The Government decided to inject a total of 4.53 trillion won by the end of September to the Commercial Bank of Korea and the Hanil Bank. With this fiscal support Commercial Bank of Korea/Hanil Bank will be provided with the opportunity to recapitalize and enhance asset quality and furthermore nurture as a leading bank. By doing so, it will also contribute greatly toward alleviating credit crunch and restoring the intermediary function of the financial sector.

I. Underlying Principle of Fiscal Support

∞ Inject fiscal money promptly upon devising rehabilitation plans so that financial restructuring is completed by the end of September

∞ Fiscal support will be based on the following principles on a timely basis

— Self-rescue efforts

o Fiscal support will be provided only on condition that feasible self-rescue efforts for enhancement of productivity and profitability, such as downsizing of personnel and branch network, disposal of fixed assets and foreign investment inducement are presented.

— Accountability

o Loss-sharing of existing shareholders through capital reduction and replacement of management that are responsible for poor management.

— Asset quality enhancement

o Draw up plans for reducing existing NPL burden and ways to prevent the buildup of newly occurring NPLs
o Drastic resolution of NPLs of substandard and below by KAMCO
o Normalization of precautionary loans through work-out
o Upgrade quality of other loans through debt-equity swap or mutual fund

— Promptness and Sufficiency

o Support is to be provided promptly and at a sufficient level so as to facilitate normal operations of financial institutions

— Increased loans to the corporate sector

o Increase the amount of loans provided to corporates especially to SMEs

* Please refer to the attached file for details.