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SPECIAL ACT ON THE MANAGEMENT OF PUBLIC FUNDS

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SPECIAL ACT ON THE MANAGEMENT OF PUBLIC FUNDS

Act No. 6281, Dec. 20, 2000

Amended by Act No. 6807, Dec. 26, 2002

Act No. 7111, Jan. 29, 2004

Act No. 7428, Mar. 31, 2005

Act No. 7760, Dec. 29, 2005

Act No. 8863, Feb. 29, 2008

CHAPTER GENERAL PROVISIONS

Article 1 (Purpose)

The purpose of this Act is to provide for matters necessary to ensure efficient use of public funds as well as to minimize the burden on nationals, by enhancing objectivity, fairness and transparency in raising, administering and managing those funds.

Article 2 (Definitions)

As used in this Act:

1. The term public funds means funds provided for the restructuring of financial institutions from the following:

(a) Fund for Redemption of Deposit Insurance Fund Bonds established under the Depositor Protection Act;

(b) Non-performing Loan Resolution Fund established under the Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset Management Corporation;

(c) Fund for Management of Public Funds established under the Act on the Fund for Management of Public Funds;

(d) State-owned property referred to in the Act on the Contribution In-kind of State Properties;

(e) Capital which the Bank of Korea established under the Bank of SPECIAL ACT ON THE MANAGEMENT OF PUBLIC FUNDS

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Korea Act invests in financial institutions; or

(f) Public loans referred to in the Introduction and Management of Public Loans Act.

2. The term "financial institution" means any of the following: (a) A financial institution referred to in the Act on the Structural Improvement of the Financial Industry;

(b) An insured financial institution referred to in the Depositor Protection Act (hereinafter referred to as the "insured financial institution"); and

(c) A financial institution referred to in the Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset Management Corporation. CHAPTER DELETED

Articles 3 through 12 Deleted. CHAPTER MANAGEMENT, ETC. OF PUBLIC

FUNDS

Article 13 (Least Cost Principle)

(1) The Government, the Korea Deposit Insurance Corporation and the Korea Asset Management Corporation shall provide assistance from public funds in such a manner as to minimize the investment cost thereof and maximize the efficiency thereof.

(2) The Financial Services Commission shall, if it requests the Government or the Korea Deposit Insurance Corporation (hereinafter referred to as the "Government, etc.") to make investments in insolvent financial institutions or to purchase securities under Article 12 of the Act on the Structural Improvement of the Financial Industry, submit to the Government, etc. materials verifying the compliance with the least cost principle under paragraph (1) of this Article and actual investigation materials on assets and liabilities of those financial institutions in accordance with Presidential Decree. SPECIAL ACT ON THE MANAGEMENT OF PUBLIC FUNDS

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(3) The Government, the Korea Deposit Insurance Corporation and the Korea Asset Management Corporation shall prepare and keep materials verifying that assistance from public funds is provided in compliance with the least cost principle under paragraph (1).

(4) The standards and procedures for the least cost principle under paragraphs (1) through (3) and other details thereof shall be provided for by Presidential Decree.

Article 14 (Impartial Loss Sharing Principle, etc.) (1) In providing assistance from public funds, the Government, etc. shall do so on condition that persons liable for insolvency of financial institutions eligible for such assistance should share any loss on an impartial basis. (2) In providing assistance from public funds, the Government, etc. shall do so in two or more installments: Provided, That this shall not apply to vicarious payment of deposits and other cases provided for by Presidential Decree.

(3) The Government, etc. shall provide assistance from public funds on condition that financial institutions eligible for such assistance should strive for their own restructuring.

(4) If there are persons responsible for the management and supervision of insolvent financial institutions, the Government, etc. shall, without delay, have such persons take such responsibility including damages in accordance with relevant Acts and subordinate statutes. (5) In the case of paragraphs (1) through (4), the standards, procedures and other details shall be provided for by Presidential Decree. Article 15 (Report to National Assembly)

(1) The Financial Services Commission shall, at least once every quarter, prepare a report on the administration of public funds such as their use and reuse after recovery and submit it to the National Assembly: Provided, That a report on the status of the management of assets acquired by such use or reuse shall be submitted not later than the end of March of every year. (2) The chairperson of the Financial Services Commission shall, if the National Assembly requests him/her to present himself/herself in connection with a report submitted under paragraph (1), present himself/herself and give his/her reply. Article 16 (Auditing, etc. by Board of Audit and Inspection) SPECIAL ACT ON THE MANAGEMENT OF PUBLIC FUNDS

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The Board of Audit and Inspection shall conduct audits relating to public funds in accordance with the Board of Audit and Inspection Act and submit a report on such audits to the National Assembly. Article 17 (Conclusion of Arrangement for Implementation of Management Normalization)

(1) The Government, etc. shall, in case of intending to provide assistance from public funds, conclude an arrangement for the implementation of a plan for management normalization (hereafter referred to as an "arrangement") with the financial institution in question in accordance with Presidential Decree.

(2) An arrangement under paragraph (1) shall include the following matters for normalization of the management of the financial institution in question:

1. Objective level of the said financial institution with respect to the standards for financial soundness provided for by Presidential Decree, including the capital adequacy ratio;

2. Objective level of the said financial institution with respect to the standards for earning provided for by Presidential Decree, including return on assets;

3. Objective level of the said financial institution with respect to the standards for asset quality provided for by Presidential Decree, including bad loan ratio;

4. Detailed implementation plan including a plan for the restructuring of the said financial institution such as the coordination of personnel, organizations and wages and a financing plan necessary to reach objective levels referred to in subparagraphs 1 through 3;

5. Consent to matters which are included in an implementation plan referred to in subparagraph 4 and which require the consent of a labor union of the said financial institution;

6. Additional implementation plan including a freeze on the total personnel expenses which shall be carried out by the said financial institution, if it does not reach objective levels referred to in subparagraphs 1 through 3; and

7. Other matters provided for by Presidential Decree. (3) The Government, etc. shall disclose an arrangement under paragraph (1) through electronic documents, etc.: Provided, That matters which can seriously affect the management of the financial institution in question SPECIAL ACT ON THE MANAGEMENT OF PUBLIC FUNDS

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and which are provided by Presidential Decree may be excluded. (4) The Government, etc. shall quarterly review the implementation status under an arrangement under paragraph (1) and report to the Financial Services Commission. (5) In order to review the implementation status under paragraph (4), the Government, etc. may request financial institutions assisted from public funds to report on their business or property, to submit materials and to have relevant persons present themselves and give their opinions.

(6) If an executive or employee of a financial institution assisted from public funds falls under any of the following subparagraphs, the Government may request the head of such institution to take corrective measures or to remove the executive from his/her office, suspend his/her duties or issue a warning or caution to him/her or to take disciplinary action against, or issue a caution to, the employee:

1. If the said executive or employee violates this Act or regulations, orders or directions under this Act;

2. If the said executive or employee does not comply with an arrangement under paragraph (1);

3. If the said executive or employee falsely prepares a report or materials requested by the Korea Deposit Insurance Corporation under this Act or an arrangement or neglects the submission thereof;

4. If the said executive or employee refuses, interferes with or evade activities carried out by the Korea Deposit Insurance Corporation under this Act or an arrangement; or

5. If the said executive or employee neglects the implementation of corrective orders issued or disciplinary action taken by the Korea Deposit Insurance Corporation.

Article 18 (Conclusion of Arrangement with Insolvent Enterprise) (1) A financial institution assisted from public funds under Article 17 (1) shall, if it provides an insolvent enterprise referred to in Presidential Decree with new funds, conclude with such enterprise an arrangement including a written consent of a person related to the restructuring of such enterprise and other matters provided for by Presidential Decree. (2) The details of the conclusion of an arrangement, etc. under paragraph (1) shall be provided for by Presidential Decree. SPECIAL ACT ON THE MANAGEMENT OF PUBLIC FUNDS

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(3) A financial institution which concludes an arrangement under paragraph (1) may not, if it deems that such arrangement is not implemented or such implementation is difficult, provide the insolvent enterprise in question with new funds.

Article 19 (Sale, etc. of Assets)

(1) The Government, the Korea Deposit Insurance Corporation and the Korea Asset Management Corporation shall endeavor to minimize the burden on nationals by selling shares and other assets of a financial institution held by them at appropriate prices.

(2) Deleted.

(3) Deleted.

(4) Deleted.

(5) Deleted.

Article 20 (Bankruptcy Procedures in Certain Cases) (1) If an insured financial institution assisted from public funds including the payment of insurance under the Depositor Protection Act (including an insured financial institution determined prior to a contract under the Act on the Structural Improvement of the Financial Industry) is dissolved or bankrupt, a court of competent jurisdiction shall, when the efficient recovery of such public funds is necessary, appoint the Korea Deposit Insurance Corporation or its executive or employee as a liquidator or a trustee in bankruptcy, notwithstanding the provisions of Article 531 of the Commercial Act, Article 355 of the Debtor Rehabilitation and Bankruptcy Act, and Acts related to the appointment of liquidators or trustees in bankruptcy. (2) If the Korea Deposit Insurance Corporation is appointed as a liquidator or a trustee in bankruptcy under paragraph (1) of this Article, Article 539 (2) of the Commercial Act and Articles 364, 492 and 493 of the Debtor Rehabilitation and Bankruptcy Act shall not apply.

Article 21 (Publication of White Book)

The Financial Services Commission shall, not later than the end of August of every year, publish a white book on the management of public funds including the status of the administration thereof in accordance with Presidential Decree. Article 21-2 (Record Preservation Period)

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The following records which are related to the Committee for Management of Public Funds established under Article No. 6281 (hereafter referred to as the "Committee" in this Article) shall be permanently preserved:

1. Records related to the deliberation and coordination by the Committee;

2. Records deliberated on by the Committee after receiving a report from a public funds-related institution including the Government, the Financial Services Committee (referring to Financial Supervisory Committee established under the previous Act on the Establishment, etc. of Financial Supervisory Organizations: hereafter the same shall apply in this Article), the Korea Deposit Insurance Corporation and the Korea Asset Management Corporation; and

3. Records related to materials submitted to the Committee after implementing following measures:

(a) Request for submitting reports, materials or documents against the Financial Services Committee, the Korea Deposit Insurance Corporation and the Korea Asset Management Corporation; (b) Request for presenting or submitting of opinions against the interested persons, references or related officials; or (c) On-spot survey on related institutions.

[This Article Wholly Amended by Act No. 8863, Feb. 29, 2008] CHAPTER DELETED

Articles 22 through 24 Deleted. ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. Article 2 (Period during Which Bankruptcy Procedures in Certain Cases Apply)

The bankruptcy procedures in certain cases under Article 20 shall remain in force for a period of five years after this Act enters into force: Provided, That liquidators or trustees in bankruptcy appointed by a court of competent jurisdiction under Article 20 shall remain effective until the procedures for liquidation or bankruptcy of the foundation in question expire. SPECIAL ACT ON THE MANAGEMENT OF PUBLIC FUNDS

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Article 3 (Transitional Provisions on Bankruptcy Procedures, etc. in Certain Cases)

If the efficient recovery of public funds is necessary, a court of competent jurisdiction shall, within three months after the enforcement date of this Act, appoint additionally the Korea Deposit Insurance Corporation or its executive or employee as a liquidator or a trustee in bankruptcy of an insured financial institution whose liquidation or bankruptcy procedures are in progress at the time when this Act enters into force. ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on January 1, 2003. (Proviso Omitted) Articles 2 through 11 Omitted.

ADDENDA

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

(2) (Examples of Application of Record Preservation Period) Notwithstanding the provisions of other Acts, the amended provisions of Article 21-2 of this Act shall apply to any period during which the following documents including those prepared and managed by the restructuring planning office established under the Financial Supervisory Commission in order to develop a policy on the financial and corporate restructuring and to systematically and efficiently perform restructuring affairs in course of raising, investment and use of public funds prior to January 1, 2001 and by the corporate restructuring committee established under the arrangement among financial institutions for corporate restructuring promotion, are preserved:

1. Documents prepared and managed by the restructuring planning office for a period from its establishment to its dissolution;

2. Documents prepared and managed by the corporate restructuring committee for a period from its establishment to its dissolution; and

3. Documents prepared and managed by the corporate restructuring committee, which any financial supervisory organization established under the Act on the Establishment, etc. of Financial Supervisory Organizations receives from that committee.

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ADDENDA

Article 1 (Enforcement Date)

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

ADDENDUM

This Act shall enter into force three months after the date of its promulgation. ADDENDA

Article 1 (Enforcement Date)

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