(1)Range of Application
(2)Credit Risk Management
(3)Business Territory
(4)Domestic & Overseas Transaction Network
(1)Restriction in Approval Authority Limit
(2)Credit Line
(3)Loan Maturity
(4)Repayment Method
(5)Loan Pricing
(1)Credit Evaluation
(2)Receiving agreement documents etc.
(3)Loan Disbursement
(1)Principle in security interest
(2)Acquisition of Collateral
(3)Realization Value of Collateral
(4)Guarantor Standing
(5)Guarantee from parent company
(1)Post management
(2)Asset Quality/Allowance for Bad Debts
(3)Repayment priority order
(4)Selection & Management as Potentially Problematic Loan (PPL)

(1) Range of Application
Application to the loans handled in domestic/overseas branch and fund operation division (hereinafter, referred to as
“branch”) which would be under the jurisdiction of Overseas Loan Team of Credit Approval Division
(2) Risk Management
Minimize the risk followed by loan operation considering the credit rating of debtor, external elements including local industry, economy, financial environment, etc, examining the loan structure of branch, propriety of loan interest, etc.
(3) Business Territory
Loan for company debtor is restricted regarding the debtor located within sales territory prescribed separately by CCO and it excludes the following loan.
① Loan approved by CCO with exception
② Loan to company located within Korea
③ Loan approved by review sub-committee of higher committee
④ Investment loan sponsored by investment banking department & our bank local corporation
⑤ Loan transferred based on determination on transfer and undertaking of asset by headquarter
(4) Domestic & Overseas Transaction Network
○
Chief of branch shall focus on promoting contribution for entire bank through domestic and overseas network in loan handling
1. Attract the L/C open and purchase relevant to export/import with Korea to our bank
2. Provision of information to domestic branch to attract the transaction between local corporation of domestic company and the headquarter in Korea regarding the bank finance to our bank
(1)Restriction in Discretionary Limit
Reduction in discretionary limit of debtor with credit rating of under 5(0)
Overseas Company
Debtor with Credit Rating of under 5(0)
(Including Public & Other Debtor)
Handling of Mortgage
(Purchase, Refinance)
(2)Loan Limit
Range of Loan
Handling
Loan for working capital of Company
Loan for local
Corporation, Etc.
Finance for Import
Cost among
Export/Import
Financing
Reduction of discretionary limit
(Total credit line) of company loan to
½ by chief of branch
○
Processed within range when credit limit or total exposure limit is prescribed in detailed regulation of risk management
○
Loan limit is processed within range of consumed fund
○
Guarantee processed within range of consumed amount based on usage
○ Principle to process within range of 1 cycle consumed fund
○ Application of fund balance plan in case estimate of operating fund consumption limit calculation table is unreasonable
○
Operation within range of appropriate amount considering the local sales capacity including sales performance and prospects at site, sales loss and gain, average turnover rate, stock possession, etc.
○ Operation within proper range considering the customs, fare, insurance cost, etc actually consumed in import.
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(3) Loan Period
Setting Loan Period within
30 years within
5 years within
10 years
Operating and
Household Fund
Facility
Fund
Real-Estate Purchase Fund for Residence and Commerce
* Exception applies with approval of Review Sub-Committee of higher committee.
Extension in Loan
Period
For Import
Settlement Fund
○
Extension in unity of within 1 year
○
Cannot exceed Item 1 including the original stipulation period
○ Loan stipulation period can be extended within rage of 6 month for operation and 1 year for movables
○ Period of loan for Usance L/C & D/A payment → Operation within 1 years including the import by deferred payment period
(4)Repayment Method
Loan with Loan Period of over 1 year
○
Repayment with regular installment of over 1 time a year
○
Constant amortization of monthly principal and interest for real-estate purchase fund loan for residence and commerce.
Installment Repayment
○ Application of grace period and grace period is within 1/3 of loan period
○ No grace period for household fund loan and real-estate purchase fund loan
(5) Loan Pricing
① Interest Rate (Including the applying standard interest)/ Guarantee commission rate
○ Determination by person with discretionary powers in loan considering loan period, risk, proper margin
②
Interest rate is settled with the adjustable and variable rate interlocking to standard interest including the market rate, etc.
○ In case of no risk for adjustable and variable rate, fixed rate is available with approval of Review Sub-
Committee or higher committee
③ Rate application standard and fee requesting standard by chief of branch
○ Consideration of risk based on change in procurement rate
○
Including the calculation standard of standard rate and mark-up for each branch and application standard of default interest
④
Person with approval right for interest reduction
○ Discretionary loan by general manager of branch: General Manager of branch
○ Loan approved by headquarter: Head of International Group
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(1) Credit Evaluation
1) Requested Document for Loan Application
1.Business plan & sales performance
2.Calculation Basis for Consumption Fund
3. Current Status of Bank Transaction Performance & Contribution
4. Current Status of Liabilities
5. Credit Report
6. Recently Settled Financial Statement & Estimated Financial Statement in future
7. Appraisal of Collateral
8. Request for Loan
9. Other Documents
2) Analysis & Opinion in Credit Evaluation
1. Propriety in use of fund & appropriateness in supporting scale
2. Appropriateness in repayment capability and loan period by cash flow, etc
3. Method for Preservation of Bond (Credit and Asset Report of Debtor, Guarantor, Etc.)
4. Current status and prospects of business
5. Current status and prospects of industry
6. Financial structure & sales performance
7. Bank transaction status & contribution to our bank
8. Appropriateness of pricing
9. Regulation target for various credit line
(2)Request for Stipulation, Etc
1) Requested document in advance for loan disbursement
○ Verification documents for qualification of debtor and guarantor,
○ Loan Stipulation
○ Promissory Note,
○ Documents on preservation of bond based on relevant law including collateral guarantee contract, etc.
2) Contents of Loan Stipulation
○ Securing rights of our bank within range allowed by local law
3) Loan handling currency and currency relevant to preservation of bond including collateral, guaranty, etc
○
Same Currency Principle
Contents of Loan Stipulation
-Call option, right to change interest rate, power of sale for loan
- Obligation for data submission to sales and financial status of debtor
- Application standard including interest or fee, etc
- Cause for profit loss within period including violation of stipulation, cross default, etc.
- Observance of financial ratio of debtor or restriction on asset management
- Obligation for collateral provision of debtor including collateral assignment of sales asset, etc.
-Liabilities without in-advance written agreement of bank or stipulation for banning collateral provision of asset, etc.
- Liabilities for early repayment fee of debtor in case of early repayment with request of debtor
*Item 5 or Item 8 is included when it is determined to be necessary by chief of branch
(3) Loan disbursement
1) Payment of Loan
Cautions in Loan Disbursement
○ Principle to deposit to savings account in name of debtor
○ Loan stipulation where it can be directly paid to debtor in check or cash with receipt if necessary,
2) Loan Document
○
Filing with classification into loan application document for each debtor, credit report, document on preservation of bond, documents on follow-up services
○
Important documents including document on preservation of bond, etc are listed in the ledger and then stored in vault
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(1)Principle for Security Interest
Measures for
Preservation of Bond
○
Seek proper measure for preservation of bond as prescribed in local law on local sales asset including the sales bond, stock asset, etc of debtor.
Measures for
Collateral Supplement
○ Measures for collateral supplement including the request for additional collateral, etc with increase of credit loan Including the decrease in value of collateral, etc
○ Reexamination on sales circumstances, operation of loan in reduction if necessary
Subordination
Agreement
○ Bond of headquarter is always subordination agreement than bond of our bank in
Liquidating the credit handling of local finance for local corporation.
(2)Cautions in acquiring collateral
1) Confirmation in acquiring collateral
Field Appraisal
Of Collateral
○
Confirmation on liquidity
○
Confirmation on risk followed by environmental problem
○ Confirmation on restriction in disposition
2) Principle for acquiring collateral
○
It is principle to acquire collateral within country of loan handling branch
○
Acquisition of collateral within Korea in case it is recognized based on foreign exchange transaction in Korea
○ Approval of Review Sub-Committee or higher in case of acquiring collateral in 3 rd country
3) Real-Estate acquirable as collateral
○
Prescribed in special regulations of loan or loan guidelines for each region (each branch)
4) Stock, Bond
○
Stipulation for bank to exercise the right of sales for securities
5) Transfer and assignment of loan in collateral department
○ Examination on allowance by agreement of collateral provider and relevant law
6) Management with classification into use for residence and commerce
○
Acquirable collateral type : Prescribed in special regulations of loan or loan guidelines for each region (each branch).
7) In acquiring collateral
○ Management by registering information relevant for each type and collateral expiration
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(3)Realization Value of Collateral
Type of Collateral
1)Deposits received by local bank (including the deposits from local corporation bank) and guarantee deposits
2)Marketable securities issued or guaranteed by government or bank including the fixed claims within 1 year of completion by central government or central bank of OECD member country
3) Local Real-Estate
4) Financial institution issuing guarantee or standby L/C
5) SBA guarantee for SBA Loan branch in US
Realization Value of Collateral
100% of deposits and guarantee deposits
90% of bond or market price
Prescribed in special regulation or loan guidelines for each region (each branch)
100% of Guarantee
100% of Guarantee
6) Savings received by our bank in Korea
Foreign Currency Deposit : 100% of deposits
Won-denominated deposit: Principal received or 80% of discount sales (Including money trust, CD, cover bill)
50% of Appraisal Value – Senior bond 7) Real-Estate in Korea
8) With approval of Review Sub-Committee of higher including the local surety insurance securities, other bond with collateral value, securities, real-estate, etc
9)When settlement of mortgage does not reach realization value of collateral
10)In case senior bond exceeds the 50% of appraisal value
Realization value of collateral
Settlement of mortgage
No recognition of realization value of collateral
(4)Guanrator Standing
1) Principle for Guarantor Standing
○
Principle for guarantor standing of over 1 person with secure asset and credit in handling of loan
2) Elimination of guarantor standing
Elimination of guarantor standing
1) Debtor with credit rating of 1 or 2
2) Handling of loan within range of realization value of collateral.
(It is principle for standing of president or actual controlling shareholder in case of collateral with risk for lowering of future value)
3) In case of discount in eligible paper reactivated by local central bank
4) Company with credit rating of over 5 opens L/C allotting the master l/c nego money, in payment to original benefactor.
5) Loan to local staff of our bank within range of retirement benefits available of preservation of bond
6) In case of recognition by person with discretionary powers (put recognition basis and opinion on approval documents)
3) Guarantee Limit
○ Over 120% of credit limit.
○ Over 100% of credit limit is available when it is prescribed in guaranty contract in that range of obligation guaranteed includes the guaranty limit together with all liabilities including interest, damages, etc.
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(5)Guarantee by parent company
1) In case of handling local finance of local corporation with credit
○
Handling after receiving guarantee by parent company (including the guaranty by affiliated company) as prescribed in foreign currency transaction act, etc
2) Handling of headquarter guaranteed loan
Request for parent Co. issued guarantee and its management
Loan after confirmation on outcome of guarantee by parent company
GM of Overseas Br.
GM of Br. in Korea
Request for parent Co. issued guarantee and its management and sending copy of document relevant to outcome notification
Local corporation
(1)Follow-Up Services
1) Obligations of chief of branch for follow-up services
○
Regular examination on collateral (including stock asset and sales bond)
○
Regular or special inspection on management status of company
○
Request for early repayment or examination on operation of loan in reduction
○
Examination on use other than purpose of loan and seek immediate measures for collection with discovery of use, etc
○
Close examination on cause of delay and seek measures for collection, etc
2) Prevention on generation of overdue loan
○
Prevention on overdue loan by taking measures including the collection or extension, etc with in-advance notification of date of repayment, amount of repayment, etc.
3) Generation of overdue loan
○
Effort for early normalization and collection, necessary measures for preservation of bond
(2)Asset quality/allowance for bad debts
1) Classification of loan quality
○ Execution based on appropriate facility rating according to the credit rating guidelines on overseas company debtor
○
Classification based on overdue period on credit rating exempted debtor and individual debtor
Classification of Loan Quality
Normal
Precautionary
Substandard
Doubtful
Estimated
Loss
Section
Credit Rating
Overdue Period
Credit Rating
Overdue Period
Credit Rating
Overdue Period
Credit Rating
Overdue Period
Credit Rating
Overdue Period
Standard
1~6
Less than 1 month
7
Over 1 month less than 3 month
8
Over 3 month
9
Over 3 month less than 12 month
10
Over 12 month
Allowance for
Bad Debts
0.7%
(Household
1.0%)
7%
(10%)
20%
(20%)
50%
(55%)
100%
(100%)
Notes
Collection Estimate
Exceeding Collection
Estimate
Exceeding Collection
Estimate
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(3) Repayment priority order
1) Normal loan
Suspense
Payment
Overdue interest
Interest Principal
2) Loan subject to liquidation
Suspense
Payment
Principal
Accrued
Interest
* In case of separate local accounting standard, it can be processed with approval of chief of loan review department
(4)Selection & management of PPL
1) Selection procedure for PPL
○ Head of Credit Approval Division shall take measures for proper follow-up services early among following loans in each term
Loan
1) Loan classified lower than cautious
2) Loan to debtor demand more than basic cautions including excessive loan, etc.
3) Handling of loan violating the regulation relevant to loan
4) Loan to debtor presenting the indication for default including the aggravation in financial structure, lack of sales, aggravation in circumstance of industry, etc.
5) Loan over USD 5,000,000 based on total loan to same debtor
6) Overdue loan, loan with no-revision of interest, Loan to workout company, etc
○ Notification to chief of branch after selecting PPL in case minimization of risk for damage is necessary
○ In case of increase in risk including bankruptcy of headquarter, etc, notify to chief of branch after selection of PPL immediately after generation of cause
○ Exclusion of loan to debtor with credit rating of higher than 4, loan for legal procedures and settlement, loan to debtor under USD 50 for total loan limit based on limit standard.
2) Head of Credit Approval Division can request the provision of review data for selection of PPL to general manager of branch
3) Management of PPL
○
General Manager of Branch shall examine loan repayment capability including change in sales and financial status, etc periodically
○
Establishment and practice of proper measures among response measures.
Response Measures
1) Control in new loan and reduction in previous loan
2) Examination on human and physical collateral and enforcement in measures for preservation of bond
3) Encouragement of improvement in management including the voluntary effort
4) Loan normalization through debt restructuring
5) Collection of loan in case there is no prospects for improvement in management
6) Management on local resource collection including the A/R, inventory, investment asset, etc of debtor company
○ Submission of loan watch list on response measures and performance to loan review officer for each region for each term based on loan watch list
○ Loan application from PPL, indicate ‘PPL’ in request for loan approval
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