ | — | | | ₩ | 247,885 | | KB Star Office Private Real Estate Investment Trust No.1 | | | — | | | | 10,000 | | | | — | | | | — | | | | 10,000 | | KB No.2 Special Purpose Acquisition Company | | | — | | | | 1,085 | | | | (1,085 | ) | | | — | | | | — | | KB No.3 Special Purpose Acquisition Company | | | — | | | | 1,780 | | | | — | | | | (315 | ) | | | 1,465 | | KB No.4 Special Purpose Acquisition Company | | | — | | | | 2,280 | | | | — | | | | (404 | ) | | | 1,876 | | KB No.5 Special Purpose Acquisition Company | | | — | | | | 2,180 | | | | — | | | | (364 | ) | | | 1,816 | | KB No.6 Special Purpose Acquisition Company | | | — | | | | 1,710 | | | | — | | | | (272 | ) | | | 1,438 | | Korea Credit Bureau Co., Ltd | | | — | | | | 19 | | | | — | | | | — | | | | 19 | | UAMCO., Ltd | | | — | | | | 2 | | | | — | | | | — | | | | 2 | |
| | | | | | | | | | | | | | | | | | | | | | | 20171 | | | | Beginning | | | Loans | | | Repayments | | | Others | | | Ending | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | | | | | | | | | | | KB Insurance Co., Ltd.2 | | ₩ | 6,791 | | | ₩ | — | | | ₩ | — | | | ₩ | (6,791 | ) | | ₩ | — | | Korea Credit Bureau Co., Ltd. | | | 14 | | | | 8 | | | | — | | | | — | | | | 22 | | Incheon Bridge Co., Ltd. | | | 209,105 | | | | 202,503 | | | | (211,194 | ) | | | — | | | | 200,414 | | Jaeyang Industry Co., Ltd. | | | 303 | | | | — | | | | — | | | | (303 | ) | | | — | | KB Star Office Private Real Estate Investment Trust No.1 | | | 10,000 | | | | — | | | | — | | | | — | | | | 10,000 | | RAND Bio Science Co., Ltd. | | | 1 | | | | — | | | | — | | | | — | | | | 1 | | Inno Lending Co., Ltd. | | | — | | | | 2 | | | | — | | | | — | | | | 2 | | SY Auto Capital Co., Ltd. | | | 30,049 | | | | 44,039 | | | | (34,031 | ) | | | — | | | | 40,057 | | Food Factory Co., Ltd. | | | — | | | | 700 | | | | — | | | | (21 | ) | | | 679 | | Builton Co., Ltd. | | | — | | | | 1 | | | | — | | | | — | | | | 1 | | Bungaejanter. Inc. | | | — | | | | 400 | | | | — | | | | 25 | | | | 425 | | Big Dipper Co., Ltd. | | | — | | | | 6 | | | | — | | | | — | | | | 6 | | KB No.8 Special Purpose Acquisition Company | | | 2,490 | | | | — | | | | — | | | | (194 | ) | | | 2,296 | | KB No.9 Special Purpose Acquisition Company | | | 2,584 | | | | — | | | | — | | | | (228 | ) | | | 2,356 | | KB No.10 Special Purpose Acquisition Company | | | 1,495 | | | | 295 | | | | — | | | | (187 | ) | | | 1,603 | | KB No.11 Special Purpose Acquisition Company | | | 790 | | | | — | | | | — | | | | (93 | ) | | | 697 | |
(1)1 | Transactions and balances arising from operating activities between related parties,parties; such as, payments, are excluded. |
(2)2 | Not considered to beExcluded from the Group’s related party as atof December 31, 2014. 2017. |
Unused commitments to related parties as of December 31, 20132016 and 2014,2017, are as follows: | | | | | | | | | | | | | 2013 | | | 2014 | | | | (In millions of Korean won) | | Balhae Infrastructure Fund | | Purchase of security investment | | ₩ | 21,744 | | | ₩ | 21,744 | | UAMCO., Ltd. | | Loan commitments in Korean won | | | 127,800 | | | | — | | | | Purchase of security investment | | | 89,950 | | | | 89,950 | | United PF 1st Recovery Private Equity Fund | | Loan commitments in Korean won | | | 54,600 | | | | — | | | Purchase of security investment | | | 49,383 | | | | 49,383 | | KoFC KBIC Frontier Champ 2010-(PEF) | | Purchase of security investment | | | 2,200 | | | | 2,150 | | KoFC POSCO HANHWA KB Shared Growth Private Equity Fund | | Purchase of security investment | | | 35,975 | | | | 23,750 | | Incheon Bridge Co., Ltd. | | Loan commitments in Korean won | | | 42,088 | | | | 33,163 | | KB GwS Private Securities Investment Trust and others | | Loan commitments | | | 757 | | | | 372 | | | Purchase of security investment | | | 1,119 | | | | 1,119 | |
| | | | | | | | | | | | | 2016 | | | 2017 | | | | (In millions of Korean won) | | Associates and Joint Ventures | | | | | | | | | KB Insurance Co., Ltd.1 | | Commitments of derivative financial instruments | | ₩ | 251,833 | | | ₩ | — | | | | Unused commitments of credit card | | | 20,859 | | | | — | | Balhae Infrastructure Company | | Purchase of security investment | | | 13,371 | | | | 12,564 | | Korea Credit Bureau Co., Ltd. | | Unused commitments of credit card | | | 116 | | | | 108 | | KoFC KBIC Frontier Champ2010-5(PEF) | | Purchase of security investment | | | 2,150 | | | | 2,150 | | KB GwS Private Securities Investment Trust | | Purchase of security investment | | | 876 | | | | 876 | | Aju Good Technology Venture Fund | | Purchase of security investment | | | 18,000 | | | | 11,768 | | Incheon Bridge Co., Ltd. | | Loan commitments in Korean won | | | 50,000 | | | | 20,000 | | | | Unused commitments of credit card | | | 89 | | | | 86 | | KoFC POSCO HANHWA KB Shared Growth Private Equity Fund No. 2 | | Purchase of security investment | | | 12,550 | | | | 12,550 | | SY Auto Capital Co., Ltd. | | Loan commitments in Korean won | | | 20,000 | | | | 10,000 | | | | Unused commitments of credit card | | | 101 | | | | 92 | | isMedia Co., Ltd.1 | | Loan commitments in Korean won | | | 1,260 | | | | — | | KB No.9 Special Purpose Acquisition Company | | Unused commitments of credit card | | | 1 | | | | 1 | | KB No.10 Special Purpose Acquisition Company | | Unused commitments of credit card | | | 4 | | | | 5 | | RAND Bio Science Co., Ltd. | | Unused commitments of credit card | | | 24 | | | | 24 | | Builton Co., Ltd. | | Unused commitments of credit card | | | — | | | | 4 | | Food Factory Co., Ltd. | | Unused commitments of credit card | | | — | | | | 11 | | Inno Lending Co., Ltd. | | Unused commitments of credit card | | | — | | | | 13 | | Big Dipper Co., Ltd. | | Unused commitments of credit card | | | — | | | | 94 | | KB-KDBC New Technology Business Investment Fund | | Purchase of security investment | | | — | | | | 15,000 | | Key management | | Loan commitments in Korean won | | | 898 | | | | 984 | |
Unused commitments received from related party entities as at December 31, 2013 and 2014, are as follows:
| | | | | | | | | | | | | 2013 | | | 2014 | | | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | Ssangyong Engineering & Construction Co., Ltd. (1) | | Acceptances and Guarantees Outstanding in Won | | ₩ | 293,500 | | | ₩ | — | |
(1)1 | DeemedThe amounts are not to bedisclosed as these are excluded from the Group’s related party as of December 31, 2014; therefore, 2014 balances are not presented. 2017. |
Compensation to key management for the years ended December 31, 2012, 20132015, 2016 and 2014,2017, consists of: | | | 2012 | | | 2015 | | | | Short-term employee benefits | | | Post- employment benefits | | | Termination benefits | | | Share-based payments | | | Total | | | Short-term employee benefits | | | Post-employment benefits | | | Termination benefits | | | Share-based payments | | | Total | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Registered directors (executive) | | ₩ | 4,075 | | | ₩ | 230 | | | ₩ | — | | | ₩ | 3,480 | | | ₩ | 7,785 | | | ₩ | 1,612 | | | ₩ | 60 | | | ₩ | — | | | ₩ | 925 | | | ₩ | 2,597 | | Registered directors (non-executive) | | | 1,107 | | | | — | | | | — | | | | 18 | | | | 1,125 | | | | 848 | | | | — | | | | — | | | | — | | | | 848 | | Non-registered directors | | | 6,067 | | | | 436 | | | | — | | | | 3,751 | | | | 10,254 | | | | 6,173 | | | | 94 | | | | 163 | | | | 4,320 | | | | 10,750 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 11,249 | | | ₩ | 666 | | | ₩ | — | | | ₩ | 7,249 | | | ₩ | 19,164 | | | ₩ | 8,633 | | | ₩ | 154 | | | ₩ | 163 | | | ₩ | 5,245 | | | ₩ | 14,195 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | | Short-term employee benefits | | | Post-employment benefits | | | Termination benefits | | | Share-based payments | | | Total | | | | | (In millions of Korean won) | | Registered directors (executive) | | | ₩ | 1,165 | | | ₩ | 63 | | | ₩ | — | | | ₩ | 863 | | | ₩ | 2,091 | | Registered directors(non-executive) | | | | 796 | | | | — | | | | — | | | | — | | | | 796 | | Non-registered directors | | | | 6,637 | | | | 208 | | | | — | | | | 8,776 | | | | 15,621 | | | | | | | | | | | | | | | | | | | Total | | | ₩ | 8,598 | | | ₩ | 271 | | | ₩ | — | | | ₩ | 9,639 | | | ₩ | 18,508 | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | | Short-term employee benefits | | | Post-employment benefits | | | Termination benefits | | | Share-based payments | | | Total | | | | | (In millions of Korean won) | | Registered directors (executive) | | | ₩ | 2,026 | | | ₩ | 87 | | | ₩ | — | | | ₩ | 2,991 | | | ₩ | 5,104 | | Registered directors(non-executive) | | | | 896 | | | | — | | | | — | | | | — | | | | 896 | | Non-registered directors | | | | 8,420 | | | | 338 | | | | — | | | | 14,610 | | | | 23,368 | | | | | | | | | | | | | | | | | | | Total | | | ₩ | 11,342 | | | ₩ | 425 | | | ₩ | — | | | ₩ | 17,601 | | | ₩ | 29,368 | | | | | | | | | | | | | | | | | | |
Details of assets pledged as collateral to related parties as of December 31, 2016 and 2017 are as follows: | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | Short-term employee benefits | | | Post- employment benefits | | | Termination benefits | | | Share-based payments | | | Total | | | | (In millions of Korean won) | | Registered directors (executive) | | ₩ | 3,270 | | | ₩ | 144 | | | ₩ | — | | | ₩ | (578 | ) | | ₩ | 2,836 | | Registered directors (non-executive) | | | 1,199 | | | | — | | | | — | | | | 13 | | | | 1,212 | | Non-registered directors | | | 7,305 | | | | 380 | | | | 1,024 | | | | 5,686 | | | | 14,395 | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 11,774 | | | ₩ | 524 | | | ₩ | 1,024 | | | ₩ | 5,121 | | | ₩ | 18,443 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 2016 | | | 2017 | | | | | | Carrying amount | | | Collateralized amount | | | Carrying amount | | | Collateralized amount | | | | | | (In millions of Korean won) | | Associates | | | | | | | KB Insurance Co., Ltd.1 | | Land and buildings | | ₩ | 217,369 | | | ₩ | 26,000 | | | ₩ | — | | | ₩ | — | | | Investment securities | | | 50,000 | | | | 50,000 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | 2014 | | | | Short-term employee benefits | | | Post- employment benefits | | | Share-based payments | | | Total | | | | (In millions of Korean won) | | Registered directors (executive) | | ₩ | 1,580 | | | ₩ | 136 | | | ₩ | (15 | ) | | ₩ | 1,701 | | Registered directors (non-executive) | | | 1,203 | | | | — | | | | (15 | ) | | | 1,188 | | Non-registered directors | | | 7,517 | | | | 406 | | | | 5,678 | | | | 13,601 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 10,300 | | | ₩ | 542 | | | ₩ | 5,648 | | | ₩ | 16,490 | | | | | | | | | | | | | | | | | | |
1 | The amounts are not disclosed as these are excluded from the Group’s related party as of December 31, 2017. |
Collateral received from related party entitiesparties as of December 31, 20132016 and 2014,2017, is as follows: | | | | | | | | | | | | | | | 2013 | | | 2014 | | | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | Kores Co., Ltd.(1) | | Row house | | ₩ | 24 | | | ₩ | — | | | | Apartment | | | 24 | | | | — | | | | Factory/Forest land | | | 15,000 | | | | — | | Incheon Bridge Co., Ltd. | | Fund management account for Standby loan commitment | | | 65,000 | | | | 65,000 | | KB Star office Private real estate Investment Trust No.1 | | Real estate | | | — | | | | 13,000 | | Key management | | Time deposits and others | | | 207 | | | | 296 | | | | Real estate | | | 7,381 | | | | 3,583 | |
| | | | | | | | | | | | | | | 2016 | | | 2017 | | | | | | (In millions of Korean won) | | Associates | | | | | | | | | | | KB Insurance Co., Ltd.1 | | Investment securities | | ₩ | 50,000 | | | ₩ | — | | KB Star Office Private Real Estate Investment Trust No.1 | | Real estate | | | 13,000 | | | | 13,000 | | Key management | | Time deposits and others | | | 251 | | | | 388 | | | | Real estate | | | 2,759 | | | | 2,287 | |
(1)1 | DeemedThe amounts are not to bedisclosed as these are excluded from the Group’s related party as of December 31, 2014; therefore, 2014 balances are not presented. 2017. |
As of December 31, 2014,2017, Incheon Bridge Co., Ltd,Ltd., a related party, provides fund management account, civil engineering completed risk insurance, shares and management rights as unsubordinated collaterals in respectsenior collateral amounting to collateralized amount₩611,000 million to a financial syndicate that consists of ₩816,400the Group and five other institutions, and as subordinated collateral amounting to ₩384,800 million to subordinated debt holders that consist of the Group and two other institutions. Also, it provides certificate of credit guarantee amounting to ₩400,000 million as collateral to a financial syndicate consisting of the Group and fourfive other institutions, and as subordinated collateral in respect to collateralized amountinstitutions. 44. Business Combination 44.1 The Acquisition of ₩201,100 million to subordinated debt holders consistingshares of KB Insurance Co., Ltd. On May 19, 2017, the Group acquired 36,237,649 shares out of all outstanding shares of KB Insurance Co., Ltd., and two other institutions. 44. Business combination
The Group obtained controlthis share acquisition increased the Group’s ownership of Woori FinancialKB Insurance Co., Ltd. from the Woori Financial Group Inc. for ₩279,870 million (11,180,630 shares, 52.02%) on March 20, 2014. Woori Financial39.81% to 94.30%. Therefore, KB Insurance Co., Ltd. operates rentalbecame a subsidiary to the Group. The main purpose of facilities, installment financial business, factoring business and others. Woori Financial Co., Ltd. has changed its name to KB Capital Co., Ltd.
The Group expects synergies from diversification of business portfolio through reinforcement of non-banking services, diversification of profit structure through expansion of customer range, vitalization of connected business between financial subsidiaries, reinforcement of retail banking business marketing, financing cheap money through the financial group and others.
The goodwill of business combination consistsis to improve competitiveness of expected synergiesnon-banking business by maximizing the operational synergy with subsidiaries innon-banking businesses.
| | | | | | | 2017 | | | | (In millions of Korean won) | | Consideration | | | | | Fair value of existing holdings at the time of stock exchange | | ₩ | 1,425,743 | | Equity securities(=36,237,649 shares X ₩33,000) | | | 1,195,842 | | | | | | | Total consideration transferred | | ₩ | 2,621,585 | | | | | | | Recognized amounts of identifiable assets acquired and liabilities assumed | | | | | Cash and cash equivalents | | ₩ | 547,889 | | Financial assets at fair value through profit or loss | | | 1,095,668 | | Available-for-sale financial assets | | | 9,186,062 | | Held-to-maturity financial assets | | | 4,616,377 | | Loans | | | 6,604,530 | | Other receivables | | | 767,458 | | Property plant and equipment(included Investment property) | | | 895,141 | | Intangible assets | | | 2,434,049 | | Other assets | | | 4,187,919 | | | | | | | Total Assets | | | 30,335,093 | | | | | | | Insurance contract liabilities | | | 22,889,439 | | Financial liabilities | | | 625,850 | | Other liabilities | | | 3,905,189 | | | | | | | Total liabilities | | | 27,420,478 | | | | | | | Total identifiable net assets | | ₩ | 2,914,615 | | | | | | | Non-controlling interests1 | | | 170,044 | | Gains on bargain purchase | | | 122,986 | |
1 | Measured at the proportionate share of KB Insurance Co., Ltd.’s net assets applies only to instruments that represent present ownership interests. |
As a result of the business combination, there was a gain on the value of unrecognized assets and others. The consideration transferredbargain purchase and the assets and liabilities arising fromGroup recognized it as othernon-operating income in the M&A dealconsolidated statement of comprehensive income.
Details of loans acquired are as follows: | | | | | | | Amounts2017 | | | | (In millions of Korean won) | | Total considerationFair value of loans
| | ₩ | 279,870 | | | | | 6,604,530 | | Recognized amountsContractual total amount of identifiable assets acquired and liabilities assumed
| | | | | Cash and due from financial institutionsloan receivables
| | | 17,5726,651,314 | | Available-for-sale financial assetsContractual cash flows that are not expected to be recovered
| | | 6,872(59,906 | | Loans
| | | 3,888,468 | | Equipment / intangible assets
| | | 16,828 | | Other assets
| | | 59,055 | | | | | | | Total assets
| | | 3,988,795 | | | | | | | Debts
| | | 580,000 | | Debentures
| | | 2,751,344 | | Other liabilities
| | | 272,495 | | | | | | | Total liabilities
| | | 3,603,839 | | | | | | | Total identifiable net assets
| | ₩ | 384,956 | | | | | | | Ratio of shareholding acquired (%)
| | | 52.02 | | Relevant amount of shares
| | ₩ | 200,261 | | Goodwill
| | | 79,609 | | Acquisition-related costs(1)
| | | 2,094 | |
(1) | Recorded as fee and commission expense in the statement of comprehensive income.
|
The receivables including loans from the M&A deal at the acquisition dateDetails of intangible assets recognized as a result of business combinations are as follows:
| | | | | | | Amounts2017 | | | | (In millions of Korean won) | | Fair value
| | | | | Due from financial institutionsValue of business acquired (VOBA)1
| | ₩ | 4,6012,395,291 | | LoansOthers2
| | | 3,893,069 | | Others
| | | 25,32138,758 | | | | | | | Total fair value | | ₩ | 3,922,9912,434,049 | | | | | | |
Contractual1
| In accordance with IFRS 4, an indirect method using embedded value was applied in measurement of VOBA. In business combination or contract transfer, insurance liabilities and intangible assets are separately presented to recognize embedded value in financial statements. VOBA is a concept similar to present value of in force (PVIF) and Present value of future profits (PVFP or PVP). The intangible assets from embedded value is calculated through the actuarial model and cash flow that were originally used to calculate the embedded value. |
2 | Memberships and other intangible assets were previously held by KB Insurance Co., Ltd. |
In 2017, the Group measured 39.81% of KB Insurance Co., Ltd.’s equity interest held before the business combination at fair value and recognized ₩1,806 million as a loss on investment in the consolidated statements of income. After the acquisition date, operating income and net income of KB Insurance Co., Ltd. were ₩500,691 million and ₩330,286 million, respectively. If KB Insurance Co., Ltd. had been consolidated from the beginning of the current period, the operating profit and profit for the period of the Group would be ₩622,123 million and ₩430,190 million, respectively, in the consolidated statement of comprehensive income. 44.2 The Results of VOBA Sensitivity Analysis The results of sensitivity analysis from changes in assumption applied to calculate the value (VOBA) of acquired business recognized by business combination are as follows: | | | | | | | | | | | | | | | 2017 | | | | Assumption change | | | VOBA outputs | | | Gain or losses from evaluation | | | | | | | (In millions of Korean won) | | Standard amount | | | | | | ₩ | 2,395,291 | | | ₩ | — | | Loss ratio | | | 10% | | | | 1,020,243 | | | | (1,375,048 | ) | | | | -10% | | | | 3,770,338 | | | | 1,375,047 | | Surrenders and termination rates | | | 10% | | | | 2,425,348 | | | | 30,057 | | | | | -10% | | | | 2,360,035 | | | | (35,256 | ) | Insurance operating expenses ratio | | | 10% | | | | 2,256,197 | | | | (139,094 | ) | | | | -10% | | | | 2,534,384 | | | | 139,093 | | Return on investment | | | +0.5%p | | | | 3,153,368 | | | | 758,077 | | | | | -0.5%p | | | | 1,576,618 | | | | (818,673 | ) | Discount rate | | | +0.5%p | | | | 2,250,386 | | | | (144,905 | ) | | | | -0.5%p | | | | 2,551,657 | | | | 156,366 | |
44.3 Insurance Risk at the Time of Business Combination 44.3.1 Overview Insurance risk arises from acceptance of insurance contract, and payment of claim, comprising insurance price risk and reserve risk. Insurance price risk represents loss exceeding expected mortality or expense ratio assumed in premium calculation; the difference of premium received from customers and actual claim payment. Reserve risk represents insufficient insurance reserve causing insurer unable to cover future payment of insurance claim. 44.3.2 Purposes, policies and procedures to manage risk arising from insurance contracts KB Insurance Co. Ltd. is exposed to actuarial risk and acceptance risk, each arising from pricing of insurance contract and acceptance terms, respectively. Acceptance guidelines and procedures are established by insurance product to avoidnon-profitable insurance contract by examining subjects beforehand. The insurer performs analysis of insurance risk expected in price determination before acceptance and of the risk after acceptance in its effort to minimize actuarial risk by subsequent actions including premium adjustment, change in sales condition, end of sales of product and new product development. In addition, KB Insurance Co. Ltd. establishes reinsurance strategies based on its reinsurance operating standards by holding adequate level of reinsurance to address future accident causing insurer immediately liable with large amount. The insurer manages risks comprehensively supporting customer protection and achieving stable profit to maximize enterprise value in the long term. KB Insurance Co. Ltd.’s enterprise risk is calculated using standard RBC model. Assets and product portfolio are managed and risk limit is set to keep risk level reasonable given its capital adequacy. 44.3.3 Exposure to insurance price risk According to RBC standard, KB Insurance Co. Ltd. defines insurance price risk exposure as risk premium for the last one year adding or subtracting premium of original insurance and reinsurance, assumed and ceded. | | | | | | | | | | | | | | | | | | | 2017 | | | | Direct insurance | | | Inward reinsurance | | | Outward reinsurance | | | Total | | | | (In millions of Korean won) | | General | | ₩ | 908,992 | | | ₩ | 81,311 | | | ₩ | 579,954 | | | ₩ | 410,349 | | Automobile | | | 1,984,178 | | | | — | | | | 40,486 | | | | 1,943,692 | | Long-term | | | 1,845,647 | | | | — | | | | 250,459 | | | | 1,595,188 | | | | | | | | | | | | | | | | | | | Total | | ₩ | 4,738,817 | | | ₩ | 81,311 | | | ₩ | 870,899 | | | ₩ | 3,949,229 | | | | | | | | | | | | | | | | | | |
44.3.4 Concentration of Insurance risk KB Insurance Co., Ltd. is selling generalnon-life insurances (fire, maritime, injury, technology, liability, package, title, guarantee and special type insurances), automobile insurances (for private use, for hire, for business, bicycle and other), long-term insurances (long-termnon-life, property damage, injury, driver, savings, illness, nursing and pension) and various other insurances. KB Insurance Co., Ltd.’s risk is distributed through reinsurance, joint acceptance and diversified selling. In addition, insurances that cover serious damage of risk, although with rare possibility of the occurrence of disaster, such as storm and flood insurance are limited, and KB Insurance Co., Ltd. controls the risk through joint acquisition. 44.3.5 Loss development tables General Insurance | | | | | | | | | | | | | | | | | | | | | | | Payment year | | Accident year | | After 1 year | | | After 2 years | | | After 3 years | | | After 4 years | | | After 5 years | | | | (In millions of Korean won) | | Estimate of gross ultimate claims (A) | | | | | | | | | | | | | | | | | | | | | 2012.4.1 ~ 2013.3.31 | | ₩ | 155,846 | | | ₩ | 188,494 | | | ₩ | 194,197 | | | ₩ | 198,574 | | | ₩ | 197,475 | | 2013.4.1 ~ 2014.3.31 | | | 168,274 | | | | 196,711 | | | | 198,849 | | | | 198,251 | | | | — | | 2014.4.1 ~ 2015.3.31 | | | 121,300 | | | | 141,807 | | | | 143,129 | | | | — | | | | — | | 2015.4.1 ~ 2016.3.31 | | | 126,747 | | | | 150,115 | | | | — | | | | — | | | | — | | 2016.4.1 ~ 2017.3.31 | | | 148,162 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | 720,329 | | | | 677,127 | | | | 536,175 | | | | 396,825 | | | | 197,475 | | | | | | | | | | | | | | | | | | | | | | | Gross cumulative claim payments (B) | | | | | | | | | | | | | | | | | | | | | 2012.4.1 ~ 2013.3.31 | | | 118,748 | | | | 172,826 | | | | 185,043 | | | | 190,131 | | | | 191,849 | | 2013.4.1 ~ 2014.3.31 | | | 129,198 | | | | 175,994 | | | | 189,194 | | | | 191,700 | | | | — | | 2014.4.1 ~ 2015.3.31 | | | 88,311 | | | | 126,826 | | | | 135,437 | | | | — | | | | — | | 2015.4.1 ~ 2016.3.31 | | | 93,964 | | | | 136,169 | | | | — | | | | — | | | | — | | 2016.4.1 ~ 2017.3.31 | | | 107,770 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | 537,991 | | | | 611,815 | | | | 509,674 | | | | 381,831 | | | | 191,849 | | | | | | | | | | | | | | | | | | | | | | | Difference(A-B) | | ₩ | 182,338 | | | ₩ | 65,312 | | | ₩ | 26,501 | | | ₩ | 14,994 | | | ₩ | 5,626 | | | | | | | | | | | | | | | | | | | | | | |
Automobile Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Payment year | | Accident year | | After 1 year | | | After 2 years | | | After 3 years | | | After 4 years | | | After 5 years | | | After 6 years | | | After 7 years | | | | (In millions of Korean won) | | Estimate of gross ultimate claims (A) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2010.4.1 ~ 2011.3.31 | | ₩ | 1,025,148 | | | ₩ | 1,041,743 | | | ₩ | 1,049,759 | | | ₩ | 1,053,279 | | | ₩ | 1,053,674 | | | ₩ | 1,054,482 | | | ₩ | 1,055,616 | | 2011.4.1 ~ 2012.3.31 | | | 1,103,363 | | | | 1,118,764 | | | | 1,125,789 | | | | 1,130,637 | | | | 1,132,811 | | | | 1,134,588 | | | | — | | 2012.4.1 ~ 2013.3.31 | | | 1,129,311 | | | | 1,151,262 | | | | 1,160,820 | | | | 1,166,840 | | | | 1,169,692 | | | | — | | | | — | | 2013.4.1 ~ 2014.3.31 | | | 1,124,402 | | | | 1,154,322 | | | | 1,164,003 | | | | 1,174,204 | | | | — | | | | — | | | | — | | 2014.4.1 ~ 2015.3.31 | | | 1,205,298 | | | | 1,224,037 | | | | 1,236,693 | | | | — | | | | — | | | | — | | | | — | | 2015.4.1 ~ 2016.3.31 | | | 1,242,591 | | | | 1,257,538 | | | | — | | | | — | | | | — | | | | — | | | | — | | 2016.4.1 ~ 2017.3.31 | | | 1,292,711 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 8,122,824 | | | | 6,947,666 | | | | 5,737,064 | | | | 4,524,960 | | | | 3,356,177 | | | | 2,189,070 | | | | 1,055,616 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross cumulative claim payments(B) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2010.4.1 ~ 2011.3.31 | | | 898,401 | | | | 1,010,255 | | | | 1,033,873 | | | | 1,043,730 | | | | 1,048,664 | | | | 1,050,860 | | | | 1,051,681 | | 2011.4.1 ~ 2012.3.31 | | | 954,486 | | | | 1,079,455 | | | | 1,106,620 | | | | 1,120,852 | | | | 1,128,085 | | | | 1,130,188 | | | | — | | 2012.4.1 ~ 2013.3.31 | | | 963,250 | | | | 1,112,141 | | | | 1,140,658 | | | | 1,154,668 | | | | 1,160,801 | | | | — | | | | — | | 2013.4.1 ~ 2014.3.31 | | | 948,421 | | | | 1,105,324 | | | | 1,137,731 | | | | 1,155,656 | | | | — | | | | — | | | | — | | 2014.4.1 ~ 2015.3.31 | | | 1,007,236 | | | | 1,180,056 | | | | 1,210,707 | | | | — | | | | — | | | | — | | | | — | | 2015.4.1 ~ 2016.3.31 | | | 1,042,046 | | | | 1,208,525 | | | | — | | | | — | | | | — | | | | — | | | | — | | 2016.4.1 ~ 2017.3.31 | | | 1,079,668 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 6,893,508 | | | | 6,695,756 | | | | 5,629,589 | | | | 4,474,906 | | | | 3,337,550 | | | | 2,181,048 | | | | 1,051,681 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Difference(A-B) | | ₩ | 1,229,316 | | | ₩ | 251,910 | | | ₩ | 107,475 | | | ₩ | 50,054 | | | ₩ | 18,627 | | | ₩ | 8,022 | | | ₩ | 3,935 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Long-term Insurance | | | | | | | | | | | | | | | | | | | | | | | Payment year | | Accident year | | After 1 year | | | After 2 years | | | After 3 years | | | After 4 years | | | After 5 years | | | | (In millions of Korean won) | | Estimate of gross ultimate claims (A) | | | | | | | | | | | | | | | | | | | | | 2012.4.1 ~ 2013.3.31 | | ₩ | 648,694 | | | ₩ | 871,989 | | | ₩ | 897,650 | | | ₩ | 902,898 | | | ₩ | 904,400 | | 2013.4.1 ~ 2014.3.31 | | | 737,540 | | | | 999,838 | | | | 1,029,937 | | | | 1,035,705 | | | | — | | 2014.4.1 ~ 2015.3.31 | | | 822,235 | | | | 1,106,997 | | | | 1,138,537 | | | | — | | | | — | | 2015.4.1 ~ 2016.3.31 | | | 945,954 | | | | 1,286,361 | | | | — | | | | — | | | | — | | 2016.4.1 ~ 2017.3.31 | | | 1,102,183 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | 4,256,606 | | | | 4,265,185 | | | | 3,066,124 | | | | 1,938,603 | | | | 904,400 | | | | | | | | | | | | | | | | | | | | | | | Gross cumulative claim payments (B) | | | | | | | | | | | | | | | | | | | | | 2012.4.1 ~ 2013.3.31 | | | 606,551 | | | | 859,742 | | | | 889,948 | | | | 898,142 | | | | 901,629 | | 2013.4.1 ~ 2014.3.31 | | | 696,685 | | | | 984,891 | | | | 1,021,364 | | | | 1,032,301 | | | | — | | 2014.4.1 ~ 2015.3.31 | | | 770,283 | | | | 1,090,501 | | | | 1,130,781 | | | | — | | | | — | | 2015.4.1 ~ 2016.3.31 | | | 892,901 | | | | 1,271,183 | | | | — | | | | — | | | | — | | 2016.4.1 ~ 2017.3.31 | | | 1,051,471 | | | | — | | | | — | | �� | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | 4,017,891 | | | | 4,206,317 | | | | 3,042,093 | | | | 1,930,443 | | | | 901,629 | | | | | | | | | | | | | | | | | | | | | | | Difference(A-B) | | ₩ | 238,715 | | | ₩ | 58,868 | | | ₩ | 24,031 | | | ₩ | 8,160 | | | ₩ | 2,771 | | | | | | | | | | | | | | | | | | | | | | |
44.3.6 Liquidity risk of insurance contracts Liquidity risk arising from insurance contracts is the increase in refunds at maturity caused by concentrations of maturity, the increase in surrender values caused by unexpected amounts in cancellation and the increase in payments of claims caused by catastrophic events. KB Insurance Co., Ltd. manages payment of refunds payable at maturity by analyzing maturity of insurance. Premium reserve’s maturity structure as of the business combination date is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | Within 1 year | | | 1~5 years | | | 5~10 years | | | 10~20 years | | | More 20 years | | | Total | | | | (In millions of Korean won) | | Long-term insurance non participating | | | | | | | | | | | | | | | | | | | | | | | | | Non-linked | | ₩ | 54,301 | | | ₩ | 202,759 | | | ₩ | 185,691 | | | ₩ | 76,049 | | | ₩ | 97,970 | | | ₩ | 616,770 | | Linked | | | 457,494 | | | | 2,311,040 | | | | 2,256,942 | | | | 1,240,524 | | | | 8,991,508 | | | | 15,257,508 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 511,795 | | | | 2,513,799 | | | | 2,442,633 | | | | 1,316,573 | | | | 9,089,478 | | | | 15,874,278 | | | | | | | | | | | | | | | | | | | | | | | | | | | Annuity | | | | | | | | | | | | | | | | | | | | | | | | | Non-linked | | | 10 | | | | 143 | | | | 1,775 | | | | 4,109 | | | | 1,490 | | | | 7,527 | | Linked | | | 183 | | | | 44,147 | | | | 276,785 | | | | 1,025,511 | | | | 2,066,527 | | | | 3,413,153 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sub-total | | | 193 | | | | 44,290 | | | | 278,560 | | | | 1,029,620 | | | | 2,068,017 | | | | 3,420,680 | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset-linked | | | | | | | | | | | | | | | | | | | | | | | | | Linked | | | — | | | | 27,059 | | | | — | | | | — | | | | — | | | | 27,059 | | Total | | | | | | | | | | | | | | | | | | | | | | | | | Non-linked | | | 54,311 | | | | 202,902 | | | | 187,466 | | | | 80,158 | | | | 99,460 | | | | 624,297 | | Linked | | | 457,677 | | | | 2,382,246 | | | | 2,533,727 | | | | 2,266,035 | | | | 11,058,035 | | | | 18,697,720 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ₩ | 511,988 | | | ₩ | 2,585,148 | | | ₩ | 2,721,193 | | | ₩ | 2,346,193 | | | ₩ | 11,157,495 | | | ₩ | 19,322,017 | | | | | | | | | | | | | | | | | | | | | | | | | | |
44.3.7 Credit risk of insurance contract Credit risk of insurance contract is the economic loss arising fromnon-performing contractual obligations due to decline in credit ratings or default. Through strict internal review, KB Insurance Co., Ltd. cedes insurance contracts to the insurers rated aboveBBB- of S&P rating. As of business combination date, there are 219 reinsurance companies that deal with KB Insurance Co., Ltd., and the top three insurance companies’ concentration and credit ratings are as follows: | | | | | | | | | Due from financial institutionsReinsurance company
| | Ratio | | | Credit rating | | KOREANRE | | | 66.60 | % | | | AA | | STARR INTERNATIONAL | | | 3.41 | % | | | AA+ | | SWISSREINSURANCE | | | 3.22 | % | | | AAA | |
Exposures to credit risk related to reinsurance as of business combination date were as follows: | | | | | | | 2017 | | | | (In millions of Korean won) | | Reinsurance assets1 | | ₩ | 4,601730,251 | | LoansNet receivables from reinsurers2
| | | 3,900,760 | | Others
| | | 26,47844,443 | | | | | | | Total contractual cash flow | | ₩ | 3,931,839774,694 | | | | | | |
1 | Net carrying amounts that deduct impairment loss |
2 | Net carrying amounts of each reinsurance company that offsets reinsurance accounts receivable and reinsurance accounts payable and deduct allowance for loan losses |
44.3.8 Interest risk of insurance contract The interest rate risk exposure from KB Insurance Co., Ltd.’s insurance contracts is the risk of unexpected losses in net interest income or net assets arising from changes in interest rates and it is managed to minimize the loss experienced. For long-term,non-life insurance contracts, KB Insurance Co., Ltd. calculates exposure of interest-bearing assets and interest-bearing liabilities. Liabilities exposure is premium reserves after subtracting costs of termination deductions. Asset exposure is interest-bearing assets. Assets that receive only fees without interest are excluded from interest bearing assets. Exposure to interest rate risk | | | | | | | 2017 | | | | (In millions of Korean won) | | Estimate of the contractual cash flows not expected to be collectedLiabilities
| | | | | LoansFixed interest rate
| | ₩ | 82,640622,570 | | OthersVariable interest rate
| | | 1,08518,268,800 | | | | | | | Total estimate of the contractual cash flows not expected to be collected | | | 18,891,370 | | | | | | | Assets | | | | | Due from banks | | | 319,960 | | Financial assets at fair value through profit or loss | | | 386,040 | | Available-for-sale financial assets | | | 6,660,182 | | Held-to-maturity financial assets | | | 4,143,851 | | Loans | | | 6,465,291 | | | | | | | Total | | ₩ | 83,72517,975,324 | | | | | | |
The Group measured non-controlling interestsMeasurement and recognition method
Duration is used to measure interest rate risk within risk based solvency test. ALM system for risk based solvency test is utilized to manage interest rate risk internally. In addition, Risk Management Committee sets ALM strategy every year to manage interest rate risk. Sensitivity to changes in interest rates Generally, when interest rates rise, the value and duration of assets and liabilities fall, when interest rates fall, value and duration of assets and liabilities increase. When duration of assets is shorter than duration of liabilities, the interest risk is increased if the interest rates fall since increased asset value is smaller than liabilities increase. Negative spread risk control To control interest expenses from other liabilities and investment incomes from assets, KB CapitalInsurance Co., Ltd.’s publicizes its interest rate considering market interest rate and return on invested insurance assets of KB Insurance Co., Ltd. 44.4 Acquisition of MARITIME SECURITIES INCORPORATION In October 9, 2017 the Group acquired 99.40% shares of MARITIME SECURITIES INCORPORATION, which operates in Vietnam securities industry. The transfer price paid by the group was ₩38,479 million, and recognized goodwill of ₩13,092 million by recognizing the net asset fair value asandnon-controlling interest of the date of acquisition. As a result, non-controlling interest amounting to ₩184,695₩25,539 million is recognized as of the date of acquisition. Due to the business combination, the netand ₩152 million, respectively. There are no operating income andor profit for the period from March 20, 2014 to December 31, 2014, includedincurred and recognized in the consolidated statement of comprehensive income were ₩39,666 million and ₩29,990 million (profit attributableprofit or loss after the acquisition date.
The name has changed to shareholders of the parent company is ₩15,601 million), respectively.KB SECURITIES VIETNAM JOINT STOCK COMPANY in January 2018. Assuming the date of acquisition is the beginning of the reporting period, the income from operations and net profit for the period would have increased by ₩6,137 million and ₩4,649 million, respectively. In calculating the pro forma information, the operating results of the acquired companies for the period before acquisition have been adjusted to reflect the Group’s accounting policies and the fair value adjustments made upon acquisition.
45. Approval of Issuance of the Financial Statements The issuance of the Group’s consolidated financial statements as of and for the year ended December 31, 2014,2017, was approved by the Board of Directors on February 5, 2015. 8, 2018.46. Parent Company Information The following tables present the Parent Company Only financial information: Condensed Statements of Financial Position | | | Dec. 31 2012 | | | Dec. 31 2013 | | | Dec. 31 2014 | | | Dec. 31 2016 | | | Dec. 31 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Assets | | | | | | | | | | | Cash held at bank subsidiaries | | ₩ | 96,234 | | | ₩ | 77,298 | | | ₩ | 30,739 | | | ₩ | 115,065 | | | ₩ | 245,400 | | Receivables from nonbanking subsidiaries | | | 25,000 | | | | 10,000 | | | | 10,000 | | | Financial assets at fair value through profit of loss | | | | 246,656 | | | | 284,485 | | Loans | | | | 29,415 | | | | 10,000 | | Investments in subsidiaries(1) | | | | | | | | | | | Banking subsidiaries | | | 14,821,721 | | | | 14,821,721 | | | | 14,821,721 | | | | 14,821,721 | | | | 14,821,721 | | Nonbanking subsidiaries | | | 3,123,127 | | | | 3,470,722 | | | | 3,735,845 | | | Nonbanking subsidiaries. | | | | 6,571,024 | | | | 9,240,395 | | Investments in associate(1) | | | | 1,053,690 | | | | — | | Other assets | | | 323,946 | | | | 284,801 | | | | 612,216 | | | | 532,581 | | | | 500,833 | | | | | | | | | | | | | | | | | | Total assets | | ₩ | 18,390,028 | | | ₩ | 18,664,542 | | | ₩ | 19,210,521 | | | ₩ | 23,370,152 | | | ₩ | 25,102,834 | | | | | | | | | | | | | | | | | | Liabilities and shareholders’ equity | | | | | | | | | | | Debts | | ₩ | — | | | ₩ | — | | | ₩ | — | | | ₩ | 350,000 | | | ₩ | 300,000 | | Debentures | | | — | | | | 349,157 | | | | 628,837 | | | | 3,474,200 | | | | 5,162,600 | | Other liabilities | | | 305,686 | | | | 266,963 | | | | 295,010 | | | | 524,135 | | | | 513,689 | | Shareholders’ equity | | | 18,084,342 | | | | 18,048,422 | | | | 18,286,674 | | | | 19,021,817 | | | | 19,126,545 | | | | | | | | | | | | | | | | | | Total liabilities and shareholders’ equity | | ₩ | 18,390,028 | | | ₩ | 18,664,542 | | | ₩ | 19,210,521 | | | ₩ | 23,370,152 | | | ₩ | 25,102,834 | | | | | | | | | | | | | | | | | |
(1) | Investments in subsidiaries and associate were accounted at cost method in accordance with IAS 27. |
Condensed Statements of Comprehensive Income | | | 2012 | | 2013 | | | 2014 | | | 2015 | | 2016 | | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Income | | | | | | | | | | | | | Dividends from subsidiaries: | | | | | | | | Dividends from banking subsidiaries | | ₩ | 687,925 | | | ₩ | 245,044 | | | ₩ | 493,782 | | | Dividends from subsidiaries | | | ₩ | 315,527 | | | ₩ | 686,919 | | | ₩ | 693,660 | | Dividends from an associate | | | | — | | | 7,989 | | | | 15,884 | | Interest from subsidiaries | | | 6,018 | | | | 3,859 | | | | 2,391 | | | | 2,185 | | | 2,192 | | | | 3,207 | | Other income | | | — | | | | — | | | | — | | | | 2,540 | | | 10,700 | | | | 14,336 | | | | | | | | | | | | | | | | | | | | | Total income | | | 693,943 | | | | 248,903 | | | | 496,173 | | | | 320,252 | | | 707,800 | | | | 727,087 | | | | | | | | | | | | | | | | | | | | | Expense | | | | | | | | | | | | | Interest expense | | | 3,025 | | | | 5,227 | | | | 19,149 | | | | 27,929 | | | 60,521 | | | | 101,107 | | Non-interest expense | | | 44,901 | | | | 48,273 | | | | 43,473 | | | | 49,088 | | | 57,311 | | | | 78,077 | | | | | | | | | | | | | | | | | | | | | Total expense | | | 47,926 | | | | 53,500 | | | | 62,622 | | | | 77,017 | | | 117,832 | | | | 179,184 | | | | | | | | | | | | | | | | | | | | | Profit(loss) before tax expense | | | 646,017 | | | | 195,403 | | | | 433,551 | | | | 243,235 | | | 589,968 | | | | 547,903 | | | | | | | | | | | | | | | | | | | | | Tax income(expense) | | | 1,080 | | | | 423 | | | | (600 | ) | | | 190 | | | 164 | | | | 5,522 | | | | | | | | | | | | | | | | | | | | | Profit(loss) for the year | | | 647,097 | | | | 195,826 | | | | 432,951 | | | | 243,425 | | | 590,132 | | | | 553,425 | | | | | | | | | | | | | | | | | | | | | Other comprehensive income(loss) for the year, net of tax | | | (862 | ) | | | 65 | | | | (1,523 | ) | | | (741 | ) | | 237 | | | | (491 | ) | | | | | | | | | | | | | | | | | | | | Total comprehensive income for the year | | ₩ | 646,235 | | | ₩ | 195,891 | | | ₩ | 431,428 | | | ₩ | 242,684 | | | ₩ | 590,369 | | | ₩ | 552,934 | | | | | | | | | | | | | | | | | | | | |
Condensed Statements of Cash Flows | | | 2012 | | 2013 | | 2014 | | | 2015 | | 2016 | | 2017 | | | | (In millions of Korean won) | | | (In millions of Korean won) | | Operating activities | | | | | | | | | | | | | Net income (loss) | | ₩ | 647,097 | | | ₩ | 195,826 | | | ₩ | 432,951 | | | Net income | | | ₩ | 243,425 | | | ₩ | 590,132 | | | ₩ | 553,425 | | Reconciliation of net income (loss) to net cash provided by operating activities: | | | | | | | | | | | | | Other operating activities, net | | | 15,807 | | | | 40,272 | | | | (286,554 | ) | | | 304,444 | | | 5,588 | | | 16,718 | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) operating activities | | | 662,904 | | | | 236,098 | | | | 146,397 | | | Net cash inflow (outflow) from operating activities | | | | 547,869 | | | 595,720 | | | 570,143 | | | | | | | | | | | | | | | | | | | | | Investing activities | | | | | | | | | | | | | Net payments from (to) subsidiaries | | | (136,526 | ) | | | (369,590 | ) | | | (279,870 | ) | | | (90,000 | ) | | (1,684,021 | ) | | (1,413,932 | ) | Other investing activities, net | | | 7,998 | | | | (2,710 | ) | | | 750 | | | | (880,059 | ) | | (201,890 | ) | | 21,376 | | | | | | | | | | | | | | | | | | | | | Net cash used in investing activities | | | (128,528 | ) | | | (372,300 | ) | | | (279,120 | ) | | Net cash outflow from investing activities | | | | (970,059 | ) | | (1,885,911 | ) | | (1,392,556 | ) | | | | | | | | | | | | | | | | | | | | Financing activities | | | | | | | | | | | | | Increase in debts | | | 170,000 | | | | 315,000 | | | | — | | | Decreases in debts | | | (300,000 | ) | | | (315,000 | ) | | | — | | | Net increase(decrease) in debts | | | | — | | | 350,000 | | | (50,263 | ) | Increases in debentures | | | — | | | | 349,077 | | | | 279,340 | | | | 1,017,752 | | | 1,975,742 | | | 1,836,114 | | Decreases in debentures | | | (50,000 | ) | | | — | | | | — | | | Repayments of debentures | | | | — | | | (150,000 | ) | | (149,669 | ) | Cash dividends paid | | | (278,173 | ) | | | (231,811 | ) | | | (193,176 | ) | | | (301,354 | ) | | (378,625 | ) | | (497,969 | ) | Acquisition of treasury shares | | | | — | | | (716,808 | ) | | (185,465 | ) | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) financing activities | | | (458,173 | ) | | | 117,266 | | | | 86,164 | | | Net cash inflow from financing activities | | | | 716,398 | | | 1,080,309 | | | 952,748 | | | | | | | | | | | | | | | | | | | | | Net increase in cash held at bank subsidiaries | | | 76,203 | | | | (18,936 | ) | | | (46,559 | ) | | | 294,208 | | | (209,882 | ) | | 130,335 | | Cash held at bank subsidiaries at January 1 | | | 20,028 | | | | 96,231 | | | | 77,295 | | | Cash and cash equivalents subsidiaries at January 1 | | | | 30,736 | | | 324,944 | | | 115,062 | | | | | | | | | | | | | | | | | | | | | Cash held at bank subsidiaries at December 31 | | ₩ | 96,231 | | | ₩ | 77,295 | | | ₩ | 30,736 | | | Cash and cash equivalents subsidiaries at December 31 | | | ₩ | 324,944 | | | ₩ | 115,062 | | | ₩ | 245,397 | | | | | | | | | | | | | | | | | | | | |
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