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					                              REGULATION
                                    ON
       SUPERVISION OF MERCHANT BANKING BUSINESS
                    Regulation on Supervision of Merchant Banking Business



                              CONTENTS


I.     General Provisions
§1.    Purpose
§2.    General Guidelines
§3.    Scope of Application
§4.    [Deleted]
§4-2. The Scope of Equity Capital
§4-3. Credit Extension

II.    Authorization
Section 1. Procedures

§5.    Authorization
Section 2. Standards for Authorization
§6.    Actions Taken by the Governor Following Modification(s) in Articles
of                  Incorporation and Mode of Business Operation
§7.    [Deleted]
§8.    [Deleted]
§9.     Relocation of Head Office
§10.    Authorization for Holding Concurrent Position(s) by Executive
        Officers

III.   Business Operation
§11.   Maturity of Notes
§12.   Deposit and Delivery of Notes
§13.   [Deleted]
§13-2. Mode of Transaction for Note Management Account
§13-3. Management of the Trusted Fund in the Note Management Account
§13-4. Issuance of Cover Bills
§14.   [Deleted]
§14-2. Amount of Bonds Issued
§15.   [Deleted]
§16.   Approval of exception to the Credit Ceiling to a Single Borrower
§16-2. Management of Large Credit Exposure
§16-3. Debt-Equity Swaps Exempted from Restriction on Securities
         Investment
§16-4. Scope of Beneficiary Certificates Exempted from Restriction on
Securities          Investment
§17. Restriction on Securities Investment
§17-2. [Deleted]
§18.   Disposal of Real Estate
§18-2. Selection of Qualified Companies
§18-3. Use of Discount Limits
§19.   Sales of Unsecured Notes
§20.   Notes Intermediation
§21.   [Deleted]
§21-2. Disclosure of Credit Rating
§22.   [Deleted]
§23.   Soundness of Management
§24.   Support for SMEs (Small and Medium Size Enterprises)

IV.    Guidance for Sound Management
Section 1. Management Guidance Standards
§25.   Management Guidance Ratios
§26.   Asset Soundness Classification
§26-2. Asset Subject to Classification
§26-3. Loan Loss Provisioning Standards
§27.   Risk Management System
§27-2. Risk Management Organization
§27-3. Risk Management Rules and Regulations
§28.   Accounting Standards and Settlement of Accounts
Section 2. Management Performance Evaluation and Prompt Corrective
Action

§29.   Management Performance Analysis and Evaluation
§30.   Management Improvement Recommendation
§30-2. Management Improvement Request
§30-3. Management Improvement Order
§30-4. Suspension of Prompt Corrective Action
§30-5. Emergency Measures
§30-6. Submission of the Management Improvement Plan
§30-7. Implementation of Management Improvement Plan
§30-8 Support Measures for Implementation of Prompt Corrective Actions
Section 2-2.Valuation and Calculation of Assets and Liabilities for
          Determining Insolvent Financial Institutions
§31. An MBC Subject to Valuation
§31-2. Scope of Valuation
§31-3. Valuation Criteria
§31-4. Valuation Procedures
Section 3. Management Disclosure
§32.   Submission of Business Report
§33.   Management Disclosure
§34.   [Deleted]
V.     Examination
§35.   [Deleted]
§36.   [Deleted]
§37.   [Deleted]
§38.   [Deleted]

V-2.   Foreign Exchange Regulation
Section 1. General Provisions of Foreign Exchange Regulation
§38-2. Definitions
Section 2. Registration of Institutions in Foreign Exchange Business
§38-3. Requirements for Registration
§38-4. Modification(s) of Registration
Section 3. Prudential Foreign Exchange Regulation
§38-5. Exchange Rate Risk Management
§38-6. Liquidity Risk Management
§38-7. Management of Sources of Medium and Long Term Loans in Foreign
       Currency
§38-8. Offshore Financial Management
§38-9. Internal Management of Financial Institution
§38-10.        Preclusion
Section 3. Sanctions for Violation of the Prudential Foreign Exchange
Regulation

§38-11.        Sanctions for Violation of the Ceiling on Foreign Currency
Position
§38-12.        Sanctions for Deficiency in Foreign Currency Liquidity Ratio
§38-13.        Reporting of Sanctions
Section 4. Reporting of Foreign Exchange
§38-14.        Reporting

VI.    Intermediary
§38-15.        Definitions
§38-16.        Basic Principles of Transaction
§39.   Operation Manual of an Intermediary
§39-2. Institutions Participating in the Intermediation
§39-3. Asset Management Soundness of an Intermediary
§39-4. Short-term Financial Market Operation Council

VII.   Supplementary Provisions
§40.   Assistance
§41.   Specifics
§42.   Reporting
§43.   Application of Other Guidelines
§44.   Special Cases of Asset Management

                                                          Addenda
                                                        Enacted on April 1, 1998
                                                      Amended on June 12, 1998
                                                    Amended on October 9, 1998
                                                 Amended on December 11,1998
                                                    Amended on March 12, 1999
                                                     Amended on March 26,1999
                                                     Amended on August 6, 1999
                                                Amended on September 10, 1999
                                                Amended on December 24, 1999
                                                       Amended on June 9, 2000
                                          Amended on July 26, 2000 FSC 2000-74
                                        Amended on October 6, 2000 FSC 2000-94
                                    Amended on December 29, 2000 FSC 2000-119
                                       Amended on February 14, 2001 FSC 2001-9
                                        Amended on March 14, 2001 FSC 2001-13
                                     Amended on September 4, 2001 FSC 2001-63
                                        Amended on October 4, 2001 FSC 2001-74
                                     Amended on November 13, 2001 FSC 2001-89
                                    Amended on December 19, 2001 FSC 2001-106
                                           Amended on May 1, 2002 FSC 2002-21
                                        Amended on January 3, 2003 FSC 2002-89
                                          Amended on July 29, 2003 FSC 2003-39




                               CHAPTER I.
                           GENERAL PROVISIONS

§1. Purpose
The purpose of this Regulation is to prescribe matters necessary for the
enforcement of the matters under the authority of the Financial Supervisory
Commission (hereinafter, "the FSC") in respect of the supervision of
merchant banking corporations (hereinafter, "MBC") and intermediaries, as
articulated under the Merchant Banking Corporation Act (hereinafter, "the
Act"), its enforcement decree (hereinafter, "the Decree"), Act on the
Establishment of Financial Supervisory Organizations (hereinafter, "the
Supervisory Act"), its enforcement decree, Act on Foreign Exchange Trade,
its enforcement decree, and any other relevant statutes thereof. <Amended
July 26, 2000, December 29, 2000>

§2. General Guidelines
An MBC shall observe any statutes or regulations of relevance to its
business operation, and shall strive to provide comprehensive financial
supports by supplying timely and sufficient operating- and investment funds
to business enterprises.

§3. Scope of Application
The business operation of the MBCs and intermediaries shall be governed
by the provisions of this Regulation, unless prescribed otherwise by other
statutes or the FSC. However, only Chapters 6 and 7 and Articles 6, 10, 32,
and 33 shall be applied to intermediaries.<Amended August 1, 2002>

§4. Definitions of Terms [Deleted August 6, 1999]

§4-2. The Scope of Equity Capital <Added August 6, 1999>
(1) Equity capital pursuant to Article 2 subparagraph 3 of the Act and Article
2-2 of the Decree shall be calculated as the sum of the core capital and
supplementary capital subtracted by the deductions, based on separate
financial statements of an MBC.
(2)The scope of the core capital, supplementary capital and deductions
under paragraph (1) corresponds to <Appendix Table 1>, and the permitted
scope and limit of the supplementary capital shall be determined following
the method of calculating equity capital prescribed by the Governor of the
Financial Supervisory Service pursuant to Article 25 paragraph (2).

§4-3. Credit Extension <Added August 6, 1999>
The scope of credit extension pursuant to Article 2 subparagraph 4 of the
Act and Article 2-3 of the Decree corresponds to <Appendix Table 2>.


                              CHAPTER II.
                            AUTHORIZATION
                                 Section 1.
                                Procedures

§5. Authorization
(1) Any person intending to obtain the authorization for branches pursuant to
Article 4 of the Act shall apply to the FSC in the manner prescribed by the
Governor of the Financial Supervisory Service (hereinafter, "the Governor").
<Amended August 6, 1999>
   1. through 5. [Deleted August 6, 1999]
(2) [Deleted July 26, 2000]
(3) [Deleted August 6, 1999]


                              Section 2.
                      Standards for Authorization
§6. Actions Taken by the Governor Following Modification(s) in Articles of
       Incorporation and Mode of Business Operation <Amended
December 29, 2000>
In the event the Governor adjudges that the report(s) submitted pursuant to
Article 17-2 paragraph (1) of the Decree on any modification(s) in the articles
of incorporation and mode of business operation, fails to meet any one of
the standards under the following subparagraphs (exclusive of
subparagraph 4 in case of modification(s) in articles of incorporation), he or
she may request correction(s) thereof within a reasonable period of time.
<Amended December 29, 2000>
   1.The modification(s) shall not be inconsistent with the relevant statutes;
   2.The modification(s) shall not contravene the inherent nature of a
      corporation;
   3.The modification(s) shall not infringe on the rights and interests of the
      users; and
   4.In light of the expected scale of the modified mode of business
      operation and its prospect for profit or loss, the modification(s) shall
      not warrant any detriment to sound management of the MBC or any
      disorder in the credit system.

§7. Modification in Mode of Business Operation [Deleted August 6, 1999]

§8. Decrease of Capital [Deleted August 6, 1999]

§9. Relocation of Head Office
The Governor shall review the reports submitted in advance pursuant to
Article 8 paragraph (2) subparagraph 3 of the Act, with regard to any
speculative adverse effects on the supply and demand of funds in the area
where the MBC concerned conducts its business, the establishment of
proper competition with other financial institutions, and on the maintenance
of credit system. <Amended August 6, 1999>

§10. Authorization for Holding Concurrent Position(s) by Executive Officers
(1) The "corporation(s) permitted by FSC" under Article 13 subparagraph 6
of the Decree corresponds to any one of the following subparagraphs.
<Added August 6, 1999>
   1.A corporation that maintains a continuous cooperative relationship with
      the corresponding MBC's controlling shareholder(s) through business
      transaction(s); and
   2.A corporation which conducts business(es) classified as 'financing' or
      'insurance' pursuant to the Korean Standard Industry Classification
      published by the Bureau of Statistics.
(2) The authority and duties concerning the authorization for holding
concurrent position(s) pursuant to Article 20 of the Act and Article 13 of the
Decree shall be delegated to the Governor. <Amended August 6, 1999>


                             CHAPTER III.
                         BUSINESS OPERATION

§11. Maturity of Notes
The "period determined by the FSC" pursuant to Article 7 paragraph (1)
subparagraph 1 of the Act corresponds to the period of one year from the
date of transaction(s). <Amended August 6, 1999>

§12. Deposit and Delivery of Notes
Notes issued, sold or intermediated by an MBC shall be delivered in real or
by deposit passbook(s).

§13. Ancillary Business [Deleted July 26, 2000]
        §13-2. Mode of Transaction for Note Management Account <Added
        December 29, 2000>
(1) The trust period for note management account(s) transacted pursuant to
Article 6-4 paragraph (1) subparagraph 1 of the Decree shall be less than
one year.
(2) The transaction(s) of note management account(s) shall be executed
through trust or withdrawal at anytime by trust passbook(s) of the note
management account(s).

§13-3. Management of the Trusted Fund in the Note Management Account
        <Added December 29, 2000>
(1) The assets belonging to the trusted fund(s) in the note management
account(s) of an MBC shall comprise discounted bills of transaction
partner(s), before-shipment trade bills, cover bills issued by financial
institutions, factoring financing notes or bonds, government bonds and other
public bonds, financial bonds, securities subject to open market operation,
listed bonds, negotiable certificates of deposit, and reserve assets for
payment.
(2) An MBC shall operate in the form of discounted bills, trade bills and
factoring financing for over 50/100 of the total assets under the trusted
fund(s) in its note management account(s).
(3) The asset(s) under the trusted fund(s) shall be managed separately from
the holding assets of the MBC's own account.
(4) In the event of swap-transaction(s) between the assets under the trusted
fund(s) and the holding assets of an MBC, the interest rate for the assets
admitted into the note management account(s) shall be equal to, or higher
than, the interest rate for the assets drawn out from the account(s), and any
bad assets shall be transferred to the MBC's own account without delay.

§13-4. Issuance of Cover Bills <Added December 29, 2000>
(1) New bills (cover factoring bills or cover trade bills) may be issued by
virtue of integration or division of factoring bills and bonds or trade bills,
which an MBC holds after discount or purchase (hereinafter, "the original
bills and other instruments").
(2) The cover bills under paragraph (1) shall be issued within the holding
balance and final maturity day(s) of the original bills and other instruments,
which may not be sold or incorporated into the note management account.

§14. Types of Transaction for Intermediary [Deleted August 6, 1999]
§14-2. Amount of Bonds Issued
In the event an MBC issues bond(s) with maturity of five years or longer by
discount method, the balance of the discounted issuance may be subtracted
from the amount of bonds issued under Article 10 of the Act.

§15. Debt Ceiling [Deleted August 6, 1999]
      §16.Approval of exception to the Credit Ceiling to a Single Borrower
      <Amended entirely August 6, 1999>
(1) In the event an MBC intends to exceed the credit ceiling prescribed
under Article 15 paragraphs (1) through paragraph (4) of the Act, for such
reason(s) as stipulated under Article 9-4 paragraph (1) subparagraph 1 of
the Decree, the MBC shall apply for approval of exception to the credit
ceiling to the Governor within seven days prior to the expected credit
extension(s).
(2) The "corporation(s) permitted by the FSC" under Article 9-4 paragraph
(1) subparagraph 1 corresponds to any one of the following subparagraphs.
   1.Institutions governed by the Frame Act for Management of Government
       Investment Institution;
   2.Institutions governed by the Provincial Public Corporations Act;
   3.Korean Asset Management Company, as under the Act Concerning
       Efficient Resolution of Distressed Assets of Financial Institutions and
       the Establishment of Korean Asset Management Company;<Amended
       July 26, 2000>
   4.Korean Deposit Insurance Corporation, as under the Depositor
       Protection Act;
   5.Special public corporation(s) established by corresponding
       enactment(s), applicable under any one of the following
       subparagraphs :
       a.enterprise(s) qualified to benefit from the funds the Government or
          municipal governments provide to preserve any losses incurred;
       b. corporation(s), whose ratio of equity participation by the
          Government is 50/100 or above; or
       c. corporation(s), whose ratio of equity participation by the
          Government is under 50/100, and which receives an authorization
          of its budget and financial and tax-wise support from the
          Government.
   6.Financial institution(s) under the Banking Act; and
   7.Financial institution(s), which applies the same risk-weight(s) as those
       of the financial institution(s) under subparagraph 6, according to the
       standards of calculating the ratio of equity capital against the
       risk-weighted assets pursuant to Article 25 paragraph (2).
(3) The "circumstance(s) recognized by the FSC" under the provisions of
Article 9-4 paragraph (1) subparagraph 2 item d of the Decree corresponds
to any circumstances applicable under the following subparagraphs.
   1.Merger or transfer of business operation with other financial institutions;
   2.Modification(s) in the composition of single borrower(s) or parties of
      interest;
   3.Modification(s) in the account heading(s) of the balance sheet(s) of an
      MBC; or
   4.Modification(s) in the scope of credit extension pursuant to Article 4-3.
(4) In the event an MBC violates the credit ceiling for reason(s) prescribed
under Article 9-4 paragraph (1) subparagraph 2 of the Decree, it shall obtain
the approval of the Governor by submitting its correction plan(s) within one
month from the date of violation, in which event the MBC shall be presumed
to receive approval from FSC pursuant to Article 9-4 paragraph (1) of the
Decree. <Amended July 26, 2000>
(5) In the event an MBC, in receipt of the approval(s) pursuant to paragraph
(4), applicable under each subparagraph of Article 9-4 paragraphs (3) of the
Decree, intends to extend the period of violating the credit ceiling pursuant
to Article 15 paragraph (6)p of the Act, the MBC shall apply to the Governor
by seven days prior to the expiration of the original extension period. The
period permitted for extension is less than one year. <Amended July 26,
2000>
(6) Matters concerning the approval(s) under paragraphs (1) and (5) shall be
delegated to the Governor. <Amended July 26, 2000>
(7) The Governor shall report to the FSC on the status quo of the
approval(s) pursuant to paragraphs (1), (4), and (5) on a quarterly basis.
<Amended July 26, 2000>
(8) The Governor shall determine the specifics of the application(s) for
approval(s) pursuant to paragraphs (1), (3), and (4). <Amended July 26,
2000>

§16-2. Management of Large Credit Exposure <Added August 6, 1999>
(1) Violation(s) of the ceiling(s) on the total amount of large credit exposure
provided under Article 15 paragraph (3) of the Act shall be determined on
the basis of the balance as of the end of each month.
(2) The Governor shall determine the specific details concerning the
report(s) necessary for the management of the ceiling(s) on the total amount
of large credit exposure by MBCs.

§ 16-3. Debt-Equity Swaps Exempted from Restriction on Securities
       Investment <Added August 6, 1999, Article 17-2 Changed to Article
       16-3>
(1) In the event an MBC comes to hold stocks, by converting loans
(corresponding to the credit extensions recognized into the balance sheet of
<Appendix Table 2>; hereinafter as such in this Article) extended to the
enterprise(s) applicable under any one of the following subparagraphs into
investment in equity shares, pursuant to Article 11 paragraph (1)
subparagraph 5 of the Decree and Article 11 paragraph (6) of the Act
Concerning the Structural Improvement of the Financial Industry, such
holding of stocks shall not be viewed as acquisition of stocks pursuant to
Article 17 of the Act. <Amended August 6, 1999; Amended July 26, 2000>
   1.Enterprises in receipt of decision(s) for the commencement of
      liquidation procedures pursuant to the Company Reorganization Act;
   2.Enterprises in receipt of decision(s) for the commencement of
      composition pursuant to the Composition Act;
   3.Enterprises in the process of workout pursuant to the Agreement
      among Financial Institutions for the Promotion of Corporate
      Restructuring;
   4.Enterprises subject to the Agreement among Financial Institutions on
      the Promotion of Rehabilitation of Enterprises Showing Signs of
      Insolvency and on Effective Management of Bad Credits, and subject
      to syndicated loans extended by financial institutions;
   5.Enterprises subject to industry rationalization; and
   6.Enterprises not applicable under subparagraphs (1) through (5), but
      holding bad credits, and approved by the Governor as debt-equity
      swap(s) are adjudged necessary for management rehabilitation of the
      enterprises concerned. <Amended August 6, 1999>
(2) In the event of converting the loans extended to the enterprise(s)
applicable under any one of the subparagraphs of paragraph (1) (except
subparagraph 6) into investment in equity shares, such an MBC shall report
to the Governor on the debt-equity swap(s) within seven days therefrom.
<Amended August 8, 1999>

§ 16-4.Scope of Beneficiary Certificates Exempted from Restriction on
               Securities Investment <Added August 6, 1999> <Amended
        July 26, 2000>
"Beneficiary certificates prescribed by the FSC" under Article 11 paragraph
(1) subparagraph 7 of the Decree corresponds to any one of the following
subparagraphs.
   1.Beneficiary certificates of short-term financing market type investment
      trust (Money Market Fund) (limited to those sold after March 21.
      1999):
   2.Beneficiary certificates of public or corporate bond type, whose period
      of collecting termination fees is less than three months:
   3.Beneficiary certificates designated by the Governor from among such
      beneficiary certificates accounted as other deposits or cash
      equivalents.

§17. Restriction on Securities Investment
(1) The ceilings on securities investment(s) pursuant to the provisions of
Article 11 paragraph (2) of the Decree correspond to the limits under the
following subparagraphs, and when an MBC intends to hold securities in
excess of the limits prescribed under subparagraphs 1 and 2, the MBC shall
obtain the approval(s) of the FSC. <Amended August 6, 1999, July 26,
2000>
   1.20/100 of the total number of shares issued by a single company
       (exclusive of shares issued by securities investment companies as
       under the Securities Investment Company Act); <Amended June 12,
       1998, August 6, 1999, October 6, 2000, December 29, 2000>
   2.5/100 of the equity capital of an MBC, in the event of shares issued by
       its controlling shareholder(s) or parties of special interest thereto. The
       shares approved by the FSC pursuant to subparagraph 1, however,
       shall not be included in the ceiling; <Amended August 6, 1999, July
       26, 2000> and
   3.The lesser amount between 5/100 of the equity capital of an MBC and
       10/100 of the paid-in capital of companies subject to investment, in the
       event of unlisted shares sold by the controlling shareholder(s) of the
       MBC concerned and parties of special interest thereto. The shares
       approved by the FSC pursuant to subparagraphs (1) and (2), however,
       shall not be included in the ceiling. <Added July 26, 2000>
(2) Notwithstanding paragraph (1), an MBC shall not be applicable under
paragraph (1) subparagraph 2, when it makes any investment(s) to the
institution(s) under the following subparagraphs.<Amended August 6, 1999>
   1.Financial institutions incorporated by authorizations pursuant to the
      Banking Act; <Amended August 6, 1999>
   2.Securities companies, securities finance companies, investment
      consulting companies, and transfer agencies, as under the Securities
      and Exchange Act;
   3.Management companies, as under the Securities Investment Trust
      Business Act;
   4.Insurers, under the Insurance Business Act;
   5. Intermediaries, as under the Act;
   6.Mutual savings and finance companies, as under the Mutual Savings
      and Finance Company Act;
   7.Trust companies, as under the Trust Business Act;
   8.Financial companies specializing in loan business, as under the Credit-
      Specialized Financial Business Act; <Amended August 6, 1999>
   9.Futures trading companies, as under the Futures Trading Act;
   10.Small and medium industry venture capital companies, as under the
       Act on Supporting Establishment of Small and Medium Industry; and
   11.Agencies designated as credit ratings agency for unsecured corporate
       bonds by the Governor (hereinafter, "designated credit ratings
       agency"); <Amended August 6, 1999>

§17-2. Debt-Equity Swap [Deleted August 6, 1999, Changed to Article 16-3]

§18. Disposal of Real Estate
(1) Indisputable circumstance(s), as recognized under Article 12-2
paragraph (1)p of the Decree, corresponds to the period of one year from
submission(s) of report(s) to the Governor on extension of the period for
disposing non-operational real estate(s), on account of failure(s) or
suspension(s) of auction sale. <Amended August 6, 1999>
(2) [Deleted August 6, 1999]

§18-2. Selection of Qualified Companies <Added August 6, 1999>
(1) An MBC shall select qualified companies, with which it intends to enter
into transaction(s) of discounts, sales, intermediation, acceptances and
guarantees of notes. This, however, shall not apply to discounting of notes
guaranteed by other financial institutions.
(2) An MBC selecting qualified companies shall conduct thorough credit
investigations and analyses on financial status and management
performance, based on which the MBC shall establish reasonable discount
limits in compliance with the restrictions pursuant to Article 15 paragraph (4)
of the Act. When selecting qualified companies on the basis of credit
evaluation report(s) produced by the designated credit rating agency(s),
however, an MBC may waive the credit investigation and analysis. <Added
on December 29, 2000>
(3) For the purposes of confirming the credit standing(s) and soundness of
holding assets of the qualified companies, an MBC shall conduct its own
credit investigation more than once a year, or shall avail itself of the
evaluation results produced by the designated credit rating agencies for their
credit-worthiness. <Added December 29, 2000>

§18-3. Use of Discount Limits <Added December 29, 2000>
(1) In the event an MBC discounts note(s), it shall be bound by the limit(s)
pertaining to the discount client(s), which are qualified companies.
(2) Notwithstanding paragraph (1), when unqualified companies request
discount(s) of notes acquired directly from the qualified companies through
commercial transaction(s), an MBC can use the discount limit(s) of the
qualified companies concerned.

§19. Sales of Unsecured Notes
(1) In the event an MBC sells unsecured note(s), it shall not conduct any
act(s) in the nature of guaranteeing the payment(s) of the note(s) such as,
but not limited to, giving a memorandum or letter to the effect of promising
direct or indirect guarantee by the MBC itself or by other parties for the
payment of the note(s) in question. In the event of selling note(s) issued by
SMEs (small and medium sized enterprises) guaranteed by banking
institution(s), the Credit Guarantee Fund, Korea Technology Credit
Guarantee Fund, or other MBCs, the preceding clause shall not be
applicable.
(2) [Deleted]
(3) The lowest rating of the unsecured note(s) sold by an MBC, based on the
credit evaluation of more than one designated credit rating agencies, shall
be B rate or higher. In the event of paragraph (1) or notes issued by
companies specifically designated by the Governor, however, the credit
ratings requirement(s) may be waived. <Proviso Amended September 10,
1999>
(4) An MBC may sell unsecured notes within 200 percent of the limit
prescribed under Article 15 paragraph (4) of the Act to each of the qualified
companies separately. <Added December 29, 2000>
(5) In the event an MBC sells note(s) meeting all the requirements provided
under the following subparagraphs, the limit prescribed under paragraph (4)
shall not apply. <Added December 29, 2000>
   1.Issuer: listed corporation(s);
   2.Credit evaluation rating: A2 rate or higher for every credit evaluation
      rating; and
   3.Unit of transaction: over KRW 10 million at par value.

§20. Notes Intermediation
(1) An MBC is qualified to intermediate sales of only the unsecured notes,
the lowest credit rating of which, pursuant to the credit evaluation of the
designated credit rating agency, is B rate or higher. In the event of
companies specifically designated by the Governor, however, the credit
rating requirement(s) may be waived. <Proviso added September 10, 1999,
Amended December 29, 2000>
(2) The total balance of the unsecured notes intermediated by an MBC
pursuant to paragraph (1) shall meet the requirement under the following
subparagraphs.
   1.a manufacturing enterprise : within 40/100 of its equity capital (within
      30/100 in case of an enterprise whose credit rating is B rate); and
   2.a non-manufacturing enterprise : within 30/100 of its equity capital
      (within 20/100 in case of an enterprise whose credit rating is B rate).

§21. Preservation of Claims [Deleted December 11, 1998]

§21-2. Disclosure of Credit Rating <Added December 29, 2000>
(1) In the event of selling, or intermediating sales of, unsecured notes, an
MBC shall state the lowest credit rating from the credit evaluation performed
by the designated rating agencies, either on its passbooks or in any empty
space at the notes in question, and shall make available for public
knowledge at its places of business the credit evaluation rating disclosed by
the designated credit rating agencies.
(2) An MBC shall display at its places of business the statement(s) of
bankruptcy rate per credit rating disclosed by the designated rating agencies
pursuant to the provisions of Article 17 paragraph (2) subparagraph 11 on a
quarterly basis.

§ 22. Ex Ante Review and Ex Post Facto Control of Credit Extension
      [Deleted December 29, 2000]

§23. Soundness of Management
(1) An MBC shall not extend loans in direct or indirect consideration of
purchasing its own shares by the borrower(s).
(2) An MBC shall not provide fund(s), either directly or indirectly in the form
of, but not limited to, loan(s) or payment guarantee(s), to the holders of
indebted capital such as, but not limited to, subordinated bonds or
subordinated borrowings. <Added on August 6, 1999>
(3) An MBC shall not provide its own property as collateral for other
person(s). <Amended August 6, 1999>
(4) An MBC shall not commit any sales or exchange of real estate with its
controlling shareholder(s) and parties of special interest thereto, when the
sales price differs more than 10/100 from the price estimated within last
three months by officially certified appraiser(s).
   1.[Deleted July 26, 2000]
   2.[Deleted July 26, 2000]
(5) An MBC shall not engage in any unconscionable activities applicable
under any one of the following subparagraphs in relation to its credit
extension(s).
   1.Freezing the deposits by restricting the use of borrowed money or
      increasing financial cost of borrower(s) beyond the standards
      prescribed by the Governor;
   2.Unjustly transferring the credit risk undertaken by the MBC to its
      customer(s), either directly or indirectly; and
   3.Any other act(s) to the effect of obtaining unjust profits or infringing on
      the interests of the customer(s), by taking advantage of the MBC's
      superior position.

§24. Support for SMEs (Small and Medium Size Enterprises)
An MBC shall supply to SMEs (small and medium size enterprises) over
25/100 of the gross amount of its holding notes against enterprises
(exclusive of public institutions and non-profit institutions), factoring
financing, payment guarantees for notes, and mid-long term loans.
<Amended December 11, 1998>


                         CHAPTER IV.
               GUIDANCE FOR SOUND MANAGEMENT
                            Section 1.
                   Management Guidance Standards

§25. Management Guidance Ratios
(1) Pursuant to Article 21-2 of the Act, Article 14 paragraphs (1) and (3) of
the Decree, an MBC shall maintain the management guidance ratios
applicable under the following subparagraphs.
   1.Ratio of equity capital to the risk weighted assets: 8/100 or more;
   2.Ratio of assets to liabilities in won currency, whose maturities expire
      within less than three months (hereinafter, "liquidity ratio in won
      currency"): 100/100 or more; <Amended August 6, 1999>
   3.[Deleted June 9, 2000]
   4.[Deleted June 9, 2000]
   5.Ratio of net non-performing loans weighted by risk of losses: 0/100 or
      less <Amended March 14, 2001>
(2) Detailed criteria on the calculation of ratios under paragraph (1) shall be
determined by the Governor. The ratio under paragraph (1) subparagraph 1
shall be calculated based on the consolidated balance sheet of the MBC.
<Amended June 9, 2000>
(3) The Governor may require the submission of a plan or a contract for the
improvement of a MBC with the possible aggravation of management
guidance ratio under paragraph (1) or the one with the management
weakness in the management status analysis or evaluation under Article 29,
or the Governor may conclude management improvement agreements with
the financial institution concerned. However, this is not applicable to any
MBC in receipt of management improvement recommendation,
management improvement request, or management improvement order
pursuant to Articles 30 to 30-3 of this Regulation.

§26. Asset   Soundness Classification
(1) An MBC shall regularly classify the soundness of its holding assets into
five different categories of "normal," "precautionary," "substandard,"
"doubtful," and "estimated loss" while considering the debt-repayment
capability of the borrowers and the contents of the financial transactions,
and accumulate and maintain adequate loss provisioning, including
allowances for payment guarantees (as such hereinafter.).
(2)   For asset soundness classification and loan loss provisioning
accumulation under paragraph (1), financial institutions shall establish
standards for asset soundness classification and loss provisioning
accumulation including the evaluation standards for the debt-repayment
capability of the borrowers by reflecting the standards under Appendix Table
3 and Article 26-3.
(3) The Governor may examine adequacy of                   asset soundness
classification and loan loss provisioning accumulation of a MBC and require
the corrections thereof when determining their inadequacy .
(4) To maintain the feasibility and objectivity of the asset classification and
loan loss provisioning standards pursuant to paragraph (1), a MBC shall
maintain independent credit review ability.
(5) An MBC shall shall secure the soundness of its assets through the early
write-off of their assets classified as "doubtful" or "estimated loss" pursuant
to paragraph (1) (hereinafter, "non-performing assets").
(6) The Governor may require such MBC to write off the specific
non-performing assets when he deems that the write-off performance of
the non-performing assets of a financial institution is insufficient.
§26-2. Asset Subject to Classification <Added June 9, 2000>
"Holding assets" under Article 26 paragraph (1) corresponds to the assets
determined under the following subparagraphs, which include such relevant
assets as note management account.
   1.Loans under the Accounting Principles of Merchant Banking Business
      prescribed by the Securities and Futures Commission (hereinafter,
      "loans");
   2.Payments guarantee with determinate primary obligation (hereinafter,
      "determinate payments guarantee");
   3.Securities;
   4.Lease assets;
   5.Suspense payments or account receivables; and
   6.Any other assets recognized by an MBC as necessary for classification.

§26-3. Loan Loss Provisioning Standards <Added June 9, 2000>
(1) Standards for loan loss provisioning of an MBC are as follows:
   1.As for loans, suspense payments of credit character, and accounts
      receivables as of the date of account settlement (including quarterly
      provisional account settlement; hereinafter as such), an MBC shall
      accumulate reserves for loss provisioning corresponding to the
      amounts under the following subparagraphs in accordance with the
      results of assets classification:.
      a. 0.5/100 or more of assets classified as normal;
      b. 2/100 or more of assets classified as precautionary;
      c. 20/100 or more of assets classified as substandard;
      d. 50/100 or more of assets classified as doubtful; and
      e. 100/100 of assets classified as estimated loss
   2.Notwithstanding subparagraph 1, loan loss provisioning may not be
      accumulated in cases where borrower(s) are the Government or local
      governments or call loans and repurchase agreements (RPs) among
      loans classified as "normal".
   3.An MBC shall accumulate the amounts determined in the following
      items as the payment guarantee reserves for the determinate payment
      guarantees as of the end of each quarter, pursuant to the results of
      asset soundness classification.
      a. 20/100 or more of the payment guarantees classified as normal;
      b. 50/100 or more of the payment guarantees classified as doubtful;
      and
       c. 100/100 of the payment guarantees classified as estimated loss
   4.With the respect to operation lease assets (including advanced lease),
       the required loan loss provisioning which complies with the standard
       under subparagraph 1 as a result of classification of the relevant asset
       soundness as of the end of each quarter shall be accumulated as
       provisioning for losses on sale of operation lease assets.
(2) Notwithstanding paragraph(1), the Governor may require the relevant
MBC to accumulate the total amounts of expected loss into special loss
provisioning by the end of a relevant quarter in the event a financial accident
under the Regulation Concerning the Examination and Sanction of Financial
Institutions has led or is expected to lead to losses exceeding the amounts
equivalent to 1/100 of equity capital as of the end of the previous month.
(3) In the event asset soundness classification of the expected loss is
determined after special loss provisioning has been made under paragraph
(2), the MBC may accumulate the loan loss provisioning pursuant to
paragraph (1).

§27. Risk Management System <Amended entirely December 24, 1999>
(1) For prevention and efficient management of risks along with various
business operation, a MBC shall build and operate a comprehensive risk
management system, which can recognize, assess, monitor, and control the
corresponding risk.
(2) In line with the risk management system under paragraph (1), an MBC
shall assess and manage significant risks measurable such as credit risk,
market risk, and liquidity risk, which may occur in its transactions by each
type.
(3) For efficient risk management, an MBC shall set up and operate an
adequate risk-bearing ceiling and transaction limit by departments,
transactions or person in charge.

§27-2. Risk Management Organization <Added December 24, 1999>
(1) The board of directors of an MBC shall deliberate and decide on the
matters necessary for risk management, such as approval of policies and
strategies on risk management, and establishment and revision or
regulations on risk management.
(2) For efficient performance of the approvals and decisions on risk
management, an MBC shall establish and operate the risk management
committee (hereinafter, "the committee"), which shall conduct the business
under any of the following subparagraphs.
   1.Establishment of policies and strategies on risk management.
   2.Decision on bearable risk levels
   3.Determination of risk ceilings and approval of exceeding the ceilings.
   4.Report to the board of directors on the matters approved or decided by
      the committee.
(3) An MBC shall set up a risk management unit for comprehensive
management of the risks which may occur in its business and support of the
board of directors As for an MBC whose scale of business is smaller than
the standards prescribed by the Governor, however, existing unit(s) or
person(s) in charge may undertake this duties.

§27-3. Risk Management Rules and Regulations <Added December 24,
1999>
An MBC shall establish internal regulations or guidelines, as befitting its
specific needs and circumstances, in respect of risk management basic
policies, organization and procedures, limitation adjustments, internal control
and risk measurement, and administration structure.

§28. Accounting Standards and Settlement of Accounts
(1) An MBC shall comply with the Accounting Principles for Merchant
Banking Business prescribed by the Securities and Futures Commission in
accounting and drafting financial statements. <Amended August 6, 1999>
    1. through 5. [Deleted. August 6, 1999]
(2) Specific matters and accounting standards for foreign exchange
accounts consigned by the Enforcement Decree of the Foreign Exchange
Transactions Act, which are not prescribed under the Accounting Principles
for Merchant Banking Business, shall be determined by the Governor.
(3) An MBC shall enlarge its internal retainment by duly accumulating all
provisioning and reserves in compliance with the terms mandated by the
Governor.


                       Section 2.
  Management Performance Evaluation and Prompt Corrective
                         Action
                <Amended March 26, 1999>

§29. Management Performance Analysis and Evaluation
(1) The Governor shall analyze the management performance of an MBC
and thereby supervise the soundness of management practice.
(2) The Governor may evaluate management performance through the
examination of an MBC, the results of which may be reflected in the
supervision and examination business.
(3) In the event the Governor determines that there exist(s) any cause(s) for
the deterioration of the soundness of management practice or for
management underperformance following the analysis and evaluation of
management performance pursuant to paragraphs (1) and (2), he or she
shall subject the MBC concerned to a more strengthened supervision and
examination for immediate alleviation of the circumstances. <Added
December 24, 1999>
(4) The management performance evaluation pursuant to paragraph (2)
shall be conducted upon the head office of an MBC and its corporation(s)
incorporated overseas, with respect to such criteria as its "capital
adequacy," "asset soundness," "business management capacity,"
"profitability," and "liquidity,", the evaluation results of which being
categorized into five ratings as first grade (excellent), second grade (good),
third grade (mediocre), fourth grade (weak), and fifth grade (risky), for each
of the criteria separately as well as for the overall performance of the MBC.
<Amended December 24, 1999>
(5) The specifics concerning the management performance analysis and
evaluation pursuant to paragraphs (1) through (4) shall be determined by the
Governor, wherein he or she may take into consideration the management
performance of companies that are subject to consolidation in calculating the
ratio of equity capital against the risk-weighted assets under Article 25
paragraph (1) subparagraph 1. <Amended December 24, 1999, December
29, 2000>

§30. Management Improvement Recommendation
(1) In the event an MBC is applicable under any one of the following
subparagraphs, the Governor shall subject such an MBC to the
implementation of the applicable recommendation(s) he or she issues.
<Amended December 29, 2000>
   1.When the ratio of equity capital against the risk-weighted assets
     pursuant to Article 25 falls under 8/100;
   2.When in receipt of fourth grade (weak) or below for the criteria of
     "capital adequacy" or "asset soundness", while in receipt of an overall
     rating of third grade (mediocre) or above following the management
     performance evaluation pursuant to Article 29; and
   3.When an MBC is adjudged to become applicable under subparagraph
     1 or 2 as a consequence of the culmination(s) of large scale financial
     crime(s) or accident(s) or non-performing loans. <Amended December
        29, 2000>
(2) Recommendation(s) under paragraph (1) corresponds to either a part or
all of the measures under the following subparagraphs.
   1.Improvement in personnel management and organizational operation;
   2.Cost reduction;
   3.Enhancement in the efficiency of business offices administration;
   4.Restriction on investment in fixed assets, expansion into new business,
      or new contribution;
   5.Disposal of non-performing assets;
   6.Increase or decrease in capital;
   7.Restriction on distribution of dividends; and
   8.Allocation of special loan loss provisioning.
(3) When issuing recommendation(s) pursuant to paragraph (1), the
Governor may take such measures as "precaution" or "warning" against an
MBC or executive officer(s) related thereof. <Amended entirely March 26,
1999>

§30-2. Management Improvement Requirement <Added March 26, 1999>
(1) In the event an MBC is applicable under any one of the following
subparagraphs, the FSC shall subject such an MBC to the implementation of
the applicable request(s) it issues. <Amended December 29, 2000>
   1.When the ratio of equity capital against the risk-weighted assets
      pursuant to Article 25 falls under 6/100;
   2.When in receipt of an overall rating of fourth grade (weak) or below
      following the management performance evaluation pursuant to Article
      29;
   3.When an MBC is adjudged to become applicable under paragraph (1)
      or (2) as a consequence of the culmination(s) of large scale financial
      accident(s) or crime(s) or non-performing loans; <Amended December
      29, 2000>
   4.When an MBC in receipt of management improvement
      recommendation(s) pursuant to Article 30 paragraph (1) does not
      implement its management improvement plan(s) with valuation and
      calculation of assets and liabilities.
(2) Requirement(s) under paragraph (1) corresponds to either a part or all of
the measures under the following subparagraphs.
   1.Closure·consolidation or restriction on opening of new branch offices;
   2. Downsizing of organization;
   3. Restriction on holding risky assets and disposal of such assets;
   4. Restriction on the level of interest applicable to deposits;
   5. Liquidation of subsidiaries;
   6. Requiring replacement of executive officer(s);
   7. Partial suspension of business operation;
   8.Drafting of plans for merger, admission as a subsidiary into a Financial
      Holding Company (hereinafter, "FHC") (inclusive of such cases where
      an MBC incorporates an FHC either individually or jointly with other
      financial institutions and thereby joining the FHC as a subsidiary),
      third-party takeover, or transfer of business entire or partial;
      <Amended December 29, 2000> and
   9. Any matters prescribed under Article 30 paragraph (2).

§30-3. Management Improvement Order <Added March 26, 1999>
(1) In the event an MBC is applicable under any one of the following
subparagraphs, the FSC shall subject such an FSC to the implementation of
the applicable order(s) he or she issues. <Amended December 29, 2000>
    1.When an MBC becomes an insolvent financial institution pursuant to
       Article 2 subparagraph 3 of the Act on the Structural Improvement of
       Financial Industry;
    2.When the ratio of equity capital against the risk-weighted assets
       pursuant to Article 25 falls under 2/100;
    3.When an MBC in receipt of management improvement requirement(s)
       pursuant to Article 30-2 paragraph (1) does not comply with the
       consequential terms of its management improvement plan(s), as a
       consequence of which the MBC receives implementation demand(s)
       pursuant to Article 30-6 paragraph (6), the subsequent noncompliance
       with which, or the prospects of noncompliance with which, renders the
       MBC adjudged to face serious difficulties in business operation.
(2) Order(s) under paragraph (1) corresponds to either a part or all of the
measures under the following subparagraphs. However, such measures as
"suspension of entire business operation," "transfer of entire business
operation," "transfer of entire contracts," or "destruction of entire shares"
shall be applicable only when an MBC is declared as an insolvent financial
institution pursuant to paragraph (1) subparagraph 1, or when it is adjudged
to have failed to meet the standards prescribed under paragraph (1)
subparagraph 2, whereby the underperformance of such an MBC is
considered to be detrimental to the maintenance of a sound credit order or
to the protection of transaction partners. <Amended December 29, 2000>
   1.Full or partial destruction of shares;
   2.Suspension of executive officer(s) from office and appointment of
      conservator(s);
   3.Merger, or admission as a subsidiary into an FHC (inclusive of such
      cases where an MBC incorporates an FHC either individually or jointly
      with other financial institutions and thereby joining the FHC as a
      subsidiary); <Amended December 29, 2000>
   4.Full or partial transfer of business operation;
   5.Third-party takeover of the MBC;
   6. Suspension of business operation for less than six months;
   7. Full or partial transfer of contract(s); and
   8. Matters prescribed under Article 30-2 paragraph (2).
(3) In the event of an MBC in receipt of management improvement
recommendation(s) pursuant to Article 30 paragraph (1) or management
improvement requirement(s) pursuant to Article 30-2 paragraph (1), whose
normal business operation is adjudged difficult without financial support from
outside, as a consequence of which the Government or the Deposit
Protection Corporation has decided to invest therein, the FSC may order the
MBC in question to either increase or decrease its capital, in spite of
paragraph (1).

§30-4. Postponement of Prompt Corrective Action <Added March 26, 19>
The Governor or the FSC may postpone a prompt corrective action for a
specified period of time when recognizing that an MBC applicable under any
one of the subparagraphs of Article 30 paragraph (1), Article 30-2 paragraph
(1), or Article 30-3 paragraph (1) has clearly met the standards through the
increase in its capital or sale of its assets, that it will probably satisfy such
standards within a short period of time, or that there are some reasons
corresponding thereto. <Amended December 29, 2000>
(2) [Deleted December 29, 2000]

§30-5. Emergency Measures <Added March 26, 1999>
(1) In the event an MBC is applicable under any one of the following
subparagraphs, whereby detriment of the interest of transaction partner(s) is
highly warranted, the FSC may take emergency measure(s) to eliminate the
risk(s) involved therein. Where convening of the FSC is not possible under
any emergency situation, Chairman of the FSC may take measure(s)
immediate and necessary, following which he or she shall call to convene
the FSC and report on the measure(s) taken without delay.
   1.When an MBC faces such circumstance(s) as including, but not limited
     to, deficiency of reserve assets for deposit payment or debt
        redemption incapacity, as a result of a radical shortage of liquidity;
    2.When normal business operation of an MBC is deemed impossible or
        impractical, due to such unforeseen accident(s) as, but not limited to,
        temporary closure of business, suspension of business operation, a
        run on fund withdrawals or labor dispute(s); and
    3.When bankruptcy of an MBC is imminent or when it is on a deposit
        payment default.
(2) Emergency measure(s) in paragraph (1) corresponds to either a part or
all of the measures under the following subparagraphs.
   1. Restriction on fund receipt(s) or credit extension(s);
   2. Complete or partial suspension of fund payments;
   3. Prohibition of debt servicing act(s); and
   4. Disposal of assets.

§30-6. Submission of the Management Improvement Plan <Added March
       26, 1999>
(1) An MBC in receipt of management improvement recommendation(s),
management improvement requirement(s), or management improvement
order(s) pursuant to Articles 30, 30-2, or 30-3 shall submit plan(s) which
shall reflect the measure(s) taken (hereinafter, "management improvement
plan") to the Governor within a time frame the Governor or the FSC
prescribes not exceeding one month from the date of such measure(s).
<Amended December 29, 2000>
(2) The Governor shall decide on the approval of the plan(s) submitted
pursuant to paragraph (1) and Article 30 paragraph (1), and the FSC shall
decide on the approval(s) of the plan(s) submitted pursuant to paragraph (1)
and Article 30-2 paragraph (1), and paragraph (1) and Article 30-3
paragraph (1), within one month from such submission(s). <Amended
December 29, 2000>
(3) The Governor shall receive a review of the Management Assessment
Committee comprised of independent professionals in advance prior to
making approval decision pursuant to the provisions of paragraph (2). This,
however, shall not apply in the event of emergency or deliberation deemed
unnecessary by the Governor. <Amended August 1, 2002>
(4) In the event the management improvement plan(s) submitted pursuant to
paragraph (1) by an MBC in receipt of management improvement
recommendation(s) pursuant to Article 30 paragraph (1) fails to prove
feasible, the Governor shall disapprove of the plan(s). The FSC, in this case,
shall require implementation of measure(s) partially or entirely applicable
under Article 30-2 and submission(s) of plan(s) reflective of the measure(s)
taken within a specified period of time. <Amended December 29, 2000>
(5) In the event the management improvement plan(s) submitted pursuant to
paragraphs (1) and (4) by an MBC in receipt of management improvement
requirement(s) pursuant to Article 30-2 paragraph (1) fails to prove feasible,
the FSC shall disapprove. The FSC, in this case, shall require
implementation of measure(s) partially or entirely applicable under each
subparagraph of Article 30-2 paragraph (2) and submission(s) of plan(s)
reflective of the measure(s) taken within a specified period of time. When the
plan(s) thus submitted fails to prove feasible, the FSC may require or order
implementation of measure(s) partially applicable under Article 30-3
paragraph (2). <Amended December 29, 2000>
(6) An MBC in receipt of the approval(s) of its management improvement
plan(s) pursuant to paragraph (2) shall submit to the Governor a quarterly
report on the progress in implementation of the approved plan(s) by the
tenth day of each new quarter, whereby the Governor shall examine the
implementation results, and when it is adjudged insufficient or its further
implementation is likely impractical due to any change of circumstances
such as modification(s) in relevant system(s), the Governor may take
measure(s) necessary such as, but not limited to, requiring of modification(s)
of the plan(s) or demanding full implementation of the approved plan(s)
within a time frame it prescribes. <Amended December 29, 2000>
(7) In the event the Governor requires an MBC in receipt of management
improvement requirement(s) of modification(s) of major terms of its
management improvement plan(s) or of full implementation of the plan(s)
within a specified period of time pursuant to paragraph (6), the Governor
shall report to the FSC in advance. <Added December 29, 2000>
(8) In the event an MBC re-submits its management improvement plan(s)
with modification(s) of major terms therein pursuant to paragraph (6),
paragraphs (2) through (5) shall be applied. <Added December 29, 2000>
(9) In the event an MBC in receipt of management improvement order(s)
pursuant to Article 30-3 submits plan(s) reflective of the measure(s) taken,
paragraphs (5) through (8) may be applied. <Added December 29, 2000,
Amended February 14, 2001>
(10) The Governor shall determine specific matters pertaining to the
organization and operation of the Management Assessment Committee
under paragraph (3).

§30-7. Implementation of Management Improvement Plan <Added March
26, 1999>
(1) The implementation period for the management improvement plan of an
MBC in receipt of management improvement recommendation(s) pursuant
to Article 30 shall be within one year from the date of the approval of the
plan.
(2) The implementation period for the management improvement plan of an
MBC in receipt of management improvement requirement(s) pursuant to
Article 30-2 shall be within one and a half year from the date of the approval.
In the event of an MBC in receipt of management improvement
requirement(s) while in receipt of management improvement
recommendation(s) pursuant to Article 30, the one-and-a-half year period
shall be counted from the date of the approval of the plan(s) for the
management improvement recommendation(s).
(3) When in receipt of demand of full implementation of management
improvement plan(s) by the Governor pursuant to Article 30-6 paragraph (6),
the period provided under paragraph (2) may be extended.
(4) In the event of an early successful implementation of the management
improvement plan by an MBC in receipt of management improvement
recommendation(s), requirement(s), or order(s) pursuant to Articles 30
through 30-3, through such means as increase(s) in capital or resolution(s)
of non-performing loans, as a consequence of which the MBC has achieved
a significant management rehabilitation, the Governor or the FSC may
alleviate the degree(s) of the measure(s) required or waive any further
implementation thereof.
(5) In the event the implementation period expires and the management of
an MBC in receipt of management improvement recommendation(s),
requirement(s), or order(s) pursuant to Articles 30 through 30-3 is adjudged
sufficiently rehabilitated, the Governor or the FSC shall notify the MBC of the
termination of the measure(s) taken; in the event the management
performance of an MBC is applicable under Article 30 paragraph (1), Article
30-2 paragraph (1) or Article 30-3 paragraph (1), the Governor or the FSC
shall take a separate and corresponding management improvement
recommendation(s), management             improvement      requirement(s)    or
management improvement order(s).

§30-8 Support Measures for Implementation of Prompt Corrective Actions
In the event an MBC fails to comply with the requirements prescribed under
Articles 10, 15, 17, and 19 of the Act as a result of mergers and acquisitions,
assumption, business transfer, taking over of business or transfer of
contracts among financial institutions by prompt corrective action pursuant to
the provisions of Article 11 paragraph (5) of the Act on the Structural
Improvement of the Financial Industry, it shall submit a plan for resolving the
situation within one month and report on its performance to the Governor on
a semi annual basis.
                           Section 2-2.
       Valuation and Calculation of Assets and Liabilities for
           Determining Insolvent Financial Institutions
                     <Added March 26, 1999>

§31. An MBC Subject to Valuation
(1) An MBC subject to the valuation and calculation of assets and liabilities
for the determination of an insolvent financial institution shall be applicable
under any one of the following subparagraphs.
   1.An MBC whose asset soundness has drastically deteriorated due to the
      occurrence of major financial accidents or large non-performing loans
      etc. and which the Governor adjudges that its liabilities may exceed its
      assets;
   2.An MBC whose ratio of equity capital to the risk-weighted assets
      pursuant to Article 25 falls below 4/100; <Amended December 24,
      1999> and
   3.An MBC in receipt of fifth grade (risky) for the criteria prescribed by the
      Governor following the management performance evaluation pursuant
      to Article 29. <Amended entirely March 26, 1999>

§31-2. Scope of Valuation <Added March 26, 1999>
(1) In principle, each account title of assets and liabilities on the balance
sheet of an MBC at the end of the latest month shall be valued and
calculated pursuant to Article 31, however, the subparagraphs applicable
under one of the followings shall be excluded from the valuation and
calculation.
    1.Reserves for adjusting asset values (referring to loan loss provisioning,
       reserves for depreciation, other allowances); and
    2.Assets and liabilities of securities investment trust(s) without principal
       preservation agreements in the securities investment trust account(s).
(2) With respect to annotations in the balance sheet(s), the items in the
following subparagraphs shall be subject to valuation and calculation.
   1.Payment guarantee; and
   2.Credit extension agreement.

§31-3. Valuation Criteria <Added March 26, 1999>
(1) The assets and liabilities subject to valuation and calculation pursuant to
Article 31-2 shall be valued based in accordance with the criteria under the
following subparagraphs.
   1.For account headings where the book value reflects the real value, the
      valuation and calculation shall be based upon the book value;
   2.For account headings where the book value fails to reflect the real
      value, the valuation and calculation shall be based upon the market
      value or the real value subtracted by the estimated amount of loss;
      and
   3.Annotations shall be recognized as liabilities after calculating the
      estimated amount of loss, if applicable.
(2) The detailed criteria on the valuation and calculation of each item in
assets, liabilities, and footings pursuant to paragraph (1) shall be determined
by the Governor.

§31-4. Valuation procedures <Added March 26, 1999>
(1) The Governor may demand that an MBC subject to the valuation and
calculation of their assets and liabilities, and may conduct on-site
examinations of their assets and liabilities when necessary.
(2) In the event an MBC is applicable under Article 31 subparagraph 2, the
Governor shall conduct the valuation and calculation of its assets and
liabilities in every quarter until the ratio of equity capital against the
risk-weighted assets reaches 4/100.
                             Section 3.
                        Management Disclosure

§32. Submission of Business Report
(1) An MBC shall submit a monthly business report and an annual business
operation report to the Governor.
(2) The specific standards and procedures applicable under paragraph (1)
shall be determined by the Governor.

§33. Management Disclosure
(1) The Governor shall announce on a quarterly basis matter(s) of
significance to the soundness of capital structure of MBC, as prescribed
under each subparagraph of Article 17 paragraph (1) of the Decree. <Added
August 6, 1999>
(2) An MBC must disclose the matters applicable under subparagraphs (1)
through (6) of Article 17 paragraph (2) of the Decree within three months
from the settlement date. However, disclosure on the result of the first half
year settlement shall be made within two months from the settlement date of
the first half year. <Amended August 6, 1999>
   1. through 5. [Deleted August 6, 1999]
(3) The specific disclosure items and method of disclosure under paragraph
(2) shall be determined in conformity with the Uniform Management
Disclosure Standards for Merchant Banking Corporations prescribed by the
Chairman of the Association of Merchant Banking Corporations (hereinafter,
"the Association"). <Amended August 6, 1999>
(4) An MBC must disclose the relevant contents, in the event the soundness
of its management either has been damaged or is likely to be damaged due
to cases applicable under the following subparagraphs. <Amended August
6, 1999>
   1.When an MBC is applicable under Article 17 paragraph (2)
      subparagraph 7 of the Decree; <Amended August 6, 1999>
   2.When non-performing loan(s) or financial accident(s) arise beyond the
      scale prescribed by the Governor; <Amended August 6, 1999> and
   3.When any other matter(s), recognized as of significance by the
      Governor, applicable under Article 17 paragraph (2) subparagraph 2
      should arise. <Amended August 6, 1999>
(5) The subjects, contents, methods, time and etc, of the disclosure(s) under
paragraph (4) shall be determined by the Governor. <Amended August 6,
1999>
(6) In the event an MBC makes disclosure(s) of matters prescribed under
paragraphs (1) through (4) without due diligence through false statement(s)
or omission(s) of material fact(s) or information, the Governor may require
the MBC of redisclosure(s) or correction(s).

§34. Matters to be Reported [Deleted August 6, 1999]


                         CHAPTER V.
             EXAMINATION [DELETED AUGUST 6, 1999]

§35. Commencement of Examination [Deleted March 12, 1999]

§36. Examination Results [Deleted March 12, 19]

§37. Disposition of the Examination Results [Deleted March 12, 1999]

§38. Prevention of Financial Accident or Crime [Deleted August 6, 1999]


                             CHAPTER V-2.
  FOREIGN EXCHANGE REGULATION <ADDED DECEMBER 29,
                      2000>
                           Section 1.
       General Provisions of Foreign Exchange Regulation

§38-2. Definitions <Added December 29, 2000>
A "merchant banking corporation" (MBC) under this Chapter corresponds to
the merchant banking corporation, which has registered to conduct the
foreign exchange business pursuant to the provisions of Article 8 paragraph
(1) of the Foreign Exchange Transactions Act.


                              Section 2.
    Registration of Institutions in Foreign Exchange Business

§38-3. Requirements for Registration <Added December 29, 2000>
(1) "Standards for financial soundness applicable to financial institutions
concerned determined by the FSC" under Article 13 paragraph (2)
subparagraph 1 of the enforcement decree of the Foreign Exchange
Transactions Act shall be as the following subparagraphs.
   1.Minimum capital standards under Article 3 of the Act;
   2.Equity capital standards under Article 25;
(2) When the Minister of Finance and Economy requests the confirmation of
adequacy of the requirement for registration under Article 13 paragraph (3)
of Enforcement Decree on Foreign Exchange Transaction Act, the Governor
shall confirm it in accordance with the standards under paragraph (1).
§38-4. Alteration of Registration <Added December 29, 2000>
(1) When intending to establish(provided that it is authorized pursuant to
Article 4 of the Act) or close its domestic offices handling foreign exchange
business or to change its addresses pursuant to Article 16 paragraph (1) of
the decree of the Foreign Exchange Transactions Act, the FSC shall report
to the Governor at least seven days before the date thereof.
(2) Detailed matters concerning declaration under paragraph (1) shall be
determined by the Governor.


                           Section 3.
           Management of Foreign Exchange Soundness
§38-5. Exchange Rate Risk Management
(1) Pursuant to Article 21 subparagraph 2 of the decree of the Foreign
Exchange Transactions Act, an MBC shall verify compliance with the ceiling
on foreign exchange purchase amounts in excess and foreign exchange
sales amounts in excess on the basis of the balance of every business day.
Otherwise, foreign exchange position on Saturdays or holidays of the New
York Foreign Exchange Market should be on the basis of average balances
aggregated with the foreign exchange position of the following business day.
(2) When in violation of the ceiling on foreign exchange positions, an MBC
shall report such violation to the Governor within three business days from
the date of its violation.

§38-6. Liquidity Risk Management
(1) An MBC shall classify and manage its assets and liabilities in foreign
currency by each remaining maturity date under Article 21 subparagraph 4
of the enforcement Decree of the Foreign Exchange Transactions Act, and
maintain the ratio under the following subparagraphs.
   1.The Ratio of assets with remaining maturity of less than three months
      to liabilities with remaining maturity of less than three months : 80/100
      or above; and
   2.The ratio of mismatch in maturities of assets and liabilities in foreign
      currency.
      a.Ratio of assets exceeding liabilities in the event of remaining
         maturity of less than seven days; 0/100 or above
      b. Ratio of debts exceeding assets being in the event of remaining
         maturity of less than one month : 10/100 or below
(2) The method of classification of remaining maturity, the scope of assets
and liabilities and the method of ratio calculation under paragraph (1) shall
be determined by the Governor.

§38-7. Management of Financial Sources for Medium and Long Term Loans
       in Foreign Currency
(1) Pursuant to Article 21 subparagraph 4 of the enforcement decree of the
Foreign Exchange Transactions Act, an MBC shall secure funds in foreign
currency with redemption period of over one year for over 50/100 of its loans
in foreign currency with redemption period of over one year. This, however,
shall not apply when the balance of loans in foreign currency is less than
USD 50 million.
(2) The scope of loans and financing in foreign currency pursuant to
paragraph (1) shall be determined by the Governor.

§38-8. Offshore Finance Management
(1) In the event an MBC secures funds from non-residents under Article 3
paragraph (1) subparagraph 13 of the Foreign Exchange Transactions Act
(hereinafter, "non-residents') and operate these funds towards non-residents
(hereinafter, "offshore financing"), they shall establish offshore financing
accounts, which shall be calculated by separating from other transactions.
(2) The methods of financing and operating offshore financing accounts
under paragraph (1) are as the following subparagraphs.
   1.The method of financing
      a. Borrowing(s) from non-residents or other offshore financing
      accounts
      b. Deposit(s) from non-residents or other offshore financing accounts
      c. Issuance(s) of foreign currency securities abroad
      d. Sales of credits in foreign currency against non-residents
   2.The method of operating
      a.Loans or safekeepings to non-residents or other offshore financing
      accounts
      b.Acquisition or purchase of foreign currency securities issued by
          non-residents

§38-9. Internal Management of Financial Institution
(1) An MBC shall establish and operate its internal management standards
for each kind of risks occurred in foreign currency transactions, such as
country risks, large credit risks, financial derivatives transaction risks, market
risks and others under Article 21 subparagraph 6 of the Enforcement Decree
of the Foreign Exchange Transactions Act
(2) In the event an MBC intends to establish and alter the management
standards or make foreign currency transactions beyond the management
standards under paragraph (1), it shall pass through the resolution of an
internal risk management organization.
(3) The Governor shall establish examplary standards, and when the risk
management standards of an MBC are deemed inappropriate, the Governor
may request the correction thereof .

§38-10. Preclusion <Added December 29, 2000>
The provisions under this Chapter are not applicable to the securities
investment trust accounts of an MBC.
                            Section 4.
        Sanctions against Violations of the Supervision on
                 Foreign Exchange Soundness

§38-11. Sanctions against Violations of the Ceiling on Foreign Currency
         Position
(1) The Governor may impose a sanction pursuant to the following
subparagraphs in the event an MBC violates the ceiling on the foreign
currency position under Article 38-5.
   1.When violating once within the last one year from the date of ceiling
      violation, warning; and
   2.When violating twice within the last one year from the date of violation:
      reduction of the ceilings on foreign currency position by daily average
      violation amount multiplied by the number of days violation.
(2) An MBC shall be subject to double-reductions of the ceilings on foreign
currency position under paragraph (1) subparagraph 2 when it is applicable
under any of the following subparagraphs.
   1.When violating three times or more within the last one year from the
       date of ceiling violation;
   2.When committing the violation on purpose; and
   3.When reporting under paragraph (1) has not been made within three
       business days from the first date of ceiling violation.
(3) In the event that a decrease in the equity capital and other reasons for
exceeding the ceiling is deemed unavoidable in applying paragraphs (1) and
(2), the Governor may exempt, postpone, or cancel the sanctions thereof.
(4) The Governor may take such measures as a warning, a correction order
or a reduction of ceiling foreign currency position for a specified period
against an MBC, which does not comply with the reporting requirement or
makes a false report.

§38-12. Sanctions for Failure to Achieve Foreign Currency Liquidity Ratio
         <Added December 29, 2000>
(1) In the event an institution conducting foreign exchange business fails to
achieve and maintain the ratios prescribed under Articles 38-6 and 38-7
twice or less during the past one year period (and four times or less during
the past one year period with respect to the ratios provided under Article
38-6 paragraph (1) subparagraph 2), it shall submit an explanatory
statement and recovery plan to the Governor in accordance with the
stipulations of the Governor.
(2) In the event an institution conducting foreign exchange business fails to
achieve and maintain the ratios prescribed under Articles 38-6 and 38-7 at
least three times during the past one year period, ascended ratios under the
following subparagraphs shall be applied notwithstanding Articles 38-6 and
38-7.
   1.Ratio provided under Article 38-6 paragraph (1) subparagraph 1
      a. Failure to achieve and maintain three times during the past one year
         period : 85/100 or above
      b.Failure to achieve and maintain four times during the past one year
         period : 90/100 or above
   2.Ratio provided under Article 38-6 paragraph (1) subparagraph 2 item b
      a. Failure to achieve and maintain three times during the past one year
         period : 5/100 or below
      b.Failure to achieve and maintain four times during the past one year
         period : 0/100 or below
   3.Failure to achieve and maintain the ratio provided under Article 38-7
      paragraph (1) three times during the past one year period : Secure
      funds in foreign currency with redemption period of over one year for
      over 55/100 of its loans in foreign currency with redemption period of
      over one year.
(3) When an institution conducting foreign exchange business becomes
applicable under the following subparagraphs 1 through 3, it shall suspend
new borrowings in foreign currency with maturity of less than three months
(except the Call Money with maturity of less than 30 days), and when it
becomes applicable under subparagraph 4, it shall suspend new loans in
foreign currency with maturity of over one year, until it achieves the ratios
provided under the following subparagraphs.
   1.Failure to achieve and maintain the ratios provided under each item of
      paragraph (2) subparagraph 1 or Article 38-6 paragraph (1)
      subparagraph 1 at least five times during the past one year period :
      90/100 or over.
   2.Failure to achieve and maintain the ratios provided under Article 38-6
      paragraph (1) subparagraph 2 item a at least five times during the past
      one year period : 0/100 or above.
   3.Failure to achieve and maintain the ratios provided under each item of
      paragraph (2) subparagraph 2 or Article 38-6 paragraph (1)
      subparagraph 2 item b at least five times during the past one year
      period : 0/100 or below.
   4.Failure to achieve and maintain the ratios provided under paragraph (2)
       subparagraph 3 or Article 38-7 paragraph (1) at least four times during
       the past one year period : Secure funds in foreign currency with
       redemption period of over one year for over 55/100 of its loans in
       foreign currency with redemption period of over one year.
(4) Even where sanctions are applicable under paragraph (2) or (3), where
inextricable due to economic and financial circumstances domestic and
abroad, the Governor may recommend exemption, suspension or removal of
sanctions in effect to the FSC; provided that, for exemption, sanction subject
to exemption shall not be counted toward the number of violation.
(5) In the event an institution conducting foreign exchange business fails to
achieve and maintain the ratios provided under Articles 38-6 and 38-7 at
least twice during the past one year period, the Governor may take actions
necessary to the institutions such as shortening the length of reporting cycle
provided under Article 38-14.

§38-13. Status Report on Sanctions
When imposing sanctions against an MBC under Articles 38-6 and 38-7, the
Governor shall report the status of sanctions to the FSC within one month
after the end of every quarter.

                              Section 5.
                    Reporting on Foreign Exchange

§38-14. Reporting
An MBC shall report its current status of assets and liabilities in foreign
currency, its current status of financing and operation of funds in foreign
currency and other matters necessary for enforcement of this Chapter in
such manners as determined by the Governor.

                        CHAPTER VI.
            INTERMEDIARY <AMENDED JULY 26, 2000>

§38-15. Definitions <Added December 29, 2000>
The terms used hereinunder this Chapter shall be defined as follows:
   1.A "call transaction" means short-term money transaction between
      financial institutions with maturity of less than 30 days;
   2.A "simple intermediation" means when an intermediary helps the
      consummation of transaction(s) between money lender(s) and
      borrower(s) for a specified commission; and
   3.A "sales intermediation" means when an intermediary participates in
      the transaction(s) on its own account.

§38-16. Basic Principles of Transaction <Added December 29, 2000>
An intermediary shall in principle engage in simple intermediation(s). In case
of call transaction intermediation, however, an intermediary may engage in
sales intermediation(s) to the minimum extent necessary for the facilitation
of transactions.

§39. Operation Manual of an Intermediary <Added July 26, 2000>
(1) Pursuant to Article 3 paragraph (3) subparagraph 4 of the Decree, an
intermediary may include the specific details related to the matters
prescribed under the following subparagraphs as "any other matters of
relevance to the business operation".
   1.Principles in intermediation;
   2.Method of settlement;
   3.Method of providing materials to the transacting financial institutions;
       and
   4.Any other matters determined necessary by an intermediary for
       facilitating its intermediation operations and for the convenience of the
       transacting financial institutions.
(2) Article 6 shall be applicable to an intermediary, in which event "MBC"
shall be substituted by "intermediary".

§39-2. Institutions Participating in the Intermediation <Added August 6,
        1999>
(1) The institutions applicable under the following subparagraphs may
perform money transactions with other financial institutions through
intermediaries. The institutions under subparagraph 14, however, may not
borrow via call transactions stipulated under Article 38-15 paragraph (1).
   1.A financial institution, as under the Banking Act;
   2.A special banking institution, as under the corresponding enactments;
   3.An MBC and an intermediary, as under the Merchant Banking
      Corporation Act;
   4.A mutual savings bank and the Korea Federation of Savings Banks, as
      under the Mutual Savings Bank Act;
   5.Federation of Credit Unions, as under the Credit Union Act;
   6.New Communities Savings Companies Association, as under the New
      Communities Savings Company Act;
   7.A trust company, as under the Trust Business Act;
   8.A management company, as under the Securities Investment Trust
      Business Act;
   9.A securities company and a securities finance company, as under the
      Securities and Exchange Act;
   10.An insurance company, as under the Insurance Business Act;
   11.A credit specialized financial company, as under the Credit
       Specialized Financial Business Act;
   12.A venture capital company, as under the Act on Supporting
       Establishment of Small and Medium Size Enterprises;
   13. A futures trading company, as under the Futures Trading Act;
   14.Public Fund Management Fund, as under the Act on Public Fund
       Management Fund;
   15. [Deleted]
   16.Any other person(s) engaged in financial business or finance-related
      business, as determined by the Governor.

§39-3. Asset Management Soundness of an Intermediary <Added August 6,
        1999>
(1) For the purposes of maintaining the soundness of asset management, an
intermediary shall not conduct any acts applicable under any one of the
following subparagraphs.
   1.Borrowing money beyond the amount prescribed by the Governor; and
   2.Providing its assets as a collateral for other person(s).
(2) The Governor may determine specific procedures necessary for
maintaining soundness of intermediaries.

§39-4. Short-term Financial Market Operation Council <Added August 6,
        1999>
Intermediaries may establish a short-term financial market operation council
for discussing and deliberating on such matters concerning the development
and operation of the short-term financial market as, but not limited to,
intermediation operation methods and standards.


                    CHAPTER VII.
    SUPPLEMENTARY PROVISIONS <ADDED JULY 26, 2000>

§40. Assistance
(1) The Governor shall assist the FSC in its services under the following
subparagraph. <Amended July 26, 2000>
   1.Enforcement and implementation of the regulations or decisions of      the
      FSC; and
   2.Administration and disposition of matters delegated or directed by     the
      FSC.
(2) With respect to the matters of delegation pursuant to Article 17-2 of   the
Decree, the Governor shall submit a quarterly report to the FSC on          the
results thereof. <Added July 26, 2000>

§41. Specifics
(1) The Governor may determine the specifics necessary for the
enforcement of this Regulation.
(2) In the event the Governor determines such less significant matters or
issues as specific methods, procedures and formats necessary for the
enforcement of this Regulation in connection with any rules and regulations
he or she prescribes for conducting the duties, such determination(s) shall
be deemed as approved by the FSC pursuant to Article 39 paragraph (2) of
the Act on the Establishment of Financial Supervisory Organizations.

§42. Report
(1) The Governor shall report to the FSC on matters of relevance to the
enforcement of this Regulation.
(2) An MBC shall report any matters necessary for the enforcement of this
Regulation in compliance with the terms mandated by the Governor.

§43. Application of Other Guidelines
With respect to equipment leasing business and securities investment trust
business, an MBC shall comply with any provision(s) specifically applicable
to MBCs pursuant to any other relevant statutes or mandate(s) and
directive(s) of the Governor.

§44. Special Cases of Asset Management
(1) In the event a merchant bank intends to acquire beneficiary certificates of
a securities investment trust or stocks of a securities investment company
for the purposes of entrusting a trustee company established under the
Securities Investment Trust Act or an asset management company
established under the Securities Investment Company Act (hereinafter, "the
asset manager") with the asset management, each of the following
standards shall be complied with.
   1. That it shall be a securities investment trust company established
       under Article 33 paragraph (2) of the Securities Investment Trust Act,
       or a securities investment company established under Article 79
       paragraph (1) of the Securities Investment Company Act, whose
       beneficiary or shareholder shall each be a single merchant bank,
       securities investment trust, or a securities investment company
       (hereinafter, "the privately placed single fund");
   2. That the asset management guidelines specifying the purpose of asset
       management, operating strategy such as major investment targets,
       investment restrictions, performance assessment, and termination of
       contract, among others, shall be observed; and
   3. That the following items shall be included in the internal control
       standards under Article 5-3 of the Act and Article 6 of the Enforcement
       Decree;
       a.Matters pertaining to the appointment and dismissal of the asset
       manager;
       b.Matters pertaining to the asset manager's asset management
          performance and results;
       c. Matters pertaining to the organization for the purposes of monitoring
          the propriety of the asset management by the asset manager;
       d. Matters pertaining to developing a system for integrating and
          managing the assets invested by the merchant bank, i.e.,
          securities, and the privately placed single funds; and
       e. Matters needed for the sound asset management by other merchant
          banks.
(2) In the event the merchant bank holds "the privately placed single fund's
beneficiary certificates or stocks," the assets of the privately placed single
fund in question shall provide the basis for the application of the provisions
of Article 4-3, Article 17, and Article 25 paragraph (1) subparagraph (1).
The same shall apply with respect to the merchant bank reaching any
specific monetary trust agreement with a trust company established under
the Trust Business Act in accordance with Article 3 paragraph (2)
subparagraph (1) of the Enforcement Decree of the Trust Business Act.
(3) With respect to a securities investment trust or a securities investment
company other than the privately placed single fund, whose beneficiary or
shareholder is a single merchant bank (hereinafter, "the publicly placed
single fund"), the provisions of paragraph (1) subparagraphs 2 and 3 and
paragraph (2) shall be applied mutatis mutandis. <Added January 3, 2003>
                                  Addenda

§1. Effective Date
This Regulation shall be effective on April 1, 1998.

§2. Interim Measures
(1) In the event of excess of the debt ceiling provided under Article 15 while
this Regulation is in force, an MBC shall conform to the ceiling(s) therein
within three years from the date when this Regulation is applicable. Excess
of the ratio of liabilities against the equity capital of an MBC as of the
effective date of this Regulation shall not be permitted, however.
(2) The ratio prescribed in Article 25 paragraph (1) subparagraph 1 shall be
applied as 'over 4/100' until June 340, 1998, 'over 6/100' until June 30, 1999,
and 8/100 thereafter.
(3) The first clause of Article 19 paragraph (2) shall not apply to the
unsecured notes sold before the effective date of this Regulation.

§3. Interim Measures Concerning the Authority and Duties of the FSS
Until the establishment of the Financial Supervisory Service (FSS), the
'Governor' in this Regulation shall be viewed as the Chief Director of Credit
Management Fund, and the FSS as the Credit Management Fund. However,
the Governor from Articles 35 through Article 37 shall be viewed as the
Governor of the Bank Supervisory Service and the FSS as the Bank
Supervisory Service.

                                Addendum
                              (June 12, 1998)
This Regulation shall be effective on June 12, 1998.

                               Addendum
                             (October 9, 1998)
This Regulation shall be effective on October 9, 1998.

                               Addendum
                           (December 11, 1998)
This Regulation shall be effective on December 12, 1998.
                                Addenda
                             (March 26, 1999)

§1. Effective Date
This Regulation shall be effective on March 27, 1999.

§2. Interim Measures on Management Performance Evaluation
The evaluation of management performance prescribed under Article 29
shall be effective from January 1, 2000.

§3. Interim Measures on Application of the Equity Capital Ratio for Prompt
     Corrective Action
In application of the ratio of equity capital against the risk-weighted assets
prescribed under Article 30 paragraph (1) subparagraph 1 and Article 30-2
paragraph (1) subparagraph 1, before June 30. 1999, the ratio under Article
30 paragraph (1) subparagraph 1 shall be "below 6/100", and the ratio under
Article 30-2 paragraph (1) subparagraph 1 shall be "below 4/100".

§4. Interim Measures on Deferred Write-offs of Losses Related to Corporate
     Restructuring
(1) An MBC, whose ratio of equity capital against the risk-weighted assets is
2/100 or above, and which is capable of maintaining that ratio at 8/100 or
above (6/100 before the end of June 1999) only through the equal write-offs
of losses on a quarterly basis pursuant to the method prescribed under
subparagraph 1 below, shall submit to the Governor, within one month from
the end of the quarter in which the corresponding event(s) occurs, its
management rehabilitation plan which shall be reflective of the matters
applicable under each of the following subparagraphs.
   1.Details of equal write-offs on a quarterly basis through March 31. 2002,
       of corporate restructuring related losses, whose amount has been
       determined before June, 30. 1999 (corresponding to the losses
       incurred in connection with the loans extended to the enterprises
       applicable under Article 17-2 subparagraphs 1 through 5; hereinafter,
       "loss");
   2.Substance of the measures prescribed in each subparagraph of
       paragraph (2); and
   3.Any other issues or matters as recommended or requested by the
       Governor.
(2) In the event the Governor approves the management rehabilitation plan
submitted pursuant to paragraph (1), he or she shall take measure(s)
applicable under each of the following subparagraphs until such plan is fully
implemented. Article 30 paragraph (2), Article 30-2 paragraph (2) and Article
30-7, in this event, shall not apply.
   1.Prohibition of international business operations (excluding such
      business operations requiring further attention as, but not limited to,
      performance of obligations, including redemption of debts, arising from
      contracts entered into in connection with the international business
      operations to the extent the cause of the transaction(s) is terminated,
      or exercise of rights for the purposes of preserving the value of holding
      assets);
   2.Restriction on increasing assets; and
   3.Any other measures necessary such as restriction on expansion into
      new business area.

§5. Interim Measures on MBCs with Substandard Ratio of Equity Capital
(1) An MBC, whose ratio of equity capital against the risk-weighted assets
(hereinafter, "equity capital ratio"), in the event of lump-sum write-off(s) of
losses, is below 2/100, or whose equity capital ratio falls under 8/100 (6/100,
before the end of June, 1999), though 2/100 or above, after equal writing off
on a quarterly basis pursuant to the method provided under Article 4
paragraph (1) of this Addenda, shall be subjected to the measures under the
following subparagraphs.
   1.An MBC whose net asset value is below zero: immediate suspension of
      business operation;
   2.An MBC whose equity capital ratio is in between 0 and 2/100:
      management improvement request pursuant to Article 30-2 (including
      the measures provided under each subparagraph of Article 4
      paragraph (2) of this Addenda); and
   3.An MBC, whose equity capital ratio is 2/100 or above, or whose equity
      capital ratio falls under 8/100 (6/100, before the end of June, 1999)
      after equal write-off(s) on a quarterly basis, or whose management
      improvement plan(s) submitted pursuant to Article 4 paragraph (1) of
      this Addenda is not approved: the measures provided under Article 30
      paragraph (2) and each subparagraph of Article 4 paragraph (2) of this
      Addenda.
(2) After taking immediate suspension of business operation against an
MBC applicable under paragraph (1) subparagraph 1, the FSC shall have an
accounting firm evaluate the net assets value of the MBC within two months
from the date of the suspension.
(3) In the event an MBC subject to the evaluation of its net assets value
pursuant to paragraph (2) is adjudged as in default of payment, and whose
capital is not increased within thirty days thereafter, the FSC shall request
the Ministry of Finance and Economy to revoke the authorization for the
MBC in question.

§6. Interim Measures on Measures Taken by the Ministry of Finance and
     Economy
Any measures taken by the Ministry of Finance and Economy, the FSC, or
the Governor pursuant to the "Directives for Management Rehabilitation of
MBCs (March 21, 1998)" prescribed by the Ministry of Finance and
Economy, shall be deemed to have been taken by the FSC or the Governor
respectively, if any corresponding provision(s) thereto exists.


                               Addendum
                             (August 6, 1999)
This Regulation shall be effective on October 6, 1999.


                               Addendum
                          (September 10, 1999)
         This Regulation shall be effective on September 10, 1999.
                                Addenda
                           (December 24, 1999)

§1. Effective Date
This Regulation shall be effective on January 1, 2000. The management
performance evaluation prescribed in Article 29 paragraph (2), however,
shall be performed from the first business year that starts after the effective
date of this Regulation.

§2. Submission of Mid-Long Term Plan
An MBC shall establish mid-long term plan(s) for building and operating a
comprehensive risk management system, which shall be submitted to the
Governor by the end of December in 1999.


                                 Addenda
                               (June 9, 2000)

§1. Effective date
This Regulation shall be effective on June 30, 2000.

§2. Exception to Asset Classification of Companies Subject to the Corporate
     Work-Out Program [Deleted February 14, 2001]

                                 Addendum
                               (July 26, 2000)
This Regulation shall be effective on the date of promulgation.

                               Addendum
                             (October 6, 2000)
This Regulation shall be effective on the date of promulgation.

                                Addenda
                           (December 29, 2000)

§1. Effective Date
This Regulation shall be effective on January 1, 2001.
§2. Repeal of Provisions
The provisions under the following subparagraphs shall be repealed
simultaneously as this Regulation is effective.
   1.Regulation on Sales of Short Term Financial Products of Merchant
      Banking Corporations by Foreigner; and
   2.Provisions concerning MBCs in Regulation on the Supervision of
      Foreign Exchange Business.

§3. General Interim Measures
Any act(s) made under the Regulation on Sales of Short Term Financial
Products of Merchant Banking Corporations by Foreigners and the
Regulations on the Supervision of Foreign Exchange Business, shall be
viewed as in compliance with this Regulation.

§4. Revision of Other Regulations
Any references to the 'Regulation on the Supervision of Merchant Banking
Corporations' by any other regulations while this Regulation is effective, shall
be viewed as made with respect to the Regulation on the Supervision of
Merchant Banking Business.

                                Addendum
                            (February 14, 2001)
This Regulation shall be effective on the date of promulgation.

                                Addendum
                              (March 14, 2001)
This Regulation shall be effective on the date of promulgation.

                                 Addenda
                            (September 1, 2001)

§1.   Effective Date
This Regulation shall be effective on September 30, 2001.

§2. Interim Regulation
Article 38-12 shall not be applied to whomever in violation of the amended
provisions of Article 38-7 and its enforcement rules and regulations from the
date of the promulgation of this Regulation until December 31, 2001.

                               Addendum
                             (October 4, 2002)

§1. Effective Date
This Regulation shall be effective on the date of promulgation.

                                Addenda
                           (November 13, 2002)

§1. Effective Date
This Regulation shall be effective on the date of promulgation.

§2. Interim Measure
In the event an MBC becomes subject to the submission of a resolution plan
pursuant to the amended provisions of Article 30-8 by reason of causes prior
to the date of the promulgation of this Regulation, it shall submit the plan
within one month from the date of the promulgation of this Regulation.

                               Addendum
                           (December 19, 2001)
This Regulation shall be effective on January 1, 2002.

                                Addendum
                               (May 1, 2002)
This Regulation shall be effective on the date of promulgation.

                                 Addenda
                             (January 3, 2003)

§1. Enforcement Date
This Regulation shall be effective on the date of promulgation. The
provisions of "Article 25 paragraph (1) subparagraph 1" of Article 44
paragraph (2), however, shall be effective on April 1, 2003.
§2. Applicable Cases
With respect to the application of the amended provisions of Article 44 to the
privately or publicly placed single funds established prior to the enforcement
of this Regulation, Article 44 paragraph (1) subparagraph 2 shall apply with
respect to the acquisition of beneficiary certificates or stocks of the privately
or publicly placed single funds following the enforcement of this Regulation.

§3. Interim Measures for Special Cases on the Asset Management
The merchant bank in excess of the investment ceilings stipulated under the
amended provisions of Article 44 paragraph (2) upon the enforcement of this
Regulation shall ensure that the ceilings are observed within 3 months from
the enforcement.

                                 Addendum
                               (July 29, 2003)
This Regulation shall be effective on the date of promulgation.

				
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