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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-255836
PROSPECTUS SUPPLEMENT
(To Prospectus Dated July 22, 2021)
The Export-Import Bank of Korea
(A statutory juridical entity established under The Export-Import Bank of Korea Act of 1969, as amended, in the Republic of Korea)
US$1,000,000,000 1.250% Notes due 2025
US$1,000,000,000 1.625% Notes due 2027
US$1,000,000,000 2.125% Green Notes due 2032
Our US$1,000,000,000 aggregate principal amount of notes due 2025 (the “2025 Notes”) will bear interest at a rate of 1.250% per annum, our US$1,000,000,000 aggregate principal amount of notes due 2027 (the “2027 Notes”) will bear interest at a rate of 1.625% per annum and our US$1,000,000,000 aggregate principal amount of green notes due 2032 (the “2032 Notes,” and together with the 2025 Notes and the 2027 Notes, the “Notes”) will bear interest at a rate of 2.125% per annum. Interest on the 2025 Notes is payable semi-annually in arrears on January 18 and July 18 of each year, beginning on July 18, 2022. Interest on the 2027 Notes is payable semi-annually in arrears on January 18 and July 18 of each year, beginning on July 18, 2022. Interest on the 2032 Notes is payable semi-annually in arrears on January 18 and July 18 of each year, beginning on July 18, 2022.
The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof. The Notes will be represented by one or more global notes registered in the name of a nominee of The Depository Trust Company (“DTC”), as depositary.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
2025 Notes | 2027 Notes | 2032 Notes | ||||||||||||||||||||||
Per Note | Total | Per Note | Total | Per Note | Total | |||||||||||||||||||
Public offering price | 99.850% | US$ | 998,500,000 | 99.675% | US$ | 996,750,000 | 99.517% | US$ | 995,170,000 | |||||||||||||||
Underwriting discounts | 0.300% | US$ | 3,000,000 | 0.300% | US$ | 3,000,000 | 0.300% | US$ | 3,000,000 | |||||||||||||||
Proceeds to us, before expenses | 99.550% | US$ | 995,500,000 | 99.375% | US$ | 993,750,000 | 99.217% | US$ | 992,170,000 |
In addition to the initial public offering price, you will have to pay for accrued interest, if any, from (and including) January 18, 2022.
Approval in-principle has been received from the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing and quotation of the Notes on the SGX-ST. There can be no assurance that we will obtain or be able to maintain a listing of the Notes on the SGX- ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and listing and quotation of any Notes on, the SGX-ST are not to be taken as an indication of the merits of the issuer or the Notes.
The underwriters expect to deliver the Notes to investors through the book-entry facilities of DTC, in each case on or about January 18, 2022.
Joint Bookrunners and Lead Managers
BNP PARIBAS | ||||||||||||
Citigroup | ||||||||||||
Daiwa Capital Markets Europe | ||||||||||||
HSBC | ||||||||||||
J.P. Morgan | ||||||||||||
KB Securities | ||||||||||||
MUFG |
Co-Manager
KEXIM Asia Limited
Prospectus Supplement Dated January 5, 2022
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You should rely only on the information contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted.
Prospectus Supplement
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Prospectus
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Certain Defined Terms and Conventions | 1 | |||
Use of Proceeds | 2 | |||
The Export-Import Bank of Korea | 3 | |||
Overview | 3 | |||
Capitalization | 4 | |||
Business | 5 | |||
Selected Financial Statement Data | 7 | |||
Operations | 9 | |||
Description of Assets and Liabilities | 15 | |||
Debt | 25 | |||
Credit Policies, Credit Approval and Risk Management | 27 | |||
Capital Adequacy | 28 | |||
Overseas Operations | 29 | |||
Property | 30 | |||
Management and Employees | 30 | |||
Tables and Supplementary Information | 31 | |||
Financial Statements and the Auditors | 42 | |||
The Republic of Korea | 137 | |||
Land and History | 137 | |||
Government and Politics | 139 | |||
The Economy | 142 | |||
Principal Sectors of the Economy | 151 | |||
The Financial System | 158 | |||
Monetary Policy | 163 | |||
Balance of Payments and Foreign Trade | 166 | |||
Government Finance | 176 | |||
Debt | 179 | |||
Tables and Supplementary Information | 182 |
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Description of the Securities | 185 | |||
Description of Debt Securities | 185 | |||
Description of Warrants | 191 | |||
Terms Applicable to Debt Securities and Warrants | 192 | |||
Description of Guarantees | 193 | |||
Limitations on Issuance of Bearer Debt Securities and Bearer Warrants | 194 | |||
Taxation | 195 | |||
Korean Taxation | 195 | |||
United States Tax Considerations | 197 | |||
Plan of Distribution | 205 | |||
Legal Matters | 206 | |||
Authorized Representatives in the United States | 206 | |||
Official Statements and Documents | 206 | |||
Experts | 206 | |||
Forward-Looking Statements | 207 | |||
Further Information | 209 |
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CERTAIN DEFINED TERMS
All references to “we” or “us” mean The Export-Import Bank of Korea. All references to “Korea” or the “Republic” contained in this prospectus supplement mean The Republic of Korea. All references to the “Government” mean the government of Korea. References to “₩”, “Won” or “Korean won” are to the lawful currency of Korea and references to “US$” or “U.S. dollars” are to the lawful currency of the United States. Terms used but not defined in this prospectus supplement shall have the same meanings given to them in the accompanying prospectus.
In this prospectus supplement and the accompanying prospectus, where information has been provided in units of thousands, millions or billions, such amounts have been rounded up or down. Accordingly, actual numbers may differ from those contained herein due to rounding. Any discrepancy between the stated total amount and the actual sum of the itemized amounts listed in a table, is due to rounding.
Our financial information included in this prospectus supplement was prepared under International Financial Reporting Standards as adopted by Korea (“Korean IFRS” or “K-IFRS”). References in this prospectus supplement to “separate” financial statements and/or information are to financial statements and/or information prepared on a non-consolidated basis. Unless specified otherwise, our financial and other information included in this prospectus supplement is presented on a separate basis in accordance with Korean IFRS and does not include such information with respect to our subsidiaries.
ADDITIONAL INFORMATION
The information in this prospectus supplement is in addition to the information contained in our accompanying prospectus dated July 22, 2021. The accompanying prospectus contains information regarding ourselves and Korea, as well as a description of some terms of the Notes. You can find further information regarding us, Korea, and the Notes in registration statement no. 333-255836, as amended, relating to our debt securities, with or without warrants, and guarantees, which is on file with the U.S. Securities and Exchange Commission.
WE ARE RESPONSIBLE FOR THE ACCURACY OF THE INFORMATION IN THIS DOCUMENT
We are responsible for the accuracy of the information in this document and confirm that to the best of our knowledge we have included all facts that should be included not to mislead potential investors. The address of our registered office is 38 Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, The Republic of Korea. The SGX-ST assumes no responsibility for the contents of this prospectus supplement and the accompanying prospectus, and makes no representation as to liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and listing and quotation of any Notes on, the SGX-ST are not to be taken as an indication of the merits of the issuer or the Notes.
NOTIFICATION UNDER SECTION 309B(1)(C) OF THE SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE
We have determined, and hereby notify all relevant persons (as defined in Section 309A(1) of the SFA), that the Notes are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
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UK FINANCIAL PROMOTION LEGEND
This communication is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). The Notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
NOT AN OFFER IF PROHIBITED BY LAW
The distribution of this prospectus supplement and the accompanying prospectus, and the offer of the Notes, may be legally restricted in some countries. If you wish to distribute this prospectus supplement or the accompanying prospectus, you should observe any restrictions. This prospectus supplement and the accompanying prospectus should not be considered an offer and it is prohibited to use them to make an offer, in any state or country which prohibits the offering.
The Notes may not be offered or sold in Korea, directly or indirectly, or to any resident of Korea, except as permitted by Korean law. For more information, see “Underwriting—Foreign Selling Restrictions.”
The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.
The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom (“UK”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”); or (ii) a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (“FSMA”) and any rules or regulations made under the Insurance Distribution Directive, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA.
INFORMATION PRESENTED ACCURATE AS OF DATE OF DOCUMENT
This prospectus supplement and the accompanying prospectus are the only documents on which you should rely for information about the offering. This prospectus supplement may only be used for the purposes for which it has been published. We have authorized no one to provide you with different information. You should not assume that the information in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date on the front of each document.
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This summary highlights selected information from this prospectus supplement and the accompanying prospectus and may not contain all of the information that is important to you. To understand the terms of our Notes, you should carefully read this prospectus supplement and the accompanying prospectus.
The Notes
We are offering US$1,000,000,000 aggregate principal amount of 1.250% notes due January 18, 2025 (the “2025 Notes”), US$1,000,000,000 aggregate principal amount of 1.625% notes due January 18, 2027 (the “2027 Notes”) and US$1,000,000,000 aggregate principal amount of 2.125% green notes due January 18, 2032 (the “2032 Notes,” and together with the 2025 Notes and the 2027 Notes, the “Notes”).
The 2025 Notes will bear interest at a rate of 1.250% per annum, payable semi-annually in arrears on January 18 and July 18 of each year. The first interest payment on the 2025 Notes will be made on July 18, 2022 in respect of the period from (and including) January 18, 2022 to (but excluding) July 18, 2022. Interest on the 2025 Notes will accrue from January 18, 2022 and will be computed based on a 360-day year consisting of twelve 30-day months. See “Description of the Notes—Payment of Principal and Interest—2025 Notes.”
The 2027 Notes will bear interest at a rate of 1.625% per annum, payable semi-annually in arrears on January 18 and July 18 of each year. The first interest payment on the 2027 Notes will be made on July 18, 2022 in respect of the period from (and including) January 18, 2022 to (but excluding) July 18, 2022. Interest on the 2027 Notes will accrue from January 18, 2022 and will be computed based on a 360-day year consisting of twelve 30-day months. See “Description of the Notes—Payment of Principal and Interest—2027 Notes.”
The 2032 Notes will bear interest at a rate of 2.125% per annum, payable semi-annually in arrears on January 18 and July 18 of each year. The first interest payment on the 2032 Notes will be made on July 18, 2022 in respect of the period from (and including) January 18, 2022 to (but excluding) July 18, 2022. Interest on the 2032 Notes will accrue from January 18, 2022 and will be computed based on a 360-day year consisting of twelve 30-day months. See “Description of the Notes—Payment of Principal and Interest—2032 Notes.”
The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof. The Notes will be represented by one or more global notes registered in the name of a nominee of The Depository Trust Company (“DTC”), as depositary.
We do not have any right to redeem the Notes prior to maturity.
Listing
Approval in-principle has been received from the SGX-ST for the listing and quotation of the Notes on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and listing and quotation of any Notes on, the SGX-ST are not to be taken as an indication of the merits of the issuer or the Notes. For so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Notes, if traded on the SGX-ST, will be traded in a minimum board lot size of S$200,000 (or its equivalent in foreign currencies). Accordingly, the Notes, if traded on the SGX-ST, will be traded in a minimum board lot size of US$200,000.
Form and settlement
We will issue each series of the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC. Except as described in the accompanying prospectus under “Description of the
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Securities—Description of Debt Securities—Global Securities,” the global notes will not be exchangeable for Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest through book-entry accounts. You may hold your beneficial interests in the Notes through Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, S.A. (“Clearstream”) if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Any secondary market trading of book-entry interests in the Notes will take place through DTC participants, including Euroclear and Clearstream. See “Clearance and Settlement—Transfers Within and Between DTC, Euroclear and Clearstream.”
Further Issues
We may from time to time, without the consent of the holders of the Notes, create and issue additional debt securities with the same terms and conditions as the Notes in all respects so that such further issue shall be consolidated and form a single series with the Notes. We will not issue any such additional debt securities unless the issuance would constitute a “qualified reopening” for U.S. federal income tax purposes or such additional debt securities would otherwise be part of the same “issue” for U.S. federal income tax purposes.
Delivery of the Notes
We expect to make delivery of the Notes, against payment in same-day funds on or about January 18, 2022, which we expect will be the eighth business day following the date of this prospectus supplement, referred to as “T+8.” You should note that initial trading of the Notes may be affected by the T+8 settlement. See “Underwriting—Delivery of the Notes.”
Underwriting
KEXIM Asia Limited is an affiliate of ours and has agreed not to offer or sell any Notes in the United States or to any U.S. persons. See “Underwriting—Relationship with the Underwriters.”
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The 2025 Notes and the 2027 Notes
We will use the net proceeds from the sale of the 2025 Notes and the 2027 Notes for our general operations, including extending foreign currency loans and repayment of our maturing debt and other obligations.
The 2032 Notes
Use of the Proceeds from the Sale of the 2032 Notes
We will use the net proceeds from the sale of the 2032 Notes to finance or refinance, in whole or in part, new or existing projects or assets related to (i) renewable energy, (ii) clean transportation, (iii) energy efficiency, (iv) sustainable water and wastewater management and (v) pollution prevention and control (collectively, “Eligible Green Projects or Assets”) in accordance with our Sustainable Finance Framework, which is in alignment with the Green Bond Principles 2021, Social Bond Principles 2021 and Sustainability Bond Guidelines 2021 published by the International Capital Markets Association. Examples of Eligible Green Projects or Assets include the following:
• | Renewable energy: infrastructure dedicated to connecting renewable energy production and storage units to the grid (including powerlines and related infrastructure such as substations) and projects aimed at developing the generation and use of renewable energy, such as solar energy, wind energy, marine energy, hydro energy, bioenergy and geothermal energy, as well as fuel cell and other energy storage systems for renewable energy projects and assets; |
• | Clean transportation: projects aimed at developing and manufacturing low-carbon passenger and freight transportation or related infrastructure, including but not limited to passenger non-public transportation, passenger public transportation, freight rail and road freight, as well as developing, manufacturing and recycling of rechargeable batteries and fuel cell for clean transportation; |
• | Energy efficiency: projects aimed at developing and manufacturing infrastructure, equipment and technology that improve energy efficiency, including but not limited to battery facilities, energy storage facilities, smart grid technologies, waste heat recovery technologies and energy management systems, as well as developing technologies such as LED lighting, smart meters for households and replacement of boilers to improve energy performance; |
• | Sustainable water and wastewater management: projects aimed at developing and manufacturing infrastructure equipment and technology for provision of clean and/or drinking water, wastewater treatment, prevention of water pollution, increase of water-use efficiency, restoration of hydro-ecological systems and flooding mitigation such as urban drainage systems; and |
• | Pollution prevention and control: projects aimed at developing and manufacturing infrastructure equipment and technology for recycling of materials, reuse of materials and recycling of organic waste into biogas or biomass energy. |
Project Evaluation and Selection Process
Under our project evaluation and selection process, the Eligible Green Projects or Assets will be identified and selected using the criteria indicated above by our Sustainable Finance Working Group, which is composed of representatives from our Treasury, ESG Management, Credit Policy, Engineering & Environment Advisory and Finance departments. The Sustainable Finance Working Group will review and monitor the allocation of net proceeds from the sale of the 2032 Notes on an annual basis, and as necessary, to ensure that the proceeds are allocated to Eligible Green Projects or Assets in accordance with our Sustainable Finance Framework.
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Management of Proceeds
An amount equal to the net proceeds from the issue of the 2032 Notes will be deposited in our general funding accounts and earmarked for allocation to Eligible Green Projects or Assets. We will monitor and track the allocation of the net proceeds from the 2032 Notes through our internal records.
Any balance of the net proceeds from the 2032 Notes not yet allocated to Eligible Green Projects or Assets may be managed in cash or cash equivalents or used to repay existing borrowings under our general credit facilities.
Reporting
We will publish a report on the allocation of the net proceeds from the 2032 Notes within one year from the date of issuance of the 2032 Notes and annually thereafter until the proceeds from the 2032 Notes have been fully allocated. Such reports will include allocation information, such as the aggregate amount allocated to Eligible Green Projects or Assets, examples of such Eligible Green Projects or Assets (subject to our confidentiality obligations) and the remaining balance of unallocated proceeds. Impact reporting will be disclosed where possible and will include relevant environmental impacts associated with the Eligible Green Projects or Assets that were funded with the net proceeds of the 2032 Notes.
DNV, an external consultant, has issued an opinion dated September 24, 2021 on our Sustainable Finance Framework (the “Second Party Opinion”). An independent verifier will also be issuing verification reports (“Verification Reports”) on the allocation of the net proceeds from the issue of the 2032 Notes on an annual basis. The Second Party Opinion and our Sustainable Finance Framework are, and the Verification Reports will be, publicly available on the following website: https://www.koreaexim.go.kr/site/homepage/menu/viewMenu?menuid=002001006006.
Investment Considerations
The 2032 Notes may not be a suitable investment for all investors seeking exposure to “green” assets. We will allocate an amount equivalent to the net proceeds from the issuance of the 2032 Notes to finance and/or refinance, in whole or in part, Eligible Green Projects or Assets as described in “Use of the Proceeds from the Sale of the 2032 Notes” above in accordance with our Sustainable Finance Framework, which is in alignment with the Green Bond Principles 2021, Social Bond Principles 2021 and Sustainability Bond Guidelines 2021 published by the International Capital Markets Association. The examples of Eligible Green Projects or Assets provided in “Use of the Proceeds from the Sale of the 2032 Notes” section are for illustrative purposes only and no assurance can be provided by us or any of the Underwriters that disbursements for projects with these specific characteristics will be made by us during the term of the 2032 Notes. Our Sustainable Finance Framework and the Second Party Opinion are not incorporated into, and do not form a part of, this prospectus supplement or the accompanying prospectus.
There is currently no market consensus on what precise attributes are required for a particular project or series of notes to be defined as “green,” and therefore, no assurance can be provided by us or any of the Underwriters to investors that investing in the 2032 Notes or that the selected Eligible Green Projects or Assets will meet, whether in whole or in part, any present or future investor expectations or requirements regarding environmental performance or sustainability. Although the Eligible Green Projects or Assets will be selected in accordance with the categories recognized under our Sustainable Finance Framework, and will be developed in accordance with relevant legislation and standards, there can be no guarantee that the projects will deliver the environmental benefits as anticipated, or that adverse environmental and/or social impacts will not occur during the design, construction, commissioning and operation of the projects. In addition, where any negative impacts are insufficiently mitigated, the projects may become controversial and may be criticized by activist groups or other stakeholders.
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The Second Party Opinion may not reflect the potential impact of all risks related to the structure, market, additional risks discussed above and other factors that may affect the value of the 2032 Notes. The Second Party Opinion is not a recommendation to buy, sell or hold securities and is only current as of the date that the Second Party Opinion was initially issued. In addition, although we have agreed to certain reporting and use of proceeds obligations in connection with certain environmental criteria, our failure to comply with such obligations will not constitute a breach or an event of default under the 2032 Notes. A withdrawal of the Second Party Opinion or any failure by us to use an amount equivalent to the net proceeds from the issue of the 2032 Notes on Eligible Green Projects or Assets or to meet or continue to meet the investment requirements of certain environmentally-focused investors with respect to the 2032 Notes may affect the value of the 2032 Notes and may have consequences for certain investors with portfolio mandates to invest in green assets.
No representation or assurance is given by us or any of the Underwriters with respect to the suitability of the Second Party Opinion or that the 2032 Notes will fulfill, whether in whole or in part, the environmental and sustainability criteria to qualify as “green” bonds. Each potential purchaser of 2032 Notes should determine for itself the relevance of the information contained in this prospectus supplement regarding the use of proceeds and its purchase of 2032 Notes should be based upon such investigation as it deems necessary.
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This section provides information that supplements the information about our bank and the Republic included under the headings corresponding to the headings below in the accompanying prospectus dated July 22, 2021. Defined terms used in this section have the meanings given to them in the accompanying prospectus. If the information in this section differs from the information in the accompanying prospectus, you should rely on the information in this section.
THE EXPORT-IMPORT BANK OF KOREA
Unless specified otherwise, the information provided below is stated on a separate basis in accordance with K-IFRS. Our financial information as of and for the nine months ended September 30, 2021 and 2020 in this prospectus supplement is presented based on our unaudited internal management accounts.
Overview
As of June 30, 2021, we had ₩77,516 billion of outstanding loans, including ₩39,281 billion of outstanding export credits, ₩30,033 billion of outstanding overseas investment credits and ₩6,126 billion of outstanding import credits, as compared to ₩76,288 billion of outstanding loans, including ₩38,487 billion of outstanding export credits, ₩28,617 billion of outstanding overseas investment credits and ₩5,332 billion of outstanding import credits as of December 31, 2020.
Capitalization
As of June 30, 2021, our authorized capital was ₩15,000 billion and our capitalization was as follows:
June 30, 2021(1) | ||||
(billions of Won) (unaudited) | ||||
Long-Term Debt(2)(3)(4)(5)(6): | ||||
Borrowings in Korean Won | ₩ | — | ||
Borrowings in Foreign Currencies | 723 | |||
Export-Import Financing Debentures | 48,424 | |||
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Total Long-term Debt | ₩ | 49,148 | ||
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Capital and Reserves: | ||||
Capital Stock(7) | ₩ | 12,748 | ||
Additional Paid-in Capital | — | |||
Capital Adjustments | (134 | ) | ||
Retained Earnings | 1,832 | |||
Legal Reserve(8) | 446 | |||
Voluntary Reserve(8) | 712 | |||
Regulatory Reserve for Loan Losses(9) | 149 | |||
Unappropriated Retained Earnings | 524 | |||
Other Components of Equity(10) | 1,145 | |||
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Total Capital and Reserves | ₩ | 15,591 | ||
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Total Capitalization | ₩ | 64,739 | ||
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(1) | Except as described in this prospectus supplement, there has been no material adverse change in our capitalization since June 30, 2021. |
(2) | Consists of borrowings and debentures with maturities of more than a year remaining. |
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(3) | We have translated borrowings in foreign currencies as of June 30, 2021 into Won at the rate of ₩1,130.0 to US$1.00, which was the market average exchange rate as announced by the Seoul Monetary Brokerage Services Ltd., on June 30, 2021. |
(4) | As of June 30, 2021, we had contingent liabilities totaling ₩35,767 billion, which consisted of ₩27,273 billion under outstanding guarantees and acceptances and ₩8,494 billion under contingent guarantees and acceptances issued on behalf of our clients. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the six months ended June 30, 2021 and 2020—Note 36.” |
(5) | As of June 30, 2021, we had entered into 438 interest rate related derivative contracts with a notional amount of ₩42,058 billion and 476 currency related derivative contracts with a notional amount of ₩30,596 billion in accordance with our policy to hedge interest rate and currency risks. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the six months ended June 30, 2021 and 2020—Note 20.” |
(6) | See “The Export-Import Bank of Korea—Description of Assets and Liabilities—Sources of Funding” of the accompanying prospectus for an explanation of these sources of funds. All of our borrowings, whether domestic or international, are unsecured and unguaranteed. |
(7) | As of June 30, 2021, our authorized ordinary share capital was ₩15,000 billion and issued fully-paid ordinary share capital was ₩12,748 billion. For more information, see “The Export-Import Bank of Korea—Business—Government Support and Supervision” of the accompanying prospectus. |
(8) | See “The Export-Import Bank of Korea—Business—Government Support and Supervision” of the accompanying prospectus for a description of the manner in which annual net income is transferred to the legal reserve and may be transferred to the voluntary reserve. |
(9) | If the estimated allowance for credit loss determined by K-IFRS for accounting purposes is lower than that for regulatory purposes as required by Regulation on Supervision of Banking Business, we reserve such difference as regulatory reserve for loan losses. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the six months ended June 30, 2021 and 2020—Note 23.” |
(10) | See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of and for the six months ended June 30, 2021 and 2020—Note 22.” |
Government Support
In March, April and June 2021, the Government made contributions to our capital of ₩110 billion, ₩29 billion and ₩160 billion, respectively, in cash.
Selected Financial Statement Data
Recent Developments
The following tables present selected separate financial information as of September 30, 2021 and December 31, 2020 and for the first nine months of 2021 and 2020, which has been derived from our unaudited separate internal management accounts as of September 30, 2021 and for the first nine months of 2021 and 2020 prepared in accordance with K-IFRS.
Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
(billions of Won) | ||||||||
(unaudited) | ||||||||
Income Statement Data | ||||||||
Total Interest Income | ₩ | 1,297 | ₩ | 1,814 | ||||
Total Interest Expense | 594 | 1,153 | ||||||
Net Interest Income | 703 | 661 | ||||||
Operating Income | 895 | 452 | ||||||
Income before Income Tax | 903 | 467 | ||||||
Income Tax Expense | 240 | 115 | ||||||
Net Income | 662 | 351 |
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As of September 30, 2021 (unaudited) | As of December 31, 2020 | |||||||
(billions of Won) | ||||||||
Balance Sheet Data | ||||||||
Total Loan Credits(1) | ₩ | 79,417 | ₩ | 76,288 | ||||
Total Borrowings(2) | 81,821 | 78,718 | ||||||
Total Assets | 101,592 | 97,590 | ||||||
Total Liabilities | 85,790 | 83,121 | ||||||
Total Shareholders’ Equity | 15,802 | 14,469 |
(1) | Gross amount, including domestic usance bills, foreign-currency bills bought, advance payments on acceptances and guarantees, call loans, inter-bank loans in foreign currency, private placement corporate bonds in local currency and others and before deducting allowance for loan losses and net deferred loan origination fees and costs. |
(2) | Includes debentures. |
For the first nine months of 2021, we had net income of ₩662 billion compared to net income of ₩351 billion for the first nine months of 2020, primarily due to a reversal of provision for credit losses in the amount of ₩81 billion in the first nine months of 2021 compared to recognition of such losses in the amount of ₩391 billion in the corresponding period of 2020, mainly reflecting an improvement in the overall asset quality of our loan portfolio. Such effect was partially offset by an increase in income tax expense to ₩240 billion in the first nine months of 2021 from ₩115 billion in the corresponding period of 2020, primarily due to an increase in income before income tax to ₩903 billion in the first nine months of 2021 from ₩467 billion in the corresponding period of 2020, as well as a decrease in net commission income to ₩200 billion in the first nine months of 2021 from ₩281 billion in the corresponding period of 2020, primarily due to a decrease in commissions received in connection with structuring transactions and guarantee contracts.
As of September 30, 2021, our total assets increased to ₩101,592 billion from ₩97,590 billion as of December 31, 2020, primarily due to an increase in Loan Credits to ₩79,417 billion as of September 30, 2021 from ₩76,288 billion as of December 31, 2020.
As of September 30, 2021, our total liabilities increased to ₩85,790 billion from ₩83,121 billion as of December 31, 2020, primarily due to an increase in debentures to ₩75,790 billion as of September 30, 2021 from ₩72,642 billion as of December 31, 2020.
The increases in assets and liabilities were primarily due to increases in the volume of loans and debt, respectively. The depreciation of the Won against the U.S. dollar as of September 30, 2021 compared to December 31, 2020 magnified the effect of the increases in the volume of loans and debt, as a majority of our assets and liabilities consisted of foreign currency loans and debt (including significant percentages in U.S. dollars).
As of September 30, 2021, our total shareholders’ equity increased to ₩15,802 billion from ₩14,469 billion as of December 31, 2020, primarily due to (i) an increase in retained earnings to ₩1,970 billion as of September 30, 2021 from ₩1,349 billion as of December 31, 2020 and (ii) an increase in capital stock to ₩12,748 billion as of September 30, 2021 from ₩12,449 billion as of December 31, 2020.
Based on preliminary data, our capital adequacy ratio as of September 30, 2021, on a consolidated basis, was 15.6%, an increase from 15.1% as of December 31, 2020.
Separate Financial Statement Data
You should read the following financial statement data together with our separate financial statements and notes included in this prospectus supplement. The following tables present selected separate financial
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information as of June 30, 2021 and December 31, 2020 and for the six months ended June 30, 2021 and 2020, which has been derived from our unaudited separate K-IFRS financial statements as of June 30, 2021 and for the six months ended June 30, 2021 and 2020 included in this prospectus supplement:
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
(billions of Won) | ||||||||
(unaudited) | ||||||||
Income Statement Data | ||||||||
Total Interest Income | ₩ | 871 | ₩ | 1,294 | ||||
Total Interest Expense | 395 | 862 | ||||||
Net Interest Income | 476 | 432 | ||||||
Operating Income | 681 | 222 | ||||||
Income before Income Tax | 690 | 237 | ||||||
Income Tax Expense | 166 | 57 | ||||||
Net Income | 523 | 180 | ||||||
As of June 30, 2021 (unaudited) | As of December 31, 2020 | |||||||
(billions of Won) | ||||||||
Balance Sheet Data | ||||||||
Total Loan Credits(1) | ₩ | 77,516 | ₩ | 76,288 | ||||
Total Borrowings(2) | 79,964 | 78,718 | ||||||
Total Assets | 99,284 | 97,590 | ||||||
Total Liabilities | 83,693 | 83,121 | ||||||
Total Shareholders’ Equity | 15,591 | 14,469 |
(1) | Gross amount, including domestic usance bills, foreign-currency bills bought, advance payments on acceptances and guarantees, call loans, inter-bank loans in foreign currency, private placement corporate bonds in local currency and others and before deducting allowance for loan losses and net deferred loan origination fees and costs. |
(2) | Includes debentures. |
In the first half of 2021, we had net income of ₩523 billion compared to net income of ₩180 billion in the corresponding period of 2020. The principal factors for the increase in net income to ₩523 billion in the first half of 2021 from ₩180 billion in the corresponding period of 2020 included:
• | net other operating income in the amount of ₩655 billion in the first half of 2021 compared to net other operating expense in the amount of ₩1,232 billion in the corresponding period of 2020, primarily due to net gain on fair value hedged items of ₩645 billion in the first half of 2021 compared to net loss on such items of ₩1,215 billion in the corresponding period of 2020; and |
• | reversal of impairment loss on credit in the amount of ₩74 billion in the first half of 2021 compared to recognition of such losses in the amount of ₩335 billion in the corresponding period of 2020, mainly reflecting an improvement in the overall asset quality of our loan portfolio. |
The above factors were partially offset by net loss on hedging derivative assets in the amount of ₩760 billion in the first half of 2021 compared to net gain on such assets in the amount of ₩964 billion in the corresponding period of 2020, as well as a decrease in net gain on financial assets at fair value through profit or loss to ₩28 billion in the first half of 2021 from ₩148 billion in the corresponding period of 2020.
As of June 30, 2021, our total assets increased to ₩99,284 billion from ₩97,590 billion as of December 31, 2020, primarily due to an increase in Loan Credits to ₩77,516 billion as of June 30, 2021 from ₩76,288 billion as of December 31, 2020.
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As of June 30, 2021, our total liabilities increased to ₩83,693 billion from ₩83,121 billion as of December 31, 2020, primarily due to an increase in debentures to ₩74,391 billion as of June 30, 2021 from ₩72,642 billion as of December 31, 2020.
The increases in assets and liabilities were primarily due to increases in the volume of loans and debt, respectively. The depreciation of the Won against the U.S. dollar as of June 30, 2021 compared to December 31, 2020 magnified the effect of the increase in the volume of loans and debt, as a majority of our assets and liabilities consisted of foreign currency loans and debt (including significant percentages in U.S. dollars).
As of June 30, 2021, our total shareholders’ equity increased to ₩15,591 billion from ₩14,469 billion as of December 31, 2020, primarily due to our net income of ₩523 billion in the first half of 2021 as well as contributions made to our capital by the Government in the first half of 2021.
Operations
Loan Operations
In the first half of 2021, we provided total loans of ₩31,503 billion, a decrease of 12% from the corresponding period of 2020.
Export Credits
As of June 30, 2021, export credits in the amount of ₩39,281 billion represented 51% of our total outstanding Loan Credits. Our disbursements of export credits amounted to ₩17,976 billion in the first half of 2021, a decrease of 15% from the corresponding period of 2020, which was mainly due to a decrease in demand for loan and trade financing from domestic exporters. The appreciation of the Won against the U.S. dollar as of June 30, 2021 compared to June 30, 2020 magnified the effect of the decrease in the volume of export credits in the first half of 2021, as a majority of our export credits consisted of foreign currency credits (including a significant percentage in U.S. dollars).
Overseas Investment Credits
As of June 30, 2021, overseas investment credits amounted to ₩30,033 billion, representing 39% of our total outstanding Loan Credits. Our disbursements of overseas investment credits in the first half of 2021 decreased by 13% to ₩8,417 billion from the corresponding period of 2020, primarily due to decreased demand in overseas investment and project credits. The appreciation of the Won against the U.S. dollar as of June 30, 2021 compared to June 30, 2020 magnified the effect of the decrease in the volume of overseas investment credits in the first half of 2021, as a majority of our overseas investment credits consisted of foreign currency credits (including a significant percentage in U.S. dollars).
Import Credits
As of June 30, 2021, import credits in the amount of ₩6,126 billion represented 8% of our total outstanding Loan Credits. Our disbursements of import credits amounted to ₩5,110 billion in the first half of 2021, an increase of 1% over the corresponding period of 2020, which was mainly due to an increase in demand for financing for raw materials used for export and domestic consumption. The appreciation of the Won against the U.S. dollar as of June 30, 2021 compared to June 30, 2020 partially offset the effect of the increase in the volume of import credits in the first half of 2021, as a majority of our import credits consisted of foreign currency credits (including a significant percentage in U.S. dollars).
Guarantee Operations
Guarantee commitments as of June 30, 2021 increased slightly to ₩35,767 billion from ₩34,703 billion as of December 31, 2020. Guarantees we had confirmed as of June 30, 2021 decreased to ₩27,273 billion from ₩27,961 billion as of December 31, 2020.
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For further information regarding our guarantee and letter of credit operations, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of June 30, 2021 and for the six months ended June 30, 2021 and 2020—Note 36”.
Description of Assets and Liabilities
Total Credit Exposure
The following table sets out our Credit Exposure as of June 30, 2021, categorized by type of exposure extended:
June 30, 2021 | ||||||||||
(billions of Won, except for percentages) | ||||||||||
A | Loans in Won | ₩ | 24,538 | 24 | % | |||||
B | Loans in Foreign Currencies | 49,251 | 48 | |||||||
C | Loans (A+B) | 73,789 | 72 | |||||||
D | Other Loans(1) | 3,728 | 4 | |||||||
E | Loan Credits (C+D) | 77,516 | 75 | |||||||
F | Allowances for Possible Loan Losses | 1,744 | 2 | |||||||
G | Loan Credits (including present value discounts) (E-F) | 75,772 | 74 | |||||||
H | Confirmed Guarantees | 27,273 | 26 | |||||||
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I | Credit Exposure (G+H) | ₩ | 103,046 | 100 | % | |||||
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(1) | Includes domestic usance bills, foreign currency bills bought, advance payments on acceptances and guarantees, call loans, inter-bank loans in foreign currencies and private placement corporate bonds in Won. |
Loan Credits by Geographic Area
The following table sets out the total amount of our outstanding Loan Credits (including call loans and inter-bank loans in foreign currency) as of June 30, 2021, categorized by geographic area(1):
June 30, 2021 | As % of June 30, 2021 Total | |||||||
(billions of Won, except for percentages) | ||||||||
Asia(2) | ₩ | 60,916 | 79 | % | ||||
Europe | 8,275 | 11 | ||||||
America | 6,605 | 9 | ||||||
Africa | 1,721 | 2 | ||||||
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Total | ₩ | 77,516 | 100 | % | ||||
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(1) | For purposes of this table, export credits have been allocated to the geographic areas in which the foreign buyers of Korean exports are located; overseas investment credits have been allocated to the geographic areas in which the overseas investments being financed are located; and import credits have been allocated to the geographic areas in which the sellers of the imported goods are located. |
(2) | Includes Australia. |
Individual Exposure
As of June 30, 2021, our largest Credit Exposure was to Samsung Heavy Industries Co., Ltd. in the amount of ₩3,559 billion, an increase from ₩3,515 billion as of December 31, 2020, primarily due to an increase in guarantees.
As of June 30, 2021, our second and third largest Credit Exposures, respectively, were to Daewoo Shipbuilding & Marine Engineering Co., Ltd. in the amount of ₩3,010 billion and Doosan Heavy Industries & Construction in the amount of ₩2,286 billion.
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The following table sets out our five largest Credit Exposures as of June 30, 2021(1):
Rank | Name of Borrower | Loans | Guarantees | Total | ||||||||||
(billions of Won) | ||||||||||||||
1 | Samsung Heavy Industries | 1,457 | 2,102 | 3,559 | ||||||||||
2 | Daewoo Shipbuilding & Marine Engineering | 540 | 2,470 | 3,010 | ||||||||||
3 | Doosan Heavy Industries & Construction | 1,979 | 307 | 2,286 | ||||||||||
4 | Korean Air Lines | 1,066 | 449 | 1,515 | ||||||||||
5 | GS Engineering & Construction | 646 | 730 | 1,376 |
(1) | Excludes loans and guarantees extended to affiliates. |
Source: Internal accounting records
Asset Quality
Asset Classifications
The following table provides information on our asset quality and loan loss reserves as of June 30, 2021:
As of June 30, 2021 | ||||||||
Loan Amount(1) | Loan Loss Reserve(2) | |||||||
Normal | ₩ | 126,902 | ₩ | 755 | ||||
Precautionary | 8,879 | 1,260 | ||||||
Sub-standard | 118 | 48 | ||||||
Doubtful | 499 | 430 | ||||||
Estimated Loss | 248 | 234 | ||||||
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Total | ₩ | 136,646 | ₩ | 2,726 | ||||
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(1) | These figures include loans (excluding inter-bank loans and call loans), domestic usance bills, bills bought, notes bought, advances for customers, confirmed and unconfirmed acceptances and guarantees and unused loan commitments, among others. |
(2) | These figures include present value discount. |
Reserves for Credit Losses
As of June 30, 2021, the amount of our non-performing assets was ₩865 billion, a decrease of 47.0% from ₩1,631 billion as of December 31, 2020. As of June 30, 2021, our non-performing asset ratio was 0.6%, compared to 1.2% as of December 31, 2020.
We cannot provide any assurance that our current level of exposure to non-performing assets will not increase in the future or that any of our borrowers (including our largest borrowers as described above) is not currently facing, or in the future will not face, material financial difficulties.
The following table sets forth information regarding our loan loss reserves as of June 30, 2021:
As of June 30, 2021 | ||||
Loan Amount(1) | ||||
Loan Loss Reserve (A) | ₩ | 2,726 | ||
NPA (B)(1) | 865 | |||
Total Equity (C) | 15,591 | |||
Reserve to NPA (A/B) | 315 | % | ||
Equity at Risk (B-A)/C | — |
(1) | Non-performing assets, which are defined as assets that are classified as substandard or below. |
Source: Internal accounting records.
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Investments
As of June 30, 2021, our total investment in securities amounted to ₩14,451 billion, representing 14.6% of our total assets.
The following table sets out the composition of our investment securities as of June 30, 2021:
Type of Investment Securities | Amount | % | ||||||
(billions of Won | ||||||||
Financial Assets at FVOCI | ₩ | 12,178 | 84 | % | ||||
Securities at Amortized Cost | 708 | 5 | ||||||
Investments in Associates and Subsidiaries | 1,565 | 11 | ||||||
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Total | ₩ | 14,451 | 100 | % | ||||
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For further information relating to the classification guidelines and methods of valuation of our financial instruments (including securities), see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of June 30, 2021 and for the six months ended June 30, 2021 and 2020—Note 5”.
Guarantees and Acceptances and Contingent Liabilities
As of June 30, 2021, we had issued a total amount of ₩27,273 billion in confirmed guarantees and acceptances, of which ₩24,158 billion, representing 88.6% of the total amount, was classified as normal and ₩2,867 billion, representing 10.5% of the total amount, was classified as precautionary, and ₩248 billion, representing 0.9% of the total amount, was classified as substandard or below.
Derivatives
As of June 30, 2021, our outstanding loans made at floating rates of interest totaled approximately ₩51,904 billion, whereas our outstanding borrowings made at floating rates of interest totaled approximately ₩54,519 billion, including those raised in Australian Dollar, Euro and Brazil Real and swapped into U.S. dollar floating rate borrowings. As of June 30, 2021, we had entered into 438 interest rate related derivative contracts with a notional amount of ₩42,058 billion and had entered into 476 currency related derivative contracts with a notional amount of ₩30,596 billion. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of June 30, 2021 and for the six months ended June 30, 2021 and 2020—Note 20”.
Sources of Funding
We raised a net total of ₩30,801 billion (new borrowings plus loan repayments by our clients less repayment of our existing debt) during the first half of 2021, a decrease of 27.7% from ₩42,578 billion in the corresponding period of 2020. The total loan repayments, including prepayments by our clients, during the first half of 2021 amounted to ₩29,962 billion, a decrease of 11.7% from ₩33,933 billion during the corresponding period of 2020.
As of June 30, 2021, we had no outstanding borrowings from the Government. We issued Won-denominated domestic bonds in the aggregate amount of ₩8,230 billion during the first half of 2021.
During the first half of 2021, we issued eurobonds in the aggregate principal amount of US$2,813 million in various types of currencies under our existing global medium term notes program, a 1.0% increase from US$2,785 million in the corresponding period of 2020. In addition, we issued global bonds during the first half of 2021 in the aggregate amount of US$3,500 million under our U.S. shelf registration statement compared with US$500 million in the corresponding period of 2020. As of June 30, 2021, the outstanding amounts of our notes
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and debentures were US$33,335 million, JPY 23,600 million, HKD 6,363 million, BRL 1,266 million, EUR 3,929 million, THB 8,880 million, CHF 1,250 million, AUD 4,606 million, INR 27,400 million, CNY 6,162 million, IDR 13,083,000 million, PEN 473 million, NZD 854 million, ZAR 1,900 million, NOK 2,250 million, SEK 250 million, GBP 35 million, CAD 65 million, MXN 12,150 million, CZK 3,420 million, PLN 194 million and SGD 200 million.
We also borrow from foreign financial institutions in the form of loans that are principally made bilaterally or by syndicates of commercial banks at floating or fixed interest rates and in foreign currencies, with original maturities ranging from one to five years. As of June 30, 2021, the outstanding amount of such borrowings from foreign financial institutions was US$1,381 million.
As of June 30, 2021, our total paid-in capital amounted to ₩12,748 billion, and the Government, The Bank of Korea and Korea Development Bank owned 69%, 9% and 22%, respectively, of our paid-in capital.
As of June 30, 2021, the aggregate outstanding principal amount of our borrowings (including export-import financing debentures), which was ₩79,366 billion, was equal to 20.1% of the authorized amount of ₩394,980 billion.
Debt
Debt Repayment Schedule
The following table sets out the principal repayment schedule for our debt outstanding as of June 30, 2021:
Maturing on or before December 31, | ||||||||||||||||||||
2021 | 2022 | 2023 | 2024 | Thereafter | ||||||||||||||||
(billions of won) | ||||||||||||||||||||
Won | ₩ | 8,475 | ₩ | 9,760 | ₩ | 2,310 | ₩ | 850 | ₩ | 1,650 | ||||||||||
Foreign(2) | 7,449 | 11,317 | 9,002 | 8,863 | 19,689 | |||||||||||||||
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Total Won Equivalent | ₩ | 15,924 | ₩ | 21,077 | ₩ | 11,312 | ₩ | 9,713 | ₩ | 21,339 | ||||||||||
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(1) | Borrowings in foreign currency have been translated into Won at the market average exchange rates on June 30, 2021, as announced by the Seoul Money Brokerage Services Ltd. |
(2) | This figure includes debentures, bank loans, commercial papers and repurchase agreements. |
As of June 30, 2021, our foreign currency assets maturing within three months, six months and one year exceeded our foreign currency liabilities coming due within such periods by US$4,571 million, US$6,461 million and US$5,266 million, respectively. As of June 30, 2021, our total foreign currency liabilities exceeded our total foreign currency assets by US$281 million.
Capital Adequacy
As of June 30, 2021, our capital adequacy ratio, on a consolidated basis, was 16.0%, an increase from 15.1% as of December 31, 2020.
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The following table sets forth our capital base and capital adequacy ratios (on a consolidated basis) reported as of June 30, 2021:
June 30, 2021 | ||||
(billions of Won, except for percentages) | ||||
Tier I | ₩ | 15,596 | ||
Paid-in Capital (including capital adjustments) | 12,748 | |||
Retained Earnings(1) | 1,887 | |||
Accumulated other comprehensive income | 1,120 | |||
Common shares issued by consolidated subsidiaries of the bank and held by third parties | 2 | |||
Deductions from Tier I Capital | 162 | |||
Capital Adjustments | 134 | |||
Deferred Tax Asset | 0 | |||
Others | 28 | |||
Tier II (General Loan Loss Reserves) | 1,824 | |||
Total Capital | 17,420 | |||
Risk Adjusted Assets | 108,606 | |||
Capital Adequacy Ratios | ||||
Tier I common equity | 14.36 | % | ||
Tier 1 | 14.36 | % | ||
Tier I and Tier II | 16.0 | % |
(1) | Net amount after deducting regulatory reserve for bad loans. |
Source: Internal accounting records.
Management and Employees
Management
The members of the Board of Directors are currently as follows:
Name | Board Member Since | Position | ||||||
Moon-kyu Bang | October 30, 2019 | Chairman and President | ||||||
Woo-seog Kwon | May 15, 2021 | Vice President | ||||||
Tae-soo Kim | May 15, 2021 | Executive Director | ||||||
Bok-hwan Yu | January 6, 2020 | Non-Executive Director | ||||||
Tammy Chung | January 6, 2020 | Non-Executive Director | ||||||
Jaimin Lee | September 18, 2021 | Non-Executive Director | ||||||
Tae-ho Yun | September 18, 2021 | Non-Executive Director |
Financial Statements and the Auditors
Our interim separate financial statements as of June 30, 2021 and December 31, 2020 and for the six months ended June 30, 2021 and 2020 appearing in this prospectus supplement were prepared in conformity with K-IFRS, as summarized in Note 2 of the notes to our unaudited separate financial statements as of June 30, 2021 and for the six months ended June 30, 2021 and 2020 included in this prospectus supplement.
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THE EXPORT-IMPORT BANK OF KOREA
CONDENSED SEPARATE INTERIM STATEMENTS OF FINANCIAL POSITION
AS OF JUNE 30, 2021 AND DECEMBER 31, 2020
June 30, 2021 | December 31, 2020 | |||||||
(Korean won in millions) | ||||||||
ASSETS: | ||||||||
Cash and due from financial institutions (Notes 4, 5 and 7) | ₩ | 4,131,909 | ₩ | 4,025,737 | ||||
Financial assets at fair value through profit or loss (“FVTPL”) (Notes 4, 5, 8 and 20) | 2,162,547 | 3,478,402 | ||||||
Hedging derivative assets (Notes 4, 5 and 20) | 931,344 | 1,499,766 | ||||||
Loans at amortized cost (Notes 4, 5, 10 and 37) | 75,412,061 | 73,407,381 | ||||||
Financial investments (Notes 4, 5 and 9) | 12,885,999 | 11,042,411 | ||||||
Investments in associates and subsidiaries (Note 11) | 1,565,153 | 1,919,212 | ||||||
Tangible assets, net (Note 12) | 263,826 | 263,087 | ||||||
Intangible assets, net (Note 13) | 26,849 | 28,082 | ||||||
Deferred tax assets (Note 34) | 964,042 | 1,107,370 | ||||||
Retirement benefit assets, net (Note 18) | — | 4,801 | ||||||
Other assets (Notes 4, 5, 14 and 37) | 939,926 | 813,786 | ||||||
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₩ | 99,283,656 | ₩ | 97,590,035 | |||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
LIABILITIES: | ||||||||
Financial liabilities at FVTPL (Notes 4, 5 and 20) | ₩ | 524,340 | ₩ | 753,442 | ||||
Hedging derivative liabilities (Notes 4, 5 and 20) | 430,660 | 418,970 | ||||||
Borrowings (Notes 4, 5 and 15) | 5,573,065 | 6,076,631 | ||||||
Debentures (Notes 4, 5 and 16) | 74,390,786 | 72,641,777 | ||||||
Provisions (Notes 17 and 36) | 560,798 | 626,611 | ||||||
Retirement benefit liabilities, net (Note 18) | 901 | — | ||||||
Other liabilities (Notes 4, 5, 19 and 37) | 2,212,065 | 2,603,158 | ||||||
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83,692,615 | 83,120,589 | |||||||
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STOCKHOLDERS’ EQUITY: | ||||||||
Capital stock (Notes 1 and 21) | 12,748,254 | 12,449,456 | ||||||
Capital adjustments | (133,713 | ) | (132,271 | ) | ||||
Other components of equity (Notes 20 and 22) | 1,144,973 | 803,317 | ||||||
Retained earnings (Note 23) | ||||||||
(Regulatory reserve for loan losses as of June 30, 2021 and December 31 2020: ₩149,219 million and ₩338,574 million) | 1,831,527 | 1,348,944 | ||||||
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15,591,041 | 14,469,446 | |||||||
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₩ | 99,283,656 | ₩ | 97,590,035 | |||||
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See accompanying notes to condensed separate interim financial statements.
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THE EXPORT-IMPORT BANK OF KOREA
CONDENSED SEPARATE INTERIM STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
(Korean won in millions) | ||||||||
OPERATING INCOME: | ||||||||
Net interest income (Notes 24 and 37): | ||||||||
Interest income | ₩ | 871,249 | ₩ | 1,293,547 | ||||
Interest expenses | (395,039 | ) | (861,890 | ) | ||||
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476,210 | 431,657 | |||||||
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Net commission income (Notes 25 and 37): | ||||||||
Commission income | 139,261 | 171,028 | ||||||
Commission expenses | (8,994 | ) | (5,740 | ) | ||||
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130,267 | 165,288 | |||||||
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Dividend income (Note 26) | 38,493 | 34,150 | ||||||
Net gain (loss) on financial assets at FVTPL (Note 27) | 28,306 | 148,232 | ||||||
Net gain (loss) on hedging derivative assets (Notes 20 and 28) | (760,263 | ) | 963,781 | |||||
Net gain (loss) on financial investments (Note 29) | 1,530 | 497 | ||||||
Net gain (loss) on foreign exchange transaction | 150,840 | 152,989 | ||||||
Net other operating income (expenses) (Note 30) | 655,028 | (1,232,169 | ) | |||||
Reversal of (additional) impairment loss on credit (Notes 31 and 37) | 74,165 | (334,602 | ) | |||||
General and administrative expenses (Note 32) | (113,201 | ) | (107,387 | ) | ||||
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Total operating income | 681,375 | 222,436 | ||||||
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NON-OPERATING INCOME (Note 33): | ||||||||
Net gain (loss) on investments in associates and subsidiaries | 10,931 | 16,913 | ||||||
Net other non-operating income (expenses) | (2,563 | ) | (1,924 | ) | ||||
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8,368 | 14,989 | |||||||
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PROFIT BEFORE INCOME TAX | 689,743 | 237,425 | ||||||
INCOME TAX EXPENSES (Note 34) | (166,401 | ) | (57,397 | ) | ||||
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PROFIT FOR THE PERIOD | 523,342 | 180,028 | ||||||
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(Adjusted profit for the period after regulatory reserve for loan losses for the six months ended June 30, 2021 and 2020: ₩550,657 million and ₩280,353 million) (Note 23) | ||||||||
OTHER COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD (Note 22) | ||||||||
Items not reclassified subsequently to profit or loss: | ||||||||
Remeasurement of net defined benefit liabilities | — | (1,040 | ) | |||||
Net gain (loss) on equity securities at fair value through other comprehensive income(“FVOCI”) | 465,732 | 85,755 | ||||||
Income tax effect | (112,705 | ) | (20,501 | ) | ||||
Items that are or may be reclassified subsequently to profit or loss: | ||||||||
Net gain (loss) on debt securities at FVOCI | (15,971 | ) | 16,297 | |||||
Net gain (loss) on valuation of cash flow hedge | 970 | — | ||||||
Income tax effect | 3,630 | (3,944 | ) | |||||
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341,656 | 76,567 | |||||||
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TOTAL COMPREHENSIVE INCOME | ₩ | 864,998 | ₩ | 256,595 | ||||
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See accompanying notes to condensed separate interim financial statements.
S-22
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
CONDENSED SEPARATE INTERIM STATEMENTS OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
Other components of equity | ||||||||||||||||||||||||||||||||
Capital stock | Capital adjustments | Gain (Loss) on valuation of financial assets at FVOCI | Gain (Loss) on valuation of cash- flow hedge | Remeasurement, net of defined benefit liabilities | Gain (loss) on disposal of financial assets at FVOCI | Retained earnings | Total | |||||||||||||||||||||||||
(Korean won in millions) | ||||||||||||||||||||||||||||||||
January 1, 2020 | ₩ | 11,871,143 | ₩ | (129,487 | ) | ₩ | 642,729 | ₩ | — | ₩ | 15,094 | ₩ | (63,415 | ) | ₩ | 1,355,571 | ₩ | 13,691,635 | ||||||||||||||
Payment of dividends | — | — | — | — | — | — | (109,037 | ) | (109,037 | ) | ||||||||||||||||||||||
Total comprehensive income | — | — | 78,581 | — | (789 | ) | (1,225 | ) | 180,028 | 256,595 | ||||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | 180,028 | 180,028 | ||||||||||||||||||||||||
Other comprehensive income (loss): | — | — | 78,581 | — | (789 | ) | (1,225 | ) | — | 76,567 | ||||||||||||||||||||||
Net loss on valuation of financial assets at FVOCI, net of tax | — | — | 78,581 | — | — | — | — | 78,581 | ||||||||||||||||||||||||
Remeasurement of net defined benefit liabilities, net of tax | — | — | — | — | (789 | ) | — | — | (789 | ) | ||||||||||||||||||||||
Net loss on disposal of financial assets at FVOCI, net of tax | — | — | — | — | — | (1,225 | ) | — | (1,225 | ) | ||||||||||||||||||||||
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June 30, 2020 | ₩ | 11,871,143 | ₩ | (129,487 | ) | ₩ | 721,310 | ₩ | — | ₩ | 14,305 | ₩ | (64,640 | ) | ₩ | 1,426,562 | ₩ | 13,839,193 | ||||||||||||||
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January 1, 2021 | ₩ | 12,449,456 | ₩ | (132,271 | ) | ₩ | 853,563 | ₩ | 3 | ₩ | 11,855 | ₩ | (62,104 | ) | ₩ | 1,348,944 | ₩ | 14,469,446 | ||||||||||||||
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Paid-in capital increase | 298,798 | (1,442 | ) | — | — | — | — | — | 297,356 | |||||||||||||||||||||||
Payment of dividends | — | — | — | — | — | — | (40,759 | ) | (40,759 | ) | ||||||||||||||||||||||
Total comprehensive income | — | — | 325,518 | 735 | — | 15,403 | 523,342 | 864,998 | ||||||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | 523,342 | 523,342 | ||||||||||||||||||||||||
Other comprehensive income (loss): | — | — | 325,518 | 735 | — | 15,403 | — | 341,656 | ||||||||||||||||||||||||
Net gain on valuation of financial assets at FVOCI, net of tax | — | — | 325,518 | — | — | — | — | 325,518 | ||||||||||||||||||||||||
Net gain on valuation of cash flow hedge, net of tax | — | — | — | 735 | — | — | — | 735 | ||||||||||||||||||||||||
Net loss on disposal of financial assets at FVOCI , net of tax | — | — | — | — | — | 15,403 | — | 15,403 | ||||||||||||||||||||||||
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June 30, 2021 | ₩ | 12,748,254 | ₩ | (133,713 | ) | ₩ | 1,179,081 | ₩ | 738 | ₩ | 11,855 | ₩ | (46,701 | ) | ₩ | 1,831,527 | ₩ | 15,591,041 | ||||||||||||||
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See accompanying notes to condensed separate interim financial statements.
S-23
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
CONDENSED SEPARATE INTERIM STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
(Korean won in millions) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Profit for the period | ₩ | 523,342 | ₩ | 180,028 | ||||
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Adjustments to reconcile profit for the period to net cash used in operating activities: | ||||||||
Income tax expenses | 166,401 | 57,397 | ||||||
Interest income | (871,249 | ) | (1,293,547 | ) | ||||
Interest expenses | 395,039 | 861,890 | ||||||
Dividend and distribution income | (45,602 | ) | (44,853 | ) | ||||
Dividend received from subsidiaries and associates | (10,931 | ) | (16,913 | ) | ||||
Loss on financial assets at FVTPL | 11,064 | 2,917 | ||||||
Transfer to derivatives’ credit risk provision | — | 14,145 | ||||||
Loss on redemption of bonds | — | 28 | ||||||
Loss on foreign exchange transactions | 464,283 | 1,157,392 | ||||||
Additional impairment loss on credit | — | 334,602 | ||||||
Depreciation and amortization | 8,917 | 9,668 | ||||||
Loss on disposal of tangible, intangible and other assets | 1 | — | ||||||
Loss on valuation of derivative assets for trading | 557,372 | 537,750 | ||||||
Loss on valuation of derivative assets for hedging | 702,584 | 538,902 | ||||||
Loss on fair value hedged items | 29,676 | 1,294,259 | ||||||
Retirement benefits | 5,617 | 5,494 | ||||||
Gain on financial assets at FVTPL | (5,030 | ) | (9,483 | ) | ||||
Gain on financial assets at FVOCI | (1,530 | ) | (497 | ) | ||||
Reversal of derivatives’ credit risk provision | (14,378 | ) | — | |||||
Gain on foreign exchange transactions | (696,758 | ) | (1,308,298 | ) | ||||
Reversal of impairment loss on credit | (74,165 | ) | — | |||||
Gain on fair value hedged items | (674,246 | ) | (79,032 | ) | ||||
Gain on valuation of derivative assets for trading | (416,376 | ) | (682,116 | ) | ||||
Gain on valuation of derivative assets for hedging | (46,010 | ) | (856,234 | ) | ||||
Gain on disposal of tangible, intangible and other assets | (23 | ) | (77 | ) | ||||
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(515,344 | ) | 523,394 | ||||||
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Changes in operating assets and liabilities: | ||||||||
Due from financial institutions | (148,776 | ) | 440,220 | |||||
Financial assets and liabilities at FVTPL | 947,655 | (510,101 | ) | |||||
Hedging derivative assets and liabilities | (75,492 | ) | (205,123 | ) | ||||
Loans at amortized cost | (278,891 | ) | (9,004,251 | ) | ||||
Other assets | 284,761 | (256,946 | ) | |||||
Provisions | 3,147 | 30,053 | ||||||
Net retirement benefit liabilities (assets) | 85 | (1,446 | ) | |||||
Other liabilities | (495,416 | ) | 130,099 | |||||
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237,073 | (9,377,495 | ) | ||||||
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Payment of income tax | (400,397 | ) | (366,777 | ) | ||||
Interest received | 845,957 | 1,301,667 | ||||||
Interest paid | (352,007 | ) | (870,149 | ) | ||||
Dividend received | 56,533 | 61,766 | ||||||
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Net cash provided by (used in) operating activities | 395,157 | (8,547,566 | ) | |||||
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S-24
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
CONDENSED SEPARATE INTERIM STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (CONTINUED)
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
(Korean won in millions) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Disposals of financial investments | ₩ | 466,064 | ₩ | 281,562 | ||||
Disposals of investments in associates | — | 7,614 | ||||||
Disposals of tangible assets | 23 | 77 | ||||||
Acquisitions of financial investments | (1,353,538 | ) | (1,624,808 | ) | ||||
Acquisitions of investments in associates | (26,461 | ) | — | |||||
Acquisitions of tangible assets | (4,256 | ) | (1,321 | ) | ||||
Acquisitions of intangible assets | (4,168 | ) | (1,867 | ) | ||||
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Net cash used in investing activities | (922,336 | ) | (1,338,743 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Increase in call-money | — | 380,243 | ||||||
Proceeds from borrowings | 10,882,659 | 8,518,490 | ||||||
Proceeds from debentures | 30,623,094 | 18,109,034 | ||||||
Paid-in capital increase | 297,356 | — | ||||||
Increase in deposits | — | 2 | ||||||
Repayment of borrowings | (11,607,377 | ) | (5,369,003 | ) | ||||
Repayment of debentures | (29,714,381 | ) | (11,861,892 | ) | ||||
Decrease in deposits | — | (2 | ) | |||||
Payment of dividends | (40,759 | ) | (109,037 | ) | ||||
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Net cash provided by financing activities | 440,592 | 9,667,835 | ||||||
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NET DECREASE IN CASH AND CASH EQUIVALENTS | (86,587 | ) | (218,474 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD | 3,071,235 | 2,913,676 | ||||||
EFFECTS OF FOREIGN EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS IN FOREIGN CURRENCIES | 41,869 | (403,034 | ) | |||||
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CASH AND CASH EQUIVALENTS, END OF THE PERIOD (Note 7 and 35) | ₩ | 3,026,517 | ₩ | 2,292,168 | ||||
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See accompanying notes to condensed separate interim financial statements.
S-25
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO THE CONDENSED SEPARATE INTERIM FINANCIAL STATEMENTS
AS OF JUNE 30, 2021 AND DECEMBER 31, 2020,
AND FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
1. | GENERAL: |
(1) | Summary of The Export-Import Bank of Korea |
The Export-Import Bank of Korea (the “Bank”) was established in 1976 as a special financial institution under The Export-Import Bank of Korea Act (the “EXIM Bank Act”) to grant financial facilities for overseas trade (i.e., export and import), investments and resources development activities. As of June 30, 2021, the Bank operates a head office in Seoul, Marine Finance Center in Busan, ten domestic branches, three domestic offices, a domestic subsidiary, four overseas subsidiaries, and twenty-four overseas offices.
The Bank’s authorized capital is ₩15,000,000 million, and through numerous capital increases since the establishment, its paid-in capital is ₩12,748,254 million as of June 30, 2021. The Government of the Republic of Korea (the “Government”), the Bank of Korea, and the Korea Development Bank hold 68.74%, 9.14%, and 22.12%, respectively, of the ownership of the Bank as of June 30, 2021.
The Bank, as a trustee of the Government, has managed the Economic Development Cooperation Fund (“EDCF”) since June 1987 and the Inter-Korean Cooperation Fund (“IKCF”) since March 1991. These funds are accounted for separately and are not included in the Bank’s separate interim financial statements. The Bank receives fees from the Government for the trustee services.
(2) | Summary of subsidiaries and associates |
1) | Subsidiaries of the Bank as of June 30, 2021 and December 31, 2020 are as follows: |
(June 30, 2021)
Subsidiaries | Location | Capital stock | Main business | Number of shares owned | Percentage of owner- ship (%) | Financial statements as of | ||||||||||||||||
KEXIM Bank UK Limited | United Kingdom | GBP | 81mil. | Finance | 81,283,897 | 100.00 | Jun. 30, 2021 | |||||||||||||||
KEXIM Vietnam Leasing Co. (*1) | Vietnam | USD | 53mil. | Finance | — | 100.00 | Jun. 30, 2021 | |||||||||||||||
PT.KOEXIM Mandiri Finance | Indonesia | IDR | 52,000mil. | Finance | 442 | 85.00 | Jun. 30, 2021 | |||||||||||||||
KEXIM Asia Limited | Hong Kong | USD | 130mil. | Finance | 130,000,000 | 100.00 | Jun. 30, 2021 | |||||||||||||||
EXIM PLUS Co., Ltd. | Korea | KRW | 950mil. | Service | 190,000 | 100.00 | Jun. 30, 2021 |
(December 31, 2020)
Subsidiaries | Location | Capital stock | Main business | Number of shares owned | Percentage of owner- ship (%) | Financial statements as of | ||||||||||||||||
KEXIM Bank UK Limited | United Kingdom | GBP | 81mil. | Finance | 81,283,897 | 100.00 | Dec. 31, 2020 | |||||||||||||||
KEXIM Vietnam Leasing Co. (*1) | Vietnam | USD | 53mil. | Finance | — | 100.00 | Dec. 31, 2020 | |||||||||||||||
PT.KOEXIM Mandiri Finance | Indonesia | IDR | 52,000mil. | Finance | 442 | 85.00 | Dec. 31, 2020 | |||||||||||||||
KEXIM Asia Limited | Hong Kong | USD | 130mil. | Finance | 130,000,000 | 100.00 | Dec. 31, 2020 | |||||||||||||||
EXIM PLUS Co., Ltd. | Korea | KRW | 950mil. | Service | 190,000 | 100.00 | Dec. 31, 2020 |
(*1) | This entity does not issue share certificates. |
S-26
Table of Contents
2) | Associates of the Bank as of June 30, 2021 and December 31, 2020 are as follows: |
(June 30, 2021)
Associates | Location | Capital stock | Main business | Number of shares owned | Percentage of owner- ship (%) | Financial statements as of | ||||||||||||||||
Credit Guarantee and Investment Fund | Philippines | USD | 1,129mil. | Financial service | 171,400,000 | 15.18 | Jun. 30, 2021 | |||||||||||||||
KTB Newlake Global Healthcare PEF | Korea | KRW | 33,850mil. | Financial service | 8,462,558,125 | 25.00 | Jun. 30, 2021 | |||||||||||||||
Korea Aerospace Industries. Ltd. | Korea | KRW | 487,376mil. | Manufacturing | 25,745,964 | 26.41 | Jun. 30, 2021 | |||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | Korea | KRW | 541,453mil. | Shipbuilding | — | — | Jun. 30, 2021 |
(December 31, 2020)
Associates | Location | Capital stock | Main business | Number of shares owned | Percentage of owner- ship (%) | Financial statements as of | ||||||||||||||||
Korea Asset Management Corporation | Korea | KRW | 949,566mil. | Financial service | 44,482,396 | 23.41 | Dec. 31, 2020 | |||||||||||||||
Credit Guarantee and Investment Fund | Philippines | USD | 1,102mil. | Financial service | 147,600,000 | 13.39 | Dec. 31, 2020 | |||||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. | Korea | KRW | 6,262mil. | Shipbuilding | 1,040,000 | 83.03 | Dec. 31, 2020 | |||||||||||||||
KTB Newlake Global Healthcare PEF | Korea | KRW | 33,850mil. | Financial service | 8,462,558,125 | 25.00 | Dec. 31, 2020 | |||||||||||||||
Korea Aerospace Industries. Ltd. | Korea | KRW | 487,376mil. | Manufacturing | 25,745,964 | 26.41 | Dec. 31, 2020 | |||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | Korea | KRW | 541,453mil. | Shipbuilding | — | — | Dec. 31, 2020 |
2. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: |
(1) | Basis of condensed separate financial statement preparation |
These condensed separate interim financial statements were prepared in accordance with K-IFRS No.1034, ‘Interim Financial Reporting’ as part of the period covered by the Bank’s K-IFRS annual financial statements. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.
These financial statements are separate financial statements prepared in accordance with K-IFRS No.1027, ‘Separate Financial Statements’ presented by a parent, an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost.
The Bank’s accounting policies applied for the accompanying condensed separate interim financial statements are the same as the policies applied for the preparation of separate financial statements as of and for the year ended December 31, 2020.
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Table of Contents
(2) | Functional Currency |
Items included in the separate financial statements in the Bank are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The separate financial statements are presented in Korean won, which is the Bank’s functional and presentation currency.
(3) | New and amended standards and interpretation adopted by the Bank |
The Bank has applied the following standards and amendments for the first time for their annual reporting period commenced January 1, 2021.
1) | Amendments to K-IFRS No.1109 ‘Financial Instruments’, K-IFRS No.1039 ‘Financial Instruments: Recognition and Measurement’, K-IFRS No.1107 ‘Financial Instruments: Disclosure’, K-IFRS No.1104 ‘Insurance Contracts’ and K-IFRS No.1116 ‘Leases’ – Interest Rate Benchmark Reform |
In relation to interest rate benchmark reform, the amendments provide a practical expedient allowing entities to change the effective interest rate instead of changing the carrying amount and apply hedge accounting without discontinuance although the interest rate benchmark is replaced in hedging relationship. These amendments do not have a significant impact on the Bank’s financial statements.
(4) | New standards and interpretations not yet adopted by the Bank |
The following new accounting standards and interpretations have been published that are not mandatory for June 30, 2021 reporting periods and have not been early adopted by the Bank.
1) | Amendments to K-IFRS No.1116 ‘Leases’ – COVID-19 related rent concessions after June 30, 2021 |
The practical expedient which allows for a lessee to not assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification, is extended by 12 months –permitting lessees to apply it to rent concessions for which any reduction in lease payments affects payments originally due on or before June 30, 2022. A lessee that chooses to apply the practical expedient has to consistently apply the practical expedient to eligible contracts with similar characteristics and in similar circumstances. These amendments should be applied for annual periods beginning on or after April 1, 2021, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the financial statements.
2) | Amendments to K-IFRS No.1016 ‘Property, Plant and Equipment’ – Proceeds before intended use |
The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. Instead, the entity will recognize the proceeds from selling such items, and the costs of producing those items, as profit or loss. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the financial statements.
3) | Amendments to K-IFRS No.1103 ‘Business Combination’ – Reference to the Conceptual Framework |
The amendments update a reference of definition of assets and liabilities to qualify for recognition in revised Conceptual Framework for Financial Reporting. However, the amendments add an exception for the recognition of liabilities and contingent liabilities within the scope of K-IFRS No.1037 ‘Provisions, Contingent Liabilities and Contingent Assets’, and K-IFRS No.2121 ‘Levies’. The amendments also confirm that contingent assets should not be recognized at the acquisition date. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the financial statements.
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Table of Contents
4) | Amendments to K-IFRS No.1037 ‘Provisions, Contingent Liabilities and Contingent Assets’ – Onerous Contracts: Cost of Fulfilling a Contract |
The amendments clarify that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts when assessing whether the contract is onerous. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the financial statements.
3. | SIGNIFICANT ESTIMATES AND JUDGMENTS: |
The preparation of separate financial statements requires the application of accounting policies, especially certain critical accounting estimates and assumptions that may have a significant impact on assets (liabilities) and income (expenses). The management’s estimate of outcome may differ from an actual outcome if the management’s estimates and assumptions based on its best judgment at the reporting date are different from the actual environment.
Estimates and assumptions are continually evaluated and the change in an accounting estimate is recognized prospectively by including it in profit or loss in the period of the change, if the change affects that period only, or the period of the change and future periods, if the change affects both. Significant judgments are the same as those applied in preparation of the annual separate financial statements for the year ended December 31, 2020.
4. | RISK MANAGEMENT: |
4-1. | Summary |
(1) | Overview of Risk Management Policy |
The financial risks that the Bank is exposed to are credit risk, market risk, liquidity risk, operational risk, interest risk, credit concentration risk, strategy/reputational risk, outsourcing risk, settlement risk and others. Credit risk, market risk, liquidity risk, and operational risk have been recognized as the Bank’s key risks.
The Bank’s risk management system focuses on increasing transparency, developing risk management environment and preemptive response to risks due to rapid changes in financial environment to support the Bank’s long-term strategy and business decision efficiently.
The note regarding financial risk management provides information about the risks that the Bank is exposed to, the objective, policies and process for managing the risk, the methods used to measure the risk and capital adequacy. Additional quantitative information is disclosed throughout the separate financial statements.
(2) | Risk Management Group |
1) | Risk Management Committee |
The Risk Management Committee establishes risk management strategies in accordance with the directives of the board of directors and determines the Bank’s target risk appetite, approves significant risk matters and reviews the level of risks that the Bank is exposed to and the appropriateness of the Bank’s risk management operations as an ultimate decision-making authority.
2) | Risk Management Council |
The Risk Management Council is a consultative group that reviews and makes decisions on matters delegated by the Risk Management Committee and discusses the detailed issues relating to the Bank’s risk management.
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Table of Contents
3) | Risk Management Practices Committee |
The Risk Management Practices Committee assists the Risk Management Committee and the Risk Management Council. It performs practical work process relating to risk management plan, including targeted Bank for International Settlements (“BIS”) ratio, risk management strategy, risk measurement, risk analysis, economic capital limit and others.
4-2. Credit risk
(1) | Overview of Credit Risk |
Credit risk is the risk of possible losses in an asset portfolio in the events of counterparty’s default, breach of contract and deterioration in the credit quality of the counterparty. For the risk management reporting purposes, the individual borrower’s default risk, country risk, specific risks and other credit risk exposure components are considered as a whole.
(2) | Credit Risk Management |
The Bank controls the credit concentration risk exposure by applying and managing total exposure limits to prevent the excessive risk concentration to specific industry and specific borrowers. The Bank maintains allowances for loan losses associated with credit risk on loans and receivables to manage its credit risk.
(3) | Maximum exposure to credit risk |
The Bank’s maximum exposure of financial instruments to credit risk as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
Jun. 30, 2021 | Dec. 31, 2020 | |||||||
Cash and due from financial institutions | ₩ | 4,131,909 | ₩ | 4,025,737 | ||||
Financial assets at FVTPL (*1) | 755,138 | 1,028,226 | ||||||
Hedging derivative assets | 931,344 | 1,499,766 | ||||||
Loans at amortized cost (*2) | 75,412,473 | 73,421,763 | ||||||
Financial investments | 3,468,728 | 2,440,374 | ||||||
Other financial assets | 918,496 | 792,202 | ||||||
Acceptances and guarantee contracts | 35,767,478 | 34,702,514 | ||||||
Commitments (*3) | 25,437,494 | 26,024,757 | ||||||
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Total | ₩ | 146,823,060 | ₩ | 143,935,339 | ||||
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(*1) | Financial assets at FVTPL exclude debt securities related to beneficiary certificates and paid-in capital. |
(*2) | Loans at amortized cost exclude loan valuation adjustment related to fair value hedging. |
(*3) | Commitments exclude commitments on purchase of beneficiary certificates which are included in other commitments in Note 36. |
(4) | Credit risk of loans |
In order to secure asset quality and enhance equity capital adequacy, the Bank reserves and manages allowances for loan losses on loans that have credit risk. Impairment on loans can be either deducted directly from the carrying amount thereof or can be deducted using the account of allowances for loan losses. The Bank’s financial statements presents impairment on loans using the account of allowances for loan losses, after the measurement of credit risk inherent in loans.
The Bank writes off on non-profitable loans, non-recoverable loans, loans classified as estimated loss by asset quality category, loans requested to be written off by Financial Supervisory Service (“FSS”) and others upon approval of Loan Management Committee.
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Table of Contents
Loans as of June 30, 2021 and December 31, 2020 are categorized as follows (Korean won in millions):
(June 30, 2021)
12 month expected credit losses | Lifetime expected credit losses | Credit-impaired financial assets | Total | |||||||||||||
Collective assessment: | ||||||||||||||||
Best | ₩ | 21,947,375 | ₩ | 192 | ₩ | 504,115 | ₩ | 22,451,682 | ||||||||
Outstanding | 24,213,573 | — | 41,500 | 24,255,073 | ||||||||||||
Good | 23,053,916 | 2,747,256 | 13,717 | 25,814,889 | ||||||||||||
Below normal | — | 1,145,529 | 87,279 | 1,232,808 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 69,214,864 | 3,892,977 | 646,611 | 73,754,452 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Individual assessment: | ||||||||||||||||
Best | — | — | 3,804 | 3,804 | ||||||||||||
Outstanding | — | — | — | — | ||||||||||||
Good | — | 1,988,955 | 17,404 | 2,006,359 | ||||||||||||
Below normal | — | 1,205,422 | 546,439 | 1,751,861 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | — | 3,194,377 | 567,647 | 3,762,024 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 69,214,864 | ₩ | 7,087,354 | ₩ | 1,214,258 | ₩ | 77,516,476 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net deferred origination fees and costs | (359,657 | ) | ||||||||||||||
|
| |||||||||||||||
Allowances | (1,744,346 | ) | ||||||||||||||
|
| |||||||||||||||
Total | ₩ | 75,412,473 | ||||||||||||||
|
|
(December 31, 2020)
12 month expected credit losses | Lifetime expected credit losses | Credit-impaired financial assets | Total | |||||||||||||
Collective assessment: | ||||||||||||||||
Best | ₩ | 22,586,463 | ₩ | 4,534 | ₩ | 4,601 | ₩ | 22,595,598 | ||||||||
Outstanding | 22,639,881 | — | — | 22,639,881 | ||||||||||||
Good | 24,329,178 | 1,713,345 | 4,894 | 26,047,417 | ||||||||||||
Below normal | — | 516,491 | 86,999 | 603,490 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 69,555,522 | 2,234,370 | 96,494 | 71,886,386 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Individual assessment: | ||||||||||||||||
Best | — | — | 3,663 | 3,663 | ||||||||||||
Outstanding | — | — | — | — | ||||||||||||
Good | — | 2,062,518 | 25,677 | 2,088,195 | ||||||||||||
Below normal | — | 1,116,284 | 1,193,484 | 2,309,768 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | — | 3,178,802 | 1,222,824 | 4,401,626 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 69,555,522 | ₩ | 5,413,172 | ₩ | 1,319,318 | ₩ | 76,288,012 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net deferred origination fees and costs | (364,854 | ) | ||||||||||||||
|
| |||||||||||||||
Allowances | (2,501,395 | ) | ||||||||||||||
|
| |||||||||||||||
Total | ₩ | 73,421,763 | ||||||||||||||
|
|
S-31
Table of Contents
The above carrying amounts exclude loan valuation adjustment related to fair value hedging amounting to ₩(412) million and ₩(14,382) million as of June 30, 2021 and December 31, 2020, respectively.
(5) | Credit quality of securities |
Securities (debt securities) exposed to credit risk as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
(June 30, 2021)
12 month expected credit losses | Lifetime expected credit losses | Credit- impaired financial assets | Total | |||||||||||||
Grade 1 | ₩ | 3,468,728 | ₩ | — | ₩ | — | ₩ | 3,468,728 | ||||||||
Grade 2 | — | — | — | — | ||||||||||||
Grade 3 | — | — | — | — | ||||||||||||
Grade 4 | — | — | — | — | ||||||||||||
Grade 5 | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 3,468,728 | ₩ | — | ₩ | — | ₩ | 3,468,728 | ||||||||
|
|
|
|
|
|
|
|
(December 31, 2020)
12 month expected credit losses | Lifetime expected credit losses | Credit- impaired financial assets | Total | |||||||||||||
Grade 1 | ₩ | 2,440,374 | ₩ | — | ₩ | — | ₩ | 2,440,374 | ||||||||
Grade 2 | — | — | — | — | ||||||||||||
Grade 3 | — | — | — | — | ||||||||||||
Grade 4 | — | — | — | — | ||||||||||||
Grade 5 | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 2,440,374 | ₩ | — | ₩ | — | ₩ | 2,440,374 | ||||||||
|
|
|
|
|
|
|
|
(6) | Concentration of credit risk |
The amounts disclosed below exclude loan valuation adjustment related to fair value hedging amounting to ₩(412) million and ₩(14,382) million as of June 30, 2021 and December 31, 2020, respectively.
S-32
Table of Contents
1) | Loans by country where the credit risk belongs to as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Loans in local currency | Loans in foreign currencies | Others | Total | Ratio (%) | Deferred loan origination fees | Allowances | ||||||||||||||||||||||
Asia: | ||||||||||||||||||||||||||||
Korea | ₩ | 24,508,945 | ₩ | 6,989,888 | ₩ | 2,287,696 | ₩ | 33,786,529 | 43.59 | ₩ | (12,273 | ) | ₩ | (754,313 | ) | |||||||||||||
China | — | 2,247,554 | 419,691 | 2,667,245 | 3.44 | (1,765 | ) | (26,820 | ) | |||||||||||||||||||
Saudi Arabia | — | 2,329,344 | 35,112 | 2,364,456 | 3.05 | (28,407 | ) | (8,728 | ) | |||||||||||||||||||
India | — | 2,704,842 | 13,343 | 2,718,185 | 3.51 | (17,363 | ) | (3,391 | ) | |||||||||||||||||||
Indonesia | 17,000 | 3,130,956 | 15,743 | 3,163,699 | 4.08 | (46,711 | ) | (13,339 | ) | |||||||||||||||||||
Vietnam | — | 3,833,594 | 102,229 | 3,935,823 | 5.08 | (28,887 | ) | (36,326 | ) | |||||||||||||||||||
Australia | — | 337,870 | 258 | 338,128 | 0.44 | — | (149 | ) | ||||||||||||||||||||
Philippines | — | 39,956 | — | 39,956 | 0.05 | (7 | ) | (715 | ) | |||||||||||||||||||
Qatar | — | 516,681 | — | 516,681 | 0.67 | (1,866 | ) | (2,959 | ) | |||||||||||||||||||
Singapore | — | 405,716 | 87,826 | 493,542 | 0.64 | (4,218 | ) | (912 | ) | |||||||||||||||||||
Oman | — | 1,162,482 | — | 1,162,482 | 1.50 | (13,620 | ) | (9,505 | ) | |||||||||||||||||||
Hong Kong | — | 322,251 | 234,527 | 556,778 | 0.72 | (73 | ) | (9,844 | ) | |||||||||||||||||||
The United Arab Emirates | — | 4,433,193 | 4,654 | 4,437,847 | 5.73 | (21,161 | ) | (2,009 | ) | |||||||||||||||||||
Uzbekistan | — | 1,123,900 | — | 1,123,900 | 1.45 | (9,403 | ) | (30,753 | ) | |||||||||||||||||||
Others | 12,200 | 3,228,897 | 369,995 | 3,611,092 | 4.64 | (88,257 | ) | (89,766 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | 24,538,145 | 32,807,124 | 3,571,074 | 60,916,343 | 78.59 | (274,011 | ) | (989,529 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Europe: | ||||||||||||||||||||||||||||
Russia | — | 189,995 | — | 189,995 | 0.25 | (111 | ) | (843 | ) | |||||||||||||||||||
United Kingdom | — | 1,327,004 | 8,995 | 1,335,999 | 1.72 | (9,545 | ) | (275,040 | ) | |||||||||||||||||||
France | — | 85,746 | 6,442 | 92,188 | 0.12 | (672 | ) | (124 | ) | |||||||||||||||||||
Netherlands | — | — | �� | 10,969 | 10,969 | 0.01 | — | (62 | ) | |||||||||||||||||||
Greece | — | 1,870,507 | — | 1,870,507 | 2.41 | (10,090 | ) | (2,862 | ) | |||||||||||||||||||
Ireland | — | 52,602 | — | 52,602 | 0.07 | (264 | ) | (115 | ) | |||||||||||||||||||
Turkey | — | 1,299,242 | 13,535 | 1,312,777 | 1.69 | (13,082 | ) | (55,866 | ) | |||||||||||||||||||
Germany | — | 301,167 | 342 | 301,509 | 0.39 | (429 | ) | (961 | ) | |||||||||||||||||||
Ukraine | — | 31,640 | — | 31,640 | 0.04 | — | (31 | ) | ||||||||||||||||||||
Hungary | — | 1,201,037 | 75 | 1,201,112 | 1.55 | (1,966 | ) | (1,528 | ) | |||||||||||||||||||
Others | — | 1,772,017 | 103,328 | 1,875,345 | 2.42 | (6,461 | ) | (11,727 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | — | 8,130,957 | 143,686 | 8,274,643 | 10.67 | (42,620 | ) | (349,159 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
America: | ||||||||||||||||||||||||||||
Panama | — | 878,793 | — | 878,793 | 1.13 | (4,199 | ) | (11,219 | ) | |||||||||||||||||||
United States | — | 2,427,149 | 12,479 | 2,439,628 | 3.15 | (3,803 | ) | (12,404 | ) | |||||||||||||||||||
The British Virgin Islands | — | 16,750 | — | 16,750 | 0.02 | — | — | |||||||||||||||||||||
Mexico | — | 333,015 | — | 333,015 | 0.43 | (3,404 | ) | (1,683 | ) | |||||||||||||||||||
Bermuda | — | — | — | — | — | — | — | |||||||||||||||||||||
Brazil | — | 1,789,672 | — | 1,789,672 | 2.31 | (3,884 | ) | (4,098 | ) | |||||||||||||||||||
Others | — | 1,147,042 | 46 | 1,147,088 | 1.48 | (4,304 | ) | (15,099 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | — | 6,592,421 | 12,525 | 6,604,946 | 8.52 | (19,594 | ) | (44,503 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Africa: | ||||||||||||||||||||||||||||
Marshall Islands | — | 535,531 | — | 535,531 | 0.69 | (2,794 | ) | (2,453 | ) | |||||||||||||||||||
Nigeria | — | 382,140 | — | 382,140 | 0.49 | (6,361 | ) | (7,542 | ) | |||||||||||||||||||
Morocco | — | 105,809 | 467 | 106,276 | 0.14 | (1,017 | ) | (140 | ) | |||||||||||||||||||
Others | — | 696,597 | — | 696,597 | 0.90 | (13,260 | ) | (351,020 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | — | 1,720,077 | 467 | 1,720,544 | 2.22 | (23,432 | ) | (361,155 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 24,538,145 | ₩ | 49,250,579 | ₩ | 3,727,752 | ₩ | 77,516,476 | 100.00 | ₩ | (359,657 | ) | ₩ | (1,744,346 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-33
Table of Contents
(December 31, 2020)
Loans in local currency | Loans in foreign currencies | Others | Total | Ratio (%) | Deferred loan origination fees | Allowances | ||||||||||||||||||||||
Asia: | ||||||||||||||||||||||||||||
Korea | ₩ | 23,613,174 | ₩ | 7,168,916 | ₩ | 2,481,756 | ₩ | 33,263,846 | 43.60 | ₩ | (11,881 | ) | ₩ | (1,235,386 | ) | |||||||||||||
China | — | 2,054,071 | 389,330 | 2,443,401 | 3.20 | (2,121 | ) | (27,196 | ) | |||||||||||||||||||
Saudi Arabia | — | 2,373,563 | 315,958 | 2,689,521 | 3.53 | (28,597 | ) | (10,531 | ) | |||||||||||||||||||
India | — | 2,337,629 | 94,826 | 2,432,455 | 3.19 | (17,974 | ) | (3,171 | ) | |||||||||||||||||||
Indonesia | 17,000 | 3,069,737 | 6,217 | 3,092,954 | 4.05 | (51,141 | ) | (12,867 | ) | |||||||||||||||||||
Vietnam | — | 3,510,539 | 81,247 | 3,591,786 | 4.71 | (24,260 | ) | (34,211 | ) | |||||||||||||||||||
Australia | — | 325,312 | 524 | 325,836 | 0.43 | — | (144 | ) | ||||||||||||||||||||
Philippines | — | 63,299 | — | 63,299 | 0.08 | (21 | ) | (763 | ) | |||||||||||||||||||
Qatar | — | 550,527 | — | 550,527 | 0.72 | (2,003 | ) | (3,028 | ) | |||||||||||||||||||
Singapore | — | 504,408 | 292 | 504,700 | 0.66 | (2,083 | ) | (792 | ) | |||||||||||||||||||
Oman | — | 1,005,790 | 52 | 1,005,842 | 1.32 | (14,130 | ) | (8,464 | ) | |||||||||||||||||||
Hong Kong | — | 270,700 | 1,051,401 | 1,322,101 | 1.73 | (107 | ) | (9,845 | ) | |||||||||||||||||||
The United Arab Emirates | — | 4,159,300 | 5,734 | 4,165,034 | 5.46 | (19,862 | ) | (1,874 | ) | |||||||||||||||||||
Uzbekistan | — | 1,062,147 | — | 1,062,147 | 1.39 | (9,929 | ) | (29,620 | ) | |||||||||||||||||||
Others | 13,000 | 3,174,857 | 1,231,313 | 4,419,170 | 5.79 | (92,654 | ) | (89,988 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | 23,643,174 | 31,630,795 | 5,658,650 | 60,932,619 | 79.87 | (276,763) | (1,467,880 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Europe: | ||||||||||||||||||||||||||||
Russia | — | 114,835 | — | 114,835 | 0.15 | — | (506 | ) | ||||||||||||||||||||
United Kingdom | — | 997,553 | 831 | 998,384 | 1.31 | (8,941 | ) | (262,805 | ) | |||||||||||||||||||
France | — | 87,201 | 5,384 | 92,585 | 0.12 | (712 | ) | (147 | ) | |||||||||||||||||||
Netherlands | — | — | 9,199 | 9,199 | 0.01 | — | (53 | ) | ||||||||||||||||||||
Greece | — | 1,517,733 | 2,513 | 1,520,246 | 1.99 | (10,349 | ) | (2,432 | ) | |||||||||||||||||||
Ireland | — | 46,710 | — | 46,710 | 0.06 | (272 | ) | (102 | ) | |||||||||||||||||||
Turkey | — | 1,043,559 | 8,087 | 1,051,646 | 1.38 | (13,513 | ) | (54,237 | ) | |||||||||||||||||||
Germany | — | 167,815 | 22,297 | 190,112 | 0.25 | (265 | ) | (1,041 | ) | |||||||||||||||||||
Ukraine | — | 30,464 | — | 30,464 | 0.04 | — | (32 | ) | ||||||||||||||||||||
Hungary | — | 605,948 | — | 605,948 | 0.79 | (390 | ) | (608 | ) | |||||||||||||||||||
Others | — | 1,868,075 | 78,157 | 1,946,232 | 2.55 | (7,294 | ) | (12,032 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | — | 6,479,893 | 126,468 | 6,606,361 | 8.66 | (41,736 | ) | (333,995 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
America: | ||||||||||||||||||||||||||||
Panama | — | 803,007 | — | 803,007 | 1.05 | (3,656 | ) | (51,223 | ) | |||||||||||||||||||
United States | — | 2,303,389 | 19,275 | 2,322,664 | 3.04 | (4,065 | ) | (12,171 | ) | |||||||||||||||||||
The British Virgin Islands | — | 29,865 | — | 29,865 | 0.04 | (124 | ) | (14 | ) | |||||||||||||||||||
Mexico | — | 459,154 | — | 459,154 | 0.60 | (3,616 | ) | (1,944 | ) | |||||||||||||||||||
Bermuda | — | 88,499 | — | 88,499 | 0.12 | (652 | ) | — | ||||||||||||||||||||
Brazil | — | 1,842,203 | — | 1,842,203 | 2.41 | (4,074 | ) | (4,672 | ) | |||||||||||||||||||
Others | — | 1,102,916 | — | 1,102,916 | 1.45 | (4,106 | ) | (15,947 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | — | 6,629,033 | 19,275 | 6,648,308 | 8.71 | (20,293 | ) | (85,971 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Africa: | ||||||||||||||||||||||||||||
Marshall Islands | — | 549,415 | — | 549,415 | 0.72 | (2,848 | ) | (9,384 | ) | |||||||||||||||||||
Madagascar | — | 377,443 | — | 377,443 | 0.49 | (1,123 | ) | (376,320 | ) | |||||||||||||||||||
Nigeria | — | 392,252 | — | 392,252 | 0.51 | (6,926 | ) | (7,395 | ) | |||||||||||||||||||
Morocco | — | 114,195 | — | 114,195 | 0.15 | (1,090 | ) | (150 | ) | |||||||||||||||||||
Others | — | 667,294 | 125 | 667,419 | 0.89 | (14,075 | ) | (220,300 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | — | 2,100,599 | 125 | 2,100,724 | 2.76 | (26,062 | ) | (613,549 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 23,643,174 | ₩ | 46,840,320 | ₩ | 5,804,518 | ₩ | 76,288,012 | 100.00 | ₩ | (364,854) | ₩ | (2,501,395 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-34
Table of Contents
2) | Loans by industry as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Loans | Deferred loan origination fees | Allowances | ||||||||||||||||||||||||||
Loans in local currency | Loans in foreign currencies | Others | Total | Ratio (%) | ||||||||||||||||||||||||
Manufacturing | ₩ | 14,512,832 | ₩ | 23,356,008 | ₩ | 751,525 | ₩ | 38,620,365 | 49.82 | ₩ | (183,093 | ) | ₩ | (1,150,634 | ) | |||||||||||||
Transportation | 1,362,748 | 6,494,345 | 249,600 | 8,106,693 | 10.46 | (33,690 | ) | (163,254 | ) | |||||||||||||||||||
Financial institutions | 7,346,540 | 5,797,126 | 2,573,390 | 15,717,056 | 20.28 | (3,637 | ) | (16,886 | ) | |||||||||||||||||||
Wholesale and retail | 441,684 | 774,439 | 112,532 | 1,328,655 | 1.71 | (1,978 | ) | (26,050 | ) | |||||||||||||||||||
Real estate | — | 307,066 | — | 307,066 | 0.40 | (1,894 | ) | (2,360 | ) | |||||||||||||||||||
Construction | 271,450 | 1,114,644 | 2,371 | 1,388,465 | 1.79 | (10,711 | ) | (33,271 | ) | |||||||||||||||||||
Public sector and others | 602,891 | 11,406,951 | 38,334 | 12,048,176 | 15.54 | (124,654 | ) | (351,891 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 24,538,145 | ₩ | 49,250,579 | ₩ | 3,727,752 | ₩ | 77,516,476 | 100.00 | ₩ | (359,657 | ) | ₩ | (1,744,346 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(December 31, 2020)
Loans | Deferred loan origination fees | Allowances | ||||||||||||||||||||||||||
Loans in local currency | Loans in foreign currencies | Others | Total | Ratio (%) | ||||||||||||||||||||||||
Manufacturing | ₩ | 14,910,922 | ₩ | 22,265,933 | ₩ | 812,594 | ₩ | 37,989,449 | 49.79 | ₩ | (191,945 | ) | ₩ | (1,856,758 | ) | |||||||||||||
Transportation | 1,479,886 | 5,929,875 | 282,513 | 7,692,274 | 10.08 | (32,280 | ) | (218,842 | ) | |||||||||||||||||||
Financial institutions | 5,898,046 | 5,254,076 | 4,632,890 | 15,785,012 | 20.69 | (3,227 | ) | (14,095 | ) | |||||||||||||||||||
Wholesale and retail | 594,874 | 808,517 | 44,806 | 1,448,197 | 1.90 | (1,942 | ) | (26,336 | ) | |||||||||||||||||||
Real estate | — | 149,666 | — | 149,666 | 0.20 | (1,680 | ) | (1,868 | ) | |||||||||||||||||||
Construction | 240,814 | 965,852 | 12,463 | 1,219,129 | 1.60 | (11,652 | ) | (46,831 | ) | |||||||||||||||||||
Public sector and others | 518,632 | 11,466,401 | 19,252 | 12,004,285 | 15.74 | (122,128 | ) | (336,665 | ) | |||||||||||||||||||
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| |||||||||||||||
Total | ₩ | 23,643,174 | ₩ | 46,840,320 | ₩ | 5,804,518 | ₩ | 76,288,012 | 100.00 | ₩ | (364,854 | ) | ₩ | (2,501,395 | ) | |||||||||||||
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S-35
Table of Contents
3) | Concentration of credit risk of financial assets at FVTPL and financial investments (debt securities) by industry as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Jun. 30, 2021 | Dec. 31, 2020 | |||||||||||||||
Amount | Ratio (%) | Amount | Ratio (%) | |||||||||||||
Financial Assets at FVTPL | ||||||||||||||||
Banking and insurance | ₩ | 16,945 | 47.03 | ₩ | 5,314 | 33.77 | ||||||||||
Others | 19,085 | 52.97 | 10,423 | 66.23 | ||||||||||||
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| |||||||||
Subtotal | 36,030 | 100.00 | 15,737 | 100.00 | ||||||||||||
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Financial Assets at FVOCI | ||||||||||||||||
Government and government sponsored institutions | 1,753,174 | 63.51 | 1,097,762 | 56.75 | ||||||||||||
Banking and insurance | 615,029 | 22.28 | 375,565 | 19.41 | ||||||||||||
Others | 392,351 | 14.21 | 461,170 | 23.84 | ||||||||||||
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Subtotal | 2,760,554 | 100.00 | 1,934,497 | 100.00 | ||||||||||||
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Securities at amortized cost | ||||||||||||||||
Government and government sponsored institutions | 510,659 | 72.11 | 331,116 | 65.45 | ||||||||||||
Banking and insurance | 110,788 | 15.64 | 133,108 | 26.31 | ||||||||||||
Others | 86,727 | 12.25 | 41,653 | 8.24 | ||||||||||||
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Subtotal | 708,174 | 100.00 | 505,877 | 100.00 | ||||||||||||
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Total | ₩ | 3,504,758 | ₩ | 2,456,111 | ||||||||||||
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4) | Concentration of credit risk of financial assets at FVTPL and financial investments (debt securities) by country as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Jun. 30, 2021 | Dec. 31, 2020 | |||||||||||||||
Amount | Ratio (%) | Amount | Ratio (%) | |||||||||||||
Financial Assets at FVTPL | ||||||||||||||||
Korea | ₩ | 19,085 | 52.97 | ₩ | 10,423 | 66.23 | ||||||||||
Others | 16,945 | 47.03 | 5,314 | 33.77 | ||||||||||||
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| |||||||||
Subtotal | 36,030 | 100.00 | 15,737 | 100.00 | ||||||||||||
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Financial Assets at FVOCI | ||||||||||||||||
Korea | 1,377,735 | 49.91 | 1,230,720 | 63.62 | ||||||||||||
Others | 1,382,819 | 50.09 | 703,777 | 36.38 | ||||||||||||
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Subtotal | 2,760,554 | 100.00 | 1,934,497 | 100.00 | ||||||||||||
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Securities at amortized cost | ||||||||||||||||
Korea | 253,993 | 35.87 | 213,250 | 42.15 | ||||||||||||
Others | 454,181 | 64.13 | 292,627 | 57.85 | ||||||||||||
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Subtotal | 708,174 | 100.00 | 505,877 | 100.00 | ||||||||||||
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Total | ₩ | 3,504,758 | ₩ | 2,456,111 | ||||||||||||
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S-36
Table of Contents
5) | Credit enhancement and its financial effect as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Loans (*1) | Acceptances and guarantees | Unused loan commitments | Total | Ratio (%) | ||||||||||||||||
Maximum exposure to credit risk | ₩ | 75,412,473 | ₩ | 35,767,478 | ₩ | 25,437,494 | ₩ | 136,617,445 | 100.00 | |||||||||||
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Credit enhancement: | ||||||||||||||||||||
Deposits and savings | 194,615 | 114,429 | 45,812 | 354,856 | 0.26 | |||||||||||||||
Export guarantee insurance | 409,335 | 907,328 | 4,069 | 1,320,732 | 0.97 | |||||||||||||||
Guarantee | 1,991,597 | 1,614,000 | 121,441 | 3,727,038 | 2.73 | |||||||||||||||
Securities | 119,108 | 404,390 | — | 523,498 | 0.38 | |||||||||||||||
Real estate | 2,935,888 | 502,777 | 82,796 | 3,521,461 | 2.57 | |||||||||||||||
Ships | 734,412 | 143,626 | — | 878,038 | 0.64 | |||||||||||||||
Others | 34,290 | — | — | 34,290 | 0.03 | |||||||||||||||
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Subtotal | 6,419,245 | 3,686,550 | 254,118 | 10,359,913 | 7.58 | |||||||||||||||
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Exposure to credit risk after deducting credit enhancement | ₩ | 68,993,228 | ₩ | 32,080,928 | ₩ | 25,183,376 | ₩ | 126,257,532 | 92.42 | |||||||||||
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(December 31, 2020)
Loans (*1) | Acceptances and guarantees | Unused loan commitments | Total | Ratio (%) | ||||||||||||||||
Maximum exposure to credit risk | ₩ | 73,421,763 | ₩ | 34,702,514 | ₩ | 26,024,757 | ₩ | 134,149,034 | 100.00 | |||||||||||
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Credit enhancement: | ||||||||||||||||||||
Deposits and savings | 167,339 | 43,175 | 39,025 | 249,539 | 0.19 | |||||||||||||||
Export guarantee insurance | — | 947,590 | 7,818 | 955,408 | 0.71 | |||||||||||||||
Guarantee | 1,846,556 | 1,699,941 | 353,972 | 3,900,469 | 2.91 | |||||||||||||||
Securities | 227,473 | 433,001 | — | 660,474 | 0.49 | |||||||||||||||
Real estate | 2,632,355 | 476,773 | 19,210 | 3,128,338 | 2.33 | |||||||||||||||
Ships | 697,744 | 175,893 | 41,237 | 914,874 | 0.68 | |||||||||||||||
Others | 388,607 | — | 2,859 | 391,466 | 0.29 | |||||||||||||||
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| |||||||||||
Subtotal | 5,960,074 | 3,776,373 | 464,121 | 10,200,568 | 7.60 | |||||||||||||||
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Exposure to credit risk after deducting credit enhancement | ₩ | 67,461,689 | ₩ | 30,926,141 | ₩ | 25,560,636 | ₩ | 123,948,466 | 92.40 | |||||||||||
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(*1) | Loans exclude loan valuation adjustment related to fair value hedging. |
S-37
Table of Contents
4-3. Liquidity risk
(1) | Overview of liquidity risk |
Liquidity risk is the risk that the Bank is unable to meet its payment obligations arising from financial liabilities as they become due. The Bank discloses all financial asset, financial liabilities and off-balance sheet items, such as loan commitments and analysis of the contractual maturity, which are related to liquidity risk, into seven categories. The cash flows disclosed in the maturity analysis are undiscounted contractual amounts, including principal and future interest, which resulted in disagreement with the discounted cash flows included in the separate statements of financial position. However, for derivatives, each discounted cash flow consisting of current fair value is presented.
(2) | Principles of the liquidity risk management |
1) | Liquidity risk is managed with integration. The Bank measures, reports and controls liquidity risk by quantification with reasonable method. |
2) | Liquidity risk reflects financing plans and fund-using plans, and the Bank reports the liquidity risk with preciseness, timeliness and consistency. |
3) | The Bank establishes liquidity risk management strategy by analyzing liquidity maturity, liquidity gap structure and market environment. |
(3) | Liquidity risk management |
Risk management department monitors changes by liquidity risk sources and compliance of risk limits. It notifies related departments to prepare countermeasures in case the measured liquidity risk is close to risk limits. Also, it analyzes crisis situations and effects of the crisis situations and reports to the Risk Management Committee on a regular basis. Each related department monitors changes of liquidity risk sources and compliance of risk limits by itself and if exposure to new risk is expected, it discusses the matter with the head of risk management department.
(4) | Measurement of liquidity risk |
The Bank measures liquidity ratio, liquidity gap ratio and others for local currency and foreign currencies and simulates analysis reflecting market environment, product features and the Bank’s strategies.
(5) | Analysis on remaining contractual maturity of financial liabilities and off-balance-sheet items |
Remaining contractual maturity and amount of financial liabilities and off-balance-sheet items as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
(June 30, 2021)
On demand | Within 1 month | 1 to 3 months | 3 to 6 months | 6 to 12 months | 1 year to 5 years | Over 5 years | Total | |||||||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||||||||||
Financial liabilities at FVTPL | ₩ | 524,340 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | 524,340 | ||||||||||||||||
Hedging derivative liabilities | — | 10,514 | 58,040 | 4,237 | 11,503 | 242,974 | 103,392 | 430,660 | ||||||||||||||||||||||||
Borrowings | — | 113,187 | 1,339,179 | 2,093,305 | 1,314,375 | 731,080 | — | 5,591,126 | ||||||||||||||||||||||||
Debentures | — | 1,742,835 | 4,577,290 | 6,373,780 | 13,554,769 | 40,224,303 | 12,692,856 | 79,165,833 | ||||||||||||||||||||||||
Other financial liabilities | — | 742,419 | 33 | 42,724 | 4,203 | 220,543 | 927,750 | 1,937,672 | ||||||||||||||||||||||||
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| |||||||||||||||||
Total | ₩ | 524,340 | ₩ | 2,608,955 | ₩ | 5,974,542 | ₩ | 8,514,046 | ₩ | 14,884,850 | ₩ | 41,418,900 | ₩ | 13,723,998 | ₩ | 87,649,631 | ||||||||||||||||
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S-38
Table of Contents
On demand | Within 1 month | 1 to 3 months | 3 to 6 months | 6 to 12 months | 1 year to 5 years | Over 5 years | Total | |||||||||||||||||||||||||
Off-balance sheet items (*1): | ||||||||||||||||||||||||||||||||
Commitments | ₩ | 25,437,494 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | 25,437,494 | ||||||||||||||||
Financial guarantee contracts | 12,548,298 | — | — | — | — | — | — | 12,548,298 | ||||||||||||||||||||||||
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| |||||||||||||||||
Total | ₩ | 37,985,792 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | 37,985,792 | ||||||||||||||||
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|
(December 31, 2020)
On demand | Within 1 month | 1 to 3 months | 3 to 6 months | 6 to 12 months | 1 year to 5 years | Over 5 years | Total | |||||||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||||||||||
Financial liabilities at FVTPL | ₩ | 753,442 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | 753,442 | ||||||||||||||||
Hedging derivative liabilities | — | 24,087 | 23,878 | 56,425 | 41,361 | 188,486 | 84,733 | 418,970 | ||||||||||||||||||||||||
Borrowings | — | 337,469 | 524,406 | 2,529,342 | 1,395,729 | 1,317,114 | — | 6,104,060 | ||||||||||||||||||||||||
Debentures | — | 2,530,630 | 5,546,667 | 6,642,817 | 12,260,797 | 37,380,189 | 12,202,465 | 76,563,565 | ||||||||||||||||||||||||
Other financial liabilities | — | 1,190,104 | — | 72 | 49,835 | 197,447 | 934,544 | 2,372,002 | ||||||||||||||||||||||||
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| |||||||||||||||||
Total | ₩ | 753,442 | ₩ | 4,082,290 | ₩ | 6,094,951 | ₩ | 9,228,656 | ₩ | 13,747,722 | ₩ | 39,083,236 | ₩ | 13,221,742 | ₩ | 86,212,039 | ||||||||||||||||
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| |||||||||||||||||
Off-balance sheet items (*1): | ||||||||||||||||||||||||||||||||
Commitments | ₩ | 26,024,757 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | 26,024,757 | ||||||||||||||||
Financial guarantee contracts | 12,097,063 | — | — | — | — | — | — | 12,097,063 | ||||||||||||||||||||||||
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| |||||||||||||||||
Total | ₩ | 38,121,820 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | 38,121,820 | ||||||||||||||||
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(*1) | Financial guarantees and loan commitments provided by the Bank have maturities. The Bank should fulfill the obligation immediately when the counterparty requests payment. |
4-4. Market risk
(1) | Overview of market risk |
1) | Definition of market risk |
Market risk is the risk of possible losses that arise from the changes of market factors, such as interest rate, stock price, foreign exchange rate, commodity value. The Bank classifies exposures to market risk into either foreign exchange rate risk or interest rate risk. Foreign exchange risk is the possible losses on assets and liabilities denominated in foreign currencies due to changes of foreign exchange rate. Interest rate risk is the possible losses on assets and liabilities due to changes of interest rate.
2) | Market risk management group |
The Bank operates the Risk Management Committee and the Risk Management Council for managing risks and risk limits. The Risk Management Practices Committee assists the Risk Management Committee and the Risk Management Council for practical matters, such as managing adequate assets and liabilities by analyzing foreign exchange risk, interest rate risk, liquidity risk and effects by initiating new product. Market risk is managed by product and currency for minimizing segments exposed to changes of foreign exchange, interest rate and securities’ price. Foreign exchange risk is measured by definite method. Interest rate risk is measured by IRRBB standards, definite method and probabilistic method and definite method is used for limits management. Meanwhile, the Bank performs financial crisis analysis supposing exceptional, but possible events for evaluating latent weakness. The analysis is used for important decision making, such as risk mitigation, emergency plan development and limit setup. The results of the analysis are reported to the board of directors and management on a quarterly basis.
S-39
Table of Contents
(2) | Foreign exchange risk |
1) | Management of foreign exchange risk |
Foreign exchange risk management limit is set up and a risk management division head monitors changes of foreign exchange risk by source and compliance of risk limits regularly. A finance division head also monitors changes of foreign exchange risk by source and compliance of risk limits. The finance division head needs to cooperate with the risk management division head in case it is expected that the Bank will be exposed to a new risk. The risk management division head orders related divisions to prepare countermeasures in case it is apprehended that foreign exchange risk exceeds risk limit. If foreign exchange risk exceeds the risk limit, the risk management division head orders related divisions to prepare countermeasures and reports to Risk Management Committee after resolving the exceeded limit problem.
2) | Measurement of foreign exchange risk |
Foreign exchange risk is managed by foreign exchange VaR and foreign exchange position. Foreign exchange VaR is measured on a monthly basis and foreign exchange position is measured on a daily basis. It is measured separately by currency for assets and liabilities denominated in foreign currencies exceeding 5% of total assets and liabilities denominated in foreign currencies.
3) | Measurement method |
Value at Risk (VaR) |
The Bank uses a yearly VaR to measure market risk. The yearly VaR is a statistically estimated maximum amount of loss that could occur in one year under normal distribution of financial variables. The Bank calculates VaR using equal weighted-average method based on historical changes in market rates, prices and volatilities over the previous five years data and measures VaR at a 99% single tail confidence level. VaR is a commonly used market risk management technique. However, the method has some shortcomings.
VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a good indicator of future events, as there may be conditions and circumstances in the future that the model does not anticipate. As a result, the timing and magnitude of the actual losses can be different, depending on the assumptions made at the time of calculation. In addition, the time periods used for the model, generally one day or 10 days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient, or too long, the VaR results may understate or overstate the potential loss.
Stress testing |
The stress testing is carried out to analyze the abnormal market situation reflecting intrinsic volatility of foreign exchange that has significant influent on the value of portfolio.
Results of measurement |
Results of foreign exchange VaR as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
Jun. 30, 2021 | Dec. 31, 2020 | |||||||||||||||||||||||||||||||
Average | Minimum | Maximum | Ending | Average | Minimum | Maximum | Ending | |||||||||||||||||||||||||
Foreign exchange risk | ₩ | 25,442 | ₩ | 14,425 | ₩ | 42,470 | ₩ | 24,319 | ₩ | 55,957 | ₩ | 10,811 | ₩ | 91,200 | ₩ | 10,811 |
S-40
Table of Contents
(3) | Interest rate risk in bank account |
1) | Management of interest rate risk |
Interest rate risk management limit is set up and included in internal capital management limit. A risk management division head monitors changes of interest rate risk by source and compliance of risk limits regularly. A finance division head also monitors changes of interest rate risk by source and compliance of risk limits. The finance division head needs to cooperate with the risk management division head in case it is expected that the Bank will be exposed to a new risk. The risk management division head orders related divisions to prepare countermeasures in case it is apprehended that interest rate risk exceeds risk limit. If interest rate risk exceeds the risk limit, the risk management division head orders related divisions to prepare countermeasures and reports to Risk Management Committee after resolving the exceeded limit problem.
The Bank is closely monitoring the outputs of various industry groups and markets that manage the transition to the new interest rate, including announcements by Inter-Bank Offered Rate (“IBOR”) regulation authority. Regulation authority has made it clear that as of December 31, 2021, they will no longer persuade or force banks to submit IBORs. In response to these announcements, the Bank established an IBOR transition program and plan consisting of major business areas such as finance, accounting, tax, legal, IT, and risk. The purpose of the program is to understand where exposure to IBOR occurs within the business and prepare and implement an action plan to facilitate the transition to alternative interest rate. The Bank aims to complete the transition and alternative plan by the year-end of 2021.
2) | Measurement of interest rate risk |
Interest rate risk is managed by measuring DNII (Change in Net Interest Income) and DEVE (Change in Economic Value of Equity) and uses interest rate sensitivity gap and duration gap as supplementary index.
DNII and DEVE are measured on a monthly basis, and interest rate sensitivity gap and duration gap are measured on a daily basis. The Bank simulates analysis reflecting market environment, product features and the Bank’s strategies.
3) | Measurement method |
Change in Economic Value of Equity (DEVE) |
The Bank uses a yearly DEVE to measure interest rate risk. The yearly DEVE is the maximum amount of loss that could occur in one year under normal distribution of financial variables. The Bank calculates the yearly DEVE by using variance-covariance method at a 99% single tail confidence level based on the previous five years data using equal weighted-average method.
DEVE estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a good indicator of future events, as there may be conditions and circumstances in the future that the model does not anticipate. As a result, the timing and magnitude of the actual losses can be different depending on the assumptions made at the time of calculation.
Stress testing |
The stress testing is carried out to analyze the abnormal market situation reflecting intrinsic volatility of interest rate that has significant influence on the value of portfolio and is performed at least once in every quarter.
S-41
Table of Contents
Results of measurement |
Results of interest rate risk as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
Jun. 30, 2021 | Dec. 31, 2020 | |||||||||||||||||||||||||||||||
Average | Minimum | Maximum | Ending | Average | Minimum | Maximum | Ending | |||||||||||||||||||||||||
Interest rate risk | ₩ | 25,962 | ₩ | 12,694 | ₩ | 37,966 | ₩ | 24,847 | ₩ | 29,669 | ₩ | 15,452 | ₩ | 47,859 | ₩ | 38,356 |
4-5. Capital risk
The Bank follows the standard of capital adequacy established by the Financial Services Commission. The standard is based on Basel III, which was established by Basel Committee on Banking Supervision in BIS. In Korea, this standard has been followed since December 2013. According to the standard, the Bank should maintain at least 8% or above of BIS capital ratio for risk-weighted asset, and quarterly report BIS capital ratio to the FSS.
According to Korean Banking Supervision rules for operations, the Bank’s capitals are mainly divided into two categories:
(1) | Tier 1 capital (basic capital): Basic capital is composed of capital stock-common and other basic capital. Capital stock-common includes common stock satisfied with qualifications, capital surplus, retained earnings, accumulated other comprehensive income, other reserves and non-controlling interests among the common stock of consolidated subsidiaries. Other basic capital includes securities and capital surplus satisfied with qualifications |
(2) | Tier 2 capital (supplementary capital): Supplementary capital is composed of the securities and capital surplus satisfied with qualifications, non-controlling interests among the securities of consolidated subsidiaries and the amounts of less than below 1.25% of credit risk-weighted asset like allowance for credit losses in respect of credits classified as normal or precautionary. |
The risk-weighted asset includes intrinsic risks in total assets, errors of internal operation processes and loss risk from external events. It indicates a size of assets reflecting the level of risks that the Bank bears. The Bank computes the risk-weighted asset by risks (credit risk, market risk and operational risk) and uses it for calculation of BIS capital ratio.
S-42
Table of Contents
5. | FINANCIAL ASSETS AND FINANCIAL LIABILITIES: |
5-1. Classification and fair value
(1) | Carrying amounts and fair values of financial instruments as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Jun. 30, 2021 | Dec. 31, 2020 | |||||||||||||||
Carrying amount | Fair value | Carrying amount | Fair value | |||||||||||||
Financial assets: | ||||||||||||||||
Cash and due from financial institutions | ₩ | 4,131,909 | ₩ | 4,131,429 | ₩ | 4,025,737 | ₩ | 4,025,686 | ||||||||
Financial assets at FVTPL | 2,162,547 | 2,162,547 | 3,478,402 | 3,478,402 | ||||||||||||
Hedging derivative assets | 931,344 | 931,344 | 1,499,766 | 1,499,766 | ||||||||||||
Loans at amortized cost | 75,412,061 | 75,968,670 | 73,407,381 | 74,065,894 | ||||||||||||
Financial assets at FVOCI | 12,177,825 | 12,177,825 | 10,536,535 | 10,536,535 | ||||||||||||
Securities at amortized cost | 708,174 | 710,985 | 505,876 | 515,610 | ||||||||||||
Other financial assets | 918,496 | 918,496 | 792,202 | 792,202 | ||||||||||||
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|
|
|
| |||||||||
Total | ₩ | 96,442,356 | ₩ | 97,001,296 | 92,245,899 | 94,914,095 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities: | ||||||||||||||||
Financial liabilities at FVTPL | ₩ | 524,340 | ₩ | 524,340 | ₩ | 753,442 | ₩ | 753,442 | ||||||||
Hedging derivative liabilities | 430,660 | 430,660 | 418,970 | 418,970 | ||||||||||||
Borrowings | 5,573,065 | 5,578,546 | 6,076,631 | 6,071,603 | ||||||||||||
Debentures | 74,390,786 | 75,240,845 | 72,641,777 | 73,332,650 | ||||||||||||
Other financial liabilities | 1,937,672 | 1,937,672 | 2,372,002 | 2,372,002 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 82,856,523 | ₩ | 83,712,063 | ₩ | 82,262,822 | ₩ | 82,948,667 | ||||||||
|
|
|
|
|
|
|
|
Fair value is the amount at which the assets could be exchanged or the liabilities could be settled in transaction between knowledgeable and willing independent parties. For each class of financial assets and financial liabilities, the Bank discloses the fair value of that class of assets and liabilities in a way that permits them to be compared with their carrying amount at the end of each reporting period. The best estimate of the fair value of a financial instrument is the price quoted in an active market.
S-43
Table of Contents
Methods for measuring fair value of financial instruments are as follows:
Financial instruments | Method of measuring fair value | |
Loans and receivables | As demand deposits and transferable deposits do not have maturity and are readily convertible to cash, the carrying amounts of these deposits approximate their fair values. Fair values of the deposits with the maturity of more than one year are determined by discounted cash flow model (“DCF model”). DCF model is also used to determine the fair value of loans. Fair value is determined by discounting the cash flows expected from each contractual period by applying the discount rates for each period. | |
Investment securities | Financial investments are measured at fair value using a quoted market price in an active market. If a quoted market price is not available, they are measured by using a price quoted by a third party, such as a pricing service or broker or using the DCF model. | |
Derivatives | For exchange traded derivative, quoted price in active market is used to determine fair value and for OTC (over-the-counter) derivative, fair value is determined primarily using the DCF model. The Bank uses internally developed valuation models that are widely used by market participants to determine fair value of plain OTC derivatives including option, interest rate swap and currency swap based on observable market parameters. However, some complex financial instruments are valued using the results of independent pricing services, where part or all of the inputs are not observable in the market. | |
Borrowings | Fair value is determined using DCF model discounting contractual future cash flows by appropriate discount rate. | |
Debentures | Fair value of debentures denominated in local currency is determined by using the valuation of independent third-party pricing services in accordance with the market prices that are quoted in active markets. Fair value of debentures denominated in foreign currencies is determined by DCF model. |
Fair values of financial assets and financial liabilities classified as fair value Level 3 of the fair value hierarchy are determined by using the valuation of independent third-party pricing services. Meanwhile, carrying amounts of other financial assets and financial liabilities are regarded as an approximation of fair values.
(2) | Fair value hierarchy |
1) | The Bank classifies financial instruments as three level of fair value hierarchy as below: |
Level 1: | Financial instruments measured at quoted prices from active markets are classified as fair value Level 1. This level includes listed equity securities, derivatives, and government bonds traded in an active exchange market. |
Level 2: | Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as Level 2. This level includes the majority of debt and general OTC derivatives such as swap, futures and options |
Level 3: | Financial instruments measured using valuation techniques where one or more significant inputs are not based on observable market data are classified as Level 3. This level includes unlisted equity securities, structured bonds and OTC derivatives. |
S-44
Table of Contents
2) | Fair value hierarchy of financial assets and liabilities, which are not measured at fair value as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets: | ||||||||||||||||
Cash and due from financial institutions | ₩ | 2,860,117 | ₩ | — | ₩ | 1,271,312 | ₩ | 4,131,429 | ||||||||
Loans at amortized cost | — | — | 75,968,670 | 75,968,670 | ||||||||||||
Securities at amortized cost | — | 710,985 | — | 710,985 | ||||||||||||
Other financial assets | — | — | 918,496 | 918,496 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 2,860,117 | ₩ | 710,985 | ₩ | 78,158,478 | ₩ | 81,729,580 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities: | ||||||||||||||||
Borrowings | ₩ | — | ₩ | 5,578,546 | ₩ | — | ₩ | 5,578,546 | ||||||||
Debentures | — | 75,240,845 | — | 75,240,845 | ||||||||||||
Other financial liabilities | — | — | 1,937,672 | 1,937,672 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | — | ₩ | 80,819,391 | ₩ | 1,937,672 | ₩ | 82,757,063 | ||||||||
|
|
|
|
|
|
|
|
(December 31, 2020)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets: | ||||||||||||||||
Cash and due from financial institutions | ₩ | 2,299,935 | ₩ | — | ₩ | 1,725,751 | ₩ | 4,025,686 | ||||||||
Loans at amortized cost | — | — | 74,065,894 | 74,065,894 | ||||||||||||
Securities at amortized cost | — | 515,610 | — | 515,610 | ||||||||||||
Other financial assets | — | — | 792,202 | 792,202 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 2,299,935 | ₩ | 515,610 | ₩ | 76,583,847 | ₩ | 79,399,392 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities: | ||||||||||||||||
Borrowings | ₩ | — | ₩ | 6,071,603 | ₩ | — | ₩ | 6,071,603 | ||||||||
Debentures | — | 73,332,650 | — | 73,332,650 | ||||||||||||
Other financial liabilities | — | — | 2,372,002 | 2,372,002 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | — | ₩ | 79,404,253 | ₩ | 2,372,002 | ₩ | 81,776,255 | ||||||||
|
|
|
|
|
|
|
|
S-45
Table of Contents
3) | Fair value hierarchy of financial assets and liabilities measured at fair value as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets: | ||||||||||||||||
Financial assets at FVTPL | ₩ | — | ₩ | 1,657,114 | ₩ | 505,433 | ₩ | 2,162,547 | ||||||||
Hedging derivative assets | — | 931,344 | — | 931,344 | ||||||||||||
Financial assets at FVOCI | 204,050 | 2,760,554 | 9,213,221 | 12,177,825 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 204,050 | ₩ | 5,349,012 | ₩ | 9,718,654 | ₩ | 15,271,716 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities: | ||||||||||||||||
Financial liabilities at FVTPL | ₩ | — | ₩ | 523,631 | ₩ | 709 | ₩ | 524,340 | ||||||||
Hedging derivative liabilities | — | 430,660 | — | 430,660 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | — | ₩ | 954,291 | ₩ | 709 | ₩ | 955,000 | |||||||||
|
|
|
|
|
|
|
|
(December 31, 2020)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets: | ||||||||||||||||
Financial assets at FVTPL | ₩ | — | ₩ | 3,030,986 | ₩ | 447,416 | ₩ | 3,478,402 | ||||||||
Hedging derivative assets | — | 1,499,766 | — | 1,499,766 | ||||||||||||
Financial assets at FVOCI | 168,171 | 1,934,498 | 8,433,866 | 10,536,535 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 168,171 | ₩ | 6,465,250 | ₩ | 8,881,282 | ₩ | 15,514,703 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities: | ||||||||||||||||
Financial liabilities at FVTPL | ₩ | — | ₩ | 751,319 | ₩ | 2,123 | ₩ | 753,442 | ||||||||
Hedging derivative liabilities | — | 418,970 | — | 418,970 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | — | ₩ | 1,170,289 | ₩ | 2,123 | ₩ | 1,172,412 | |||||||||
|
|
|
|
|
|
|
|
4) | The valuation techniques and input variables of Level 2 financial instruments subsequently not measured at fair value as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Fair value | Valuation techniques | Input variables | ||||||||||
Financial assets | ||||||||||||
Financial assets at amortized cost Debt securities | ₩ | 710,985 | DCF Model | Discount rate | ||||||||
Financial liabilities | ||||||||||||
Borrowings | 5,578,546 | DCF Model | Discount rate | |||||||||
Debentures | 75,240,845 | DCF Model | Discount rate |
S-46
Table of Contents
(December 31, 2020)
Fair value | Valuation techniques | Input variables | ||||||||||
Financial assets | ||||||||||||
Financial assets at amortized cost Debt securities | ₩ | 515,610 | DCF Model | Discount rate | ||||||||
Financial liabilities | ||||||||||||
Borrowings | 6,071,603 | DCF Model | Discount rate | |||||||||
Debentures | 73,332,650 | DCF Model | Discount rate |
5) | The valuation techniques and input variables of Level 3 financial instruments subsequently not measured at fair value as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Fair value | Valuation techniques | Input variables | ||||||||||
Financial assets | ||||||||||||
Cash and due from financial Institutions | ₩ | 1,271,312 | DCF Model | Discount rate | ||||||||
Loans at amortized cost | 75,968,670 | DCF Model | Discount rate | |||||||||
Other financial assets | 918,496 | DCF Model | Discount rate | |||||||||
Financial liabilities | ||||||||||||
Other financial liabilities | 1,937,672 | DCF Model | Discount rate |
(December 31, 2020)
Fair value | Valuation techniques | Input variables | ||||||||||
Financial assets | ||||||||||||
Cash and due from financial Institutions | ₩ | 1,725,751 | DCF Model | Discount rate | ||||||||
Loans at amortized cost | 74,065,894 | DCF Model | Discount rate | |||||||||
Other financial assets | 792,202 | DCF Model | Discount rate | |||||||||
Financial liabilities | ||||||||||||
Other financial liabilities | 2,372,002 | DCF Model | Discount rate |
6) | The valuation techniques and input variables of Level 2 financial instruments, measured at fair value after initial recognition, as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Fair value | Valuation techniques | Input variables | ||||||||||
Financial assets | ||||||||||||
Financial assets at FVTPL: | ||||||||||||
Debt securities | ₩ | 938,245 | DCF Model | Discount rate | ||||||||
Derivative assets for trading | 718,869 | DCF Model | Discount rate | |||||||||
Hedging derivative assets | 931,344 | DCF Model | Discount rate | |||||||||
Financial assets at FVOCI: | ||||||||||||
Debt securities | 2,760,554 | DCF Model | Discount rate | |||||||||
Financial liabilities | ||||||||||||
Financial liabilities at FVTPL: | ||||||||||||
Derivative liabilities for trading | 523,631 | DCF Model | Discount rate | |||||||||
Hedging derivative liabilities | 430,660 | DCF Model | Discount rate |
S-47
Table of Contents
(December 31, 2020)
Fair value | Valuation techniques | Input variables | ||||||||||
Financial assets | ||||||||||||
Financial assets at FVTPL: | ||||||||||||
Debt securities | ₩ | 2,019,807 | DCF Model | Discount rate | ||||||||
Derivative assets for trading | 1,011,179 | DCF Model | Discount rate | |||||||||
Hedging derivative assets | 1,499,766 | DCF Model | Discount rate | |||||||||
Financial assets at FVOCI: | ||||||||||||
Debt securities | 1,934,498 | DCF Model | Discount rate | |||||||||
Financial liabilities | ||||||||||||
Financial liabilities at FVTPL: | ||||||||||||
Derivative liabilities for trading | 751,319 | DCF Model | Discount rate | |||||||||
Hedging derivative liabilities | 418,970 | DCF Model | Discount rate |
7) | The valuation techniques and input variables (significant but unobservable) of Level 3 financial instruments, measured at fair value after initial recognition, as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Fair value (Korean won in million) | Valuation techniques | Significant unobservable input factors | Range | Relationship between unobservable input factors | ||||||||||||||
Financial assets at FVTPL: | ||||||||||||||||||
Unlisted stock | ₩ | 8,473 | ||||||||||||||||
Beneficiary certificates | 368,067 | NAV Methods | — | — | — | |||||||||||||
Paid-in capital | 109,569 | |||||||||||||||||
Loans | 19,085 | | LSMC Simulation | | Volatility | 16.69%~22.01% | If volatility is increased (decreased), fair value is increased (decreased). | |||||||||||
Derivative assets | 239 | | Binomial Model | | Volatility | 34.97% | If volatility is increased (decreased), fair value is increased (decreased). | |||||||||||
Financial assets at FVOCI: | ||||||||||||||||||
Unlisted stock | ₩ | 9,190,247 | | DCF Model/ Binomial CCA NAV Methods |
| | Discount rate Growth Volatility |
| | 7.52%~15.32% 1% 23.74%~34.97% |
| If discount rate is decreased (increased)/ if growth rate is increased (decreased), if volatility is increased (decreased) fair value is increased (decreased). | ||||||
Paid-in capital | 22,974 | NAV Methods | — | — | — | |||||||||||||
Financial liabilities at FVTPL: | ||||||||||||||||||
Derivative liabilities | ₩ | 709 | | Binomial Model | | Volatility | 34.97% | If volatility is increased (decreased), fair value is increased (decreased). |
S-48
Table of Contents
(December 31, 2020)
Fair value (Korean won in million) | Valuation techniques | Significant unobservable input factors | Range | Relationship between unobservable input factors | ||||||||||||||
Financial assets at FVTPL: | ||||||||||||||||||
Unlisted stock | ₩ | 8,669 | ||||||||||||||||
Beneficiary certificates | 308,468 | NAV Methods | — | — | — | |||||||||||||
Paid-in capital | 118,546 | |||||||||||||||||
Loans | 10,423 | | LSMC Simulation | | Volatility | 22.64% | If volatility is increased (decreased), fair value is increased (decreased). | |||||||||||
Derivative assets | 1,310 | | Binomial Model | | Volatility | 22.84% | If volatility is increased (decreased), fair value is increased (decreased). | |||||||||||
Financial assets at FVOCI: | ||||||||||||||||||
Unlisted stock | ₩ | 8,412,403 | | DCF Model/ Binomial CCA NAV Methods |
| | Discount rate Growth Volatility |
| | 7.82%~15.29% 1% 22.84%~32.60% |
| If discount rate is decreased (increased)/ if growth rate is increased (decreased), if volatility is increased (decreased) fair value is increased (decreased). | ||||||
Paid-in capital | 21,463 | NAV Methods | — | — | — | |||||||||||||
Financial liabilities at FVTPL: | ||||||||||||||||||
Derivative liabilities | ₩ | 2,123 | | Binomial Model | | Volatility | 22.84% | If volatility is increased (decreased), fair value is increased (decreased). |
S-49
Table of Contents
8) | Changes in Level 3 financial assets that are measured at fair value for the six months ended June 30, 2021 and for the year ended December 31, 2020 are as follows (Korean won in millions): |
(Six months ended June 30, 2021)
Beginning balance | Profit (Loss) | Other comprehensive income (loss) | Purchases/ issues | Sales/ settlements | Transfers into Level 3 / Transfers out of Level 3 | Ending balance | ||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||
Securities at FVTPL | ₩ | 435,683 | ₩ | (2,324 | ) | ₩ | — | ₩ | 78,336 | ₩ | (25,586 | ) | ₩ | — | ₩ | 486,109 | ||||||||||||
Loans at FVTPL | 10,423 | 3,662 | — | 5,000 | — | — | 19,085 | |||||||||||||||||||||
Derivative assets for trading | 1,310 | (1,071 | ) | — | — | — | — | 239 | ||||||||||||||||||||
Financial assets at FVOCI | 8,433,866 | — | 418,095 | 380,520 | (19,260 | ) | — | 9,213,221 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 8,881,282 | ₩ | 267 | ₩ | 418,095 | ₩ | 463,856 | ₩ | (44,846 | ) | ₩ | — | ₩ | 9,718,654 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||
Derivative liabilities for trading | ₩ | (2,123 | ) | ₩ | 1,414 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | (709 | ) |
(2020)
Beginning balance | Profit (Loss) | Other comprehensive income (loss) | Purchases/ issues | Sales/ settlements | Transfers into Level 3 / Transfers out of Level 3 | Ending balance | ||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||
Securities at FVTPL | ₩ | 329,105 | ₩ | 1,474 | ₩ | — | ₩ | 157,057 | ₩ | (51,953 | ) | ₩ | — | ₩ | 435,683 | |||||||||||||
Loans at FVTPL | 11,074 | 191 | — | — | (842 | ) | — | 10,423 | ||||||||||||||||||||
Derivative assets for trading | — | 1,310 | — | — | — | — | 1,310 | |||||||||||||||||||||
Financial assets at FVOCI | 7,957,930 | — | 267,138 | 208,798 | — | — | 8,433,866 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 8,298,109 | ₩ | 2,975 | ₩ | 267,138 | ₩ | 365,855 | ₩ | (52,795 | ) | ₩ | — | ₩ | 8,881,282 | |||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||
Derivative liabilities for trading | ₩ | — | ₩ | (2,123 | ) | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | (2,123 | ) |
S-50
Table of Contents
9) | In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss for the period and total gains or losses for financial instruments held at the end of the reporting period in the separate statements of comprehensive income for the six months ended June 30, 2021 and for the year ended December 31, 2020 are as follows (Korean won in millions): |
Net gain (loss) from financial investments | ||||||||
Six months ended June 30, 2021 | 2020 | |||||||
Total gains (losses) on financial assets held at the end of the period | ₩ | 267 | ₩ | 2,975 | ||||
Total gains (losses) on financial liabilities held at the end of the period | 1,414 | (2,123 | ) | |||||
|
|
|
| |||||
Total gains (losses) included in profit or loss for the period | 1,681 | 852 | ||||||
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|
|
|
10) | The sensitivity of fair value analysis for the Level 3 financial instruments |
The Bank performed the sensitivity analysis for the Level 3 financial instruments for which fair value would be measured differently upon reasonably possible alternative assumptions. The Bank classified the effect from changes upon the alternative assumptions into favorable effect and unfavorable effect and presented the most favorable effect or the most unfavorable effect in the table hereunder. Stocks are the financial instruments subject to sensitivity analysis, which are classified as Level 3 and of which changes in fair value are recognized as other comprehensive income. Meanwhile, equity instruments, which are recognized as cost among the financial instruments and are classified as Level 3 are excluded from the sensitivity analysis.
Sensitivity analysis details per market risk variable of each Level 3 financial instrument held and measured at fair value as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
(June 30, 2021)
Profit(loss) | Other comprehensive income (loss) | |||||||||||||||
Favorable | Unfavorable | Favorable | Unfavorable | |||||||||||||
Financial assets: | ||||||||||||||||
Loans at FVTPL (*1) | ₩ | 719 | ₩ | (1,200 | ) | ₩ | — | ₩ | — | |||||||
Derivative assets for trading (*1) | 71 | (67 | ) | — | — | |||||||||||
Financial assets at FVOCI (*1,2) | — | — | 29,081 | (25,421 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 790 | ₩ | (1,267 | ) | ₩ | 29,081 | ₩ | (25,421 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities: | ||||||||||||||||
Derivative liabilities for trading (*1) | ₩ | 211 | ₩ | (199 | ) | ₩ | — | ₩ | — |
S-51
Table of Contents
(December 31, 2020)
Profit(loss) | Other comprehensive income (loss) | |||||||||||||||
Favorable | Unfavorable | Favorable | Unfavorable | |||||||||||||
Financial assets: | ||||||||||||||||
Loans at FVTPL (*1) | ₩ | 43 | ₩ | (30 | ) | ₩ | — | ₩ | — | |||||||
Derivative assets for trading (*1) | 4 | (4 | ) | — | — | |||||||||||
Financial assets at FVOCI (*1,2) | — | — | 32,469 | (28,467 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 47 | ₩ | (34 | ) | ₩ | 32,469 | ₩ | (28,467 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities: | ||||||||||||||||
Derivative liabilities for trading (*1) | ₩ | 257 | ₩ | (254 | ) | ₩ | — | ₩ | — |
(*1) | Changes in fair value are computed by increasing or decreasing the volatility of the underlying asset by 10%, which are unobservable inputs. |
(*2) | Changes in fair value of stocks are computed by increasing or decreasing growth rate by 0.5% and discount rate by 1%, which are unobservable inputs. |
5-2. Classification by categories of financial instruments
The carrying amounts of each category of financial assets and financial liabilities as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
(June 30, 2021)
Financial assets at FVTPL | Financial assets at amortized cost | Financial assets at FVOCI | Hedging derivative assets | Total | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and due from financial institutions | ₩ | — | ₩ | 4,131,909 | ₩ | — | ₩ | — | ₩ | 4,131,909 | ||||||||||
Financial assets at FVTPL | 2,162,547 | — | — | — | 2,162,547 | |||||||||||||||
Hedging derivative assets | — | — | — | 931,344 | 931,344 | |||||||||||||||
Loans at amortized cost | — | 75,412,061 | — | — | 75,412,061 | |||||||||||||||
Financial investments | — | 708,174 | 12,177,825 | — | 12,885,999 | |||||||||||||||
Other financial assets | — | 918,496 | — | — | 918,496 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | ₩ | 2,162,547 | ₩ | 81,170,640 | ₩ | 12,177,825 | ₩ | 931,344 | ₩ | 96,442,356 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Hedging derivative liabilities | Total | |||||||||||||
Financial liabilities: | ||||||||||||||||
Financial liabilities at FVTPL | ₩ | 524,340 | ₩ | — | ₩ | — | ₩ | 524,340 | ||||||||
Hedging derivative liabilities | — | — | 430,660 | 430,660 | ||||||||||||
Borrowings | — | 5,573,065 | — | 5,573,065 | ||||||||||||
Debentures | — | 74,390,786 | — | 74,390,786 | ||||||||||||
Other financial liabilities | — | 1,937,672 | — | 1,937,672 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 524,340 | ₩ | 81,901,523 | ₩ | 430,660 | ₩ | 82,856,523 | ||||||||
|
|
|
|
|
|
|
|
S-52
Table of Contents
(December 31, 2020)
Financial assets at FVTPL | Financial assets at amortized cost | Financial assets at FVOCI | Hedging derivative assets | Total | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and due from financial institutions | ₩ | — | ₩ | 4,025,737 | ₩ | — | ₩ | — | ₩ | 4,025,737 | ||||||||||
Financial assets at FVTPL | 3,478,402 | — | — | — | 3,478,402 | |||||||||||||||
Hedging derivative assets | — | — | — | 1,499,766 | 1,499,766 | |||||||||||||||
Loans at amortized cost | — | 73,407,381 | — | — | 73,407,381 | |||||||||||||||
Financial investments | — | 505,876 | 10,536,535 | — | 11,042,411 | |||||||||||||||
Other financial assets | — | 792,202 | — | — | 792,202 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | ₩ | 3,478,402 | ₩ | 78,731,196 | ₩ | 10,536,535 | ₩ | 1,499,766 | ₩ | 94,245,899 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Hedging derivative liabilities | Total | |||||||||||||
Financial liabilities: | ||||||||||||||||
Financial liabilities at FVTPL | ₩ | 753,442 | ₩ | — | ₩ | — | ₩ | 753,442 | ||||||||
Hedging derivative liabilities | — | — | 418,970 | 418,970 | ||||||||||||
Borrowings | — | 6,076,631 | — | 6,076,631 | ||||||||||||
Debentures | — | 72,641,777 | — | 72,641,777 | ||||||||||||
Other financial liabilities | — | 2,372,002 | — | 2,372,002 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 753,442 | ₩ | 81,090,410 | ₩ | 418,970 | ₩ | 82,262,822 | ||||||||
|
|
|
|
|
|
|
|
5-3. | Offset of financial instruments |
The bank holds the financial instruments which grant it the rights to offset in case of default, insolvency, or bankruptcy of the counterparties though it does not meet the criteria for offsetting of K-IFRS No. 1032. Cash collaterals do not meet the offsetting criteria in K-IFRS No. 1032, but they can be set off with net amounts of financial instruments.
S-53
Table of Contents
The effects of netting agreements as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
(June 30, 2021)
Gross amounts of recognized financial assets (liabilities) | Gross amounts of recognized financial liabilities (assets) to be setoff | Net amounts of financial assets (liabilities) presented in the separate statements of financial position | Amount that is not offset in the separate statements of financial position | Net amount | ||||||||||||||||||||
Financial instruments | Cash collateral | |||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||
Derivatives | ₩ | 1,650,211 | ₩ | — | ₩ | 1,650,211 | ₩ | (486,141 | ) | ₩ | (482,766 | ) | ₩ | 681,304 | ||||||||||
Receivable spot exchange | 67,830 | — | 67,830 | (67,830 | ) | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩ | 1,718,041 | ₩ | — | ₩ | 1,718,041 | ₩ | (553,971 | ) | ₩ | (482,766 | ) | ₩ | 681,304 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Financial liabilities: | ||||||||||||||||||||||||
Derivatives | ₩ | 954,291 | ₩ | — | ₩ | 954,291 | ₩ | (486,141 | ) | ₩ | (108,912 | ) | ₩ | 359,238 | ||||||||||
Payable spot exchange | 67,830 | — | 67,830 | (67,830 | ) | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩ | 1,022,121 | ₩ | — | ₩ | 1,022,121 | ₩ | (553,971 | ) | ₩ | (108,912 | ) | ₩ | 359,238 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(December 31, 2020)
Gross amounts of recognized financial assets (liabilities) | Gross amounts of recognized financial liabilities (assets) to be setoff | Net amounts of financial assets (liabilities) presented in the separate statements of financial position | Amount that is not offset in the separate statements of financial position | Net amount | ||||||||||||||||||||
Financial instruments | Cash collateral | |||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||
Derivatives | ₩ | 2,510,945 | ₩ | — | ₩ | 2,510,945 | ₩ | (699,981 | ) | ₩ | (878,186 | ) | ₩ | 932,778 | ||||||||||
Receivable spot exchange | 10,860 | — | 10,860 | (10,860 | ) | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩ | 2,521,805 | ₩ | — | ₩ | 2,521,805 | ₩ | (710,841 | ) | ₩ | (878,186 | ) | ₩ | 932,778 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Financial liabilities: | ||||||||||||||||||||||||
Derivatives | ₩ | 1,170,290 | ₩ | — | ₩ | 1,170,290 | ₩ | (699,981 | ) | ₩ | (115,544 | ) | ₩ | 354,765 | ||||||||||
Payable spot exchange | 10,860 | — | 10,860 | (10,860 | ) | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩ | 1,181,150 | ₩ | — | ₩ | 1,181,150 | ₩ | (710,841 | ) | ₩ | (115,544 | ) | ₩ | 354,765 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
5-4. Transfer of financial assets
The Bank continues to recognize the financial assets related to repurchase agreements on the statements of financial position since those transactions are not qualified for derecognition even though the Bank transfers the financial assets. Since financial assets sold under repurchase agreements is sold to be repurchased at fixed prices, the Bank retains substantially all the risks and rewards of ownership of the asset. There are no carrying amounts of transferred assets and relevant liabilities as of June 30, 2021 and December 31, 2020.
6. | OPERATING SEGMENT: |
Though the Bank conducts business activities related to financial services, in accordance with relevant laws, such as the Export-Import Bank of Korea Act, it does not report separate segment information, as management considers the Bank to be operating under one core business.
S-54
Table of Contents
7. | CASH AND DUE FROM FINANCIAL INSTITUTIONS: |
(1) | Cash and cash equivalents as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Detail | Jun. 30, 2021 | Dec. 31, 2020 | ||||||
Due from financial institutions in local currency | ₩ | 762,626 | ₩ | 1,176,870 | ||||
Due from financial institutions in foreign currencies | 3,369,283 | 2,848,867 | ||||||
|
|
|
| |||||
Subtotal | 4,131,909 | 4,025,737 | ||||||
|
|
|
| |||||
Restricted due from financial institutions | (516,368 | ) | (554,502 | ) | ||||
Due from financial institutions with original maturities of more than three months at acquisition date | (589,024 | ) | (400,000 | ) | ||||
|
|
|
| |||||
Subtotal | (1,105,392 | ) | (954,502 | ) | ||||
|
|
|
| |||||
Total (*1) | ₩ | 3,026,517 | ₩ | 3,071,235 | ||||
|
|
|
|
(*1) | Equal to the cash and due from financial institutions as presented on the separate statements of cash flows. |
(2) | Details of due from financial institutions as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Jun. 30, 2021 | Dec. 31, 2020 | |||||||||||||||
Detail | Amount | Interest (%) | Amount | Interest (%) | ||||||||||||
Due from financial institutions in local currency: | ||||||||||||||||
Demand deposits | ₩ | 3,646 | — | ₩ | 1,061 | — | ||||||||||
Time deposits | 530,000 | 0.65~0.93 | 948,301 | 0.72~0.94 | ||||||||||||
Certificate of deposits | 225,425 | 0.88~1.10 | 223,000 | 0.84 | ||||||||||||
Others | 3,400 | 0.35 | 3,500 | 0.35 | ||||||||||||
Margin for derivatives | 155 | — | 1,008 | — | ||||||||||||
|
|
|
| |||||||||||||
Subtotal | 762,626 | 1,176,870 | ||||||||||||||
|
|
|
| |||||||||||||
Due from financial institutions in foreign currencies: | ||||||||||||||||
Demand deposits | 358,391 | — | 250,863 | — | ||||||||||||
On demand | 2,466,684 | — | 1,928,442 | — | ||||||||||||
Offshore demand deposits | 27,995 | — | 116,068 | — | ||||||||||||
Others | 114,810 | — | 190,940 | — | ||||||||||||
Margin for derivatives | 401,403 | — | 362,554 | — | ||||||||||||
|
|
|
| |||||||||||||
Subtotal | 3,369,283 | 2,848,867 | ||||||||||||||
|
|
|
| |||||||||||||
Total | ₩ | 4,131,909 | ₩ | 4,025,737 | ||||||||||||
|
|
|
|
S-55
Table of Contents
(3) | Restricted due from financial institutions as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Detail | Financial Institution | Jun. 30, 2021 | Dec. 31, 2020 | Reason for restriction | ||||||||
Others | DEUTSCHE BANK TRUST COMPANY AMERICAS and others | ₩ | 516,367 | ₩ | 554,502 | Credit Support Annex (CSA) for derivative transactions |
8. | FINANCIAL ASSETS AT FVTPL: |
Details of financial assets at FVTPL as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
Jun. 30, 2021 | Dec. 31 2020 | |||||||
Debt securities in local currency | ||||||||
Paid-in capital | ₩ | 98,486 | ₩ | 107,377 | ||||
Beneficiary certificates | 1,076,070 | 2,133,661 | ||||||
|
|
|
| |||||
Subtotal | 1,174,556 | 2,241,038 | ||||||
|
|
|
| |||||
Debt securities in foreign currencies | ||||||||
Bonds | 16,945 | 5,314 | ||||||
Paid-in capital | 11,083 | 11,169 | ||||||
Beneficiary certificates | 213,297 | 189,300 | ||||||
|
|
|
| |||||
Subtotal | 241,325 | 205,783 | ||||||
|
|
|
| |||||
Equity securities in foreign currency stocks | ||||||||
Stocks | 8,473 | 8,669 | ||||||
Loans at FVTPL | ||||||||
Privately placed corporate bonds | 19,085 | 10,423 | ||||||
Derivative assets for trading | ||||||||
Equity related | 239 | 1,310 | ||||||
Interest rates related | 467,706 | 529,715 | ||||||
Foreign currencies related | 251,161 | 481,464 | ||||||
Others | 2 | — | ||||||
|
|
|
| |||||
Subtotal | 719,108 | 1,012,489 | ||||||
|
|
|
| |||||
Total | ₩ | 2,162,547 | ₩ | 3,478,402 | ||||
|
|
|
|
S-56
Table of Contents
9. | FINANCIAL INVESTMENTS: |
Details of financial investments as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
Jun. 30, 2021 | Dec. 31 2020 | |||||||
Financial assets at FVOCI | ||||||||
Debt securities in local currency | ||||||||
National bond | ₩ | 1,045,954 | ₩ | 1,052,310 | ||||
Equity securities in local currency | ||||||||
Stocks | 9,394,297 | 8,580,575 | ||||||
Paid-in capital | 22,974 | 21,463 | ||||||
|
|
|
| |||||
Subtotal | 9,417,271 | 8,602,038 | ||||||
|
|
|
| |||||
Debt securities in foreign currencies | ||||||||
Corporate bonds and etc. (*1) | 1,714,600 | 882,187 | ||||||
Securities at amortized cost | ||||||||
Debt securities in local currencies | ||||||||
National bond | 100,543 | 100,732 | ||||||
Debt securities in foreign currencies | ||||||||
Corporate bonds and etc. (*1) | 607,631 | 405,144 | ||||||
|
|
|
| |||||
Total | ₩ | 12,885,999 | ₩ | 11,042,411 | ||||
|
|
|
|
(*1) | It includes debt securities, which are pledged as collateral amounting to ₩129,503 million and ₩125,457 million as of June 30, 2021 and December 31, 2020, respectively. |
S-57
Table of Contents
10. | LOANS AT AMORTIZED COST: |
Loans as presented below exclude loan valuation adjustment related to fair value hedging amounting to ₩(412) million and ₩(14,382) million as of June 30, 2021 and December 31, 2020, respectively.
(1) | Details of loans as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Detail | Jun. 30, 2021 | Dec. 31, 2020 | ||||||||
Loans in local currency | Loans for export | ₩ | 15,621,591 | ₩ | 14,961,693 | |||||
Loans for foreign investments | 2,477,552 | 2,648,893 | ||||||||
Loans for import | 4,684,960 | 3,929,944 | ||||||||
Troubled Debt Restructuring | 1,544,118 | 1,812,100 | ||||||||
Others | 209,924 | 290,544 | ||||||||
|
|
|
| |||||||
Subtotal | 24,538,145 | 23,643,174 | ||||||||
|
|
|
| |||||||
Loans in foreign currencies | Loans for export | 23,395,426 | 22,022,802 | |||||||
Loans for foreign investments | 23,746,912 | 22,624,489 | ||||||||
Loans for rediscounted trading notes | 282,500 | 467,840 | ||||||||
Loans for import | 1,205,743 | 1,206,460 | ||||||||
Overseas funding loans | 592,788 | 492,471 | ||||||||
Others | 27,210 | 26,258 | ||||||||
|
|
|
| |||||||
Subtotal | 49,250,579 | 46,840,320 | ||||||||
|
|
|
| |||||||
Others | Domestic usance bills | 235,720 | 195,732 | |||||||
Foreign-currency bills bought | 1,098,580 | 1,407,927 | ||||||||
Advance payments on acceptances and guarantees | 32,952 | 42,266 | ||||||||
Call loans | 1,241,000 | 2,649,600 | ||||||||
Interbank loans in foreign currencies | 847,500 | 1,206,593 | ||||||||
Private placement corporate bonds in local currency | 272,000 | 302,400 | ||||||||
|
|
|
| |||||||
Subtotal | 3,727,752 | 5,804,518 | ||||||||
|
|
|
| |||||||
Total | 77,516,476 | 76,288,012 | ||||||||
|
|
|
| |||||||
Net deferred origination fees and costs | (359,657 | ) | (364,854 | ) | ||||||
Allowance for loan losses | (1,744,346 | ) | (2,501,395 | ) | ||||||
|
|
|
| |||||||
Total | ₩ | 75,412,473 | ₩ | 73,421,763 | ||||||
|
|
|
|
S-58
Table of Contents
(2) | Changes in allowance for loan losses for the six months ended June 30, 2021 and for the year ended December 31, 2020, are as follows (Korean won in millions): |
(Six months ended June 30, 2021)
12 month expected credit losses | Lifetime expected credit losses | Credit- impaired financial assets | Total | |||||||||||||
Beginning balance | ₩ | 321,298 | ₩ | 1,116,426 | ₩ | 1,063,671 | ₩ | 2,501,395 | ||||||||
- Transfer to 12 month expected credit losses | 36,512 | (1,512 | ) | (35,000 | ) | — | ||||||||||
- Transfer to lifetime expected credit losses | (7,504 | ) | 57,519 | (50,015 | ) | — | ||||||||||
- Transfer to credit-impaired financial assets | (829 | ) | (786 | ) | 1,615 | — | ||||||||||
Written-off | — | — | (309 | ) | (309 | ) | ||||||||||
Collection | — | — | 5,416 | 5,416 | ||||||||||||
Loan-for-equity swap | — | — | (409,110 | ) | (409,110 | ) | ||||||||||
Others | (48,754 | ) | (376,320 | ) | — | (425,074 | ) | |||||||||
Unwinding effect | — | — | (3,964 | ) | (3,964 | ) | ||||||||||
Foreign exchange translation | 5,610 | 18,927 | 10,998 | 35,535 | ||||||||||||
Additional provisions (Reversal of provisions) | 678 | 92,666 | (52,887 | ) | 40,457 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance (*1) | ₩ | 307,011 | ₩ | 906,920 | ₩ | 530,415 | ₩ | 1,744,346 | ||||||||
|
|
|
|
|
|
|
|
(2020)
12 month expected credit losses | Lifetime expected credit losses | Credit- impaired financial assets | Total | |||||||||||||
Beginning balance | ₩ | 286,290 | ₩ | 758,393 | ₩ | 1,131,277 | ₩ | 2,175,960 | ||||||||
- Transfer to 12 month expected credit losses | 4,272 | (4,272 | ) | — | — | |||||||||||
- Transfer to lifetime expected credit losses | (12,303 | ) | 27,636 | (15,333 | ) | — | ||||||||||
- Transfer to credit-impaired financial assets | (1,826 | ) | (80,629 | ) | 82,455 | — | ||||||||||
Written-off | — | — | (218,764 | ) | (218,764 | ) | ||||||||||
Collection | 51,904 | — | 207 | 52,111 | ||||||||||||
Loan-for-equity swap | — | — | (8,403 | ) | (8,403 | ) | ||||||||||
Others | (26,808 | ) | — | — | (26,808 | ) | ||||||||||
Unwinding effect | (69 | ) | (582 | ) | (13,198 | ) | (13,849 | ) | ||||||||
Foreign exchange translation | (5,684 | ) | (37,818 | ) | (13,259 | ) | (56,761 | ) | ||||||||
Additional provisions (Reversal of provisions) | 25,522 | 453,698 | 118,689 | 597,909 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance (*1) | ₩ | 321,298 | ₩ | 1,116,426 | ₩ | 1,063,671 | ₩ | 2,501,395 | ||||||||
|
|
|
|
|
|
|
|
(*1) | Includes additional allowance for loan losses to cover the losses due to economic downturn caused by the spread of the COVID-19. |
S-59
Table of Contents
11. | INVESTMENTS IN ASSOCIATES AND SUBSIDIARIES: |
(1) | Details of investments in associates and subsidiaries as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Company | Detail | Location | Business | Year-end | Ownership (%) | Net asset (*1) | Carrying amount | |||||||||||||||||||||
KEXIM Bank UK Limited | Subsidiary | United Kingdom | Financial service | December | 100.00 | ₩ | 150,238 | ₩ | 138,312 | |||||||||||||||||||
KEXIM Vietnam Leasing Co. | Subsidiary | Vietnam | Financial service | December | 100.00 | 66,657 | 57,755 | |||||||||||||||||||||
PT.KOEXIM Mandiri Finance | Subsidiary | Indonesia | Financial service | December | 85.00 | 21,245 | 25,270 | |||||||||||||||||||||
KEXIM Asia Limited | Subsidiary | Hong Kong | Financial service | December | 100.00 | 188,478 | 167,839 | |||||||||||||||||||||
EXIM PLUS Co., Ltd. | Subsidiary | Korea | Service | December | 100.00 | 1,313 | 950 | |||||||||||||||||||||
Credit Guarantee and Investment Fund (*2) | Associate | Philippines | Financial service | December | 15.18 | 221,900 | 197,820 | |||||||||||||||||||||
KTB Newlake Global Healthcare PEF | Associate | Korea | Financial service | December | 25.00 | 7,744 | 8,463 | |||||||||||||||||||||
Korea Aerospace Industries. Ltd. | Associate | Korea | Manufacturing | December | 26.41 | 328,349 | 968,744 | |||||||||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd (*3) | Associate | Korea | Shipbuilding | December | — | — | — | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total | ₩ | 1,565,153 | ||||||||||||||||||||||||||
|
|
S-60
Table of Contents
(December 31, 2020)
Company | Detail | Location | Business | Year-end | Ownership (%) | Net asset (*1) | Carrying amount | |||||||||||||||||||||
KEXIM Bank UK Limited | Subsidiary | United Kingdom | Financial service | December | 100.00 | ₩ | 144,182 | ₩ | 138,312 | |||||||||||||||||||
KEXIM Vietnam Leasing Co. | Subsidiary | Vietnam | Financial service | December | 100.00 | 63,446 | 57,755 | |||||||||||||||||||||
PT.KOEXIM Mandiri Finance | Subsidiary | Indonesia | Financial service | December | 85.00 | 20,890 | 25,270 | |||||||||||||||||||||
KEXIM Asia Limited | Subsidiary | Hong Kong | Financial service | December | 100.00 | 180,097 | 167,839 | |||||||||||||||||||||
EXIM PLUS Co., Ltd. | Subsidiary | Korea | Service | December | 100.00 | 1,016 | 950 | |||||||||||||||||||||
Korea Asset Management Corporation | Associate | Korea | Financial service | December | 23.41 | 473,327 | 380,520 | |||||||||||||||||||||
Credit Guarantee and Investment Fund (*2) | Associate | Philippines | Financial service | December | 13.39 | 184,173 | 171,359 | |||||||||||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. (*4) | Associate | Korea | Shipbuilding | December | 83.03 | (333,211 | ) | — | ||||||||||||||||||||
KTB Newlake Global Healthcare PEF | Associate | Korea | Financial service | December | 25.00 | 7,992 | 8,463 | |||||||||||||||||||||
Korea Aerospace Industries. Ltd. | Associate | Korea | Manufacturing | December | 26.41 | 315,473 | 968,744 | |||||||||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd (*3) | Associate | Korea | Shipbuilding | December | — | — | — | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total | ₩ | 1,919,212 | ||||||||||||||||||||||||||
|
|
(*1) | In cases of associates, the amounts represent net asset after considering account percentage of ownership. |
(*2) | As of June 30, 2021 and December 31, 2020 the entity is classified into an associate because the Bank has significant influence in the way of representation on the board of directors or equivalent governing body of the investee. |
(*3) | This entity is not an associate with the current ownership. However, considering potential voting rights, the Bank has classified the entity as an associate. The Bank holds convertible bonds issued by the entity amounting to ₩2,332,832 million. |
(*4) | This entity was under the creditor-led work out programs. The Bank should have at least 75% of the total creditor’s loans to have a substantive control based on the creditor’s agreement. As the Bank had only 70.60% of the total creditor’s loans, this was classified into associates. |
S-61
Table of Contents
(2) | Changes in investments in associates and subsidiaries for the six months ended June 30, 2021 and for the year ended December 31, 2020 are as follows (Korean won in millions): |
(Six months ended June 30, 2021)
Company | Detail | Beginning balance | Acquisitions | Disposals (*1) | Impairment loss | Ending balance | ||||||||||||||||||
KEXIM Bank UK Limited | Subsidiary | ₩ | 138,312 | ₩ | — | ₩ | — | ₩ | — | ₩ | 138,312 | |||||||||||||
KEXIM Vietnam Leasing Co. | Subsidiary | 57,755 | — | — | — | 57,755 | ||||||||||||||||||
PT.KOEXIM Mandiri Finance | Subsidiary | 25,270 | — | — | — | 25,270 | ||||||||||||||||||
KEXIM Asia Limited | Subsidiary | 167,839 | — | — | — | 167,839 | ||||||||||||||||||
EXIM PLUS Co., Ltd. | Subsidiary | 950 | — | — | — | 950 | ||||||||||||||||||
Korea Asset Management Corporation | Associate | 380,520 | — | (380,520 | ) | — | — | |||||||||||||||||
Credit Guarantee and Investment Fund | Associate | 171,359 | 26,461 | — | — | 197,820 | ||||||||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. | Associate | — | — | — | — | — | ||||||||||||||||||
KTB Newlake Global Healthcare PEF | Associate | 8,463 | — | — | — | 8,463 | ||||||||||||||||||
Korea Aerospace Industries. Ltd. | Associate | 968,744 | — | — | — | 968,744 | ||||||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | Associate | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 1,919,212 | ₩ | 26,461 | ₩ | (380,520 | ) | ₩ | — | ₩ | 1,565,153 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
(*1) | As the Bank did not participate in the Korea Asset Management Corporation’s paid-in capital increase and lost significant influence on the Korea Asset Management Corporation for the period of six months ended June 30, 2021, it was reclassified from investments in associates to financial assets at FVOCI. |
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(2020)
Company | Detail | Beginning balance | Acquisition | Disposals | Impairment loss | Ending balance | ||||||||||||||||||
KEXIM Bank UK Limited | Subsidiary | ₩ | 48,460 | ₩ | 89,852 | ₩ | — | ₩ | — | ₩ | 138,312 | |||||||||||||
KEXIM Vietnam Leasing Co. | Subsidiary | 10,275 | 47,480 | — | — | 57,755 | ||||||||||||||||||
PT.KOEXIM Mandiri Finance | Subsidiary | 25,270 | — | — | — | 25,270 | ||||||||||||||||||
KEXIM Asia Limited | Subsidiary | 49,139 | 118,700 | — | — | 167,839 | ||||||||||||||||||
EXIM PLUS Co., Ltd. | Subsidiary | 950 | — | — | — | 950 | ||||||||||||||||||
Korea Asset Management Corporation | Associate | 380,520 | — | — | — | 380,520 | ||||||||||||||||||
Credit Guarantee and Investment Fund | Associate | 143,220 | 28,139 | — | — | 171,359 | ||||||||||||||||||
HSG SUNGDONG Shipbuilding Co., Ltd. | Associate | — | — | — | — | — | ||||||||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. | Associate | — | — | — | — | — | ||||||||||||||||||
KTB Newlake Global Healthcare PEF | Associate | 10,045 | — | (1,582 | ) | — | 8,463 | |||||||||||||||||
KBS-KDB Private Equity Fund | Associate | 6,032 | — | (6,032 | ) | — | — | |||||||||||||||||
Korea Aerospace Industries. Ltd. | Associate | 1,110,990 | — | — | (142,246 | ) | 968,744 | |||||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | Associate | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 1,784,901 | ₩ | 284,171 | ₩ | (7,614 | ) | ₩ | (142,246 | ) | ₩ | 1,919,212 | ||||||||||||
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|
|
|
|
|
|
(3) | Summarized financial information of associates and subsidiaries as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Company | Assets | Liabilities | Operating income (loss) | Profit (loss) for the period | Total comprehensive income (loss) | |||||||||||||||
KEXIM Bank UK Limited | ₩ | 545,712 | ₩ | 395,475 | ₩ | 586 | ₩ | (139 | ) | ₩ | 6,118 | |||||||||
KEXIM Vietnam Leasing Co. | 212,971 | 146,314 | 1,042 | 832 | 3,291 | |||||||||||||||
PT.KOEXIM Mandiri Finance | 167,311 | 146,066 | 856 | 194 | 355 | |||||||||||||||
KEXIM Asia Limited | 671,257 | 482,779 | 3,121 | 2,392 | 8,549 | |||||||||||||||
EXIM PLUS Co., Ltd. | 2,473 | 1,161 | 318 | 297 | 297 | |||||||||||||||
Credit Guarantee and Investment Fund | 1,553,224 | 91,435 | 23,962 | 23,962 | 56,045 | |||||||||||||||
KTB Newlake Global Healthcare PEF | 31,116 | 140 | 168 | 168 | 168 | |||||||||||||||
Korea Aerospace Industries. Ltd. | 5,851,117 | 4,570,520 | 68,389 | 65,773 | 65,813 | |||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | 9,816,076 | 7,189,675 | (1,220,345 | ) | (1,246,945 | ) | (1,241,471 | ) |
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(December 31, 2020)
Company | Assets | Liabilities | Operating income (loss) | Profit (loss) for the year | Total comprehensive income (loss) | |||||||||||||||
KEXIM Bank UK Limited | ₩ | 499,074 | ₩ | 354,892 | ₩ | 1,805 | ₩ | 2,748 | ₩ | 3,647 | ||||||||||
KEXIM Vietnam Leasing Co. | 204,020 | 140,574 | 1,841 | 1,962 | (3,314 | ) | ||||||||||||||
PT.KOEXIM Mandiri Finance | 160,964 | 140,074 | (1,437 | ) | (5,948 | ) | (7,623 | ) | ||||||||||||
KEXIM Asia Limited | 544,995 | 364,898 | 4,224 | 3,547 | (10,741 | ) | ||||||||||||||
EXIM PLUS Co., Ltd. | 1,950 | 934 | 166 | 162 | 162 | |||||||||||||||
Korea Asset Management Corporation | 5,844,961 | 3,823,061 | 53,888 | 60,496 | 66,506 | |||||||||||||||
Credit Guarantee and Investment Fund | 1,470,605 | 95,156 | 27,655 | 7,367 | (38,711 | ) | ||||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. | 385,557 | 786,871 | (14,586 | ) | (21,702 | ) | (21,702 | ) | ||||||||||||
KTB Newlake Global Healthcare PEF | 32,273 | 305 | 1,334 | 1,334 | 1,334 | |||||||||||||||
Korea Aerospace Industries. Ltd. | 5,137,550 | 3,904,310 | 141,988 | 71,274 | 88,098 | |||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | 10,320,775 | 6,451,804 | 153,437 | 86,573 | 114,107 |
12. | TANGIBLE ASSETS: |
Changes in tangible assets for the six months ended June 30, 2021 and for the year ended December 31, 2020 are as follows (Korean won in millions):
(Six months ended June 30, 2021)
Detail | Beginning balance | Acquisitions | Disposals | Depreciation | Ending balance | |||||||||||||||
Lands | ₩ | 190,807 | ₩ | — | ₩ | — | ₩ | — | ₩ | 190,807 | ||||||||||
Buildings | 60,570 | — | — | (963 | ) | 59,607 | ||||||||||||||
Leasehold improvements | 172 | 1,023 | — | (74 | ) | 1,121 | ||||||||||||||
Vehicles | 1,258 | 34 | — | (219 | ) | 1,073 | ||||||||||||||
Furniture and fixture | 9,825 | 3,199 | (1 | ) | (2,260 | ) | 10,763 | |||||||||||||
Construction in progress | 455 | — | — | — | 455 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | ₩ | 263,087 | ₩ | 4,256 | ₩ | (1 | ) | ₩ | (3,516 | ) | ₩ | 263,826 | ||||||||
|
|
|
|
|
|
|
|
|
|
(2020)
Detail | Beginning balance | Acquisitions | Disposals | Depreciation | Ending balance | |||||||||||||||
Lands | ₩ | 190,807 | ₩ | — | ₩ | — | ₩ | — | ₩ | 190,807 | ||||||||||
Buildings | 62,496 | — | — | (1,926 | ) | 60,570 | ||||||||||||||
Leasehold improvements | 145 | 60 | — | (33 | ) | 172 | ||||||||||||||
Vehicles | 783 | 858 | — | (383 | ) | 1,258 | ||||||||||||||
Furniture and fixture | 10,885 | 4,034 | (2 | ) | (5,092 | ) | 9,825 | |||||||||||||
Construction in progress | — | 455 | — | — | 455 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | ₩ | 265,116 | ₩ | 5,407 | ₩ | (2 | ) | ₩ | (7,434 | ) | ₩ | 263,087 | ||||||||
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|
|
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13. | INTANGIBLE ASSETS: |
Changes in intangible assets for the six months ended June 30, 2021 and for the year ended December 31, 2020 are as follows (Korean won in millions):
(Six months ended June 30, 2021)
Detail | Beginning balance | Acquisitions | Disposals | Amortization | Reversal of (Additional) impairment | Ending balance | ||||||||||||||||||
Computer software | ₩ | 8,484 | ₩ | 517 | ₩ | — | ₩ | (1,912 | ) | ₩ | — | ₩ | 7,089 | |||||||||||
System development fees | 15,942 | 3,651 | — | (3,489 | ) | — | 16,104 | |||||||||||||||||
Memberships | 3,656 | — | — | — | — | 3,656 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩ | 28,082 | ₩ | 4,168 | ₩ | — | ₩ | (5,401 | ) | ₩ | — | ₩ | 26,849 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(2020)
Detail | Beginning balance | Acquisitions | Disposals | Amortization | Reversal of (Additional) impairment | Ending balance | ||||||||||||||||||
Computer software | ₩ | 10,756 | ₩ | 1,632 | ₩ | (1 | ) | ₩ | (3,903 | ) | ₩ | — | ₩ | 8,484 | ||||||||||
System development fees | 19,970 | 3,488 | — | (7,516 | ) | — | 15,942 | |||||||||||||||||
Memberships | 3,656 | — | — | — | — | 3,656 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩ | 34,382 | ₩ | 5,120 | ₩ | (1 | ) | ₩ | (11,419 | ) | ₩ | — | ₩ | 28,082 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
14. | OTHER ASSETS: |
(1) | Details of other assets as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Jun. 30, 2021 | Dec. 31, 2020 | |||||||
Other financial assets: | ||||||||
Guarantee deposits | ₩ | 49,152 | ₩ | 39,874 | ||||
Accounts receivable | 108,616 | 53,102 | ||||||
Accrued income | 769,950 | 728,740 | ||||||
Receivable spot exchange | 56 | 78 | ||||||
Allowances for loan losses on other assets | (9,278 | ) | (29,592 | ) | ||||
|
|
|
| |||||
Subtotal | 918,496 | 792,202 | ||||||
|
|
|
| |||||
Other assets: | ||||||||
Advance payments | 62 | — | ||||||
Prepaid expenses | 9,934 | 11,440 | ||||||
Current income tax asset | 3,596 | 2,570 | ||||||
Sundry assets | 7,838 | 7,574 | ||||||
|
|
|
| |||||
Subtotal | 21,430 | 21,584 | ||||||
|
|
|
| |||||
Total | ₩ | 939,926 | ₩ | 813,786 | ||||
|
|
|
|
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(2) | Changes in allowances for loan losses on other assets for the six months ended June 30, 2021 and for the year ended December 31, 2020 are as follows (Korean won in millions): |
Six months ended June 30, 2021 | 2020 | |||||||
Beginning balance | ₩ | 29,592 | ₩ | 7,888 | ||||
Collection | — | 116 | ||||||
Additional provisions (Reversal of provisions) | (20,366 | ) | 21,980 | |||||
Others | 52 | (392 | ) | |||||
|
|
|
| |||||
Ending balance | ₩ | 9,278 | ₩ | 29,592 | ||||
|
|
|
|
15. | BORROWINGS: |
(1) | Details of borrowings as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Detail | Lender | Interest rate (%) | Amount | |||||||
Borrowings in foreign currencies: | ||||||||||
Borrowings from the Government | MINISTRY OF ECONOMY AND FINANCE | | LIBOR 3M+0.64 ~ LIBOR 3M+0.78 |
| ₩ | 1,221,620 | ||||
Short term borrowings from foreign financial institutions | THE BANK OF TOKYO-MITSUBISHI UFJ, LTD, SEOUL BRANCH | LIBOR 3M+0.38 | 543,424 | |||||||
Long term borrowings from foreign financial institutions | CREDIT AGRICOLE CIB and others | | LIBOR 3M+0.47 ~ LIBOR 3M+0.55 |
| 1,017,000 | |||||
Discount on borrowings | (36 | ) | ||||||||
Commercial papers denominated in foreign currencies | CITIBANK N.A., HONG KONG(US) And others | 0.14 ~ 0.30 | 1,423,800 | |||||||
Offshore commercial papers denominated in foreign currencies | CITIBANK N.A., HONG KONG(US) And others | (-)0.52 ~ 0.25 | 279,777 | |||||||
Others (Foreign banks) | HSBC BANK, SEOUL BRANCH and others | 0.05 ~ 0.35 | 235,720 | |||||||
Others (CSA) | BANK OF AMERICA (VM) and others | 0.08 | 851,760 | |||||||
|
| |||||||||
Total | ₩ | 5,573,065 | ||||||||
|
|
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Table of Contents
(December 31, 2020)
Detail | Lender | Interest rate (%) | Amount | |||||||
Borrowings in foreign currencies: | ||||||||||
Borrowings from the Government | MINISTRY OF ECONOMY AND FINANCE | | LIBOR 3M+0.64 ~ LIBOR 3M+0.78 |
| ₩ | 1,176,216 | ||||
Short term borrowings from foreign financial institutions | THE BANK OF TOKYO-MITSUBISHI UFJ, LTD, SEOUL BRANCH | LIBOR 3M+0.38 | 537,252 | |||||||
Long term borrowings from foreign financial institutions | CREDIT AGRICOLE CIB and others | | LIBOR 3M+0.32 ~ LIBOR 3M+0.85 |
| 1,686,400 | |||||
Discount on borrowings | (131 | ) | ||||||||
Commercial papers denominated in foreign currencies | MIZUHO SECURITIES ASIA LTD and others | 0.21 ~ 2.33 | 911,744 | |||||||
Offshore commercial papers denominated in foreign currencies | CITIBANK N.A., HONG KONG And others | (-)0.46 ~ 0.28 | 225,107 | |||||||
Others (Foreign banks) | DBS BANK LTD and others | 0.06 ~ 0.20 | 195,732 | |||||||
Others (CSA) | BANK OF AMERICA (VM) and others | 0.09 | 1,344,311 | |||||||
|
| |||||||||
Total | ₩ | 6,076,631 | ||||||||
|
|
(2) | Details of the borrowings from other financial institutions as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Type | Borrowings in foreign currencies | |||
Commercial banks | ₩ | 4,351,481 |
(December 31, 2020)
Type | Borrowings in foreign currencies | |||
Commercial banks | ₩ | 4,900,546 |
The above borrowings excluded the present value discounting effect.
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16. | DEBENTURES: |
Details of debentures as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
June 30, 2021 | Dec. 31, 2030 | |||||||||||||||
Detail | Interest rate (%) | Amount | Interest rate (%) | Amount | ||||||||||||
Local currencies: | ||||||||||||||||
Floating rate | | 31-Day CD-0.01~ 31-Day CD+0.12 |
| ₩ | 2,490,000 | | 31-Day CD-0.01~ 31-Day CD+0.12 |
| ₩ | 1,340,000 | ||||||
Fixed rate | 0.63~4.70 | 20,555,000 | 0.67~4.70 | 21,465,000 | ||||||||||||
|
|
|
| |||||||||||||
Subtotal | 23,045,000 | 22,805,000 | ||||||||||||||
|
|
|
| |||||||||||||
Fair value hedging adjusting | (33,472 | ) | (31,803 | ) | ||||||||||||
Discount on debentures | (37,281 | ) | (47,141 | ) | ||||||||||||
|
|
|
| |||||||||||||
Subtotal | 22,974,247 | 22,726,056 | ||||||||||||||
|
|
|
| |||||||||||||
Foreign currencies: | ||||||||||||||||
Floating rate | | Libor3M+0.30~ Libor3M+1.35 |
| 9,991,890 | | Libor3M+0.30~ Libor3M+1.35 |
| 10,543,268 | ||||||||
Fixed rate | 0.00 ~ 8.50 | 40,756,321 | 0.00~8.50 | 38,057,286 | ||||||||||||
|
|
|
| |||||||||||||
Subtotal | 50,748,211 | 48,600,554 | ||||||||||||||
|
|
|
| |||||||||||||
Fair value hedging adjusting | 764,322 | 1,393,009 | ||||||||||||||
Discount on debentures | (95,994 | ) | (77,842 | ) | ||||||||||||
|
|
|
| |||||||||||||
Subtotal | 51,416,539 | 49,915,721 | ||||||||||||||
|
|
|
| |||||||||||||
Total | ₩ | 74,390,786 | ₩ | 72,641,777 | ||||||||||||
|
|
|
|
17. | PROVISIONS: |
(1) | Details of provisions as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Jun. 30, 2021 | Dec. 31, 2020 | |||||||
Provisions for acceptances and guarantees | ₩ | 335,196 | ₩ | 387,027 | ||||
Provisions for unused loan commitments | 222,456 | 239,584 | ||||||
Provisions for legal proceedings | 3,146 | — | ||||||
|
|
|
| |||||
Total | ₩ | 560,798 | ₩ | 626,611 | ||||
|
|
|
|
(2) | Changes in provisions for the six months ended June 30, 2021 and for the year ended December 31, 2020 are as follows (Korean won in millions): |
(Six months ended June 30, 2021)
Acceptances and guarantees | ||||||||||||||||
12 month expected credit losses | Lifetime expected credit losses | Credit- impaired financial assets | Total | |||||||||||||
Beginning balance | ₩ | 42,507 | ₩ | 272,431 | ₩ | 72,089 | ₩ | 387,027 | ||||||||
- Transfer to 12 month expected credit losses | 32,147 | (7,165 | ) | (24,982 | ) | — | ||||||||||
- Transfer to lifetime expected credit losses | (7,483 | ) | 7,483 | — | — | |||||||||||
- Transfer to credit-impaired financial assets | (11 | ) | — | 11 | — | |||||||||||
Foreign exchange translation | 1,841 | 7,375 | 438 | 9,654 | ||||||||||||
Additional provisions (Reversal of provisions) | (33,701 | ) | 3,135 | (30,919 | ) | (61,485 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | ₩ | 35,300 | ₩ | 283,259 | ₩ | 16,637 | ₩ | 335,196 | ||||||||
|
|
|
|
|
|
|
|
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Table of Contents
Unused loan commitments | ||||||||||||||||
12 month expected credit losses | Lifetime expected credit losses | Credit- impaired financial assets | Total | |||||||||||||
Beginning balance | ₩ | 34,073 | ₩ | 188,718 | ₩ | 16,793 | ₩ | 239,584 | ||||||||
- Transfer to 12 month expected credit losses | 15,000 | — | (15,000 | ) | — | |||||||||||
- Transfer to lifetime expected credit losses | — | — | — | — | ||||||||||||
- Transfer to credit-impaired financial assets | (58 | ) | — | 58 | — | |||||||||||
Foreign exchange translation | 544 | — | 11 | 555 | ||||||||||||
Reversal of provisions | (16,974 | ) | (598 | ) | (111 | ) | (17,683 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | ₩ | 32,585 | ₩ | 188,120 | ₩ | 1,751 | ₩ | 222,456 | ||||||||
|
|
|
|
|
|
|
|
(2020)
Acceptances and guarantees | ||||||||||||||||
12 month expected credit losses | Lifetime expected credit losses | Credit- impaired financial assets | Total | |||||||||||||
Beginning balance | ₩ | 48,514 | ₩ | 209,840 | ₩ | 48,087 | ₩ | 306,441 | ||||||||
- Transfer to 12 month expected credit losses | 187 | (187 | ) | — | — | |||||||||||
- Transfer to lifetime expected credit losses | (4,107 | ) | 4,107 | — | — | |||||||||||
- Transfer to credit-impaired financial assets | (40 | ) | — | 40 | — | |||||||||||
Foreign exchange translation | (1,369 | ) | (10,113 | ) | (997 | ) | (12,479 | ) | ||||||||
Additional provisions (Reversal of provisions) | (678 | ) | 68,784 | 24,959 | 93,065 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | ₩ | 42,507 | ₩ | 272,431 | ₩ | 72,089 | ₩ | 387,027 | ||||||||
|
|
|
|
|
|
|
|
Unused loan commitments | ||||||||||||||||
12 month expected credit losses | Lifetime expected credit losses | Credit- impaired financial assets | Total | |||||||||||||
Beginning balance | ₩ | 23,771 | ₩ | 200,695 | ₩ | 8,474 | ₩ | 232,940 | ||||||||
- Transfer to 12 month expected credit losses | 2,268 | (2,268 | ) | — | — | |||||||||||
- Transfer to lifetime expected credit losses | (45 | ) | 474 | (429 | ) | — | ||||||||||
- Transfer to credit-impaired financial assets | (1 | ) | — | 1 | — | |||||||||||
Foreign exchange translation | (382 | ) | (28 | ) | (38 | ) | (448 | ) | ||||||||
Additional provisions (Reversal of provisions) | 8,462 | (10,155 | ) | 8,785 | 7,092 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | ₩ | 34,073 | ₩ | 188,718 | ₩ | 16,793 | ₩ | 239,584 | ||||||||
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|
|
|
|
|
|
18. | RETIREMENT BENEFIT PLAN: |
The Bank operates both defined benefit plan and defined contribution plan.
(1) | Defined benefit plan |
The Bank operates defined benefit plans, which have the following characteristics:
• | The entity has the obligation to pay the agreed benefits to all its current and past employees. |
• | The entity is liable for actuarial risk (excess of actual payment against expected amount) and investment risk. |
The present value of the defined benefit obligation recognized in the separate statements of financial position is calculated annually by independent actuaries in accordance with actuarial valuation method. The
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present value of the defined benefit obligation is calculated using the projected unit credit method (“PUC”). The data used in the PUC, such as interest rates, future salary increase rate, mortality rate, consumer price index and expected return on plan asset, are based on observable market data and historical data, which are annually updated.
Actuarial assumptions may differ from actual results due to change in the market, economic trend and mortality trend, which may affect defined benefit obligation liabilities and future payments. Actuarial gains and losses arising from changes in actuarial assumptions are recognized in the period incurred through other comprehensive income or loss.
(2) | Details of defined benefit obligation as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Jun. 30, 2021 | Dec. 31, 2020 | |||||||
Present value of defined benefit obligations | ₩ | 114,782 | ₩ | 111,011 | ||||
Fair value of plan assets | (113,881 | ) | (115,812 | ) | ||||
|
|
|
| |||||
Net defined benefit liabilities (assets) | ₩ | 901 | ₩ | (4,801 | ) | |||
|
|
|
|
(3) | Changes in net defined benefit obligations for the six months ended June 30, 2021 and for the year ended December 31, 2020 are as follows (Korean won in millions): |
(Six months ended June 30, 2021)
Present value of the defined benefit obligations | Plan assets | Net defined benefit liabilities (assets) | ||||||||||
Beginning balance | ₩ | 111,011 | ₩ | (115,812 | ) | ₩ | (4,801 | ) | ||||
Contributions from the employer | — | — | — | |||||||||
Current-service cost | 5,703 | — | 5,703 | |||||||||
Interest expense (income) | 1,733 | (1,819 | ) | (86 | ) | |||||||
Actuarial gains and losses arising from changes in demographic assumptions | — | — | — | |||||||||
Actuarial gains and losses arising from changes in financial assumptions | — | — | — | |||||||||
Actuarial gains and losses arising from experience adjustments | — | — | — | |||||||||
Management fees on plan assets | — | — | — | |||||||||
Benefits paid | (3,665 | ) | 3,750 | 85 | ||||||||
|
|
|
|
|
| |||||||
Ending balance | ₩ | 114,782 | ₩ | (113,881 | ) | ₩ | 901 | |||||
|
|
|
|
|
|
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(2020)
Present value of the defined benefit obligations | Plan assets | Net defined benefit liabilities (assets) | ||||||||||
Beginning balance | ₩ | 100,628 | ₩ | (103,871 | ) | ₩ | (3,243 | ) | ||||
Contributions from the employer | — | (14,700 | ) | (14,700 | ) | |||||||
Current-service cost | 11,100 | — | 11,100 | |||||||||
Interest expense (income) | 3,045 | (3,156 | ) | (111 | ) | |||||||
Actuarial gains and losses arising from changes in demographic assumptions | 1,945 | — | 1,945 | |||||||||
Actuarial gains and losses arising from changes in financial assumptions | (834 | ) | 1,235 | 401 | ||||||||
Actuarial gains and losses arising from experience adjustments | 885 | — | 885 | |||||||||
Management fees on plan assets | — | 190 | 190 | |||||||||
Benefits paid | (5,758 | ) | 4,490 | (1,268 | ) | |||||||
|
|
|
|
|
| |||||||
Ending balance | ₩ | 111,011 | ₩ | (115,812 | ) | ₩ | (4,801 | ) | ||||
|
|
|
|
|
|
(4) | Details of plan assets as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Jun. 30, 2021 | Dec. 31, 2020 | |||||||
Cash and cash equivalent | ₩ | 35,907 | ₩ | 14,600 | ||||
Others | 77,974 | 101,212 | ||||||
|
|
|
| |||||
Total | ₩ | 113,881 | ₩ | 115,812 | ||||
|
|
|
|
(5) | Retirement benefit costs incurred from the defined contribution plan for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions): |
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Retirement benefits | ₩ | 2,342 | ₩ | 247 |
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19. | OTHER LIABILITIES: |
Details of other liabilities as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
Jun. 30, 2021 | Dec. 31, 2020 | |||||||
Other financial liabilities: | ||||||||
Financial guarantee contract liabilities | ₩ | 1,195,093 | ₩ | 1,182,101 | ||||
Foreign exchanges payable | 75 | 543,678 | ||||||
Accounts payable | 121,999 | 24,639 | ||||||
Accrued expenses | 620,345 | 621,424 | ||||||
Guarantee deposit received | 160 | 160 | ||||||
|
|
|
| |||||
Subtotal | 1,937,672 | 2,372,002 | ||||||
|
|
|
| |||||
Other liabilities: | ||||||||
Allowance for credit loss in derivatives | 23,387 | 37,765 | ||||||
Unearned income | 110,961 | 148,608 | ||||||
Current tax payable | 135,519 | 11,426 | ||||||
Sundry liabilities | 4,526 | 33,357 | ||||||
|
|
|
| |||||
Subtotal | 274,393 | 231,156 | ||||||
|
|
|
| |||||
Total | ₩ | 2,212,065 | ₩ | 2,603,158 | ||||
|
|
|
|
20. | DERIVATIVES: |
The Bank operates derivatives both for trading and hedging purposes. Derivatives held for trading purpose are included in financial assets and liabilities at FVTPL.
(1) | Fair value hedge |
Fair value hedge is a hedge of the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss. When applying fair value hedge, the gain or loss on the hedged item attributable to the hedged risk shall adjust the carrying amount of the hedged item and be recognized in profit or loss.
The Bank shall discontinue prospectively the fair value hedge if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Bank revokes the designation. Any adjustment arising from the gain or loss on the hedged item attributable to the hedged risk to the carrying amount of a hedged financial instrument for which the effective interest method is used shall be amortized to profit or loss.
The Bank uses interest rate swaps for hedging changes of fair values in hedged items arising from changes in interest rates. The Bank also uses currency swaps for hedging changes of fair values in hedged items arising from changes in foreign exchange rates.
(2) | Cash flow hedge |
Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction and could affect profit or loss. When applying cash flow hedge, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge shall be recognized in other comprehensive income; and the ineffective portion of the gain or loss on the hedging instrument are recognized in profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains or losses that were
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recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the same period or periods during which the hedged forecast cash flows affect profit or loss.
The Bank shall discontinue prospectively the cash flow hedge if hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Bank revokes the designation. The forecasted transaction is no longer expected to occur, any related cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income from the period when the hedge was effective are reclassified from equity to profit or loss as a reclassification adjustment.
The Bank uses interest rate swaps for hedging changes of cash flows in hedged items arising from changes in interest rates. The Bank also uses currency swaps for hedging changes of cash flows in hedged items arising from changes in foreign exchange.
(3) | Details of derivative assets and liabilities as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Derivative assets | ||||||||||||||||||||
Detail | Notional | Fair value hedge | Cash flow hedge | Trading | Total | |||||||||||||||
Interest: | ||||||||||||||||||||
Interest rate forwards | ₩ | 39,550 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ||||||||||
Interest rate swaps | 42,057,985 | 413,884 | — | 467,706 | 881,590 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Subtotal | 42,097,535 | 413,884 | — | 467,706 | 881,590 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Currency: | ||||||||||||||||||||
Currency forwards | 4,491,467 | — | — | 25,408 | 25,408 | |||||||||||||||
Currency swaps | 26,104,428 | 516,502 | 958 | 225,753 | 743,213 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Subtotal | 30,595,895 | 516,502 | 958 | 251,161 | 768,621 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Stock: | ||||||||||||||||||||
Stock options | 46,952 | — | — | 239 | 239 | |||||||||||||||
Other: | ||||||||||||||||||||
Other derivatives | 10,170 | — | — | 2 | 2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | ₩ | 72,750,552 | ₩ | 930,386 | ₩ | 958 | ₩ | 719,108 | ₩ | 1,650,452 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Derivative liabilities | ||||||||||||||||||||
Detail | Notional | Fair value hedge | Cash flow hedge | Trading | Total | |||||||||||||||
Interest: | ||||||||||||||||||||
Interest rate forwards | ₩ | 39,550 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ||||||||||
Interest rate swaps | 42,057,985 | 90,477 | — | 286,319 | 376,796 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Subtotal | 42,097,535 | 90,477 | — | 286,319 | 376,796 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Currency: | ||||||||||||||||||||
Currency forwards | 4,491,467 | — | — | 17,393 | 17,393 | |||||||||||||||
Currency swaps | 26,104,428 | 340,183 | — | 219,919 | 560,102 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Subtotal | 30,595,895 | 340,183 | — | 237,312 | 577,495 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Stock: | ||||||||||||||||||||
Stock options | 46,952 | — | — | 709 | 709 | |||||||||||||||
Other: | ||||||||||||||||||||
Other derivatives | 10,170 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | ₩ | 72,750,552 | ₩ | 430,660 | ₩ | — | ₩ | 524,340 | ₩ | 955,000 | ||||||||||
|
|
|
|
|
|
|
|
|
|
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(December 31, 2020)
Derivative assets | ||||||||||||||||||||
Detail | Notional | Fair value hedge | Cash flow hedge | Trading | Total | |||||||||||||||
Interest: | ||||||||||||||||||||
Interest rate forwards | ₩ | 10,880 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ||||||||||
Interest rate swaps | 39,330,211 | 636,346 | — | 529,715 | 1,166,061 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Subtotal | 39,341,091 | 636,346 | — | 529,715 | 1,166,061 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Currency: | ||||||||||||||||||||
Currency forwards | 5,110,583 | — | — | 96,037 | 96,037 | |||||||||||||||
Currency swaps | 27,596,486 | 863,420 | — | 385,427 | 1,248,847 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Subtotal | 32,707,069 | 863,420 | — | 481,464 | 1,344,884 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Stock: | ||||||||||||||||||||
Stock options | 46,952 | — | — | 1,310 | 1,310 | |||||||||||||||
Other: | ||||||||||||||||||||
Other derivatives | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | ₩ | 72,095,112 | ₩ | 1,499,766 | ₩ | — | ₩ | 1,012,489 | ₩ | 2,512,255 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Derivative liabilities | ||||||||||||||||||||
Detail | Notional | Fair value hedge | Cash flow hedge | Trading | Total | |||||||||||||||
Interest: | ||||||||||||||||||||
Interest rate forwards | ₩ | 10,880 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ||||||||||
Interest rate swaps | 39,330,211 | 54,003 | — | 237,316 | 291,319 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Subtotal | 39,341,091 | 54,003 | — | 237,316 | 291,319 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Currency: | ||||||||||||||||||||
Currency forwards | 5,110,583 | — | — | 157,331 | 157,331 | |||||||||||||||
Currency swaps | 27,596,486 | 364,967 | — | 356,672 | 721,639 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Subtotal | 32,707,069 | 364,967 | — | 514,003 | 878,970 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Stock: | ||||||||||||||||||||
Stock options | 46,952 | — | — | 2,123 | 2,123 | |||||||||||||||
Other: | ||||||||||||||||||||
Other derivatives | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | ₩ | 72,095,112 | ₩ | 418,970 | ₩ | — | ₩ | 753,442 | ₩ | 1,172,412 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(4) | Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions): |
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Fair value hedge – hedged items | ₩ | 644,570 | ₩ | (1,215,227 | ) | |||
Fair value hedge – hedging instruments | (760,324 | ) | 963,781 |
(5) | As a result of cash flow hedge, the Bank recognized ₩970 million as other comprehensive income (before tax effect) for the six months ended June 30, 2021, and there is no ineffectiveness recognized in relation to cash flow hedge for the six months ended June 30, 2021 and 2020. |
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(6) | Hedge accounting |
1) | Purpose and strategy of risk avoidance |
The Bank transacts with derivative financial instruments to hedge its interest rate risk and currency risk arising from the assets and liabilities of the Bank. The Bank applies the fair value hedge accounting for the changes in the market interest rates of the financial debentures in Korean won and foreign currency and the loans in foreign currency and cash flow hedge accounting for interest rate swaps and currency swaps to hedge cash flow risk due to interest rates of the debentures in Korean won and currency risk due to the loans in foreign currency.
2) | Nominal values and average hedge ratio for derivatives as of June 30, 2021 and December 31, 2020 are as |
follows (Korean won in millions):
(June 30, 2021)
Within 1 year | 1 to 2 years | 2 to 3 years | 3 to 4 years | 4 to 5 years | Over 5 years | Total | ||||||||||||||||||||||
Fair value hedges | ||||||||||||||||||||||||||||
Nominal amount of hedged items | ₩ | 7,339,676 | ₩ | 4,868,449 | ₩ | 8,482,663 | ₩ | 7,285,890 | ₩ | 4,649,852 | ₩ | 9,051,088 | ₩ | 41,677,618 | ||||||||||||||
Nominal amount of hedging instruments | 7,113,766 | 4,856,465 | 8,481,503 | 6,438,390 | 4,649,852 | 9,094,896 | 40,634,872 | |||||||||||||||||||||
Average hedge ratio | 96.92% | 99.75% | 99.99% | 88.37% | 100.00% | 100.48% | 97.50% | |||||||||||||||||||||
Cash flow hedges | ||||||||||||||||||||||||||||
Nominal amount of hedged items | ₩ | 80,000 | ₩ | 56,500 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | 136,500 | ||||||||||||||
Nominal amount of hedging instruments | 80,000 | 56,500 | — | — | — | — | 136,500 | |||||||||||||||||||||
Average hedge ratio | 100% | 100% | — | — | — | — | 100% |
(December 31, 2020)
Within 1 year | 1 to 2 years | 2 to 3 years | 3 to 4 years | 4 to 5 years | Over 5 years | Total | ||||||||||||||||||||||
Fair value hedges | ||||||||||||||||||||||||||||
Nominal amount of hedged items | ₩ | 9,451,404 | ₩ | 5,781,962 | ₩ | 5,665,046 | ₩ | 5,243,700 | ₩ | 6,531,111 | ₩ | 9,246,375 | ₩ | 41,919,598 | ||||||||||||||
Nominal amount of hedging instruments | 9,038,034 | 5,770,424 | 5,662,797 | 5,243,700 | 5,727,209 | 9,288,553 | 40,730,717 | |||||||||||||||||||||
Average hedge ratio | 95.63% | 99.80% | 99.96% | 100.00% | 87.69% | 100.46% | 97.16% | |||||||||||||||||||||
Cash flow hedges | ||||||||||||||||||||||||||||
Nominal amount of hedged items | ₩ | 80,000 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | 80,000 | ||||||||||||||
Nominal amount of hedging instruments | 80,000 | — | — | — | — | — | 80,000 | |||||||||||||||||||||
Average hedge ratio | 100% | — | — | — | — | — | 100% |
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3) | Effect of hedge accounting on statements of financial position, statements of comprehensive income, statements of changes in equity |
① | Effect of hedging instruments on statements of financial position, statements of comprehensive income, statements of changes in equity as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Detail | Nominal amount | Carrying amount of assets | Carrying amount of liabilities | Changes of fair value in the year | ||||||||||||
Fair value hedges | ||||||||||||||||
Interest swap | ₩ | 27,341,104 | ₩ | 413,884 | ₩ | 90,477 | ₩ | (425,021 | ) | |||||||
Currency swap | 13,293,768 | 516,502 | 340,183 | (410,608 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 40,634,872 | 930,386 | 430,660 | (835,629 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Cash flow hedges | ||||||||||||||||
Interest swap | 80,000 | — | — | — | ||||||||||||
Currency swap | 56,500 | 958 | — | 970 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 136,500 | 958 | — | 970 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 40,771,372 | ₩ | 931,344 | ₩ | 430,660 | ₩ | (834,659 | ) | |||||||
|
|
|
|
|
|
|
|
(December 31, 2020)
Detail | Nominal amount | Carrying amount of assets | Carrying amount of liabilities | Changes of fair value in the year | ||||||||||||
Fair value hedges | ||||||||||||||||
Interest swap | ₩ | 26,354,678 | ₩ | 636,346 | ₩ | 54,003 | ₩ | 704,102 | ||||||||
Currency swap | 14,376,039 | 863,420 | 364,967 | 853,656 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 40,730,717 | 1,499,766 | 418,970 | 1,557,758 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Cash flow hedges | ||||||||||||||||
Interest swap | 80,000 | — | — | 4 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 40,810,717 | ₩ | 1,499,766 | ₩ | 418,970 | ₩ | 1,557,762 | ||||||||
|
|
|
|
|
|
|
|
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Table of Contents
② | Effect of hedged items on statements of financial position, statements of comprehensive income, statements of changes in equity as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Detail | Nominal amount | Carrying amount of assets | Carrying amount of liabilities | Changes of fair value in six months ended June 30, 2021 | ||||||||||||
Fair value hedges | ||||||||||||||||
Loans in foreign currencies | ₩ | 145,800 | ₩ | — | ₩ | 690 | ₩ | (2,767 | ) | |||||||
Debentures in local currency | 680,000 | — | 40,485 | 1,670 | ||||||||||||
Debentures in foreign currencies | 40,851,818 | 930,386 | 389,485 | 602,371 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 41,677,618 | 930,386 | 430,660 | 601,274 | ||||||||||||
|
| �� |
|
|
|
|
| |||||||||
Cash flow hedges | ||||||||||||||||
Loans in foreign currencies | 56,500 | 958 | — | (1,160 | ) | |||||||||||
Debentures in local currency | 80,000 | — | — | (1 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 136,500 | 958 | — | (1,161 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 41,814,118 | ₩ | 931,344 | ₩ | 430,660 | ₩ | 600,113 | ||||||||
|
|
|
|
|
|
|
|
(December 31, 2020)
Detail | Nominal amount | Carrying amount of assets | Carrying amount of liabilities | Changes of fair value in the year | ||||||||||||
Fair value hedges | ||||||||||||||||
Loans in foreign currencies | ₩ | 479,274 | ₩ | — | ₩ | 19,802 | ₩ | (18,762 | ) | |||||||
Debentures in local currency | 650,000 | — | 37,782 | 8,756 | ||||||||||||
Debentures in foreign currencies | 40,790,324 | 1,499,766 | 361,386 | (785,898 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 41,919,598 | 1,499,766 | 418,970 | (795,904 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Cash flow hedges | ||||||||||||||||
Debentures in local currency | 80,000 | — | — | (6 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 41,999,598 | ₩ | 1,499,766 | ₩ | 418,970 | ₩ | (795,910 | ) | |||||||
|
|
|
|
|
|
|
|
4) | Gains (losses) on hedged items and hedging instruments attributable to the hedged ineffectiveness for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions): |
(Six months ended June 30, 2021)
Gains on hedged items | Losses on hedging instruments | Hedge ineffectiveness recognized in profit | ||||||||||
Fair value hedges | ₩ | 601,274 | ₩ | (555,830 | ) | ₩ | 45,444 | |||||
Cash flow hedges | (1,161 | ) | 970 | — | ||||||||
|
|
|
|
|
| |||||||
Total | ₩ | 600,113 | ₩ | (554,860 | ) | ₩ | 45,444 | |||||
|
|
|
|
|
|
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Table of Contents
(Six months ended June 30, 2020)
Losses on hedged items | Gains on hedging instruments | Hedge ineffectiveness recognized in profit | ||||||||||
Fair value hedges | ₩ | (1,216,701 | ) | ₩ | 1,225,658 | ₩ | 8,957 | |||||
Cash flow hedges | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | �� | ₩ | (1,216,701 | ) | ₩ | 1,225,658 | ₩ | 8,957 | ||||
|
|
|
|
|
|
(7) | Interest Rate Benchmark Reform |
The hedging relationship to which the Bank applies fair value hedge and cash flow hedge is affected by the interest rate benchmark, which is related with the reform. The interest rate benchmarks that the hedging relationship is exposed to, are as follows (Korean won in millions):
Interest rate benchmark | Nominal amount of hedging instruments | |||
KRW CD 3M | ₩ | 370,000 | ||
KRW CMS 10Y | 110,000 | |||
USD LIBOR 3M | 31,108,590 | |||
USD LIBOR 6M | 3,426,260 | |||
EUR LIBOR 3M | 201,663 | |||
EUR LIBOR 6M | 2,890,503 | |||
EUR CMS 20Y | 250,000 | |||
EUR CMS 30Y | 30,000 | |||
GBP LIBOR 6M | 121,302 | |||
BBSW 3M | 1,952,378 | |||
YEN LIBOR 3M | 204,424 | |||
HKD LIBOR 3M | 106,252 | |||
|
| |||
Total | ₩ | 40,771,372 | ||
|
|
21. | CAPITAL STOCK: |
As of June 30, 2021, the authorized capital and paid-in capital of the Bank are ₩15,000,000 million and ₩12,748,254 million, respectively. The Bank does not issue share certificates.
Changes in capital stock for the six months ended June 30, 2021 and for the year ended December 31, 2020 are as follows (Korean won in millions):
Six months ended June 30, 2021 | 2020 | |||||||
Beginning balance | ₩ | 12,449,456 | ₩ | 11,871,143 | ||||
Paid-in capital increase | 298,798 | 578,313 | ||||||
|
|
|
| |||||
Ending balance | ₩ | 12,748,254 | ₩ | 12,449,456 | ||||
|
|
|
|
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22. | OTHER COMPONENTS OF EQUITY: |
(1) | Details of other components of equity as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Jun. 30, 2021 | Dec. 31, 2020 | |||||||
Gain (loss) on equity securities at FVOCI | ₩ | 1,126,131 | ₩ | 773,104 | ||||
Gain (loss) on debt securities at FVOCI | 6,249 | 18,355 | ||||||
Gain (loss) on valuation of cash flow hedge | 738 | 3 | ||||||
Remeasurement of net defined benefit liabilities | 11,855 | 11,855 | ||||||
|
|
|
| |||||
Total | ₩ | 1,144,973 | ₩ | 803,317 | ||||
|
|
|
|
(2) | Changes in other components for the six months ended June 30, 2021 and for the year ended December 31, 2020 are as follows (Korean won in millions): |
(Six months ended June 30, 2021)
Beginning Balance | Increase (decrease) | Tax effect | Ending balance | |||||||||||||
Gain (loss) on equity securities at FVOCI | ₩ | 773,104 | ₩ | 465,732 | ₩ | (112,705 | ) | ₩ | 1,126,131 | |||||||
Gain (loss) on debt securities at FVOCI | 18,355 | (15,971 | ) | 3,865 | 6,249 | |||||||||||
Gain (loss) on valuation of cash flow hedge | 3 | 970 | (235 | ) | 738 | |||||||||||
Remeasurement of net defined benefit liabilities | 11,855 | — | — | 11,855 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 803,317 | ₩ | 450,731 | ₩ | (109,075 | ) | ₩ | 1,144,973 | |||||||
|
|
|
|
|
|
|
|
(2020)
Beginning Balance | Increase (decrease) | Tax effect | Ending balance | |||||||||||||
Gain (loss) on equity securities at FVOCI | ₩ | 573,088 | ₩ | 263,872 | ₩ | (63,856 | ) | ₩ | 773,104 | |||||||
Gain (loss) on debt securities at FVOCI | 6,226 | 16,001 | (3,872 | ) | 18,355 | |||||||||||
Gain (loss) on valuation of cash flow hedge | — | 4 | (1 | ) | 3 | |||||||||||
Remeasurement of net defined benefit liabilities | 15,094 | (4,272 | ) | 1,033 | 11,855 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 594,408 | ₩ | 275,605 | ₩ | (66,696 | ) | ₩ | 803,317 | |||||||
|
|
|
|
|
|
|
|
23. | RETAINED EARNINGS: |
(1) | Details of retained earnings as of as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Jun. 30, 2021 | Dec. 31, 2020 | |||||||
Legal reserve (*1) | ₩ | 446,237 | ₩ | 435,996 | ||||
Voluntary reserve (*2) | 712,729 | 471,964 | ||||||
Regulatory reserve for loan losses | 149,219 | 338,574 | ||||||
Unappropriated retained earnings | 523,342 | 102,410 | ||||||
|
|
|
| |||||
Total | ₩ | 1,831,527 | ₩ | 1,348,944 | ||||
|
|
|
|
(*1) | Pursuant to the EXIM Bank Act, the Bank appropriates 10% of separate profit for each accounting period as legal reserve, until the accumulated reserve equals to its paid-in capital. |
(*2) | The Bank appropriates the remaining balance of profit for the year, after the appropriation of regulatory reserve for loan losses and declaration of dividends, to voluntary reserve. |
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(2) | Changes in retained earnings for the six months ended June 30, 2021 and for the year ended December 31, 2020 are as follows (Korean won in millions): |
Six months ended June 30, 2021 | 2020 | |||||||
Beginning balance | ₩ | 1,348,944 | ₩ | 1,355,571 | ||||
Profit for the period | 523,342 | 102,410 | ||||||
Dividends | (40,759 | ) | (109,037 | ) | ||||
|
|
|
| |||||
Ending balance | ₩ | 1,831,527 | ₩ | 1,348,944 | ||||
|
|
|
|
(3) | Regulatory reserve for loan losses |
Regulatory reserve for loan losses is calculated and disclosed according to Article 29 (1) and (2), Regulation on Supervision of Banking Business. In accordance with Regulation on Supervision of Banking Business, etc., if the estimated allowance for credit loss determined by K-IFRS for the accounting purpose is lower than those for the regulatory purpose required by Regulation on Supervision of Banking Business, the Bank should reserve such difference as the regulatory reserve for loan losses. Due to the fact that regulatory reserve for loan losses is a voluntary reserve, the amounts that exceed the existing regulatory reserve for loan losses over the compulsory regulatory reserve for loan losses at the period-end date are reversed in profit. In case of accumulated deficit, the Bank should recommence setting aside regulatory reserve for loan losses at the time when accumulated deficit is reduced to zero.
1) | Regulatory reserve for loan losses |
Details of regulatory reserve for loan losses as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions):
Jun. 30, 2021 | Dec. 31, 2020 | |||||||
Accumulated regulatory reserve for loan losses | ₩ | 149,219 | ₩ | 338,574 | ||||
Reversal of regulatory reserve for loan losses | (27,315 | ) | (189,355 | ) | ||||
|
|
|
| |||||
Regulatory reserve for loan losses | ₩ | 121,904 | ₩ | 149,219 | ||||
|
|
|
|
2) | Provision for regulatory reserve for loan losses and profit for the period after adjusting regulatory reserve for loan losses |
Details of regulatory reserve for loan losses and profit for the period after adjusting the reserve for six months ended June 30, 2021 and 2020 are as follows (Korean won in millions):
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Profit for the period | ₩ | 523,342 | ₩ | 180,028 | ||||
Reversal of regulatory reserve for loan losses | 27,315 | 100,325 | ||||||
|
|
|
| |||||
Profit after adjusting the regulatory reserve for loan losses (*1) | ₩ | 550,657 | ₩ | 280,353 | ||||
|
|
|
|
(*1) | Adjusted profit considering regulatory reserve for loan losses as above is calculated by assuming that the provision in regulatory reserve for loan losses before income tax is reflected in profit for the period. |
(4) | Details of dividends for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions): |
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
The Government | ₩ | 27,711 | ₩ | 72,430 | ||||
Bank of Korea | 3,814 | 10,701 | ||||||
Korea Development Bank | 9,234 | 25,906 | ||||||
|
|
|
| |||||
Total | ₩ | 40,759 | ₩ | 109,037 | ||||
|
|
|
|
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24. | NET INTEREST INCOME: |
Net interest income is the amount after deduction of interest expenses from interest income, and the details are as follows:
(1) | Details of interest income for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions): |
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Interest of due from financial institutions: | ||||||||
Due from financial institutions in local currency | ₩ | 3,932 | ₩ | 6,286 | ||||
Due from financial institutions in foreign currencies | 3,440 | 19,210 | ||||||
|
|
|
| |||||
Subtotal | 7,372 | 25,496 | ||||||
|
|
|
| |||||
Interest of financial assets at FVTPL: | ||||||||
Interest of securities at FVTPL | 17 | 78 | ||||||
Interest of loans at FVTPL | 75 | 75 | ||||||
|
|
|
| |||||
Subtotal | 92 | 153 | ||||||
|
|
|
| |||||
Interest of financial investments: | ||||||||
Interest of securities at FVOCI | 15,691 | 9,459 | ||||||
Interest of securities at amortized cost | 6,264 | 7,584 | ||||||
|
|
|
| |||||
Subtotal | 21,955 | 17,043 | ||||||
|
|
|
| |||||
Interest of loans: | ||||||||
Interest of loans in local currency | 266,252 | 273,837 | ||||||
Interest of loans in foreign currencies | 568,372 | 952,644 | ||||||
Interest of bills bought | 4,252 | 7,322 | ||||||
Interest of call loans | 1,346 | 14,998 | ||||||
Interest of interbank loans | 1,374 | 1,449 | ||||||
|
|
|
| |||||
Subtotal | 841,596 | 1,250,250 | ||||||
|
|
|
| |||||
Other interest income | 234 | 605 | ||||||
|
|
|
| |||||
Total | ₩ | 871,249 | ₩ | 1,293,547 | ||||
|
|
|
|
(2) | Details of interest expenses for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions): |
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Interest of borrowings: | ||||||||
Interest of borrowings in foreign currencies | ₩ | 17,715 | ₩ | 72,651 | ||||
Interest of call-money | 333 | 4,838 | ||||||
Interest of debentures: | ||||||||
Interest of debentures in local currency | 120,905 | 145,623 | ||||||
Interest of debentures in foreign currencies | 255,715 | 637,688 | ||||||
|
|
|
| |||||
Subtotal | 376,620 | 783,311 | ||||||
|
|
|
| |||||
Other interest expense | 371 | 1,090 | ||||||
|
|
|
| |||||
Total | ₩ | 395,039 | ₩ | 861,890 | ||||
|
|
|
|
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25. | NET COMMISSION INCOME: |
Net commission income is the amount after deduction of commission expenses from commission income, and the details are as follows.
(1) | Details of commission income for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions): |
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Commission income in local currency: | ||||||||
Commission income on management of EDCF (*1) | ₩ | 10,410 | ₩ | 10,122 | ||||
Commission income on management of IKCF (*2) | 1,100 | 1,125 | ||||||
Sundry commissions received from local currencies revenue | 980 | — | ||||||
|
|
|
| |||||
Subtotal | 12,490 | 11,247 | ||||||
|
|
|
| |||||
Commission income in foreign currencies: | ||||||||
Commission income on letters of credit | 1,157 | 865 | ||||||
Commission income on confirmation on export letter of credit | 13 | 176 | ||||||
Commission income on loan commitments | 12,302 | 10,417 | ||||||
Management fees | — | 991 | ||||||
Arrangement fees | 965 | — | ||||||
Advisory fees | 197 | 51 | ||||||
Advance redemption fees | 1,680 | 8,809 | ||||||
Sundry commission income on foreign exchange | 265 | 66 | ||||||
Brokerage fees for foreign currencies exchange funds | 116 | 281 | ||||||
Sundry commissions received from foreign currencies revenue | 985 | 817 | ||||||
|
|
|
| |||||
Subtotal | 17,680 | 22,473 | ||||||
|
|
|
| |||||
Others: | ||||||||
Other commission income | 8,632 | 6,597 | ||||||
Guarantee fees in foreign currencies: | ||||||||
Guarantee fees in foreign currencies | 60,393 | 77,243 | ||||||
Premium for guarantee | 40,066 | 53,468 | ||||||
|
|
|
| |||||
Subtotal | 100,459 | 130,711 | ||||||
|
|
|
| |||||
Total | ₩ | 139,261 | ₩ | 171,028 | ||||
|
|
|
|
(*1) | Economic Development Cooperation Fund |
(*2) | Inter Korean Cooperation Fund |
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(2) | Details of commission expenses for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions): |
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Commission expenses in local currency: | ||||||||
Commission expenses on domestic transactions | ₩ | 141 | ₩ | 263 | ||||
Commission expenses in foreign currencies: | ||||||||
Commission expenses on borrowings in foreign currencies | 1,431 | 764 | ||||||
Sundry commission expenses on foreign exchange | 1,857 | 1,962 | ||||||
|
|
|
| |||||
Subtotal | 3,288 | 2,726 | ||||||
|
|
|
| |||||
Others: | ||||||||
Other commission expenses | 5,565 | 2,751 | ||||||
|
|
|
| |||||
Total | ₩ | 8,994 | ₩ | 5,740 | ||||
|
|
|
|
26. | DIVIDEND INCOME: |
Details of dividend income for six months ended June 30, 2021 and 2020 are as follows (Korean won in millions):
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Financial assets at FVOCI | 38,493 | 34,150 | ||||||
Investments in associates (*1) | 10,931 | 16,913 | ||||||
|
|
|
| |||||
Total | ₩ | 49,424 | ₩ | 51,063 | ||||
|
|
|
|
(*1) | Classified as net gain on investments in associates and subsidiaries |
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27. | GAIN (LOSS) ON FINANCIAL ASSETS AT FVTPL: |
Details of gain (loss) on financial assets at FVTPL for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions):
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Securities at FVTPL: | ||||||||
Gain on valuation | ₩ | 1,368 | ₩ | 9,429 | ||||
Loss on valuation | (11,064 | ) | (2,917 | ) | ||||
Gain on disposal | 5,344 | 6,852 | ||||||
Loss on disposal | (446 | ) | (1,869 | ) | ||||
Others | 7,109 | 10,702 | ||||||
|
|
|
| |||||
Subtotal | 2,311 | 22,197 | ||||||
|
|
|
| |||||
Loans at FVTPL: | ||||||||
Gain on valuation | 3,662 | 54 | ||||||
Loss on disposal | — | (29 | ) | |||||
|
|
|
| |||||
Subtotal | 3,662 | 25 | ||||||
|
|
|
| |||||
Trading derivatives: | ||||||||
Gain on valuation | 416,376 | 682,116 | ||||||
Loss on valuation | (557,372 | ) | (537,750 | ) | ||||
Gain on transaction | 502,540 | 570,809 | ||||||
Loss on transaction | (339,211 | ) | (589,165 | ) | ||||
|
|
|
| |||||
Subtotal | 22,333 | 126,010 | ||||||
|
|
|
| |||||
Total | ₩ | 28,306 | ₩ | 148,232 | ||||
|
|
|
|
28. | GAIN (LOSS) ON HEDGING DERIVATIVES: |
Details of gain (loss) on hedging derivatives for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions):
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Gain on hedging instruments | ₩ | 159,935 | ₩ | 1,519,776 | ||||
Loss on hedging instruments | (920,198 | ) | (555,995 | ) | ||||
|
|
|
| |||||
Total | ₩ | (760,263 | ) | ₩ | 963,781 | |||
|
|
|
|
29. | GAIN (LOSS) ON FINANCIAL INVESTMENTS: |
Details of gain (loss) on financial investments for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions):
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Financial assets at FVOCI: | ||||||||
Gain on disposal | ₩ | 1,530 | ₩ | 497 |
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30. | OTHER OPERATING INCOME (EXPENSES): |
Details of other operating income (expenses) for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions):
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Other operating income: | ||||||||
Gain on sale of loans at amortized cost | ₩ | 2,709 | ₩ | — | ||||
Gain on redemption of loans at amortized cost | — | 18 | ||||||
Gain on fair value hedged items | 674,246 | 79,032 | ||||||
Reversal of derivatives’ credit risk provision | 18,578 | 2,671 | ||||||
Others | — | 18 | ||||||
|
|
|
| |||||
Subtotal | 695,533 | 81,739 | ||||||
|
|
|
| |||||
Other operating expenses: | ||||||||
Loss on fair value hedged items | (29,676 | ) | (1,294,259 | ) | ||||
Contribution to miscellaneous funds | (2,376 | ) | (2,381 | ) | ||||
Loss on redemption of bonds | — | (28 | ) | |||||
Transfer of other provisions | (3,950 | ) | — | |||||
Transfer to derivatives’ credit risk provision | (4,200 | ) | (16,816 | ) | ||||
Others | (303 | ) | (424 | ) | ||||
|
|
|
| |||||
Subtotal | (40,505 | ) | (1,313,908 | ) | ||||
|
|
|
| |||||
Total | ₩ | 655,028 | ₩ | (1,232,169 | ) | |||
|
|
|
|
31. | ADDITIONAL (REVERSAL OF) IMPAIRMENT LOSS ON CREDIT: |
Details of additional (reversal of) impairment loss on credit for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions):
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Loans at amortized cost | ₩ | 40,457 | ₩ | 179,141 | ||||
Other financial assets | (20,366 | ) | 11,485 | |||||
Guarantees | (61,485 | ) | 94,865 | |||||
Unused loan commitments | (17,683 | ) | (23,430 | ) | ||||
Financial guarantee contract | (15,675 | ) | 71,937 | |||||
Financial assets at FVOCI | 561 | 604 | ||||||
Securities at amortized cost | 26 | — | ||||||
|
|
|
| |||||
Total | ₩ | (74,165 | ) | ₩ | 334,602 | |||
|
|
|
|
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32. | GENERAL AND ADMINISTRATIVE EXPENSES: |
Details of general and administrative expenses for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions):
Detail | Six months ended June 30, 2021 | Six months ended June 30, 2020 | ||||||||
General and administrative | Short-term salaries | ₩ | 55,539 | ₩ | 52,746 | |||||
Other expenses in financing department | Office expenses | 33,019 | 27,700 | |||||||
|
|
|
| |||||||
Subtotal | 88,558 | 80,446 | ||||||||
|
|
|
| |||||||
Office expenses of EDCF | 502 | 394 | ||||||||
General and administrative—Others | Retirement benefits (defined contributions) | 2,342 | 247 | |||||||
Retirement benefits (defined benefits) | 5,617 | 5,494 | ||||||||
Depreciation of tangible assets | 3,516 | 3,832 | ||||||||
Amortization of intangible assets | 5,401 | 5,836 | ||||||||
Taxes and dues | 5,265 | 8,138 | ||||||||
Donations and contributions | 2,000 | 3,000 | ||||||||
|
|
|
| |||||||
Subtotal | 24,141 | 26,547 | ||||||||
|
|
|
| |||||||
Total | ₩ | 113,201 | ₩ | 101,727 | ||||||
|
|
|
|
33. | NON-OPERATING INCOME (EXPENSES): |
Details of non-operating income (expenses) for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions):
Detail | Six months ended June 30, 2021 | Six months ended June 30, 2020 | ||||||||
Gain on investments in associates and subsidiaries | Dividend income | ₩ | 10,931 | ₩ | 16,913 | |||||
Other incomes | Gain on disposal of tangible assets | 23 | 77 | |||||||
Rent income | 50 | 71 | ||||||||
Damages paid for breach of contracts | — | 67 | ||||||||
Interest on other loans | 34 | 58 | ||||||||
Revenue on research project | 2,765 | 1,959 | ||||||||
Other miscellaneous income | 247 | 259 | ||||||||
|
|
|
| |||||||
Subtotal | 3,119 | 2,491 | ||||||||
|
|
|
| |||||||
Other expenses | Loss on disposal of tangible assets | (1 | ) | — | ||||||
Expenses for donation | (2,405 | ) | (1,781 | ) | ||||||
Court cost | (90 | ) | (531 | ) | ||||||
Expenses on research project | (2,758 | ) | (1,939 | ) | ||||||
Other miscellaneous expenses | (428 | ) | (164 | ) | ||||||
|
|
|
| |||||||
Subtotal | (5,682 | ) | (4,415 | ) | ||||||
|
|
|
| |||||||
Total | ₩ | 8,368 | ₩ | 14,989 | ||||||
|
|
|
|
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34. | INCOME TAX EXPENSE: |
(1) | Details of income tax expenses (benefit) for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions): |
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Current income tax payable | ₩ | 136,161 | ₩ | — | ||||
Adjustments recognized in the period for current tax of prior years | (8,364 | ) | 8,465 | |||||
Changes in deferred income taxes due to temporary differences | 142,764 | 74,572 | ||||||
Changes in deferred income taxes directly reflected in equity | (104,160 | ) | (25,640 | ) | ||||
|
|
|
| |||||
Income tax expense | ₩ | 166,401 | ₩ | 57,397 | ||||
|
|
|
|
(2) | Details of the reconciliation between profit before income tax and income tax expense (benefit) for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions): |
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Profit before income tax expense | ₩ | 689,743 | ₩ | 237,425 | ||||
Income tax calculated at statutory tax rate | 179,317 | 56,995 | ||||||
Adjustments: | ||||||||
Effect on non-taxable income | — | (2,243 | ) | |||||
Effect on non-deductible expense | 140 | 79 | ||||||
Others | (4,692 | ) | (5,899 | ) | ||||
|
|
|
| |||||
Subtotal | (4,552 | ) | (8,063 | ) | ||||
|
|
|
| |||||
Adjustments recognized in the period for current tax of prior years | (8,364 | ) | 8,465 | |||||
|
|
|
| |||||
Income tax expense | ₩ | 166,401 | ₩ | 57,397 | ||||
|
|
|
| |||||
Effective tax rate from operations | 24.13 | % | 24.17 | % |
35. | STATEMENTS OF CASH FLOWS: |
Details of significant noncash investing and financing transactions for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions):
Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
Loan-for-equity swap of loans | ₩ | 409,110 | ₩ | 7,364 | ||||
Gain on valuation of financial assets at FVOCI | 428,696 | 103,669 | ||||||
Transfers investments in associates to financial assets at FVOCI | 380,520 | — | ||||||
Written-off | 309 | 13,132 |
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36. | CONTINGENT LIABILITIES AND COMMITMENTS: |
(1) | Details of contingent liabilities and commitments as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Detail | Jun. 30, 2021 | Dec. 31, 2020 | ||||||||
Guarantees | Confirmed | ₩ | 27,273,380 | ₩ | 27,960,939 | |||||
Unconfirmed | 8,494,098 | 6,741,575 | ||||||||
|
|
|
| |||||||
Subtotal | 35,767,478 | 34,702,514 | ||||||||
|
|
|
| |||||||
Loan commitments | Local currency, foreign currencies, offshore loan commitments | 24,663,641 | 24,247,153 | |||||||
Others | 1,291,437 | 2,184,291 | ||||||||
|
|
|
| |||||||
Subtotal | 25,955,078 | 26,431,444 | ||||||||
|
|
|
| |||||||
Total | ₩ | 61,722,556 | ₩ | 61,133,958 | ||||||
|
|
|
|
(2) | Details of guarantees that have been provided for others as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
Detail | Jun. 30, 2021 | Dec. 31, 2020 | ||||||||
Confirmed guarantees | Local currency: | |||||||||
Performance of contracts | ₩ | 75,088 | ₩ | 75,088 | ||||||
Repayment of advances | 76,915 | 88,958 | ||||||||
Others | 45,925 | 49,814 | ||||||||
|
|
|
| |||||||
Subtotal | 197,928 | 213,860 | ||||||||
|
|
|
| |||||||
Foreign currencies: | ||||||||||
Performance of contracts | 6,554,391 | 7,065,461 | ||||||||
Repayment of advances | 6,676,357 | 6,882,321 | ||||||||
Acceptances of imported goods | — | 1,005 | ||||||||
Confirmation on export letter of credit | 981 | — | ||||||||
Acceptances of import letter of credit | — | 217,388 | ||||||||
Foreign liabilities | 10,019,321 | 9,580,093 | ||||||||
Others | 3,824,402 | 4,000,811 | ||||||||
|
|
|
| |||||||
Subtotal | 27,075,452 | 27,747,079 | ||||||||
|
|
|
| |||||||
Unconfirmed guarantees | Issuance of import letter of credit | 310,984 | 207,315 | |||||||
Repayment of advances | 7,125,107 | 5,126,848 | ||||||||
Confirmation on export letter of credit | — | 6,229 | ||||||||
Foreign liabilities | 1,057,972 | 1,401,148 | ||||||||
Others | 35 | 35 | ||||||||
|
|
|
| |||||||
Subtotal | 8,494,098 | 6,741,575 | ||||||||
|
|
|
| |||||||
Total | ₩ | 35,767,478 | ₩ | 34,702,514 | ||||||
|
|
|
|
S-88
Table of Contents
(3) | Details of guarantees classified by country as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Confirmed guarantees | Unconfirmed guarantees | Total | ||||||||||||||||||||||||
Detail | Amount | Ratio (%) | Amount | Ratio (%) | Amount | Ratio (%) | ||||||||||||||||||||
Asia | Korea | ₩ | 15,162,636 | 55.59 | ₩ | 7,427,838 | 87.45 | ₩ | 22,590,474 | 63.16 | ||||||||||||||||
China | 187,902 | 0.69 | — | — | 187,902 | 0.53 | ||||||||||||||||||||
Saudi Arabia | 1,253,419 | 4.60 | — | — | 1,253,419 | 3.50 | ||||||||||||||||||||
India | 568,621 | 2.08 | — | — | 568,621 | 1.59 | ||||||||||||||||||||
Indonesia | 712,474 | 2.61 | 319,585 | 3.76 | 1,032,059 | 2.89 | ||||||||||||||||||||
Vietnam | 1,074,408 | 3.94 | 324,820 | 3.82 | 1,399,228 | 3.91 | ||||||||||||||||||||
Australia | 220,066 | 0.81 | — | — | 220,066 | 0.62 | ||||||||||||||||||||
Qatar | 221,435 | 0.81 | — | — | 221,435 | 0.62 | ||||||||||||||||||||
Singapore | 130,194 | 0.48 | — | — | 130,194 | 0.36 | ||||||||||||||||||||
Oman | 505,717 | 1.85 | 36,969 | 0.44 | 542,686 | 1.52 | ||||||||||||||||||||
Uzbekistan | 333,752 | 1.22 | 4,588 | 0.05 | 338,340 | 0.95 | ||||||||||||||||||||
Others | 1,415,190 | 5.20 | 194,729 | 2.30 | 1,609,919 | 4.49 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | 21,785,814 | 79.88 | 8,308,529 | 97.82 | 30,094,343 | 84.14 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Europe | United Kingdom | 559,891 | 2.05 | — | — | 559,891 | 1.57 | |||||||||||||||||||
France | 264,838 | 0.97 | — | — | 264,838 | 0.74 | ||||||||||||||||||||
Others | 1,981,789 | 7.27 | 103,080 | 1.21 | 2,084,869 | 5.82 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | 2,806,518 | 10.29 | 103,080 | 1.21 | 2,909,598 | 8.13 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
America | United States | 1,064,056 | 3.90 | 12,430 | 0.15 | 1,076,486 | 3.01 | |||||||||||||||||||
Brazil | 383,216 | 1.41 | — | — | 383,216 | 1.07 | ||||||||||||||||||||
Mexico | 400,063 | 1.47 | — | — | 400,063 | 1.12 | ||||||||||||||||||||
Bermuda | — | — | — | — | — | — | ||||||||||||||||||||
Others | 455,983 | 1.67 | 70,059 | 0.82 | 526,042 | 1.47 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | 2,303,318 | 8.45 | 82,489 | 0.97 | 2,385,807 | 6.67 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Africa | Madagascar | 83,534 | 0.31 | — | — | 83,534 | 0.23 | |||||||||||||||||||
Others | 294,196 | 1.07 | — | — | 294,196 | 0.83 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | 377,730 | 1.38 | — | — | 377,730 | 1.06 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 27,273,380 | 100.00 | ₩ | 8,494,098 | 100.00 | ₩ | 35,767,478 | 100.00 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
S-89
Table of Contents
(December 31, 2020)
Confirmed guarantees | Unconfirmed guarantees | Total | ||||||||||||||||||||||||
Detail | Amount | Ratio (%) | Amount | Ratio (%) | Amount | Ratio (%) | ||||||||||||||||||||
Asia | Korea | ₩ | 16,207,650 | 57.97 | ₩ | 5,330,002 | 79.06 | ₩ | 21,537,652 | 62.06 | ||||||||||||||||
China | 200,663 | 0.72 | — | — | 200,663 | 0.58 | ||||||||||||||||||||
Saudi Arabia | 1,283,479 | 4.59 | — | — | 1,283,479 | 3.70 | ||||||||||||||||||||
India | 554,211 | 1.98 | — | — | 554,211 | 1.60 | ||||||||||||||||||||
Indonesia | 715,347 | 2.56 | 332,780 | 4.94 | 1,048,127 | 3.02 | ||||||||||||||||||||
Vietnam | 988,464 | 3.53 | 405,658 | 6.02 | 1,394,122 | 4.02 | ||||||||||||||||||||
Australia | 226,478 | 0.81 | — | — | 226,478 | 0.65 | ||||||||||||||||||||
Qatar | 225,804 | 0.81 | — | — | 225,804 | 0.65 | ||||||||||||||||||||
Singapore | 127,444 | 0.46 | — | — | 127,444 | 0.37 | ||||||||||||||||||||
Oman | 439,393 | 1.57 | 88,691 | 1.31 | 528,084 | 1.52 | ||||||||||||||||||||
Uzbekistan | 330,221 | 1.18 | 18,033 | 0.27 | 348,254 | 1.00 | ||||||||||||||||||||
Others | 1,444,279 | 5.16 | 243,038 | 3.60 | 1,687,317 | 4.86 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | 22,743,433 | 81.34 | 6,418,202 | 95.20 | 29,161,635 | 84.03 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Europe | United Kingdom | 485,635 | 1.74 | — | — | 485,635 | 1.40 | |||||||||||||||||||
France | 281,363 | 1.00 | — | — | 281,363 | 0.81 | ||||||||||||||||||||
Others | 1,510,303 | 5.40 | 184,871 | 2.74 | 1,695,174 | 4.88 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | 2,277,301 | 8.14 | 184,871 | 2.74 | 2,462,172 | 7.10 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
America | United States | 1,166,979 | 4.18 | 11,968 | 0.18 | 1,178,947 | 3.40 | |||||||||||||||||||
Brazil | 371,831 | 1.33 | — | — | 371,831 | 1.07 | ||||||||||||||||||||
Mexico | 397,508 | 1.42 | — | — | 397,508 | 1.14 | ||||||||||||||||||||
Bermuda | 259,434 | 0.93 | — | — | 259,434 | 0.75 | ||||||||||||||||||||
Others | 288,838 | 1.03 | 126,534 | 1.88 | 415,372 | 1.20 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | 2,484,590 | 8.89 | 138,502 | 2.06 | 2,623,092 | 7.56 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Africa | Madagascar | 161,761 | 0.58 | — | — | 161,761 | 0.46 | |||||||||||||||||||
Others | 293,854 | 1.05 | — | — | 293,854 | 0.85 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | 455,615 | 1.63 | — | — | 455,615 | 1.31 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 27,960,939 | 100.00 | ₩ | 6,741,575 | 100.00 | ₩ | 34,702,514 | 100.00 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(4) | Details of guarantees classified by industry as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Confirmed guarantees | Unconfirmed guarantees | Total | ||||||||||||||||||||||
Detail | Amount | Ratio (%) | Amount | Ratio (%) | Amount | Ratio (%) | ||||||||||||||||||
Manufacturing | ₩ | 13,537,514 | 49.64 | ₩ | 7,252,375 | 85.37 | ₩ | 20,789,889 | 58.13 | |||||||||||||||
Transportation | 2,217,407 | 8.13 | — | — | 2,217,407 | 6.20 | ||||||||||||||||||
Financial institution | 1,344,929 | 4.93 | 8,287 | 0.10 | 1,353,216 | 3.78 | ||||||||||||||||||
Wholesale and retail | 712,652 | 2.61 | 39,643 | 0.47 | 752,295 | 2.10 | ||||||||||||||||||
Real estate business | 43,658 | 0.16 | 48,632 | 0.57 | 92,290 | 0.26 | ||||||||||||||||||
Construction | 4,725,959 | 17.33 | 377,577 | 4.45 | 5,103,536 | 14.27 | ||||||||||||||||||
Public sector and others | 4,691,261 | 17.20 | 767,584 | 9.04 | 5,458,845 | 15.26 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩ | 27,273,380 | 100.00 | ₩ | 8,494,098 | 100.00 | ₩ | 35,767,478 | 100.00 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
S-90
Table of Contents
(December 31, 2020)
Confirmed guarantees | Unconfirmed guarantees | Total | ||||||||||||||||||||||
Detail | Amount | Ratio (%) | Amount | Ratio (%) | Amount | Ratio (%) | ||||||||||||||||||
Manufacturing | ₩ | 13,914,707 | 49.76 | ₩ | 5,388,964 | 79.94 | ₩ | 19,303,671 | 55.63 | |||||||||||||||
Transportation | 2,004,642 | 7.17 | 42,821 | 0.64 | 2,047,463 | 5.90 | ||||||||||||||||||
Financial institution | 1,412,167 | 5.05 | 13,033 | 0.19 | 1,425,200 | 4.11 | ||||||||||||||||||
Wholesale and retail | 514,662 | 1.84 | 31,114 | 0.46 | 545,776 | 1.57 | ||||||||||||||||||
Real estate business | 43,962 | 0.16 | 48,408 | 0.72 | 92,370 | 0.27 | ||||||||||||||||||
Construction | 5,270,863 | 18.85 | 377,321 | 5.60 | 5,648,184 | 16.28 | ||||||||||||||||||
Public sector and others | 4,799,936 | 17.17 | 839,914 | 12.45 | 5,639,850 | 16.24 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩ | 27,960,939 | 100.00 | ₩ | 6,741,575 | 100.00 | ₩ | 34,702,514 | 100.00 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(5) | Global Medium-Term Note Program and CP programs |
The Bank has been establishing the following programs regarding the issue of foreign currencies bonds and CPs:
1) | Established on August 1, 1991, initially, and annually renewed, U.S. Shelf Registration to issue foreign bonds under the Securities and Exchange Commission rule of the United States of America with an issuance limit of USD 55 billion. |
2) | Established on May 14, 1997, and May 16, 1997, initially, and annually renewed, CP program to issue CPs with issuance limits of USD 6 billion and USD 2 billion, respectively. |
3) | Established on November 6, 1997, initially, and annually renewed, Global Medium-Term Note Program to issue mid-to-long-term foreign currencies bonds with an issuance limit of USD 27.5 billion. |
4) | Established on February 2, 2012, initially, and renewed every year, MYR MTN program to issue Malaysian Ringgit-denoted bonds with issuance limits of MYR 1 billion. |
5) | Established in 1995, initially, and every other yearly renewed, Yen Shelf Registration to issue Samurai bond with an issuance limit of JPY 500 billion. |
6) | Established on May 31, 2010, Australian Domestic Debt Issuance Program to issue Kangaroo bond with limit of AUD 6 billion. |
7) | Established on January 17, 2011, and renewed every two years, Uridashi Shelf Registration to issue Uridashi bond with an issuance limit of JPY 500 billion. |
(6) | Litigations |
As of June 30, 2021, 11 lawsuits (aggregated claim amount: ₩57,092 million) were filed as a plaintiff and 15 pending litigations as a defendant were filed (aggregated claim amount: ₩157,861 million). The Bank’s management expects that there is no significant impact on the financial statements due to these lawsuits but it is possible to make additional loss to the Bank due to the results of future litigation.
(7) | Written-off loans |
The Bank manages written-off loans that have claims on debtors due to the statute of limitations, uncollected after write-off, etc. The written-off loans as of June 30, 2021 and December 31, 2020 are ₩2,022,593 million and ₩1,982,456 million, respectively.
S-91
Table of Contents
(8) | Significant events during the interim reporting period |
The proliferation of COVID-19 has had a negative impact on the global economy, which may have a greater impact than the expected credit loss and potential impairment of assets in a particular portfolio, negatively impacting the profit generation capability of the Bank as follows:
• | Uncertainty may arise about the credit risk of a borrower that could be affected by COVID-19. |
• | Uncertainty may arise about forward-looking macroeconomic information related to expected credit losses. |
• | Korean won may depreciate against major foreign currencies. This may result in an increase in principal and interest payments on liabilities denominated in foreign currencies, and losses on foreign exchange transactions. |
• | Possible significant decrease in the fair value of an entity affected by COVID-19 pandemic, in which the bank invested, may occur. |
Meanwhile, the impact of COVID-19 on expected credit losses is described in note 10, Loans at amortized cost.
37. | TRANSACTIONS AND BALANCES WITH RELATED PARTIES: |
Related parties consist of entities related to the Bank, postemployment benefits, a key management personnel and a close member of that person’s family, an entity controlled or jointly controlled and an entity influenced significantly.
(1) | Details of related parties as of June 30, 2021 are as follows: |
Detail | Relationship | Ownership- percentage (%) | ||||||
Parent: | ||||||||
Korean government | Parent | 68.74 | ||||||
Subsidiaries and Associates: | ||||||||
KEXIM Bank UK Limited | Subsidiary | 100.00 | ||||||
PT.KOEXIM Mandiri Finance | Subsidiary | 85.00 | ||||||
KEXIM Vietnam Leasing Co. | Subsidiary | 100.00 | ||||||
KEXIM Asia Limited | Subsidiary | 100.00 | ||||||
EXIM PLUS Co., Ltd. | Subsidiary | 100.00 | ||||||
Credit Guarantee and Investment Fund | Associate | 15.18 | ||||||
KTB Newlake Global Healthcare PEF | Associate | 25.00 | ||||||
Korea Aerospace Industries. Ltd. | Associate | 26.41 | ||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | Associate | — |
S-92
Table of Contents
(2) | Significant balances of receivables, payables and guarantees with the related parties |
1) | Significant balances of receivables and payables with the related parties as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Detail | Receivables | Allowance / Provisions | Payables | |||||||||
Subsidiaries: | ||||||||||||
KEXIM Bank UK Limited | ₩ | 175,131 | ₩ | — | ₩ | — | ||||||
PT.KOEXIM Mandiri Finance | 142,485 | 259 | — | |||||||||
KEXIM Vietnam Leasing Co. | 117,413 | 277 | 12 | |||||||||
KEXIM Asia Limited | 158,003 | 84 | — | |||||||||
|
|
|
|
|
| |||||||
Subtotal | 593,032 | 620 | 12 | |||||||||
|
|
|
|
|
| |||||||
Associates: | ||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. (*1) | 2,924,733 | 889,477 | — | |||||||||
Korea Aerospace Industries. Ltd. | — | 100 | — | |||||||||
|
|
|
|
|
| |||||||
Subtotal | 2,924,733 | 889,577 | — | |||||||||
|
|
|
|
|
| |||||||
Total | ₩ | 3,517,765 | ₩ | 890,197 | ₩ | 12 | ||||||
|
|
|
|
|
|
(*1) | It includes ₩2,315,258 million of convertible bonds acquired through loan conversion. |
(December 31, 2020)
Detail | Receivables | Allowance / Provisions | Payables | |||||||||
Subsidiaries: | ||||||||||||
KEXIM Bank UK Limited | ₩ | 133,159 | ₩ | — | ₩ | — | ||||||
PT.KOEXIM Mandiri Finance | 137,198 | 250 | — | |||||||||
KEXIM Vietnam Leasing Co. | 108,059 | 263 | 14 | |||||||||
KEXIM Asia Limited | 124,126 | 156 | — | |||||||||
|
|
|
|
|
| |||||||
Subtotal | 502,542 | 669 | 14 | |||||||||
|
|
|
|
|
| |||||||
Associates: | ||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. | 522,111 | 515,596 | 44 | |||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. (*1) | 2,518,836 | 370,637 | 1,838 | |||||||||
Korea Aerospace Industries. Ltd. | — | 100 | — | |||||||||
|
|
|
|
|
| |||||||
Subtotal | 3,040,947 | 886,333 | 1,882 | |||||||||
|
|
|
|
|
| |||||||
Total | ₩ | 3,543,489 | ₩ | 887,002 | ₩ | 1,896 | ||||||
|
|
|
|
|
|
(*1) | It includes ₩1,991,465 million of convertible bonds acquired through loan conversion. |
S-93
Table of Contents
2) | Guarantees provided to the related parties as of June 30, 2021 and December 31, 2020 are as follows (Korean won in millions): |
(June 30, 2021)
Detail | Confirmed guarantees | Unconfirmed guarantees | Loan commitments | Other commitments | ||||||||||||
Subsidiaries: | ||||||||||||||||
KEXIM Bank UK Limited | ₩ | — | ₩ | — | ₩ | 178,911 | ₩ | — | ||||||||
PT.KOEXIM Mandiri Finance | — | — | 27,120 | — | ||||||||||||
KEXIM Vietnam Leasing Co. | — | 8,287 | 102,420 | — | ||||||||||||
KEXIM Asia Limited | — | — | 152,243 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | — | 8,287 | 460,694 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Associates: | ||||||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | 2,470,449 | 2,066,742 | 1,450,000 | — | ||||||||||||
Korea Aerospace Industries. Ltd. | — | — | 35,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 2,470,449 | 2,066,742 | 1,485,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 2,470,449 | ₩ | 2,075,029 | ₩ | 1,945,694 | ₩ | — | ||||||||
|
|
|
|
|
|
|
|
(December 31, 2020)
Detail | Confirmed guarantees | Unconfirmed guarantees | Loan commitments | Other commitments | ||||||||||||
Subsidiaries: | ||||||||||||||||
KEXIM Bank UK Limited | ₩ | — | ₩ | — | ₩ | 210,800 | ₩ | — | ||||||||
PT.KOEXIM Mandiri Finance | — | — | 26,112 | — | ||||||||||||
KEXIM Vietnam Leasing Co. | — | 4,195 | 107,829 | — | ||||||||||||
KEXIM Asia Limited | — | — | 132,192 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | — | 4,195 | 476,933 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Associates: | ||||||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. | 65,010 | 75,574 | 15,000 | — | ||||||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | 2,795,481 | 1,615,016 | 1,450,000 | — | ||||||||||||
Korea Aerospace Industries. Ltd. | — | — | 35,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 2,860,491 | 1,690,590 | 1,500,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 2,860,491 | ₩ | 1,694,785 | ₩ | 1,976,933 | ₩ | — | ||||||||
|
|
|
|
|
|
|
|
S-94
Table of Contents
(3) | Profit and loss transactions with related parties |
Profit and loss transactions with related parties for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions):
(Six months ended June 30, 2021)
Revenue | Bad debt expenses | Expenses | ||||||||||
Subsidiaries: | ||||||||||||
KEXIM Bank UK Limited | ₩ | 209 | ₩ | — | ₩ | — | ||||||
PT.KOEXIM Mandiri Finance | 309 | 9 | — | |||||||||
KEXIM Vietnam Leasing Co. | 271 | 12 | — | |||||||||
KEXIM Asia Limited | 341 | (72 | ) | — | ||||||||
EXIM PLUS Co., Ltd. | — | — | 3,205 | |||||||||
|
|
|
|
|
| |||||||
Subtotal | 1,130 | (51 | ) | 3,205 | ||||||||
|
|
|
|
|
| |||||||
Associates: | ||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. (*1) | 4,564 | — | — | |||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | 36,697 | (58,046 | ) | — | ||||||||
|
|
|
|
|
| |||||||
Subtotal | 41,261 | (58,046 | ) | — | ||||||||
|
|
|
|
|
| |||||||
Total | ₩ | 42,391 | ₩ | (58,097 | ) | ₩ | 3,205 | |||||
|
|
|
|
|
|
(Six months ended June 30, 2020)
Revenue | Bad debt expenses | Expenses | ||||||||||
Subsidiaries: | ||||||||||||
KEXIM Bank UK Limited | ₩ | 1,191 | ₩ | — | ₩ | — | ||||||
PT.KOEXIM Mandiri Finance | 1,984 | (9 | ) | — | ||||||||
KEXIM Vietnam Leasing Co. | 1,419 | 16 | — | |||||||||
KEXIM Asia Limited | 1,459 | 98 | — | |||||||||
EXIM PLUS Co., Ltd. | — | — | 3,212 | |||||||||
|
|
|
|
|
| |||||||
Subtotal | 6,053 | 105 | 3,212 | |||||||||
|
|
|
|
|
| |||||||
Associates: | ||||||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. | 3,810 | 106,275 | — | |||||||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | 36,956 | 68,835 | 62 | |||||||||
|
|
|
|
|
| |||||||
Subtotal | 40,766 | 175,110 | 62 | |||||||||
|
|
|
|
|
| |||||||
Total | ₩ | 46,819 | ₩ | 175,215 | ₩ | 3,274 | ||||||
|
|
|
|
|
|
(*1) | As the company was excluded from related parties during the period of six months ended June 30, 2021, the transaction records are records until excluded from related parties. |
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(4) | Loan transactions with related parties |
Loan transactions with related parties for six months ended June 30, 2021 and for the year ended December 31, 2020 is as follows (Korean won in millions):
(Six months ended June 30, 2021)
Detail | Financing transaction | |||||||
Loan | Collection | |||||||
Subsidiaries: | ||||||||
KEXIM Bank UK Limited | ₩ | 227,153 | ₩ | 188,887 | ||||
PT.KOEXIM Mandiri Finance | 283,252 | 283,259 | ||||||
KEXIM Vietnam Leasing Co. | 224,733 | 219,441 | ||||||
KEXIM Asia Limited | 162,217 | 132,442 | ||||||
|
|
|
| |||||
Subtotal | 897,355 | 824,029 | ||||||
|
|
|
| |||||
Associates: | ||||||||
DAESUN Shipbuilding & Engineering Co., Ltd. (*1) | 84,259 | 506,111 | ||||||
|
|
|
| |||||
Total | ₩ | 981,614 | ₩ | 1,330,140 | ||||
|
|
|
|
(2020)
Detail | Financing transaction | |||||||
Loan | Collection | |||||||
Subsidiaries: | ||||||||
KEXIM Bank UK Limited | ₩ | 366,724 | ₩ | 381,663 | ||||
PT.KOEXIM Mandiri Finance | 558,838 | 567,054 | ||||||
KEXIM Vietnam Leasing Co. | 567,377 | 590,328 | ||||||
KEXIM Asia Limited | 415,372 | 451,482 | ||||||
|
|
|
| |||||
Subtotal | 1,908,311 | 1,990,527 | ||||||
|
|
|
| |||||
Associates: | ||||||||
HSG SUNGDONG Shipbuilding Co., Ltd. | 18,290 | 189,052 | ||||||
DAESUN Shipbuilding & Engineering Co., Ltd. | 41,500 | 37,500 | ||||||
|
|
|
| |||||
Subtotal | 59,790 | 226,552 | ||||||
|
|
|
| |||||
Total | ₩ | 1,968,101 | ₩ | 2,217,079 | ||||
|
|
|
|
(*1) | As the company was excluded from related parties during the period of six months ended June 30, 2021, the transaction records are records until excluded from related parties. |
(5) | Details of compensation for key executives for the six months ended June 30, 2021 and 2020 are as follows (Korean won in millions): |
Detail | Six months ended June 30, 2021 | Six months ended June 30, 2020 | ||||||
Short-term employee benefits | ₩ | 1,276 | ₩ | 1,248 | ||||
Retirement benefits | 277 | 75 | ||||||
|
|
|
| |||||
Total | ₩ | 1,553 | ₩ | 1,323 | ||||
|
|
|
|
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THE REPUBLIC OF KOREA
The Economy
Gross Domestic Product
Based on preliminary data, GDP growth in the first nine months of 2021 was 4.0% at chained 2015 year prices, primarily due to an increase in exports of goods and services by 11.1% and an increase in aggregate private and general government consumption expenditures by 3.2%, the effect of which was offset in part by an increase in imports of goods and services by 8.0%, each compared with the corresponding period of 2020.
Principal Sectors of the Economy
Prices, Wages and Employment
Based on preliminary data, the inflation rate was 2.1% and the unemployment rate was 3.9% in the first nine months of 2021.
The Financial System
Securities Markets
The Korea Composite Stock Price Index was 3,202.3 on July 30, 2021, 3,199.3 on August 31, 2021, 3,068.8 on September 30, 2021, 2,970.7 on October 29, 2021, 2,839.0 on November 30, 2021, 2,977.7 on December 30, 2021 and 2,988.8 on January 3, 2022.
Monetary Policy
Interest Rates
On August 26, 2021, The Bank of Korea raised its policy rate to 0.75% from 0.50%, which was further raised to 1.0% on November 25, 2021, in response to rising levels of household debt and inflationary pressures.
Foreign Exchange
The market average exchange rate between the Won and the U.S. Dollar (in Won per one U.S. Dollar) as announced by the Seoul Money Brokerage Service Ltd. was Won 1,147.4 to US$1.00 on July 30, 2021, Won 1,164.4 to US$1.00 on August 31, 2021, Won 1,184.9 to US$1.00 on September 30, 2021, Won 1,171.7 to US$1.00 on October 29, 2021, Won 1,193.4 to US$1.00 on November 30, 2021 and Won 1,185.5 to US$1.00 on December 31, 2021.
Balance of Payments and Foreign Trade
Balance of Payments
Based on preliminary data, the Republic recorded a current account surplus of US$70.1 billion in the first nine months of 2021. The current account surplus in the first nine months of 2021 increased from the current account surplus of US$43.0 billion in the corresponding period of 2020, primarily due to a decrease in deficit from the services account, and to a lesser extent, increases in surpluses from the income account and the goods account.
Trade Balance
Based on preliminary data, the Republic recorded a trade surplus of US$25.3 billion in the first nine months of 2021. Exports increased by 26.2% to US$467.7 billion in the first nine months of 2021 from US$370.6 billion
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in the corresponding period of 2020, primarily due to an improvement in the domestic economic conditions of the Republic’s major trading partners. Imports increased by 28.6% to US$442.5 billion in the first nine months of 2021 from US$344.0 billion in the corresponding period of 2020, primarily due to an increase in domestic production and an improvement in consumer sentiment reflecting gradual recovery from the COVID-19 pandemic.
Foreign Currency Reserves
The amount of the Government’s foreign currency reserves was US$463.9 billion as of November 30, 2021.
Government Finance
As part of the Government’s continued efforts to mitigate the adverse effects of the ongoing global outbreak of the COVID-19 pandemic on the Korean economy, the National Assembly approved the second supplementary budget of 2021 amounting to Won 34.9 trillion in July 2021. The second supplementary budget, most of which was funded through the Government’s excess tax revenue, has been used mainly for the following purposes: (i) provision of relief packages, including support for small businesses and direct payments to eligible individuals, (ii) various forms of financial support for local communities through subsidies, (iii) purchases of vaccines and disease prevention and treatment efforts and (iv) employment support and aid for low-income households.
In December 2021, the National Assembly approved the Republic’s budget for 2022 in the amount of Won 607.7 trillion, a significant portion of which is expected to be used for measures to continue to mitigate the adverse effects of the COVID-19 pandemic on the Korean economy. As of the date of this prospectus supplement, the Republic’s plans to return to normal have been put on hold in light of the surge in the number of new daily cases of COVID-19 infections in recent months as well as the ongoing spread of the new Omicron variant of COVID-19.
For further information regarding the COVID-19 pandemic and the Republic’s past budgets (including supplementary budgets), see “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties” and “The Republic of Korea—Government Finance” in the accompanying prospectus.
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The following is a description of some of the terms of the Notes we are offering. Since it is only a summary, we urge you to read the fiscal agency agreement described below and the form of global note before deciding whether to invest in the Notes. We have filed a copy of these documents with the U.S. Securities and Exchange Commission as exhibits to the registration statement no. 333-255836.
The general terms of our Notes are described in the accompanying prospectus. The description in this prospectus supplement further adds to that description or, to the extent inconsistent with that description, replaces it.
Governed by Fiscal Agency Agreement
We will issue the Notes under the fiscal agency agreement, dated as of August 1, 1991, between us and The Bank of New York Mellon (formerly known as The Bank of New York) (as successor to JPMorgan Chase Bank, N.A.), as fiscal agent, as amended or supplemented from time to time (the “Fiscal Agency Agreement”). The fiscal agent will maintain a register for the Notes.
Payment of Principal and Interest
2025 Notes
The 2025 Notes are initially limited to US$1,000,000,000 aggregate principal amount. The 2025 Notes will mature on January 18, 2025 (the “2025 Note Maturity Date”). The 2025 Notes will bear interest at a rate of 1.250% per annum, payable semi-annually in arrears on January 18 and July 18 of each year (each a “2025 Note Interest Payment Date”). The first interest payment on the 2025 Notes will be made on July 18, 2022 in respect of the period from (and including) January 18, 2022 to (but excluding) July 18, 2022.
Interest on the 2025 Notes will accrue from January 18, 2022. If any 2025 Note Interest Payment Date or the 2025 Note Maturity Date falls on a day that is not a business day (as defined below), then payment will not be made on such date but will be made on the next succeeding day that is a business day, with the same force and effect as if made on such 2025 Note Interest Payment Date or the 2025 Note Maturity Date (as the case may be), and no interest shall be payable in respect of such delay. The term “business day” as used herein means a day other than a Saturday, a Sunday, or any other day on which banking institutions in The City of New York, London or Seoul are authorized or required by law or executive order to remain closed.
We will pay interest to the person who is registered as the owner of a 2025 Note at the close of business on the fifteenth day (whether or not a business day) preceding such Interest Payment Date. Interest on the 2025 Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months. We will make principal and interest payments on the 2025 Notes in immediately available funds in U.S. dollars.
2027 Notes
The 2027 Notes are initially limited to US$1,000,000,000 aggregate principal amount. The 2027 Notes will mature on January 18, 2027 (the “2027 Note Maturity Date”). The 2027 Notes will bear interest at a rate of 1.625% per annum, payable semi-annually in arrears on January 18 and July 18 of each year (each a “2027 Note Interest Payment Date”). The first interest payment on the 2027 Notes will be made on July 18, 2022 in respect of the period from (and including) January 18, 2022 to (but excluding) July 18, 2022.
Interest on the 2027 Notes will accrue from January 18, 2022. If any 2027 Note Interest Payment Date or the 2027 Note Maturity Date falls on a day that is not a business day (as defined below), then payment will not be made on such date but will be made on the next succeeding day that is a business day, with the same force and effect as if made on such 2027 Note Interest Payment Date or the 2027 Note Maturity Date (as the case may be),
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and no interest shall be payable in respect of such delay. The term “business day” as used herein means a day other than a Saturday, a Sunday, or any other day on which banking institutions in The City of New York, London or Seoul are authorized or required by law or executive order to remain closed.
We will pay interest to the person who is registered as the owner of a 2027 Note at the close of business on the fifteenth day (whether or not a business day) preceding such Interest Payment Date. Interest on the 2027 Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months. We will make principal and interest payments on the 2027 Notes in immediately available funds in U.S. dollars.
2032 Notes
The 2032 Notes are initially limited to US$1,000,000,000 aggregate principal amount. The 2032 Notes will mature on January 18, 2032 (the “2032 Note Maturity Date”). The 2032 Notes will bear interest at a rate of 2.125% per annum, payable semi-annually in arrears on January 18 and July 18 of each year (each a “2032 Note Interest Payment Date”). The first interest payment on the 2032 Notes will be made on July 18, 2022 in respect of the period from (and including) January 18, 2022 to (but excluding) July 18, 2022.
Interest on the 2032 Notes will accrue from January 18, 2022. If any 2032 Note Interest Payment Date or the 2032 Note Maturity Date falls on a day that is not a business day (as defined below), then payment will not be made on such date but will be made on the next succeeding day that is a business day, with the same force and effect as if made on such 2032 Note Interest Payment Date or the 2032 Note Maturity Date (as the case may be), and no interest shall be payable in respect of such delay. The term “business day” as used herein means a day other than a Saturday, a Sunday, or any other day on which banking institutions in The City of New York, London or Seoul are authorized or required by law or executive order to remain closed.
We will pay interest to the person who is registered as the owner of a 2032 Note at the close of business on the fifteenth day (whether or not a business day) preceding such Interest Payment Date. Interest on the 2032 Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months. We will make principal and interest payments on the 2032 Notes in immediately available funds in U.S. dollars.
Denomination
The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof.
Redemption
We may not redeem the Notes prior to maturity. At maturity, we will redeem the Notes at par.
Form and Registration
The Notes will be represented by one or more fully registered global notes, which will be deposited with a custodian for, and registered in the name of a nominee of, DTC. Except as described in the accompanying prospectus under “Description of the Securities—Description of Debt Securities—Global Securities,” the global notes will not be exchangeable for Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest through book-entry accounts. You may hold your beneficial interests in the Notes through Euroclear or Clearstream if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Any secondary market trading of book-entry interests in the Notes will take place through DTC participants, including Euroclear and Clearstream. See “Clearance and Settlement—Transfers Within and Between DTC, Euroclear and Clearstream.”
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The fiscal agent will not charge you any fees for the Notes, other than reasonable fees for the replacement of lost, stolen, mutilated or destroyed Notes. However, you may incur fees for the maintenance and operation of the book-entry accounts with the clearing systems in which your beneficial interests are held.
For so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, in the event that a global note is exchanged for Notes in definitive form, we will appoint and maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption. In addition, in the event that a global note is exchanged for Notes in definitive form, an announcement of such exchange will be made by or on behalf of us through the SGX-ST and such announcement will include all material information with respect to the delivery of the Notes in definitive form, including details of the paying agent in Singapore.
Further Issues
We may from time to time, without the consent of the holders of the Notes, create and issue additional debt securities with the same terms and conditions as any series of the Notes in all respects so that such further issue shall be consolidated and form a single series with the relevant series of the Notes. We will not issue any such additional debt securities unless the issuance would constitute a “qualified reopening” for U.S. federal income tax purposes or such additional debt securities would otherwise be part of the same “issue” for U.S. federal income tax purposes.
Notices
While the Notes are represented by the global note deposited with the custodian for DTC, notices to holders may be given by delivery to DTC, and such notices will be deemed to be given on the date of delivery to DTC. The fiscal agent may also mail notices by first-class mail, postage prepaid, to each registered holder’s last known address as it appears in the security register that the fiscal agent maintains. The fiscal agent will only mail these notices to the registered holder of the Notes. You will not receive notices regarding the Notes directly from us unless we reissue the Notes to you in fully certificated form.
Neither the failure to give any notice to a particular holder, nor any defect in a notice given to a particular holder, will affect the sufficiency of any notice given to another holder.
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We have obtained the information in this section from sources we believe to be reliable, including DTC, Euroclear and Clearstream. We accept responsibility only for accurately extracting information from such sources. DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform the procedures described below, and they may modify or discontinue them at any time. Neither we nor the registrar will be responsible for DTC’s, Euroclear’s or Clearstream’s performance of their obligations under their rules and procedures. Nor will we or the registrar be responsible for the performance by direct or indirect participants of their obligations under their rules and procedures.
Introduction
The Depository Trust Company
DTC is:
• | a limited-purpose trust company organized under the New York Banking Law; |
• | a “banking organization” under the New York Banking Law; |
• | a member of the Federal Reserve System; |
• | a “clearing corporation” under the New York Uniform Commercial Code; and |
• | a “clearing agency” registered under Section 17A of the Securities Exchange Act of 1934. |
DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between its participants. It does this through electronic book-entry changes in the accounts of its direct participants, eliminating the need for physical movement of securities certificates. DTC is owned by a number of its direct participants and by the New York Stock Exchange Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers Inc.
Euroclear and Clearstream
Like DTC, Euroclear and Clearstream hold securities for their participants and facilitate the clearance and settlement of securities transactions between their participants through electronic book-entry changes in their accounts. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance and settlement and lending and borrowing of internationally traded securities. Participants in Euroclear and Clearstream are financial institutions such as underwriters, securities brokers and dealers, banks and trust companies. Some of the underwriters participating in this offering are participants in Euroclear or Clearstream. Other banks, brokers, dealers and trust companies have indirect access to Euroclear or Clearstream by clearing through or maintaining a custodial relationship with a Euroclear or Clearstream participant.
Ownership of Notes through DTC, Euroclear and Clearstream
We will issue each series of the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the Notes. These financial institutions will record the ownership and transfer of your beneficial interests through book-entry accounts. You may also hold your beneficial interests in the Notes through Euroclear or Clearstream, if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Euroclear and Clearstream will hold their participants’ beneficial interests in the global notes in their customers’ securities accounts with their depositaries. These depositaries of Euroclear and Clearstream in turn will hold such interests in their customers’ securities accounts with DTC.
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We and the fiscal agent generally will treat the registered holder of the Notes, initially Cede & Co., as the absolute owner of the Notes for all purposes. Once we and the fiscal agent make payments to the registered holder, we and the fiscal agent will no longer be liable on the Notes for the amounts so paid. Accordingly, if you own a beneficial interest in the global notes, you must rely on the procedures of the institutions through which you hold your interests in the Notes, including DTC, Euroclear, Clearstream and their respective participants, to exercise any of the rights granted to holders of Notes. Under existing industry practice, if you desire to take any action that Cede & Co., as the holder of the global notes, is entitled to take, then Cede & Co. would authorize the DTC participant through which you own your beneficial interest to take such action. The participant would then either authorize you to take the action or act for you on your instructions.
DTC may grant proxies or authorize its participants, or persons holding beneficial interests in the Notes through such participants, to exercise any rights of a holder or take any actions that a holder is entitled to take under the fiscal agency agreement or the Notes. Euroclear’s or Clearstream’s ability to take actions as holder under the Notes or the fiscal agency agreement will be limited by the ability of their respective depositaries to carry out such actions for them through DTC. Euroclear and Clearstream will take such actions only in accordance with their respective rules and procedures.
Transfers Within and Between DTC, Euroclear and Clearstream
Trading Between DTC Purchasers and Sellers
DTC participants will transfer interests in the Notes among themselves in the ordinary way according to DTC rules. Participants will pay for such transfers by wire transfer. The laws of some states require certain purchasers of securities to take physical delivery of the securities in definitive form. These laws may impair your ability to transfer beneficial interests in the global notes to such purchasers. DTC can act only on behalf of its direct participants, who in turn act on behalf of indirect participants and certain banks. Thus, your ability to pledge a beneficial interest in the global notes to persons that do not participate in the DTC system, and to take other actions, may be limited because you will not possess a physical certificate that represents your interest.
Trading Between Euroclear and/or Clearstream Participants
Participants in Euroclear and Clearstream will transfer interests in the Notes among themselves according to the rules and operating procedures of Euroclear and Clearstream.
Trading Between a DTC Seller and a Euroclear or Clearstream Purchaser
When the Notes are to be transferred from the account of a DTC participant to the account of a Euroclear or Clearstream participant, the purchaser must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to receive the Notes and make payment for them. On the settlement date, the depositary will make payment to the DTC participant’s account and the Notes will be credited to the depositary’s account. After settlement has been completed, DTC will credit the Notes to Euroclear or Clearstream, Euroclear or Clearstream will credit the Notes, in accordance with its usual procedures, to the participant’s account, and the participant will then credit the purchaser’s account. These securities credits will appear the next day (European time) after the settlement date. The cash debit from the account of Euroclear or Clearstream will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the cash debit will instead be valued at the actual settlement date.
Participants in Euroclear and Clearstream will need to make funds available to Euroclear or Clearstream to pay for the Notes by wire transfer on the value date. The most direct way of doing this is to pre-position funds (i.e., have funds in place at Euroclear or Clearstream before the value date), either from cash on hand or existing lines of credit. Under this approach, however, participants may take on credit exposure to Euroclear and Clearstream until the Notes are credited to their accounts one day later.
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As an alternative, if Euroclear or Clearstream has extended a line of credit to a participant, the participant may decide not to pre-position funds, but to allow Euroclear or Clearstream to draw on the line of credit to finance settlement for the Notes. Under this procedure, Euroclear or Clearstream would charge the participant overdraft charges for one day, assuming that the overdraft would be cleared when the Notes were credited to the participant’s account. However, interest on the Notes would accrue from the value date. Therefore, in many cases the interest income on Notes which the participant earns during that one-day period will substantially reduce or offset the amount of the participant’s overdraft charges. Of course, this result will depend on the cost of funds (i.e., the interest rate that Euroclear or Clearstream charges) to each participant.
Since the settlement will occur during New York business hours, a DTC participant selling an interest in the Notes can use its usual procedures for transferring global securities to the depositories of Euroclear or Clearstream for the benefit of Euroclear or Clearstream participants. The DTC seller will receive the sale proceeds on the settlement date. Thus, to the DTC seller, a cross-market sale will settle no differently than a trade between two DTC participants.
Finally, day traders who use Euroclear or Clearstream and who purchase Notes from DTC participants for credit to Euroclear participants or Clearstream participants should note that these trades will automatically fail unless one of three steps is taken:
• | borrowing through Euroclear or Clearstream for one day, until the purchase side of the day trade is reflected in the day trader’s Euroclear or Clearstream account, in accordance with the clearing system’s customary procedures; |
• | borrowing the Notes in the United States from DTC participants no later than one day prior to settlement, which would allow sufficient time for the Notes to be reflected in the Euroclear or Clearstream account in order to settle the sale side of the trade; or |
• | staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Euroclear or Clearstream participant. |
Trading Between a Euroclear or Clearstream Seller and a DTC Purchaser
Due to time-zone differences in their favor, Euroclear and Clearstream participants can use their usual procedures to transfer Notes through their depositaries to a DTC participant. The seller must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to credit the Notes to the DTC participant’s account and receive payment. The payment will be credited in the account of the Euroclear or Clearstream participant on the following day, but the receipt of the cash proceeds will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the receipt of the cash proceeds will instead be valued at the actual settlement date.
If the Euroclear or Clearstream participant selling the Notes has a line of credit with Euroclear or Clearstream and elects to be in debit for the Notes until it receives the sale proceeds in its account, then the back-valuation may substantially reduce or offset any overdraft charges that the participant incurs over that period.
Settlement in other currencies between DTC and Euroclear and Clearstream is possible using free-of-payment transfers to move the Notes, but funds movement will take place separately.
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Korean Taxation
For a discussion of Korean tax considerations that may be relevant to you if you invest in the Notes, please refer to the section “Taxation—Korean Taxation” in the accompanying prospectus.
United States Tax Considerations
For a discussion of U.S. federal income tax considerations that may be relevant to you if you invest in the Notes and are a U.S. holder, see “Taxation—United States Tax Considerations” in the accompanying prospectus.
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Relationship with the Underwriters
We and the underwriters named below (the “Underwriters” and each an “Underwriter”) have entered into a Terms Agreement dated January 5, 2022 (the “Terms Agreement”) with respect to the Notes relating to the Underwriting Agreement—Standard Terms (together with the Terms Agreement, the “Underwriting Agreement”) filed as an exhibit to the registration statement. Subject to the terms and conditions set forth in the Underwriting Agreement, we have agreed to sell to each of the Underwriters, severally, and each of the Underwriters has severally agreed to purchase, the following principal amount of the Notes set out opposite its name below:
Names of the Underwriters | Principal Amount of 2025 Notes | Principal Amount of the 2027 Notes | Principal Amount of the 2032 Notes | |||||||||
BNP Paribas | US$ | 150,000,000 | US$ | 150,000,000 | US$ | 150,000,000 | ||||||
Citigroup Global Markets Inc. | 150,000,000 | 150,000,000 | 150,000,000 | |||||||||
Daiwa Capital Markets Europe Limited | 150,000,000 | 150,000,000 | 150,000,000 | |||||||||
The Hongkong and Shanghai Banking Corporation Limited | 150,000,000 | 150,000,000 | 150,000,000 | |||||||||
J.P. Morgan Securities LLC | 150,000,000 | 150,000,000 | 150,000,000 | |||||||||
KB Securities Co., Ltd. | 100,000,000 | 100,000,000 | 100,000,000 | |||||||||
MUFG Securities Asia Limited | 150,000,000 | 150,000,000 | 150,000,000 | |||||||||
KEXIM Asia Limited | — | — | — | |||||||||
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|
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| |||||||
Total | US$ | 1,000,000,000 | US$ | 1,000,000,000 | US$ | 1,000,000,000 | ||||||
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KEXIM Asia Limited is an affiliate of ours and has agreed not to offer or sell any Notes in the United States or to any U.S. persons.
Under the terms and conditions of the Underwriting Agreement, if the Underwriters take any Notes of a series, then the Underwriters are obligated to take and pay for all of the Notes of such series.
The Underwriters initially propose to offer the Notes directly to the public at the offering prices described on the cover page. After the initial offering of the Notes, the Underwriters may from time to time vary the offering prices and other selling terms.
If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Underwriters or any affiliate of the Underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by that Underwriter or its affiliate on behalf of us in such jurisdiction.
The Notes are a new class of securities with no established trading market. Approval in-principle has been received from the SGX-ST for the listing and quotation of the Notes on the SGX-ST. The Underwriters have advised us that they intend to make a market in the Notes. However, they are not obligated to do so and they may discontinue any market making activities with respect to the Notes at any time without notice. Accordingly, we cannot assure you as to the liquidity of any trading market for the Notes.
We have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments which the Underwriters may be required to make in respect of any such liabilities.
In connection with this offering, any of the Underwriters appointed and acting in its capacity as stabilizing manager (the “Stabilizing Managers”) or any person acting on their behalf may purchase and sell the Notes in the open market. These transactions may include over-allotment, covering transactions and stabilizing transactions.
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Over-allotment involves sales of the Notes in excess of the principal amount of the Notes to be purchased by the Underwriters in this offering, which creates a short position for the Underwriters. Covering transactions involve purchases of the Notes in the open market after the distribution has been completed in order to cover short positions. Stabilizing transactions consist of certain bids or purchases of the Notes made for the purpose of preventing or retarding a decline in the market price of the Notes while the offering is in progress. Any of these activities may have the effect of preventing or retarding a decline in the market price of the Notes. They may also cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of these transactions. The Stabilizing Managers may conduct these transactions in the over-the-counter market or otherwise. If the Stabilizing Managers commence any of these transactions, they may discontinue such transactions at any time, and must discontinue them after a limited period.
The amount of net proceeds of the 2025 Notes, the 2027 Notes and the 2032 Notes is US$995,500,000, US$993,750,000 and US$992,170,000, respectively, after deducting underwriting discounts but not estimated expenses. Our expenses associated with the Notes offering are estimated to be US$300,000. The Underwriters have agreed to pay certain of our expenses incurred in connection with the offering of the Notes.
The Underwriters and certain of their affiliates may have performed certain commercial banking, investment banking and advisory services for us and/or our affiliates from time to time for which they have received customary fees and expenses and may, from time to time, engage in transactions with and perform services for us and/or our affiliates in the ordinary course of their business.
The Underwriters or certain of their affiliates may purchase Notes and be allocated Notes for asset management and/or proprietary purposes but not with a view to distribution. The Underwriters or their respective affiliates may purchase Notes for its or their own account and enter into transactions, including credit derivatives, such as asset swaps, repackaging and credit default swaps relating to Notes and/or other securities of us or our subsidiaries or affiliates at the same time as the offer and sale of Notes or in secondary market transactions. Such transactions would be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of Notes to which this prospectus supplement relates (notwithstanding that such selected counterparties may also be purchasers of Notes).
Delivery of the Notes
We expect to make delivery of the Notes, against payment in same-day funds on or about January 18, 2022, which we expect will be the eighth business day following the date of this prospectus supplement. Under Rule 15c6-l promulgated under the Securities Exchange Act of 1934, as amended, U.S. purchasers are generally required to settle trades in the secondary market in two business days, unless they and the other parties to any such trade expressly agree otherwise. Accordingly, if you wish to trade in the Notes on any day prior to the second business day before the settlement date, because the Notes will initially settle in T+8, you may be required to specify an alternate settlement cycle at the time of your trade to prevent a failed settlement. Purchasers in other countries should consult with their own advisors.
Foreign Selling Restrictions
Each Underwriter has agreed to the following selling restrictions in connection with the offering with respect to the following jurisdictions:
Korea
Each Underwriter has severally represented and agreed that (i) it has not offered, sold or delivered and will not offer, sell or deliver, directly or indirectly, any Notes in Korea or to, or for the account or benefit of, any resident of Korea, except as permitted by applicable Korean laws and regulations; and (ii) any securities dealer to whom it sells Notes will agree that it will not offer any Notes, directly or indirectly, in Korea or to any resident of Korea, except as permitted by applicable Korean laws and regulations, or to any dealer who does not so represent and agree.
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United Kingdom
Each Underwriter has severally represented and agreed that (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to us; and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.
Prohibition of Sales to EEA Retail Investors
Each Underwriter has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes which are the subject of the offering contemplated by this prospectus supplement and the accompanying prospectus as contemplated by the final terms in relation thereto to any retail investor in the European Economic Area. For the purposes of this provision, the expression “retail investor” means a person who is one (or more) of the following:
(a) a retail client as defined in point (11) of Article 4(1) of MiFID II; or
(b) a customer within the meaning of the Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.
Prohibition of Sales to UK Retail Investors
Each Underwriter has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes which are the subject of the offering contemplated by this prospectus supplement and the accompanying prospectus as contemplated by the final terms in relation thereto to any retail investor in the UK. For the purposes of this provision, the expression “retail investor” means a person who is one (or more) of the following:
(a) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the EUWA; or
(b) a customer within the meaning of the provisions of the FSMA and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA.
Japan
Each Underwriter has severally represented and agreed that the Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the “Financial Instruments and Exchange Act”). Accordingly, each Underwriter has severally represented and agreed that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and other relevant laws and regulations of Japan.
Hong Kong
Each Underwriter has severally represented and agreed that:
• | it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) |
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of Hong Kong (the “SFO”) and any rules made under the SFO; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong (the “C(WUMP)O”) or which do not constitute an offer to the public within the meaning of the C(WUMP)O; and |
• | it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made under the SFO. |
Singapore
Each Underwriter has acknowledged that this prospectus supplement and the accompanying prospectus have not been and will not be registered as a prospectus with the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289) of Singapore (the “SFA”). Accordingly, each Underwriter has severally represented and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this prospectus supplement or the accompanying prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor under Section 274 of the SFA; (ii) to a relevant person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018 of Singapore; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
securities or securities-based derivatives contracts (each term as defined in the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:
(i) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(ii) where no consideration is or will be given for the transfer;
(iii) where the transfer is by operation of law;
(iv) as specified in Section 276(7) of the SFA; or
(v) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018 of Singapore.
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Italy
The offering of the Notes has not been registered with the Commissione Nazionale per le Società e la Borsa (“CONSOB”) pursuant to Italian securities legislation and, accordingly, no Notes may be offered, sold or delivered, nor may copies of this prospectus supplement or the accompanying prospectus or of any other document relating to any Notes be distributed in the Republic of Italy (“Italy”), except, in accordance with any Italian securities, tax and other applicable laws and regulations.
Each Underwriter has severally represented and agreed that it has not offered, sold or delivered, and will not offer, sell or deliver any Notes or distribute any copy of this prospectus supplement or the accompanying prospectus or any other document relating to the Notes in Italy except:
(a) to qualified investors (investitori qualificati), as defined pursuant to Article 100 of Legislative Decree no. 58 of February 24, 1998 (the “Financial Services Act”) and Article 34-ter, paragraph 1, letter (b) of CONSOB regulation No. 11971 of May 14, 1999 (the “Issuers Regulation”), all as amended from time to time; or
(b) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and Issuers Regulation.
In any event, any offer, sale or delivery of the Notes or distribution of copies of this prospectus supplement or the accompanying prospectus or any other document relating to the Notes in Italy under paragraphs (a) or (b) above must be:
(i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in Italy in accordance with the Financial Services Act, Legislative Decree No. 385 of September 1, 1993 (the “Banking Act”) and CONSOB Regulation No. 20307 of February 15, 2018, all as amended from time to time;
(ii) in compliance with Article 129 of the Banking Act, as amended from time to time, and the implementing guidelines of the Bank of Italy, as amended from time to time; and
(iii) in compliance with any other applicable laws and regulations, including any limitation or requirement which may be imposed from time to time by CONSOB or the Bank of Italy or other competent authority.
Canada
The Notes may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement or the accompanying prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the Underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
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Switzerland
The offering of the Notes in Switzerland is exempt from the requirement to prepare and publish a prospectus under the Swiss Financial Services Act (“FinSA”). The Notes will not be admitted to trading on any trading venue (exchange or multilateral trading facility) in Switzerland. This prospectus supplement does not constitute a prospectus pursuant to the FinSA, and no such prospectus has been or will be prepared for or in connection with the offering of the Notes.
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The validity of the Notes is being passed upon for us by Cleary Gottlieb Steen & Hamilton LLP, New York, New York, and by Bae, Kim & Lee LLC, Seoul, Korea. Certain legal matters will also be passed upon for the Underwriters by Latham & Watkins LLP, Seoul, Korea. In giving their opinions, Cleary Gottlieb Steen & Hamilton LLP and Latham & Watkins LLP, Seoul, Korea may rely as to matters of Korean law upon the opinion of Bae, Kim & Lee LLC.
OFFICIAL STATEMENTS AND DOCUMENTS
Our Chairman and President, in his official capacity, has supplied the information set forth in this prospectus supplement under “Recent Developments—The Export-Import Bank of Korea.” Such information is stated on his authority. The documents identified in the portion of this prospectus supplement captioned “Recent Developments—The Republic of Korea” as the sources of financial or statistical data are derived from official public documents of the Republic and of its agencies and instrumentalities.
We were established in 1976 as a special governmental financial institution pursuant to the Export-Import Bank of Korea Act, as amended. Our corporate registry number is 111235-0000158. Our authorized share capital is ₩15,000 billion. As of September 30, 2021, our paid-in capital was ₩15,802 billion.
Our board of directors can be reached at the address of our registered office: c/o 38 Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, The Republic of Korea.
The issue of the Notes has been authorized by our Chairman and President on November 26, 2021. On December 21, 2021, our report on the proposed issuance of the Notes has been accepted by the Ministry of Economy and Finance of Korea.
The registration statement with respect to us and the Notes has been filed with the Securities and Exchange Commission in Washington, D.C. under the Securities Act of 1933, as amended. Additional information concerning us and the Notes is contained in the registration statement and post-effective amendments to such registration statement, including their various exhibits, which may be inspected at the public reference facilities maintained by the Securities and Exchange Commission at Room 1580, 100 F Street N.E., Washington, D.C. 20549, United States.
The Notes have been accepted for clearance through DTC, Euroclear and Clearstream:
CUSIP | ISIN | |||||||
2025 Notes | 302154 DL0 | US302154DL06 | ||||||
2027 Notes | 302154 DM8 | US302154DM88 | ||||||
2032 Notes | 302154 DN6 | US302154DN61 |
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HEAD OFFICE OF THE BANK
38 Eunhaeng-ro
Yeongdeungpo-gu
Seoul 07242
Korea
FISCAL AGENT AND PRINCIPAL PAYING AGENT
The Bank of New York Mellon
Global Finance Americas
101 Barclay St, 4E
New York, NY 10286
United States of America
LEGAL ADVISORS TO THE BANK
as to Korean law | as to U.S. law | |
Bae, Kim & Lee LLC | Cleary Gottlieb Steen & Hamilton LLP | |
Tower B, Centropolis 26 Ujeongguk-ro, Jongno-gu Seoul 03161 Korea | c/o 19th Floor, Ferrum Tower 19 Eulji-ro 5-gil, Jung-gu Seoul 04539 Korea |
LEGAL ADVISOR TO THE UNDERWRITERS
as to U.S. law |
Latham & Watkins LLP Seoul 07326 |
AUDITOR OF THE BANK
KPMG Samjong Accounting Corp.
10th Floor, Gangnam Finance Center
152 Tehran-ro, Gangnam-gu
Seoul 06236
Korea
SINGAPORE LISTING AGENT
Shook Lin & Bok LLP
1 Robinson Road
#18-00 AIA Tower
Singapore 048542
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