Press Release July 1, 1998

Strengthening of Loan Classification
and Provisioning Requirements

The Banking Supervisory Authority in accordance to MOU with IMF amended related regulations to enhance prudential regulation on commercial banks.

The following details the core contents of the amendment that will go into effect July 1, 1998.

- Strengthening of prudential regulation on overdue loans to incorporate international standards

Classification Prior to Amendment Amended Criteria
Normal loans in arrears by
less than 3 months loans in arrears by
less than 1 month
Precautionary loans in arrears by
3 months to less than
6 months loans in arrears by
1 month to less than
3 months
Substandard and
below loans in arrears by
no less than 6 months loans in arrears by
no less than 3 months

- Provisioning requirements for precautionary loans will be increased from 1% to 2%

- Non-tradable securities (privately-placed bonds, commercial papers and guaranteed bills) of trust accounts will be subject to loss provisioning (provisionsing for bond amortization)
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Structural Reform Planning Unit
Financial Supervisory Commission
Seoul, Korea