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FINANCIAL HOLDING COMPANIES ACT

FINANCIAL HOLDING COMPANIES ACT

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FINANCIAL HOLDING COMPANIES ACT

Act No. 6274, Oct. 23, 2000

Amended by Act No. 6692, Apr. 27, 2002

Act No. 7338, Jan. 17, 2005

Act No. 7428, Mar. 31, 2005

Act No. 7529, May 31, 2005

Act No. 8571, Aug. 3, 2007

Act No. 8863, Feb. 29, 2008

Act No. 8906, Mar. 14, 2008

Act No. 9086, Mar. 28, 2008

CHAPTER GENERAL PROVISIONS

Article 1 (Purpose)

The purpose of this Act is to facilitate the establishment of financial holding companies and to soundly manage both financial holding compa- nies and their subsidiaries with the aim of bolstering the financial in- dustry's competitiveness, as well as contributing to the sound develop- ment of the national economy.

Article 2 (Definitions)

(1) The definitions of terms used in this Act shall be as follows:

1. The term "financial holding company" means a company whose primary business is to control (hereinafter referred to as "control") companies engaged in financial business (hereinafter referred to as "financial in- stitutions") or other companies related closely to the financial business operations through the ownership of their stocks (including equity; hereinafter the same shall apply), according to the standards pre- scribed by Presidential Decree, and which controls one or more financial institutions, and for which an authorization under Article 3 has been granted;

2. The term "subsidiary" means a company (including foreign corpo- rations) controlled by a financial holding company;

3. The term "second-tier subsidiary" means a company (including foreign FINANCIAL HOLDING COMPANIES ACT

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corporations) controlled by a subsidiary;

4. The terms "complete holding company" and "complete subsidiary" mean, in the event that a financial holding company owns the total number of stocks issued by a subsidiary, such financial holding company and such subsidiary, respectively;

5. The term "bank holding company" means a financial holding company falling under any of the following items, and which controls one or more financial institutions:

(a) A financial institution (hereinafter referred to as a "bank") estab- lished under the Banking Act;

(b) A long-term credit bank under the Long-Term Credit Bank Act; (c) A financial institution, prescribed by Presidential Decree, which runs a banking business under Article 2 (1) 1 of the Banking Act; and

(d) A financial holding company that controls financial institutions re- ferred to in items (a) through (c);

6. The term "local bank holding company" means a bank holding company that does not control any bank or any bank holding company falling under the following items:

(a) A bank whose business area covers the whole nation; and (b) A bank holding company controlling the banks of item (a);

7. The term "same person" means a particular person himself and any other person in a special relationship therewith, as prescribed by Presidential Decree, with the former (hereinafter referred to as a "specially related person");

8. The term "non-financial contributor" means an entity falling under any of the following items:

(a) The same person concerned, in cases where the sum of total capital amount (referring to the amount obtained by subtracting the total amount of liabilities from the total amount of assets in the balance sheet; hereinafter the same shall apply) of the same person's non- financial companies (referring to companies in the operation of business other than the financial business prescribed by Presi- dential Decree; hereinafter the same shall apply) is not less than 25/100 of the sum of total capital amount of companies of the same person concerned;

FINANCIAL HOLDING COMPANIES ACT

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(b) The same person concerned, in cases where the sum of total capital amount of the same person's non-financial companies is not less than two trillion won and not less than the amount prescribed by Presidential Decree; and

(c) The investment company concerned, in cases where a person falling under item (a) or (b) owns (referring to cases where the same person holds the voting rights by means of owning stocks under his/her name or another's name, or by means of contract, etc.; herein- after the same shall apply) stocks of an investment company under the Indirect Investment Asset Management Business Act (herein- after referred to as an "investment company") more than 4/100 of total outstanding stocks;

9. The term "large stockholder" means a stockholder falling under any of the following items:

(a) The largest stockholder: The person himself, where he/she and any person specially related to him/her collectively own the largest number of outstanding voting stocks of a financial holding company, no matter whose name the accounts stand under; and (b) Major stockholder: A person who owns 10/100 or more of the total outstanding voting stocks of a financial holding company, and a stockholder who exercises de facto influence on major affairs of management of a financial holding company, its subsidiaries and second-tier subsidiaries, by means of appointing, dismissing or such of executives as prescribed by Presidential Decree; and

10. The term "major investor" means those falling under any of the following items:

(a) Each person concerned, where the same persons, including one stockholder of a bank holding company, own more than 10/100 of the total outstanding voting stocks (15/100, in cases of local bank holding companies); and

(b) Each person concerned, where the same persons, including one stockholder of a bank holding company, own more than 4/100 of the total outstanding voting stocks (excluding non-voting stocks pursuant to Article 8-2 (2)) of a bank holding company (excluding local bank holding companies), and the same person concerned is the largest stockholder, or each stockholder concerned who ex- FINANCIAL HOLDING COMPANIES ACT

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ercises de facto influence on major affairs of management of a financial holding company, its subsidiaries and second-tier sub- sidiaries, by means of appointing, dismissing or such of executives as prescribed by Presidential Decree.

(2) The scope of financial business, the scope of companies related closely to operations of the financial business and the standards for the primary business referred to in paragraph (1) 1 shall be determined by Presidential Decree.

CHAPTER INCORPORATIONS, ETC. OF

FINANCIAL HOLDING

COMPANIES

Article 3 (Authorization)

(1) Any person who intends to run a financial holding company and owns more financial assets than those determined by Presidential Decree, shall obtain authorization thereof from the Financial Services Commission. (2) Any person who intends to obtain the authorization referred to in paragraph (1) shall file with the Financial Services Commission an appli- cation therefor under the conditions as prescribed by Presidential Decree.

(3) The Financial Services Commission may attach conditions to the au- thorization referred to in paragraph (1).

(4) Any financial holding company shall, where it is granted the authoriza- tion under paragraph (1), be deemed to have filed a report in accordance with Article 8 of the Monopoly Regulation and Fair Trade Act. Article 4 (Standards for Authorization)

(1) Any person who intends to obtain the authorization under Article 3 shall meet each standard in the following subparagraphs:

1. The business plan is required to be appropriate and sound for a stock corporation;

2. The business plan of a company that will become a subsidiary or a second-tier subsidiary (in cases falling under the proviso to Article FINANCIAL HOLDING COMPANIES ACT

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19 (2), a company controlled by a second-tier subsidiary shall be in- cluded; hereinafter referred to as "subsidiaries, etc.") is required to be appropriate and sound;

3. Large stockholders (including any stockholder who is a person specially related to the largest stockholder, and in cases where the largest stock- holder is a corporation, a stockholder prescribed by Presidential De- cree who exercises de facto influence on major affairs of management of the corporation; hereafter the same shall apply in Article 7-2) are required to be able to make adequate investments, financially sound and socially credible;

4. The financial standing and business management of a company that will become a financial holding company and its subsidiaries, etc. are required to be sound; and

5. Where a holding company becomes a complete holding company through an all-inclusive stock swap pursuant to Article 360-2 of the Com- mercial Act (hereinafter referred to as "stock swap") or an all-inclusive stock transfer pursuant to Article 360-15 of the same Act (hereinafter referred to as "stock transfer"), the swap ratio of stocks is required to be appropriate.

(2) Detailed standards for granting authorization pursuant to para- graph(1) shall be prescribed by Presidential Decree.

Article 5 (Consultations with Fair Trade Commission) In granting authorization in accordance with Article 3, the Financial Services Commission shall consult in advance with the Fair Trade Com- mission about matters falling under each of the following subparagraphs:

1. Matters relating to limiting conduct performed by any holding company under Article 8-2 (2) of the Monopoly Regulation and Fair Trade Act and matters relating to limiting the incorporation of holding companies under Article 8-3 of the same Act; and

2. Matters relating to whether the related market is actually limiting competition.

Article 5-2 (Obligations to Obtain Authorization) (1) Companies which fall under the requirements of bank holding compa- nies of Article 2 (1) 1 (excluding the requirements for authorization under FINANCIAL HOLDING COMPANIES ACT

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Article 3; hereinafter referred to as the "requirements for financial holding companies") due to unavoidable circumstances prescribed by Presidential Decree, such as increase in stock price of a subsidiary (excluding companies which own total assets of less than the amount set forth in Article 3 (1); hereafter referred to as "financial holding companies subject to author- ization" in this Article), shall report such fact to the Financial Services Commission within the period determined by Presidential Decree from the day of the settlement of accounts of the business year.

(2) Financial holding companies subject to authorization shall obtain authorization under Article 3, or shall cease to be subject to the require- ments for financial holding companies from the day of the settlement of accounts of the business year until the period determined by Presidential Decree: Provided, That the period may be extended by up to one year, with approval of the Financial Services Commission, when unavoidable circumstances exist. (3) Necessary matters for procedures and methods of reporting under paragraph (1) shall be determined and notified by the Financial Services Commission. [This Article Newly Inserted by Act No. 8571, Aug. 3, 2007] Article 5-3 (Prohibition from Using Trade Names)

No company which is not a financial holding company shall use words indicating a financial holding company for its trade name or title. [This Article Newly Inserted by Act No. 8571, Aug. 3, 2007] Article 6 (Publication of Authorization, etc.)

The Financial Services Commission shall, when it grants authorization under Article 3 or revokes authorization under Article 57 (2), publish without delay the details thereof on the Official Gazette, and make such details known to the public, making use of computer communications net- work, etc. Article 6-2 (Reporting Modification of Capital or Articles of Association) (1) Where a financial holding company intends to decrease its capital or amend its articles of association, it shall report to the Financial Services Commission in advance: Provided, That where the company modifies the miscellaneous matters of its articles of association, which are determined by the Financial Services Commission, it shall report such fact to the FINANCIAL HOLDING COMPANIES ACT

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Financial Services Commission within 7 days from the day of modification.

(2) Where the contents of report under the main sentence of paragraph (1) violate related Acts and subordinate statutes or may damage healthy management of the financial holding company, the Financial Services Commission shall recommend amendments or supplementation to the fi- nancial holding company. [This Article Newly Inserted by Act No. 8571, Aug. 3, 2007] CHAPTER RESTRICTION AGAINST

OWNERSHIP, ETC. OF

FINANCIAL HOLDING

COMPANIES

Article 7 (Restriction against Controling Relations between Financial Institutions and Financial Holding Companies)

(1) No financial holding company shall be in a controling relation (here- after referred to as "controling relations" in this Article), prescribed by Presidential Decree, with any financial institution (including any financial institution incorporated in accordance with the foreign Acts and subordinate statutes): Provided, That the same shall not apply to cases falling under any of the following subparagraphs and meeting the requirements de- termined by Presidential Decree:

1. Where a financial holding company has controling relations with another financial holding company;

2. Where a financial holding company has controling relations with an investment company, a private equity fund company or a company with investment purpose under the Indirect Investment Asset Management Business Act; and

3. A foreign financial institution (referring to one founded pursuant to foreign acts and subordinate statutes and engaged in financial busi- ness) determined by Presidential Decree and authorized by the Financial Services Commission as having controling relations with a financial holding company, in light of the capacity, scale and soundness of its business administration.

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(2) Notwithstanding the main sentence of paragraph (1), where a financial institution gained controling relations with a financial holding company due to unavoidable circumstances prescribed by Presidential Decree, such as exercise of security rights, it shall withdraw from controling relations with the financial holding company within the period determined by Presidential Decree: Provided, That if unavoidable circumstances exist, such period may be extended with approval of the Financial Services Commission by up to one year.

[This Article Wholly Amended by Act No. 6692, Apr. 27, 2002] Article 7-2 (Approval on Change of Large Stockholders) (1) A person who intends to be a large stockholder by acquiring stocks of a financial holding company (excluding a bank holding company) shall satisfy the standards determined by Presidential Decree for healthy man- agement, from among the standards for large stockholders under Article 4 (1) 3, and then obtain advance approval of the Financial Services Commission. (2) The Financial Services Commission may order to dispose of stocks acquired without approval pursuant to paragraph (1) within six months.

(3) No person who has acquired stocks without approval pursuant to para- graph (1) shall exercise his/her voting rights on such stocks acquired without approval.

(4) Necessary matters for the requirements of approval and order of dis- position pursuant to paragraphs (1) and (2) shall be prescribed by Presidential Decree.

[This Article Newly Inserted by Act No. 8571, Aug. 3, 2007] Article 8 (Restriction against Ownership of Stocks of Bank Holding Company)

(1) The same person shall not hold stocks of any bank holding company in excess of 10/100 of the total number of voting stocks issued by such bank holding company: Provided, That the same shall not apply to cases falling under any of the following subparagraphs, paragraph (3) of this Article, and Article 8-2 (3):

1. Where the Government or the Korea Deposit Insurance Corporation established in accordance with the Depositor Protection Act holds stocks issued by any bank holding company;

FINANCIAL HOLDING COMPANIES ACT

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2. Where a financial holding company holds stocks of a bank holding company under its control; and

3. Where the same person holds less than 15/100 of the total number of the voting stocks of a local bank holding company. (2) When the same person (excluding those prescribed by Presidential Decree) falls under any of the following subparagraphs, he/she shall report to the Financial Services Commission in the manner prescribed by Presidential Decree:

1. When he/she holds in excess of 4/100 of the total number of outstanding stocks with voting rights in a bank holding company (excluding a local bank holding company; hereafter the same shall apply in this para- graph);

2. When the same person who falls under subparagraph 1 becomes the largest stockholder of the bank holding company concerned; and

3. When the proportion of stock holdings of the same person who falls under subparagraph 1 changes above 1/100 of the total outstanding stocks with voting rights in the bank holding company concerned. (3) Notwithstanding the main sentence in the part other than any sub- paragraphs of paragraph (1), whenever the same person exceeds the re- spective limit classified in the following subparagraphs, he/she may hold the stocks of a bank holding company with the relevant approval of the Financial Services Commission: Provided, That the Financial Services Commission may approve, only when it regards it necessary in consid- eration of the possibility of contribution to the efficiency and soundness of the banking business, stock distribution among the stockholders of the bank holding company concerned, etc., by designating other holding limits besides the limits stipulated in the following subparagraphs, and in cases where the same person intends to hold in excess of the approved limit, he/she shall further obtain a separate approval from the Financial Services Commission:

1. Limit stipulated in the main sentence in the part other than any sub- paragraphs of paragraph (1) (in cases of a local bank holding com- pany, the limit stipulated in paragraph (1) 3);

2. 25/100 of the total number of outstanding stocks with voting rights in the bank holding company concerned; and

3. 33/100 of the total number of outstanding stocks with voting rights FINANCIAL HOLDING COMPANIES ACT

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in the bank holding company concerned.

(4) In cases where the Financial Services Commission does not grant approval pursuant to the provisions of paragraph (3), it shall provide clear valid grounds and inform the applicant of it within the time frame pre- scribed by Presidential Decree. (5) In applying the provisions of paragraph (3), the qualifications of the persons eligible to hold the stocks of a bank holding company, requirements and procedures of approval regarding the holding of stocks, and other necessary matters shall be prescribed by Presidential Decree in light of the risk that it will impair the soundness of the bank holding company concerned, the appropriateness of the scale of asset and the financial status, the level of credit extended by the bank holding company concerned, and the possibility to contribute to the efficiency and soundness of the financial industry, etc.

(6) In cases where an investment company holds stocks of a bank holding company with approval pursuant to paragraph (3), Article 88 (1) 2 of the Indirect Investment Asset Management Business Act shall not apply to the investment company concerned and the asset management company which is a corporate director of the investment company.

[This Article Wholly Amended by Act No. 6692, Apr. 27, 2002] Article 8-2 (Restriction against Ownership of Stocks, etc. of Non- Financial Contributor)

(1) Notwithstanding Article 8 (1), a non-financial contributor (including those excluded from the enterprise group, etc. subject to limitations on mutual investment under Article 14-2 of the Monopoly Regulation and Fair Trade Act, and consequently ceasing to constitute a non-financial contributor, for whom the period of time prescribed by Presidential Decree from the date of such exclusion has not yet elapsed; hereafter the same shall apply in paragraph (2)) shall not possess in excess of 4/100 (15/100, in cases of a local bank holding company) of the total outstanding stocks with voting rights in a bank holding company.

(2) Notwithstanding paragraph (1), in cases where a non-financial con- tributor has been approved by the Financial Services Commission by sat- isfying the requirements of financial soundness, etc. prescribed by Presi- dential Decree on condition that it shall not exercise the voting rights of the stocks in a bank holding company that it intends to hold in excess FINANCIAL HOLDING COMPANIES ACT

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of the limit of paragraph (1) (excluding cases of a local bank holding com- pany), it may hold stocks up to the limit stipulated in the main sentence in the part other than any subparagraphs of Article 8 (1).

(3) Notwithstanding paragraphs (1) and (2), Article 8 (1) and (3) shall apply to the non-financial contributors who have filed with the Financial Services Commission a plan of changeover (hereinafter referred to as the "changeover plan") within two years to cease as being a non-financial con- tributor and then has been granted approval thereof from the Financial Services Commission. (4) The approval requirements for the changeover plan under para- graph (3) and other necessary matters regarding the deliberation for ap- proval shall be prescribed by Presidential Decree. [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] Article 8-3 (Appraisal, Inspections, etc. of Changeover Plans) (1) A non-financial contributor, who intends to apply for approval in accordance with Article 8-2 (3), shall file a changeover plan with the Financial Services Commission, and the Financial Services Commission may, if deemed necessary, have an expert organization execute the ap- praisal on such plan under the conditions stipulated by the Financial Services Commission. (2) The Financial Services Commission shall, under the provisions of Presidential Decree, periodically inspect the status of compliance with the changeover plan by the non-financial contributor (hereinafter referred to as the "subject of changeover"), who holds stocks of a bank holding company in excess of the limit stipulated in Article 8-2 (1) after the changeover plan has been approved in accordance with paragraph (3) of the same Article, and publicly announce the result thereof by means of computer communications networks, etc.

(3) In cases where a subject of changeover is not acknowledged to be executing the changeover plan as the result of an inspection pursuant to the provisions of paragraph (2), the Financial Services Commission may set a time frame of up to six months and order him/her to execute it.

(4) A subject of changeover who falls under any of the following subpara- graphs shall not be eligible to exercise the voting rights of the stocks in FINANCIAL HOLDING COMPANIES ACT

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a bank holding company held in excess of the limit stipulated in Article 8-2 (1):

1. A subject of changeover who has been ordered by the Financial Services Commission to execute pursuant to the provisions of paragraph (3); and

2. A subject of changeover who has been ascertained to have been involved in any illegal dealing with a bank holding company, etc. as the result of an inspection by the Governor of the Financial Supervisory Service pursuant to Article 51-2 (1) 2.

(5) In cases where a subject of changeover falls under any of the following subparagraphs, the Financial Services Commission may set a time frame of up to six months and order him/her to dispose of any surplus stocks of a bank holding company held in excess of the limit stipulated in Article 8-2 (1):

1. Where he/she fails to comply with an execution order pursuant to the provisions of paragraph (3); and

2. Where he/she falls under paragraph (4) 2. [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] Article 9 Deleted. Article 10 (Restriction on Voting Rights on Stocks Held in Excess of Limit) (1) Any person who holds stocks issued by a bank holding company in excess of the stock-holding limit described in Article 8 (1) and (3) or 8- 2 (1) and (2) shall be prohibited from exercising voting rights in any stocks held in excess of the stock-holding limit and cause without delay his/her stockholdings to comply with the stock-holding limit.

(2) With respect to any person who fails to observe the provisions of para- graph (1), the Financial Services Commission may order him/her to dis- pose of any stocks held in excess of the stock-holding limit within a fixed period of not more than six months. Article 10-2 (Deliberation on Eligibility, etc. of Stockholders Exceeding Holding Limit)

(1) The Financial Services Commission shall, in accordance with Presi- dential Decree, deliberate whether those holding stocks of a bank holding company pursuant to the provisions of Articles 8 (3) and 8-2 (3) (hereafter referred to as "stockholders' holdings in excess of the holding limit" in FINANCIAL HOLDING COMPANIES ACT

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this Article) continue to satisfy the qualifications and requirements for approval under Article 8 (5) (hereafter referred to as the "requirements of excess holdings" in this Article) even after they hold the stocks concerned. (2) When necessary for the deliberation pursuant to the provisions of paragraph (1), the Financial Services Commission may ask a bank holding company or stockholders holding stocks in excess of the holding limit to provide necessary data or information. (3) When the Financial Services Commission recognizes any stockholder holding stocks in excess of the holding limit as failing to satisfy the require- ments of excess holdings as the result of deliberation pursuant to the provisions of paragraph (1), it may set a time frame of up to six months and order them to satisfy the requirements of excess holdings.

(4) Any stockholders who have been ordered pursuant to the provisions of paragraph (3) shall not be eligible to exercise the voting rights of the stocks in a bank holding company held in excess of the limit stipulated in Article 8 (3) 1 (in cases where the stockholders' holdings in excess of the holding limit are non-financial contributors, referring to the limit stipulated in Article 8-2 (1); hereafter the same shall apply in para- graph (5)) till they fulfill such order.

(5) When a stockholder holding in excess of the holding limit fails to fulfill the order pursuant to the provisions of paragraph (3), the Financial Services Commission may set a time frame of up to six months and order them to dispose of the surplus stocks of a bank holding company held in excess of the limit stipulated in Article 8 (3) 1.

[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] Articles 11 and 12 Deleted. Article 13 (Special Cases for Bank Holding Company) Any bank holding company may hold voting stocks issued by a bank in excess of 10/100 of the total number of voting stocks issued by such bank, notwithstanding the main sentence of Article 15 (1) of the Banking Act.

Article 14 Deleted. FINANCIAL HOLDING COMPANIES ACT

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CHAPTER BUSINESS OF FINANCIAL

HOLDING COMPANY AND

INCORPORATION OF

COMPANIES AS

SUBSIDIARIES, ETC.

THEREOF

Article 15 (Business)

Any financial holding company shall be prohibited from engaging in other profit-making business except for business prescribed by Presidential Decree as incidental to managing its subsidiaries. Article 16 (Approval for Incorporation of Company into Subsidiary, etc.) (1) Any financial holding company (excluding any financial holding com- pany that is controlled by any other financial holding company; hereafter the same shall apply in this Chapter) shall, where it incorporates a com- pany into a new subsidiary and its subsidiary incorporates a company into a new second-tier subsidiary, obtain approval thereof from the Financial Services Commission. (2) Any person who intends to obtain approval under paragraph (1) shall file an application therefor with the Financial Services Commission under the conditions prescribed by Presidential Decree.

(3) The Financial Services Commission may attach conditions to the ap- proval given under paragraph (1). Article 17 (Requirements for Approving Incorporation of Company into Subsidiary, etc.)

(1) Any financial holding company that intends to obtain the approval described in Article 16 shall meet the requirements falling under each of the following subparagraphs:

1. The business plan of a company incorporated into subsidiaries, etc. shall be appropriate and sound;

2. The financial standing and business management of such financial holding company and its subsidiaries, etc. shall be sound; and

3. The swap ratio of stocks shall be appropriate in the event that a com- pany is incorporated into a subsidiary, etc. through such stock swap. FINANCIAL HOLDING COMPANIES ACT

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(2) In granting approval under paragraph (1), the Financial Services Commission shall consult in advance with the Fair Trade Commission as to whether the incorporation of a company into a subsidiary, etc. sub- stantially limits competition in the relevant market.

(3) Detailed requirements for granting approval under paragraph (1) shall be determined by Presidential Decree.

Article 18 (Report on Incorporation of Company into Subsidiary, etc.) (1) Any financial holding company that has incorporated a company, as prescribed by Presidential Decree taking into account the type and charac- teristics, etc. of such company (hereinafter referred to as a "company subject to reporting"), into a subsidiary, etc. shall file a report thereof with the Financial Services Commission under the conditions prescribed by Presidential Decree, notwithstanding the provisions of Article 16 (1).

(2) The Financial Services Commission shall, upon receiving a report filed under paragraph (1), consult with the Fair Trade Commission as to whether the incorporation of a company into a subsidiary, etc. sub- stantially limits competition in the relevant market.

(3) The Financial Services Commission may, where it is recognized that a subsidiary, etc. incorporated under paragraph (1) does not constitute a company subject to reporting or its incorporation substantially limits competition in the relevant market, set a time frame of up to six months and order the financial holding company involved or the subsidiary in- volved to dispose of stocks of the newly incorporated subsidiary, etc. (4) When a financial holding company or a subsidiary thereof is ordered to dispose of stocks pursuant to the provisions of paragraph (3), it shall not be eligible to exercise the voting right of such stocks subject to the disposal order from the date it was issued.

(5) In cases where a financial holding company or a subsidiary thereof incorporates a company subject to reporting as a subsidiary, etc. under paragraph (1), the provisions of Article 24 of the Act on the Structural Improvement of the Financial Industry shall not apply.

FINANCIAL HOLDING COMPANIES ACT

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Article 19 (Second-Tier Subsidiaries)

(1) Every subsidiary of a financial holding company shall be prohibited from controlling companies other than a company falling under any of the following subparagraphs: Provided, That with respect to a company that controls other companies at the time when the former becomes a subsidiary, the same shall not apply for two years from the date on which the former becomes a subsidiary:

1. A financial institution, prescribed by Presidential Decree, which is re- lated in business to the subsidiary concerned; and

2. A company, prescribed by Presidential Decree, which is closely related to running a financial business.

(2) Every second-tier subsidiary of a financial holding company shall be prohibited from controlling any other company: Provided, That with respect to a company that controls another company at the time when the former becomes a second-tier subsidiary, the same shall not apply for two years from the date on which the former becomes a second-tier subsidiary. CHAPTER Deleted.

Articles 20 through 37 Deleted. CHAPTER OPERATION OF FINANCIAL

HOLDING COMPANY

Article 38 (Qualification Requirements for Executives) (1) No person falling under any of the following subparagraphs shall become an executive of any financial holding company, or he/she shall, if found to fall under any of the following subparagraphs after becoming an executive, relinquish his/her position:

1. A minor, incompetent or quasi-incompetent person;

2. A person who has been declared bankrupt, but has not yet been re- instated;

3. A person who has been sentenced to imprisonment without prison labor or heavier punishment, and five years have not yet passed since the expiration of the term of sentence (including cases where the execution FINANCIAL HOLDING COMPANIES ACT

17

of the sentence is deemed to have been terminated) or since the decision to waive such sentence has been made;

4. A person who was sentenced to a fine or a heavier punishment under this Act, foreign Acts and subordinate statutes related to financial hold- ing companies, or other finance-related Acts and subordinate statutes prescribed by Presidential Decree (including foreign finance-related Acts and subordinate statutes corresponding thereto), and five years have not yet passed since the expiration of the term of sentence (including cases where the execution of the sentence is deemed to have been terminated) or since the decision to waive such sentence has been made;

5. A person who is within a period of stay of execution after having been sentenced to a suspended sentence of imprisonment without prison labor or heavier punishment;

6. A person who has been removed from his/her office or dismissed by disciplinary action under this Act, foreign Acts and subordinate stat- utes related to financial holding companies, or other finance-related Acts and subordinate statutes prescribed by Presidential Decree (including foreign finance-related Acts and subordinate statutes corre- sponding thereto), and five years have not yet passed since;

7. A person who has worked as an executive or an employee of a corporation or a company whose business license or authorization, etc. has been cancelled (limited to a person prescribed by Presidential Decree, who was directly or correspondingly responsible for the occurrence of the cause of such cancellation) in accordance with this Act, foreign Acts and subordinate statutes related to financial holding companies, or other finance-related Acts and subordinate statutes prescribed by Presidential Decree (including foreign finance-related Acts and sub- ordinate statutes corresponding thereto), and five years have not yet passed since;

8. A person who is or was an executive or employee (limited to a person who is directly subject to, or corresponding to, the grounds for receiving such corrective measures at an appropriate time and who is prescribed by Presidential Decree) of a financial institution under corrective meas- ures at an appropriate time pursuant to Article 10 (1) the Act on the Structural Improvement of the Financial Industry or administrative FINANCIAL HOLDING COMPANIES ACT

18

measures such as decision of contract transfer of Article 14 (2) of the same Act (hereinafter referred to as "corrective measures at an appro- priate time or such"), and two years have not yet passed since; and

9. A retired executive or employee who would have been notified of advice to resign (including dismissal) or request to resign under this Act, fi- nance-related Acts and subordinate statutes prescribed by Presidential Decree, if he/she were holding office, and five years have not yet passed since the date of such notification (seven years from the date of retire- ment, if the date turning five years from the date of notification occurs later than the date falling seven years from the date of retirement). (2) An executive of a financial holding company shall have experience and knowledge in finance, and he/she shall not be detrimental to the public interests, soundness of business administration or trade order.

(3) Details on the requirement of an executive of a financial holding com- pany pursuant to paragraph (2) shall be prescribed by Presidential De- cree. Article 39 (Restrictions on Concurrent Holding of Office by Executives) (1) Any executive who works as a managing director for a financial holding company shall, where he/she is in a conflict of interest with the customers of a subsidiary, etc. of such financial holding company or he/she is feared to undermine the sound management of such subsidiary, etc., which are all prescribed by Presidential Decree, be prohibited from working as a managing director for another company or running other profit-making businesses.

(2) Any executive or employee of a financial holding company may become an executive of the subsidiary, etc. of such financial holding company not- withstanding paragraph (1) and other finance-related Acts and subordi- nate statutes.

(3) Notwithstanding other Acts and subordinate statutes, executives of a subsidiary, etc. of a financial holding company may become executives of another subsidiary, etc. of such financial holding company, which en- gages in the same type of business.

Article 40 (Appointment of Outside Directors)

(1) Every financial holding company (limited to any financial holding com- FINANCIAL HOLDING COMPANIES ACT

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pany prescribed by Presidential Decree taking into account the assets, etc. of such financial holding company and its subsidiaries; hereafter the same shall apply in this Article, Articles 41 and 42) shall have three or more outside directors (referring to directors who are not engaged in ordi- nary business of the company, and do not fall under any subparagraph of paragraph (4); hereinafter the same shall apply), and the number of outside directors shall not be less than a half of the total number of directors. (2) Every financial holding company shall establish a committee for recom- mending candidates as outside directors (hereinafter referred to as a "committee for recommending candidates as outside directors") under Article 393-2 of the Commercial Act. In this case, outside directors shall comprise up not less than a half of members of the committee for recom- mending candidates as outside directors.

(3) Outside directors shall be appointed at a general meeting of stock- holders from among persons recommended by the committee for recom- mending candidates as outside directors under paragraph (2). (4) No person falling under any of the following subparagraphs shall become an outside director of a financial holding company, or he/she shall, if found to fall under such provisions after becoming an outside director, relinquish his/her position:

1. A minor, incompetent or quasi-incompetent person;

2. A person who has been declared bankrupt and has not yet been re- instated;

3. A person who has been sentenced to imprisonment without prison labor or to a heavier punishment, and five years have not yet passed since the expiration of the term of sentence or since the decision to waive such sentence has been made;

4. A person who has been dismissed or removed from his/her position pursuant to this Act, and two years have not yet passed since;

5. The largest shareholder;

6. Any person specially related with the largest stockholder, as prescribed by Presidential Decree;

7. A major stockholder, his/her spouse, lineal ascendant or descendant;

8. A person who is or has been a full-time executive or employee of the financial holding company concerned or an affiliated company thereof FINANCIAL HOLDING COMPANIES ACT

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(referring to an affiliated company pursuant to the Monopoly Regulation and Fair Trade Act; hereinafter the same shall apply) for the last two years;

9. A spouse, lineal ascendant or descendant of a full-time executive of the financial holding company;

10. A person who is or has been a full-time executive or employee of a corporation within the last two years, which has important business relationship as prescribed by Presidential Decree with the financial holding company, or which is a competitor or collaborator of the finan- cial holding company;

11. A full-time executive or employee of a company for which a full-time executive or employee of the financial holding company is working part-time; and

12. A person who has difficulty in faithfully performing his/her duties as an outside director, or who may exercise influence over business ad- ministration of the financial holding company, as prescribed by Presi- dential Decree.

(5) Any financial holding company shall, where the makeup of the board of directors is made inconsistent with the requirements as described in paragraph (1) on the grounds of resignation, death or such of any outside director, make the composition of the board of directors consistent with the requirements of paragraph (1) at the first general meeting of stock- holders called since the date on which such grounds accrued.

(6) The provisions of the latter part of paragraph (2) shall not apply to any company that is required to appoint outside directors due to falling under the requirements of paragraph (1) for the first time. Article 41 (Audit Committee)

(1) Every financial holding committee shall establish an audit committee (referring to the audit committee under Article 415-2 of the Commercial Act; hereinafter the same shall apply).

(2) The audit committee shall meet all requirements under the following subparagraphs:

1. Outside directors shall comprise up not less than 2/3 of the total number of the members enrolled; and

2. One or more members shall be specialists in accounting or finance pre- FINANCIAL HOLDING COMPANIES ACT

21

scribed by Presidential Decree.

(3) No person falling under any of Article 40 (4) 1 through 4 and 7 through 9 shall become an internal director member of the audit committee, and he/she shall relinquish his/her position, if found to fall under such provi- sions after becoming such a member: Provided, That an internal director member, currently holding office, of the audit committee may be an internal director member of the audit committee, although he/she falls under Article 40 (4) 8. (4) The composition of any audit committee shall, where it fails to comply with the requirements of paragraph (2) on the grounds of resignation or death, etc. of any member, be brought in compliance with such requirements of paragraph (2) at the first general meeting of the stockholders called since the date on which such grounds accrued.

(5) The provisions of the proviso to Article 415-2 (2) of the Commercial Act shall not apply to the composition of any audit committee established in accordance with paragraph (1).

Article 41-2 (Recommendation on Candidates as Members of Audit Com- mittee)

Candidates as members of the audit committee shall be recommended by the committee for recommending candidates as members of the audit com- mittee, which was comprised of all of outside directors. In this case, the committee for recommending candidates as members of the audit commit- tee shall pass a resolution with the consent of not less than 2/3 of the number of outside directors on the register.

[This Article Newly Inserted by Act No. 8571, Aug. 3, 2007] Article 41-3 (Restriction on Rights to Vote of Person Concerned) No outside director, who has special interests in the case concerned, shall exercise his/her rights to vote at the resolution of the board of directors. [This Article Newly Inserted by Act No. 8571, Aug. 3, 2007] Article 41-4 (Special Cases on Structures of Control of Complete Subsidia- ries, etc.)

(1) Where a complete subsidiary or second-tier subsidiary of which total stocks issued are owned by a complete subsidiary (hereafter referred to as "complete subsidiaries, etc." in this Article) falls under the requirement determined by the Financial Services Commission as prescribed by Presidential Decree, such as clarity of management, it may not have outside FINANCIAL HOLDING COMPANIES ACT

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directors or found an audit committee, notwithstanding the provisions on the board of directors or audit committee pursuant to the Acts providing grounds for establishment of the financial institution concerned.

(2) Where complete subsidiaries, etc. do not establish an audit committee under paragraph (1), they shall appoint full-time auditors. In this case, Article 191-12 of the Securities and Exchange Act shall apply mutatis mutandis.

[This Article Newly Inserted by Act No. 8571, Aug. 3, 2007] Article 42 (Exercise of Minority Stockholders' Rights) (1) Any person who has continued to hold stocks equivalent to not less than 5/100,000 of the total number of stocks issued by a financial holding company for not less than six months, as prescribed by Presidential Decree, may exercise his/her rights as a stockholder in accordance with the provi- sions of Article 403 of the Commercial Act (including cases where the provisions apply mutatis mutandis in Articles 324, 415, 424-2, 467-2 and 542 of the Commercial Act).

(2) Any person who has continued to hold stocks equivalent to not less than 250/100,000 (not less than 125/100,000 in cases of a financial holding company prescribed by Presidential Decree) of the total number of stocks issued by a financial holding company for not less than six months, as prescribed by Presidential Decree, may exercise his/her rights as a stock- holder in accordance with the provisions of Articles 385 (including cases where the provisions apply mutatis mutandis in Article 415 of the Commercial Act), 402, and 539 of the Commercial Act. (3) Notwithstanding the provisions of paragraph (2), any person who has continued to hold stocks equivalent to not less than 25/100,000 (not less than 125/1,000,000 in cases of a bank holding company prescribed by Presidential Decree) of the total number of stocks issued by a bank holding company for not less than six months, as prescribed by Presidential Decree, may exercise his/her rights as a stockholder in accordance with the provi- sions of Article 402 of the Commercial Act.

(4) Any person who has continued to hold stocks equivalent to not less than 50/10,000 (not less than 25/10,000 in case of a financial holding company prescribed by Presidential Decree) of the total number of voting FINANCIAL HOLDING COMPANIES ACT

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stocks issued by a financial holding company for not less than six months, as prescribed by Presidential Decree, may exercise his/her rights as a stockholder in accordance with Articles 363-2 and 466 of the Commercial Act. In this case, the exercise of his/her rights as a stockholder under Article 363-2 of the Commercial Act shall be based on voting stocks. (5) Notwithstanding the provisions of paragraph (4), any person who has continued to hold stocks equivalent to not less than 5/10,000 (not less than 25/100,000 in cases of a bank holding company prescribed by Presidential Decree) of the total number of stocks issued by a bank holding company for not less than six months, as prescribed by Presidential De- cree, may exercise his/her rights as a stockholder under Article 466 of the Commercial Act. (6) Any person who has continued to hold stocks equivalent to not less than 150/10,000 (not less than 75/10,000 in cases of a financial holding company prescribed by Presidential Decree) of the total number of stocks issued by a financial holding company for not less than six months, as prescribed by Presidential Decree, may exercise his/her rights as a stock- holder in accordance with the provisions of Articles 366 and 467 of the Commercial Act. In this case, the exercise of his/her rights as a stockholder under Article 366 of the Commercial Act shall be based on voting stocks. (7) Any stockholder described in paragraph (1) may, when he/she is suc- cessful in a case after filing a claim under the provisions of Article 403 of the Commercial Act (including cases where the provisions apply mutatis mutandis in Articles 324, 415, 424-2, 467-2 and 542 of the Commercial Act), apply to any financial holding company for paying litigation costs and all other costs resulting from such litigation. Article 43 (Limits on Investment in Securities)

(1) Every financial holding company shall be prohibited from investing in securities (excluding any securities that are issued by its subsidiaries, etc. that belong to the relevant financial holding company; hereafter re- ferred to as "securities" in this Article) provided for in the Securities and Exchange Act in excess of the amount obtained by subtracting the total amount of investment in its subsidiaries from its equity capital (hereinafter referred to as the "limits on the investment"). In this case, the methods of calculating the equity capital shall be determined by Presidential FINANCIAL HOLDING COMPANIES ACT

24

Decree.

(2) The provisions of the former part of paragraph (1) shall not apply to cases where any financial holding company that has not invested in securities in excess of the limits on the investment in securities invests in securities in excess of the limits on the investment in securities on the grounds falling under any of the following subparagraphs:

1. A decrease in its equity capital;

2. Fluctuations in the prices of securities;

3. The merger of financial holding companies or the acquisition by transfer of any financial holding company;

4. The exercise of security rights or the receipt of payment in substitute form; and

5. Other inevitable cases prescribed by Presidential Decree. (3) In cases where any financial holding company invests in securities in excess of the limits on the investment in securities on the grounds referred to in each subparagraph of paragraph (2), such financial holding company shall take measures to bring its investment in securities into conformity with the limits on the investment in securities within one year from the date on which it invests in securities in excess of the limits on the invest- ment in securities: Provided, That in cases of grounds of inevitability pre- scribed by Presidential Decree, the Financial Services Commission may extend such period by fixing another period.

[This Article Wholly Amended by Act No. 7529, May 31, 2005] Article 43-2 (Obligation to Own Stocks of Subsidiaries) (1) A financial holding company shall own not less than 50/100 (30/100, if any of its subsidiaries is a corporation listed on the stock market or on KOSDAQ pursuant to the Securities and Exchange Act; hereafter re- ferred to as "standard for stock ownership" in this Article) of total number of issued stocks of its subsidiary concerned: Provided, That the same shall not apply, if it fails to meet the standard for stock ownership due to any of the following circumstances:

1. Where a financial holding company becomes subject to the requirements of a financial holding company, it owned less stocks of its subsidiary than those of the standard for stock ownership, and two years have not passed since the date it becomes subject to the requirements of a financial holding company;

FINANCIAL HOLDING COMPANIES ACT

25

2. Where a subsidiary, which used to be a corporation listed on the stock market or on KOSDAQ pursuant to the Securities and Exchange Act, failed to meet the standard for stock ownership, and one year has not passed since the date it failed to meet such standard;

3. Where a subsidiary offers stocks for subscription or sells them, it gives priority in allotment to an association of employees as stockholders pursuant to Article 191-7 of the Securities and Exchange Act, or con- version is requested for convertible bonds or the right to subscribe to new stocks is exercised for the bonds from the preemptive right to new stocks, which are issued by the subsidiary concerned pursuant to Article 513 or 516-2 of the Commercial Act, and consequently the subsidiary fails to meet the standard for stock ownership and one year has not passed since the date it failed to meet the standard for stock ownership;

4. Where a non-subsidiary becomes a subsidiary and fails to meet the standard for stock ownership, and one year has not passed since the date it became a subsidiary; and

5. Where a subsidiary has failed to meet the standard for stock ownership during the process of becoming a non-subsidiary, and one year has not passed since the date it failed to meet such standard (limited to cases where a subsidiary became a non-subsidiary within one year from the date on which it failed to meet the standard for stock ownership). (2) In applying the standard for stock ownership, a subsidiary that has issued and listed or registered stocks overseas may be deemed to be a listed corporation, if the Financial Services Commission approves it upon considering stability, mobility and clearness or such overseas market and the level of publicity and self-regulation system of the stock exchange in such foreign country. (3) Where a financial holding company substantially proves its de facto control, as prescribed by Presidential Decree, over its subsidy that is a foreign corporation (hereafter referred to as a "foreign subsidy" in this paragraph), the Financial Services Commission may lower the standard for stock ownership on stocks owned by the foreign subsidy concerned in spite of the standard for stock ownership referred to in paragraph (1). In this case, despite paragraph (1), such financial holding company shall own more stocks of its foreign subsidy than that of the standard of stock ownership set by the Financial Services Commission.

FINANCIAL HOLDING COMPANIES ACT

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(4) Necessary matters for securities markets in foreign countries as set forth in paragraph (2) and relaxation of the standard for stock ownership as set forth in paragraph (3) shall be prescribed by Presidential Decree. [This Article Newly Inserted by Act No. 8571, Aug. 3, 2007] Article 44 (Limits to Holding Stocks of Other Companies) (1) Any financial holding company may hold stocks issued by another company that is not its subsidiary, etc. within the limit of 5/100 of the total number of stocks issued by such company: Provided, That the same shall not apply to cases where the holding of such stocks falls under Article 8-2 (2) 3 (main sentence) or 4 of the Monopoly Regulation and Fair Trade Act (excluding cases where a bank holding company falls under subparagraph 4 of the same paragraph).

(2) Where a financial holding company holds stocks issued by another company (excluding a financial institution or any company related closely to financial business) in accordance with the main sentence of para- graph (1), such financial holding company shall exercise its voting rights so as not to affect the number of voting stocks derived from subtracting the number of stocks held by itself from the total number of stocks issued by that other company at a general meeting of stockholders of such other company.

Article 45 (Limit on Credit Extension)

(1) The total amount of credit extended by a financial holding company (excluding any financial holding company controlled by another financial holding company; hereafter the same shall apply in this Article) and its subsidiary, etc. (hereafter referred to as the "financial holding company, etc." in this Article) to the same borrower (referring to the same borrower net total amount of the equity capital of the financial holding company, etc.: Provided, That the same shall not apply to cased falling under any of the following subparagraphs, which is prescribed by Presidential Decree:

1. Where it is necessary for the national economy and for securing the effectiveness of credit extended by the financial holding company, etc.; and

2. Where the limit described in the main sentence is exceeded by a change in the equity capital and the same borrower, etc. although the financial holding company, etc. does not extend any additional credit. FINANCIAL HOLDING COMPANIES ACT

27

(2) The total amount of credit extended by the financial holding company, etc. to the same individual or the same corporation shall not exceed 20/100 of the net total amount of its equity capital: Provided, That the same shall not apply to cases falling under the cause of the proviso to para- graph (1). (3) The total amount of credit extended by a financial holding company, etc. to the same person who holds stocks in excess of 10/100 of the total number of voting stocks issued by that financial holding company shall not exceed an amount computed according to the method prescribed by Presidential Decree within the limit of 25/100 of the net total amount of the equity capital of such financial holding company, etc.: Provided, That the same shall not apply to cases falling under the cause of the proviso to paragraph (1). (4) Any financial holding company, etc. shall, where its total credit exceeds the limit described in paragraph (1), (2), or (3) (main sentence), cause such credit to be consistent with such limit, as prescribed by the Presiden- tial Decree, within one year from the date on which such limit is exceeded: Provided, That where there are unavoidable reasons prescribed by Presidential Decree, the Financial Services Commission may extend such period by fixing further period. (5) The scope of the subsidiary, etc. referred to in paragraphs (1) through (4), standards for extending credit and the method of computing the equity capital and the net total amount of such equity capital shall be determined by Presidential Decree.

Article 45-2 (Limit, etc. on Credit Extension for Major Investors of Bank Holding Company)

(1) The total amount of credit, which a bank holding company, etc. (excluding a financial holding company controlled by another bank holding company; hereafter the same shall apply in this Article and Articles 45-3 through 45-5) can extend to the major investors (including persons spe- cially related thereto; hereinafter the same shall apply) of the bank holding company, shall not exceed the lesser of the amount equivalent to the value of the rate, prescribed by Presidential Decree, which is within the extent of 25/100 of the net total amount of its equity capital, and the amount equivalent to the value of the investment proportion of such major investors of the bank holding company concerned: Provided, That in cases where FINANCIAL HOLDING COMPANIES ACT

28

the bank holding company, etc. falls under the cause of the proviso to Article 45 (1), the same shall not apply.

(2) The total amount of credit that a bank holding company, etc. can extend to all major investors of the bank holding company concerned shall not exceed the amount equivalent to the value of the rate, prescribed by Presidential Decree, which is within the extent of 25/100 of the net total amount of its equity capital. (3) A bank holding company, etc. shall not, for the purposes of evasion of the credit grant limit pursuant to the provisions of paragraphs (1) and (2), cross-extend credit with other bank holding companies, etc. or banks.

(4) When a bank holding company, etc. intends to extend credit (including a transaction prescribed by Presidential Decree; hereafter the same shall apply in this Article) to the major investors of the bank holding company concerned in excess of the amount prescribed by Presidential Decree, it shall be subject to the prior resolution of the board of directors. In this case, the board of directors shall make a resolution by a unanimous vote of all directors on the register. (5) When a bank holding company, etc. has extended credit to the major investors of the bank holding company concerned in excess of the amount prescribed by Presidential Decree, it shall, without delay, report such fact to the Financial Services Commission and publicly announce it by means of computer communications networks, etc.

(6) A bank holding company, etc. shall publicly announce on a quarterly basis by means of computer communications networks, etc. the matters regarding the credit grants to the major investors of the bank holding com- pany concerned as prescribed by Presidential Decree.

(7) The extent of subsidiary, etc., standard of credit grant, method of calculating the equity capital and the net total amount of the equity capital pursuant to the provisions of paragraphs (1) through (6) shall be pre- scribed by Presidential Decree.

[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] Article 45-3 (Limit, etc. on Acquisition of Stocks Issued by Major Inves- tors)

FINANCIAL HOLDING COMPANIES ACT

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(1) A bank holding company, etc. shall not acquire (including acquisition by trust business operation; hereafter the same shall apply in this Article) stocks (including investment equity; hereafter the same shall apply in this Article) issued by the major investors of the bank holding company in excess of the amount equivalent to the value of the rate, prescribed by Presidential Decree, within the extent of 1/100 of the net total amount of its equity capital.

(2) In cases where persons who have not been major investors become major investors, and consequently a bank holding company, etc. thereby exceeds the limit pursuant to the provisions of paragraph (1), such bank holding company, etc. shall dispose of the surplus stocks within the time frame prescribed by Presidential Decree.

(3) When a bank holding company, etc. intends to acquire the stocks issued by the major investors of the bank holding company concerned in excess of the amount prescribed by Presidential Decree, it shall be subject to the prior resolution of the board of directors. In this case, the board of directors shall make a resolution by a unanimous vote of all directors on the register. (4) When a bank holding company, etc. has acquired the stocks issued by the major investors of the bank holding company concerned in excess of the amount prescribed by Presidential Decree, it shall immediately report such fact to the Financial Services Commission and publicly an- nounce it by means of computer communications networks, etc. (5) A bank holding company, etc. shall publicly announce on a quarterly basis by means of computer communications networks, etc. the matters regarding the acquisition of the stocks issued by the major investors of the bank holding company concerned as prescribed by Presidential Decree.

(6) In exercising the voting rights in the stocks issued by major investors of a bank holding company, etc., the bank holding company, etc. shall exercise in a way that does contravene the terms of resolution that can be carried by the number of stocks obtained by subtracting the number of stocks held by the bank holding company concerned, etc. from the number of stocks of the major investors attending the general meeting of the FINANCIAL HOLDING COMPANIES ACT

30

stockholders: Provided, That in cases where it is evidently expected that loss to the bank holding company concerned, etc. will occur by such means as merger of the major investors, transfer and takeover of business oper- ations, selection and appointment of executives, and other means equivalent thereto, the same shall not apply. [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] Article 45-4 (Prohibition from Exercise of Undue Influence by Major Investors)

No major investor of a bank holding company shall engage in any conduct falling under any of the following subparagraphs for the purposes of his/her personal interests contrary to the interest of such bank holding company:

1. Demanding that the bank holding company concerned, etc. furnish undis- closed data or information in order to exercise undue influence: Pro- vided, That cases falling under the provisions of Article 42 (5) are excluded;

2. Exercising undue influence on the personnel management or business operations of the bank holding company concerned, etc. in consultation with other stockholders on condition of supply of a benefit in return for an economic gain, etc.;

3. Exercising influence on the business operations of the bank holding company concerned, etc. such as demanding early withdrawal of credit grants, etc. for the purposes of interference with the business activities of a competing business operator; and

4. Any other conduct equivalent to subparagraphs 1 through 3 and pre- scribed by Presidential Decree.

[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] Article 45-5 (Demands, etc. to Submit Data to Major Investors) (1) When the Financial Services Commission suspects a bank holding com- pany, etc. or its major investors having violated the provisions of Articles 45-2 through 45-4, it may demand that the bank holding company, etc. or its major investors submit necessary data.

(2) In cases where the difficulty in financial structure due to an excess of liability over assets of a major investor (limited to a company) of a bank holding company, is apprehended to be substantially detrimental to the operational soundness of such bank holding company, etc., and such FINANCIAL HOLDING COMPANIES ACT

31

cases are prescribed by Presidential Decree, the Financial Services Com- mission may take measures prescribed by Presidential Decree, such as ordering, etc. the bank holding company, etc. to limit credit grants to its major investors. [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] Article 46 (Investment of Financial Holding Companies) Any financial holding company shall be prohibited from holding stocks issued by its subsidiaries in excess of its equity capital: Provided, That the same shall not apply to capital increases for improving the financial standing of the subsidiary, etc. and cases prescribed by Presidential Decree. In this case, the method of computing the equity capital shall be determined by Presidential Decree.

Article 47 Deleted. Article 48 (Restrictions on Conduct by Subsidiaries, etc.) (1) Subsidiaries, etc. of any financial holding company shall be prohibited from engaging in any conduct falling under any of the following subpara- graphs: Provided, That the same shall not apply to cases where such sub- sidiaries, etc. are incorporated into a new financial holding company and other cases prescribed by Presidential Decree:

1. Credit extension for a financial holding company to which such sub- sidiaries, etc. belong;

2. Holding stocks issued by other subsidiaries, etc. (excluding any company controlled directly by such subsidiaries, etc.) of a financial holding com- pany to which such subsidiaries, etc. belong; and

3. Credit extension for other subsidiaries, etc. of a financial holding com- pany to which such subsidiaries, etc. belong in excess of the standards prescribed by Presidential Decree.

(2) Where subsidiaries, etc. belonging to the same financial holding com- pany extend credit to each other, such subsidiaries, etc. shall secure appro- priate securities according to the standards prescribed by Presidential Decree: Provided, That the same shall not apply to cases where such sub- sidiaries, etc. extend credit to each other for their corporate restructuring in a manner that meets the requirements prescribed by the Financial Services Commission. (3) No dishonored assets prescribed by Presidential Decree shall be traded between any financial holding company and its subsidiaries, etc. and be- tween such subsidiaries, etc.: Provided, That the same shall not apply FINANCIAL HOLDING COMPANIES ACT

32

to transactions necessary for the corporate restructuring of such subsidia- ries, etc. and other cases meeting the requirements prescribed by the Financial Services Commission. (4) Any financial holding company and its subsidiaries, etc. (hereinafter referred to as the "financial holding company, etc.") shall observe the stand- ards, such as joint publication and the joint utilization of the computer system, etc., prescribed by Presidential Decree.

(5) The subsidiaries, etc. of every financial holding company shall be prohibited from holding stocks issued by such financial holding company: Provided, That the same shall not apply to cases where the subsidiaries, etc. of such financial holding company acquire stocks issued by such finan- cial holding company under Article 62-2 (1) of this Act or Article 342-2 of the Commercial Act. (6) Deleted.

(7) No subsidiaries, etc. of any financial holding company shall, where holding stocks issued by such financial holding company or other sub- sidiaries, etc. (excluding companies directly controlled by the subsidiaries, etc. concerned) of such financial holding company, be allowed to exercise their voting rights thereof. (8) The scope of subsidiaries, etc. and standards for extending credit under paragraphs (1) 1 and 3 and (2) shall be determined by Presidential Decree.

Article 48-2 (Supply and Management of Personal Credit Information, etc.)

(1) Notwithstanding the provisions of Articles 23 and 24 (1) of the Use and Protection of Credit Information Act, a financial holding company, etc. may supply credit information regarding a person (hereinafter referred to as "personal credit information") pursuant to the provisions of subpara- graphs 1, 3 and 4 of Article 23 of the same Act to allow the financial holding company, etc. to which he/she belongs to utilize it for the purposes of business operation.

(2) Notwithstanding the provisions of Article 59 of the Securities and Exchange Act, a securities company, which is a subsidiary, etc. of a finan- cial holding company, may supply information regarding the total amount of money or securities deposited by a truster who buys and sells securities through the securities company concerned or intends to do so, to allow the financial holding company to which he/she belongs to utilize it for FINANCIAL HOLDING COMPANIES ACT

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the purposes of business operation.

(3) In cases where a subsidiary, etc. supplies the personal credit in- formation and information on the total amount of money or securities (hereinafter referred to as "personal credit information, etc.") pursuant to the provisions of paragraphs (1) and (2), the provisions of Article 24 (2) of the Use and Protection of Credit Information Act shall not apply. (4) A financial holding company, etc. shall appoint not less than one person from among the executives under its control to act as a person in charge of the management of personal credit information, etc. (hereinafter referred to as "credit information manager") for the strict management of such in- formation, etc.

(5) Each credit information manager shall prepare a business guidebook as set up by the Financial Services Commission for the strict management of personal credit information, etc. and report the contents thereof to the Financial Services Commission. (6) A financial holding company, etc. shall set up a policy for treatment of personal credit information, etc. as prescribed by Presidential Decree, and inform the other party of transactions of the financial holding company concerned, etc. thereof or announce it in public, and post it at the business office.

[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] Article 48-3 (Prohibition, etc. on Taking Bribes, etc.) (1) No executive or employee of any financial holding company shall re- ceive any gift, or offer or take or promise any bribe in connection with his/her duties.

(2) No person who is or has been an executive and employee of a financial holding company shall disclose the information that they became aware of in the course of his/her duties to others or utilize it for purposes other than his/her business operations.

[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] CHAPTER SUPERVISION OF

FINANCIAL HOLDING

COMPANIES

Article 49 (Supervision)

FINANCIAL HOLDING COMPANIES ACT

34

(1) The Financial Services Commission may issue orders necessary to supervise financial holding companies, etc. for the sound management thereof. (2) Subject to the regulations and instructions of the Financial Services Commission, the Financial Supervisory Service shall supervise whether financial holding companies, etc. comply with this Act, any other fi- nance-related Acts and subordinate statutes, and the regulations, orders and instructions of the Financial Services Commission.

Article 50 (Management Guidelines)

(1) Financial holding companies shall observe the management guidelines set by the Financial Services Commission according to Presidential Decree with respect to matters falling under each of the following subparagraphs in order to maintain the sound management thereof:

1. Matters relating to the financial standing of financial holding compa- nies and their subsidiaries, etc.;

2. Matters relating to the current status of management of financial holding companies and their subsidiaries, etc.; and

3. Other matters necessary to secure the sound management thereof. (2) The Financial Services Commission may, when any financial holding company fails to observe the management guidelines referred to in para- graph (1) and is feared to greatly undermine the soundness of its manage- ment, order such financial holding company to take necessary measures, such as the submission of a management improvement plan, an increase in capital, limits on dividends, and disposal of stocks of its subsidiaries, in order to improve its management. Article 51 (Audit)

(1) Every financial holding company and its subsidiaries, etc. shall undergo audits conducted by the Governor of the Financial Supervisory Service (hereinafter referred to as the "Governor of the Financial Supervisory Service") with respect to their business and assets. (2) The Governor of the Financial Supervisory Service may, when he/she deems it necessary to conduct an audit, ask any financial holding company and its subsidiaries, etc. to report on their business or assets, furnish data and get officials in charge to be present and state their opinions. FINANCIAL HOLDING COMPANIES ACT

35

(3) Persons who conduct the audit under paragraph (1) shall carry certifi- cates indicating their authority and show them to persons concerned. (4) The Governor of the Financial Supervisory Service may ask auditors appointed by any financial holding company and its subsidiaries, etc. under the Act on External Audit of Stock Companies to furnish information they have learned in the course of audits of such financial holding company and its subsidiaries, etc. and other data pertaining to the soundness of their management.

(5) The Governor of the Financial Supervisory Service shall, when he/she conducts an audit in accordance with paragraph (1), file a report thereof with the Financial Services Commission. In this case, such report shall, when this Act, finance-related Acts and subordinate statutes, dispositions taken in accordance with this Act and the regulations of the Financial Services Commission are found to have been violated, be appended by a statement of views with respect to the measures for dealing with such violations. (6) The Financial Services Commission may determine necessary matters concerning measures and procedures for audit and the affairs of audit.

Article 51-2 (Inspection on Subjects of Changeover) (1) In any case of the following subparagraphs, the Financial Services Commission may cause the Governor of the Financial Supervisory Service to inspect the operation and property status of the subjects of changeover within the minimum extent necessary for its duty:

1. Where it is necessary to ascertain the results of inspection pursuant to the provisions of Article 8-3 (2); and

2. Where it is acknowledged that the subjects of changeover are highly likely to engage in illegitimate dealings with a bank holding company, etc. due to unhealthy financial status, such as rapid increase in debt and occurrence of huge loss.

(2) The definite extent, method and other necessary matters regarding the inspection pursuant to the provisions of paragraph (1) shall be set by the Financial Services Commission. (3) The provisions of Article 51 (2) through (4) shall apply mutatis muta- ndis to the inspection pursuant to the provisions of paragraph (1). FINANCIAL HOLDING COMPANIES ACT

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[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] Article 52 (Alloted Charges)

(1) Any financial holding company that has undergone any audit con- ducted by the Financial Supervisory Service shall pay alloted charges to the Financial Supervisory Service to cover expenses incurred by audits. (2) Necessary matters concerning rates, limits and payments of alloted charges referred to in paragraph (1) shall be determined by Presidential Decree.

Article 53 (Accumulation of Revenue Reserves)

Every financial holding company shall accumulate not less than 10/100 of net earnings, whenever net profits on the settlement of accounts are divided, until the reserve amounts to the total amount of the capital. Article 54 (Business Report)

(1) Every financial holding company shall prepare a business report de- scribing business results, financial standing and other matters prescribed by Presidential Decree for 3 months, 6 months, 9 months and 12 months from the date on which each business year begins and file it with the Governor of the Financial Supervisory Service within one month from the closure of each period. In cases where inevitable causes are recognized to exist, the Governor of the Financial Supervisory Service may extend the deadline. (2) Detailed matters for preparing the business report referred to in para- graph (1) and other necessary matters shall be determined by the Financial Services Commission.

Article 55 (Publication of Financial Statements)

Every financial holding company shall publish a balance sheet, an income statement for the current period for the settlement of accounts, and docu- ments prescribed by the Financial Services Commission among the con- solidated financial statements required by the Act on External Audit of Stock Companies, all compiled as of the date of the settlement of accounts, according to forms prescribed by the Financial Services Commission, within 3 months from the date of the settlement of accounts: Provided, That with respect to any document which cannot be published within 3 months from the date of the settlement of accounts due to unavoidable reasons, its pub- lication may be delayed on approval of the Financial Services Commission. FINANCIAL HOLDING COMPANIES ACT

37

Article 55-2 (Submission, etc. by Electronic Documents) When a financial holding company submits or announces in public the data pursuant to the provisions of Articles 54 and 55, it may do so by means of electronic document under the conditions prescribed by the Governor of the Financial Supervisory Service or the Financial Services Commission. [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] Article 56 (Publication on Management)

Every financial holding company shall publish matters necessary to protect depositors and investors of its subsidiaries, etc., which are prescribed by Presidential Decree, in a manner prescribed by the Financial Services Commission. Article 57 (Administrative Dispositions)

(1) The Financial Services Commission may, where any financial holding company, etc. may undermine the soundness of its management by violat- ing this Act or orders issued under this Act, take measures falling under any of the following subparagraphs:

1. Cautions and warnings to the financial holding company, etc. or demand to cautions, warns and reprimands its executives and employees;

2. An order issued to correct the violation in question;

3. Deleted;

4. Recommendation to dismiss any executive or suspend his/her duties and appointment of an agent to act on behalf of any executive; 4-2. Request to an employee to resign; and

5. Suspension of part of the business of its subsidiaries, etc. which have committed a violation, for not more than six months. (2) The Financial Services Commission may, where any financial holding company, etc. falls under any of the following subparagraphs, order such financial holding company, etc. to suspend the whole of its business for a period of not more than 6 months or dispose of stocks of its subsidiaries, etc., or cancel the authorization granted to such financial holding com- pany, etc.:

1. Where it has obtained the authorization of Article 3 in a fraudulent or other unlawful manner;

2. Where it has failed to execute an order issued to correct a violation under paragraph (1) 2;

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3. Where it runs its business during a business-suspension period under paragraph (1) 5;

4. Where, in addition to subparagraphs 1 through 3, it is feared to greatly undermine the interests of depositors or investors of its subsidiaries, etc. by violating this Act or orders issued or dispositions taken under this Act; and

5. Where it ceases to fall under the provisions of Article 2 (1) 1 due to a decrease in stocks holdings, increase or decrease in assets, etc. during the business year concerned.

(3) Where the authorization of a financial holding company is revoked under paragraph (2), it shall cease to be subject to the requirements of a financial holding company within three months.

Article 57-2 (Notification to Retired Executives, etc. of Measures Taken) (1) The Financial Services Commission may have the Governor of the Financial Supervisory Service to notify the heads of relevant financial holding companies of the measures deemed to be taken, if a retired execu- tive or employee of the financial holding company, who would have been notified of measures falling under Article 57 (1) 4 or 4-2, if he/she were holding office.

(2) The head of relevant financial holding company who receives such notification pursuant to paragraph (1) shall notify the relevant executive or employee, record and retain it.

[This Article Newly Inserted by Act No. 8906, Mar. 14, 2008] Article 58 (Corrective Measures, etc.)

(1) The Financial Services Commission may order a person, who has violated Article 3 (1), 5 -2 (2), 7 or 57 (3), to take any corrective measure falling any of the following subparagraphs:

1. Submission of plans, or modification of such plans, to rectify current violation of Acts;

2. Cautions or warnings to companies involved in violation;

3. Request for cautions, warnings, or reprimands on executives or employ- ees of a company involved in violation;

4. Disposition of all, or a part of, stocks; and

5. Other measures necessary to rectify current violation of Acts. FINANCIAL HOLDING COMPANIES ACT

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(2) A person, who has been ordered to dispose of stocks pursuant to the provisions of paragraph (1) 4, shall not exercise the voting rights in such stocks ordered to be disposed of from the date of receipt of such order. Article 59 (Hearings)

The Financial Services Commission shall, where it intends to cancel the authorization granted to a financial holding company in accordance with Article 57 (2), hold hearings. CHAPTER SUPPLEMENTARY

PROVISIONS

Article 60 (Authorization for Merger, etc.)

(1) Any financial holding company shall, when it intends to dissolve itself or merge with another company, obtain authorization from the Financial Services Commission under the conditions prescribed by Presidential Decree.

(2) In determining whether to grant or deny authorization under para- graph (1), the Financial Services Commission shall examine whether such dissolution or such merger limits competition or disrupts sound order in the financial market and other matters prescribed by Presidential De- cree.

(3) The provisions of Article 3 (2) and (3) shall apply mutatis mutandis to the authorization of paragraph (1).

Article 61 (Matters to be Reported)

Any financial holding company shall, when it falls under any of the following subparagraphs, report without delay such fact to the Financial Services Commission: Provided, That the same shall not apply in cases of reporting under Article 8 (2):

1. Where an executive is changed;

2. Where the largest stockholder is changed; 2-2. Where a major investor of a bank holding company is changed; 2-3. Where stocks owned by large stockholders or a person specially re- lated thereto changed not less than 1/100 of total voting stocks issued;

3. Where the trade name is changed;

4. Where a ground for dissolution occurs; FINANCIAL HOLDING COMPANIES ACT

40

5. Where a financial holding company, or its subsidiaries, lose control over its subsidiaries, or second-tier subsidiaries; and

6. Where the soundness of the management of a financial holding com- pany, etc. is expected to be undermined, as prescribed by Presidential Decree.

Article 62 (Relation with Other Acts)

(1) Every financial holding company shall be governed by the Commercial Act and the Monopoly Regulation and Fair Trade Act except as specially provided for in this Act.

(2) Deleted.

Article 62-2 (Special Cases for Stock Swap and Stock Transfer) (1) When a subsidiary acquires stocks of a financial holding company or when a second-tier subsidiary acquires stocks of a subsidiary by means of stock swap or stock transfer, in applying the provisions of Article 342-2 of the Commercial Act to the stocks of a financial holding company or a subsidiary allocated as compensation in exchange for its own stocks which fall under any of the following subparagraphs among the stocks concerned, "six months" in paragraph (2) of the same Article shall be regarded as "three years":

1. Its own stocks acquired by the exercise of the appraisal right of the stockholders opposing the stock swap or stock transfer; and

2. Among its own stocks acquired pursuant to the provisions of Article 189-2 (1) and (2) of the Securities and Exchange Act, those purchased from the date of resolution of the board of directors regarding the approval on the stock swap contract or on the stock transfer until the expiry date of the exercise of the appraisal right of stockholders. (2) In applying the provisions of the Commercial Act to the stock swap or stock transfer to establish a financial holding company (including cases where a financial holding company, etc. transfers a company newly into a subsidiary or a second-tier subsidiary; hereafter the same shall apply in this Article) or to own all stocks of an existing subsidiary or second-tier subsidiary, "two weeks" in Articles 354 (4) (main sentence), 360-4 (1), 360-5 (2), 360-9 (2), 360-10 (4), 360-17 (1), and 363 (1) of the same Act shall be regarded as "seven days", "twenty days" in Articles 360-5 (1) and 360-5 (2) of the same Act as "ten days", "before one month" in Article 360-8 (1) of the same Act as "before five days", "when notifying of his/ FINANCIAL HOLDING COMPANIES ACT

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her intent to be opposed to the stock swap" in Article 360-10 (5) of the same Act as "when notifying of his/her intent opposing the stock swap within seven days from the date of notification or public announcement stipulated in paragraph (4)", "within the period specified for over one month" in Article 360-19 (1) 2 of the same Act as "within the period fixed for a duration of five days or longer", and "within two months" in Article 374-2 (2) of the same Act as "within one month".

(3) In cases where agreement is not reached between the stockholders opposing the stock swap or the stock transfer to establish a financial holding company or to own all stocks of an existing subsidiary or second-tier sub- sidiary and the company over the stock purchase price, the stock purchase price shall be the amount calculated in accordance with the classification of the following subparagraphs, notwithstanding the provisions of Article 374-2 (4) and (5) of the Commercial Act applied mutatis mutandis in the Article 360-5 (3) of the same Act:

1. Where the company concerned is a listed company on the stock market or on KOSDAQ pursuant to the Securities and Exchange Act: The amount calculated by a method prescribed by Presidential Decree which is based on the trading price of the stocks concerned traded on the securities market before the day of resolution by the board of directors on the approval of stock swap contract or stock transfer; and

2. Where the company concerned is other than the one in subparagraph 1: The amount calculated by an accounting expert. In this case, the level of accounting expertise and the procedures of appointment shall be prescribed by Presidential Decree.

(4) In cases where a company intending to swap stocks or transfer stocks to establish a financial holding company or to own all stocks of an existing subsidiary or second-tier subsidiary, or the stockholders holding not less than 30/100 of the number of stocks requested for appraisal pursuant to Article 360-5 of the Commercial Act, opposes the stock purchase price calculated pursuant to the provisions of paragraph (3), the company or the stockholders concerned may apply to the Financial Services Com- mission for arbitration up until ten days prior to the day the purchase pursuant to Article 374-2 (2) of the Commercial Act is to be completed. [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] FINANCIAL HOLDING COMPANIES ACT

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Article 63 (Entrustment of Authority)

The Financial Services Commission may entrust part of its authority under this Act to the Governor of the Financial Supervisory Service under the conditions prescribed by Presidential Decree.

CHAPTER IMPOSITION AND

COLLECTION OF PENALTY

SURCHARGES

Article 64 (Penalty Surcharges)

The Financial Services Commission may, where any financial holding company and its subsidiaries, etc. violate the provisions of Article 43 through 45, 45-2, 45-3, 46, 48 or 62-2 (1), impose penalty surcharges on them according to the classification falling under any of the following subparagraphs:

1. Where the investment is made in securities in excess of the limits on the investment in securities in violation of the provisions of Article 43 (1) or (3) or no measures are taken to bring the investment in securities into conformity with the limits on the investment in securities within one year: Not more than 10/100 of the excess investment amount;

2. Where the limit on stock holdings under Article 44 is exceeded: Not more than 10/100 of the total book value of the stocks in excess holdings;

3. Where the limit on credit grants under Article 45 (1) through (3) is exceeded: Not more than 10/100 of the amount of excess credit granted;

4. Where the limit of credit grants pursuant to the provisions of Article 45-2 (1) and (2) is exceeded: Not more than 20/100 of the amount of excess credit granted;

5. Where the limit of stock acquisition pursuant to the provisions of 45-3 (1) is exceeded: Not more than 20/100 of the total book value of the stocks acquired in excess;

6. Where the limit on stock holdings under Article 46 is exceeded: Not more than 10/100 of the total book value of the stocks in excess holdings;

7. Where subsidiaries, etc. extend credit to their financial holding com- FINANCIAL HOLDING COMPANIES ACT

43

pany in contravention of Article 48 (1) 1: Not more than 10/100 of the amount of credit extended;

8. Where stocks of subsidiaries, etc. are held in contravention of Article 48 (1) 2: Not more than 10/100 of the total book value of the stock holdings;

9. Where the limit on cross extension of credit between subsidiaries, etc. is exceeded in contravention of Article 48 (1) 3: Not more than 10/100 of the excess amount of credit extended;

10. Where credit is extended without securing appropriate security in con- travention of Article 48 (2): Not more than 10/100 of the amount of credit granted;

11. Where dishonored assets are traded in contravention of Article 48 (3): Not more than 10/100 of the book value of such assets;

12. Where stocks are held in violation of the provisions of Article 48 (5): Not more than 2/100 of the total book value of the stock holdings;

13. Deleted; and

14. Where stocks are held in violation of Article 62-2 (1): Not more than 2/100 of the total book value of the stock holdings. Article 65 (Imposition of Penalty Surcharges)

(1) The Financial Services Commission shall, when it imposes penalty surcharges in accordance with Article 64, take into account matters falling under each of the following subparagraphs:

1. Nature and extent of the violation;

2. Period and frequency of the violation; and

3. Scale of profits earned by the violation. (2) The Financial Services Commission may, where a company that has committed a violation of the provisions of this Act merges with another company, regard the violation committed by such company as committed by the company surviving such merger or the company newly incorporated by such merger, and impose and collect penalty surcharges.

(3) Standards for imposing penalty surcharges under paragraph (1) and other matters necessary for imposing penalty surcharges shall be de- termined by Presidential Decree.

Article 66 (Presenting Opinions)

FINANCIAL HOLDING COMPANIES ACT

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(1) The Financial Services Commission shall provide a party or an inter- ested person, etc. with an opportunity to present his/her opinion prior to imposing any penalty surcharges on him.

(2) The party or the interested person, etc. referred to in paragraph (1) may be present at a meeting of the Financial Services Commission to state his/her opinion or submit necessary data.

Article 67 (Raising Objections)

(1) Any financial holding company, etc. that is dissatisfied with a dis- position taken to impose penalty surcharges on it under Article 64 may raise an objection to the Financial Services Commission, citing the reasons thereof, within 30 days from the date on which it was notified of such disposition. (2) The Financial Services Commission shall decide on the objection raised under paragraph (1) within 30 days from the date of receipt: Provided, That where the Financial Services Commission is unable to make the decision within the period of 30 days due to unavoidable reasons, such period may be extended by up to 30 days.

(3) Any person who is dissatisfied with the decision made under para- graph (2) may file an administrative appeal.

Article 68 (Extension of Time Limit for Payment of Penalty Surcharges and Installment Payment)

(1) The Financial Services Commission may, when a person who is subject to the imposition of penalty charges (hereinafter referred to as a "person liable for penalty surcharges"), is found to have difficulty in making a lump sum payment of the total penalty surcharges due to reasons falling under any of the following subparagraphs, extend the payment time limit or allow him/her to make installment payments. In this case, the Financial Services Commission may, where it is deemed necessary, have the person liable for such penalty surcharges offer security therefor:

1. Where his/her property is significantly damaged by disaster, etc.;

2. Where his/her business is in serious crisis due to the aggravation of business conditions;

3. Where the lump sum payment of his/her penalty surcharges is expected FINANCIAL HOLDING COMPANIES ACT

45

to weaken significantly his/her funding position; and

4. Where any other cause corresponding to subparagraphs 1 through 3 occurs.

(2) Any person liable for penalty surcharges shall, when he/she intends to get the time limit for payment of his/her penalty surcharges extended or his/her penalty surcharges paid in installments under paragraph (1), file an application therefor with the Financial Services Commission at least 10 days prior to the payment time limit.

(3) The Financial Services Commission may, when any person liable for penalty surcharges, the payment time limit for which has been extended or payment of penalty surcharges in installments has been allowed under paragraph (1), falls under any of the following subparagraphs, cancel his/her decision to extend the payment time limit and to allow him/her to pay the penalty surcharges in installments, and then collect the penalty surcharges in a lump sum:

1. When he/she fails to pay penalty surcharges that have been allowed to be paid in installments within the installment payment time limit;

2. When he/she fails to execute orders issued by the Financial Services Commission for changing his/her security or preserving his/her security;

3. When he/she is subject to compulsory execution, commencement of auc- tion, adjudication of bankruptcy, dissolution of a corporation, and a disposition taken to collect national or local taxes in arrears, or the whole or part of his/her penalty surcharges are recognized as being unable to be collected; and

4. When any other cause corresponding to subparagraphs 1 through 3 occurs.

(4) Necessary matters with respect to the extension of the payment time limit, the payment of penalty surcharges in installments, or security, etc. under paragraphs (1) through (3) shall be determined by Presidential Decree.

Article 69 (Collection of Penalty Surcharges and Disposition on Arrears) (1) The Financial Services Commission may, where any person liable for penalty surcharges fails to pay his/her penalty surcharges within the pay- ment time limit, collect additional dues prescribed by Presidential Decree, which are imposed on a period ranging from the date following the date FINANCIAL HOLDING COMPANIES ACT

46

of the payment time limit to the date preceding the date of the payment.

(2) When any person liable for penalty surcharges fails to pay his/her penalty surcharges within the payment time limit, the Financial Services Commission may serve a demand notice, fixing a period for payment of such penalty surcharges in arrears, and when the person liable for penalty surcharges fails to pay the penalty surcharges and additional dues under paragraph (1) within the fixed payment period, such penalty surcharges and additional dues may be collected in the manner of a disposition taken to collect national taxes in arrears. (3) The Financial Services Commission may entrust the collection of pen- alty surcharges and additional dues or taking of disposition against arrears as prescribed in paragraphs (1) and (2) to the Commissioner of the National Tax Service. (4) Matters necessary for the collection of penalty surcharges shall be pre- scribed by Presidential Decree.

Article 69-2 (Charges to Compel Execution)

(1) When a person who has been ordered to dispose of stocks pursuant to Article 7-2 (2), 8-3 (5), 10 (2), 10-2 (5), 18 (3) or 58 (1) 4 fails to execute such order within the fixed period of time, the Financial Services Commission may impose a charge to compel execution thereof within the extent not exceeding the amount obtained by multiplying the book value of the stocks subject to disposal by 3/10,000 for each day elapsing. (2) Charges to compel execution shall be imposed for the period of time from the day following expiration of the execution period fixed in the stock disposal order until the day the stock disposal (referring to the day of stock certificate delivery) is executed.

(3) In cases where the execution is not carried out even after the elapse of ninety days from the expiration of execution period set up in the stock disposal order, the Financial Services Commission shall collect the charges to compel execution on the basis of each ninety-day period elapsing, count- ing from such expiration day. (4) The provisions of Articles 65 through 69 shall apply mutatis mutandis to the imposition and collection of the charge to compel execution. [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002] FINANCIAL HOLDING COMPANIES ACT

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CHAPTER PENAL PROVISIONS

Article 70 (Penal Provisions)

(1) A person who falls under any of the following subparagraphs shall be punished by imprisonment for not more than five years or by a fine not exceeding two hundred million won:

1. A person who meets the requirements for a financial holding company, and fails to obtain authorization in violation of Articles 3, 5-2 (2) (main sentence), or 57 (3) or did not cease to meet the requirements for a financial holding company;

2. A person who has extended credit for major investors, and such major investors who have been offered an extension of credit in violation of the provisions of Article 45-2 (1) through (3);

3. A person who has acquired stocks issued by the large stockholders in violation of the provisions of Article 45-3 (1);

4. A person who has violated the provisions of Article 45-4;

5. A person who has violated the provisions of Article 48-3 (1);

6. A person who has disclosed the information that he/she became aware of in the course of his/her duty or utilized it for purposes other than performance of duty in violation of the provisions of Article 48-3 (2); and

7. An executive or employee of a financial holding company, etc. who has furnished or disclosed personal credit information, etc. that he/she became aware of in the course of his/her duty to those other than such financial holding company, etc., or utilized personal credit information, etc. for purposes other than business operations. (2) A person who falls under any of the following subparagraphs shall be punished by imprisonment for not more than three years or by a fine not exceeding one hundred million won:

1. A person who has, or did not withdraw from, controling relations with a financial holding company in violation of Article 7 (1) or (2); 1-2. A person who owns stocks of a subsidiary less than those of the standard for stock ownership or that loosened by the Financial Services Commission in violation of Article 42 (2) 1 or (3) (latter part);

2. A person who has acquired stocks in excess of the stock-holding limit FINANCIAL HOLDING COMPANIES ACT

48

in violation of Article 44; and

3. A person who has extended credit grants in excess of the credit grant limit in violation of Article 45.

(3) A person who falls under any of the following subparagraphs shall be punished by imprisonment for not more than one year or by a fine not exceeding thirty million won:

1. A person who has violated the provisions of Article 15;

2. A person who has incorporated subsidiaries, etc. into his/her company without obtaining approval therefor in violation of Article 16;

3. A person who has incorporated second-tier subsidiaries, etc. into his/ her company in violation of the provisions of Article 19;

4. A person who has invested in securities in excess of the limits on invest- ment in securities in violation of Article 43 (1) or (3) or has failed to take measures to bring the investment in securities into conformity with the limits on investment in securities within one year;

5. A person who has acquired stocks in excess of the stock-holding limit in violation of Article 46;

6. A person who has violated the provisions of Article 48; and

7. A person who has dissolved his/her company or merged his/her com- pany with another company without obtaining authorization pursuant to the provisions of Article 60.

(4) A person who has incorporated subsidiaries, etc. into his/her company without reporting thereon in violation of Article 18 shall be punished by imprisonment for not more than six months or by a fine not exceeding ten million won.

[This Article Wholly Amended by Act No. 6692, Apr. 27, 2002] Article 71 (Joint Penal Provisions)

If the representative of a corporation or the agent, the employed or any other employee of a corporation or an individual commits a violation of Article 70 in connection with the business of the corporation or the in- dividual, such corporation or such individual shall be fined in addition to the punishment of the offender.

Article 72 (Fines for Negligence)

(1) Any person who falls under any of the following subparagraphs shall be punished by a fine for negligence not exceeding fifty million won:

FINANCIAL HOLDING COMPANIES ACT

49

1. A person who has failed to make a report in violation of Article 5-2 (1) or 8 (2), or who has failed to report in violation Article 6-2 (1); 1-2. A person who has used words indicating a financial holding com- pany, in violation of Article 5-3;

2. A person who has violated an order of the Financial Services Com- mission pursuant to the provisions of Article 10 (2);

3. A person who has failed to respond to the demand for providing, etc. of data pursuant to the provisions of Article 10-2 (2) or 45-5 (1);

4. A bank holding company, etc. which has failed to go through a resolution of the board of directors in violation of Article 45-2 (4) or 45-3 (3);

5. A bank holding company, etc. which has failed to report to the Financial Services Commission or publicly announce in violation of Article 45-2 (5) and (6) or 45-3 (4) and (5);

6. A person who has violated the provisions of Article 48-2 (4) through (6);

7. A person who has refused, obstructed or evaded the inspection pursuant to the provisions of Article 51-2; and

8. A financial holding company which has violated this Act or the regu- lations made, orders issued or directions given pursuant to this Act. (2) Any person falling under any of the following subparagraphs shall be punished by a fine for negligence not exceeding ten million won:

1. A person who has violated Article 39;

2. A person who has failed to file a business report in violation of Article 54 or falsely prepared a business report;

3. A person who has failed to publicly announce in violation of Article 55 or falsely announced in public;

4. A person who has failed to issue a public notice in violation of Article 56 or issued a false public notice;

5. A person who has evaded or hindered any audit conducted under this Act, concealing books and documents, making unreliable reports and using other methods;

6. An executive or an employee of a financial holding company, etc., who has neglected to keep or furnish documents, make reports, publish or issue public notices, which are required by this Act; and

7. A person who has violated this Act or any regulations made, orders FINANCIAL HOLDING COMPANIES ACT

50

issued, or directions given under this Act.

(3) The fines for negligence referred to in paragraphs (1) and (2) shall be imposed and collected by the Financial Services Commission as pre- scribed by Presidential Decree. (4) Any person who is dissatisfied with a disposition taken to impose a fine for negligence on him/her under paragraph (3) may raise an objection to the Financial Services Commission within 30 days from the date on which he/she was notified of such disposition.

(5) When a person who is subjected to a disposition taken to impose a fine for negligence on him/her under paragraph (3) raises an objection under paragraph (4), the Financial Services Commission shall promptly notify the competent court, which shall, upon receiving such notice, place the case on trial in accordance with the Non-Contentious Case Litigation Procedures Act. (6) Where a person fails to raise any objection within the period provided for in paragraph (4) and fails to pay the fine for negligence in question, such fine for negligence shall be collected in the manner of a disposition taken to collect national taxes in arrears.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force one month after the date of its promulgation. Article 2 Omitted.

Article 3 (Transitional Measures for Already Established Company) Where any company, which runs the principal business of controlling companies closely related to financial institutions and the financial business and controls one or more financial institutions through stock holdings, which has already filed with the Fair Trade Commission in accordance with Article 8 of the Monopoly Regulation and Fair Trade Act at the time when this Act enters into force, such company shall be deemed to have been granted authorization under this Act and measures shall be taken to bring such company into compliance with this Act within 6 months from the date on which this Act enters into force.

Article 4 (Special Cases for Restrictions on Control of Financial Holding Companies by Financial Institutions)

FINANCIAL HOLDING COMPANIES ACT

51

(1) Any financial institution (including any financial institution incor- porated in accordance with foreign Acts and subordinate statutes) that controls other financial institution at the time when this Act enters into force may become a controlling stockholder in control of a financial holding company that runs such other financial institution as a subsidiary through the swap or transfer of stocks, notwithstanding the provisions of Article

7. (2) The swap or transfer of stocks referred to in paragraph (1) shall be limited to what is actually performed within one year from the date on which this Act enters into force.

(3) A financial institution, even if it is in control of a financial holding company under paragraph (1), shall not become the largest stockholder of such financial holding company.

(4) Any financial institution, which controls a financial holding company in accordance with paragraph (1), shall be prohibited from holding stocks of such financial holding company in excess of the holding ratio (referring to the holding ratio at the time when the final effect of the swap or transfer of stocks takes effect) under which the former acquires stocks of the latter through the swap or transfer of stocks.

Article 5 (Transitional Measures concerning Credit Grant Limit) The provisions of Articles 45 (1) through (3) and 48 (1) 3, where any financial institution, which is already established at the time when this Act enters into force, has been subject to the application of transitional measures for the credit grant limit in accordance with other finance-related Acts and subordinate statutes for a certain period, shall not apply to such financial institution for such period.

Article 6 (Disposition of Stocks of Financial Holding Companies of which Korea Deposit Insurance Corporation is Controlling Stockholder) (1) Where the Korea Deposit Insurance Corporation under the Depositor Protection Act becomes a controlling stockholder of a financial holding company after November 24, 2000, the Korea Deposit Insurance Corporation shall dispose of such stocks, comprehensively taking into ac- count the maximization of public fund recovery, rapid privatization of the relevant financial holding company, direction for development of domestic financial industry, etc.

(2) The Financial Services Commission shall report to the competent stand- FINANCIAL HOLDING COMPANIES ACT

52

ing committee of the National Assembly on basic plans to dispose of the stocks pursuant to paragraph (1) and the results of disposition in the pre- vious year by March 31, annually.

(3) Notwithstanding paragraph (2), the Financial Services Commission shall report on plans to dispose of stocks pursuant to paragraph (1) and the results thereof, in cases where the competent standing committee of the National Assembly requests them.

[This Article Wholly Amended by Act No. 9086, Mar. 28, 2008] ADDENDA

(1) (Enforcement Date) This Act shall enter into force three months after the date of its promulgation: Provided, That the amended provisions of Articles 20 through 37 and 62-2 shall enter into force on the date of its promulgation.

(2) (Transitional Measures for Penal Provisions and Fine for Negligence) With respect to the application of penal provisions and fines for negligence to the violations committed before this Act enters into force, the former provi- sions shall govern.

ADDENDUM

This Act shall enter into force on the date of its promulgation. ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force one year after the date of its promulgation. Articles 2 through 6 Omitted.

ADDENDA

(1) (Enforcement Date) This Act shall enter into force three months after the date of its promulgation.

(2) (Special Cases for Limits to Investment in Securities) Any financial holding company that invests in securities in excess of the limits on invest- ment in securities on the grounds falling under any subparagraph of Article 43 (2) at the time this Act enters into force shall take measures to bring FINANCIAL HOLDING COMPANIES ACT

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its investment in securities into conformity with the limits on investment in securities within one year from the date this Act enters into force, notwith- standing the amended provisions of paragraph (3) of the same Article: Provided, That in cases where the Financial Supervisory Commission recog- nizes the inevitability of making the investment in excess of the limits on investment in securities in view of the scale of securities that are held by the relevant financial holding company and circumstances surrounding the stock market, such period may be extended.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. Article 2 (Applicability to Financial Holding Companies Subject to Authorization)

The amended provisions of Article 5-2 shall also apply to those who has failed to obtain authorization at the time this Act enters into force, or who has failed to cease to meet the requirements as a financial holding company, from among those falling under financial holding companies subject to authorization, as a result of settlement of accounts for the busi- ness year just prior to the business year to which the date this Act enters into force belongs. In this case, the period referred to in paragraphs (1) and (2) of the same Article shall be counted from the date this Act enters into force.

Article 3 (Applicability to Discontinuation of Controling Relations be- tween Financial Institutions and Financial Holding Companies) The amended provisions of Article 7 (2) shall also apply to those who failed to withdraw from controling relations at the time this Act enters into force, from among those constituting financial institutions that have controling relations with financial holding companies, as a result of settlement of accounts for the business year just prior to the business year to which the date this Act enters into force belongs. In this case, the period referred to in the same paragraph shall be counted from the date this Act enters into force.

Article 4 (Applicability to Requirements for Executives) The amended provisions of Article 38 (1) 8, (2) and (3) shall initially apply to an executive of a financial holding company, who is appointed after this Act enters into force.

Article 5 (Transitional Measures for Members of Audit Committee) FINANCIAL HOLDING COMPANIES ACT

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If termination of a member's term of office, resignation or dismissal or other circumstances to appoint new members occur, a financial holding company, which must appoint members of the audit committee pursuant to the amended provisions of Article 41 (2), shall fulfill the amended provisions until the first general meeting of stockholders called after such circumstances occur.

Article 6 (Transitional Measures concerning Special Cases on Structures of Control of Complete Subsidiaries, etc.)

Despite the amended provisions of Article 41-4, the former provisions shall apply to those appointed as outside directors before this Act enters into force until their terms of office end.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. Articles 2 through 5 Omitted.

ADDENDA

(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.

(2) (Applicability concerning Changes on Executives' Qualifications) The amended provisions of Article 38 (1) shall initially apply to a person who becomes disqualified on the grounds occurring after this Act enters into force. ADDENDUM

This Act shall enter into force on the date of its promulgation.


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